Looking forward from 2006... "Dangers Facing Bernanke"

Not to toot my own horn here, but I recently ran across a short think piece I threw together in 2006. Look familiar? This is just to point out the fact that though the severity of the current downturn might have been unexpected its occurrence should not have been.

-- The Rational

Monetary Policy:

Dangers Facing Bernanke

Hedge Funds - This market, which is an early-warning system for global credit defaults, has been growing at a 50% annualized rate without the proper infrastructure to ensure against the potential risk of a nasty and disorderly shock. Some think there is the potential for a breakdown approaching the scale of the Long-Term Capital Management hedge fund debacle of 1998.

Housing Market - Investors have been buying houses even though rents will not cover their interest payments, purely in the expectation of large capital gains. The total inventory of new and used homes waiting for buyers is still the largest of all time. The number of investors and speculators dumping their properties on the market is just beginning to swell. In addition to the pure financial losses of a burst in the market, people are much more likely to borrow to buy a house than to buy shares. Not only are new buyers taking out bigger mortgages, but existing owners have increased their mortgages to turn capital gains into cash which they can spend. As a result of such borrowing, housing booms tend to be more dangerous than stock market bubbles, and are often followed by periods of prolonged economic weakness. Additionally, two-fifths of all American jobs created since 2001 have been in housing-related sectors such as construction, real-estate lending and broking. If house prices actually fall, this boost will turn into a substantial drag.

Trade Deficit - A combination of things could prompt at least some deficit-balancing capital to repatriate. Such signs could prompt a “run” which could lead to further dollar weakness and capital withdrawal. This would allow domestic producers to discover the pricing power that has been missing the last several years and be tempted to meet strong consumption at higher prices by bidding up for labor and other resources.

Oil/Energy Price Fluxes – "Rising energy prices pose a risk to both economic activity and inflation," said Bernanke. This one is rather obvious.

Changes brought about by the election – The Democratic victory could have a big impact based on fears that they will roll back capital gains tax cuts. Additionally, there is the fear of a new wave of protectionist tendencies on both sides of the aisle that might lead to lowered levels of global trade.

Low Savings/High Credit Levels - In a recent speech, Bernanke warned Americans to save more and spend less to preserve their standard of living for the long term. In the long term the retirement of baby-boomers poses enormous challenges. Bernanke expressed the urgency of fiscal-policy reform to pave the way for either greater government revenues or lower expenses, but has no control over such policy. The Fed could tighten money supply through “higher interest rates, by imposing stricter lending standards and directly reducing money supply through market intervention” to encourage cuts in consumption and increases in savings. The danger lies in the fact that the US economy is incredibly leveraged and interest-rate-sensitive. Higher interest rates have much more effect today because of consumer preferences toward credit and debt. Additionally, Doug Noland writes that “In today’s credit boom, there is a virtually insatiable demand for trillions of Credit instruments – top-rated and perceived highly liquid. The greater the degree of Credit excess the greater the gulf between the perception of safety and liquidity and the reality of highly risky Credits acutely vulnerable to a reversal in the credit cycle.” A potential solution such as increasing interest rates to force a cut in consumption risks inducing deflation and a depression. Another option with the potential for high levels of inflation is a devaluation of the dollar so that nominal promises can be kept, while purchasing power of benefits erode.

Climate Chaos? Don't believe it.

http://www.telegraph.co.uk/news/uknews/1533290/Climate-chaos-Don%27t-believe-it.html

Just because my friend has been too busy with making money to continue his attack on ridiculousness and all that is the global warming scam I have decided to temporarily take up his banner for him. At least I'm not arguing that its all a Zionist scam...i have heard that too though... global warming and peak oil, all park of the same plot. :)

The Rational

Sadr 'offers' a 'truce?'

What exactly HAS al-Sadr offered? Though it's hard to hold back a sigh of relief after reading the announcements that "his followers would lay down their arms providing the Iraqi government met a series of demands." Don't be to excited about the situation.
In the statement the Sadrists seemed to resolve to "Ending armed manifestations in the governate of Basra and all the other governates" and "renounc[ing] those who carry weapons and target the government and service agencies and institutions, or [political] party offices." This was not specifically contingent on the government acquiescence in "Ending of attacks and arbitrary illegal arrests" and "apply the law on general amnesty, and release all prisoners who had not had charges confirmed against them, and particularly prisoners belonging to the Sadrist trend." Very vague, but positive. If Maliki's government even 'accepts' the statement by entering into some sort of negotiations or drawdown of troops is questionable...and even if they do it will all boil down to the implementation of the details as to whether anyone will emerge a "winner."

Is it all politics? Usually.

This incisive commentary on the seemingly quickly degrading Basra situation is a very valuable read. It examines the (cross cutting) motivations of the major players in Iraq and in Basra in particular. Some things are relatively clear. The U.S. wants the Iraqi government to succeed in this venture: an embarrassing defeat is the worst thing that could happen, while success will weaken Sadr and his followers. The best case scenario for the government and the US would be if Sadr accepts the weakening, abandons his fighters in Basra and the situation returns to the political table with a weakened Sadrist bloc, but without Maliki being excessively strengthened. This will hopefully show the Iraq forces as worth reckoning against and worth counting on, provide a stepping stone to breaking the militia control of Basra, and will not strengthen the SCIRI/Dawa'a groups to the point of being able to impose decisions without tradeoffs.

The most likely scenarios are less rosy.

The questions of whether MNF forces will become more involved (past air and blockade support) and how Fadhila, an anti-federalist party, will weigh in on the battle between to pro-federalist parties will be very interesting.

Definitely swing by Missing Links for a more indepth look at how the Arab press is taking the developments. He called this one.

The USS Cole deployment.

The Badger recently transmitted his translation of Al-Jazeera where it quotes Lebanese opposition politician Nabih Berri (who is also president of the Lebanese parliament) as claiming that the US ME deployment of the USS Cole was designed to focus attention on Lebanon "in order to cover up the massacres being committed in Gaza". The motivations of such military deployments are often murky, but this one is especially so. The timing of the move has stirred up passions throughout the ME and have even raised eyebrows back home and since no obvious explanation for the move seems forthcoming, it will be difficult to argue down such extreme claims.

A Question.

Would it be moral for a CIA operative to run a successful terrorist attack (with definite casualties) in order to be vetted into the top leadership of a major terrorist network?

Sacrificing a few to potentially save many? Catching the criminal by becoming criminal? How sacred is the law?

This is similar to Bonhoeffer's moral dilemma with regard to Hitler. Is murder still a sin if it is done to save?

Thoughts From a Talk by LTC John Nagl

Nagl says that the major lesson that the US military establishment drew from the first Gulf War was that the combined AirLand doctrine that utterly destroyed the relatively respected Iraqi forces was an absolute success, but it required more investment to ensure that the US retained its advantage in the field. From the hatch of a tank the view point was different and therefore the lessons that were learned also differed. Nagl left his Gulf War experience convinced that for the foreseeable future no one would bother to challenge the US in conventional warfare. This dominance (and the world's tacit acknowledgment of it) would push future wars either to the top (WMD) or the bottom (guerrilla/insurgency tactics). The book had already been written on WMD, but the American military's counter-insurgency manual had been gathering dust for years. The experience (and more specifically the failures) of the Vietnam War, rather than challenging the military to devise better ways of dealing with low level warfare, led to it neutering the counter-insurgency capabilities it had gained during the war. [This topic is also well covered in the New American Militarism by Andrew Bacevich]
Nagl emphasizes the importance of the military learning by long term institutionalization of changes rather than merely adapting with short term change in tactics and was adament in his belief that "this is the kind of war we will be fighting for the foreseeable future." Besides the importance of making good decisions with regard to doctrine, tools, technology and emphasis, it is even more important to be able to get inside the 'decision loop' of the enemy. It is not enough to design, approve and implement new technology to stop a certain design of IEDs when it only takes a week or two for the insurgents to defeat it with 12 dollar radio shack parts. US forces must be able to innovate and change ahead of the insurgents.
The focus of the new COIN doctrine is to first empower each individual soldier as decision maker, and then make the knowledge that the "best weapons [against an insurgency] don't shoot bullets" at the fore of every soldier's thought process. Killing insurgents is only valuable if it helps in building and maintaining the SWEAT-MS infrastructure (acknowledging the military's excessive love for acronyms, I still like this one; Sewer, Water, Electricity, Academics, Trash, Medical, Security.) Otherwise the dead insurgent's shoes will merely be filled by another disgruntled individual.
On a side note, an audience member brought up Sir Aylmer Haldane's work, "The Insurrection in Mesopotamia" (about the British experience putting down the Iraqi revolt in 1920) and asked if that experience proved that low-force, 'hearts and minds' COIN campaigns were mistaken strategy. I believe that the opposite is true. To paraphrase what other much wiser commentators have said, history doesn't repeat, it merely rhymes. The methods used in that case are not applicable to the Iraq of today. The Roman subjugation method of 'kill, salt and burn' and the Japanese Three All doctrine (Kill all, Burn All, Loot All) cannot be done by the US military in the 21th century. The information revolution has ensured that.In the end, the lesson that should and must be drawn from Iraq, no matter how the situation turns out, is that either conventional war fighting capabilities are not enough, or the mission's the US military should be called upon to perform should be much more limited.

Selections from Maulana Wahiduddin Khan's "Islam Rediscovered"

Maulana Khan is known for his strong anti-violence teachings. He has passionately devoted his life to showing Islam to the world as a religion of peace and tolerance instead of violence and hate. Islam Rediscovered took me a while to really get into (the translation is weak and much of his introductory rationalizations for belief are rudimentary and flimsy), but he eventually gets onto the subject of the dangers and mistakes in the most popular current interpretations of Islam. That was interesting to me. The main points he makes in this section:

1. The current Muslim mindset believes that Islam only provides a model for action in a position of strength (Muslim dominance...the dar al-Islam), not of modesty (Muslim minority...the dar al-harb).

2. The real struggle that the Muslim Ummah are called into is not the political, but the ideological spread of Islam through peaceful da'wah. -- He argues that this problematic tendency is derived from drawing inspiration from the political glory of early Muslim history rather than the Qur'an and Sunnah.

I was impressed by a few quotes in particular. With regard to point #1:

Muslims fight for their communal objectives, but they call it Islamic Jihad. Their leaders form political parties, they enter into violent conflict with other rulers in order to gain power, but they carry out all these activities in the name of Islam. Power play, pure and simple, is given the name of Islamic politics. The so-called Islamic jihad is the most glaring example of engaging in non-Islamic activities under the banner of Islam.

and,

A state of affairs has developed in which Muslims have come to believe that the cause of Islam can be served only through jihad activism, that is, armed struggle. With this mindset, they are unable to understand the significance of peaceful struggle. Anyone who talked in terms of peace and tolerance finds his integrity in question. Any attempt at making them understand the importance of peaceful struggle is seen as a conspiracy to keep them from performing jihad as a "religious duty." It is thus an extremely difficult task to call Muslims to peaceful Islam. Such a mission involves the risk of being dis-credited among one's own co-religionists.

With regard to point #2:

If the Qur'an and Sunnah are taken to be the true sources of knowledge of God's will, all mankind, in the words of a hadith, will be regarded by the believers as God's family; the whole of humanity will become their concern: whereas, when the mind is shaped by hsitory, Muslims see themselves as rulers, and others as subjects.

First published in 2001 in India, my host sister gave me this book when I was studying in
Oman. I would like to get a better feeling for how widespread teaching like Khan's really is. I know the Indian school of teaching (I know there is a better description, but i mean roughly the Tabligh movement) is very different from many other 'schools,' but it would be nice to know more. I'll dig around.

When will they realize?

...That Bush is not running for office in 2008.... Here is Michael Moore's blowing on his Horn of Righteous Indignation and delivering a powerful battle cry for 2008.

A new year has begun. And before we've had a chance to break our New Year's resolutions, we find ourselves with a little more than 24 hours before the good people of Iowa tell us whom they would like to replace the man who now occupies three countries and a white house.Twice before, we have begun the process to stop this man, and twice we have failed. Eight years of our lives as Americans will have been lost, the world left in upheaval against us... and yet now, today, we hope against hope that our moment has finally arrived, that the amazingly powerful force of the Republican Party will somehow be halted. But we know that the Democrats are experts at snatching defeat from the jaws of victory, and if there's a way to blow this election, they will find it and do it with gusto.

Oh wait... it is the same battle cry that has been lobbed at the American people for almost a decade. Stop Bush! Keep his evil from pervading the water supply! It is ridiculous. No candidates on either side revolt me as much as the extremist banner carriers that claim to represent the "true heart" of their respective parties.

Domestic Politics (of Iraq): the Kurds and the Sunni?

One of the biggest potential stories of the New Year is the new coalition" between the PUK, KDP and the Sunni Islamic Party. If the coalition shows legs it will raise many questions for Iraq's future:

Have the Kurds abandoned their alliance which was based on the concept of the Shiite and Kurdish suffering during Saddam Hussain's era? Will the new Talabani-Barazani-Hashemi alliance overthrow Prime Minister Nouri Al Maliki's government? Will former Prime Minister Iyad Alawi join the new Kurdish Sunni alliance? (The picture is thanks to SotalIraq and Abu Ardvark)

Though no union of love and happiness, the new political triangle has powerful possibilities for either a potential meltdown or greater long term stability. Or both. Before the outcry, hear me out. The political "stability" of a weak Maliki government isn't really getting anything done. It is however ensuring that working out a reasonable oil law and an appropriate level of local vs central control is oh-so-difficult. The failure of the present government will open the door to chaos and it would likely force the major Shi'ite parties to adjust their stances. If any of the smaller Shi'ite parties join the coalition (on this likelihood I am completely uninformed) it would really shake some boats. In the face of such opposition a complete degradation of the political situation could occur down sectarian lines, or more postively, a softening could occur and many of the desires of the minority groups would be met through the political process, thus legitimizing it in the eyes of many who currently feel abandoned or even threatened by the central government. The hard line Maliki's government has held toward both Kurdish (oil and Kirkuk) and Sunni (reconciliation and Al-Hashemi's "national political project") desires has seemingly pushed the groups into each other's arms. What that holds will be integral to Iraq's future.

More thoughts the new coalition can be found here at Abu Aardvark's blog and here at Badger's Missing Links -- it's a regular zoo out there.

More T.E. Lawrence Quotes

A few more interesting snippets.

“The greatest commander of men was he whose intuitions most nearly happened. Nine-tenths of tactics were certain enough to be teachable in schools; but the irrational tenth was like the kingfisher flashing across the pool, and in it lay the test of generals. It could be ensured only by instinct until at the crisis it came naturally, a reflex.” (Lawrence, p 193)

I would say this is true in any speciality, skill, or art. School can instill fundamentals. One can learn the 'generally acceptable' or what 'usually works,' but the difference between ordinary and special in anything comes from that inexplicable reserve of gut instinct--the 'irrational tenth' that can't be begged, borrowed or stolen.

“Governments saw men only in mass; but our men, being irregulars, were not formations, but individuals. An individual death, like a pebble dropped in water, might make but a brief hole; yet rings of sorrow widened out therefrom. We could not afford casualties.” (Lawrence, p 194)

Lawrence had the architect's skill of knowing the importance of understanding one's material. It is not enough to know the strengths of your building blocks, you must also understand their weaknesses. Steel and concrete beams are not beams are not used for their beauty, but because they each compensate for the weaknesses of the other. The compression strength of concrete masks its weakness when faced by tension stress. Steel reinforcement covers this weakness at minimal cost. Lawrence understood that the Arab forces were warriors, not soldiers, and could not be molded into such without losing many of their strengths. This meant that he had to deal with these weaknesses, rather than seek to change them.

"There remained the psychological element to build up into an apt shape. […] [Propaganda] was the pathic, almost the ethical, in war. Some of it concerned the crowd, an adjustment of its spirit to the point where it became useful to exploit in action, and the pre-direction of this changing spirit to a certain end. Some of it concerned the individual, and then it became a rare art of human kindness, transcending, by purposed emotion, the gradual logical sequence of the mind. It was more subtle than tactics, and better worth doing, because it dealt with uncontrollables, with subjects incapable of direct command. It considered the capacity for mood of our men, their complexities and mutability, and the cultivation of whatever in them promised to profit our intention. We had to arrange their minds in order of battle just as carefully and as formally as other officers organized their bodies.” (Lawrence, p 195)

After having read a whole book on "Emotional Intelligence," it seems like Lawrence knew its importance before it became 'important.' He describes mental attunement like a mechanic, but his application of 'purposed emotion' carried with it elements of empathetic connection, primal vision rather than micromanaged morale sessions. He also knew how to do it, not just say it.

“A province would be won when we had taught the civilians in it to die for our ideal of freedom. The presence of the enemy was secondary.” (Lawrence, p 196)

Succinct, baby. Manipulating the masses to desire a freedom not necessarily thought of or requested.

"The master key of opinion lay in the common language: where also, lay the key of imagination. Moslems whose mother tongue was Arabic looked upon themselves for that reason as a chosen people. Their heritage of the Koran and classical literature held the Arabic speaking peoples together. Patriotism, ordinarily of soil or race, was warped to a language. A second buttress of a polity of Arab motive was the dim glory of the early Khalifate, whose memory endured among the people through centuries of Turkish misgovernment. The accident that these traditions savoured rather of the Arabian Nights than of sheer history maintained the Arab rank and file in their conviction that their past was more splendid than the present of the Ottoman Turk.” (Lawrence, p 336)

The strength of language and the power of the past. This reminds me of a segment on PBS by Thomas Friedman. He is interviewing an Egyptian writer about the origins of the Arab anger toward the United States and the importance of the WTC towers. The man states simply that it came from the bitterness of dwarves toward giants. Dwarves that have memories of their own greatness, blame their fall on anyone but themselves, and know that God will return to them their glory if only they will act. This also reminds me of what i was once told about regarding a difference between the Shia and the Sunni, but i will get to that later.

The Wit and Wisdom of T.E. Lawrence's Seven Pillars of Wisdom

Hopefully all of this will eventually be melded into a consequential whole, but for now all I can do is provide what is hopefully interesting fodder to ponder over. To ensure that everyone is in the know, T.E. Lawrence is the name of the man alternatively known as T.E. Shaw or Lawrence of Arabia. As a 2nd Lt. in the British army during the first World War he played an integral role in the Arab revolt against the Ottoman empire. His story, told in his book the Seven Pillars of Wisdom (or abbreviated in "A Revolt in the Desert") is absolutely fantastic in literary, historical, cultural or even psychological terms. I'm going to be adding snippets and interesting quotes progressively.

On war:
"In modern war--absolute war as [Foch] called it--two nations professing incompatible philosophies put them to the test of force. Philosophically, it was idiotic, for while opinions were arguable, convictions needed shooting to be cured; and the struggle could end only when the supporters of the one immaterial principle had no more means of resistance against the supporters of the other. It sounded like a twentieth century restatement of the wars of religion, whose logical end was utter destruction of one creed, and whose protagonists believed that God's judgment would prevail." (Seven Pillars, p 190)

On war aims in a struggle for independence:
"In the last resort we should be compelled to the desperate course of blood and the maxims of 'murder war', but as cheaply as could be for ourselves, since the Arabs fought for freedom, and that was a pleasure to be tasted only by a man alive. Posterity was a chilly thing to work for, no matter how much a man happened to love his own, or other people's already produced children." (p 191)

On fighting a revolutionary war:
"How would the Turks defend all that? No doubt by a trench line across the bottom if we came like an army with banners; but suppose we were (as it might be) an influence, an idea, a thing intangible, invulnerable, without front or back, drifting about like a gas? Armies were like plants, immobile, firm-rooted, nourished through long stems to the head. We might be a vapour, blowing where we listed. Our kingdoms lay in each man's mind; and as we wanted nothing material to live on, so we might offer nothing material to the killing. It seemed a regular soldier might be helpless without a target, owning only what he sat on, and subjecting only what, by order, he could poke his rifle at." (p 192)

On fighting against a revolutionary war:
"[The Germans and the Turks] would believe that rebellion was absolute like war, and deal with it on the analogy of war. Analogy in human things was fudge, anyhow; and war upon rebellion was messy and slow, like eating soup with a knife."