Global Christmas and Merry Thoughts

For reasons too long to explain I found myself at Hong Kong Airport en route to Ho Chi Minh City just before Christmas. After submitting myself to all the indignities air travel includes these days I sought refuge in a fake Italian restaurant. I first noticed Jingle Bells, then I am Dreaming of a White Christmas. And the whole Christmas repertoire followed.

In North America, we are used to a specific Christmas routine. The first few days you hum along as everything you hear is very familiar. And it is everywhere. The mall, car radio, commercials on TV. Everywhere. You sing along and hum. Then it starts to get quite annoying. By the nth day of Christmas you feel like begging strangers to shoot you to stop the looping reel in your brain.

This is also the main reason I believed for the longest time that suicide rates were higher during the holiday season (they are not)

But finding the same reel at Hong Kong Airport makes me both depressed a bit and joyful as I realize that the whole world has joined us in our seasonal misery. Very compassionate of them.

This is also my segueway to wish my tiny readership a very joyous holiday season.

It is going to get better.

You'll see.

Just stop "Santa Is Coming to Town" in you brain. Peace in the Middle East is a child play afterwards...

Arab Spring: One Year Later

17 December was the anniversary of Mohamed Bouazizi's death. He was the Tunisian vegetable vendor who set himself on fire and who triggered the events collectively known as the Arab Spring.

The change that took place within a year is breathtaking. Three autocratic Arab rulers were toppled in Tunisia, Egypt and Libya. Yemen and Syria are trying to get rid of their own dictators and both countries are on the verge of civil war. There was turmoil in Bahrain, Morocco and early on even in Jordan and Saudi Arabia.

Bouazizi' sacrifice notwithstanding, my position has been that the mass movement called Arab Spring was effective and led to regime change only in cases where some external and internal actors wanted that change and it failed where such a outside push and inside assistance did not exist. In both Tunisia and Egypt, the US controlled armies sided with the protesters and ousted the existing governments. In Libya, NATO forces provided air support and arms to the anti-government side and ensured their victory.

Syria

Now, in Syria a regime change is imminent for the same reasons. The US wants Bashar al Assad gone and Turkey is willing to make that happen.

You might have noticed that Russia suddenly changed its tune and instead of blocking all UN efforts against Syria it has just circulated a draft resolution that talked about excessive use of force against those exercising their rights.

There are several reasons for that.

Christopher Hitchens R.I.P.

I discovered Graydon Carter through Spy Magazine. It was the first publication in English that I thought was consistently funny and clever. None of that Alfred E. Neuman hit and miss silliness. The reason I gave a huge credit to Craydon Carter for the tone of the magazine was because after his departure, despite co founder Kurt Andersen's continued presence, the magazine became a lot less intelligent and trenchant and funny.

So when I heard that Graydon Carter took over from Tina Brown as Editor-in-Chief of Vanity Fair, I began reading the publication. That's how I discovered Christopher Hitchens as Carter hired him siz months into his tenure. The guy was incredible. His prose was exceptionally clear and evocative. His tone was erudite without being pedantic. His knowledge of world events and history seemed endless.

I remember reading his first piece for Vanity Fair and marveling how this atheist and Marxist guy managed to get this job in them US of A. And I remember silently thanking Graydon Carter for having the guts to give that guy a forum.

Over the years, I had many reactions to Hitchens. Some positive, some negative. On the good side, I never stopped appreciating his command of the English language and his immense knowledge. Unlike darlings of the intelligentsia (e.g. luminaries like Slavoj Zizek) he never showed off just for the sake of letting the reader know how great he could be and he always explained openly and clearly where he was coming from and why he was advancing whatever thesis he was advancing.

When Banksters Eyes Are Smiling

My long time readers will remember that, for almost six months now, I have been maintaining that the Eurozone crisis was an artificial one, engineered by the bond holders to get all of their money regardless of the risk premiums they got for their investments.

Recent developments seem to confirm this notion.

If you remember, this whole idea began with Irish government underwriting some banking bonds at the urging of Merrill Lynch to restore "market confidence:" As Michael Lewis put it:

It would have been difficult for Merrill Lynch’s investment bankers not to know, at some level, that in a reckless market the Irish banks had acted with a recklessness all their own. But in the seven-page memo to Brian Lenihan—for which the Irish taxpayer forked over to Merrill Lynch seven million euros—they kept whatever reservations they may have had to themselves. “All of the Irish banks are profitable and well capitalised,” wrote the Merrill Lynch advisers, who then went on to suggest that the banks’ problem wasn’t at all the bad loans they had made but the panic in the market. The Merrill Lynch memo listed a number of possible responses the Irish government might have to any run on Irish banks. It refrained from explicitly recommending one course of action over another, but its analysis of the problem implied that the most sensible thing to do was guarantee the banks. After all, the banks were fundamentally sound. Promise to eat all losses, and markets would quickly settle down—and the Irish banks would go back to being in perfectly good shape. As there would be no losses, the promise would be free.

As I noted in July, this was both an amazing and an ironic development:

The bondholders didn’t even expect to be made whole by the Irish government. Not long ago I spoke with a former senior Merrill Lynch bond trader who, on September 29, 2008, owned a pile of bonds in one of the Irish banks. He’d already tried to sell them back to the bank for 50 cents on the dollar—that is, he’d offered to take a huge loss, just to get out of them. On the morning of September 30 he awakened to find his bonds worth 100 cents on the dollar. The Irish government had guaranteed them! He couldn’t believe his luck. Across the financial markets this episode repeated itself. People who had made a private bet that went bad, and didn’t expect to be repaid in full, were handed their money back—from the Irish taxpayer.

Incidentally, the title of Michael Lewis' article was "When Irish Eyes Are Crying."

Once the free market rule was broken, that is, if you are a bankster, you are now entitled to your gains but if you lose, we, the people, will take care of the bill, the sky was the limit. Banksters eyes were indeed smiling.

Is Likud Getting Ready to Deal?

I stumbled upon a news items the other day. Israel's Prime Minister Netanyahu called a snap leadership election within Likud.

The Likud charter requires party leadership votes to take place at least six months before national elections.

Since Israeli general elections are scheduled for November 2013, this is way too early for Netanyahu to ask for a vote on his leadership. Consequently, people began asking questions:

Hanan Krystal, Israel Radio's political analyst, said Netanyahu might also opt to bring forward the next Israeli general election, due in November 2013, should Obama look likely to beat Republican rivals in the U.S. ballot. (...)

"At the highest echelons, they have long been saying that if Obama is elected for a second term, the carrot will be replaced by a stick," Krystal said. 

"In other words, the election of Netanyahu in January or February to head the Likud allows him to bring the (general) election forward in accordance with Obama's prospects, which are currently good," he said, adding that, if rescheduled, the national ballot would likely be held in mid-2012.

After the US elections a more vigorous push might become the norm but I think that push has already started. In a widely publicized recent speech Defense Secretary Panetta said that "Israel must get to the damn peace table"

He said Israel needed to take risks, including by breathing new life into moribund peace talks with Palestinians. When asked by a moderator what steps Israel needed to take to pursue peace, Panetta said: "Just get to the damn table." 

"The problem right now is we can't get 'em to the damn table, to at least sit down and begin to discuss their differences," Panetta said.

These are very strong words from any American senior politicians and certainly a first from a Defense Secretary. Panetta also urged Israel to end its isolation by cooperating with regional players:

Panetta suggested that Israel reach out and mend fences with countries like Turkey, Egypt and Jordan which "share an interest in regional stability." 

Turkey was the first Muslim state to recognize Israel, in 1949, but relations worsened last year when Israeli commandos boarded an aid flotilla challenging a naval blockade of the Palestinian enclave of Gaza and killing nine Turks in ensuing clashes. 

"It is in Israel's interest, Turkey's interest, and U.S. interest for Israel to reconcile with Turkey, and both Turkey and Israel need to do more to put their relationship back on track," Panetta said.

Notice the emphasis on Turkey. It is not an Arab country, it is not an immediate neighbor of Israel and yet the US Secretary of Defense singles it out as Israel's primary interlocutor. You know my views on why that is the case.

My guess is that Netanyahu is not just getting ready for Obama's second term. He is also getting ready for a likely fracture in his coalition in the near future. Lieberman is dogged by a corruption investigation which could bring him down. Also:

Another powerful coalition partner, Interior Minister Eli Yishai of the Orthodox Jewish party Shas, has been dogged by allegations of mismanaging a forest fire in northern Israel last year. A state audit on the affair is due out within months.

At the time of the Mount Carmel fire outside Haifa people called for his resignation (especially after he blamed the dead police chief) and if the audit finds him responsible he might not be able to remain in government.

In other words, it is rather likely that Netanyahu will call general elections in mid 2012.

If he wins, as expected and if my working hypothesis is correct, he will reach out to less conservative parties like Kadima for a national unity coalition. This way, they can sit at the "damn" table to bring a reasonable solution to that festering problem.

After months of playing hardball (withholding tax revenues after the UNESCO membership or announcing new settlements) Likud seems to have changed its tune. First they decided to release the tax funds and yesterday they called upon Palestinians to start negotiations ahead of the visit of the envoys of the Quartet.

And when they were rebuffed, very uncharacteristically for Likud, they complained about it loudly and publicly.

Wes Clark, Neocon plans and My Hypothesis: A Recap

When people discover your humble soap box on the Internet, they continue to read it from that moment onwards, but they rarely go back to see what points you might have covered before. That's understandable. And that's why, occasionally, you need go over previously made points to bring everybody up to speed.

The trick is to find an à propos moment to be able to do it without annoying your regular readers. So, when I spotted a post by Glenn Greenwald a couple of weeks ago, I thought that I could use it as a starting point to reiterate my working hypothesis on the Middle East.

Greenwald's piece was about a speech delivered by Wes Clark, the former commander of NATO forces in Europe. It entailed a remarkable claim.

You can watch the clip here.

General Clark tells the story of a chance encounter with a Pentagon employee several weeks after 9/11. This officer tells Clark that he had just found out that the US was going to attack Iraq. Clark runs into him again six weeks later:

Six weeks later, I saw the same officer, and asked: “Why haven’t we attacked Iraq? Are we still going to attack Iraq?”
He said: “Sir, it’s worse than that. He said – he pulled up a piece of paper off his desk – he said: “I just got this memo from the Secretary of Defense’s office. It says we’re going to attack and destroy the governments in 7 countries in five years – we’re going to start with Iraq, and then we’re going to move to Syria, Lebanon, Libya, Somalia, Sudan and Iran.”[emphasis Greenwald]

Clark believes that this was a policy coup (I assume he means that it is like a coup d'etat that only takes over a policy area) and he is convinced that a half a dozen people, like Wolfowitz, Rumsfeld, Cheney (and probably Richard Perle, Elliott Abrams etc), took control of American foreign policy and steered it to "to destabilize the Middle East, turn it upside down, make it under our control.”

The idea that there was an early list of countries to be turned upside down and placed under US control is intriguing. And it does not surprise me.

And Now For Something Completely Different

For some reason, I am convinced that my tiny readership would not require a link for the title.

The title is a propos because a couple of days ago, a good friend of mine sent this link:

http://xkcd.com/

a site which bills itself as a Webcomic of romance, sarcasm, math and language.

Why is this a propos?

That's why:

http://xkcd.com/16/

By the way, I am not a huge Python fan, I watched everything they produced, I get their humour and I understand their importance. This site is way beyond that. I kept clicking through cartoons, nodding and smiling all the way.

Next time I am in Canada I am buying a couple of his posters.

Common Misconceptions About the Eurozone Crisis

Lately, I have been talking with friends about the financial crisis in Europe. Some of them are very well informed, others formed a basic opinion through occasional glances to online news sources. But the surprising thing is that they all share the same common misconceptions and do not know why the crisis happened and why it is very hard to solve.

I thought I should perhaps address these issues and spare my future dinner companions of long discussions by simply pointing to this post.

1) We need to save Greece (or GIIPS) out of solidarity

"We" are not bailing out or saving Greece. And what we are doing has certainly nothing to do with solidarity. What "we" are doing is bailing out and saving German and French banks. And by extension US banks.

Take a look at the two charts on that linked June post and you will see it immediately. Their exposure to Greek debt is about $120 billion. Their total exposure to Greece, Ireland, Portugal and Spain is $900 billion. Note that this is not GIIPS as Italy is not included in that exposure. You don't want to know what their exposure looks like with Italy in the equation.

And "we" are bailing out US banks by extensions. No one knows for sure the extent of their exposure because most of it is hidden through French and German banks but what is known is enough to make Fitch to ring alarm bells. You could say that it is only fair that "we" return the favor as the US bailed out many European banks (chief among them, Deutsche Bank and Société Générale) with the first TARP intervention. Without it both banks (and many others) probably would have gone bankrupt.

Palestinians and the UN Saga

A few weeks ago, I wrote about the significance of Palestinian membership to UNESCO.

A largely overlooked consequence of this membership was their almost automatic acceptance to other agencies like WIPO and IAEA. Since there are, not one but two US laws that automatically cuts funding to any UN agencies that allows Palestine membership, the US could find itself unable to participate in the decision making process of the World Intellectual Property Organization or the International Atomic Energy Agency. UN rules do not require the expulsion of members who fail to pay their dues. But they strip them of their vote and presence at the table.

At a time when people worry about a nuclear Iran posing a mortal threat to Israel, it would have been ironic for the US to quit the decision-making process of the Agency that deals with nuclear monitoring just to support Israel.

Not surprisingly, the corporate media did not pay much attention to that potentially embarrassing and costly repercussion. It was mostly online sites that discussed the issue. MJ Rosenberg lamented the shortsightedness of the US foreign policy and its blind subservience to Likud's vision. There was another reference in Americablog, which erroneously stated that the US left UNESCO and asked whether WIPO and ITU would be next. ITU is the international telecommunication body and chief among its concerns is the Internet. Clearly, being removed from that would also be a major headache for the US.

But to me, the real question is this: How come the Palestinians did not make a lot of noise about their intention to apply to these organizations?

For instance, UNIDO's biennial General Conference started yesterday and the outgoing chair is Iran. Why not give your dossier right now?

More importantly, why not publicize your next move?

That would almost certainly attract a lot of attention and start a whole new debate. Especially in the context of IAEA and the Iranian monitoring issue. In that case, it is not just the US interests that are in jeopardy but Israel stands to lose a lot as well.

Since the two US laws in question were written with specific language that precludes to introduction of a national security waiver, the Obama administration is in no position to prevent the US from leaving its chair empty in these critically important agencies.

In the past, the US were able to browbeat most member nations, as they did with WHO, who refused a Palestinian bid in 1989 because George Bush the father told them he would cut funding to the organization. John Bolton, who, like every neocon, is not very bright, recommended that the US threatens every organization and withdraws from all of them, if need be.

Except, this time around it would be a disaster for the US and Israel.

So, how come the Palestinians are not even mentioning the possibility?

Is it possible that my contrarian hypothesis is correct and a change is in the offing?

This Is Not Good

Nato helicopters from Afghanistan have intruded into north-west Pakistan and attacked a military checkpoint near the border, killing as many as 25 Pakistani troops, intelligence officials in the country have said.

As they did before, Pakistan promptly closed off its border to stop all supply trucks going into Afghanistan.

This comes after a sustained propaganda campaign, which included this damning documentary. Also also, right after the memogate, which cost the Pakistani Ambassador to the US his job.

I don't know if there is some sort of plan behind this or if this was done by frustrated soldiers who are convinced of that Pakistan is playing a double game.

Either way, this is not good news. Pakistan is a very volatile country, and for me, its itchy fingers on a nuclear stockpile is much more worrisome than a nuclear Iran could ever be.

Tahrir Square 2.0

A distinguished member of my tiny readership inquired why I was not commenting on the recent events in Egypt.

The reason for my reluctance to write about Egypt is a focus issue. For the most part, I tend to write about the long game, that is, I try to present a coherent perspective anchored in an explicit framework. I find the short game (the daily news) distracting and conducive to "he said, he said" type of analyses. Also, I would like to stay away from moralizing observations and that is hard to do if you deal with the sound and fury of daily events.

There is a complex game being played out in Egypt and the two main actors, the army and the Muslim Brotherhood are taking unusual steps that complicate the situation further. Field Marshall Tantawi, the artist formerly known as Mubarak's poodle, is a wily adversary but he has too many constraints. The Brotherhood, being no slouch themselves, are using a familiar playbook and countering his moves with gusto. But, they, too, have limited options.

Syria The Denouement Rapidly Approaching

My tiny readership will remember that I predicted many months ago that Turkey will play a pivotal role in removing Bashar al Assad and his government from power.

That prediction made sense in light of my hypothesis that the US was in the process of undertaking a large scale transformation of the Middle East to control the distribution of oil and gas and entrusting Turkey with the regional super power role.

It looks like things are evolving in that direction.

When the Arab League suspended Syria on 12 November, King Abdullah of Jordan went on BBC World News Television and said:

"If Bashar has the interest of his country [at heart] he would step down, but he would also create an ability to reach out and start a new phase of Syrian political life," 

Iran and Israel

If you have been reading international news headlines lately, you must have noticed a flurry of military threats emanating from Israel about Iranian nuclear installation.

The process began in early November with Shimon Peres declaring that "military option against Iran was closer." Ehud Barak chimed in and said that he cannot rule out the military option against Iran.

Russian President Medvedev promptly reacted to this saying that such overheated statements were very dangerous and a military action could have grave consequences

A couple of days later, Leon Panetta, US Defense Secretary joined Medvedev and issued a warning against such an attack.

Since then, the back and forth has been continuing. A friend of mine recently told me that he believed Israel would attack Iranian installations, like the fabled Operation Opera against Saddam's Osirak reactor. And I have been hearing the same view from a number of observers I respect.

However, my contrarian view is that there will be no such attack.

Saudi Arabian Succession and the Future of the Middle East

Saudi Arabia's strategic importance and the attention it gets in corporate media are inversely proportional.

When Crown Prince Sultan bin Abdul Aziz al Saud died on 22 October, we got the usual commentary about how he was the Minister of Defense from 1962 onward and how he dealt with every US president since JFK.

To their credit, on that day, Daily Beast got the old CIA hand and presidential adviser Bruce Riedel* ask the very pertinent question about Crown Prince Nayef and his chances to become king. Despite the existence of an Allegiance Council created to ratify the next in line, most people assume that Nayef will succeed his half brother Abdullah bin Abdul-Aziz al Saud, who is also quite old and quite ill.

Nayef is a hardliner and he is likely to reverse the modest reforms started by the current king Abdullah. He also hates Iranians with a passion and he has close ties to the Wahhabi clerics. The fact that he hates Al Qaeda seems to reassure some people in Washington but I do not share their perspective of benign neglect.

Let's examine where we stand right now.

Papandreou's Move and the Future of Euro

Dubious Causality

When I first wrote about the Eurozone crisis, I objected to the misleading presentation of the problem as bailing out Greece (or Ireland or Spain or Portugal), when in fact, it was bailing out German and French banks whose combined exposure the Southern debt is almost a trillion euros.

This is done to create a bogus causality to shield reckless banksters. Blaming Greece is like saying the US housing bubble was caused by poor people who were offered huge mortgages. Banks pushed cheap money like there was no tomorrow and devised dubious ways to push some more. If my bank offers me ten million euros fully knowing I have no way of paying back, do I have the responsibility to tell them they are out of their minds?

So, everyone is scrambling to hide the banksters role in all this. They gambled for short term gains and lost. (Just like MFGlobal) But, as we know from the US, these banks are "too big to fail" which means that if they incur those losses they will need a serious injection of capital. Lending fresh money to Greece is a way of doing this. Just like AIG bailout was in fact a bailout of banks (Societe Generale, Deutsche Bank, Goldman Sachs and Merrill Lynch), this is an indirect way of rescuing these banks.

UNESCO Palestine Vote

When I am wrong about something, I am the first one to admit it.

A short while ago I wrote about the proposed Palestinian membership to UNESCO and stated that it was not a helpful move at this point. Today, I am here to state that I was wrong in that assessment.

If you read this blog you know that while AIPAC-Likud-Republican folks use similar language for the Palestinian move, my perspective have nothing to do with theirs as I do not share their disdain for the peace process and their cynicism about a viable two-state solution.

On the contrary, I am probably the only person alive who is convinced that such a solution is likely to take place in the next couple of years. My reasoning is based on the fact that such a solution is in the interest of the US who wants to control the distribution of oil and gas in a stabilized region and in the interest of Israel who would have a hard time maintaining the regional status quo and address its security needs after the fall of Mubarak (and the eventual fall of Al-Assad in Syria).

I believe that one way or the other a Palestinian state will happen.

It is because of that belief that I thought the Palestinian move at UNESCO was unnecessary. But now that it happened, far from considering it pointless, I can see the benefits of it.

A Curious Sale

According to Reuters, the US is selling three AH-1W Super Cora attack helicopters to Turkey. Nothing unusual there. Turkey routinely buys military equipment from the US and they already have several of these helicopters.

What is unusual is the fact that these three Super Cobras come from the current inventory of the Marine Corps. As the news item noted, "such sales from the U.S. military's current inventory are extremely rare."

It seems to suggest that Turkey will need these Super Cobras in the very near future. Since they already own ten of these choppers, I doubt that they need them for their almost routine incursions into northern Iraq in pursuit of PKK forces.

So the question I am not able to answer is: why is there a sense of urgency in bolstering Turkey's attack capabilities?

Al-Asaad vs Al-Assad

I know it is a lame joke but with Tintin opening this week, I couldn't resist.

In all seriousness, this is the story of two sides waging an information war and maybe even covert operations against each other.

In This Corner: Al-Asaad

At the end of July a Syrian Colonel by the name of Riad Al-Asaad called Agence France Press to declare that he has formed the Free Syrian Army with the aim to topple the Al-Assad regime.

My reaction was: Really? Who tips a government that they are coming after them?

In September the same guy provided a nice quote to BBC's Panaroma program:

In a safe house in a bordering nation, I met one of the highest ranking defectors from the army - Colonel Riad al-Asaad, a Sunni like most people in Syria. (...)

The colonel and other officers have defected to form the Free Syria Army. Unlike Egypt and Tunisia, he is not confident that Syria's regime will fall without bloodshed.

"We are counting of defections and there are large numbers occurring every day," he said during our meeting. "But this regime cannot be taken out except by force and if they do not agree to go peacefully we will have to take them out by force." 

When it became clear that the "bordering nation" was Turkey, on 4 October, the Turkish media reported his statements about Free Syria Army and BBC quoted him  on the same day about France's unhappiness with Syria.

On Tuesday, Turkish media reported that a colonel who had defected from the Syrian army was calling for a united front against Mr Assad. 

"Opponent forces in Syria should get united and close ranks until the regime collapses," Col Riad al-Asaad, who is sheltering in Turkey, told the Anatolia news agency.  

At that point, I made a note of him, as I thought he was someone with great media contacts waging a war of perceptions.

Did You Know...

...that "that Apple only pays £3.99 to manufacture a £600 iPhone."?

No wonder they had more cash than the US government during the budget crisis.

Of course they refer to the labor cost to assemble the phone not the entire phone itself.

Read the entire report at the first link.

The ruthless squeezing of labor is why there were "1 Million Workers. 90 Million iPhones. 17 Suicides."

I admired Steve Jobs the technological visionary.

The business guy who let this naked exploitation go on?

Not so much.

The US is Not Leaving Iraq

I am sometimes quite amazed how little reporting is done and how readily and fully the corporate media repeats official pronouncements.

Two days ago, President Obama announced that by the end of the year all US troops will be leaving Iraq. Whatever paper you read, everyone simply reported that the United States will be pulling out of Iraq completely.

Do you believe that after nine years, 700 billion dollars and 4,478 American casualties, the US would leave the second largest oil reserves in the Middle East and the fulcrum of oil and gas distribution network of the region, just because their stay might prove embarrassing to some Shi'ite politicians who are afraid of Moqtada al Sadr?

If you do, I know the owner of the Brooklyn bridge and I can get you a good deal.

Actually the US is not going anywhere:

But the fact is America’s military efforts in Iraq aren’t coming to an end. They are instead entering a new phase. On January 1, 2012, the State Department will command a hired army of about 5,500 security contractors, all to protect the largest U.S. diplomatic presence anywhere overseas.

And it will not be a passive security force chauffeuring diplomats in armored limousines:

The Department also has asked the Pentagon for twenty-four Blackhawk helicopters, fifty Mine-Resistant Ambush-Protected (MRAP) vehicles and other military equipment.

As Jeremy Scahill reported more than a year ago:

What is unfolding is the face of President Obama's scaled-down, rebranded mini-occupation of Iraq. Under the terms of the Status of Forces agreement, all US forces are supposed to be out of Iraq by the end of 2011. Using private forces is a backdoor way of continuing a substantial US presence under the cover of "diplomatic security."

Bank of America

Whenever I wrote about the Eurozone crisis, I maintained that after TARP in the US and the Irish move to make private debt public, banksters became determined to take risk out of their business. They now bristle when someone mentions haircuts and in each and every case, regardless of the risk premiums they charged (as in Greece), they want all of their money back.

In the last couple of days, Bloomberg reported that Bank of America is transferring its high risk derivatives (the so-called Credit Default Swaps or CDs) to a subsidiary that holds deposits. And it is doing so with the approval of Federal Reserve. What that means is that as the subsidiary benefits from insurance from Federal Deposit Insurance Corp (FDIC), high risk or toxic stuff becomes insured by the taxpayers.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Or as Yves Smith put it using more direct language:

 Remember the effect of the 2005 bankruptcy law revisions: derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs. So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral. It’s well nigh impossible to have an orderly wind down in this scenario. You have a derivatives counterparty land grab and an abrupt insolvency. Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that. During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle. It had to get more funding from Congress. This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors. No Congressman would dare vote against that. This move is Machiavellian, and just plain evil.

Isn't that a classy move on the part of banksters? They realized that with its credit rating in tatters Bank of America might find itself insolvent. How to protect all of our money? Why, we'll get it from the taxpayers. The first time we did it with TARP it begat the Tea Party. What can go wrong?

That's the kind of move that is hardly reported in mainstream media. And if you don't know about this stuff, you believe that Occupy Wall Street protesters are out of touch hippies who resent the hard working Galtian banksters.

Wikileaks and BoA

Speaking of Bank of America, aren't you curious to what happened to Wikileaks owning a hard disk full of incriminating stuff on them? Remember this from October 2009:

"At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive's hard drives," he said. "Now how do we present that? It's a difficult problem. We could just dump it all into one giant Zip file, but we know for a fact that has limited impact. To have impact, it needs to be easy for people to dive in and search it and get something out of it."

When in November 29, 2010 Assange confirmed that they were intending to take down a major financial institution every body knew that it was Bank of America. The Bank went into defensive, hired Booz and Allen (a security and defense contractor), started aggressively buying domain names that can be used against its executives and prepared a comprehensive attack plan on Wikileaks and its supporters (including Glenn Greenwald.

Then something strange happened. Wikileaks' Number Two and Assange's long time collaborator Daniel Domscheit-Berg abruptly left the organization and on his way out, he destroyed part or all of the Bank of America files. He confirmed their destruction but denied having done so. And of course Bank of America also denied any involvement.

Since then everyone forgot about the fraud files that were supposed to be so explosive that the Bank frantically made comprehensive plans to deal with the aftermath of their release.

------------------
Update:

This is from the BBC site about half an hour ago

Wikileaks founder Julian Assange said that since last December an "arbitrary and unlawful financial blockade" had been imposed by Bank of America, Visa, MasterCard, PayPal and Western Union. 

"The attack has destroyed 95% of our revenue," he said.

I guess that answers my question.

Reflections on Nobel Peace Prizes

When the Nobel Committee awarded the 2009 Nobel Peace Prize to President Obama (who had just two wars to his name at the time) the reactions ranged from polite puzzlement to sincere outrage. Since he added a few more wars or half wars (as Libya is known in Washington) to his record, the inappropriateness of the Committee's decision became more obvious with each passing year.

This year, the Committee chose a less controversial path and named three women "for their non-violent struggle for the safety of women and for women's rights to full participation in peace-building work." 

My first reaction was that, after the unfortunate 2009 decision, they should have left Ellen Johnson Sirleaf out, especially since this decision came just days before Liberian elections. Unlike others, I was not too concerned about merit, in terms of her brief association with Charles Taylor. Stuff happens and everyone makes mistakes. Actually, a good friend of mine had the definitive pronouncement on this when she emailed me that "elected officials should not qualify for the Peace Prize." After the Obama decision, I say amen to that.

My second thought was that it was an interesting decision as it rewarded two socially conservative and religious women who became more progressive through their struggle. I call them reluctant feminists: their starting point was not gender equality but rather a sense of injustice which eventually forced them to question the patriarchal precepts of their society, culture and even religion.

In the process, instead of moving away from their faith, they seem to have moved away from the patriarchal elements of institutionalized religions.

Dennis MacAlistair Ritchie R.I.P.

We live in a society where CEOs, hedge fund managers and all around Galtian overlords claim that they need to be compensated by the billions - that's billions with a b-  if we want them to perform.

Personally, I am not impressed by Fabrice Tourré or John Paulson.

I am impressed by people like Ray Tomlinson.

I bet you don't know who he is. He is the guy who invented the email as we know it (and love it) today. If there is one "killer application" in the last 30 years, to use venture capitalist jargon, e-mail is it.

Think about it, you may not be on FaceBook or use Windows in your computer but you use email everyday. Zuckerberg and Bill Gates are worth billions.

Tomlinson? Not so much. He is my hero.

So is or was Dennis Ritchie who passed on today. This is the guy who created the C language. C is a revolutionary software development language which gave programmers access to hardware like never before. Most computer programs you use have been created by this language or an extension of it, like C++ (pronounced cee plus plus) or C# (pronounced C Sharp). Even Java and JavaScript are cousins of that language tree.

He was also one of the critical creator of UNIX operating system. UNIX is still used in most heavy duty servers and for all mission-critical applications. It was also at the center of the Open Source movement, which eventually begat Linux, which is UNIX for ordinary folks.

If you remember, the widely praised luminary Steve Jobs used UNIX to develop the NeXT Operating System which later became the Mac OS X.

As someone put it today: "Ritchie's influence rivals Job's; it's just less visible."

So, next time a hedge fund manager or a CEO who was brought in to "slash" cost (which always means lay off working people) complain about "inadequate compensation" tell them about Dennis Ritchie.

Or Ray Tomlinson.

I'm Just Sayin'

Yesterday, a very good friend of mine sent me a link to a Turkish newspaper site. The piece claimed that Shimon Peres, the President of Israel, thanked the Turkish Prime Minister Erdogan profusely for his role in the imminent release of Private Shalit. Reportedly, Peres said that he was pleasantly surprised that Erdogan would leave everything aside and focus on the humanitarian aspect.

My friend's message was "well, I thought you were a contrarian idiot but maybe you are on to something here."

Since I don't regularly read Turkish papers (too much sound and fury, as I explained before), I googled "Shalit, Peres, Erdogan" and I got just a handful of relevant hits. Almost half of them were from Ynetnews, confirming the Turkish news site's report about Peres. The tone was what you would expect from Ynetnews but gave Erdogan credit for the successful completion of the mission:

"I was told that it was done by Prime Minister Recep Tayyip Erdogan," Peres said of the man who has been constantly attacking Israel since the flotilla raid on a Turkish Gaza-bound ship.  

They also corroborated the original story's observation that Peres would not provide any details about Turkey's role.

Then I stumbled upon two interesting sites. One was from Israel Hayom, except the date was not yesterday's but July 3 of this year and it said:

The recent warming of ties between Turkey and Israel continues, with senior Israeli officials confirming on Saturday night that Turkey has made efforts toward a breakthrough in negotiations for the release of abducted Israeli soldier Gilad Shalit. 

Although the Prime Minister’s Office has refused to comment directly on the intensive discussions over Shalit’s release, one senior Israeli official revealed that over the past few weeks, relations between Ankara and Jerusalem have strengthened, and that the subject of Shalit’s release from captivity had been discussed.

Remember that this covers the time period about which neocon folks said that Erdogan is trying to destroy Israel and to start World War III.

Then I found this site which bills itself as "the authoritative source on Pakistan's security and strategic affairs" and it confirmed the July story by linking to Zaman, a conservative Turkish daily very close to the current government:

Claims emerged in July that an Israeli-Turkish businessman gave Turkish Prime Minister Erdoğan a letter from Noam Shalit, the father of the soldier, asking him to convince Hamas to accept a German mediator's swap deal proposal. Erdoğan then reportedly pledged to handle the matter personally.

More importantly, there was this bit of information,

 Noting that Turkey was informed about the deal by Hamas ahead of the agreement, Davutoğlu said Turkey expressed support for the deal.

That sounds a lot like Hamas asked Turkey if they were fine with the deal before signing on the dotted line. I doubt that Turkey has ever had that kind of sway over Hamas.

Like Peres, Davutoglu (Turkish Minister of Foreign Affairs) would not say anything about Turkey's role other than this:

“Turkey is ready to contribute to every phase of this process,” he added.

What I find significant in all this is not that Turkey helped with the liberation of Private Shalit. I don't know what they did and I am not interested in giving them credit for a process about which I know next to nothing. What I find enlightening is that behind all the blustery rhetoric that got everyone worked up, Israel and Hamas clearly had trust in Turkey and were able to work with it to achieve a very important result for both sides. So much so that Hamas sought their final approval for the deal and Israel acknowledged their assistance.

Tellingly, no party divulged Turkey's role in the process, including the Turks.

I have been claiming that a process of stabilization and peace making has been set in motion in the Middle East and Turkey was given the role of honest broker in the region. And that was the primary reason for the fiery anti-Israel rhetoric, which gave them street creds, as it were, by providing a much needed distance from the US and Israel. This incident clearly shows that this new role could be used beneficially to achieve larger goals.

Moreover, Shalit was a major sticking point in all this and now that both sides claimed victory, his release could be the turning point towards serious negotiations for a two-state solution.

Maybe, just maybe, Lieberman's corruption case will come to a head soon and we will see some speedy changes without him flushing the peace process down the toilet.

Steve Jobs RIP

I was saddened to hear of Steve Jobs' passing. That is truly a young age and it is a terrible loss for the technology world.

But I hesitated to post anything about it because I had already written an in memoriam piece back in August, highlighting his unbroken record of genius moves.

Then, I read this quote from his 2005 Standford commencement speech and I knew that I had to salute the man one more time.

Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Coming shortly after his cancer diagnosis, this is a very profound and brave thought.

May he rest in peace.

UNESCO and the Palestinian Membership

UNESCO is one of the most important specialized UN agencies.

Its stated purpose is to contribute to peace and security by promoting international collaboration through education, science, and culture in order to further universal respect for justice, the rule of law, and the human rights along with fundamental freedoms proclaimed in the UN Charter. 

These are lofty goals and very important portfolios. Unfortunately, this specialized agency with a lot of potential is not really an independent institution as its activities are closely controlled and framed by the member states.

Partly because of that and partly because of the aimless management of a series lackluster Director Generals, it gradually faded into the background and by now it is an invisible agency that is routinely confused with UNICEF.

The current Director General, Irina Bokova is a very dynamic and capable person and she has been working tirelessly to put the agency back on the map. Unlike any other UN agencies, she has made gender equality the cornerstone of her mandate and has been working to transform UNESCO's work in education, science and culture by highlighting previously ignored areas of concern such as the secondary education of girls. But her efforts are generally thwarted (if not gently sabotaged) by the very vocal and dominant member states.

And they are well placed to be able to do that.

You see, UNESCO has three constitutional organs. One is the Secretariat headed by the DG, the second is the General Conference where all 190-plus members of UNESCO sit and the third is the Executive Board, which is composed of 58 member states chosen by the General Conference. They meet twice a year to examine the work of the organization and to decide on its budget.

The Board and the General Conference can modify, redirect and stop any UNESCO policy and activity. They can impose their vision upon the organization.

In that vein, these 58 ambassadors who make up the Executive Board met two days ago and voted to give Palestine full member status (more accurately, recommended to the General Conference such membership).

This is a pointless PR stunt on the part of the member states but the media reported it as UNESCO's board members making that decision, thereby giving the impression that UNESCO Secretariat and the DG has an in-house board (like that of a corporation) and that board made that decision. It was 54 member states that did that (40 voted in favor and 14 abstained).

The problem is that it is not the member states that will pay for the consequences of that vote but the organization itself. If you have been reading this blog, you know that my working hypothesis is that the US has a grand plan to stabilize the Middle East and part of that plan is to implement the two state solution. Along the way they need to pacify Likud and its partners (such as AIPAC domestically and Yisrail Beiteinu in Israel) by reacting strongly to symbolic pro-Palestinian gestures.

One such reaction could simply mean the end of UNESCO.

Kay Granger, chairwoman of the House subcommittee that oversees foreign aid, said U.S. funding for UNESCO could be cut if full membership was granted.

"Since April, I have made it clear to the Palestinian leadership that I would not support sending U.S. taxpayer money to the Palestinians if they sought statehood at the United Nations," Granger said in a statement.

"Making a move in another U.N. agency will not only jeopardize our relationship with the Palestinians, it will jeopardize our contributions to the United Nations," said Granger, who recently held up some $200 million of aid for Palestinians.

Obviously Granger is not part of my hypothesis, as she is a conservative congresswoman from Texas supporting AIPAC and Likud. She would have done so regardless.

But the point remains that, given their current chess game (and the upcoming election), the administration would be unable to even argue against such a vote (let alone stop it) and UNESCO could lose 22 percent of its funding just so that some member states could feel smug about rubbing Israel's nose in it.

I suggested a week ago that UN granting Palestinians statehood will mean very little. That is because of this:

There is no viable Palestinian state right now. A contiguous space needs to be negotiated. And right now is the best time to do so because of the dynamics created by the so-called Arab Spring.

If UN membership is meaningless symbolic victory, acquiring membership to a specialized UN agency is just an empty PR stunt. It will do nothing for Palestinian statehood and it could simply lead the US to leave the organization as they did under Reagan.

So, I would be amused with such a pointless move if it didn't put the organization in jeopardy. I would support it if it furthered the likelihood of Palestinian statehood.

But destroying UNESCO just to pull a stunt does not sit well with me.

Syria: Next Move?

Three days ago, facing strong Chinese and Russian resistance, the US and its European allies dropped their draft Security Council resolution to impose sanctions on Syria.

Yesterday, they abandoned any hope that they might find agreeable language for a watered down version of that resolution.

Enter Turkey:

Turkey is pressing ahead with plans to impose its own sanctions on Syria, despite European powers backing down from using the UN to punish the regime for its crackdown on the protest movement. (...)

In the absence of UN security council action, Turkey's move could be decisive in a six-month standoff between Syrian security forces and anti-government activists which has seen more than 2,700 civilian deaths and sharply destablised the region. 

Erdogan is preparing for a range of economic, military and political sanctions which will further damage the once-close relationship between the two states.

The timing and location of the expected announcement are interesting.

Is this the Beginning of the End for the Euro?

The first time I wrote about the economic crisis in Europe and the Greek debt issue I suggested that the most logical scenario for them is to default and get out of the Eurozone. With the new drachma they could devalue at will, I said, and they could increase their exports and get a large portion of the budget vacationers who are nowadays leery of traveling to North Africa and Egypt. Since staying within Euro was conditional upon accepting crippling austerity measures which makes the repayment of their massive debt impossible, I thought this was the sanest choice.

I even offered the relatively recent examples of Argentina and Russia, both of whom found rapid prosperity after defaulting. Yet they suffered mightily while vacillating towards that decision.

Fast forward two months, yesterday, Stergios Skaperdas, a professor of economics at the University of California at Irvine wrote this:

The demands go well beyond those prescribed by conventional economics. They will deepen the depression and make full debt repayment even less likely than it now is. Therefore, the clear, strong nudge is for Greece to default as soon as practicable. (...) 

Since Greek banks will become insolvent, they will have to be nationalised and preparations will need to be made for that. The insurance and pension funds will need to be bailed out, too. For both banks and funds to be bailed out, the country will need its own currency. Therefore, exit from the eurozone would follow. 

Professor Skaperdas believes that Greece's exit from the Euro is necessary because without its own currency the country could never recover:

"There is little doubt among economists that the easiest mechanism for a country to gain competitiveness is to have its currency depreciate. Hence, Greece having its own currency is the easiest path to gaining international competitiveness. Cars and iPhones will become more expensive but food might actually become cheaper and employment will pick up within a few months after the introduction of the new drachma. By contrast, unemployment and deprivation with no end in sight are the predictable results of following the troika's policies."

Moreover, he feels that, with and without Greece in it, the future of the Euro is rather bleak (and therefore it is best for Greece to leave now):

For the countries of the eurozone it has become apparent that there are only two clear options: political integration or breakup. Anything else is politically or economically unsustainable. Since there is no appetite for political integration, exit from the eurozone can be expected later anyway, when it could be even less advantageous for Greece.

Syrian End Game

I am not sure how many people saw this news item from a couple of days ago:

Turkey has seized a Syrian-flagged ship loaded with weapons, Turkish Prime Minister Recep Tayyip Erdogan has said.

He did not say where or when the vessel was stopped, but vowed to confiscate any arms shipments for Syria coming through Turkish waters or airspace.

As the Syrian army blocked any exodus to Turkey to prevent them using this as a pretext to intervene, I wonder if the recently announced enhanced patrolling of the Eastern Mediterranean, is less threatening for Israel and more problematic for Syria.

After all, he vowed to do it over and over again.

And as we know, statements are more important than actions.

Pakistan Worries

It looks like I am the only person worrying about Pakistan.

Two days after I posted my worries, on 13 August, someone abducted Warren Weinstein, an American development specialist, from his home in Lahore, Pakistan. He was 48 hours away from leaving the country indefinitely. Today, I wanted to find out what happened to him and after 20 Google pages, I realized that no one reported much about the story after his abduction. There was a mistaken news of his release on 25 August (which was promptly denied by the American authorities) and that was it.

Weinstein was identified as a development consultant working on a project called Pakistan Initiative for Strategic Development and Competitiveness (PISDAC). Following the Raymond Davis debacle, many people assumed that he was probably a CIA agent. The oddly militaristic name of the project and its affiliation with the US government (albeit through USAID) seemed to strengthened their assumption. Others vehemently denied that, pointing to the fact that he was an old man trying to do some good for humanity (interestingly the "old man's" age was reported as 63, as "believed to be in his sixties" and as 70).

Regardless of whether he was a NOC or a well-paid humanitarian, several things happened after his abduction (it is just a timeline, I am not making a causal assumption as in post hoc ergo propter hoc fallacy).

Palestinian Move and What It Means for the Region

A couple of nights ago, at a dinner party, someone told me that I was wrong about my analysis of the Middle East. As Mahmoud Abbas'  application for Palestinian statehood was met with a Netanyahu rebuke and an American veto, my interlocutor took this as a confirmation that "plus ça change, plus c'est la mème chose."

They said that they always knew that this would be the case, because "Jews would never let Palestinians have a state and they would never let the US to accept Palestinian statehood."

If you digest news on a day by day basis, I realize that you could presume that I was wrong in predicting that a Palestinian state was going to be a reality in the next little while. And if you took the threatened American veto at face value, you could conclude that, despite the Arab Spring and regime change in several countries, there was no change in the American and Israeli perspectives.

As you know, I see things differently. Just look at the subheading of this blog. And, nothing I observed in the last few days seem to disprove my hypothesis. I still believe that there is a grand plan to change the face of the Middle East and that the US is behind because it has no choice but control the global distribution of oil and natural gas (as the Middle East is the hub for 70-plus percent of both of these). I also think that, for the same reason, they had a hand in those recent regime changes and in encouraging Turkey to act like a regional super power willing to confront Israel.

Given my assumptions, I think the Abbas move fits nicely in that gambit as it provided several advantages:

a) It brought the issue back on the agenda. That sounds trite but it was not self evident until a few weeks ago. With a global economic crisis going, Europe in disarray and American political institutions completely paralyzed there was no way to start a new process. Now they have to.

It presented the Israelis with a new deadline to start talking in earnest. Their Cold Peace partner Egypt is no longer able to support their every move, their only ally in the region is acting with open hostility and one of their neighbors, Syria, is about to implode bringing with it most of Lebanon. They simply cannot rely on the US veto and act like the world has not changed.

The Americans were hoping to push Netanyahu government to the negotiation table and now they know that even if they veto the UN statehood bid, Israel has no choice but talk to the Palestinians. And this time not for appearances but to achieve a lasting peace, as everything around them is about to go up in flames.

Instead of using Egypt to send this message to the Israeli government (which might have led to undesirable responses given the imminent security issues) the US used Turkey and its willing PM Erdogan to let them know that it is time to adapt to the new regional realities.

b) It made Abbas look presidential. Unlike Hamas leaders, Abbas is internationally well-known and well-regarded. The UN bid made him look good, like he was capable to stare down the mighty US.

Actually, if the US pressure was genuine, I believe he would have folded quickly, as he has no money, no power and no real friends and the move has only symbolic value. Interestingly, this time around when Lieberman suggested that Israeli government withhold customs duty payments to the Palestinian Authority, Arab countries stated that they would make up any shortfall. As we know from the chronic fiscal problems of the PA, those oil-rich Arab states were never that generous in the past. And the EU said that it would continue its financial assistance to the PA.

Abbas emerged from this fake confrontation as a leader and as the undisputed leader of the Palestinian people. This will prove to be invaluable for the subsequent steps. No one from Hamas will be able to make a claim to that position and no one will challenge his authority to represent all Palestinians. He is the preferred interlocutor both for the Israelis and the Quartet and he now looks like he was chosen by his people for the historic journey.

c) It gave the US cover. They looked like they opposed it and were prepared to veto it. As Jeremy Bowen put it:

President Barack Obama says that now the US will veto the application if ever it comes to the vote in the Security Council. He made a speech that was so pro-Israeli it shocked even the Israelis.

This is important for domestic consumption where AIPAC has extraordinary access to media and can influence the debate and the Republican candidates can fake sincerity when it comes to Israel.

It also enables them to go to Likud folks and say, "look we tried everything but you know the regional realities, there is no way we can put down Turkey and Egypt and even if we could that would leave Iran as the regional power. Do you really want that?"

In other words, from where I sit, all of this makes sense. As I suggested before, there will soon be major steps towards a Palestinian state.

Having defended my contrarian logic, let me just make a side note about the "because Jews will never let..." argument, as it is more common than most people realize. This is the danger of conflating Israel with Jewish people that I have been talking about. It enables people to project their pre-existing prejudices onto a community using the actions of a specific government with a specific ideology.

Let me explain it this way: When people talk about WWII, they always refer to Nazis, as in, Nazis did this and Nazis did that, and they are always very careful not to substitute Nazis with Germans or a whole host of Central and Eastern European people, even though, from the perspective of shared ideology (antisemitism) they could easily do so. In this case, they are doing the opposite: they are conflating Israel with Likud and Ysrael Beiteinu and then conflating that specific Israel with Jews everywhere.

Thank you neocons! Mission accomplished.

As I said before, I am not Jewish. But I am quite capable of seeing that Jews don't have much to do with Likud government's self destructive refusal to negotiate in good faith with Palestinians for a two state solution. As far as I know, a majority of the Jewish people in diaspora and in Israel are in favor of that solution. Josh Marshall, a self-defined Zionist, is very representative of that preference and this is what he says:

I'm a Zionist. I deeply believe in a two-state solution, with the '67 borders as the starting point for the discussions. I believe that for many reasons. But the most important of those is that I believe it is the best and only viable path forward for Zionism and the State of Israel.

So, it is not the American Jews who are in cahoots with Likud but AIPAC, the neocons and of course the evangelical Christians who believe the end of times is tied to the eventual destruction of Israel (which, paradoxically, makes it a desirable event for them).

In fact, when you look at the electoral results, American Jews have always voted overwhelmingly for Democratic candidates. Clearly, if they were the masters of the universe everyone seems to believe, they would have supported the Republicans and especially their evangelical wing. I will grant  that the neocons and AIPAC are very loud with excellent access to media and their views are presented as the views of American Jews but they really are a tiny minority among Jewish people.

Greece, Eurozone and Banksters: An Update

A while back, when I commented on the Greek debt and the Eurozone crisis, I suggested that the most obvious solution for Greece is to default, pull out of the Eurozone and rely on cheap drachma to get all the budget tourists who are too afraid to go back to Tunisia and Egypt.

It sounds like facetious advice but I thought that since default was inevitable (considering the size of the debt and crippling austerity measures) instead of making people suffer for a long time to end up at the same place, why not rip the bandage quickly and hope that tourism and exports fueled by cheap drachma will pull them out of that pit.

I also said that the reason Eurozone countries are being targeted by banksters and their clients, the rating agencies, is because, in this high stakes poker game, they are hoping to persuade European governments to create new and safer mechanisms that would back their high risk sovereign debt bets. To that effect, I gave the example of Irish government who got persuaded by Merrill Lynch that if they guaranteed the private debt of Irish banks, all would be fine. Overnight, the Irish taxpayers ended up with $100 billion new debt and the banksters got all their money secured. Just like Goldman Sachs taught Greek government how to hide those massive debts while giving them cheap money, Merrill Lynch conned them into bailing out the folks who made those risky bets.

The Irish case opened a new chapter for the banksters. Why take a haircut? Ever? Why not make risky bets, gets huge bonuses and then push governments into a corner and make them assume the risk behind those investments. So, when they realized that a likely Greek default was not enough to budge European governments, they downgraded Portuguese debt to junk to strongly suggest that a Greek default will be contagious and that the ensuing crisis may not be contained an the Euro will be in jeopardy. They kept saying ominously that Spain and Ireland will be next.

But the vacillation did not end.

Politicians are politicians. Clearly, Merkel has been in a tough spot with her support declining and the support for her coalition partner (FDP) collapsing. Her other partner, the conservative Bavarian CSU, is adamantly opposed to any bailout that will cost money to German taxpayers.

To make European governments understand the stakes, they chose a bigger target this time and downgraded Italian debt. The threat is real and the target is well chosen:

Any further adverse developments in Greece will precipitate a run on Italy – involving investors selling Italian government debt.  

With Berlusconi mired in scandals and Italy holding five times the sovereign debt of Greece, the assumption is that Eurozone governments cannot let that happen.

And if that threat does not work, France is next. Don't think France is immune because Sarkozy pretends to be Merkel's equal. France's fundamentals are worse than Spain, with debt hovering around 85% of GDP (Spain's is just 65%).  And as I mentioned in June, French banks have a huge exposure to Greek debt (and to Irish, Portuguese and Spanish debts). The French and German banks are holding more than a $900 billion of risky bonds in Greece, Ireland, Spain and Portugal. That is not chump change.

Just today, Siemens, who had previously applied and received bank status, moved 500 million euros from a French bank and deposited to ECB. That's one way of signalling that French banks are shaky.

The thing to remember is that they will not pull the trigger. They will simply make the target bigger and bigger and hope that someone will blink.

Someone will.

My money is still on the banksters.

Two Interesting Articles

Recently, I came across two interesting articles. They were written by Saudi writers and published by Saudi papers on 7 June 2011.

On June 7, 2011, two Saudi columnists – the liberal Khalaf Al-Harbi, of the Saudi daily 'Okaz, and Fawaz Al-'Ilmi, of the Saudi daily Al-Watan – published articles comparing Israel's situation to that of the Arab countries. Al-Harbi opined that the secret to Israel's success lay in its democratic regime and its respect for the human rights of its citizens, while Al-'Ilmi wrote that Israel's prosperity was due to its investment in education and science. It should be noted that these articles are a rare phenomenon in the Saudi government press.

I honestly don't know what to make of this.

The last sentence of the excerpt is a huge understatement. Saudi papers do not publish articles that openly praise Israel, especially for its democracy and respect for human rights. Besides their deep seated hatred of Israel such a statement would invite an obvious comparison with Saudi Arabia where democracy and respect for human rights of its citizens are almost sacrilegious concepts.

I wonder if it should be taken as a sign of the things to come.

Speaking of that, I hear that Netanyahu has just offered direct talks with Abbas on Palestinian statehood.

BBC notes that

The Jerusalem Post said this would have Israel agreeing "with reservations" to enter talks on the basis of the 1967 borders with mutual land swaps while the Palestinians would agree to the mention of Israel as the nation state of the Jewish people.

Do you remember who predicted that?

The Problems With Neo-con Perspective

A friend of mine and a reader of this blog sent me a link to David Warren's latest column entitled "the Man Who Could Trigger a World War."

Warren claims that the Turkish PM Erdogan is a dangerous antisemite who is very keen on creating a casus belli with Israel to start a world war.

This is in stark contrast to what I have been saying on this humble soapbox.

To me, Erdogan's real or perceived antisemitism is besides the point. What I am interested in is looking a large number of variables (beyond statements) and trying to understand the meaning and direction of the large scale changes that are taking place in the Middle East.

In that vein, I claimed that the so-called Arab Spring in Tunisia and Egypt was actually a military coup d'etat. And given the beholden nature of their armies to the US, for a coup d'etat to be possible the US had to be in on it. Which means (without sounding like a functionalist) these acts had to fit a larger purpose. I also suggested that Israel was a reluctant actor for some of it (i.e the Arab Spring and regime change in Egypt) and a willing participant for other aspects of this grand design (i.e. the kabuki theater with Turkey).

Obviously, one of us is dead wrong.

Normally, the intellectual gap that separates me from neo-cons is such that I would not comment on their arguments. Nothing I could say would be intelligible to them and nothing they could say would be meaningful to me. But looking more closely to that gap might be interesting for my tiny readership.

The neo-con understanding of the world is a basic and permanent us-vs-them framework with simple ideological filters.

The first one is the importance of political discourse and messages of strength and toughness conveyed to your friends and foes.  Their most often used phrase is "sending a message" and because of that they often advocate extreme military measures and a shoot-first-talk-later approach.

Secondly, they firmly believe in American exceptionalism. As you know, American exceptionalism is the ideological filter that enables you to condemn Act X when done by another country but hail the same Act X as legitimate and good when performed by the US. The filter's indispensable ingredient is the assumption that your side is inherently pure and well-intentioned. And as such it is an integral part of all your explanations.

With such a simple framework this is how you make sense of these recent events:

Two Hints About The Future

Turkish Prime Minister Erdogan is in Egypt.

He was greeted by large and enthusiastic crowds and his speech was carried live on TV. He has just addressed the League of Arab Nations and his trip will cover all three countries that experienced regime change, namely Tunisia, Egypt and Libya.

Clearly, this is a show of force on the part of Turkey, claiming not only the Middle East but North Africa within its zone of influence. Even Somalia was not too far away for Erdogan. If the term Muslim Brotherhood was not taken (and somewhat tainted) he would have claimed it. As Al Arabiya News reported:

Egypt has traditionally seen itself as the leading diplomatic player in the Arab region. But its position has been eroded by wealthy Gulf countries, such as Qatar, and lately overshadowed by Turkey, with its fast expanding economy.

What was interesting (and what prompted me to comment on it) was this:

He told the Arab League that before the year's end "we will see Palestine in a very different situation".

The Downside of Turkey's Regional Ascent

My initial motivation for starting this blog was to dispel some erroneous notions about the Arab Spring. Consequently, almost without realizing, I ended up writing more than I wanted to about the Middle East in general and Turkey's new regional role in particular.

Lately, I noticed that, while trying to argue how the mainstream narrative does not explain the regional realities, I might have given the impression that I view Turkey's regional power status positively. That is a misleading impression. I believe that Turkey's actions will be beneficial in stabilizing the region and solving two of its long-running problems. But I seriously doubt that Turkey will benefit from these actions in the long run.

Let's take a look at the overall picture.

Turkey and Israel: Is This For Real?

While I was away, my theory about Turkish Israeli tension being essentially a kabuki theater came under attack.

It became a tale told by an idiot full of sound and fury, signifying...well, let's see.

My Turkish friends are telling me that I have been wrong about the whole thing, as it has become clear that Lieberman is a belligerent idiot and Netanyahu is an empty suite who is only interested in being a Prime Minister. Neither of them cares about the long term interests of the Jewish state, they say. According to them, this dynamic duo is doing everything to alienate Israel's only friend in the region.

My Jewish and Israeli friends are telling me that Erdogan is clearly an out-of-control antisemite playing a dangerous game. They say that he began by asking for an apology, he escalated it to a demand for lifting of the Gaza blockade and now he is pretending to be the Sultan of the Middle East. They claim that he is doing all that on purpose to make it impossible to normalize Turkey's relations with Israel.

I will grant that Lieberman is probably a belligerent lightweight and as Netanyahu is likely a poseur. And Erdogan looks and sounds like an antisemite with delusions of grandeur.

But there is a big jump from these observations to a conclusion that these two countries are at each other's throat.