No wait, still bad news!

I'll let someone else start by doing the talking:

In the Summers years, from 2001 to 2006, nothing was on auto-pilot. He was the unquestioned commander, a dominating personality with the talent to move a balkanized institution like Harvard, but also a man unafflicted, former colleagues say, with self-doubt in matters of finance.

Certainly, when it came to handling Harvard’s cash account, the former US Treasury secretary had no doubts. Widely considered one of the most brilliant economists of his generation, Summers pushed to invest 100 percent of Harvard’s cash with the endowment and had to be argued down to 80 percent, financial executives say. The cash account grew to $5.1 billion during his tenure, more than the entire endowment of all but a dozen or so colleges and universities.

OK, let me put this in Point Break terms: Summers thought that he was gonna ride that once-in-a-generation wave to freedom, but instead was caught on the beach by Keanu Reeves and the Australian police and forced to kill himself. Really, though, how can you blame the guy? To quote C. Scudworth, "I watched the first two-thirds of "MC Hammer: Behind the Music" and if there's one thing I learned about money it's that it never runs out!"

But for cereal, guys, Summers is in charge of the White House's economic policy and he is a man "unafflicted ... by self-doubt." Decisiveness is one thing, and a good one when accompanied by some form of self-reflection. Hubris, however, is forever ugly and dangerous. When commentators speculate on whether or not 1600 Pennsylvania has a long-term strategy to sort out our woeful economic life, I should think that episodes like this one at Harvard would be educational.

Maybe Summers really is the economist that everyone tells him he is, or maybe he's a schmuck who only knows how to hold down the 'on' button. He ignored warnings from two endowment managers, Jack Meyer and Mohammed El-Erian, that tying up all of Harvard's liquidity in high-risk investments could backfire, and would put the university at a severe disadvantage in shoring up the inevitable losses to its endowment if it did. And when it did backfire, Harvard lost nearly $2 billion in what should have been emergency cash, in addition to $11 billion in damage to its $37 billion endowment. It also lost out on the swaps that Summers had relied on to hedge against the risk of a rise in interest rates when rates fell instead, costing a further $500 million. It ultimately took a bond issuance (always an expensive and usually cost-ineffective measure) to shore up Harvard's balance sheet, in addition to a debt sale and aggressive cost-cutting measures across the board.

It wouldn't be fair to put all of this on Summers's shoulders if Harvard wasn't essentially run by a tight group of mandarins who exercise extreme deference to authority. Summers himself left in 2006 after his infamous "women are genetically inferior to men" remarks, which, I suppose, has saved any deeper scrutiny of his role in Pied Pipering the university. Because he had been so dominant in financial matters, however, he left the endowment's managerial team stripped down to an inoperable core which was largely, as the article puts it, operating on auto-pilot. As you can imagine, that was a somewhat problematic arrangement when they hit bad weather and found no one at the wheel.

Auto-pilot? That somehow sounds familiar--could it be how the economy is being steered? The non-presence of Obama's team, or Obama himself, when it comes to matters of financial regulation or the disciplining of investment firms smacks of that same Summersian spirit of laissez-faire. Only since this ship is quite a big bigger than Harvard's, I suspect that any future storms can be expected to cost a lot more than $17 billion.

This is a piece of shit.

I thought this was a fitting thing to come back with.

Via Shakesville, Feministing and the internet generally.

EDIT: David here, just fixed the embed.

Reflecciones contemporáneas

I cannot resist dogging on people our age who are not us. I know that to mourn the yellow-heartedness and flaccidity of our fellows as against the muscularity of past generations is a sport played since time immemorial, and I confess that I do it with glee. It's just so easy!

It's fairly commonplace for people who are older than us, but for whatever reason have never fully adjusted to exiting their twenties, to spend much of their time focused on assembling a definitive list of our characteristics. This process can go one of two ways: either we're despicable atomized cretins, or we're the vanguard of some new paradigm of educated, socially-aware individualism. I tend to stumble over the latter a good deal more than the former. You've gotta be pretty blithe--or pretty something--to see the seeds of representative politics in bittorrent.

But here's a great example of exactly that blitheness in the FT, in the form of some brand (no pun intended) of marketing creep chastising the old about their misguided attempts to understand the young. I present you with a couple of his more memorable reflections on us, all delivered amiably and with tongue not at all proximate to cheek:

Carol Phillips, a US marketing specialist who teaches at the University of Notre Dame, says Millennials like and respect their parents (which might come as a surprise to the parents). But one of the mistakes baby boomers frequently make, she says, is to assume their children are more like them than they are.

...

Ms Phillips says she has observed differences in the way her students absorb information compared with their parents’ generation. Her students are visual, she says. She has ditched a word-heavy textbook in favour of one with more pictures. Research she has done comparing responses to an edition of Vogue magazine showed that younger people concentrated on the design, colour and font, whereas older readers focused on the content.

Others have noticed a difference in the generations. Lord Judge, the lord chief justice of England and Wales, said recently the way juries received information might need to change. Lawyers might have to provide evidence on screens so that jurors could download it.

“If a generation is going to arrive in the jury box that is totally unused to sitting and listening, but is using technology to gain the information it needs to form a judgment, that changes the whole orality tradition with which we are familiar,” he said.

Things that I find concerning but the author does not are in bold.

Birthday Sex and boat shoes aside, what the actual characteristics of us guys are I don't wanna hazard. I will say that if I was some sort of educational administrator, something more than a high school principal but less than a Board of Ed warlock, and I was asked to modify my curriculum so that it supported students who like pictures than words, I would probably be felled instantly by strokes in every single part of my brain. My answer to Lord High Clancius P. Judgingsfield is no, you should under no circumstances modify jury arrangements for people who are "totally unused to sitting and listening." No, I would say that a cheaper and less degrading solution would be cut you a switch and scare them sasses out the way momma done.

And on a subject that is in no way related to children or the corporal punishment thereof, has anyone else heard that water deliveries to farmers in California's Central Valley are to be slashed between 85 and 100 percent? That assertion is made by Rebecca Solnit, the author of the LRB article to which I just linked. Knowing little about Californian agriculture, except that is is catastrophically wasteful and is totally dependent on cheap water subsidies from the federal government (which have helped exhaust the Colorado River entirely), I can't say concretely what effect this would have on farmers. I'll hazard a guess that it would be, I don't know, the knockout punch?

I'd keep my eyes on the west's water crisis in coming months. It's been coming to a head for a long time, but exacerbated by climate change--California's been suffering a three-year drought, for instance--and no doubt imperiled in the future by Washington's poor finances, those already diminished stocks have nowhere to go but down. The aquifer that feeds most of the midwest's corn belt is damn near depletion, too. As Major John Wesley Powell warned his fellows in 1888, when he completed the first survey of the west's rivers and lakes for the federal government, "I tell you, gentlemen, you are piling up a heritage of conflict and litigation over water rights, for there is not sufficient water to supply these lands." The fight will be between the midwest and the west, and it's bound to be ugly--how can we choose between Iowa cornbread or California fruit salad?

Something good happens!

It has been a while, I will admit, since I have posted. It turns out that teaching children, especially children who speak a different language, operate under different cultural rules, and have insane amounts of energy, is exhausting! I probably should have expected this, but it has had a heavy toll on my ability to piece together a thought or even a sentence by the time classes end. That said, sometimes a story is just so good that, like a robotic chinese heart that requires intermittent electric shocks to remain functional, it can bring me right back to life.

It is no mystery to anyone that knows me that Dubai sits high on my list of countries that should not exist and whose existence proves bad things about humanity - just below Belgium, just above Switzerland. I was delighted, then, to learn that the vehicle that has driven virtually all of Dubai's disgusting, Caligula-esque excess over the last few years, the Dubai Investment Authority, is 59 billion dollars in the hole. How you like them apples!

Just like how California is America, but more so, Dubai is the world economy, but more so. A hyper-elite that shuffles vast sums of money around for appalling real estate schemes, a massive underclass struggling and failing to be treated as actual human beings, a political/economic system that rewards the idea of giant country-shaped islands but denies basic rights to those who are actually stuck with the shitty job of making them. You know, for all I hate about Belgium, they do have Jean-Claude Van Damme, and I can at least envision a scenario where I could go to Belgium and not want to take a long shower afterward. Dubai, though, is a moral nightmare, the kind of thing that historians will study incredulously years from now, like the Spanish inquisition or Romans lining their aquifers with lead. I know it's real knee-jerk lefty of me to try and interpret our current recession as a cleansing, purifying agent, and of course we never really learn anything from recessions and all the folks who got the ball rolling on this nonsense are up to their old tricks anyway, but if a couple years from now, Dubai just sank into the sand, never to be seen again, it would almost, almost, be worth it.

Poland update: "So that's why my oil lamps burn so long"

One thing I was surprised by in Jerusalem - the number of Poles. It didn't hurt that one of my friends was Polish, and I imagine there's a bit of a Pole-dar effect, but I seemed to encounter them in all sorts of places. Therefore, I wasn't so very surprised to find out in a short BBC article that the "President of the Union of Jewish communities [sic] of Poland" said that the Polish people were not anti-Semetic.

"It's more a broad dislike of Jews."

Wait. I know we live in an age of unstable definitions, but isn't that like saying, "It's not a duck. It's a web-footed waterfowl that has a broad bill and quacks." Now, I know "Polish Anti-Semitism" might seem to you like "Canadian Love for Maple Products," but this was a bit shocking for me, and reframed at least one conversation I had in the basement of an ancient church. I have had far more contact with Germans than Poles, and most of the Poles who I did speak with had something in common with those Germans on the subject of the Second World War - I wasn't there, and I wish it didn't happen, and it follows me everywhere, though I wasn't there.* The worrisome part of the BBC article was not the grandparents' dislike of Jews, but the fear of challenging that generational hatred, built of compounded ignorance, by exposing the children to a Jewish identity. The idea of Mrs. Bogomila sneaking out to Shabbat dinners at the community center does little to quash the propagation of hate. The overwhelming awkwardness of talking to German youth about the Holocaust is not a good thing - it tempts a backlash against continual appropriations of guilt, but comparing reactions in the two countries, it might be a necessary step, or the suggestion of what a necessary step would look like.

And so, as I give objectless thanks for being born in the first world of the first world, I think of my ancestors buzzing ferociously around my head, both the biological Alsatian goat farmers and the adopted progenitors of American WASPdom. I am compelled to force the awkward question of the other half of the "first" Thanksgiving. What guilt should the sons of immigrants feel regarding certain reservations that no one called to book? Should we feel more for each generation that was here to perpetrate, and do those of us whose actual forefathers might have traded scabby blankets have more of a responsibility than those who sat idly or innocently by but later reaped the rewards. Most importantly, how do we breach the subject without causing defensiveness to demolish discussion entirely?

The last question identifies one of the biggest plagues in the Arab-Israeli debate: defensiveness. In truth, the Israeli youth face this entire same series of questions, albeit with a different field of answers that is publicly condoned. In many ways, on roads bare of Tagalit, we can find microcosms of our own North American experience within the context of the Situation. Most importantly, we see people just like us, who want to live their lives free from chains of our ancestors suffering or wrongs committed. We, like them, want to make our own lives. But I have reservations, and though I feel I am not alone, I am unsure how to express them. Neither, clearly, does Mrs. Bogomila, and clearly, this is the capillary root of a much larger problem.

Time builds ignorance, engenders apathy. In another phrasing, time heals all wounds. However, hate is often generational - we conflate the wrongs perpetrated against our forefathers with the troubles in our own lives, and find in the abstraction of historical identities a perpetrator someone to take the blame, or the guilt.

*For a interesting, brief article on the subject, try this one. For a beautiful, somewhat longer revelation of the difficulties of innocence, read this.

Christian Science is the new real science

Thanks to the wonderful, ever-informative, and endlessly-entertaining-to-debate-my-coworkers-about podcast The Skeptic's Guide to the Universe (which I unfortunately can't link to at the moment because their site is down, but you should all listen to it), I found out that the healthcare bill that passed however long ago it was contains a wonderful little clause, inserted by Orrin Hatch (R-Utah), that requires the government to consider "religious or spiritual health care" to be a legitimate (that is, reimbursable) form of medical care.

(From the bill:)

The essential benefits provided for in subparagraph (A) shall include a requirement that there be non-discrimination in health care in a manner that, with respect to an individual who is eligible for medical or surgical care under a qualified health plan offered through a Gateway, prohibits the Administrator of the Gateway, or a qualified health plan offered through the Gateway, from denying such individual benefits for religious or spiritual health care, except that such religious or spiritual health care shall be an expense eligible for deduction as a medical care expense as determined by Internal Revenue Service Rulings interpreting section 213(d) of the Internal Revenue Code of 1986 as of January 1, 2009.*

Of course, it doesn't name Christian Scientists as the purpose for the bill, who refuse medical treatment on the grounds that it is an admission of faithlessness in God, but it's pretty clear. Not to mention that John Kerry and Ted Kennedy (zichrono livracha) both supported the provision, Boston being the founding place and headquarters of Christian Science.

Besides the obvious absurdity of this, it opens the doors for any and all quackery to demand payment from the government. Technically, if I offer a prayer before going to bed for someone's health, I should be reimbursed for my time.

What I'd like to know, however, is what position the Canadian healthcare system has on this issue. I remember reading quite a while ago that Jack Layton supports healthcare coverage for "alternative medicine," which is frankly almost a fucking deal-breaker for me to ever vote NDP. I'm going to do some research into the topic and report back in the next few days (if I remember - someone try to remind me?)

* Source quickly found on Google here

The Theatre

http://video.google.com/videoplay?docid=5256515191980985137#

This is a production by one of the premier New York companies for "new work," to which they attach the interesting definition of having not received a New York production. I would like an explanation for the divergent trend in theatre and visual arts, that while "progressive" mixed- or non-traditional media works are taking the place of sculpture and painting in the prominent galleries from snooty Chelsea to hipsterville, AnyCity, somehow base, derivative if not deteriorating theatrical trends get money pumped into them. I understand that one can't hang a play on the wall for your guests to cringe or laugh at when your back is turned, but couldn't you hang a fancy poster and make up a story like, "the audience cried for hours, days even. My money went for emotional orgasms." I also understand that theatre has no resale value. After theatre sells (i.e. to a producer or company), it then has to sell again to hundreds of people, many of whom cringe and laugh at rich art collector's parties.

This is an issue, I believe, precisely because theatre can't hang on the walls. No matter what I feel about the 30'x30' scribbles that hang in the Philadelphia Museum of Art and are supposed (by whom, I can't tell) to recount the emotional story of the Iliad, I can go down the hall to see a Duchamp painting, a Picasso sculpture, or a medieval triptych. That is, if I see an exhibit that claims to represent "progressive" visual art, I see it in conversation with a variety of artistic traditions that not only contextualize the piece I'm seeing, they remind me (at a very base level), that art doesn't suck. There are no Van Goghs, no Keats in theatre, however, and success after death is heaven if there is one. Supporting new work that is a perversion of old work on the basis of vague affinities for trope endangers theatre in general, because for every miserable show that a person sees, that person is less likely to see another similar show. Since many are wont to group all theatre in a category, "Theatre: a cultural experience" seeing Saved (even if it weren't produced professionally and marketed as new work) might keep them from seeing another play (particularly a new work). If the only theatre people see is revivals of popular plays (and indeed, especially outside of New York, this is the only theatre that makes money), then the theatre scene will become like a museum that only shows painters who re-paint Matisse, some better than others.

Worst, most people who do mount legitimate productions rely, often almost exclusively, on grants. The artists, then (like many visual artists in my belief), become completely divorced from what people are interested in seeing, and the real, monetary value of their work. Art should be a market. How did it become a Thing?

It's not a rhetorical question. I meant to post the video as a joke, but I'm desperate for your input on the matter.

Sol Goes, Earnestly, to Afghanistan (See what I did there?)

(This was originally going to be a response to Ben's post, but I decided to just make it a full blown post to itself.)

Well first, let me say that I would quickly and wholeheartedly disagree with anyone who told me that the war in Afghanistan, at least as it was purportedly waged in 2001, is "immoral" on the scale of Iraq. The government lied about WMDs in Iraq and Saddam's ties to Al Qaeda as a pretense for declaring war. They did not lie about Osama bin Laden being the head of a terrorist organization which flew planes into the World Trade Centre and the Pentagon, and attempted to fly a fourth into the White House, killing thousands of American citizens. At the time, Osama bin Ladne was in Afghanistan, under the protection of the Taliban government.

An Afghani organization killed a large number of American citizens. That is a damn good reason to start a war in Afghanistan, if there ever was a damn good reason.



As for Juan Cole, I'm always skeptical of people who start by saying things like "character of the country" and "we are dealing with a tribal society." When I read that, I usually assume that the person talking is a politico who is using poorly-understood buzzwords from anthropology and sociology to sound smart. Though it is true that Afghanistan's population tends to be organized along kinship- and locality-based lines, that does not mean it is futile to have a central government. Just because the mujahideen kicked out the Soviets in the 80's doesn't mean Afghanistan "doesn't want" to have a central government - to say so is saying that there's no difference between the US and the USSR, which is frankly insane. Perhaps most Afghanis don't want a central government that will get all in their grill and tell them how to live, which is what the USSR would have done, but that is not the same as not wanting, or at least not being willing to tolerate, a central government.

Let's get back to my first point. If you'll grant me that getting rid of the Taliban is a noble goal on the part of the US, then a central government can be a good thing. If Afghanistan remains "tribal," by which I mean lacking a central government and organized in the same way it was when the Taliban was in (more complete) power, it will continue to be very easy for the Taliban, Al Qaeda, or whoever the hell else wants to drum up support for themselves. We saw this in Africa and South America when Europeans walked in and offered local leaders guns in exchange for slaves and mining rights. For fucks sake, we saw this in Afghanistan, six or seven years ago.

A central government doesn't necessarily interfere with local leaders and such. Why can't a central government can be more "hands-off" than that? Instead of rounding up all the Afghanis, shoving them in high-rise apartments and suburbian homes, and strapping them to easy chairs in front of non-stop episodes of Cougartown and Sex Addict,* which is what I assume Cole means when he says "drag Afghanistan kicking and screaming" into the modern world, a central government could simply concern itself with keeping things like Al Qaeda out of the country. For fucks sake, and I use the phrase again for the sake of symmetry, isn't that what the Taliban did, when they were the government? Cole is saying that the Taliban prevented a tribal Afghanistan from becoming communist. What was Taliban, if not a government? An "American" government could prevent a tribal Afghanistan from becoming terrorist! The way I see it, at least, you can't have it one way and not the other!

And I guess this all comes down to whether or not you think it's right for the United States to try to prevent baddies who don't like them to go around making more baddies who don't like them. It's not a completely crazy stance to say that isn't right (my earlier point was that it's crazy to call Afghanistan immoral in the same vein as Iraq), but I would say, given that the baddies killed American citizens, it's a pretty good idea.



* Yes, there is now a show called Sex Addict.

A Post on Afghanistan

Without any consistent or particularly well informed opinions about the war in Afghanistan myself, I've been pretty hesitant to post anything on the subject. Unlike domestic politics or economic issues or even, to a certain extent, the conflict formerly known as the War in Iraq, I still haven't found a moral or logical framework through which I can really understand what is going on in Afghanistan. I certainly envy those who can claim with absolute certainty that the occupation of Afghanistan is just as futile and immoral as the occupation of Iraq. I think in most respects, I tend to agree with that argument.

The only thing keeping me from going out and buying an angry bumper sticker is that a) getting the hell out of dodge strikes my uninformed self as a pretty severe violation of the campsite rule, much to the detriment of the region's security and overall well-being and b) I suspect that there might be a strategic middle ground in which the U.S. military (and diplomatic and development sectors) support a few well defined goals of security and economic development. So far the entire argument has been confined to a linear scale of how many troops we have on the ground. But I suspect that, within certain obvious constraints, the number of troops we have in Afghanistan is only as productive as our overall strategic approach. If we continue to support a corrupt and illegitimate central government (and it is possible that any central government in Afghanistan will be perceived as such regardless), without working diplomatically at the local level, as we did in Iraq (the success of which I think cost swept under the rug called "The Surge"), then it probably doesn't matter how many troops we send into that particular meat grinder.

I do wish my thinking on the subject could be a little bit clearer. But after all, all of my points of reference come various credentialed persons on the internet and the radio, all of whom seem equally well informed and well intentioned, and none of whom I feel more inclined to trust over any other.

Except for a few. Which is the point of this post. Rather than hem-and-haw at you, and offer completely useless "on the other hand" kinds of arguments ad nauseum, I'll direct you to an interview with Juan Cole. Obviously very well informed (though more so on Middle Eastern issues, I think), he was consistently right-on in his writing on the Iraq War. And so for that reason, I tend to trust what he says. Which is all I feel equipped to do, at this point.

Excerpts:

Let's back up and talk about what the goal is in Afghanistan. Your strategy and your tactics are going to come out of your goal. I'm a little bit afraid that, in regard to the goal, you see a lot of mission creep. The goal has become standing up an Afghan government and an Afghan military that's relatively stable and can control the country. There's a lot of state-building involved in that.

I am a severe skeptic on this score. I don't think that's a proper goal for the U.S. military. I think we are dealing with a tribal society of people who, as a matter of course, are organized by clan and have feuds with each other, and feuds with other tribes, and feuds with their cousins. I think that Washington misinterprets this feuding as Talibanism, and thinks that if you put a lot of troops in there, you can pacify the country and settle it down.

I just think it is a misreading of the character of the country. Afghanistan is a country where localism is important, where people don't like the central government coming in and bothering them. There's a sense in which the communist government of the 1980s, backed by the Soviet Union, wanted to drag Afghanistan kicking and screaming into the late 20th century, and to do that you had to impose central government policy on the countryside and on the villagers. And the villagers rose up and kicked the Soviets and the communists out. They were outraged, in part, against the centralizing tendency of Kabul.

So, I just think that Afghanistan is a country that needs a light touch. You just have to accept that there's going to be a certain amount of disorder in the countryside as long as people are organized tribally. And if you put 100,000 or 150,000 Western troops in there, that's just more people to feud with.

Elections are still meaningless

In what I thought was a very clever aside, Barkley Rosser at EconoSpeak points out that Virginia has a long history of handing gubernatorial races over to the party not currently holding the presidency:

Before anybody makes too much of the gubernatorial election results in Virginia, whether from the Right that this is a Warning Shot to Obama or from the Left that Creigh Deeds just did not hew to the Obama line enough, everyone should keep in mind the contrary record of Virginia since the main part of the old Byrd machine that used to run the state switched from the Democratic to the Republican parties back in the 1970s. With its elections coming one year after the presidential ones, it has exhibited an anti-Washington attitude appropriate to the location of the former rebellious Confederacy, electing someone from the party not in the White House every time starting in 1977. Here is the record.

1977: Dem Jimmy Carter in WH, GOP John Dalton wins in VA
1981: GOP Ronald Reagan in WH, Dem Charles Robb wins in VA
1985: GOP Ronald Reagan in WH, Dem Gerald Baliles wins in VA
1989: GOP George H.W. Bush in WH: Dem L. Douglas Wilder wins in VA
1993: Dem Bill Clinton in WH: GOP George Allen wins in VA
1995: Dem Bill Clinton in WH: GOP Jim Gilmore wins in VA
2001: GOP George W. Bush in WH: Dem Mark Warner wins in VA
2005: GOP George W. Bush in WH: Dem Tim Kaine wins in VA
2009: Dem Barack Obama in WH: GOP Bob McDonnell wins in VA.

I mean, it's only thirty years worth of elections, I know, but maybe he's got a point?

Independence Day

In a typically smart and analytical piece about post-election pundit-izing, Nate Silver makes this point about independents:

Part of the problem is that 'independents' are not a particularly coherent group. At a minimum, the category of ‘independents’ includes:

1) People who are mainline Democrats or Republicans for all intents and purposes, but who reject the formality of being labeled as such;
2) People who have a mix of conservative and liberal views that don’t fit neatly onto the one-dimensional political spectrum, such as libertarians;
3) People to the extreme left or the extreme right of the political spectrum, who consider the Democratic and Republican parties to be equally contemptible;
4) People who are extremely disengaged from politics and who may not have fully-formed political views;
5) True-blue moderates;
6) Members of organized third parties.

These voters have almost nothing to do with each other and yet they all get grouped under the same umbrella as 'independents'.

Along with the civility problem, the way independents are understood and described is one of American political punditry's biggest faults. Independents aren't like Democrats or Republicans, which are relatively monolithic ideologically and vote as one large group. They are independent; even the name itself implies that it would be hard to define their voting patterns as a group because they all act independently. Pollsters and politicians and reporters tend to think of them as a group of skeptical moderate voters, some kind of mythical voting unicorn with game-changing powers. The importance independents are given strategically in turn bleeds into political writing, where they are portrayed as the sensible, free-thinking voters (that somehow all vote as a free-thinking bloc) that all Americans should try and be. The praises heaped upon this illusory people eventually come full circle: they become the reason elections are won or lost. And so, as Silver points out, a writer with a deadline and a pre-developed narrative (paging Mssrs. Brooks and Broder) can glance over some exit polls, highlight one or two numbers on independents, and pen an entire column around how an entire group of people who probably have little to do with each other believe this or that about Barack Obama, without having to back that up with anything.

Roubini Calls the Next One

You've probably heard of Nouriel Roubini. He's one of the handful of economists and financial analysts who back in the earlier half of the oughts tried to warn everyone that the real-estate boom was due for a catastrophic bust. Needless to say, after half a decade of being cast as Chicken Little, he has since 2007 received much belated and deserved attention in the press.

And for all that attention, he may very well be the Nostradamus with a calculator that so many make him out to be. Or maybe, on the other hand, he's just a broken clock with a particularly bearish bent and the good fortune of living through the economic apocalypse he has always predicted. I have no way of judging.

What I do know is that, whether you trust him or not, he is probably worth hearing out. Especially when he starts making predictions like this:

Mother of all carry trades faces an inevitable bust

But while the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fueling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions. (FT)

To summarize, there are two separate but intimately related factors at work. On the one hand, the Fed has pushed interest rates down to near-zero. Which is to say that, at least for institutional investors, it is almost free to borrow in or from the U.S.. If you happen to be a interested in investing your money in Australia or Japan or Britain, it likely makes more sense to borrow in the U.S. and trade those greenbacks in for Australian dollars or Yen or Pounds, rather than borrowing in the country of investment itself at a higher rate.

The second factor is the general poor performance of the U.S. dollar. As the U.S. dollar continues to decline versus most major currencies, the money an investor borrows in the U.S. in October will be worth less relative to other currencies when it comes time for that investor to pay up in November. For example, let's say you borrow $1000 in the U.S. at 1%, exchange those dollars for $1100 Canadian at a rate of 1.10 to 1 U.S. dollar, and invest in some Canadian asset at 3%. If the exchange rate remained stable at 1.10, your C$1100 investment has matured to C$1133 (1100 x 1.03), which you can exchange back for US$1030. Since you owe $1010 on your 1% loan, your profit from the deal is $1030 - $1010 = $20, or 2%, exactly the difference between the Canadian interest rate (3%) and the American rate (1%).

But if the U.S. dollar depreciates (i.e. becomes worth less versus the Canadian dollar)--let's say the dollar sinks from from 1.10 to parity, 1:1, over the period of maturity of your investment--your C$1133 investment return in Canada is all of a sudden worth $1133 in the U.S.. Subtracting the $1010 you owe on your loan, you come away with a handsome $123 return (12.3% = (1.03 x 1.10) - 1.01) instead of $20. As an investor, as long as you get at least 91.81% of your principal back, you still come out on top. In other words, the further the U.S. dollar declines, the more risky you can afford to be with your international investment.

On a grander scale, since the U.S. dollar has been declining against virtually every other major currency, says Roubini, the dollar has in this way become the "funding currency" for risky investments across the globe. This, he argues, is further exacerbated by the Fed's policy of quantitative easing, in which the Fed has been pushing down interest rates not only on short-term Treasury bills, as is traditional monetary practice, but on longer term Treasury securities, agency securities, and even mortgage-backed and corporate bonds. By decreasing the spread between "safe" assets, like U.S. government debt, and the more risky assets listed above, the Fed is inadvertently stoking a sense of artificial confidence in the market while driving investors towards ever riskier, higher yielding assets.

According to Rouini, there are only a few ways this can end:

Why will these carry trades unravel? First, the dollar cannot fall to zero and at some point it will stabilise; when that happens the cost of borrowing in dollars will suddenly become zero, rather than highly negative, and the riskiness of a reversal of dollar movements would induce many to cover their shorts. Second, the Fed cannot suppress volatility forever – its $1,800bn purchase plan will be over by next spring. Third, if US growth surprises on the upside in the third and fourth quarters, markets may start to expect a Fed tightening to come sooner, not later. Fourth, there could be a flight from risk prompted by fear of a double dip recession or geopolitical risks, such as a military confrontation between the US/Israel and Iran. As in 2008, when such a rise in risk aversion was associated with a sharp appreciation of the dollar, as investors sought the safety of US Treasuries, this renewed risk aversion would trigger a dollar rally at a time when huge short dollar positions will have to be closed.

In other words, this will end if a) the dollar stops declining, which he sees as inevitable b) the Fed stops propping up riskier assets, which he also sees as inevitable, or c) the U.S. economy either improves or declines. Nice odds.

The most important point here is that as he sees things, once things start to unravel, they are doomed to unravel quickly and with self-perpetuating destructive force.

[I]f factors lead the dollar to reverse and suddenly appreciate...the leveraged carry trade will have to be suddenly closed as investors cover their dollar shorts. A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co-ordinated collapse of all those risky assets – equities, commodities, emerging market asset classes and credit instruments.

Any appreciation or expected appreciation in the dollar will lead investors to pay back their dollar positions quickly, which, he argues, will lead to a further appreciation of the dollar. And because the dollar happens to be the safe-haven currency to the world, panic will beget panic.

How afraid should we be? Not knowing much about it, I would say that unless the vast bulk of the carry traders are financing absolute junk, I don't see why a gradual stabilization of the dollar can't lead to an equally gradual evaporation of the carry trade as investors close their positions, not necessarily at a loss, but at less of a gain than one might otherwise anticipate. That being said, if the dollars starts rapidly climbing for any particular reason, we are likely as fucked as he says we are.

Either way, no matter how much credence you put into this particular analysis, I suppose we can all consider ourselves warned.

Wait, is there actually good news?

I do not often come upon things that make me feel good about America. Between Heart Attack Grill, high finance windfalls, Glenn Beck, and Couples Retreat, everything could be said to suck. I was mildly surprised, then, to read an op-ed in the Times by Frank Rich contending that we are, contrary to everything I have believed up until this moment, movin' on up.

How? We're all familiar with the absolutely abysmal behavior of the Republicans since Obama's inauguration (and really, since time immemorial), and, moreover, that it has been disturbingly successful at hiding the fact that they are an impotent mess of a party. Rich takes no exception with the first part of that statement--the Republicans are clearly shitheads--but he gives some positive evidence to contradict the conclusion. Apparently, according to a WSJ-NBC News poll, only 17% of Americans now self-identify as Republicans. That's undoubtedly a generational, if not watershed, low. The previous record for disaffection with the party was set in the mid-70's, when 25% of Americans identified themselves as Republicans, well below the 55% or more who self-identified as Democrats.

Source: http://lanekenworthy.net/category/politics/

Rich's point is that the hardliners who have seized control of the red slate have committed a grave error, and only their very public blustering has kept attention away from the fact that their base is nearly insignificant, and is only continuing to shrink.

His primary example of this trend, and the story around which the article is written, is a congressional race in upstate New York that's become something of a fiasco. When Obama nominated John McHugh (R-NY:23) to be Secretary of the Army, he inadvertently prompted a vicious round of GOP bloodletting. $3,000,000 has already been poured into the race to fill McHugh's seat by out-of-state sources. To put that in perspective, 650,000 people live in the 23rd and its largest employer is a local military base; it is poor and it is rural and it is not usually a hotbed of political maelstroming. Yet every Republican luminary from Palin to Kristol has intervened in the race, in what is clearly a proxy war for control of the party. And even though the reactionary candidate, Doug Hoffman, doesn't live in the district and was described by district officials as "showing no grasp" of local issues, he is, through the largesse of the far-right, set to beat out right-of-center local politician Dede Scozzafava.

Rich thinks that this is a sign that the Republicans are seriously jeopardizing their electoral chances, and that Democrats everywhere should feel more sanguine about the party's chances in the midterms. Republican candidates in the Virginia and Jersey governor's races, both with solid conservative credentials, have actually complemented Obama on his Nobel Prize and even used imagery of him and his quotes in their campaign ads. They are apparently aware that the 44% of Americans who call themselves independents wouldn't bat an eye if Michele Bachmann was eaten alive by barracudas, and that most of them--unless they're 67--do not watch Fox News. It's good to be reminded that much of the fear of the GOP's resurgence is in fact GOP artifice, and that we might have already moved further left as a nation than anyone has yet acknowledged.

Then again, 1975 was five years before the election of Reagan and a total victory for conservatism in not only the political but the social and cultural spheres of America as well. And what Rich doesn't highlight, though he mentions it, is that identification with the Democratic party is, at 30%, while stronger than with the Republicans, nowhere near what I would call burgeoning. If anything, the trend is, as it has been for a while, towards more Americans becoming independents, and that is a much trickier demographic to read. I doubt that they would be any more reliably liberal than they would be conservative, and their lack of principles is what makes them--and the States more generally--so politically flaccid.

Trust me, I know a lot about your rights

Having just rewatched All the President's Men, complete with pauses every couple of minutes to fill in my poor co-viewer on some pointless Nixon trivia and wet my pants with excitement, this made me laugh pretty hard:

The Family Foundation Action has a robocall out from the former Nixon conspirator and minister Chuck Colson, urging citizens to vote for a rather unusual reason: "I know what it is to lose your right to vote," he says, referring to the felon disenfranchisement laws that kept him from the polls.

The robocall is playing in Virginia, and it doesn't go so far as to endorse anyone, it does highlight the sacred privilege of voting, something Colson laments having lost. Here's Chuck Colson, in a little more detail. As a little bit of icing on the cake, he was the dude who, beyond Watergate, the Ellsberg affair, and the subsequent cover-ups of both, suggested firebombing the Brookings Institution. The question I have is this: who is going to vote because Charles Colson tells them to? If you are in the minority of people who remember/care about his large role in criminalizing an entire leg of the three-legged stool that is the American government, is this going to convince you to get out there and punch some ballots? And if you don't know who he is, what does this achieve?

The Trap

With the news that Abdullah Abdullah is pulling out of the Afghani Presidential run-off, things in that particular quagmire take yet another turn for the worse. Karzai is generally perceived in Washington as a weak ally, turning a blind eye to his brother selling opium and, you know, frauding the hell out of an election to keep himself in power in a pathetically unsubtle way. Just getting the run-off took a lot of effort on America's part, mainly focused on a lengthy and successful conversation between John Kerry and Karzai, and it looks now like it may be completely unnecessary.

Of course, without a run-off, Karzai gains none of the legitimacy that the run-off was designed to bring back to him - he gets to be president, but without any respected authority. So now, NATO and the UN either expend a vast sum of money to set up a predetermined election in the hopes that it will prop out Karzai, or abandon it and lose yet more leverage to secure and reform the country. This really is, as far as I can tell, lose-lose.

I have generally kept my mind to myself on Afghanistan. This was partly intellectual laziness: it's a damn hard thing to make one's mind up about, both because I considered it a legitimate occupation when it began in 2001 and because I seriously wanted it to work out. While more cynical views made logical sense to me, I hoped - I really really hoped - that NATO was capable of doing something that Britain and the USSR had failed to do, to make sense of a violently pre-modern part of the world. I don't know whether you can attribute this irrational roadblock in my mind to my liberalism or maybe some not-so-dormant noblesse oblige neoconservatism, but it allowed me to avoid taking a really critical look at what I expected and hoped for in Afghanistan.

This whole run-off thing, though, has done wonders for clearing my mind. I don't have any idea how we are supposed to leave, and I can't say for sure that our leaving won't leave us in a slightly more dangerous world. But I can say that there is no way we are going to make ourselves a significantly safer world by sticking around for another 10 years and dumping another quarter of a trillion dollars down the drain.

The real questions we face now are the following:
1. What can we say, minimally, is a success? No safe havens? A functional government? What is the least we can do before we can spin ourselves a win? The country will not be a functional country and the Taliban is not going away; we have to aim much much lower.
2. What is the shortest amount of time necessary to do this? What is a reasonable amount of time (please, please not in Friedman Units) before it is clear it is unachievable?
3. If we do not achieve success, is sticking around worth the lives and money to achieve the goals we outline?
4. What kind of political coalition in the United States can force a close to the occupation? How can we strengthen this coalition? Do we have to get along with Ron Paul to get this done? An American domestic lobby is essential here, as Canada is most likely leaving soon anyway and we all know this thing ends when you guys say so.

So what is it? Do any of you have answers? I'm putting my ignorance well out on display here and I'll say that if there are any counterarguments I want to hear them. I've had my head in the sand on this for so long (...8 years) that I'm willing to take a beating on this. I just don't see how we can win this, and I don't think trying to do so is really even worth it.

Blasphemy

That's it, the traditional press is dead. Find me a single blogger who would make this mistake.