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Thursday, April 13, 2006


emergence of the praetorians

the saga of donald rumsfeld's recent years has made for some very frightening reading, but has been as instructive an example of the dysfunction of american power and government as may have been hoped for.

iraq was rumsfeld's war and his misguided ideological misconceptions put into woeful practice have cost thousands of lives, fractured the american military and lost a major war -- a point never more clearly made that in a recent recounting of the invasion of iraq by the new york times' michael gordon and general bernard trainor.

The authors also argue that America's bad policies have turned the occupation of Iraq into a fiasco—a fiasco that was not inevitable. They give George Bush's national security chiefs a pasting. The best, such as Condoleezza Rice, the national security adviser, were feeble; the worst vain and incompetent—and the worst of all were Donald Rumsfeld, the defence secretary, and General Tommy Franks, who commanded the invading troops.

For 18 months beforehand, Mr Rumsfeld bullied his officers into writing war-plans bound by his dogmas. With utter faith in the technological superiority of America's troops, and a profound ignorance of Iraq, he saw to it that America invaded the country with around one-third of the soldiers that many of his generals wanted. Those who questioned the tactic were chased sneeringly away.

A visceral aversion to protracted peacekeeping led Mr Rumsfeld to want to withdraw most of these troops within a few weeks of occupying Iraq. Such a move would only be possible if the country's institutions, including the army and police, survived the invasion intact, which Mr Rumsfeld, of course, predicted that they would. He also assumed that allies would send peacekeepers to help out. Some military planners urged a more cautious approach; one wise man suggested preparing a force of American policemen in case Iraq's police collapsed. They were ignored.

General Franks proved the defence secretary's perfect ally. Oafish and proud of it, the general was only interested in grabbing Iraq, not in rebuilding it. This was unfortunate as Mr Rumsfeld had volunteered his department for that task—in part, it appears, to spite Colin Powell at the State Department. A month before the invasion, America still had no post-war plan.
as the scope and depth of his complete failure became increasingly obvious, rumsfeld himself moved on into deeper self-delusion, lying to those who know better and denying the existence of any problem at all.

finally, it appears, with yet another catastrophic mistake now looming on the horizon, this has all become too much even for those whose oath of loyalty runs to the constitution through the president and his appointee. jim lobe is reporting on a growing campaign within the military hierarchy to send rumsfeld packing, previously only hinted at by the change of heart of john murtha.

The brass' unease with Rumsfeld's plans for going to war date originally from his summary dismissal in early 2003 of then-Army Chief of Staff Gen. Eric Shinseki's testimony before Congress that the occupation of Iraq would require "several hundred thousand troops."

Shinseki's effective early retirement, apparently in retaliation for speaking out with such candor, was taken by most of the brass as a message from Rumsfeld that public disagreement with his views could have serious career consequences.

When, by early 2004, it had become clear that Washington had indeed not deployed sufficient troops to control Iraq, a number of retired generals began speaking out forcefully against Rumsfeld and his civilian advisers.

In May 2004, the former head of the U.S. Central Command, ret. Marine Gen. Anthony Zinni, accused them of "dereliction of duty" in failing to prepare adequately for the war and called on Bush to fire them if they did not resign.

In recent weeks, Zinni has renewed those demands, stressing in various public appearances that Rumsfeld had deliberately ignored extensive contingency planning developed under his command in the late 1990s for an Iraq invasion and overruled officers who raised questions about his own plans.

In the past three weeks, he has been joined by three other retired generals, including Batiste.

In a remarkably frank New York Times column published Mar. 19, ret. Army Maj. Gen. Paul Eaton, who had been in charge of training the Iraqi military during the first year of the occupation, argued that Rumsfeld "has shown himself incompetent strategically, operationally, and tactically" and "has put the Pentagon at the mercy of his Cold Warrior's view of the world and his unrealistic confidence in technology to replace manpower."

"In the five years Mr. Rumsfeld has presided over the Pentagon," Eaton wrote, "I have seen a climate of groupthink become dominant and a growing reluctance by experienced military men and civilians to challenge the notions of the senior leadership."

Eaton's blast was followed this week by an anguished column in Time magazine by ret. Marine Lt. Gen. Gregory Newbold, the top operations officer for the Joint Chiefs of Staff before the invasion, who assailed the brass, including himself, for "act[ing] timidly when their voices urgently needed to be heard."

"The consequence of the military's quiescence," he wrote, "was that a fundamentally flawed plan was executed for an invented war…."

"My sincere view is that the commitment of our forces to this fight was done with a casualness and swagger that are the special province of those who have never had to execute these missions – or bury the results," he asserted, calling for the replacement of Rumsfeld "and many others unwilling to fundamentally change their approach."

With his remarks Wednesday, Batiste, who retired from the Army in November and whose forces were based in Tikrit until last May, joined the rebellion, firmly taking Zinni's side.

"[W]hen decisions are made without taking into account sound military recommendations, sound military decision making, sound planning, then we're bound to make mistakes," he said. "You know, it speaks volumes that guys like me are speaking out from retirement about the leadership climate in the Department of Defense."
this has always been the most insistent danger to the republic presented by the rise of such incompetent ideologues and advocates of an unfettered spartanism and nascent dictatorship. the goals of such power-mad nietzscheans cannot be met without the allegiance of the armed forces, who are always the final repository of power in any amoral state, and yet the nature of such men as rumsfeld is not to collaborate but to dominate. as has been shown in parable by the travails of captain ian fishback, many thoughtful military men must be considering that their oath to the constitution and their loyalty to the elected political administration of the country are no longer one and the same.

such a realization of divorce, if it comes to wide realization, spells the end of democracy in the united states or any democracy. the american military is just as capable as any other army of history of becoming its own kingmaker, and the inability of popular democracy to enforce a reasonable measure of culpability and restraint on american political leadership in the face of organized efforts to the contrary end is becoming a glaring systemic flaw. how long the military remains aloof of that fact and its consequences largely determines the remaining lifespan of our system of government.

in that light, such transgressions of the military into civilian politics are not to be celebrated, no matter how badly needed or desired. they are merely to be noted as the signposts of national and civilizational decay that they are.

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Say, why don't you do something nice and write a note to Jane Jacobs family:

I would have written an e-mail but have lost your address.


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Monday, April 10, 2006


the krona

chaotic events in distant lands are common news items in the back pages of american papers. indeed, one of the telltale signs of a society whose imperial ambitions are boundless is an overweening concern for such matters, which would ordinarily have little import on affairs closer to home.

but the wall street journal today highlights one chaotic event in one distant land that may have more to tell americans that we would wish it to. the icelandic krona has collapsed dramatically in recent weeks with its small equity market plummeting in tandem.

the turmoil began with a publication by fitch warning of "macroeconomic imbalances" that could undo the krona, one of the greatest beneficiaries of the global carry trade. explains the journal:

In Iceland and a few other countries -- including New Zealand, Turkey and Australia -- investors found a lucrative way to take advantage of [Japanese] low rates: They borrowed vast sums in places like Japan (where rates are near 0%), and invested the money in places like Iceland, where rates stand at 11.5%. The maneuver, known as the "carry trade", has emerged as one of the most popular hedge-fund strategies in recent years.

But it can leave an economy vulnerable if the speculative money suddenly reversed direction. In one of the first signs of how Iceland's woes could affect other markets, on Wednesday, shares of easyJet PLC fell 9% after an Icelandic investor, FL Group, sold its 17% stake in the British carrier. FL Group said the sale wasn't related to Iceland's problems. But it is raising concerns that Icelandic investors, who went on an overseas buying spree in recent years, might have to sell holdings abroad to cover obligations at home.
this page has discussed the carry trade and its unwinding at some length. taken in conjunction with the recent market collapses in the middle east -- including turkey, another carry trade beneficiary -- iceland's crisis may very well represent the canary in the coalmine of global finance. the slowing economic conditions and inverted yield curve in the united states in combination with the end of quantitative easing in japan is giving speculators great reason to begin to undo these trades, which play yield differences with massive amounts of leverage by borrowing at low short-term rates and buying higher yielding instruments -- be they western mortgages, emerging market debt or equities. these inflows of ready capital have fuelled what can only be called a speculative credit bubble in multinational housing (including notably the united states), as well as asian and other emerging debt and equity markets.

the end of quantitative easing in japan is a topic that merits further discussion. a recent issue of the economist carried this article regarding a major chance in strategy for the bank of japan.

ON MARCH 9th the Bank of Japan (BoJ) declared that the days of its ultra-loose monetary policy were over and that it was winding down its unorthodox practice, begun five years ago, of flooding the banking system with free money. This drastic measure, known as “quantitative easing” was designed to pull Japan out of deflation after the cutting of interest rates to nil had failed to do the trick.

In keeping with modern, open central-banking fashion, the BoJ has also supplied a much-needed peek at the map it will use to steer itself back to a more “normal” monetary policy: one that is conducted by varying interest rates, not the quantity of money. Even so, because Japan is about to embark on an unusual journey, the way ahead is bound to contain surprises.

... The bank's first, delicate job is managing a smooth end to quantitative easing. In effect, this policy has consisted of stuffing the reserve accounts that commercial banks must keep at the BoJ with free cash. These accounts contain ¥30 trillion-35 trillion ($260 billion-300 billion), far more than would be required simply to keep overnight interest rates at zero (about ¥6 trillion). The idea was to get banks with shrinking loan books to lend more and so boost the economy.

There is a danger of mopping up that liquidity too fast, especially if prices ease again (as they might, once last year's rise in energy prices works its way out of the figures). But there is also a danger of mopping too slowly, and letting speculation take hold in markets for financial assets and property. The effect of the BoJ's largesse is already plain in the stockmarket, where day traders buying on margin were a big force behind the market's 40% surge last year. The policy has been felt in all sorts of foreign markets too (see article).
this second article highlights some of what this page feels all too likely to come down the pike.

IF YOU were charitable, you would say it had the elegance of simplicity. If you weren't, you'd call it obvious. The “carry trade” is, however, one of the most talked-about trading strategies of recent times.

The favourite subject of the masters of capitalism has much in common with the dinner-table topic of choice in large parts of the English-speaking world: making money from the property market. Both involve borrowing cheaply to buy something with a higher expected return. The carry traders, however, have travelled further than housebuyers in pursuit of lucre. Lately, they have gone to Japan, to borrow yen for next to nothing, convert it into other currencies, and buy anything from emerging-market stocks to gold, property and Kenyan shillings. While it has lasted, the trade has brought an air of old-fashioned derring-do to international capital markets; after all, as long as the yen holds steady or depreciates, it is hard to lose. But the end of Japan's ultra-loose monetary policy, signalled this week, might make the carry trade look a good deal riskier. This gives speculators the willies. Some, theatrically, believe it could cause the “avian flu” of global financial markets.

... Even if [BoJ] carry on regardless, the world's investors still have good reason to be cautious about Japan. First, Japanese corporations' years of deleveraging, which have helped fuel the global liquidity glut, may be ending, says John Richards of Barclays Capital in Tokyo. That may affect Japanese demand for foreign assets, such as American Treasuries.

Second, the BoJ has been responsible, along with America's Federal Reserve and the European Central Bank, for an exceptionally long period of unusually accommodative monetary policy. The other two have already begun to tighten. If policy becomes still tighter all round, it is hard to see global bond yields staying at their recent low levels (see chart). And third, investors might ask whether it is worth hunting out high-yielding assets in emerging markets and leveraged credit markets, if they can get attractive returns in safer places.

Such thoughts may already be permeating global bond markets, where yields on ten-year American Treasuries, German bunds and Japanese government bonds have risen in recent weeks. Further rises could be unsettling in a global economy where consumers, governments and many buy-out firms are leveraged to the gills. The BoJ is unlikely to be overly troubled by the interests of those bloated borrowers. Which is why they should be watching the bank's every move.
the amount of capital borrowed in japan and tied up in these trades is not definitely known -- but is almost surely constitutes a significant part of the most massive fiscal and monetary imbalances in the history of western capital markets. literally trillions have been borrowed to take advantage of the disparate returns between nations and markets as the american federal reserve held rates too low for too long over the last few years in the aftermath of the 2000-2002 nasdaq crash.

to note that the united states is also one of the great beneficiaries of the carry trade is to note that it too is vulnerable to financial shocks of a like kind. america is deeply dependent on the gargantuan and continuous inflow of foreign capital, as demonstrated by its truly staggering current account deficit. while much of that capital has been the investment of chinese and japanese central banks in currency manipulation, some of it is certainly hot money borrowed in japan that will be removed as japanese rates rise and yen liquidity declines. once such unwinding of the carry trade is begun, the potential consequences in an environment of trillion-dollar deficits are nothing short of earth-shaking -- and can quickly take on a life and mind of its own by the force of unintended consequences.


Are you the reason why gold has gotten so expensive recently?


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i sometimes wish i could say i was that consequential, mr mk, but i am not. :)

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Thursday, April 06, 2006


war approaches again

war with iran is growing closer, notes andrew sullivan, as iran is referred to the united nations security council.

Key players in the Bush administration think a military confrontation with Iran is unavoidable, leading to stepped up military planning for such a prospect, according to several experts and recently departed senior government officials.

Some of these observers stressed that military strikes against Iran are not imminent and speculated that the escalated war chatter could be a deliberate ploy to ratchet up diplomatic pressure on Tehran to abandon its nuclear ambitions. Still, they made clear, the tone in Washington has changed drastically.

"In recent months I have grown increasingly concerned that the administration has been giving thought to a heavy dose of air strikes against Iran's nuclear sector without giving enough weight to the possible ramifications of such action," said Wayne White, a former deputy director at the State Department's Bureau of Intelligence and Research. White, who worked in the bureau's Office of Analysis for the Near East and South Asia, left government in early 2005 and is now an adjunct scholar at the Middle East Institute.

Several experts and former officials interviewed by the Forward pointed to Vice President Dick Cheney as one of the key figures who has concluded that the ongoing diplomatic efforts to bring Iran before the United Nations Security Council and eventually slap the Islamic regime with sanctions will come to naught, forcing Washington to resort to force to prevent Tehran from developing nuclear weapons.
it is time for americans to prepare for the fact that war with iran will be very hard to avoid -- it will probably happen, and not because iran forced it to happen but because american imperial delusions of managing the world without its consent have become so deeply ingrained in the ruling class that very little short of immolation and disaster will free them from its hubristic grip. iran will behave as the proud, independent, fiercely nationalistic society it is, all but daring american imperial intervention. and american imperialists, seeing validation in conflict, will in all likelihood sternly oblige.

their view is summed with scintillating irony in this paragraph.

Looking ahead, "the greatest danger is Iran's overconfidence," said Michael Rubin, a scholar at the conservative American Entreprise Institute who worked on Iran policy at the Pentagon until his departure in 2004. "They believe we're bogged down in Iraq. They may believe we're stymied in the U.N. by the Russians and Chinese. They may believe oil prices are too high for action. But the administration is deadly serious. Any military action would likely involve the air force and navy, not the troops in Iraq. And while everyone recognizes the problems of any military action, there is a real belief that the consequences of Iran going nuclear would be worse."
in other words, they underestimate just how crazy we really are.

this page is hard pressed to see how a nuclear iran is any worse than the nuclear ussr with which we coexisted, albeit tenuously, for sixty years without a major conflict. now one is supposed to believe that a nuclear iran is unacceptble? this is talk motivated out of a lack of respect for the possible outcomes and a childlike faith in american superiority. to say that the rewards of firing missiles and dropping bombs into iran outweigh the risks is to know nothing of either, and is in fact a heady example of the arrogance with which the americal political class now disdains the world. and to claim that it is iran's overconfidence which is the danger! it sickens to read it.

this is clear-cut insanity on the part of the administration and its principals -- there is no other word for it. they have lost a war in iraq, failing to achieve any of the desirable stratgic outcomes intended and instead delivering mesopotamia into the hands of persian nationalists and islamists. and they have neither the men nor materiel to successfully prosecute a war in iraq, much less one in a nation three times the size with one of the most impassioned nationalist streaks of any on the globe. not only will iranians rally around the mullahs as iraqis have done; they will rally around their political leadership in ahmadinejad, who is no saddam hussein and is frankly beloved of the very numerous poor and religious of his nation.

however so, this administration -- vexed as only the arrogant can be by the former and ignorant as only the arrogant can be by the latter -- nonetheless drives plans forward for yet another national humiliation because, to their blinkered eyes, it is thought "inevitable".

such steps, if actually taken beyond the planning stage, would be confirmation for this writer that american political leadership is every bit as mad as nero or caligula ever were -- and their ascendancy, like those malevolent emperors, not a disease but a symptom of a broader and deeper civilizational malignancy that is moving inexorably toward suicide, collapse and dissipation.

UPDATE: seymour hersh is reporting on the iran plan.

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bush and cheney outed plame

impeachment has been a word distant from capitol hill since bill clinton was exonerated by the senate in 1999. but the ongoing investigation into the plame affair has taken a twist that will resurrect the word if not the reality, and charge the 2006 midterm elections with a measure of ideological fervor.

I. Lewis "Scooter" Libby testified to a federal grand jury that he had received "approval from the President through the Vice President" to divulge portions of a National Intelligence Estimate (NIE) regarding Saddam Hussein's purported efforts to develop nuclear weapons, according to the court papers. Libby was said to have testified that such presidential authorization to disclose classified information was "unique in his recollection," the court papers further said.

Bush and Cheney authorized the release of the information regarding the NIE in the summer of 2003, according to court documents, as part of a damage-control effort undertaken only days after former ambassador Joseph C. Wilson IV alleged in an op-ed in The New York Times that claims by Bush that Saddam Hussein had attempted to procure uranium from the African nation of Niger were most likely a hoax.

According to the court papers, "At some point after the publication of the July 6 Op Ed by Mr. Wilson, Vice President Cheney, [Libby's] immediate supervisor, expressed concerns to [Libby] regarding whether Mr. Wilson's trip was legitimate or whether it was in effect a junket set up by Mr. Wilson's wife."

Wilson's wife, Valerie Plame, was a covert CIA officer at the time, and Cheney, Libby, and other Bush administration officials believed that Wilson's allegations could be discredited if it could be shown that Plame had suggested that her husband be sent on the CIA-sponsored mission to Niger.

Two days after Wilson's op-ed, Libby met with then-New York Times reporter Judith Miller and not only disclosed portions of the NIE, but also Plame's CIA employment and potential role in her husband's trip.

Regarding that meeting, Libby "te that he was specifically authorized in advance... to disclose the key judgments of stifiedthe classified NIE to Miller" because Vice President Cheney believed it to be "very important" to do so, the court papers filed Wednesday said. The New York Sun reported the court filing on its Web site early Thursday.

Libby "further testified that he at first advised the Vice President that he could not have this conversation with reporter Miller because of the classified nature of the NIE," the court papers said. Libby "testified that the Vice President had advised [Libby] that the President had authorized [Libby] to disclose relevant portions of the NIE."
this comports fully with previous information that libby had learned of plame's identity through vice president cheney.

to be clear, libby's testimony claims that he was authorized to disclose parts of the national intelligence estimate -- it does not specifically claim that he was authorized to reveal plame's identity. however, there is a chain of conditional probabilities that would seem to put the issue safely beyond reasonable doubt, even if it cannot be proven.

moreover, if libby's testimony is true, it would expose yet another deception in an ever-lengthening chain for the bush administration, as the president has long claimed to know nothing about how this information was leaked.

note that leaks to bob woodward were part of what libby claims to have been authorized by the president to do.

Although not reflected in the court papers, two senior government officials said in interviews with National Journal in recent days that Libby has also asserted that Cheney authorized him to leak classified information to a number of journalists during the run-up to war with Iraq. In some instances, the information leaked was directly discussed with the Vice President, while in other instances Libby believed he had broad authority to release information that would make the case to go to war.

In yet another instance, Libby had claimed that President Bush authorized Libby to speak to and provide classified information to Washington Post assistant managing editor Bob Woodward for "Plan of Attack," a book written by Woodward about the run-up to the Iraqi war.
this sets the stage for a very intriguing process. the bush administration, among many other gross and unprecedented claims of totalitarian authority, claims to be able to declassify information unilaterally by the authority of the president. legal scholarship debates this point, but the administration will certainly claim on this ground that the revealing of the estimate or of plame's identity, being directed by the president, was legal.

the investigation of patrick fitzgerald will have to determine where further indictments are warranted, but this much is becoming clearer: plame's undercover identity was outed by the very highest offices of the land -- whether as mere revenge for her husband's writing in the new york times or as a means to defusing an investigation into the niger-yellowcake forgeries being conducted by plame's outfit in the cia or both. bush is, of course, immune to prosecution by law enforcement no matter how blatant the transgression -- it is left to congress to remonstrate and punish a sitting president.

and this is why the 2006 midterms increasingly look politically important. there has long been a wide fringe movement of leftist activism energized to try to impeach bush. but what are the real chances of electing democratic majorities in the house and senate such that bush could be impeached? such a possibility seems remote to this page, following so closely on the gerrymandering which followed the 2000 census -- even abysmal popularity of this failing president and the thick smell of scandal that covers the republican party may not be enough to turn specially-designed congressional districts from red to blue.

in the end, impeachment would almost necessarily rely upon republican house members, alienated from their leadership on points of principle, to risk forsaking party money and machinery to indict a republican president. that seems impossible.


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