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Monthly Archives: September 2012

Consider these Americans:

Our first case is one of five million Americans unemployed for more than 27 weeks:

Graph of Civilians Unemployed for 27 Weeks and Over

A second American is part owner of a $20 trillion investment fund.

A third American is terrified that her pension fund will go bust (as the Illinois teachers’ fund will some time during the next ten years, among many others).

The $20 trillion fund squirrels away its money in safe, low-yielding assets. It won’t invest in the kind of risky investments that put bricks on top of mortar and hires workers.

Because American #2 at the $20 trillion investment fund won’t take risks, American #1 can’t find a job. And because low-risk investments now pay very little — investment-grade corporate bonds and mortgage-backed securities with federal backing yield barely 3% — pension funds can’t earn enough to meet their obligations to prospective retirees, and American #3 won’t have enough retirement income to live on.

All these Americans could well be the same individual, and probably are members of the same family.

Pension and retirement funds in the United States control $16 trillion in assets. That’s more than double the total assets of the whole U.S. banking system, and more than five times the total assets of hedge funds world-wide. The retirement savings of ordinary Americans dominate the capital markets, not the sort of fat-cats caricatured in the press. Add another $4 trillion in life insurance assets, which mainly reflect the retirement savings of the middle class, and the middle class investment fund now stands at $20 trillion.

Americans won’t take risks on each other. That’s our problem.  A decade ago, at the peak of China’s investment in American securities, I quipped that a rich Chinese won’t lend money to a poor Chinese, unless the poor Chinese moves to America. That’s starting to change. China’s huge trade surplus has shrunk to nearly zero as the Chinese consume more at home. The problem now is that middle-class Americans won’t invest in themselves.


We’re not talking about greedy Wall Street cheating Main Street: The plain fact of the matter is that $20 trillion of middle-class retirement savings refuse to invest in the sweat and ingenuity of the same people who own the savings. Corporations have about $2 trillion of cash on hand, and a lot has been written about the risk-aversion of U.S. companies. But that’s a tenth of the money available to pension funds.

There are two possible explanations.

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There is a school of thought, ably represented by First Things editor R.R. Reno, that blames the leftward drift in American higher education for Barack Obama’s resentment of the United States, rather than his Third World upbringing. The estimable Dr. Reno, who is a friend and former colleague, called D’Souza’s film 2016 “misguided” in a recent post on the FT blog:

I was and remain unconvinced by the argument that Obama’s anti-colonialist father explains his governing mentality. By my reckoning, the emerging postmodern liberalism of Columbia University circa 1982 (where I was for a semester as a visiting student) explains Obama pretty well.

Not only do we not need to go to Kenya to find the sources of Obama’s worldview (the Ivy League will do just fine), but in fact the very realistic and at times cold-blooded sentiments of post-colonial Africans who wrested their futures out of the hands of their European masters cuts against the magical thinking that characterizes the sort of liberalism that the Obama White House represents.

Rusty’s got a point — I got a B.A. from Columbia a few years earlier at a time when you could read one book by Marx and one by Freud (as the joke went) and pass any course in the college. But D’Souza has a better point. My own reading has a minor difference with D’Souza’s (the key figure in Obama’s mind is his anthropologist mother rather than is absent Kenyan father), but we are on the same page: Obama is an alien intrusion into American political life, a Third-World anthropologist profiling us. D’Souza may not be not as smart as Rusty Reno (few people are) but he has an advantage: he grew up in the Third World and knows what it means to actually be there.

What’s the difference between growing up in the Third World, and taking an Ivy League course in neocolonial studies? It’s about the same as the difference between sex education, and sex. I’m an unabashed globalizer and modernizer (I wrote a book warning that the extinction of most of the world’s cultures was inevitable), but some awful things happen en route to modernity. I’ve spent a lot of time in poor countries of the Global South as an economist and banker, and there have been moments when I wished I was a Communist. One sees heart-wrenching poverty and humiliation, and there are days when it would do the heart good to put some people up against a wall.

I saw a three-year old girl caring for her one-year-old sister while her parents tried to sell chewing gum at a traffic light in Lima.

I saw a thousand elderly people gathered in an impromptu flea market in the dead of winter, selling pathetic pieces of used clothing for the price of a meal, a few hundred yards from the Kremlin.

I saw garbage pickers living atop toxic rubbish in half a dozen countries.

It’s one thing to read about this kind misery; it’s another to see it first-hand and frequently; and it’s still another thing to grow up with it. There are any number of good and decent people I know who hate the West for the misery it occasioned (although they know perfectly well that the local ruling class is more predatory than the worst Western colonialist). Some of them are friends and colleagues at Asia Times Online. Their point of view is understandable. The difference between them and President Obama is that they do not lie about what they believe.

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Thank Obama for Russia’s Resurgence

September 19th, 2012 - 7:46 am

Russia has expelled USAID, and the pundits are wagging a collective finger at the Kremlin. Complaints about the lack of democracy in Russia recall the late Sam Kinison’s monologue about food in the desert. There has never been democracy in Russia, least of all during Boris Yeltsin’s presidency. Yeltsin and his oligarch friends stole more than any thieves in world history, which is why so many of the world’s richest people are Russian and why Russia went bankrupt in July 1998. The free-for-all following the collapse of Communism ultimately gave us the Putin regime, and there he remains. It is easy to to support a noble democracy activist like Garry Kasparov, the former world chess champion. It’s a bit harder to cheer for the women of Pussy Riot, who didn’t deserve long prison sentences for their disgusting behavior in a Moscow cathedral. In America, we would ignore them, while Russia characteristically made a horrible example of them.

But it really doesn’t matter much. Russians never learned how to stand up for their rights, and most of the prospective leaders of a hypothetical Russian democracy did what Kinison advised in the case of world hunger: they moved to where the democracy was. Their kids take a lot of the science prizes in New York public schools and ace medical school admissions in Israel.

Americans instinctively sympathize with democracy movements everywhere. I sympathize, too: I took part in the first wave of neo-conservative economists commuting to Moscow in the early 1990s, trying to help the Russians build a free market, as chief economist for a supply-side consulting firm. The fact is that complaining about the Putin regime’s misbehavior is about as effective as shooting spitballs through a straw at the bears in the zoo. Go and do it if it makes you feel brave or self-righteous, but keep the expectations down.

Let’s talk about how to tame the bear, rather than just tease it.

The real problem is that Russia has played a weak hand into a strategic resurgence, thanks to the fecklessness and stupidity of the Obama administration. By throwing its support behind the Muslim Brotherhood, Obama threw not just Israel but also Saudi Arabia under the bus. The Brotherhood styles itself a “modern” Islamist alternative to the KSA’s medieval throwback of a monarchy, and rightly so. The Brotherhood is just as modern as the Fascist or Communist parties of Europe; it is a modern totalitarian vanguard party rather than an antiquated monarchy. The Brotherhood threatens the Sunni Gulf states from within, and Iran threatens them from the outside. There isn’t a policy-maker or business leader in Europe or Japan who expects the Saudi monarchy to last another ten years, or thinks that Obama’s silly sanctions will prevent Iran from getting nuclear weapons.

Among other things, Obama has turned his back on America’s longstanding commitment to energy security in the Persian Gulf. If Iran has nuclear weapons, it can close the Straits of Hormuz at will, and bring the other Gulf states to their knees (unless, of course, they get their own nuclear weapons — which is not especially comforting for energy security, either).

That is why Russia, the world’s largest hydrocarbon producer, has the undivided attention of the Europeans and the Japanese: if they can’t rely on the Persian Gulf, the have no choice but to do more business with Moscow. That gives Putin huge strategic leverage, on a silver platter, thanks to the Obama administration.

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Is Egypt Ungovernable? Essay for JINSA

September 14th, 2012 - 8:18 am

The Jewish Institute for National Security Affairs kindly invited me to become a Visiting Fellow. Below is an excerpt of my first work product for JINSA.

The Obama administration is baffled by the Egyptian government’s response to the Sept. 11 attack on the American embassy in Cairo. It took President Mohamed Morsi two days to denounce the assault on the embassy, and even then he placed the blame on a hitherto unnoticed clip posted on YouTube rather than on the attackers. For two days after the flag-burning, Egyptian security was absent while demonstrators threatened the embassy. “A single security vehicle was imaged making an occasional and completely feckless foray through the gathering area, during the early morning of 13 September in Cairo. No Egyptian police or military or other security personnel were present,” the Nightwatch letter observed Sept. 13. The Muslim Brotherhood called for mass protests against the Youtube clip, albeit “peaceful” ones.

Morsi’s behavior raises questions about Egypt’s governability. On the face of it, his actions seem puzzling. Washington has done everything possible to reach out to the Muslim Brotherhood. It called loudly for Hosni Mubarak’s resignation when protests erupted in early 2011. It invited Brotherhood representatives to the White House last April, before Egypt’s presidential elections. It backed Morsi’s August 12 cold coup against the Supreme Council of the Armed Forces and the firing of Gen. Tantawi and the old guard of the Egyptian military, and embraced Tantawi’s successor Gen. El-Sisi, a Brotherhood member.

The White House said nothing when Morsi traveled to Iran in late August, breaking Iran’s diplomatic isolation, believing (as the Council on Foreign Relations’ Steven Cook put it) that Morsi would be a “better interlocutor” between Washington and Tehran. And it offered $1 billion of American aid, in the form of loan forgiveness and new credits, as well as backing for a $4.8 billion loan from the International Monetary Fund. Secretary Clinton Sept. 13 bent over backwards to placate Islamist sentiment, calling the YouTube video “disgusting and reprehensible.”

Indeed, the Obama administration is so deeply invested in the notion that the Muslim Brotherhood embodies the future of Islamic democracy that the imagination strains to identify a circumstance that might persuade the White House to abandon its support for the new Egyptian regime. The loyalty that President Obama and Secretary of State Clinton evince for the Muslim Brotherhood recalls the zinger that concludes “Some Like It Hot,” when Joe E. Brown tells a drag Jack Lemmon, “Nobody’s perfect.”

Why, then, would President Morsi bite the hand that is trying to feed it? His undisguised contempt for American perceptions and neglect of diplomats’ security are a profound embarrassment to the White House, and fodder for Obama’s opponent in the presidential election. Morsi has made it harder, if not outright impossible, for Obama to deliver the proffered aid package, which Egypt desperately requires.

The answer well may be that no one can govern Egypt. Even Islamists have to eat.

Read the whole essay here.

When Do We Get to Attack Obama’s Character?

September 12th, 2012 - 2:57 pm

Barack Obama is not a bad man, just a bad president, Mitt Romney said in his acceptance speech at the Republican National Convention, echoing the self-characterization of the Wizard of Oz. The political pros advise against it, and with well-studied reasons. Responding to a question of this genre at a political conference some months ago, Karl Rove explained that if you attack Obama personally, you make all the people who voted for him feel badly. The way to get people to do what you want, by contrast, is to make people feel good about themselves. Politics is the art of flattering the voters, and that is just what Romney did: he told the voters that they had every right in the world to feel good when they voted for Obama, and they should vote against him now because the best feeling they had about Obama was then they voted for him.

I am not a candidate’s handler, though, and have no aspirations to be one. I don’t dispute Karl Rove’s competence or second-guess Romney’s speech writers.  Like most conservatives, I was disgusted by the Obama administration’s apology for a hitherto unnoticed YouTube video. Obama is the first American president who truly dislikes the United States and blames its hegemonic position for most of the world’s troubles.

Almost a year before the 2008 election I characterized then-candidate Obama as a third-world anthropologist profiling us. There’s nothing in American culture with which to compare him, which is what makes him dangerous: he is an invasive pest with no natural enemies. He bears comparison to the carnival mentalist played by Tyrone Power, Jr. in Nightmare Alley, but his motivations are ideological rather than pecuniary.

How is it possible that we elected a president who embraces the Muslim Brotherhood, and who has thrown under the bus not just Israel, but all of America’s Middle Eastern allies? I addressed the issue in an essay published in Asia Times Online on Feb. 26, 2008, reposted below. Its major omission is the role of Valerie Jarrett, Obama’s Senior Counselor and general factotum. Otherwise I stand by the thesis.  


*    *   *   *   *

Obama’s Women Reveal His Secret

Cherchez la femme,” advised Alexander Dumas in: “When you want to uncover an unspecified secret, look for the woman.” In the case of Barack Obama, we have two: his late mother, the went-native anthropologist Ann Dunham, and his rancorous wife Michelle. Obama’s women reveal his secret: he hates America.

We know less about Senator Obama than about any prospective president in American history. His uplifting rhetoric is empty, as Hillary Clinton helplessly protests. His career bears no trace of his own character, not an article for the Harvard Law Review he edited, or a single piece of legislation. He appears to be an empty vessel filled with the wishful thinking of those around him. But there is a real Barack Obama. No man — least of all one abandoned in infancy by his father — can conceal the imprint of an impassioned mother, or the influence of a brilliant wife.

America is not the embodiment of hope, but the abandonment of one kind of hope in return for another. America is the spirit of creative destruction, selecting immigrants willing to turn their back on the tragedy of their own failing culture in return for a new start. Its creative success is so enormous that its global influence hastens the decline of other cultures. For those on the destruction side of the trade, America is a monster. Between half and nine-tenths of the world’s 6,700 spoken languages will become extinct in the next century, and the anguish of dying peoples rises up in a global cry of despair. Some of those who listen to this cry become anthropologists, the curators of soon-to-be extinct cultures; anthropologists who really identify with their subjects marry them. Obama’s mother, the University of Hawaii anthropologist Ann Dunham, did so twice.

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God, the Afterthought

September 6th, 2012 - 3:42 pm

The Democratic Party didn’t quite succeed in banning God from its platform, but it did its best to ensure that no-one would listen to him by putting a liberal clergyman who talks about anything except God in front of a deserted stadium. That checked the God box without allowing the Maker of Heaven to get a word in edgewise.

Rabbis from the wrongly named Conservative movement are used to preaching to empty rooms, but there was something surreal in the image of the Los Angeles Sinai Temple’s Rabbi David Wolpe blessing a deserted stadium late Wednesday night long after the Democrats had departed. Named by Newsweek the most influential American rabbi, Wolpe beamed empathy and gestured eloquently to the vacant stadium. After the last-minute vote by acclamation to return God to the party platform, Wolpe’s benediction had deep symbolic overtones. Clint Eastwood talked to an empty chair, while Wolpe talked to ten thousand empty chairs.

Rabbi Wolpe proposed gratitude that “our nation is founded on the highest principles of freedom and resourcefulness and creativity and ever-renewed strength, and we understand that those worthy ideals stand alongside the commitment to compassion, to goodness, our sacred covenant to care for those those are bereaved and bereft, who are frightened and hungry and bewildered and seek shelter from the cold.” He talked of “teachers with strength of soul and wild, wonderful visions.” And he added:

Ours is a holy charge.  A single moment, a touch, a glance, a word can change a life. Our children look to us with aspirational eyes, with the hope that their world will be kinder, sweeter, smarter than the world we have known. Each of these changes touches all of us, for you have taught us that we must count on one another, that our country is strong through community, and that the Children of Israel on the way to that sanctified and cherished land, and ultimate to that golden and capital city of Jerusalem, that these children of Israel did not walk through this wilderness alone.

The wild and wonderful rabbi from Los Angeles put religion squarely in the middle of the helping professions, somewhere between social work and psychotherapy, and Israel into a generic communitarian mix. That raises a question: if rabbis only echo what the politicians say, why not have them speak after everyone else is gone? I hope I’m not the only one who found Wolpe confusing. In 2001 he set off a storm with a Passover sermon that insisted that the Exodus never happened (because archaeologists can’t prove it happened). If he doesn’t think it happened, why bring it up now?

Contrast this with the benediction concluding the Republican National Convention that came from the country’s senior Catholic cleric, Cardinal Timothy Dolan, the archbishop of New York. He said in part:

Almighty God, who gives us the sacred and inalienable gift of life, we thank you as well for the singular gift of liberty. Renew in all of our people a respect for religious freedom in full, that first most cherished freedom. Make us truly free by tethering freedom to truth and ordering freedom to goodness. Help us live our freedom in faith, hope and love, prudently and with justice, courageously and in a spirit of moderation. Enkindle in our hearts a new sense of responsibility for freedom’s cause and make us ever grateful for all those who for more than two centuries have given their lives in freedom’s defense. We commend their noble souls to your eternal care as even now we beg your mighty hand upon our beloved men and women in uniform. May we know the truth of your creation, respecting the laws of nature and nature’s God and not seek to replace it with idols of our own making.

Those are beautiful words. Strong was the warning against making idols for ourselves — that is, worshiping the work of our hands, rather than the author of Liberty. The whole of the Republican convention delegates remained in place to hear Cardinal Dolan after Mitt Romney’s acceptance speech, unlike their Democratic counterparts, who walked out on Rabbi Wolpe. Viewers of CNN, though, did not hear Cardinal Dolan, because Wolf Blitzer was too busy trolling the punditeska for instant comments on the Romney speech to allow Dolan to be heard. Fox News carried the cardinal’s benediction rather than the pundits.

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Egypt Is an Adversary, Not a Neutral

September 3rd, 2012 - 8:30 am

Update: The Obama administration is offering a trickle of new money for Egypt under the grandiose rubric of a “bailout” for the Egyptian economy. The Wall Street Journal reports that the US will offer debt forgiveness of slightly over half a billion dollars (with little impact on the country’s massive cash crunch) and will support a $4.8 billion IMF loan. Also:

Beyond the debt forgiveness and IMF loan, U.S. officials are promoting two financing opportunities: $375 million in financing through the U.S. Overseas Private Investment Corp., a government development finance agency, for loan guarantees for small-to-medium sized Egyptian businesses; and $60 million to help launch such firms through a new U.S.-Egypt Enterprise Fund.

But the Journal adds, “The aid offers will still strain to meet Egypt’s estimated $12 billion in external financing needs. Last year’s revolution and the subsequent 19 months of political instability have kept tourists and foreign investors at bay.” The external financing requirement at current import levels is closer to $20 billion by my reckoning, with a trade deficit running at $36 billion a year, offset by Suez Canal revenues of about $5 billion, tourism revenues of perhaps $7 billion, and $3 to $4 billion of workers’ remittances.

The proposed aid is “part of a gilded-charm offensive that Washington hopes will help shore up the country’s economy and prevent its new Islamist leadership from drifting beyond America’s foreign-policy orbit.” That train left the station when the Muslim Brotherhood forced out the old-guard military leadership in August.

By far the most perspicacious analyst of Egypt’s foreign policy shift is my Asia Times Online colleague, M.K. Bhadrakumar, formerly Egypt’s ambassador to Turkey among other countries. He predicted Egypt’s turn to Tehran in an Aug. 2 post on his Indian Punchline blog, noting that the Iranian vice-president’s visit to Cairo “is a development that holds the potential to shake up Middle Eastern politics.” Tehran had been courting the Egyptian Islamists for months, he observed, “inviting a series of Egyptian goodwill delegations from the civil society in a sustained effort to reach out to the various sections — especially the Islamist forces — of Egyptian society…[and] a critical mass of opinion began accruing in Egypt, including within the Muslim Brotherhood, regarding the restoration of normal ties with Iran.”

Iran outplayed the Saudis in Cairo, he explains: “Taking advantage of the economic crisis in Egypt, Riyadh offered economic assistance, but with strings attached. The bottom line for the Saudis is that Egypt shouldn’t dilute Riyadh’s regional campaign to ‘isolate’ Iran. … The Saudis hoped that Morsi would play footsie on the Sunni-Sh’ite front and get Egypt to play its due role in the Syrian crisis.” As I reported last week in Asia Times, Morsi will deal with his economic crisis not by soliciting Saudi help, but by rationing food, fuel, and electricity, turning Egypt into a sort of North Korea on the Nile. That is in keeping with the Muslim Brotherhood’s character as a modern totalitarian vanguard party with an Islamist ideology, and the Islamist socialism of the late Brotherhood ideologue Sayyid Qutb.

Of course, the opposite occurred: Egypt proposed to include Iran in a “quartet” with itself, Turkey, and Saudi Arabia to sort out the Syrian crisis, giving Tehran an effective veto over regime change in Syria. The Western press is full of self-consoling reports about how Egypt’s Muslim Brotherhood president Mohamed Morsi offended his Iranian hosts at last week’s Non-Aligned Movement summit eeting in Tehran by saying unkind things about their Syrian allies. Look beneath the rhetoric, Ambassador Bhadrakumar now advises, and watch what is really going on.

Iranian FM Ali Akbar Salehi presented the tantalizing idea of a NAM group in the search of a settlement of the Syrian crisis. The group comprises the NAM’s past, present and future chairpersons – Egypt, Iran and Venezuela – plus Lebanon and Iraq.

Clearly, this is one of those rare moments when a new “centre of gravity” is forming in the geopolitics of the Middle East region. It is an intriguing formation since Egyptian president Mohamed Morsi openly called for regime change in Syria, while Iran and Venezuela would be ambivalent about the very concept. But then, all three are agreed that the “transition” should be a wholly Syrian-owned process without outside intervention.
This is Iranian diplomacy at its best, showing mastery over the art of the possible. What matters infinitely more than everything else from the Iranian viewpoint is that Tehran and Cairo are sharing a regional platform on Syria. Both are OIC members while Egypt is also a member of the Arab League. The “regional consensus” that the United States and Saudi Arabia struggled so hard to put together has been dispatched to oblivion.
Turkey’s Syrian debacle is becoming very serious. Egypt’s “entry” puts pressure on Saudi Arabia to change course. The Iranian media has given the impression that some sort of rapprochment between Tehran and Riyadh is on the cards. The restoration of Egypt’s relationship with Syria, equally, changes the calculus for Turkey.
It is no small matter for Tehran that Morsi called Iran a “strategic partner” for Egypt. Even a commentary in the Voice of America admits that the symbolism of Morsi’s visit to Iran “has concerned countries trying to isolate Iran – in particular, Egypt’s longtime ally the United States.” The best spin VOA could give is that Morsi’s trip does not mean Egypt’s “full-fledged approval of Iran” and that the “apparent closeness could be a bargaining chip” in Egypt’s negotiations with the US.

Ambassador Bhadrakumar, I should note, is the scion of a distinguished Indian political family long associated with that country’s Communist Party. He and I disagree about the world as much as two journalists can, but I salute his superior grasp of regional developments. It says something about the world after Obama that we find out what is happening after the fact, from our adversaries rather than our friends.

The Tehran Non-Aligned Movement summit was an unambiguous triumph for Iran and a thoroughgoing humiliation for the United States, despite the spin from the foreign policy establishment. The ubiquitous Steven A. Cook of the Council on Foreign Relations went so far as to claim that Egypt’s turn to Tehran was positive for America because it made Egypt a better “interlocutor” with Iran–as if the only problem we had with Iran was a failure to communicate. The Non-Aligned Movement voted 120 to zero in support of Iran’s right to the full nuclear fuel cycle. Tehran didn’t get an endorsement of its Syrian policy, to be sure–just the offer of a de facto veto on any future regime change in Syria.

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