I know most of you do not read much of what I post but this is worth reading so I am reposting. 1a is also interesting if you wish to learn what Mauldin thinks. (See 1 and 1a below)
---
Quick overview of recent travels by friend, fellow memo reader and Zionist: " ...Vacation was excellent....Egypt fascinating.....pyramids awesome....the people pray 5 times a day but live in squalor....trash everywhere....and the average citizen is glad Mubarak is gone but is naive that the Muslim Brotherhood will not try to lead them into Shariah law.
Turkey impressive . Remains to be seen where Erdogan will lead them. And the people in Athens blame all their troubles on the govt....with no recognition that they are a democracy.....and voted in these problems.
Glad we live in the USA.....even with our boy President (hopefully for only 1 more year.)"
However, the 'boy' messiah is not easily beatable. (See 2 below.)
--
Are we beginning to see the start of the next Mid East War? (See 3 and 3a below.)
---
Glick on slurs.
When a so called friend makes a snide comment about someone to you the next time it could be a snide comment about you they are sharing with someone else. (See 4 below.)
---
Dick
----------------------------------------------------------------------------------------------------------------
1)The To The Point
By Dr. Jack Wheeler:
I've been asked by friends of a particular candidate to provide him with a private briefing on the most critical foreign policy issues America faces. What follows is not the usual HFR but a condensed summary of that briefing, which contains much of my Map of the Future talk at Rendezvous XI last weekend.
Russia. Putin is an ersatz macho-man, all hat and no karovi. Russia's navy is made of rust. Russia's ill-trained army of drunkards couldn't conquer Romania. Russian male life expectancy is lower than that of Bangladesh. Russia is a mafiacracy with a doomed economy dependent on oil & gas exports that fracking in Europe & the US will make uncompetitive. Do svidanya.
China. No wives, no water, no banks - and a hyper-dangerous military.
Much of China is uninhabited - deserts, mountains, and wastelands.
Habitable China is about the size of the US east of the Mississippi, with over a billion people squeezed into it. Northern China is turning into a waterless dust bowl. Scores of millions of Chinese men will never get married due to the Chicom's idiotic one-child policy and resultant mass female infanticide.
100 million bachelors are explosively dangerous. Chinese state banks are insolvent after going on a post-2008 loan binge with debt and credit in China now (according to the IMF) above 200% of GDP. A sharp economic contraction (increasingly likely) plus all those angry unmarried men equals war, the history-honored scapegoat diversion of tyrants.
The obvious Chicom choice for war would be Taiwan. But the Formosa Strait is 100 miles wide and China has no amphibious capacity. Taiwan is on the northern rim of the South China Sea, rapidly becoming one of the most jeopardous flash points in the world. Bordered by Taiwan, the Philippines, Malaysia, Brunei, Indonesia, Singapore, Vietnam, and China, over 50% by value of the world's shipping traverses it - and China claims all of it, the entire South China Sea, as its own territorial waters.
This cannot stand. China must be publicly informed by the next president that the South China Sea is international waters, period, there will be no discussion or negotiation. What is to be negotiated is the cooperative exploitation of what resources, such as oil, it may contain. No amount of Chicom bullying and saber-rattling will do any good. Every other country on the sea will join the US in this - and so will India and Japan.
Further, the Chicoms need to grasp that any aggression of theirs in the South China Sea will be naval only, and thus does nothing to occupy all their angry young bachelors. They need to go some place, a place with lots of water and lots of room for them, a place where the women prefer them to the local men who are drunks and beat up their wives, ideally a place once belonging to China but stolen by a foreign aggressor - so to get it back would give them a mission. Maybe even a wife.
There is such a place. It's called Siberia - specifically what China called its Maritime Provinces and Russia, after it seized them in 1860, calls the Russian Far East.
It's only a matter of time, at most a decade or two, before Beijing converts most all of eastern Siberia into Chinese Siberia. There is simply no way a dying Russia can hold on to it. Might as well divert the Chicoms toward it and away from Taiwan and the South China Sea.
North Korea. The Norks have no nukes. The half-kiloton yield in their tests means they failed to make weapons-grade plutonium. So they are no threat to us. They are a threat to South Korea with 11,000 artillery tubes aimed at the 17 million people of Greater Seoul. There is no need for American soldiers to be hostages to this. South Korea is a rich country with a powerful military capable of taking care of itself. We do not need to be there any longer.
India. The world's largest democracy is prickly, but the only country in Asia capable of standing up to China. The Chicoms are building naval bases in India's Indian Ocean neighbors such as Pakistan, Sri Lanka, and Burma, which they call their "String of Pearls" around India's neck. India is countering with a growing alliance with China's ancient neighbor enemy, Vietnam.
The next president should build on President Bush's initiative for military and economic ties between the US and India. That could include a joint India-US naval base in Cam Ranh Bay in Vietnam on the South China Sea. The Vietnamese would welcome us. Among nations, there are no permanent enemies, only permanent interests.
The Great Game of the 19th century was between the Russian and British Empires colliding in Asia. The 21st century players of this game are China and India. It's in our interests to be on India's side.
Pakistan/Afghanistan. Both are make-believe countries with no legitimate rationale for sovereignty. The key problem in both is Pakistan's "government within a government" spy agency, the ISI - Inter-Services Intelligence. It is radical hate-America jihadi Islamist. It created and is in the heroin business with the Taliban.
The first necessary condition towards any solution in this region is its dismantlement.
The other key problem is our State Department's anaphylactic allergy to regime and border changes. The best solution for Afghanistan would be for it to cease to exist as presently constituted. Actually, the same for Pakistan.
The Baluchis of southern Afghanistan and southwest Pakistan want their own Baluchistan (they have a marvelous harbor and the biggest gold deposits in the world according to BHP Biliton). They'd be joined by the Baluchis of southeast Iran and most likely by the Sindhis of adjoining Sind in southern Pakistan with the big city of Karachi.
The Tajiks of northern Afghanistan do not want their lives run by Pushtuns. They'd much rather secede and join Tajikistan - which wants our help to stabilize and protect it from Russia. The Pushtuns straddle the Af-Pak border. They dream of being united in a separate Pushtunistan. Pakistan's ruling group, the Punjabis, would retain the Punjab.
But basically, as with the Koreas, this no longer should be our problem to solve. Af-Pak should be India's problem to solve - Pak nukes, after all, are aimed at India, not us. There is no real nation to build in Afghanistan, and our troops have no purpose dying for it.
Terrorist threats are the business of the CIA and spec-ops teams, not the Marines or Army.
Again, we need to ally with India and assist them in what is their problem, not ours, to solve.
Iran. This week we learned that Iran's government planned an act of war against us in our own capital. It is hard to overestimate the number of problems in the world that would be solved with this government gone. And that's the solution: regime change. Apply a straightforward Reagan Doctrine strategy to overthrow Iran's mullah regime by sponsoring - with money and weapons - insurrections throughout the country.
Of Iran's 78 million, over 20 million are ethnic Azeri - almost three times the number of Azeris in Azerbaijan next door, whom they would love to join in a Greater Azerbaijan. There are at least eight million Kurds, who would fight tooth and nail against their Tehran oppressors if we gave them support. There are three million Ahwazi Arabs who populate Iran's oil patch, Kuhzestan, across the border from southern Iraq.
And of course there are the Persians themselves, some 33 million, whose mass street protests have been so brutally suppressed (and which the current president did not lift a finger or say a word to support).
A president determined to effect regime change in Iran would succeed quickly. The world's main state sponsor of Islamic terrorism would be no more. Iraq would be free to flourish, Syria would be quickly liberated, the threat to the Saudi and Gulf oil fields would be removed, and of course, Iran's nuclear program would be destroyed in the process (Israeli spec-ops would see to that).
It's a long list of positives and few if any negatives. All it needs is a president with the courage of Ronald Reagan.
Israel. The pre-1967 demarcations our current president demands Israel return to were not borders - they were cease-fire lines where Israel was able to stop the Arab invasions after declaring its independence in 1948. The Six-Day War recaptured Israel's legitimate territory, and that territory, including Golan and Judea-Samaria (the so-called "West
Bank") should remain so.
The Palestinians need to be told to STFU, that they no longer will be coddled and treated like spoiled children. They will recognize the state of Israel as legitimate and Jewish, or they can move to the Sinai, where Egypt will give them a Palestinian State since the Egyptians love Palestinians so much (the dirty secret is that the rest of the Arab world despises Palestinians and calls them rafida, Arabic for the N-word). Arabs and Euroweenies who object can shove their Nazi Anti-Semitism up their noses.
That's the way a pro-American pro-Israel president would deal with Israel and the Arabs. Then there's Turkey.
Turkish Prime Minister Recep Tayyip Erdogan (air-doh-wan) is an Islamist megalomaniac fantasizing about recreating the Ottoman Caliphate. He is constantly threatening Israel, pretending his high school navy is a match for Israel's NFL navy. Yet he has gutted the Turkish officer corps and filled it with incompetent stooges.
Erdogan needs a US president to explain to him that any duke-out between Turkey and Israel will result in his total humiliation, causing his overthrow and Turkey's expulsion from NATO.
Islam. In addition to the above re: Israel and Iran, the next president should make a clear and public distinction between Islam the religion and Islamism the political ideology masquerading as a religion. That Islamism will no longer be accorded the respect due an actual religion but treated with the contempt due any fascist ideology such as Communism or Nazism.
The next president should draw a distinct line between all variants of Islamism, such as Wahhabis, Deobandis, Khomeini Shias, and other forms of Jihadi and Sharia Islam, with peaceful and tolerant forms of Islam such as practiced by Sufis and Ismailis. It is with the latter that the future of Islam lies.
And for any Moslem in the US who agitates for Sharia law, he is welcome to do so - in a country that practices it, not in America. As for Islamic terrorism, its practitioners should receive a drone strike -a policy of the current president that should be continued.
The current president has, however, utterly failed to champion the rights and religious freedom of Christians in the Moslem world. A truly American foreign policy would do so.
Europe. It's Old Europe, now known as the Eurozone, serving as an object lesson of the scam of the welfare state versus New Europe, the liberated former colonies of the Soviet Union who learned the hard way the evils of socialism and the virtues of capitalism.
A new president would focus attention on the Baltics, Poland, Czechia, Slovakia, Hungary, Romania, Bulgaria, Macedonia, Albania, Croatia, and Slovenia. And he would politely educate the lands of Old Europe on welfare state socialism as a religion of envy. Ireland is already figuring this out and is recovering thereby.
Mexico. As Radio Free Europe and Radio Liberty significantly helped bring freedom to Soviet Eastern Europe and the Soviet Union, the next president could institute a Radio Free Mexico (including satellite television and web sites) teaching free market and small business economics to Mexicans.
Mexico is the land of crony corrupt corporate fascist capitalism. As a result, most Mexicans live in medieval poverty while the richest man in the world is a Mexican - Carlos Slim - whose wealth was gained with state-protected monopolies. A true free market economy would enable Mexicans to become prosperous in their own country.
The only real solution to the US illegal alien problem is for those aliens to want to stay in or go back to their own country where they are free to prosper.
In the meantime, the next president can use the National Guard, seriously armed, to secure our borders. And if drone strikes are so good at killing terrorists, they should be equally good at killing leaders of the Mexican drug cartels.
America and the World. The next president's foreign policy should be based on the opposite of the current president.
The current president is embarrassed to be an American. The next president should be bursting with pride to be an American. The current president has a compulsion to apologize for America, a compulsion to appease those who envy America and her historically unparalleled success. The next president should feel America has nothing whatever to apologize for, and could not care less about those who envy her.
The next president, as opposed to the current one, should have no qualms in laughing at the lunacy of Warmism, the theory of human CO2 production causing global doom. Warmism is the Fascist Left's replacement for Marxism as a rationale for their seizure of power over our lives.
CO2 is a trace greenhouse gas (95% of the world's atmospheric greenhouse gases is water vapor), and our human production is a trace of that. One tenth of one percent of greenhouse gases are made by man.
Humans do not cause global warming, period.
Explaining and rejecting this removes the obstacles to the world's most game-changing technology today - hydraulic fracturing or fracking of shale gas and shale oil deposits. Once the political shackles on this technology are removed, America will not only be fully energy independent, but a major energy exporter to the world. The crony capitalist scam of "renewable energy" will be dead -no more Solyndras, wind farm boondoggles, and ethanol subsidies.
Oh, Russia's energy stranglehold on Europe will disappear and Israel will be an energy exporter. Exposing the Fascist Left's hoax of Warmism and fully utilizing fracking technology will enable America and much of the world to live in an era of cheap and abundant energy - providing the material foundation for an ever-growing widespread prosperity.
Lastly, the next president needs to explain that America really does need to be the world's policeman. As America apologizes and retreats from the world, the wolves emerge from the forest, from China to Iran.
Only America can keep the world's wolves at bay.
We do not need to nation-build. We do not need our soldiers in Afghanistan. We do not need our soldiers in South Korea. We do not need our soldiers in Europe - Russian tanks (however many can still
run) are not going to charge through the Fulda Gap. Once we effect regime change in Iran, we will not need our soldiers in Iraq.
We do need a strong, well-equipped and trained military, an army, an air force, and coast guard. But what we need most of all is an immensely strong navy, along with special forces - Marines, Rangers, SEALs, Delta, et al. Without that, the world's wolf packs run wild and unchecked.
The American Economy and Foreign Policy. A strong America obviously requires a strong and flourishing economy. This can only be achieved by getting the government out of the way of it.
This cannot be done by a smooth-talking sophist who believes in Warmism (thus renewable energy crony capitalist scams), and whose health care program served as the model for the abomination of Obamacare.
This cannot be done by a Johnny One Note who can only talk about his tax reform plan that will take years to implement (if ever), and thus will do absolutely nothing to immediately revive the economy and create massive job growth.
This cannot be done by anyone pretending his business experience can be applied to running a government. Governments and their bureaucracies are the opposite of a for-profit business and cannot be run on business principles. Governments, the federal government in particular, can only be run on Constitutional principles, which means eliminating all federal activities, programs, agencies, and departments not enumeratedly authorized by the Constitution. (Not all at once but in an orderly manner - Rome wasn't torn down in a day.)
This can be done only by someone with successful executive government experience who is committed to those Constitutional restrictions, most particularly those embodied in the 10th Amendment.
I wish that person well in the debate next Tuesday and in the months of campaigning to come. The 2012 GOP nomination campaign will be a test of endurance. It will not and mathematically cannot be won quickly.
30 states hold their GOP primaries before April, which are by new RNC rules proportional. A candidate who wins a majority or plurality of votes in these primaries only gets his proportion of the delegates - it's not winner-take-all. 55% of the votes, say, gets you 55% of the delegates, no more.
Further, because they are in violation of RNC rules for insisting on ridiculously early primaries, New Hampshire, Nevada, South Carolina, Florida, Arizona, and Michigan will be penalized with a loss of half of their delegates. Iowa is a non-binding caucus so it's just a pr show.
The race will not be won until deep into April - and thus will be won by the best funded, best organized, and most determined never-give-up persistent candidate. For America's sake, let that candidate be also the most Constitutionally principled.
1a)Where is the ECB Printing Press? Where Can I Find €3 Trillion?
By John Mauldin
Europe remains the focus of markets, and rightly so. But the picture is not as clear as one would like. Different analysts point to different problems – if only this one problem could be solved, then all this would go away, they tend to say. Sadly, it is not one problem but three that must be solved, and none of them is easy. In today’s letter I try and offer a basic primer on the problems facing Europe. My challenge to myself is to do it in a short piece rather than the book-length tome it could easily become. Thus, in the pursuit of brevity, we will not be as in-depth as usual, but I think it helps us to step back a few feet and look at the larger picture before we focus on minutiae.
Where Can I Find €3 Trillion?
First, for the record, the European issue is not a crisis of confidence, as Merkel and Sarkozy, et al., keep telling us. It is structural. And until the structural issues are dealt with, the problems will not be solved.
The first problem facing Europe is the glaring sore thumb: there is simply too much sovereign debt in Greece, Ireland, Spain, Italy, Portugal, and Belgium. That is not news. What has yet to be absorbed by the markets is that the cost of bailouts, present and potential, is likely to be in the €3 trillion range, talking an average of the estimates I have seen (with the Boston Consulting Group suggesting €6 trillion). €3 trillion is not pocket change. Indeed, it is a number that is inconceivable in scope.
Greece has been told that they can write off 50% of their debt held by private entities, but not that owed to the IMF, ECB, or other public entities. This means something more like a 20-30% haircut on total debt. Sean Egan suggests that eventually Greece will write off closer to 90%. That is a number that cannot be contemplated in polite European circles, as it is plenty enough to cause a serious banking crisis.
And that is before we get to the rest of the problem children. Portugal will need at least a 40% write-off (probably more!). The Irish are going to walk away from the bank debt they assumed in the banking crisis. While on paper Spain looks like it may survive, in reality it has significant problems in its banking sector. If they move to insure the solvency of their banks, their debts become unmanageable, not to mention that their debt grows each and every month from the rather large deficits they run and seem totally unwilling to try to reduce. The Spanish government deficit is likely to be at least 7% next year, well above their target of 6%. The “semi-autonomous regions” are in deep trouble, and their citizens are leveraged due to excessive real estate exuberance. Unemployment across Spain is 21%, and for the young it is over 40%.
The Spanish government has adopted the rather novel idea that if it doesn’t pay its bills then its deficit will not be as large and therefore they can get closer to meeting their targets. Yields on Spanish debt are about 1% lower than on Italian debt, but give them time.
And then there is Italy. Italy is simply too big to save. Yes, it looks like Berlusconi is leaving, but he is not the real problem. The problem is a 10-year bond yield at 7%, when your debt is 120% of GDP and growing. Italy is likely to be in recession soon, which will only make the problem worse. A drop in GDP while deficits rise means that debt-to-GDP rises faster. That means interest-rate costs are rising faster than (the lack of) growth in the economy. The deficit is a reported 4.6%. By contrast, Germany’s is 4.3%. But the difference is the debt. The market realizes that if you grow debt by 5% a year, it will not be but a few years until Italy is at 150%. There is no retreat without default from such a number, and the markets are saying, “We’ve seen this movie before and the ending is not a happy one. We think we’ll leave at intermission.”
The ONLY reason that Italian yields have dropped below 7% is that the European Central Bank has been buying Italian debt “in size.” Any retreat by the ECB from buying Italian debt and Italian yields shoot to the moon. Italy will need to raise close to €350 this year, including new debt and rollover debt. The higher rates will put even more pressure on the deficit.
Debt, whether it is with an individual, a family, a city, or a country, always has a limit. Debt cannot grow beyond the ability to service the debt. That is the clear lesson of Rogoff and Reinhardt’s epic work, This Time Is Different. When that limit is reached, the debt must be restructured in some way, either with better terms or through some sort of default.
Mediterranean Europe simply borrowed more than it could pay, given the cash flows of the various countries. And now we are at the Endgame. How can one deal with the debt?
The best solution is to figure out how to grow your economy faster than the growth of debt. Over time, debt service becomes a smaller part of the economy. But Southern Europe does not seemingly have that option. Certainly not Greece, Portugal, or Spain; and this week we learned that Italian production was off 4.8%. Europe, even Germany, is slipping into recession.
Germany is in the position of wanting the problem countries to cut their deficits through something called austerity. And living within your means is hardly a novel idea. It makes a great deal of sense. But when you are a country in recession and have to cut back, it only makes the recession worse for a period of time. Asking Greece to cuts its deficit by 4% a year for 4 years to get to something closer to balance means that the Greek economy will shrink by at least 10%, if not more. Tax revenues, never on solid footing, will shrink, making the deficit worse. How do you ask people to willingly enter into a pepression for a rather long time in order to pay back the banks, even if the debts were freely taken on by the government and the money spent on the populace, and even if the haircuts are 50%?
Yes, if Greece leaves the euro that means they will also have a depression. No one will lend them money for at least three years. Their banks will be insolvent, their pension funds destroyed. Their ability to buy needed materials (like oil, medicines, etc.) will be limited to the amount of goods they can produce and sell. Government employees will be forced to leave jobs, as there will be no money to pay them. Those on government pensions will get a fraction of what they were promised. Going back to the drachma will be painful in the extreme. Just as staying in the euro will be painful. Greece has no good choices.
There are those who suggest that Europe is demonstrating the failure of the socialist welfare state. And there is some reason to say that. But I don’t think the socialist welfare state is the cause of the debt crisis. One can have a welfare state without debt, if you are willing to run a sensible budget. Think of the Scandinavian countries.
And you can have countries without much social welfare get into debt problems. There are plenty of examples in history. Amassing large amounts of debt is a national problem that has as much to do with character as anything else. That is true for families or for countries. It is wanting to spend for goods and services today and pay for them in the future.
Debt has its uses. Properly used, it can be of great benefit to societies and families. People can buy homes and tools that can be used for the production of goods, build roads and other infrastructure, etc. But debt cannot be allowed to become the master of the budget or the source for current spending, again whether for families or countries. And Greece and its fellow countries have used debt to fund current spending and now have run up against the inability to borrow more at sustainable levels.
The easy answer is to cut spending. But when you cut back spending, even borrowed spending, it is going to affect GDP. It is something that may have to be done, but it is not without consequence. Ireland, a small country of 4.2 million people, just paid close to €1 billion to service debt that it owes for taking on the debts of its banks that went bankrupt. That is hugely unpopular in Ireland, and it will not be long before the Irish government simply says no. If the current one does not, then there will be a new one that does. Unless the Irish renegotiate their debt, they will be paying on it for decades. Debt that was private debt and paid to European banks (who lent to Irish banks) is now public debt. And it is a punitive and crushing debt.
We can go to each problem country and home in on its own particular situation, and the answer almost always seems to be that the debt must be dealt with in some manner that either directly or indirectly amounts to default. (Even if the Eurozone leaders say that a 50% haircut by a bank is “voluntary.” Yeah, right. European leaders have a different understanding of voluntary than I learned in school.)
But that is the problem. The European Commission is trying to figure out how to find €1 trillion to use to bail out southern Europe and Ireland. They so far cannot, and the market recognizes that fact and that the needs are actually much higher. European leaders cannot (at least publicly) fathom how to find €3 trillion. But whether or not they can “find” another few trillion, that debt will have to be restructured or defaulted. Once you go down that path, as they have with Greece, it is just a matter of time before you have to do the same for Portugal and Ireland; and are Spain and Italy close on their heels?
When Leverage Comes Back to Haunt You
European regulators allowed their banks to leverage up to 450 to 1 on their capital, on the theory that sovereign nations in an enlightened Europe could not default, and therefore no reserves need to be kept for “investing” in government debt. And with those rules, banks borrowed massively and invested it in government debt, making the spread. It was an awesome free profit machine. Until Greece became a road bump. Now it is a nightmare. Even if you only invested 4% of your bank’s assets in Greek debt, if that is more than your capital then you are bankrupt.
Irish banks were foolish and invested in Irish real estate that was in a bubble. They went bankrupt. Spanish banks were even more heavily leveraged to real estate, but have yet to write down their debt. They assume that houses will only lose about 15%, rather than the 50% that the real world is suggesting. And you can get away with that for a time if you own the agencies that rate the real estate debt, as the Spanish banks do. But most of the rest of European banks are going to go bankrupt the old-fashioned, tried-and-true, proven-over-the-centuries way: by buying government debt. Somehow they want to be seen as rational in leveraging up government debt.
As I told the Irish crowd last week, don’t worry about your bank debt; all you have to do is wait a little while. When French and Italian banks (and most of the other banks in Europe) are publicly insolvent and have to go to their respective countries and the ECB for capital, the relatively small amount (by comparison) of Irish bank debt will not even be noticed when you default. I was trying for a little humor, but there is a core of truth in that glib remark.
France cannot afford to bail out its banks. As we have seen this week, they are already in danger of losing their AAA rating, as a false (premature?) press release from S&P suggested. (Someone is in trouble for that one! Seriously, you think S&P is not ready for this? There is reason to believe, I hear, that this was a draft for use later. We’ll see.) France will want the Eurozone to bail out their banks, and that means the ECB. If France gets such a deal, Ireland will certainly demand – and get – one, too.
The German Dilemma
And that brings us to the third problem, which has two parts: (1) the massive trade imbalances in Europe, where Germany and a few others export and the rest of Europe buys, And (2) the fact that German labor is far cheaper on a relative basis than Greek or Portugal labor (or that of most of the rest of the Eurozone). German workers have seen very little rise in their incomes, while Southern Europe labor costs have risen to over 30% higher.
I won’t go into the details (I have written about this before), but there is a basic rule in economics. You can reduce private debt and you can reduce public debt and you can run a trade deficit. But you can only do two of the three at the same time. The total of the three must balance.
Greece runs a massive trade deficit. They are also attempting to reduce their government debt, and private debt (that borrowed by business and consumers) is being forcibly reduced, as the banks are in full retreat.
Greece must therefore endure a large reduction in its labor costs if it wants to reduce its government deficit. Sell that one to the unions. (By the way, Irish public unions took a large reduction, as did pensioners. Different political climate and country.) Germany seemingly wants the rest of Europe to behave like Germans, except that they also want them to continue to buy German products and run trade deficits, while Germany exports its way to prosperity.
In the “old days” of a decade ago, a European country could simply devalue its currency and adjust the relative value of labor that way. But with a fixed currency there is no adjustment mechanism other than reduced pay or large unemployment numbers, which eventually translates into lower wages.
Essentially, the southern part of Europe is on an odd sort of “gold standard,” with the euro being the fixed standard. And the adjustments are painful. There are no easy answers if you stay with the euro. And leaving is its own nightmare.
So How Do We Solve the Eurozone Problem?
Let’s quickly look at options for solving this.
1. The Germans (and the Dutch and Finns, et al.) can simply take their export surplus and taxes and savings and pay for the deficits in the southern zone until such time as they can be brought under control. Or they can bail out all the banks. Not just their own but throughout Europe, as a customer without a banking system cannot buy your products. That seems to be a political non-starter.
2. The problem countries can make the extremely painful adjustments, cut their deficits, and enter into a lengthy pepression. That also seems to be a political non-starter.
3. The Eurozone can forgive enough debt to get the various countries back to a place where they can function, nationalizing the banks that hold the debt, which would lead to a Europe-wide deep recession. Possible if the Eurozone leaders can sell it, but it is a tough sell.
4. A few countries (2? 3? 4?) can leave the Eurozone. If this is not done in an orderly fashion, the chaos will reverberate around the world.
All of the above paths (or some combination of them) mean a banking crisis and chaos and long-term recessions. These are not pretty paths. But the above options assume that the ECB remains true to its Bundesbank core. Which brings us to the next “solution.”
Where Is the ECB Printing Press?
It is hard for us in the US to understand, but the commitment of European leaders to a united Europe is amazingly strong. They will do whatever they think they must do (and/or can sell to the voters) to maintain the European Union.
As a way to think about it, the US fought its most bloody war over the question of whether or not to remain a union. I think you have to call that commitment. While I am not suggesting that Europe is getting ready to start a civil war, I think it is helpful to remember that commitments to an ideal can drive people into situations that others have a hard time understanding.
Let’s summarize. There is too much debt in many southern countries; and while I have not yet mentioned it, France is not far from having its own crisis if they do not get back into balance. And if they lose their AAA rating, then any EFSF solution is just so much bad paper.
The banks and banking system are effectively insolvent. There are large trade imbalances that make it almost impossible for the weaker Eurozone countries to grow their way out of the problem.
The path of least resistance, and I use that term guardedly, is for the ECB to find its printing press. Perhaps they can borrow one from Bernanke. Yes, I know they are buying sovereign debt now, but they are “sterilizing” it, meaning they sell euro paper to offset the monetary base effects (large oversimplification, I know).
But the money to solve the crisis does not exist. The only way to find it is for the ECB to print money and print in size, enough to lower the value of the euro and make exports cheaper (which gives southern Europe a chance to grow out of its problems). Which is of course something the Germans vehemently oppose, as it goes against their core DNA coding.
But the choice is print or let the euro perish. I see no other realistic solution, aside from massive austerity, willingly accepted by Europeans everywhere, along with the nationalization of their banks, etc., as described above. I think there is even less willingness to endure all that.
It is a hard choice, I know. If you held a gun to my head and asked, “What do you think they will do?” I would have to say, “I think the ECB prints.” But not without a lot of rancor and solemn pledges and maybe a rewriting of the treaty in order to get Germany to go along.
The choice is between a much lower euro or one that is far different from today’s, with a number of countries having left it. There are no good or easy choices.
As a closing aside, a lower euro means lower US and emerging-market exports (Europe is China’s biggest customer!) to Europe and more competition from Europeans in what the rest of the world sells to each other. It will be the beginning of serious trade issues and when coupled with the collapse of the Japanese yen, circa 2013, will usher in currency wars and protectionism. This will be a decade we will be glad to leave in 2020.
-------------------------------------------------------------------------------------------------------------
2)The 2012 Presidential Election Will Be Won or Lost in the Middle
By Neil Snyder
The odds of President Obama being re-elected are much higher than the odds of him being elected in 2008. Don't take anything for granted, because this battle won't be easy.
The 2012 presidential election promises to be a real humdinger. Speaking broadly, political pundits tell us that it will focus on the economy (things like jobs, taxes, and spending) and that it will be brutal. Political insiders put a finer point on it. For instance, Chris Lehane, who helped guide Al Gore's failed 2000 campaign for the presidency, said, "It's going to be extremely different, with much more hand-to-hand combat, from one foxhole to another, targeted to key states." Terry Holt, a Republican consultant, said, "You can expect a very negative campaign. In 2008, Barack Obama was peddling hope and change. Now he's peddling fear and poverty."
Tuesday's election results prove that both Lehane and Holt were on the right track. The "Personhood Amendment" failed in Mississippi, and Ohioans rejected limits on collective bargaining "which would have limited the bargaining abilities of 350,000 unionized public workers." But those issues are far from settled. Abortion opponents are pursuing "life-at-fertilization ballot initiatives" in six other states, and collective bargaining for public employees remains a hot topic in states across the fruited plain. The 2012 presidential election will help to resolve those and other issues.
Demonstrating how muddy the political waters are right now, a few days ago, Colorado voters rejected tax hikes for education. Colorado is a pivotal "swing state," and both political parties are anxious to claim its nine electoral votes. By clobbering Proposition 13 almost 2-to-1, Colorado voters sent a message about taxation that was loud and clear. Prior to the vote, Stateline called Proposition 13 "the nation's most high-profile tax measure" and said that "the outcome is likely to be viewed as a barometer of attitudes toward the tough fiscal choices states have ahead." After the vote, The Denver Post called Colorado "a killing field for tax measures." It's becoming obvious that voters are fed up with profligate government spending and needless taxation to support questionable and marginal programs.
John Avlon, a senior columnist for Newsweek and The Daily Beast, said that in Tuesday's election, "swing voters asserted their independence" by "repudiating Republican ideological overreach in key votes but denying Democrats clear-cut victories heading into 2012." Michael Barone, a columnist for The Washington Examiner, called attention to the fact that "the same Ohio voters ... who voted 61% against [Governor] Kasich's public employee union restrictions also voted 66% for Issue 3, which purported to shield Ohioans from any mandate to buy health insurance. This was a clear repudiation of Obamacare, and about half the folks that the unions turned out voted against Obamacare."
Avlon and Barone are correct. Voters in one state after another are throwing off their party mantles and making up their own minds. The 2012 presidential election will address a wide range of economic and social issues, but the thing that sets it apart is the fact that it will determine where we stand as a nation on issues that have heretofore been dominated almost exclusively by political purists on the far left and far right.
Stated simply, at long last, voters are engaged in the debate. That means liberals and conservatives will have to duke it out to determine which group holds sway over the middle. Voters will be asked to decide whether the United States is going to continue on a path that leads to socialism or if our nation will return to its roots and reward individual initiative and effort.
Judging by what we've seen so far, the answer will be a combination of the two. Voters don't want the United States to become a European-style socialist country; neither do they want it to be a pure laissez-faire capitalist state. Dogmatists on the left and right had better pay attention, because voters are in no mood for politics as usual.
President Obama and his ardent supporters reside on the far left of the political spectrum -- so far left that they have to hide their true proclivities. They know that the general public won't accept the president's ideas this time around if he presents them from his liberal perch, so he's slowly and methodically gravitating to the center in hopes of losing as few voters in the middle as possible while retaining his leftist base.
Don't expect Obama 2.0 to closely resemble Obama 1.0. This time around, he'll be more circumspect. He'll present himself as a man of the people who sees both sides of critical issues, but his agenda will remain the same. Piece by piece, little by little, he'll present parts of his plan, believing that voters won't notice his maneuvering to the left. It's like the bullfrog: if you toss a bullfrog into boiling water, he will jump out and save himself because he has strong legs and quick reflexes, but if you place him in cold water and heat it up slowly, he will eventually die because he doesn't realize that the water is getting hotter.
The president will use that approach because it works. History teaches us that voters adjust slowly to the world that politicians fashion, and they do it without making much of a fuss since gradual changes, although offensive to some, seem minor to most. But President Obama has an advantage in 2012 that he didn't have in 2008. He holds the reins of power, and he'll use tax dollars to buy off vocal critics. Whoever the president's opponent turns out to be had better beware, because conservative dogma will fail in 2012 just as surely as liberal dogma will.
Fortunately for the GOP, after three years in office, President Obama can't run in 2012 on abstract promises about hope and change. He has a performance record, and it's a millstone around his neck, but it will mean nothing if Republicans nominate a conservative purist. That's what the results in Colorado, Ohio, and Mississippi tell us. The 2012 presidential election will be won or lost in the middle, where people can be persuaded by facts. That's what the GOP nominee must deliver.
In September, President Obama said, "I just have to remind people that here's one thing I know for certain: the odds of me being reelected are much higher than the odds of me being elected in the first place." He was absolutely right. Don't take anything for granted, because this battle won't be easy.
Neil Snyder is a chaired professor emeritus at the University of Virginia. His blog, SnyderTalk.com, is posted daily. His latest book is titled If You Voted for Obama in 2008 to Prove You're Not a Racist, You Need to Vote for Someone Else in 2012to Prove You're Not an Idiot.
--------------------------------------------------------------------------------------------------------------
3)Mid-East war fears after Iranian base blasts, Syria's Arab League suspension
the potential for a regional flare-up shot up Friday and Saturday, Nov-11-12, with the blasts at two Iranian arms bases which killed at least 32 Revolutionary Guards men including Iran's top missile expert, and the Arab League Foreign Ministers' decision to suspend Syria's membership over Bashar Assad's brutal military crackdown on civilians.
As windows shattered in Tehran, the streets were awash with rumors that Iran was under attack, or that the regime had staged a failed nuclear test. Foreign businessmen were said to be fleeing the country.
In Kuwait, lawmakers demanded an urgent debate on the potential fallout from an attack on Iran three days after British ministers were briefed on a possible US-backed Israeli strike against Iran's nuclear sites in the last week of December or early next year. Hopes faded for effective international sanctions in the wake of nuclear watchdog evidence of Iran's nuclear capabilities, even as US President Obama tackled Russian and Chinese leaders at .
Hours after the base explosions in Iran, the Arab League decided to suspend the membership of its ally Syria and impose political and economic sanctions on the Assad regime. Members were advised to withdraw their ambassadors form the Syrian capital until their Nov. 2 peace plan was implemented. The AL decision was praised by US President Barack Obama and backed by the UN Secretary General Ban Ki-moon.
This penalty hurts Bashar Assad more than would a threatened Turkish invasion and seizure of a buffer enclave to serve the Syrian opposition. It conveys the Arab world's rejection of the legitimacy of Bashar Assad's regime. The Syrian ruler has got away with defying the UN Security Council, NATO and even Washington. He will find it much harder to survive being cast out of the fold by his Arab brethren who are punishing him for the contempt he showed for the peace deal they initiated and he signed by having his troops kill another 250 civilians in ten days.
Indeed the Qatari foreign minister Hamad bin Jassim, reading out of the decision, warned Assad that further non-compliance would result in "more steps to protect the citizens of Syria" by the Arab League – a broad hint at military intervention to aid the beleaguered opposition as Assad tried ineffectually to brand the Arab bloc American puppets.
Turkey, Saudi Arabia, Qatar and Jordan are already arming Syrian opposition groups and Turkey is hosting their command and training facilities. The scenario is beginning to resemble the Libyan format. There too, Qatari, Jordanian and Turkish military elements took part in the NATO operation to overthrow Muammar Qaddafi. And Bashar Assad may be nearing the end of his tether.
No one any longer credits his word after his repeated promises in the nine-month uprising against him to pull his troops out of city centers, release prisoners and enact reforms, while only piling on the savagery. His army is turning against him. Even before the Arab League struck home, the tens of trained fighters going over to the opposition in the early months of the conflict were swelling in the last two weeks to hundreds, taking their arms with them. The ruling Assad clan and military command have reached a crossroads in the pact they concluded in March to extinguish the uprising regardless of the cost in blood.
That pact may now prove unsustainable confronting its parties with three broad options:
1. The army's top commanders may decide they can no longer get away with the slaughter committed in the name of the regime and the time has come to get rid of Bashar Assad. A coup d'etat would be one way.
2. Assad may get in first with a preemptive coup of his own to install in Damascus a military junta composed of trusted loyalists which he and his family will manipulate behind the scenes. This move would ease some of the Arab and Western pressure on him to step down.
3. He could make good on his threat to start a Middle East conflagration along with Iran and Hizballah. Most of the action would be aimed against Israel forcing the Arab League to go along with Syria and restore its status.
The war rumors sweeping Tehran after the explosions at the Revolutionary Guards bases and the hard choices confronting the discredited Assad regime have generated a highly perilous climate in the region. All its capitals are on edge for trouble. This time, the usual conspiracy allegations from Tehran and Damascus won't wash.
3a) Mossad behind Iran blast:Blogger Richard Silverstein claims Israel orchestrated explosion that killed 17 at Iranian missile storage facility, in collaboration with local militant group
By Dudi Cohen
US blogger Richard Silverstein said Saturday that Israel was the mastermind behind the blast the killed at least 17 people at an Iranian Revolutionary Guard Corps base near Tehran.
In his blog, Tikun Olam, Silverstein quotes an Israeli expert as saying that the Mossad was responsible for the explosion, in collaboration with the Iranian militant opposition group Mojahedin-e-Khalq.
"It is widely known within intelligence circles that the Israelis use the MEK for varied acts of espionage and terror ranging from fraudulent Iranian memos alleging work on nuclear trigger devices to assassinations of nuclear scientists and bombings of sensitive military installations," Silverstein said.
He attributed an incident similar to Saturday's explosion which occurred at a different IRGC missile base last year to Mossad sabotage.
Silverstein noted that his source "has never been wrong so far in the reports he’s offered."
'External sabotage unlikely'
Meanwhile, a former IRGC soldier said that the explosion occurred at military storage facility where Shihab missiles are stored. Hamed Ebrahimi, who served at the base for two months, told the Iranian online daily Rooz that the tough security at the facility makes it highly unlikely that the blast was caused by an act of external interference.
The soldier said that the base is split into two divisions; one stores missiles, while the other serves as an air force training center.
A senior IRGC officer was among the massive blast's victims. The officer, identified as Hassan Tehrani Moqaddam, held a rank parallel to brigadier general, the Fars news agency said. He reportedly served as a researcher at a Tehran university and headed the "Jihad Self-Reliance" unit, mostly tasked with developing arms and missiles following the embargo imposed on Iran since 1979.
The explosion occurred 40 km (25 miles) outside Tehran, and was felt in the capital.
The IRGC ruled out the possibility that deliberate sabotage was behind the flare-up. On Saturday, it was reported that the blast occurred while munitions were being moved.
"The primary cause for the explosion is being determined, and will be made public at a later date," IRGC spokesman Ramezan Sharif said, stressing that the 17 people who died in the incident and the 16 who were injured were all IRGC operatives, and not civilians.
The funeral procession for the victims has been scheduled for Monday, and is to leave the IRGC's headquarters in Tehran.
---------------------------------------------------------------------------------------------------------
4)With friends like these
By Caroline B. Glick
The slurs against Prime Minister Binyamin Netanyahu voiced by French President Nicolas Sarkozy and US President Barack Obama after last week's G-20 summit were revealing as well as repugnant.
Thinking no one other than Obama could hear him, Sarkozy attacked Netanyahu saying, "I can't stand to see him anymore, he's a liar."
Obama responded by whining, "You're fed up with him, but me, I have to deal with him every day."
These statements are interesting both for what they say about the two presidents' characters and for what they say about the way that Israel is perceived by the West more generally.
To understand why this is the case it is necessary to first ask, when has Netanyahu ever lied to Sarkozy and Obama?
This week the UN's International Atomic Energy Agency's report about Iran's nuclear weapons program made clear that Israel — Netanyahu included — has been telling the truth about Iran and its nuclear ambitions all along. In contrast, world leaders have been lying and burying their heads in the sand.
Since Iran's nuclear weapons program was first revealed to the public in 2004, Israel has provided in-depth intelligence information proving Iran's malign intentions to the likes of Sarkozy, Obama and the UN. And for seven years, the US government — Obama included — has claimed that it lacked definitive proof of Iran's intentions.
Obama wasted the first two years of his administration attempting to charm the Iranians out of their nuclear weapons program. He stubbornly ignored the piles of evidence presented to him by Israel that Iran was not interested in cutting a deal.
Perhaps Obama was relying on the US's 2007 National Intelligence Estimate about Iran's nuclear weapons program. As Israel said at the time, and as this week's IAEA report proves, it was the NIE — which claimed that Iran abandoned its nuclear weapons program in 2003 — not Israel that deliberately lied about the status of Iran's nuclear weapons program. It was the US intelligence community that purposely deceived the American government and people about the gravest immediate threat to US national security.
Israel, including Netanyahu, was telling the truth.
So if Netanyahu never lied about Iran, what might these two major world leaders think he lies about? Why don't they want to speak with him anymore?
Could it be they don't like the way he is managing their beloved "peace process" with the Palestinians?
The fact is that the only times Netanyahu has spoken less than truthfully about the Palestinians were those instances when he sought to appease the likes of Obama and Sarkozy. Only when Netanyahu embraced the false claims of the likes of Obama and Sarkozy that it is possible to reach a peace deal with the Palestinians based on the establishment of an independent Palestinian state west of the Jordan River could it be said that he made false statements.
Because the truth is that Israel never had a chance of achieving peace with the Palestinians. And the reason this has always been the case has nothing to do with Netanyahu or Israel.
There was never any chance for peace because the Palestinians have no interest in making peace with Israel. As the West's favorite Palestinian "moderate," Fatah leader and Palestinian Authority chairman Mahmoud Abbas said in an interview with Egypt's Dream TV on October 23, "I've said it before and I'll say it again. I will never recognize the 'Jewishness' of the state [of Israel] or a 'Jewish state.'"
That is, Abbas will never make peace with Israel.
Acknowledging this, on Tuesday Netanyahu reportedly told his colleagues that through their recent actions, the Palestinians have abrogated the foundations of the peace process. As he put it, "By boycotting negotiations and by going instead to the United Nations [to achieve independent statehood], they [the Palestinians] have reneged on a central tenet of Oslo."
That tenet, which formed the basis of the Oslo peace process, was "land for peace." As Netanyahu explained, Israel gave up land within the framework of the Oslo accords. In exchange the Palestinians committed to resolve their conflict with Israel through direct negotiations that would lead to peace. Their UN gambit, like Abbas's statement to Egyptian television, shows the Palestinians — not Israel — have been lying all along. They pocketed Israel's territorial concessions and refused to make peace.
So why do the likes of Sarkozy and Obama hate Netanyahu? Why is he "a liar?" Why don't they pour out their venom on Abbas, who really does lie to them on a regular basis?
The answer is because they prefer to blame Israel than acknowledge that their positive assessments of the Palestinians are nothing more than fantasy. And they are not alone. The Western preference for fantasy over reality was given explicit expression by former US president Bill Clinton in September.
In an ugly diatribe against Netanyahu at his Clinton Global Initiative Conference, Clinton insisted that the PA under Abbas was "pro-peace" and that the only real obstacle to a deal was Netanyahu. Ironically, at the same time Clinton was attacking Israel's leader for killing the peace process, Abbas was at the UN asking the Security Council to accept an independent Palestine in a de facto state of war with Israel as a full member.
So too, while Clinton was blaming him for the failure of the peace process, Netanyahu at the UN using his speech to the General Assembly to issue yet another plea to Abbas to renew peace talks with Israel.
Clinton didn't exhaust his ammunition on Netanyahu. He saved plenty for the Israeli people as well. Ignoring the inconvenient fact that the Palestinians freely elected Hamas to lead them, Clinton provided his audience with a bigoted taxonomy of the Israeli public through which he differentiated the good, "pro-peace Israelis" from the bad "anti-peace" Israelis.
As he put it, "The most pro-peace Israelis are the Arabs, second the Sabras, the Jewish Israelis that were born there; third, the Ashkenazi of long-standing, the European Jews who came there around the time of Israel's founding."
As for the bad Israelis, in the view of the former president, "The most anti-peace are the ultra-religious who believe they're supposed to keep Judea and Samaria, and the settler groups, and what you might call the territorialists, the people who just showed up lately and they're not encumbered by the historical record."
By ranking the worthiness of Israel's citizens in accordance with whether or not they agree with Clinton and his friends, Clinton was acting in line with what has emerged as standard operating practice of Israel's "friends" in places like Europe and the US. Like Clinton, they too think it is their right to pick and choose which Israelis are acceptable and which are unworthy.
Wednesday we saw this practice put into play by British Ambassador Matthew Gould. This week the Knesset began deliberations on a bill that would prohibit foreign governments and international agencies from contributing more than NIS 20,000 to Israeli non-governmental organizations. The bill was introduced by Likud MK Ofir Okunis with Netanyahu's support.
According to Haaretz, Gould issued a thinly veiled threat to Okunis related to the bill. Gould reportedly said that if the bill is passes, it would reflect badly on Israel in the international community.
Last month Makor Rishon published a British government document titled, "NGOs in the Middle East Funded by the Foreign and Commonwealth Office." The document showed that in 2010, outside of Iraq, the British government gave a total of 100,000 pounds to pro-democracy NGOs throughout the Arab world.
In contrast to Britain's miserly attitude towards Arab civil society organizations, Her Majesty's Government gave more than 600,000 pounds to far-leftist Israeli NGOs. These Israeli groups included the Economic Cooperation Foundation, Yesh Din, Peace Now, Ir Amim, and Gisha. All of these groups are far beyond Israeli mainstream opinion. All seek to use international pressure on Israel to force the government to adopt policies rejected by the vast majority of the public.
So for every pound Britain forked out to cultivate democracy in twenty Arab non-democracies, it spent six pounds to undermine democracy in Israel — the region's only democracy.
And the British couldn't be more pleased with the return on their investment. Speaking to the British Parliament last year, Britain's Minister of Middle East Affairs Alistair Burt said the money has successfully changed Israeli policies. As he put it, "Since we began supporting these programs some significant changes have been made in the Israeli justice system, both civilian and military, and in the decisions they make. They have also raised a significant debate about these matters and we believe these activities will strengthen democracy in Israel."
In other words, as far as Britain is concerned, "strengthening democracy" in Israel means tipping the scales in favor of marginal groups with no noticeable domestic constituency.
These shockingly hostile statements echo one made by then-presidential candidate Obama from the campaign trail in February 2008. At the time Obama said, "I think there is a strain within the pro-Israel community that says unless you adopt a[n] unwavering pro-Likud approach to Israel that you're anti-Israel and that can't be the measure of our friendship with Israel."
Scarcely a day goes by when some foreign leader, commentator or activist doesn't say that being pro-Israel doesn't mean being pro-Israeli government. And like Obama's campaign trail statement, Clinton's diatribe, Sarkozy's and Obama's vile gossip about Netanyahu and Britain's self-congratulatory declarations and veiled threats, those who make a distinction between the Israeli people and the Israeli government ignore two important facts.
First Israel is a democracy. Its governments reflect the will of the Israeli people and therefore, are inseparable from the people. If you harbor contempt for Israel's elected leaders, then by definition you harbor contempt for the Israeli public. And this makes you anti-Israel.
The second fact these statements ignore is that Israel is the US's and Europe's stalwart ally. If Sarkozy and Obama had said what they said about Netanyahu in a conversation about German Chancellor Angela Merkel, or if Netanyahu had made similar statements about Obama or Sarkozy, the revelation of the statements would have sparked international outcries of indignation and been roundly condemned from all quarters.
And this brings us to the other troubling aspect of Sarkozy's and Obama's nasty exchange about Netanyahu. Their views reflect a wider anti-Israel climate.
Outside the Jewish world, Sarkozy's and Obama's hateful, false statements about their ally provoked no outrage. Indeed, it took the media three days to even report their conversation. This indicates that Obama and Sarkozy aren't alone in holding Israel to a double standard. They aren't the only ones blaming Israel for the Palestinians' bad behavior.
The Western media also holds Israel to a separate standard. Like Obama and Sarkozy, the media blame Israel and its elected leaders for the Palestinians' duplicity. Like Obama and Sarkozy, the media blame Israel for failing to make their peace fantasies come true.
And that is the real message of the Obama-Sarkozy exchange last week. Through it we learn that blaming the Jews and the Jewish state for their enemies' behavior is what passes for polite conversation among Western elites today.
--------------------------------------------------------------------------------------------------------
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment