Monthly Archives: October 2008

NEWS & VIEWS ROUNDUP & EDITOR’S COMMENT: October 10

As crisis spreads, global approach weighed

The United States and Britain appear to be converging on a similar blueprint for stemming the financial chaos sweeping the world, one day before a crucial meeting of leaders begins in Washington that the White House hopes will result in a more coordinated response.

The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans. [continued…]

Moment of truth

… on Wednesday the British government, showing the kind of clear thinking that has been all too scarce on this side of the pond, announced a plan to provide banks with £50 billion in new capital — the equivalent, relative to the size of the economy, of a $500 billion program here — together with extensive guarantees for financial transactions between banks. And U.S. Treasury officials now say that they plan to do something similar, using the authority they didn’t want but Congress gave them anyway.

The question now is whether these moves are too little, too late. I don’t think so, but it will be very alarming if this weekend rolls by without a credible announcement of a new financial rescue plan, involving not just the United States but all the major players.

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution. [continued…]

Panic attacks: Voters unload at GOP rallies

The unmistakable momentum behind Barack Obama’s campaign, combined with worry that John McCain is not doing enough to stop it, is ratcheting up fears and frustrations among conservatives.

And nowhere is this emotion on plainer display than at Republican rallies, where voters this week have shouted out insults at the mention of Obama, pleaded with McCain to get more aggressive with the Democrat and generally demonstrated the sort of visceral anger and unease that reflects a party on the precipice of panic.

The calendar is closing and the polls, at least right now, are not.

With McCain passing up the opportunity to level any tough personal shots in his first two debates and the very real prospect of an Obama presidency setting in, the sort of hard-core partisan activists who turn out for campaign events are venting in unusually personal terms. [continued…]

McCain supporters in Bethlehem, PA:

Editor’s Comment — There are indications that after having fanned the flames of Obama-hatred among his supporters, McCain is now recognizing the ugliness of what he has provoked.

John McCain can’t play the role of being the guy you’d like to share a beer with. Instead, what he should be asking himself is whether he wants to rely on the support of people he’d be scared to share a beer with.

When a candidate starts being disgusted by his own supporters, it’s time for some soul-searching. McCain doesn’t need to consider how he’d answer the phone at 3am; he needs to think about how he lives with himself after he’s lost this election.

The class war before Palin

… over the past few decades, the Republican Party has driven away people who live in cities, in highly educated regions and on the coasts. This expulsion has had many causes. But the big one is this: Republican political tacticians decided to mobilize their coalition with a form of social class warfare. Democrats kept nominating coastal pointy-heads like Michael Dukakis so Republicans attacked coastal pointy-heads.

Over the past 15 years, the same argument has been heard from a thousand politicians and a hundred television and talk-radio jocks. The nation is divided between the wholesome Joe Sixpacks in the heartland and the oversophisticated, overeducated, oversecularized denizens of the coasts.

What had been a disdain for liberal intellectuals slipped into a disdain for the educated class as a whole. The liberals had coastal condescension, so the conservatives developed their own anti-elitism, with mirror-image categories and mirror-image resentments, but with the same corrosive effect. [continued…]

Hearts and votes in Appalachia

… when Obama visits the region, [poet, author and purebred Appalachian, Ron] Rash recommends that he say the following: “I know that for well over a century, the only time people come to Appalachia is when they want something. They want your coal, your timber and they want your vote. They take what they want and they leave and they don’t come back until they want some more. I’m not going to do that.

“I’ll make a vow to you today that a year from now, I’ll be back. And we’ll discuss what I’ve done and whether you feel like I’ve honored what I’ve said here today. I’ll come back this time of year for as long as I am president.”

Obama should also say that though he is different in many ways, he is much the same. He didn’t grow up with wealth, and had to work hard, as they do. On the war — a prickly point in these parts — Obama should recognize that Appalachia has contributed more than its fair share to America’s wars.

He should say: “We may disagree about this war, but one reason I disagree is because this region more than any other has sent soldiers into battle for this country. And part of honoring that is not sending them into a war that has not been well thought-out.”

Straight talk without condescension is all anyone asks. It may be all Obama needs to finish the race. [continued…]

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ANALYSIS: The end of Western hegemony

Crisis marks out a new geopolitical order

Blame greedy bankers. Blame Alan Greenspan’s careless stewardship of the US Federal Reserve. Blame feckless homeowners who took out loans they could never expect to repay. Blame politicians and regulators everywhere for closing their eyes to the approaching tempest.

All of the above are culpable. I am sure there are even more villains lurking out there. Sometimes, though, it is worth looking through the other end of the telescope. The wreckage of the financial system holds up a mirror to the changing geopolitical balance. It offers advice, and a warning, as to what the west should make of the emerging global order.

Until quite recently, the talk was about the humbling of America’s laisser faire capitalism. The US government’s $700bn bail-out was the price to be paid for past hubris. For reasons that still elude me, one or two European politicians seemed to delight in the troubles of an ally that still guarantees their security.

Schadenfreude comes before a fall. Solid, conservative Germany has been among the European nations forced to shore up its banks. Angela Merkel, the chancellor, has been driven to assure German voters publicly that their savings are safe.

Belgium and the Netherlands have rescued Fortis. Ireland and Greece have issued blanket guarantees to bank depositors. Others have done something similar. Most dramatically, Gordon Brown’s British government has part-nationalised all of its leading banks in a desperate bid to crack the ice of the credit freeze.

If the toxic mortgage securities and opaque credit swaps that infected the world’s financial system came with a made-in-the-US stamp, European banks were eager buyers. For the humbling of America, we should substitute the humbling of the west.

Asia, as we have seen in the markets this week, is not immune from the shocks and stresses. Japan, which has only quite recently emerged from the long twilight of its 1990s banking collapse, has now been hit anew by the global storm. China felt compelled this week to follow western central banks in cutting interest rates. So did a host of smaller Asian countries. Recession in the US and Europe will slow the growth of Asia’s rising economies.

Standing back, though, two things mark out this crisis as unique. First, is its sheer ferocity. I am not sure how useful it is to make comparisons with the 1930s. History never travels in a straight line. What is evident is that governments and central banks have had no previous experience of coping with shocks and stresses of the intensity and ubiquity we have seen during the past year.

The second difference is one of geography. For the first time, the epicentre has been in the west. Viewed from Washington, London or Paris, financial crises used to be things that happened to someone else – to Latin America, to Asia, to Russia.

The shock waves would sometimes lap at western shores, usually in the form of demands that the rich nations rescue their own imprudent banks. But these crises drew a line between north and south, between the industrialised and developing world. Emerging nations got into a mess; the west told them sternly what they must do to get out of it.

The instructions came in the form of the aptly-named Washington consensus: the painful prescriptions, including market liberalisation and fiscal consolidation, imposed as the price of financial support from the International Monetary Fund.

This time the crisis started on Wall Street, triggered by the steep decline in US house prices. The emerging nations have been the victims rather than the culprit. And the reason for this reversal of roles? They had supped enough of the west’s medicine.

A decade ago, after the crisis of 1997-98 wrought devastation on some of its most vibrant economies, Asia said never again. There would be no more going cap in hand when the going got rough. To avoid the IMF’s ruinous rules, governments would build their own defences against adversity by accumulating reserves of foreign currency.

Those reserves – more than $4,000bn-worth at the present count – financed credit in the US and Europe. There were other sources of liquidity, of course, notably the Fed and the reserves accumulated by energy producers. It also took financial chicanery to turn reckless mortgage lending in to triple A rated securities. But as a Chinese official told my FT colleague David Pilling the other day: “America drowned itself in Asian liquidity.”

Owning up to the geopolitical implications will be as painful for the rich nations as paying the domestic price for the profligacy. The erosion of the west’s moral authority that began with the Iraq war has been greatly accelerated. The west’s debtors cannot any longer expect their creditors to listen to their lectures. Here lies the broader lesson. The shift eastwards in global economic power has become a commonplace of political discourse. Almost everyone in the west now speaks with awe of the pace of China’s rise, of India’s emergence as a geopolitical player, of the growing roles in international relations of Brazil and South Africa.

Yet the rich nations have yet to face up properly to the implications. They can imagine sharing power, but they assume the bargain will be struck on their terms: that the emerging nations will be absorbed – at a pace, mind you, of the west’s choosing – into familiar international forums and institutions.

When American and European diplomats talk about the rising powers becoming responsible stakeholders in the global system, what they really mean is that China, India and the rest must not be allowed to challenge existing standards and norms.

This is the frame of mind that sees the Benelux countries still holding a bigger share than China of the votes at the IMF; and the Group of Seven leading industrialised nations presuming this weekend that it remains the right forum to redesign the global financial system.

I have no inhibitions about promoting the values of the west – of preaching the virtues of the rule of law, pluralist politics and fundamental human rights. Nor of asserting that, for all the financial storms, a liberal market system is the worst option except for all the others. The case for global rules – that open markets need multilateral governance – could not have been made more forcefully than by the present crisis.

Yet the big lesson is that the west can no longer assume the global order will be remade in its own image. For more than two centuries, the US and Europe have exercised an effortless economic, political and cultural hegemony. That era is ending. [complete article]

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NEWS & VIEWS ROUNDUP & EDITOR’S COMMENTS: October 9

Taking hard new look at a Greenspan legacy

“Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004

George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”

And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.

Today, with the world caught in an economic tempest that Mr. Greenspan recently described as “the type of wrenching financial crisis that comes along only once in a century,” his faith in derivatives remains unshaken. [continued…]

Globalizing the crisis response

The financial crisis has gone global. Stock indexes have fallen and credit markets are seizing up around the world. In recent days, as most Americans focused on the political drama of the rescue package, a number of European banks have failed or been taken over. Several in Russia and Eastern Europe are teetering on the verge of insolvency. Many Latin American countries are newly vulnerable because foreign banks are big players there. Few nations can escape the financial contagion.

Also looming is an even more virulent form of contagion: decreased levels of economic activity because of contracting trade flows. Japan and several European countries are already in recession. If the United States and the entire European Union sink further, as looks increasingly possible, emerging markets and developing countries will face lower exports and less growth. Even China will experience a sharp slowdown because of its heavy reliance on overseas markets. Unemployment will soar almost everywhere.

Globalization of the crisis requires a globalized response. While the consequences of financial crises are clearly international, the regulation of finance remains almost wholly national. And national efforts, including the U.S. rescue plan and European governments’ remedies for their nations’ bank problems, will continue to be the first responses.

Yet an internationally coordinated strategy, ranging far beyond the heroic efforts of the world’s leading central banks, is essential now that the U.S. rescue plan is in place. When finance ministers convene in Washington this week for the annual International Monetary Fund meeting, they should adopt several initial components of such a strategy. Not doing so would be almost as serious as if Congress had adjourned without passing the rescue legislation. [continued…]

Editor’s Comment — Even though it is a conceit for America to regard itself as an indispensable nation, there are clearly times when American presidential leadership has a vital role to play in galvanizing support for global action.

In attempting to lead the world at a time of crisis, any president when this close to leaving office would be at a serious disadvantage, but none more so than George Bush. Is it conceivable that he can rise above his status as the lamest of lame ducks? Could he not at least announce that he wants to convene a summit of world leaders to meet in Washington in mid-November with the president-elect in attendance?

It’s time to start laying the groundwork for revamping the Bretton Woods system. There is, as Bush would say, hard work to be done — yet no evidence that he is prepared to start doing it.

Afghanistan: the neo-Taliban campaign

The attack on the Marriott Hotel in Islamabad on 20 September, killing some 60 people, was compared to 9/11 in Pakistan and could be a turning point in the conflict in this region. President Bush has authorised ground operations against Taliban bases in Pakistan, which has now become the main theatre in the ‘war on terror’. Meanwhile, the neo-Taliban, operating an al-Qaida franchise there and in Afghanistan, have controlled the escalation of guerrilla resistance in a sophisticated military strategy based on the conduct of the Vietnam war. [continued…]

Editor’s Comment — On September 11, 2001, when President Bush uttered the words, “We will make no distinction between the terrorists who committed these acts and those who harbor them,” Osama bin Laden’s prayers were answered and his strategic assumptions confirmed. Al Qaeda would be provided with a war on terrorism exactly on the terms that it needed.

A few hundred Arabs holed up in caves in Eastern Afghanistan always knew that sooner or later they would outstay their welcome. Their only hope was that in the eyes of their enemies, al Qaeda and the Taliban would be seen as one.

As a prelude to 9/11, the destruction of the Buddha statues in Bamiyan — portrayed in the media as a barbaric act of fanatical Islamic iconoclasm — was in fact a political masterstroke. It cemented the bond between guests — who should have been seen as the enormous liability that they were and still are — and their naive hosts. As Jason Burke reported in May 2002: “Letters found in houses in Kabul show that bin Laden and other senior figures in al Qaeda leant heavily on Mullah Mohammed Omar, the reclusive one-eyed cleric who led the Talibs, to destroy the statues despite, or rather because of, the international outrage at their plans.”

After Western nations first spurned Taliban appeals for humanitarian aid, then vigorously condemned the destruction of a global heritage site, it was easy for Mullah Omar’s Arab friends to claim that the West’s concern for Afghanistan did not extend to its people.

Seven years later, as Syed Saleem Shahzad indicates, it now appears to be too late to try and drive a wedge between al Qaeda and the Taliban — in the neo-Taliban a fusion of indigenous and foreign forces now appear to be inseparably mixed.

At this point, to suppose that capturing or killing Osama bin Laden would be of any lasting consequence in the “good war” is to ignore that the Afghan-Pakistan war has, as NATO commanders concede, become unwinnable.

The surge that failed

When, decades from now, historians compile the record of this Afghan war, they will date the Afghan version of the surge — the now trendy injection of large numbers of troops to resuscitate a flagging war effort — to sometime in early 2007. Then, a growing insurgency was causing visible problems for U.S. and NATO forces in certain pockets in the southern parts of the country, long a Taliban stronghold. In response, military planners dramatically beefed up the international presence, raising the number of troops over the following 18 months by 20,000, a 45% jump.

During this period, however, the violence also jumped — by 50%. This shouldn’t be surprising. More troops meant more targets for Taliban fighters and suicide bombers. In response, the international forces retaliated with massive aerial bombing campaigns and large-scale house raids. The number of civilians killed in the process skyrocketed. In the fifteen months of this surge, more civilians have been killed than in the previous four years combined.

During the same period, the country descended into a state of utter dereliction — no jobs, very little reconstruction, and ever less security. In turn, the rising civilian death toll and the decaying economy proved a profitable recipe for the Taliban, who recruited significant numbers of new fighters. They also won the sympathy of Afghans who saw them as the lesser of two evils. Once confined to the deep Afghan south, today the insurgents operate openly right at the doorstep of Kabul, the capital. [continued…]

Secret Saudi dinner, Karzai’s brother and the Taliban

The Afghan government of President Hamid Karzai has been involved in secret negotiations with Gulbuddin Hekmatyar, the former Mujaheddin leader now labelled a terrorist by the US and Britain.

The Independent has learned that extensive talks have taken place between President Karzai’s representatives and the Hekmatyar group which has been responsible for a series of bloody attacks in Afghanistan.

The revelation, from senior diplomatic sources, comes alongside a report claiming that the President’s brother, Qayum Karzai, attended a dinner in Saudi Arabia hosted by King Abdullah which was also attended by members of the Taliban insurgency and the former Pakistani Prime Minister Nawaz Sharif. [continued…]

US should talk with its enemies: Petraeus

General David Petraeus said Wednesday that attempts are being made to open talks with the Taliban in Afghanistan and that the United States should be prepared to engage with its enemies.

His comments came a day after US presidential rivals Barack Obama and John McCain tangled over the question of directly engaging Iran in their second one-on-one debate.

“I’m trying to go around minefields these days and not blunder into them,” Petraeus said. “But I do think you have to talk to enemies.” [continued…]

U.S. study is said to warn of crisis in Afghanistan

A draft report by American intelligence agencies concludes that Afghanistan is in a “downward spiral” and casts serious doubt on the ability of the Afghan government to stem the rise in the Taliban’s influence there, according to American officials familiar with the document.

The classified report finds that the breakdown in central authority in Afghanistan has been accelerated by rampant corruption within the government of President Hamid Karzai and by an increase in violence by militants who have launched increasingly sophisticated attacks from havens in Pakistan.

The report, a nearly completed version of a National Intelligence Estimate, is set to be finished after the November elections and will be the most comprehensive American assessment in years on the situation in Afghanistan. Its conclusions represent a harsh verdict on decision-making in the Bush administration, which in the months after the Sept. 11, 2001, attacks made Afghanistan the central focus of a global campaign against terrorism.

Beyond the cross-border attacks launched by militants in neighboring Pakistan, the intelligence report asserts that many of Afghanistan’s most vexing problems are of the country’s own making, the officials said. [continued…]

The Obama surge: will it last?

Obama’s had another advantage in these debates, one that is difficult to quantify but very real: he simply seems more comfortable, and confident, than McCain. Part of this is, sadly, attributable to the physical awkwardness imposed by McCain’s war wounds and his bouts with cancer — the restricted arm movements; the scarred, clenched jaw. But there is also a pent-up anger to McCain. He seems to be concentrating so hard on trying to stay calm that he doesn’t have much energy left over to answer questions in a free and creative way. He is not the sort of person, in the end, that you want to invite into your living room for a four-to-eight-year stay.

Barack Obama is. We are witnessing something remarkable here: Obama’s race is receding as he becomes more familiar. His steadiness has trumped his skin color; he is being judged on the content of his character. But there is a real challenge — and opportunity — inherent in his success. Obama has taken some inspired risks in this campaign. His willingness to propose more governmental control of the health-care market is a prime example. But he has also been very cautious, a typical politician in many ways. The most obvious is in his resolute unwillingness to deliver bad news or make any significant demands on the public. Neither he nor McCain had anything but platitudes to offer when asked what sacrifices they would ask of the American people. Worse, when Brokaw asked if he thought the economy was going to get worse before it gets better, Obama flatly said, “No. I’m confident about the economy.”

That was, no doubt, the politic answer. But not the correct one. Obama was underestimating the public’s capacity to hear the truth — which is odd, since the national desire for substance, the unwillingness to be diverted by “lipstick on a pig” trivialities, has been so striking in this campaign. Everyone knows this recession is going to hurt, that there will be a price for our profligacy and that some hard shoveling will be necessary to get out of this hole. Indeed, that knowledge is what has made Obama’s success possible. But if he wants to do more than merely succeed, if he wants to govern successfully, he is going to have to trust the people as much as they are beginning to trust him. After years of happy talk from politicians, that is the change we really need. [continued…]

Obama in the corner

American voters are staggering under the worst financial crisis since at least 1982. Asset values are tumbling, consumer spending is contracting, and a recession is visibly on the way. This crisis follows upon seven years in which middle-class incomes have stagnated and Republican economic management has been badly tarnished. Anybody who imagines that an election can be won under these circumstances by banging on about William Ayers and Jeremiah Wright is … to put it mildly … severely under-estimating the electoral importance of pocketbook issues.

We conservatives are sending a powerful, inadvertent message with this negative campaign against Barack Obama’s associations and former associations: that we lack a positive agenda of our own and that we don’t care about the economic issues that are worrying American voters.

Republicans used negative campaigning successfully against Michael Dukakis and John Kerry, it’s true. But 1988 and 2004 were both years of economic expansion, pro-incumbent years. 2008 is like 1992, only worse. If we couldn’t beat Clinton in 1992 by pointing to his own personal draft-dodging and his own personal womanizing, how do we expect to defeat Obama in a much more anti-incumbent year by attacking the misconduct of people with whom he once kept company (but doesn’t any more)? [continued…]

Does Sarah Palin have a Pentecostal problem?

If conservative columnist William Kristol is to be believed, Sarah Palin is surprised that her own campaign hasn’t made a bigger deal out of the controversial remarks of Barack Obama’s former pastor. The relationship between Obama and Jeremiah Wright is, according to Palin, fair game in the presidential campaign because it speaks to the question of the Democratic candidate’s character. “I don’t know why that association isn’t discussed more,” Kristol, writing in the New York Times, quoted Palin as telling him.

John McCain’s campaign aides could probably answer that question for Palin. The ink on Kristol’s column had barely dried before they were on the phone to political reporters declaring that the GOP nominee had long believed it would be inappropriate to raise the Wright issue. But McCain’s current sensitivity is much more related to his running mate’s own pastor problems than to any newfound campaign honor code.

Palin’s religious background must initially have been seen as a positive to McCain campaign vetters, who assumed that her faith would appeal to the conservative base of the party that has always been suspicious of McCain. But ever since she joined the ticket in late August, the Alaska governor’s various religious affiliations have caused headaches. First came reports that her pastor at the nondenominational Wasilla Bible Church was connected to Jews for Jesus, an organization that seeks to convert Jews to Christianity. Prominent Jewish leaders, including the co-chair of McCain’s Jewish outreach effort, have since demanded to know whether Palin also believes that Jews must be converted. The Bible Church became an issue again when Katie Couric asked Palin about the church’s promotion of a program to help gays “overcome” their homosexuality. [continued…]

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NEWS & VIEWS ROUNDUP: October 8

For the new contagion, the same old prescriptions

Against a backdrop of an unfolding meltdown in global financial markets and the near-certainty of a U.S. recession, the two candidates for president used the occasion of a much-anticipated town hall meeting last night to repeat all the talking points they were making long before the recent bank failures, the free fall of stock prices and the federal government’s expensive rescue efforts.

A televised national debate is hardly the ideal place to lay out a 10-point program for containing the credit crisis or for rebuilding and redesigning the world’s financial infrastructure. But neither did either candidate see it as an opportunity to lay out the broad principles he would follow in managing the current crisis or to sketch the outlines of a new form of capitalism that might replace the current model, which many Americans are coming to conclude provides too little in the way of fairness and economic security.

Asked by an Internet questioner what sacrifices they were prepared to ask Americans to make to get us out of the economic mess, both Barack Obama and John McCain sidestepped the question, with McCain resorting to his familiar promises to cut back on pork-barrel spending and Obama pitching a easy-to-swallow plea for everyone to turn down the thermostat.

Rather than talking about sacrifices, the candidates got into their most spirited exchanges while trying to outdo each other in proving that he would be the most aggressive and committed in cutting taxes for most households. [continued…]

It is time for comprehensive rescues of financial systems

As John Maynard Keynes is alleged to have said: “When the facts change, I change my mind. What do you do, sir?” I have changed my mind, as the panic has grown. Investors and lenders have moved from trusting anybody to trusting nobody. The fear driving today’s breakdown in financial markets is as exaggerated as the greed that drove the opposite behaviour a little while ago. But unjustified panic also causes devastation. It must be halted, not next week, but right now.

The time for a higgledy-piggledy, institution-by-institution and country-by-country approach is over. It took me a while – arguably, too long – to realise the full dangers. Maybe it was errors at the US Treasury, particularly the decision to let Lehman fail, that triggered today’s panic. So what should be done? In a word, “everything”. The affected economies account for more than half of global output. This makes the crisis much the most significant since the 1930s. [continued…]

The Palins’ un-American activities

“My government is my worst enemy. I’m going to fight them with any means at hand.”

This was former revolutionary terrorist Bill Ayers back in his old Weather Underground days, right? Imagine what Sarah Palin is going to do with this incendiary quote as she tears into Barack Obama this week.

Only one problem. The quote is from Joe Vogler, the raging anti-American who founded the Alaska Independence Party. Inconveniently for Palin, that’s the very same secessionist party that her husband, Todd, belonged to for seven years and that she sent a shout-out to as Alaska governor earlier this year. (“Keep up the good work,” Palin told AIP members. “And God bless you.”) [continued…]

Voting the fate of the nation

In his acceptance speech at the Democratic National Convention, Barack Obama called the forthcoming presidential election a “defining moment” in this country’s history. It is conceivable that he is right. There are precedents in American history for an election inaugurating a period of reform and political realignment.

Such a development, however, is extremely rare and surrounded by contingencies normally beyond the control of the advocates of reform. So let me speculate about whether the 2008 election might set in motion a political reconfiguration — and even a political renaissance — in the United States, restoring a modicum of democracy to the country’s political system, while ending our march toward imperialism, perpetual warfare, and bankruptcy that began with the Cold War. [continued…]

Spying on the future

The year is 2010 and, yes, Saddam Hussein is gone and there are no American troops in Iraq, but, as the report suggests, “the challenge will be to see whether a modern, secular successor government emerges that does not threaten its neighbors” — especially since those dogged Iraqis are back at work on their nuclear weapons program. Meanwhile, the national security agenda of American policymakers, who face no conventional military challenges, is dominated by five questions: “whether to intervene, when, with whom, with what tools, and to what end?”

Surveying the world in 2010, we find a Russia irredeemably in economic decline, a China beset by too many internal problems to hope for military dominance in Asia, and a North Korea so transformed that military tensions have vanished from the Korean peninsula (along, evidently, with the North Korean nuclear program). Oh, and those food riots that swept the globe recently, they never happened. After all, it’s well known that food production has kept up with population pressures, and energy production has been more than a match for global energy needs. As for global warming? Never heard of it. On the bright side, the key to the future is “international cooperation,” led, of course, by us truly. [continued…]

Judge orders 17 detainees at Guantánamo freed

A federal judge on Tuesday ordered the Bush administration to release 17 detainees at Guantánamo Bay by the end of the week, the first such ruling in nearly seven years of legal disputes over the administration’s detention policies.

The judge, Ricardo M. Urbina of Federal District Court, ordered that the 17 men be brought to his courtroom on Friday from the prison at Guantánamo Bay, Cuba, where they have been held since 2002. He indicated that he would release the men, members of the restive Uighur Muslim minority in western China, into the care of supporters in the United States, initially in the Washington area.

“I think the moment has arrived for the court to shine the light of constitutionality on the reasons for detention,” Judge Urbina said.

Saying the men had never fought the United States and were not a security threat, he tersely rejected Bush administration claims that he lacked the power to order the men set free in the United States and government requests that he stay his order to permit an immediate appeal.

The ruling was a sharp setback for the administration, which has waged a long legal battle to defend its policies of detention at the naval base at Guantánamo Bay, arguing a broad executive power in waging war. Federal courts up to the Supreme Court have waded through detention questions and in several major cases the courts have rejected administration contentions. [continued…]

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NEWS & VIEWS ROUNDUP: October 7

Why McCain’s time with the Council of World Freedom matters

Since Sunday, Democrats have been buzzing about the re-revelation that during the 1980s, Sen. John McCain served on the board of a far-right conservative organization that had supplied arms and funds to paramilitary organizations in Latin America.

Democratic strategist Paul Begala lit the fire when, during an appearance on Meet the Press, he warned that this relatively obscure detail from McCain’s past could draw him into a guilt-by-association game he was bound to regret.

“John McCain sat on the board of…the U.S. Council for World Freedom,” said Begala, “The Anti-Defamation League, in 1981 when McCain was on the board, said this about this organization. It was affiliated with the World Anti-Communist League – the parent organization – which ADL said ‘has increasingly become a gathering place, a forum, a point of contact for extremists, racists and anti-Semites.'” [continued…]

Global fears of a recession grow stronger

When the White House brought out its $700 billion rescue plan two weeks ago, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Three days after the plan was approved, it looks like a pebble tossed into a churning sea.

The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home, where it pummeled stock and credit markets on Monday.

While the Bush administration’s bailout package offers help to foreign banks, it seems to have done little to reassure investors, particularly in Europe, where banks are failing and countries are racing to stave off panicky withdrawals after first playing down the depth of the crisis.

Far from being the cure for the world’s ills, economists said, the rescue plan might end up being a stopgap for the United States alone. With Europe showing few signs of developing a coordinated response to the crisis, there is very little on the horizon to calm rattled investors. [continued…]

The GOP goes back to its ugly roots

The End of Days is approaching for John McCain and Sarah Palin, and at least one member of the ticket is not likely to greet this development with religious rapture. Their numbers are tanking. Their campaign has had to pull out of Michigan, and they are trailing in most of the battleground states they must hold onto. Even Karl Rove has predicted an Obama win if the election were held today. McCain’s hotheaded behavior during the Wall Street crisis and his numerous other erratic tactical swerves have backfired. And his biggest gamble, choosing Sarah Palin as vice president, is increasingly looking like a disaster.

McCain’s all-too-predictable response: get ugly, as he did on Monday is his disturbing rant against Obama in New Mexico.

The man who incessantly talks about “honor” has checked his own at the door. Back in April, McCain — himself the victim of a vicious, race-baiting smear campaign orchestrated by Karl Rove in 2000 — disavowed a North Carolina ad attacking Obama for his association with the Rev. Jeremiah Wright. “It’s not the message of the Republican Party,” McCain said. “It’s not the message of my campaign. I’ve pledged to conduct a respectful campaign.”

But that was before McCain faced imminent defeat. His “pledge” has turned out to be about as credible as his sudden incarnation as a lifelong enemy of Wall Street. On Monday, McCain rolled out a new TV ad, “Dangerous,” that accuses Obama of being “dishonorable.” “Who is Barack Obama?” a narrator ominously asks. “He says our troops in Afghanistan are ‘just air-raiding villages and killing civilians.’ How dishonorable.”

Of course, this is an outrageous smear. Obama was simply pointing out the well-known fact that in fighting an insurgency, over-reliance on air power is counterproductive. That’s because airstrikes inevitably result in civilian deaths, which turn the population against the side carrying them out. U.S. airstrikes and the ensuing civilian casualties are one of the biggest points of contention between the U.S. and Hamid Karzai’s regime in Afghanistan, and they are a huge issue in Pakistan and Iraq as well.

But none of those facts matter, because McCain desperately needs to paint Obama as a traitor, an alien, a defeatist, and un-American. The rhetorical question “Who is Barack Obama?” is not accidental: It is intended to raise fundamental doubts about whether he is a real American. It ties into the online smears that accuse him of being a Muslim, a terrorist, of not saluting the flag, hating the troops, attending a madrassa, hating Israel, and so on. [continued…]

The United States and Iraq: still getting it wrong

The United States presidential candidates are not the only ones scrambling to put together a credible interpretation of the situation in Iraq these days. The Pentagon’s latest quarterly report to the US Congress – Measuring Stability and Security in Iraq, delivered on 1 October 2008 – shows that Washington’s defence establishment shares the same difficulty.

There are two basic problems in the report, which covers the period June-August 2008. The first concerns its assessment of “the fundamental nature of the conflict in Iraq”. At the outset there is bombast: “[While] security has improved dramatically, the fundamental character of the conflict in Iraq remains unchanged – a communal struggle for power and resources”. That is as about as wrong as one can be in describing the political dynamics of the past year. [continued…]

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NEWS & VIEWS ROUNDUP & EDITOR’S COMMENTS: October 5

Obama to preempt McCain assault

Branding his opponent as “erratic in a crisis,” Sen. Barack Obama (D-Ill.) is preempting plans by Sen. John McCain (R-Ariz.) to portray him as having sinister connections to controversial Chicagoans.

Obama officials call it political jujitsu – turning the attacks back on the attacker.

McCain officials had said early in the weekend that they plan to begin advertising after Tuesday’s debate that will tie Obama to convicted money launderer Tony Rezko and former Weathermen radical William Ayers.

But Obama isn’t waiting to respond. His campaign is going up Monday on national cable stations with a scathing ad saying: “Three quarters of a million jobs lost this year. Our financial system in turmoil. And John McCain? Erratic in a crisis. Out of touch on the economy. No wonder his campaign wants to change the subject. [continued…]

Palin hits Obama for ‘terrorist’ connection

Alaska Gov. Sarah Palin on Saturday slammed Sen. Barack Obama’s political relationship with a former anti-war radical, accusing him of associating “with terrorists who targeted their own country.”

Palin’s attack delivered on the McCain campaign’s announcement that it would step up attacks on the Democratic presidential candidate with just a month left before the November general election. [continued…]

Editor’s Comment — The McCain campaign is clearly getting desperate. The election is a whole month away and they’re already unleashing what they hope will be political weapons of mass destruction.

But the name that McCain and Palin need to keep in mind is not William Ayers — it’s José María Aznar López.

There was a man convinced that terrorism, as a political issue, was a reliable ally and yet it destroyed his chance to continue governing Spain.

Americans aren’t that stupid. When the issue is the economy and the GOP shouts “terrorism”, instead of provoking fear, they are more likely to churn up disgust.

The real Americans

As Sarah Palin “aw-shucks-ed” her way through Thursday’s debate, she repeatedly played the one card that has become her stock in trade: She is a real American. Her rural roots, her lack of sophistication and worldliness, her bare bones education, her plain-spokenness, her moose hunting — all of these seemed to brand her as a typical American, one of us us. She has even taken to calling herself Jane Sixpack.

This characterization, ludicrous as it may be in a country as diverse as ours, is more than a matter of political aesthetics. One of the most important components of our recent presidential elections is the redefinition — actually the narrowing of the definition — of what constitutes an American. Since 2000 at least, we’ve been asking ourselves which candidate is the one we’d rather belly up to the bar with for a beer. Never mind George W. Bush’s Brahmin pedigree and Yale education; he reinvented himself as a cowboy. By comparison, Al Gore was ridiculed as a Harvard stiff and John Kerry as Frenchified. Now Barack Obama is being subjected to the same mockery.

It is tempting to attribute this sort of demagoguery entirely to Republican calculation. By constantly promoting the notion that Republicans are just a bunch of NASCAR fans and that Democrats are effete, the GOP has successfully divided the country not between red and blue politics but between one version of America and another, between the allegedly authentic and the allegedly inauthentic. But in reality, Republicans have only been exploiting a vein deep within the American consciousness. And who can blame them? What Republicans realize is that most Americans always have been desperately afraid of being seen as phony, and they are actively hostile toward anyone with airs. In fact, liberty is only one foundation of America. The nation rests just as securely on fear and resentment. [continued…]

Editor’s Comment — In the political contest over who can make the most authentic claim on American identity, a core American value that gets glossed over is self-reliance. Sure, the goal of ending this country’s dependence on foreign oil pays lip service to the notion of self-reliance (even while tapping into bipartisan xenophobia), but historically and inherently, self-reliance means being able to tame ones appetites and find contentment in knowing that what is sufficient is enough.

The America that can never have enough is an America that has lost touch with its roots.

9/11 was big. This is bigger.

Two September shocks will define the presidency of George W. Bush. Stunningly enough, it already seems clear that the second — the financial crisis that has only begun to unfold — may well have far greater and more lasting ramifications than the terrorist attacks of Sept. 11, 2001.

That’s because while 9/11 changed the way we view the world, the current financial crisis has changed the way the world views us. And it will also change, in some very fundamental ways, the way the world works.

Of course, the Sept. 11 attacks left a deep scar on the soul of the country and caused immense tragedy. Beyond human losses, they also revealed that being the sole superpower did not make us safe. But the attacks themselves were not, in a real sense, as significant a turning point in world history as they may have seemed at the time. (Remember, it was actually Bush’s father who had first been put in charge of an American “war on terror” during the 1980s when he was Ronald Reagan’s vice president.)

The current economic debacle is far more likely to be seen by historians as a true global watershed: the end of one period and the beginning of another. The financial chaos has brought down the curtain on a wide range of basic and enduring tenets also closely linked with the Reagan era, those associated with neoliberal economics, the system that the Nobel Prize-winning economist Joseph Stiglitz has called “that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently and serve the public interest well.” Already this crisis has seen not just our enemies but even some of our closest allies wondering whether we are at the beginning of the end of both American-style capitalism and of American supremacy. [continued…]

He told us to go shopping. Now the bill is due.

It’s widely thought that the biggest gamble President Bush ever took was deciding to invade Iraq in 2003. It wasn’t. His riskiest move was actually one made right after the Sept. 11, 2001, terrorist attacks when he chose not to mobilize the country or summon his fellow citizens to any wartime economic sacrifice. Bush tried to remake the world on the cheap, and as the bill grew larger, he still refused to ask Americans to pay up. During this past week, that gamble collapsed, leaving the rest of us to sort through the wreckage.

To understand this link between today’s financial crisis and Bush’s wider national security decisions, we need to go back to 9/11 itself. From the very outset, the president described the “war on terror” as a vast undertaking of paramount importance. But he simultaneously urged Americans to carry on as if there were no war. “Get down to Disney World in Florida,” he urged just over two weeks after 9/11. “Take your families and enjoy life, the way we want it to be enjoyed.” Bush certainly wanted citizens to support his war — he just wasn’t going to require them actually to do anything. The support he sought was not active but passive. It entailed not popular engagement but popular deference. Bush simply wanted citizens (and Congress) to go along without asking too many questions.

So his administration’s policies reflected an oddly business-as-usual approach. Senior officials routinely described the war as global in scope and likely to last decades, but the administration made no effort to expand the armed forces. It sought no additional revenue to cover the costs of waging a protracted conflict. It left the nation’s economic priorities unchanged. Instead of sacrifices, it offered tax cuts. So as the American soldier fought, the American consumer binged, encouraged by American banks offering easy credit. [continued…]

Pitbull Palin mauls McCain

Sarah Palin’s post-Couric/Fey comeback at last week’s vice presidential debate was a turning point in the campaign. But if she “won,” as her indulgent partisans and press claque would have it, the loser was not Joe Biden. It was her running mate. With a month to go, the 2008 election is now an Obama-Palin race — about “the future,” as Palin kept saying Thursday night — and the only person who doesn’t seem to know it is Mr. Past, poor old John McCain.

To understand the meaning of Palin’s “victory,” it must be seen in the context of two ominous developments that directly preceded it. Just hours before the debate began, the McCain campaign pulled out of Michigan. That state is ground zero for the collapsed Main Street economy and for so-called Reagan Democrats, those white working-class voters who keep being told by the right that Barack Obama is a Muslim who hung with bomb-throwing radicals during his childhood in the late 1960s.

McCain surrendered Michigan despite having outspent his opponent on television advertising and despite Obama’s twin local handicaps, an unpopular Democratic governor and a felonious, now former, black Democratic Detroit mayor. If McCain can’t make it there, can he make it anywhere in the Rust Belt?

Not without an economic message. McCain’s most persistent attempt, his self-righteous crusade against earmarks, collapsed with his poll numbers. Next to a $700 billion bailout package, his incessant promise to eliminate all Washington pork — by comparison, a puny grand total of $16.5 billion in the 2008 federal budget — doesn’t bring home the bacon. Nor can McCain reconcile his I-will-veto-government-waste mantra with his support, however tardy, of the bailout bill. That bill’s $150 billion in fresh pork includes a boondoggle inserted by the Congressman Don Young, an Alaskan Republican no less. [continued…]

Relax, Captain Ali: the USS Washington is sinking fast

As the world economy creaked slowly over the edge of the abyss last week, business was booming in the East African seaside village of Hobyo. There, a local entrepreneur called Sugule Ali worked the international media by sat-phone as he pondered the gains from his latest hostile takeover – of the freighter Faina.

Ali could be called a captain of industry in what’s left of Somalia. His business is piracy, and business is booming: pirates have attacked 62 ships this year, exchanging the vessels and their crews for ransoms estimated at $30 million.

That infusion of cash has jump-started the local economy in nearby towns such as Eyl, sparking a boom in construction and support industries like restaurants to feed the hostage crews while pirate “accountants” carrying laptops and sat-phones negotiate with shipping companies (who usually pay). Ali initially set his ransom for the Faina at $30 million, expecting to make as much as the whole industry had taken this year for just the one ship – because of its cargo. The Ukrainian vessel, flying the flag of Belize, was carrying 33 Russian T-72 tanks, a large number of RPGs and other armaments. He soon dropped his price to $20 million, and lower – maybe because the US Navy had sailed a warship to within spitting distance of the pirate camp, and a Russian frigate was on its way.

The urgency of America’s response to the Faina’s hijacking was driven by its primary strategic objective in the region – pursuing al Qa’eda and all who would associate with it. The danger of a shipload of heavy weapons falling into the hands of radical Islamists needed to be nipped in the bud. [continued…]

Jewish terrorism threatens Israel

Professor Zeev Sternhell knows as much as anyone about the current threat from Jewish terrorism.

His right leg is recovering from shrapnel caused when a bomb, believed to have been the work of right-wing Jewish extremists, exploded outside the front door of his Jerusalem apartment last week.

While Arab-Jewish violence is common, the attack on the 73-year-old historian has shocked public opinion in Israel because all the evidence points to it being intra-Jewish.

“I consider it an act of Jewish terrorism,” he said in an interview from the modest apartment where the bomb exploded. [continued…]

A schizophrenic state

The West Bank separation fence divides Israeli society into two worlds utterly different in their perceptions of reality and of the problems that affect them. On one side are those disturbed by the crisis on Wall Street, by the lack of leadership and the Iranian threat. Few worry about what is happening in the West Bank, and certainly no one visits there. The Palestinians are forgotten when there are no suicide bombings, the settlers are viewed as a strange society, and the peace talks pursued by Ehud Olmert seem like irrelevant spin.

On the other side of the fence, in Settlers’ Country, things look quite different. There, no one worries about Wall Street or Ahmadinejad, but about survival. The settlers are angry with the state that evacuated the Gush Katif settlements in the Gaza Strip, at the army and the Supreme Court and the leftist media. They take seriously Olmert’s declarations of support for withdrawing from nearly all of the West Bank, prepare for the coming withdrawal and make pilgrimages to abandoned outposts like Homesh.

This schizophrenia, convenient for both sides, has been nurtured by the Olmert government. Despite the prime minister announcing his backing for the evacuation of settlements beyond the fence, he essentially gave the settlers free rein after the destruction of the Amona outpost. Defense Minister Ehud Barak refused to wrestle with the settlers in the government’s name and consistently sought ways to negotiate with them, claiming he is unwilling to solve problems created by his predecessors over 40 years ago all by himself. Barak was supported by the unwillingness of the army and police to deploy forces to evacuate unauthorized outposts by force. [continued…]

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CAMPAIGN 08: The Great Schlep and a lame retort

Fair and balanced: Sarah Silverman vs. Jackie Mason

Just remember, if you belong to the target audience for Sarah Silverman’s video, make sure it’s the message — not the video, absolutely not the video — that you pass along to your Floridian relatives 😉

Readers should note, this video contains strong language.

Readers should note, this video contains pretty weak language.

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CAMPAIGN 08 & EDITOR’S COMMENTS: Be careful what you wish for…

Free Sarah Palin

Maybe John McCain should fire the advisers who won’t let Sarah Palin do more interviews. The Alaska Governor has faced two major campaign challenges — her acceptance speech and last night’s debate — and each time she’s shown herself worthy of the national stage. Let Mrs. Palin be herself, and then when she makes a mistake, as every candidate does, it won’t be treated like some epic judgment on her fitness to be Vice President. [complete article]

Editor’s Comment — Sarah Palin’s performance against Joe Biden was everything the McCain campaign could have hoped for — but therein lies the campaign’s problem. Her success has nulified the argument for keeping her under wraps.

A last-minute effort by Palin supporters to paint debate-moderator Gwen Ifill as being in the tank with Obama may well have had its desired effect by making Ifill pull a few punches. Why, for instance, did Ifill not ask Palin a question that so many observers would like answered:

John McCain said this week he has turned to you for advice on foreign policy issues, and I quote: “many times in the past.” Would you tell us about a few of the foreign policy issues on which you’ve advised Mr McCain?

Since Ifill didn’t ask it, the question’s still out there.

Palin’s answer seems somewhat predictable: “We’ve talked a lot about energy policy.”

OK. Since energy policy is Palin’s silver bullet on foreign policy, national security, the economy — and who knows, maybe she can even work in an angle on health care — it’s time she gave an in-depth interview on the issue where Sarah Palin is supposedly a national expert. How about she does a segment on 60 Minutes or Face the Nation or Charlie Rose, and let’s see how she does in clearly articulating the nature of the problem and her vision of a solution when it comes to crafting an energy policy for the US.

At the end of the debate, Palin put in a request for unmediated contact with the American people:

I like being able to answer these tough questions without the filter, even, of the mainstream media kind of telling viewers what they’ve just heard. I’d rather be able to just speak to the American people like we just did.

Sorry, but that was the one and only vice-presidential debate. So, she’ll either have to rely on stump speeches, handshakes, and John McCain’s bald-faced lies about how he relies on her advice, or, she’ll need to find the courage to face the media.

A candidate who isn’t ready to deal with the press, isn’t ready to campaign — let alone hold office.

Hail Mary vs. Cool Barry

Krauthammer’s Hail Mary Rule: You get only two per game. John McCain, unfortunately, has already thrown three. The first was his bet on the surge, a deep pass to David Petraeus who miraculously ran it all the way into the end zone.

Then, seeking a game-changer after the Democratic convention, McCain threw blind into the end zone to a waiting Sarah Palin. She caught the ball. Her subsequent fumbles have taken the sheen off of that play, but she nonetheless invaluably solidifies his Republican base.

When the financial crisis hit, McCain went razzle-dazzle again, suspending his campaign and declaring that he’d stay away from the first presidential debate until the financial crisis was solved.

He tempted fate one time too many. After climbing up on his high horse, McCain had to climb down. The crisis unresolved, he showed up at the debate regardless, rather abjectly conceding Obama’s mocking retort that presidential candidates should be able to do “more than one thing at once.” (Although McCain might have pointed out that while he was trying to do two things, Obama was sitting on the sidelines doing one thing only: campaigning.)

You can’t blame McCain. In an election in which all the fundamentals are working for the opposition, he feels he has to keep throwing long in order to keep hope alive. Nonetheless, his frenetic improvisation has perversely (for him) framed the rookie challenger favorably as calm, steady and cool.

In the primary campaign, Obama was cool as in hip. Now Obama is cool as in collected. He has the discipline to let slow and steady carry him to victory. He has not at all distinguished himself in this economic crisis — nor, one might add, in any other during his national career — but detachment has served him well. He understands that this election, like the election of 1980, demands only one thing of the challenger: Make yourself acceptable. Once Ronald Reagan convinced America that he was not menacing, he won in a landslide. If Obama convinces the electorate that he is not too exotic or green or unprepared, he wins as well. [complete article]

Editor’s Comment — Charles Krauthammer can be credited as a neocon who isn’t willing to even pretend he’s started drinking the Kool-Aid. And the McCain campaign’s belief that hitching their candidates to the slogan “Maverick” is a pathway to victory, merely underlines the degree to which the word “Republican” has become toxic.

In a time of crisis, will most Americans decide they want to place a bet on Mr Unpredictable? I don’t think so. Indeed, the more McCain slides in the polls, the more unpredictable he’s likely to become. He won’t be able to persuade others to see him differently than the way he sees himself.

The voters are looking for a leader, not a loner.

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NEWS & VIEWS ROUNDUP: October 2

Robert Baer interviewed on NPR

“What ultimately the Iranians would like is to become an equal partner of the United States — I know this is a tall order and we’re going to wait decades for anything like this to come about — but in their hearts this is what they would like.”

Terry Gross: An equal partner in what?

Baer: In the Middle East.

They would like to sit down with the United States and Israel and actually come to a solution for the Palestinians.

They would like to support and give power to the Shia in Lebanon, because the Shia are approaching a majority in Lebanon.

They would like to co-administer Mecca with the Saudis.

They feel that their sect has been repressed since 680AD — since the murder of the Prophet’s grandson. They believe that this is the Shia millenium. [continued…]

Heeding the lessons of another war

Forty years ago, the United States began to mount raids into Cambodia and to undermine the government of King Sihanouk in order to cut Vietcong supply lines.

As a result, America’s war with Vietnamese Communism spread into Cambodia, leading to the triumph of the Khmer Rouge and the Cambodian genocide. But these horrors occurred after the U.S. itself had quit Vietnam and after the U.S.-backed regime in South Vietnam had collapsed. Washington’s widening of the war benefited neither America nor its local allies.

The U.S. is now making the same mistake in Afghanistan and Pakistan. If continued, ground incursions by U.S. troops across the border into Pakistan in search of the Taliban and Al Qaeda risk drastically undermining the Pakistani state, society and army.

Many Pakistanis are berating their new civilian government and the military for being too supine in their response to the American actions. There have also been public calls for NATO supply lines through Pakistan to be cut, which could cripple the Western military effort in Afghanistan. The latest dreadful terrorist attack in Islamabad illustrates the danger of a wider conflagration and the price Pakistan is paying for its role as a U.S. ally. [continued…]

Reversal of fortune

When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.

Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion. [continued…]

The specter of Wall Street

Wall Street sits at the eye of a political hurricane. Its enemies converge from every point on the compass. What a stunning turn of events.

For well more than half a century Wall Street has enjoyed a remarkable political immunity, but matters were not always like that. Now, with history marching forward in seven league boots, we are about to revisit a time when the Street functioned as the country’s lightning rod, attracting its deepest animosities and most passionate desires for economic justice and democracy.

For the better part of a century, from the 1870s through the tumultuous years of the Great Depression and the New Deal, the specter of Wall Street haunted the popular political imagination. For Populists it was the “Great Satan,” its stranglehold over the country’s credit system being held responsible for driving the family farmer to the edge of extinction and beyond. [continued…]

The choice

Never in living memory has an election been more critical than the one fast approaching—that’s the quadrennial cliché, as expected as the balloons and the bombast. And yet when has it ever felt so urgently true? When have so many Americans had so clear a sense that a Presidency has—at the levels of competence, vision, and integrity—undermined the country and its ideals?

The incumbent Administration has distinguished itself for the ages. The Presidency of George W. Bush is the worst since Reconstruction, so there is no mystery about why the Republican Party—which has held dominion over the executive branch of the federal government for the past eight years and the legislative branch for most of that time—has little desire to defend its record, domestic or foreign. The only speaker at the Convention in St. Paul who uttered more than a sentence or two in support of the President was his wife, Laura. Meanwhile, the nominee, John McCain, played the part of a vaudeville illusionist, asking to be regarded as an apostle of change after years of embracing the essentials of the Bush agenda with ever-increasing ardor.

The Republican disaster begins at home. Even before taking into account whatever fantastically expensive plan eventually emerges to help rescue the financial system from Wall Street’s long-running pyramid schemes, the economic and fiscal picture is bleak. During the Bush Administration, the national debt, now approaching ten trillion dollars, has nearly doubled. Next year’s federal budget is projected to run a half-trillion-dollar deficit, a precipitous fall from the seven-hundred-billion-dollar surplus that was projected when Bill Clinton left office. Private-sector job creation has been a sixth of what it was under President Clinton. Five million people have fallen into poverty. The number of Americans without health insurance has grown by seven million, while average premiums have nearly doubled. Meanwhile, the principal domestic achievement of the Bush Administration has been to shift the relative burden of taxation from the rich to the rest. For the top one per cent of us, the Bush tax cuts are worth, on average, about a thousand dollars a week; for the bottom fifth, about a dollar and a half. The unfairness will only increase if the painful, yet necessary, effort to rescue the credit markets ends up preventing the rescue of our health-care system, our environment, and our physical, educational, and industrial infrastructure. [continued…]

Anger vs. steadiness in the crisis

A few hours before the House of Representatives smacked down the financial-bailout package, I watched John McCain — eyes flashing, jaw clenched, oozing sarcasm and disdain — on the attack in Ohio: “Senator Obama took a very different approach to the crisis our country faced. At first he didn’t want to get involved. Then he was ‘monitoring the situation.’ That’s not leadership; that’s watching from the sidelines.” And I thought of Karl Rove. Back in 2003, at the height of Howard Dean mania, Rove was skeptical about Dean’s staying power as a candidate: “When was the last time Americans elected an angry President?”

Much has been written about McCain’s mercurial temperament during the past few weeks. An election campaign that was supposed to be all about Barack Obama has turned out to be all about John McCain. In the process, the other side of the equation — Obama’s steadiness throughout — has been pretty much overlooked. Just after the House shot down the bailout, Obama took to the stage in Colorado, and the contrast with McCain couldn’t have been greater: “Now is not the time for fear, now is not the time for panic,” he said. “We may not be able to do everything overnight … But I want you to understand, I know we can do it … Things are never smooth in Congress. It will get done.”

We journalists have an extensive vocabulary for cataloging the failures of politicians and a skimpy one for celebrating their successes. It’s safer to be skeptical: no one will ever accuse you of being in the tank. And so we’ve heard lots, in a negative way, about Obama’s coolness and intellectuality. And at times in this campaign — during Hillary Clinton’s populist transformation, after Sarah Palin’s convention speech — Obama’s demeanor has seemed problematic. He was too remote, too cerebral and nuanced in his answers, it was said; he had to get warmer, learn to love junk food, practice his bowling. But Obama stubbornly remained himself through the tough times; his preternatural calm has proved reassuring in both the economic crisis and the first debate. “His performance has been polished and steady,” a prominent Republican told me. “John’s has not been.” [continued…]

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NEWS & VIEWS ROUNDUP: October 1

Olmert’s lame-duck epiphany about Palestinian peace

He is a former leader in the rightist Likud Party who for decades staunchly believed that the West Bank and Gaza Strip belonged to the Jewish people and that the territories, along with the Golan Heights, should remain part of Greater Israel forever. Along with former Prime Minister Ariel Sharon, Ehud Olmert gradually came to understand that this was a fantasy. They broke away from Likud and created the centrist Kadima (“Onward”) Party three years ago. Now, as Olmert hands the reins to Tzipi Livni and leaves office amid a corruption scandal, he’s made a series of stunning departure statements that form a swan song of historical importance. Peace advocates, Israeli dreamers, Arab skeptics and U.S. mediators in a future McCain or Obama Administration should read his words carefully and take note.

The political lame duck’s views expressed in interviews and public comments reveal the sweeping reversals that have taken place among some of Israel’s ultra-nationalists. Olmert says Israel should withdraw from “almost all” of the West Bank and Golan Heights. A former mayor of “the undivided capital of the Jewish state,” he now advocates dividing Jerusalem with the Palestinians. He wants to keep some of the Jewish settlements that adjoin Israel’s pre-1967 border but accepts giving the future Palestinian state Israeli territory in a land swap with a “close to 1-to-1-ratio.” “The notion of a Greater Israel no longer exists,” Olmert says, “and anyone who still believes in it is deluding themselves.” [continued…]

Bahrain calls for Middle East bloc to bring together Iran and Israel

Middle Eastern countries should set up a new regional organisation that includes all Arab states as well as Israel, Iran and Turkey, pro-western Bahrain urged yesterday.

The call – which is likely to provoke controversy – came from Sheikh Khalid bin Ahmed al-Khalifa, the Gulf state’s foreign minister. “Why don’t we all sit together even if we have differences and even if we don’t recognise each other?” he told the London-based daily al-Hayat. “Why not become one organisation?

“Aren’t we all members of a global organisation called the United Nations? Why not [come together] on a regional basis? This is the only way to solve our problems. There’s no other way to solve them, now or in 200 years.”

Asked if that should include Israel, he replied: “With Israel, Turkey, Iran and Arab countries. Let them all sit together in one group.” [continued…]

Trio of warlords blamed for surge in Afghanistan violence

The escalating insurgency in Afghanistan is being spearheaded by a trio of warlords who came to prominence in the CIA-backed war to oust the Soviets but who now direct attacks against U.S. forces from havens in Pakistan, according to U.S. military and intelligence officials.

Militant groups led by the three veteran mujahedin are behind a sharp increase this year in the number and sophistication of attacks in Afghanistan and pose a major challenge to President Bush’s hope of stabilizing the country by deploying thousands of additional troops.

Despite a flurry of U.S. airstrikes against their organizations and million-dollar bounties on their heads, the Pashtun chieftains have been able to operate, and even expand their networks, largely unmolested from bases spread along the border with Pakistan. [continued…]

British envoy says mission in Afghanistan is doomed, according to leaked memo

Britain’s Ambassador to Afghanistan has stoked opposition to the allied operation there by reportedly saying that the campaign against the Taleban insurgents would fail and that the best hope was to install an acceptable dictator in Kabul.

Sir Sherard Cowper-Coles, a Foreign Office heavyweight with a reputation for blunt speaking, delivered his bleak assessment of the seven-year Nato campaign in Afghanistan in a briefing with a French diplomat, according to French leaks. However sources in Whitehall said the account was a parody of the British Ambassador’s remarks.

François Fitou, the deputy French Ambassador to Kabul, told President Sarkozy’s office and the Foreign Ministry in a coded cable that Sir Sherard believed that “the current situation is bad; the security situation is getting worse; so is corruption and the Government has lost all trust”. [continued…]

A shake-up at the top of Pakistan’s spy agency

Pakistan may currently enjoy what seems to be a healthy if noisy democracy, but the office of army chief remains the most powerful one in the country — certainly exceeding the effective control of any politician or civilian bureaucrat. And now Pakistan’s army chief, General Ashfaq Kayani, is showing that he is truly in charge of the military — and hence the most powerful man in the country.

Just before midnight on Sept. 29, Kayani replaced the head of Pakistan’s premier intelligence agency and elevated a slew of handpicked generals to key positions in a major shake-up of the military leadership. The most striking appointment is the promotion of Lieut. General Ahmed Shujaa Pasha to head of the Inter-Services Intelligence (ISI), one of the world’s most powerful spy agencies — routinely described, and decried, as a “state within a state.” Pasha, who had headed military operations in the tribal areas, replaces Lieut. General Nadeem Taj, an appointee and relative of recently departed President and ex–army chief Pervez Musharraf, who was infamous for intertwining military and political affairs. [continued…]

Terrorist attacks in Pakistan stir anger at U.S.

For Jamil Asghar, owner of the Bata Shoe Store in Saddar Market, preparations for this year’s Eid-al-Fitr celebrations are being marred by an ever-present sense of danger.

“Look around you,” he says, surveying the crowded middle-class bazaar. “If a bomb went off here, where these innocent people are standing, can you imagine how bad it would be?”

Though unequivocal in his view that terrorists are kaffirs (unbelievers), Asghar also has no doubt where the root cause of the recent increase in suicide bombings and other deadly attacks lies: the United States and its military incursions into Pakistan’s tribal zones. [continued…]

The cost of boots on the ground in Iraq

It takes half a million dollars per year to maintain each sergeant in combat in Iraq. Thanks to a Senate committee inquiry, an authoritative government study finally details the costs of keeping boots on the ground. The Congressional Budget Office (CBO), in its report Contractors’ Support of U.S. Operations in Iraq, compared the costs of maintaining a Blackwater professional armed guard versus the U.S. military providing such services itself. Both came in at about $500,000 per person per year.

News reports of the study have largely focused on the total cost of U.S. contractors. The 190,000 contractors in Iraq and neighboring countries, from cooks to truck drivers, have cost U.S. taxpayers $100 billion from the start of the war through the end of 2008. Overlooked in this media coverage has been the sheer cost per soldier of keeping the army in Iraq. This per-soldier cost is more comprehensible and alarming than the rather abstract aggregate figure. [continued…]

The trickle-up bailout

The theory underlying the bailout plan stalled in Congress is that rescuing the finance industry will restore market stability and that the benefits will eventually trickle down to average Americans. Thus, solving the subprime mortgage crisis has morphed into a much larger challenge: reassembling the architecture of the financial markets, which seemingly requires giving the Treasury secretary nearly a trillion dollars and extraordinary latitude to pick winners and losers.

There is an easier and more politically palatable fix: Pay off all the delinquent mortgages.

The financial crisis is a liquidity crisis, yes, but it is ultimately a product of homeowner failures to pay. Unless this fundamental problem is fixed, we will continue to see — and need to treat — the symptoms. The proposed bailout ignores this. Yet the sum being demanded from taxpayers is almost certainly more than sufficient to pay off all currently delinquent mortgages. [continued…]

GOP, RIP?

The Republican-led defeat of President Bush’s Wall Street bailout plan caused an immediate financial catastrophe: The stock market fell an unprecedented 777.68 points, wiping out, by one estimate, $1.2 trillion in wealth. But the greater and more lasting damage may be to the Republican Party itself.

Percentagewise, the Sept. 29 crash was one-third the size of Black Monday, the stock-market crash of Oct. 19, 1987. As I write, the Dow Jones Industrial Average has risen more than halfway back up (though stock prices remain volatile). It’s still possible to believe that the economy will return to normal in a year or two. For Republicans, though, the events of Sept. 29 could well be remembered as the start of a decades-long exile from power—much as Democrats remember Nov. 4, 1980. [continued…]

The GOP blames the victim

Two weeks ago, I wrote that the breakdown of the nation’s financial industry was undeniably a self-induced injury; that it would finally force conservatives to own up to the wrongheadedness of their deregulatory project; that they couldn’t possibly blame the disaster on any of their traditional bogeymen.

But I had forgotten about conservatives’ extraordinary instincts for blame-evasion. This is a movement, after all, that blandly recasts its greatest idols as traitors once their popularity has crashed; that routinely sloughs off responsibility for . . . well . . . anything since, by its logic, conservatism has never really been tried in the first place. Consider in this respect Mitt Romney’s remarkable speech to the Republican convention a few weeks ago, in which he rallied his party against Washington — a place his party has controlled, to one degree or another, for nearly three decades — by listing the city’s various institutions and crying, “It’s liberal!”

Or consider the way the House Republicans torpedoed the bailout bill a few days ago. The real reason they did it was almost certainly to evade responsibility for an unpopular measure but the announced reason seemed designed to convince the nation’s 7-year-olds — because Nancy Pelosi said something mean. [continued…]

Mainstream economists reconsider globalization

Fifteen years after NAFTA and ten years after the protests against the World Trade Organization in Seattle, economists can now look at the actual results from a host of multilateral free-trade agreements. The results do little to overthrow the basic theoretical argument about comparative advantage–economies do best when they specialize in producing the goods and services they can make most efficiently and trade for those goods outside their specialization–but they have led many economists to be far more skeptical of the actual “free trade” policies that have emerged from Washington over the last several decades. The evidence has forced academics to focus on the distribution of trade’s negative effects, the role trade agreements play in rising inequality, and the failure of trade agreements to deliver the bounty of jobs their advocates predicted. The result is that, while they may still deride protectionism, laissez-faire economists who once sought to keep government from meddling in the market have begun to embrace an unlikely new partner: the welfare state. [continued…]

Can Asia rescue the global economy?

hat change a decade brings. Western bankers and pundits who hectored Asians for poor governance and lack of transparency during the 1997 financial crisis now hope for help from Asia as the hallowed “Anglo-American financial system” implodes.

Asian countries whose currencies and economies collapsed then were not victims of their own monetary or fiscal profligacy. Unlike the US today, their governments did not have large budget deficits, nor did they cause inflation by printing money. Some like Thailand had fixed exchange rates which became overvalued because they were tied to a then-strengthening US dollar, and capital-market liberalization attracted large short-term foreign capital inflow. This “hot money” built up domestic asset bubbles and generated large current account deficits, which attracted currency speculators. Other countries like Indonesia were victims of financial contagion once their neighbors’ currencies crashed.

Since then, many though not all economists have concluded that capital market liberalization and free capital flows in developing countries not only fail the test as an unalloyed good, but are unnecessary and, at worst, pernicious. [continued…]

This economy does not compute

A few weeks ago, it seemed the financial crisis wouldn’t spin completely out of control. The government knew what it was doing — at least the economic experts were saying so — and the Treasury had taken a stand against saving failing firms, letting Lehman Brothers file for bankruptcy. But since then we’ve had the rescue of the insurance giant A.I.G., the arranged sale of failing banks and we’ll soon see, in one form or another, the biggest taxpayer bailout of Wall Street in history. It seems clear that no one really knows what is coming next. Why?

Well, part of the reason is that economists still try to understand markets by using ideas from traditional economics, especially so-called equilibrium theory. This theory views markets as reflecting a balance of forces, and says that market values change only in response to new information — the sudden revelation of problems about a company, for example, or a real change in the housing supply. Markets are otherwise supposed to have no real internal dynamics of their own. Too bad for the theory, things don’t seem to work that way.

Nearly two decades ago, a classic economic study found that of the 50 largest single-day price movements since World War II, most happened on days when there was no significant news, and that news in general seemed to account for only about a third of the overall variance in stock returns. A recent study by some physicists found much the same thing — financial news lacked any clear link with the larger movements of stock values. [continued…]

Lesson from a crisis: when trust vanishes, worry

In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.

A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again.

Frederic Mishkin — Meyer’s grandson and, until he stepped down a month ago, an ally of Ben Bernanke’s on the Federal Reserve Board — told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy.

All of which may be true. But there is good reason for the public’s skepticism. The experts and policy makers who so desperately want to take action have failed to tell a compelling story about why they’re so afraid. [continued…]

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