The irony is clear

Weeks before U.S. election, Mideast gives Obama perfect storm

By Peter Apps and Matt Spetalnick

An eruption of violent unrest across the Middle East is confronting President Barack Obama with the most serious challenge yet to his efforts to keep the Arab Spring from morphing into a new wave of anti-Americanism - and he has few good options to prevent it.

Less than two months before the U.S. presidential election, a spate of attacks on embassies in Libya, Egypt and Yemen poses a huge dilemma for a U.S. leader who took office promising a "new beginning" with the Muslim world but has struggled to manage the transformation that has swept away many of the region's long-ruling dictators.

On top of that, even as he tries to fend off foreign policy criticism from Republican rival Mitt Romney, Obama is grappling with an escalating crisis in U.S.-Israeli relations over Iran's nuclear program and increased bloodshed in Syria, where President Bashar al-Assad has defied international calls to step aside.

Obama's Middle East woes deepened this week with a series of mob attacks on U.S. diplomatic compounds and the killing of America's ambassador to Libya. Demonstrators were incensed by a U.S.-made film they consider blasphemous to Islam.

Kicked in the teeth

Voting Is A Sap's Game

by James E. Miller

With the U.S. presidential election right around the corner, Americans are getting themselves all in a tizzy to go to the voting booth and remind the holders of public office who they work for.  Because it’s a presidential election, the stakes are looked to as even higher as the media paints the contest between Barack Obama and Mitt Romney as a conflict with extreme consequence.  The statist tramps known as mainstream journalists are championing the race as a great ideological battle.  The fact that the candidates differ little on policy and vision is purposefully avoided.  To the political and intellectual establishment, the show must go on.  Their way of life depends on it.

Already in both the Republican National Convention and Democratic National Convention the party elites took the opportunity to trample on the democratic virtue of dissent.  On the Republican side, Ron Paul supporters were effectively told to get lost as party leaders rammed through a rule change to make it next to impossible to nominate a pure grassroots candidate.  The Democrats, per usual, were no better.  When it came time to vote on whether the party platform should contain language on God and ensuring Jerusalem remains the capital of Israel, the voice vote was disregarded and the language was kept.  And as a Fox News showed, the decision was predetermined by the teleprompter.  In one fell swoop, both of America’s major political parties demonstrated that their own members can’t be trusted.  The irony is that this practice of top-down dictation is wholly reflective of the reality of governance.

"Obama's Middle East Policy Is in Ruins"

Germany Opines on the obvious

Since the US media appears to have little if anything to say on the topic of the global anti-Pax Americana insurrection that does not devolve purely along pre-election party lines, here is what Germany thinks.

From Spiegel

US embassies in the Muslim world were on high alert Friday following days of violent protests against an anti-Islam film. Germany, too, closed several embassies in fear of attacks. Some German commentators argue that the violence shows that Obama's Middle East policies have failed.

After days of protests over an anti-Islam film, American diplomatic missions in the Middle East and North Africa were braced for further violence after Friday prayers. The US put its overseas missions on high alert.

Germany has closed its embassies in a number of Muslim-majority countries in fear of attacks. "We are observing how the security situation develops with great attentiveness and we have increased security precautions at a number of foreign missions," a spokesman for the German Foreign Office told SPIEGEL ONLINE. Embassies in North Africa, Afghanistan and Pakistan are believed to be among those affected.

The spokesman said that the missions would only close on Friday, though. Other German institutions such as aid organizations have also been urged to increase security precautions, he said.

The Restaurant At The End Of Europe

The hoot and the holler resounding from Vienna to Amsterdam

By Mark J. Grant
This is the name of the restaurant at the end of Europe; the Palace of the Wizard. This is where I sit and watch the long story unfold until the day when the folding stops and the fabric tears. After almost forty years on Wall Street I understand both the joke and the punchline and you cannot pay off old debt with vastly greater amounts of new debt without consequences and, I assure you, there will be consequences. This paradigm does not work for a corporation or a sovereign nation and the borrower is eventually brought to his knees by the sheer weight of the debt that he has laden upon his back. The interest rate paid is only part of the equation with the rest being the absolute size of what is undertaken.

Germany, with a GDP of $3.55 trillion cannot hope, in any terms, to support a European construct that is over $15.2 trillion without the hammer of fiscal reality at some point whacking her backside with a very loud bang. The remaining economically sound nations of the Netherlands, Austria, and Finland also do not have the capacity or the desire, according to the Prime Minister of the Netherlands and the Finance Minister of Austria, to support the rest of the Continent that is sliding into the pit of fiscal morass. “No more money for other nations” is the hoot and the holler resounding from Vienna to Amsterdam. 

Time To Come Home?

If Mideast governments can't keep our diplomats safe, we should bring them back

By PATRICK J. BUCHANAN

Is it not long past time to do a cost-benefit analysis of our involvement in the Middle and Near East?

In this brief century alone, we have fought the two longest wars in our history there, put our full moral authority behind an ”Arab Spring” that brought down allies in Tunisia, Egypt and Yemen, and provided the air power that saved Benghazi and brought down
Moammar Gadhafi.

Yet this week U.S. embassies were under siege in Tunisia, Egypt and Yemen, and U.S. diplomats were massacred in Benghazi.

The cost of our two wars is 6,500 dead, 40,000 wounded and $2 trillion piled onto a national debt that is $16 trillion, larger than the entire U.S. economy. And what in heaven’s name do we have to show for it?

We face pandemic hatred of our country from Morocco to Pakistan. The sight of American flags being ripped to shreds and burned by mobs has become so common over there we seem almost to have gotten used to it.

Psychoanalyzing The Fed

The psychology of diminishing political and financial returns of Fed promises

by Charles Hugh Smith 

Rather than regurgitate the usual economic analysis of the Fed's policies, let's hazard a psychoanalysis of the Fed. Given the primacy of psychological factors in human behavior, it is astonishing how little attention is paid to the psychology of the Fed's statements and policies.

Zero Hedge offered just such a psychological insight (with a deliciously Freudian twist) with this question: Does the Fed need to re-instill some discipline in order to regain its omnipotence? Why (For The Fed) It Is All In The Foreplay

Exactly. Subservience is a slippery slope, and if the Fed "caves in" to market demands for a massive QE campaign, then where is the Fed's vaunted autonomy? It's gone. So what happens in a few months when the market is once again in danger of rolling over? Will the Fed cave in again and issue more QE? If it doesn't, the market reaction will be violently negative, and the Fed will get blamed for the catastrophic decline.

You see the positive feedback loop of Fed subservience: the longer the Fed puts off regaining autonomy, the more disruptive their refusal to obey the market will be.

The more they appear to meekly comply to the demands of the market, the greater the pressure will be on them to continue giving the market what it now needs to continue rising: QE.

The only psychologically wise choice is to nip Fed subservience to the market in the bud before it becomes even more destabilizing.

The Fed's 'Monetary Morphine'

A different kind of inflation problem

By George F. Will

Fortunately, not everything is up to date in Kansas City. Esther George, president of the regional Federal Reserve Bank here, is refreshingly retrograde regarding what less circumspect people welcome as the modernizing of the nation’s central bank into a central economic planner. She has concerns, both prudential and philosophical, about the transformation of the Fed in ways that erase the distinction between monetary policy, which is the Fed’s proper business, and fiscal policy, which is inherently political.

The basic interest rate — i.e., the federal funds rate minus the inflation rate — was negative during about 40 percent of the disastrous 1970s and the 2000s, which ended disastrously. Because today’s rate is negative, the Fed’s stimulus repertoire is reduced to “quantitative easing.” That phrase, which is how government speaks when trying not to be understood, means printing money. Except printing is so 20th century. Nowadays, the Fed gives banks digital transfusions of money to lower long-term interest rates, which result in . . .

Not much bang for trillions of bucks. With corporations holding upward of $2 trillion in cash, and 30-year mortgages at 3.5 percent, George, speaking several weeks before this week’s meeting of the Federal Open Market Committee, asked: “Is there anyone not borrowing today or purchasing a house because interest rates aren’t low enough? Do we expect that businesses will hire if their long-term rates are lower?”

The Fed Goes Political

Taking the Mask Off

By David Harsanyi

Now the spigot is open — wide open. QE III is here. And the Fed is about to become a campaign issue, whether it likes it or not.

Chairman Ben Bernanke announced Thursday that the Fed would spend $40 billion a month on mortgage-backed securities with no set date to end those purchases.

“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate,” said the Fed in a statement.

The Fed’s action is primarily aimed at the short term. Though there is no sign of inflation, rising food and gas prices have created inflation fears among Americans. People don’t care about price indexes they care about prices. Printing money won’t be popular.

The Map to Power

Seeing the world as it is

The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate, Robert D. Kaplan

By WILLIAM ANTHONY HAY

Winston Churchill noted the symbiotic relationship between space and human action with the remark that “we shape our buildings, and afterwards our buildings shape us.”

On a much greater scale, consider how the physical world and its contours shape human development, just as humanity adapts the environment to its needs. The obvious faded from view in recent decades, however: globalization set the tone for the post-Cold War idea that old limits mattered little in a very new world. Grand, transformative projects sought to recast societies and institutions. Disappointment ensued with the failure of nation-building in the Middle East and the collapse of economic prosperity throughout the developed world.

In The Revenge of Geography, Robert Kaplan draws upon many thinkers, some unjustly neglected, to sketch a guide through the wreckage of these lost hopes. Far from creating the flat world Thomas Friedman described in his eponymous (and ephemeral) bestseller, globalization brings distant threats closer to home and draws differences into sharper relief. The future requires a new map.

Constructing the map to encompass geography in its fullest sense—embodying demographics, climate, and resources along with topography—highlights the factors that drive world trends. History and anthropology take the analysis further by providing context and showing how trends work over time. Geography, Kaplan argues persuasively, sets the framework within which contingency operates. International politics makes little sense without it.

The Salafi Moment

The West should be careful how it reacts

As the death of a U.S. ambassador in Libya demonstrates, the ultraconservative Salafi movement is pushing to the forefront in the politics of the Middle East. 

BY CHRISTIAN CARYL

By now you've probably heard. Just a few hours after an angry mob of ultraconservative Muslims stormed the U.S. Embassy in Cairo, the U.S. ambassador to Libya waskilled during a protest in the city of Benghazi. Both riots were provoked by the news that an anti-Muslim group in the United States has released a film that insults the Prophet Mohammed. In Egypt, the protestors hauled down the U.S. flag and replaced it with the same black banner sometimes used by Al Qaeda. Shades of Iran, 1979. Scary stuff.

Both attacks are utterly outrageous. But perhaps the United States shouldn't have been caught completely off guard. The rioters in both cases come from the region's burgeoning Salafi movement, and the Salafis have been in the headlines a lot lately. In Libya, over the past few months, they've been challenging the recently elected government by demolishing ancient Sufi shrines, which they deem to be insufficiently Islamic. In Tunisia, they've been attacking businesses that sell alcohol and instigating nasty social media campaigns about the country's female competitors in the Olympics. In Syria's civil war, there are increasing reports that the opposition's wealthy Gulf financiers have been channeling cash to Salafi groups, whose strict interpretation of Islam is considered close to the puritanical Wahhabism of the Saudis and others. Lately Salafi groups have been gaining fresh prominence in parts of the Islamic world -- from Mali to Lebanon, from Kashmir to Russia's North Caucasus.

The Day The Roof Fell In

Americans don’t want to bomb, they don’t want to build; they want to get out

by WALTER RUSSELL MEAD

Sometimes trouble blows up out of a clear blue sky. That’s what happened to the White House yesterday.

Coming out of the Democratic Convention, despite an uninspiring speech, President Obama had a united party and a comfortable bounce. While the economy was no great shakes, the President’s stewardship of foreign affairs helped give his administration an air of competence and professionalism. At a time when war-weary and terror-wary Americans, buffeted by storms at home and upheavals abroad, want nothing more than a quiet life, “no drama” Obama was ready to campaign as a safe and experienced steward of the national interest against a gaffe-prone challenger.

But that was before 9/11/12, the day the roof fell in. The Chicago teacher strike raised doubts about the President’s domestic leadership, the publication of Bob Woodward’s new book raised questions about his economic management and political skills, and 11 years to the day after the 9/11 attack, radical America-hating Islamists stormed the U.S. embassies in Cairo and Benghazi, assassinated the U.S. ambassador to Libya and three others even as U.S. and Israeli relations sank to another low point.

“No drama” Obama is in it now: his ex-chief of staff is locked in a high profile cage fight with one of the most important unions and donors in the Democratic stable in his home town; his humanitarian intervention in Libya has created yet another bloody Middle East imbroglio for the United States; his efforts to reconcile the U.S. and moderate Islamism—in part by distancing the U.S. from Israel—have angered Israel without reducing Islamist bitterness against the United States.

Turkey in the era of Erdogan

Turkish diplomacy risks looking naive and ineffective

By Gideon Rachman

Turkey, in the era of Recep Tayyip Erdogan, is playing a regional and global rule that has filled its leaders with pride and ambition.

The country’s record of economic and political success has greatly added to its prestige and power. Some around Erdogan have even spoken of a “new Ottomanism”, that would see the country re-emerging as a dominant force in the region.

But the Arab spring and, specifically, the uprising in Syria have risked exposing Turkey’s claim to a unique influence in its region. Turkish diplomacy, which a couple of years ago seemed to be sweeping all before it, now risks looking naive and ineffective.

Yet, even through the flaws in the Erdogan approach to the world are now emerging, the prime minister can justly point to a transformation in the country’s international image in recent years.

In the decades before the Erdogan era, foreign policy was one-dimensional. Following in the tradition of Mustafa Kemal Ataturk, the country was determined to look West. Its self-imposed mission was to join the European Union (EU).

What's So Bad About Deflation?

The key question: cui bono

by Charles Hugh-Smith

One of the most widely accepted truisms of our time is that deflation is bad: bad for debtors, bad for the indebted government, and therefore bad for the economy.

What all this overlooks is how wonderful mild deflation is for those who owe no debt but who own the debt and the income streams that flow from debt. What the "deflation is bad" argument ignores is who controls the financial and political systems, and what set of conditions benefits them.

The entire Survival+ critique is based on one simple but revealing question: cui bono--to whose benefit?

The "deflation is bad" view naively assumes the Federal government wants inflation to lower its own debt burden. But since the machinery of governance is directed not at what's good for the government, but at what's good for the financial Elites that influence policy, then the only meaningful question is: what's best for the financial Elites?

Europe Has Had Enough, But Can It Stand Up To Gazprom?

Everyone plays dirty, any means to an end

by Jen Alic

Gazprom has Europe’s natural gas market in a stranglehold and Europe is attempting to fight back, first with a raid last year on the Russian giant’s offices and then with a probe launched earlier this week against its allegedly illicit efforts to control the EU’s natural gas supplies.

The bottom line is that the same natural gas revolution in the US, which was enabled by hydraulic fracturing (fracking), is now threatening to loosen Gazprom’s noose on the EU, and Gazprom simply won’t have it.  

To head off a potential natural gas revolution in the EU, Gazprom is pulling out all the stops, and EU officials say that the company has been illegally throwing obstacles in the way of European gas diversification.

Poland’s situation is a case in point. Last year, a US Department of Energy report estimated Poland’s shale gas reserves at 171 trillion cubic feet. Gazprom got nervous. In March this year, the Polish Geological Institute suddenly felt compelled to contradict that report, saying reserves were only around 24.8 trillion cubic feet. In June, Exxon announced it would pull out of its shale gas projects in Poland. Investors started getting cold feet and shares began to drop. Chevron and ConocoPhillips are plodding along with their shale gas operations, for now.

A slap in Hollande’s face

The French Are Having Serious Regrets About Electing François Hollande

By Wolf Richter

France is mired in a stagnating economy. The private sector is under pressure, auto manufacturing is heading into a depression.

Unemployment hit a 13-year high of 10.2 percent, leaving over 3 million people out of work.

Youth unemployment of 22.7 percent, bad as it is, belies the catastrophic jobs situation for young people in ghetto-like enclaves, such as the northern suburbs of Paris.

Gasoline and diesel prices are hovering near record highs. So there are a lot of very unhappy campers.

In a BVA poll, 55 percent of the respondents were dissatisfied with President François Hollande’s efforts to tackle the economic crisis. By comparison, only 31 percent were dissatisfied with Nicolas Sarkozy in 2007 at the end of his honeymoon. Devastatingly, for a socialist: 57 percent believed that he didn’t distribute the “efforts” equitably—same as Sarkozy, the president of the rich.

Should Syria burn, Turkey will ultimately burn too

The Push to Ignite a Turkish Civil War Through a Syrian Quagmire

By Mahdi Darius Nazemroaya

Turkey itself is a major target for destabilization, upheaval, and finally balkanization through its participation in the US-led siege against Syria. Ankara has burned its bridges in Syria for the sake of its failing neo-Ottoman regional policy. The Turkish government has actively pursued regime change, spied on Syria for NATO and Israel, violated Syrian sovereignty, supported acts of terrorism and lawlessness, and provided logistical support for the insurgency inside Syria.

Any chances of seeing some form of Turkish regional leadership under neo-Ottomanism have faded. Turkey’s southern borders have been transformed into intelligence and logistical hubs for the CIA and the Mossad in the process, complete with an intelligence “nerve centre” in the Turkish city of Adana. Despite Turkey’s denials, reports about Adana are undeniable and Turkish officers have also been apprehended in covert military operations against the Syrian Arab Republic. The Turkish Labour Party has even demanded that the US General Consul in Adana be deported for “masterminding and leading the activities of Syrian terrorists.” Mehmet Ali Ediboglu and Mevlut Dudu, two Turkish MPs, have also testified that foreign fighters have been renting homes on Turkey’s border with Syria and that Turkish ambulances have been helping smuggle weapons for the insurgents inside Syria.

Japan is not broke

If Japan Is Broke, How Is It Bailing Out Europe?

By Ellen Brown 

Japan's massive government debt conceals massive benefits for the Japanese people, with lessons for the US debt "crisis".
It was recently pointed out that the Japanese government was by far the largest single non-eurozone contributor to the latest euro rescue effort. [1] This, he said, is "the same government that has been going round pretending to be bankrupt (or at least offering no serious rebuttal when benighted American and British commentators portray Japanese public finances as a trainwreck)."

Noting that it was also Japan that rescued the International Monetary Fund (IMF) system virtually single-handedly at the height of the global panic in 2009, Fingleton asked:

How can a nation whose government is supposedly the most overborrowed in the advanced world afford such generosity? ...

The betting is that Japan's true public finances are far stronger than the Western press has been led to believe. What is undeniable is that the Japanese Ministry of Finance is one of the most opaque in the world ...

Fingleton acknowledged that the Japanese government's liabilities are large, but said we also need to look at the asset side of the balance sheet:

[T]he Tokyo Finance Ministry is increasingly borrowing from the Japanese public not to finance out-of-control government spending at home but rather abroad. Besides stepping up to the plate to keep the IMF in business, Tokyo has long been the lender of last resort to both the US and British governments. Meanwhile it borrows 10-year money at an interest rate of just 1.0%, the second lowest rate of any borrower in the world after the government of Switzerland.

It's a good deal for the Japanese government: it can borrow 10-year money at 1% and lend it to the US at 1.6% (the going rate on US 10-year bonds), making a tidy spread.

Japan's debt-to-GDP (gross domestic product) ratio is nearly 230%, the worst of any major country in the world. Yet Japan remains the world's largest creditor country, with net foreign assets of US$3.19 trillion. In 2010, its GDP per capita was more than that of France, Germany, the UK and Italy. [2] And while China's economy is now larger than Japan's because of its burgeoning population (1.3 billion versus 128 million), China's $5,414 GDP per capita is only 12% of Japan's $45,920.

Egypt’s War on Culture Threatens Not Only Art, But Regional Status

Forward to the past

Dancers rehearse for a performance of "Qasem Amin's Women" at a theater in Cairo February 10, 2010

By Alexander Brock 

Last Friday, a historic book market in the Mediterranean coastal city of Alexandria was destroyed by Egyptian security forces, leaving kiosks in shambles and the streets littered with rare and valuable manuscripts. Political figures and activists were swift to denounce this mindless destruction of Egypt’s cultural heritage, demanding that President Mohammed Morsi take action against the governor of Alexandria who ordered the raid. The governor, for his part, deflected the criticism, claiming that the vendors were operating without a permit.

The ransacking in Alexandria represents the latest in a series of attacks on Egypt’s intellectual and cultural life that is being perceived as a “war on culture,” which, as observers have pointed out, raises serious questions about the Muslim Brotherhood’s commitment to certain essential characteristics of a democratic political order, such as freedom of expression, thought and ideas. But, importantly, the consequences of these forays into Egypt’s creative life reach beyond its borders. Restricting freedom of expression in Egypt could potentially kill Cairo’s ambitions to regain its leadership role in the Middle East and its reputation as the cultural powerhouse of the Arab world.

Egyptian cinema, traditionally the most vibrant such industry in the region, has seen some of its brightest stars either sent to prison or subjected to public defamation in recent months. Adel Imam, Egypt’s most famous comedic actor, was convicted of “offending Islam” in some of his past character roles and was sentenced to three months in jail in April of this year. More recently, a conservative Salafist cleric accused a renowned actress on public television of having committed “on-air adultery,” adding that she was “cursed” and would “never enter heaven.” This prompted President Morsi to hold a meeting with a small circle of prominent artists and intellectuals at his presidential palace, during which he stressed the important function that creative artists serve in the new Egypt, adding that he opposes unfounded slander of any kind. For many, however, the damage had been done and a number of movie stars refused to attend the gathering.