Archive for the 'CW – wrong!' Category

4.2 million barrels of reduced production and a price of $38

Wednesday, January 14th, 2009

On the very day that oil peaked at $147 a barrel in July of this year, the Washington Post said, “this oil shock is different. There is little prospect that drivers will ever again see gas prices retreat to the levels they enjoyed for much of the last generation…spare production capacity has practically vanished — it’s now about 2 percent beyond the world’s total daily consumption of 85.5 million barrels.” Now oil is less that $38 and 4.2 million barrels of production has been removed from the market. AP

light, sweet crude for February delivery was up 35 cents to $37.94 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, prices fell as low as $36.10…Prices of futures contracts for later this year are higher than the February contract on investor expectations that OPEC’s announced production cuts of 4.2 million barrels a day since September will begin to reduce global supply.

As it turns out, all those stories in the summer about never ending increases in oil prices really did merit a metaphorical Sports Illustrated cover.

Hard to believe

Tuesday, December 9th, 2008


Spring 2008: “As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices,” Goldman said.

It hard to believe we went from a market heading to infinity to one heading to zero in only a few months.


Fall 2008: Merrill…said that a temporary drop below $25 was possible should China fall into a recession.

We don’t know if things are darkest just before the dawn, but we do know that when people say “this time it’s different” it’s time to start swimming in the opposite direction.

Continuing the oil price watch

Monday, November 3rd, 2008

Reuters reports on a trend, the exact opposite of which was predicted at the peak in July:

Oil fell nearly 6 percent on Monday as further indicators of falling demand linked to a potential recession offset OPEC plans to reign in output. U.S. crude settled down $3.90 at $63.91 a barrel, after October saw the steepest monthly price decline ever for oil as global demand slowed. London Brent crude dropped $4.84 to settle at $60.48 a barrel. Oil hit a record $147.27 a barrel in mid-July

Just remember where things are heading the moment someone says, “This time it’s different.”

Quite a day — what will the Lehman Chapter 11 bring?

Monday, September 15th, 2008

So much for inflation. The underlying trend in many major asset categories has been deflationary for a while, fundamentally on account of ever-restricting credit standards in the marketplace. This has been masked by the speculative bubble in commodities, which would appear to be over. If it isn’t over yet, the (necessary but sad) Chapter 11 filing of Lehman Brothers, the shotgun wedding of Merrill and BofA, and the meltdown of AIG, are all moving us further and further down that path. Oil is now off $50 from its high, and in our view may well have the better part of another $50 yet to fall. WSJ:

Light, sweet crude for October delivery was recently down $5.40, or 5.3%, at $95.78 a barrel on the New York Mercantile Exchange. October Brent crude on the ICE Futures exchange, which expires Monday, was down $5.24 to $92.34 a barrel. Nymex crude earlier fell to $94.13 a barrel, the lowest price since Feb. 14

Meanwhile, China is trying to address future anemic growth through easing lending restrictions, which as we have said many times, probably won’t be enough to keep growth where it needs to be in that country.

UPDATE

Oops, the day got a little worse. WSJ:

The Dow Jones Industrial Average, which languished with a loss between 200 and 300 points for most of the day, saw its losses accelerate in the last hour of trading. It ended down by 504.48 points, off 4.4%, at 10917.51. All 30 of its components fell, led by a 60.8% plunge in American International Group. The Federal Reserve on Monday asked Goldman Sachs Group and J.P. Morgan Chase to help make $70-$75 billion in loans available to the company, according to people familiar with the situation…

Bank of America was also a big decliner among Dow stocks, off 21.3%…Goldman was off 12.1%, while Morgan Stanley fell 13.5%…Washington Mutual tumbled 26.7% as investors feared it wouldn’t be able to find a buyer…”We’ve re-established ‘moral hazard,’” a person involved in the Lehman talks told the Journal…”Is that a good thing or a bad thing? We’re about to find out.”

One hopes that, in allowing the failure of Lehman Brothers and the stampede that followed, the current crop of regulators is steering a course to avoid some of the really devastating mistakes of the past.

Fasten your seat belts

Saturday, January 5th, 2008

WNBC reports the latest good news in commercial aviation:

Anti-missile systems will be put on several passenger planes flying in and out of John F. Kennedy Airport, U.S. Department of Homeland Security officials said Friday…Three of the anti-missile systems will be placed on American Airlines flights flying between JFK and airports in California, officials said. It is the first time passenger planes will be outfitted with the technology. Military jets have the equipment and there were recent tests on non-passenger cargo flights…

The program is a test to see if the anti-missile systems are effective in helping prevent a terrorist from using a shoulder-fired missile to shoot down a passenger jet. Shoulder fired missiles can be referred to as MANPADS, man portable air defense systems.

New cabin announcement: “In preparation for take off, please make sure that your seat is in its upright and locked position, your tray tables are stowed, and all electronic devices are in the off position, including iPods, cells phones and any devices that can remotely trigger MANPADS or other man portable air defense systems.” Feel better about flying now?

That was quick

Thursday, September 6th, 2007

A couple of months ago we were in a golded age, with bankers saying they would be dancing to the tune of dealmakers until the music stopped. Suddenly it did. WSJ:

The last deals boom, which ended in 2001, was propelled by a rising stock market, especially in the technology sector. That enabled companies to use their inflated stock as currency to make bold bids for corporate icons. The pinnacle of that boom was America Online’s acquisition of Time Warner.

The latest boom, which stretched from the end of 2003 to the middle of this summer, is looking to Wall Streeters like the richest era since the rise of the modern deal-making industry in the 1980s. From 2004 to date, about $13.32 trillion worth of deals were struck, according Dealogic. That exceeds the total during the technology boom years of 1998 to 2001, when, adjusted for inflation, $13.21 trillion of deals were struck. Inflation-adjusted totals for the 1980s deals boom were far lower. In the most recent cycle, cash rather than stock played a bigger part in the average deal.

What fueled it was cheaply priced credit — bank loans and high-yield bonds were readily available. The biggest beneficiaries were private-equity funds, which took advantage of low interest rates and lax terms from lenders to make acquisitions more cheaply and with lower risks than corporations could. In 2000, leveraged buyouts accounted for only $14 of every $100 spent on deals in the U.S. This year, through July, they accounted for $37 of every $100. Earlier this year, investors were suggesting huge companies such as Home Depot Inc., then worth about $100 billion, as candidates for leveraged buyouts.

“I would call it a very unusual confluence of cheap debt, huge pools of money to invest, and asset prices that became unattractive to most companies,” says Marc Granetz, co-head of investment banking for Credit Suisse in New York. The credit-market trouble “means we aren’t likely to see large or very levered private-equity deals for some time.”

With over $300 billion in deals unable to be securitized, the hangover from the dance marathon just might last for a while.

Get out your mukluks

Wednesday, June 20th, 2007

It’s going to get very cold very soon, according to a new series of studies. Professor Timothy Patterson of Carleton College in the Financial Post:

In a series of groundbreaking scientific papers starting in 2002, Veizer, Shaviv, Carslaw, and most recently Svensmark et al., have collectively demonstrated that as the output of the sun varies, and with it, our star’s protective solar wind, varying amounts of galactic cosmic rays from deep space are able to enter our solar system and penetrate the Earth’s atmosphere. These cosmic rays enhance cloud formation which, overall, has a cooling effect on the planet. When the sun’s energy output is greater, not only does the Earth warm slightly due to direct solar heating, but the stronger solar wind generated during these “high sun” periods blocks many of the cosmic rays from entering our atmosphere. Cloud cover decreases and the Earth warms still more.

The opposite occurs when the sun is less bright. More cosmic rays are able to get through to Earth’s atmosphere, more clouds form, and the planet cools more than would otherwise be the case due to direct solar effects alone. This is precisely what happened from the middle of the 17th century into the early 18th century, when the solar energy input to our atmosphere, as indicated by the number of sunspots, was at a minimum and the planet was stuck in the Little Ice Age. These new findings suggest that changes in the output of the sun caused the most recent climate change. By comparison, CO2 variations show little correlation with our planet’s climate on long, medium and even short time scales.

In some fields the science is indeed “settled.” For example, plate tectonics, once highly controversial, is now so well-established that we rarely see papers on the subject at all. But the science of global climate change is still in its infancy, with many thousands of papers published every year. In a 2003 poll conducted by German environmental researchers Dennis Bray and Hans von Storch, two-thirds of more than 530 climate scientists from 27 countries surveyed did not believe that “the current state of scientific knowledge is developed well enough to allow for a reasonable assessment of the effects of greenhouse gases.” About half of those polled stated that the science of climate change was not sufficiently settled to pass the issue over to policymakers at all.

Solar scientists predict that, by 2020, the sun will be starting into its weakest Schwabe solar cycle of the past two centuries, likely leading to unusually cool conditions on Earth. Beginning to plan for adaptation to such a cool period, one which may continue well beyond one 11-year cycle, as did the Little Ice Age, should be a priority for governments. It is global cooling, not warming, that is the major climate threat to the world, especially Canada. As a country at the northern limit to agriculture in the world, it would take very little cooling to destroy much of our food crops, while a warming would only require that we adopt farming techniques practiced to the south of us.

Question: can large, hysterical, well-funded, and oh-so trendy Global Warming and Global Cooling movements exist simultaneously?

The “brilliant” Shanghai stock market

Sunday, May 20th, 2007

If you were concerned (like many analysts) that the Shanghai stock market — which doubled last year and is up 50% this year — is in a bubble, you should now calm down. The Peoples Daily reports on the “brilliant policy decisions” that have led to the current performance of the Shanghai market:

Zhou Zhengqing, a member of the NPC Standing Committee, vice chairman of the Financial and Economic Committee and former chairman of the China Securities Regulatory Commission…According to Zhou, there is no serious bubble in China’s stock market…Since June 2001, China’s capital market has been stagnant. This is not normal. According to Zhou, there are multiple reasons for this. One is a misunderstanding of the development of capital markets. Faulty thinking is common in society…

“The major shifts and changes that occurred in 2006 are the result of efforts to improve and expand reforms. This has not been easy; we must cherish the situation we now have,” said Zhou Zhengqing. “There were five main factors that contributed to last year’s turning point.”

– Firstly, the CPC Central Committee and the State Council have attached great importance to the development of the capital market and made important strategic plans and brilliant policy decisions.

– Secondly, the improved legal environment is conducive to the development of the capital market.

– Thirdly, by completing equity division reforms, China solved some of its major lingering problems, which will have a long-term impact on the healthy development of China’s capital market. Moreover, shareholders can no longer hold both tradable and non-tradable shares or share the same equity property, strengthening the basic mechanism.

– Fourthly, the sustained, rapid and healthy development of the national economy created a favorable external environment for the capital market. “The money market in particular was more liquid, which helped ease the shortage of funds in the capital market that has been a problem for the last two years.

– Meanwhile, investor’s growing demands have raised the objective requirements for the development of the capital market,” said Zhou.

There you have it: brilliant policy decisions by government officials and a shortage of stock to fill “investor’s growing demands.” Nothing to worry about there. So if it concerned you that Shanghai was trading at a p/e of nearly 40x or so, stop worrying. Everything will be just fine. After all, as the Peoples Daily said, “faulty thinking is common in society.”

Where would you guess planetary warming would come from?

Friday, March 2nd, 2007

National Geographic:

Simultaneous warming on Earth and Mars suggests that our planet’s recent climate changes have a natural — and not a human-induced — cause…Earth is currently experiencing rapid warming…Mars, too, appears to be enjoying more mild and balmy temperatures. In 2005 data from NASA’s Mars Global Surveyor and Odyssey missions revealed that the carbon dioxide “ice caps” near Mars’s south pole had been diminishing for three summers in a row.

Habibullo Abdussamatov, head of the St. Petersburg’s Pulkovo Astronomical Observatory in Russia, says the Mars data is evidence that the current global warming on Earth is being caused by changes in the sun. “The long-term increase in solar irradiance is heating both Earth and Mars,” he said.

Abdussamatov believes that changes in the sun’s heat output can account for almost all the climate changes we see on both planets. Mars and Earth, for instance, have experienced periodic ice ages throughout their histories. “Man-made greenhouse warming has made a small contribution to the warming seen on Earth in recent years, but it cannot compete with the increase in solar irradiance,” Abdussamatov said.

The news story characterizes the idea that the sun is heating the planets as “controversial.” In some ways, the 21st century does not represent progress over the 18th century.

“Environmentalism as a metaphysical ideology”

Monday, February 12th, 2007

Czech president Vaclav Klaus, as translated by Professor Lubos Motl of Harvard, and as carried by Drudge:

Global warming is a false myth and every serious person and scientist says so. It is not fair to refer to the U.N. panel. IPCC is not a scientific institution: it’s a political body, a sort of non-government organization of green flavor. It’s neither a forum of neutral scientists nor a balanced group of scientists. These people are politicized scientists who arrive there with a one-sided opinion and a one-sided assignment. Also, it’s an undignified slapstick that people don’t wait for the full report in May 2007 but instead respond, in such a serious way, to the summary for policymakers where all the “but’s” are scratched, removed, and replaced by oversimplified theses. This is clearly such an incredible failure of so many people, from journalists to politicians. If the European Commission is instantly going to buy such a trick, we have another very good reason to think that the countries themselves, not the Commission, should be deciding about similar issues…

Environmentalism as a metaphysical ideology and as a worldview has absolutely nothing to do with natural sciences or with the climate. Sadly, it has nothing to do with social sciences either. Still, it is becoming fashionable and this fact scares me. The second part of the sentence should be: we also have lots of reports, studies, and books of climatologists whose conclusions are diametrally opposite. Indeed, I never measure the thickness of ice in Antarctica. I really don’t know how to do it and don’t plan to learn it. However, as a scientifically oriented person, I know how to read science reports about these questions, for example about ice in Antarctica. I don’t have to be a climate scientist myself to read them. And inside the papers I have read, the conclusions we may see in the media simply don’t appear. But let me promise you something: this topic troubles me which is why I started to write an article about it last Christmas. The article expanded and became a book. In a couple of months, it will be published. One chapter out of seven will organize my opinions about the climate change. Environmentalism and green ideology is something very different from climate science. Various findings and screams of scientists are abused by this ideology…

[Don't you believe that we're ruining our planet?] I will pretend that I haven’t heard you. Perhaps only Mr Al Gore may be saying something along these lines: a sane person can’t. I don’t see any ruining of the planet, I have never seen it, and I don’t think that a reasonable and serious person could say such a thing. Look: you represent the economic media so I expect a certain economical erudition from you. My book will answer these questions. For example, we know that there exists a huge correlation between the care we give to the environment on one side and the wealth and technological prowess on the other side. It’s clear that the poorer the society is, the more brutally it behaves with respect to Nature, and vice versa. It’s also true that there exist social systems that are damaging Nature – by eliminating private ownership and similar things – much more than the freer societies. These tendencies become important in the long run. They unambiguously imply that today, on February 8th, 2007, Nature is protected uncomparably more than on February 8th ten years ago or fifty years ago or one hundred years ago. That’s why I ask: how can you pronounce the sentence you said? Perhaps if you’re unconscious? Or did you mean it as a provocation only? And maybe I am just too naive and I allowed you to provoke me to give you all these answers, am I not? It is more likely that you actually believe what you say.

Maybe he should run for US President in 2008.

Of ferrets, handkerchiefs, and bird flu

Monday, December 18th, 2006

There is apparently less to worry about than has been commonly thought. Michael Fumento, the anti-worrier, explains:

A flu pandemic can come about in two ways. One way is for the virus to randomly mutate to become easily transmissible between humans. “Randomly” is the key word here. There are no evolutionary pressures to make H5N1 adapt better to humans. Given enough time, H5N1 might mutate so that it could under the right conditions become pandemic. But that could take millions of years, during which time it would be more likely to mutate itself out of existence. H5N1 was first identified in Scottish chickens in 1959. It has been flying around the globe for close to half a century and hasn’t done a number on us yet. There’s absolutely no reason to think it will pick this year or next to do so.

Another scenario is that somebody with human flu could contract avian flu at the same time and the two flus could “reassort” into hybrid avian-human flu. The last two flu epidemics in the 20th century–1957-58 and 1968-69–were caused by such hybrids. We can help reduce this possibility by vaccinating as many people as possible (especially Southeast Asian poultry farmers) against human flu, thus reducing the potential number of “mixing vessels.” Programs underway to keep farmers away from poultry droppings and spittle (birds don’t sneeze or cough) will also help.

A fascinating study in the August 8, 2006, issue of Proceedings of the National Academy of Sciences would seem to indicate we’re already pretty safe from a human-avian hybrid. Researchers from the U.S. Centers for Disease Control and Prevention conducted three separate studies with ferrets, which are among the few animals known to suffer from and transmit human flu. The ferrets were infected with several H5N1 strains in addition to a common human influenza virus (H3N2) that circulates almost every year. The infected animals were then either placed in the same cage with uninfected ferrets to test transmissibility by close contact or in adjacent cages with perforated walls to test spread of the virus from respiratory droplets.

The research showed that the H3N2 virus passed easily by droplets (ferrets do sneeze and do not use handkerchiefs) but the H5N1 virus did not spread–the same thing we’re seeing in humans infected with H5N1 from birds.

Separately, the scientists used gene splicing to create a hybrid H5N1/H3N2 virus. In other words, rather than letting nature take its course and seeing if the viruses would reassort, they guaranteed that reassortment occurred. They found these hybrids also did not pass easily between the animals. Moreover, ferrets injected with the reassorted virus showed symptoms less severe than those with the pure avian flu. Reassortment appears to have weakened the virus.

One less thing, perhaps, to worry about. But there will be other things soon, of that we have no doubt.

Where was the Sunni – Shiite debate in 2002-2003?

Thursday, December 14th, 2006

You’d think that what appears to be one of the most incendiary and poisonous blood-feuds on the planet — the Shiite/Sunni strife in Iraq — would have been Topic A or nearly so in the run-up to the war in Iraq, for war planners and particularly those critical of the war. However, the Sunni – Shiite internecine death struggle does not appear to have been at the top of the list of concerns of war boosters and war critics. Here is a NYT report on the very eve of the war, March 14, 2003, which finally mentions the topic in paragraph 7:

The cost of postwar reconstruction of Iraq will be at least $20 billion a year and will require the long-term deployment of 75,000 to 200,000 troops to prevent widespread instability and violence against former members of Saddam Hussein’s government, a panel of national security experts say in a new study.

The panel, consisting of senior American officials from Republican and Democratic administrations, was organized by the Council on Foreign Relations. It concludes that President Bush has failed ”to fully describe to Congress and the American people the magnitude of the resources that will be required to meet the post-conflict needs” of Iraq.

The panel was led by James R. Schlesinger, secretary of defense in the Nixon and Ford administrations, and Thomas R. Pickering, ambassador to the United Nations under Mr. Bush’s father. Others on the panel included Gen. John M. Shalikashvili, who was chairman of the Joint Chiefs of Staff from 1993 to 1997 and is now retired, and Jeanne J. Kirkpatrick, who served in senior positions in the Reagan administration.

They urged Mr. Bush ”to make clear to Congress, the American people and the people of Iraq that the United States will stay the course” in Iraq by financing a ”multibillion-dollar” reconstruction program and seeking formal Congressional endorsement of it….

One risk arises from the aspirations for independence by ethnic Kurds in the north, which could set off a conflict with Turkey. Another stems from the deep grievances of the Shiite population against the Sunni minority that has dominated the country since its founding. How political leaders are chosen and how Iraq’s oil resources are managed also carry the seeds of conflict that will demand significant American resources.

We also found this in a NYT story on March 1, 2003 — but it was in paragraph 12 of the story:

It is also hard to find anyone who will dare speculate what Iraq may look like after Mr. Hussein. But outside experts say the nightmare chain of events will be that the Baath Party will collapse quickly and completely and Iraq will tumble into civil war, with its deep divisions between the Kurds, Arabs, Sunni Muslims and Shiite Muslims.

We found the references to Shiite – Sunni problems in the very anti-war New York Times, but they were not highlighted or featured at the tops of stories. By contrast, we also found endorsements of the promise of Iraqi democracy, this one by Barham Salih in the NYT in February 2003:

When Colin Powell appears at the United Nations today, he is expected to talk about Iraq’s efforts to build weapons of mass destruction and its ties with terrorist organizations. Those are excellent reasons for overthrowing Saddam Hussein. As we all know, there are other powerful reasons, too — most notably the desire of my people to be free from repression and to plant the seeds of democracy in soil that has for too long been given over to tyranny.

In my office in Sulaimaniya, in the part of Iraq already free from Saddam Hussein’s control, I meet almost every day with travelers from Baghdad and other parts of Iraq. Without exception they tell me of the continued suffering inflicted by the Iraqi regime, of the hope secretly nurtured by so many enslaved Iraqis for a free life, for a country where they can speak without retribution.

Most of my Iraqi compatriots — Shiite and Sunni Arab, Turkmen and Assyrian, Muslim, Christian and Yazidi — have been united by what they have endured under the dictatorship of Saddam Hussein’s Baath Party. They want the overthrow of a regime that used chemical weapons against the Kurds and wasted a nation’s natural resources on wars rather than schools. They want democracy in Iraq. These are goals worthy of the world’s support.

Those who doubt the prospects of a liberated Iraq should examine the record of Iraqi Kurdistan since 1991. Under our autonomous regional government, we have used our share of oil revenues to invest not in chemical and biological weapons, but in education and health. We have tripled both the number of schools and doctors since 1991, and we have reduced infant mortality to its lowest level ever in our region. We have a free and diverse news media, with hundreds of newspapers, magazines and television stations. We respect the rights of minorities.

These achievements should be celebrated as a model for the rest of Iraq. Indeed, we Kurds are willing to give up our dreams of an independent Kurdistan in order to bring our expertise in governing to a new democratic Iraq.

So what looks today like the number one problem of Iraq was not particularly highlighted — even by the war’s most ardent MSM opponent — in the immediate run-up to the war. We saw in the Ralph Peters article this statement, delivered as the current Conventional Wisdom: “The deadly hatred goes too deep between Shia and Sunni (killing Jews is just for practice). You can’t broker peace between fanatics.” How come this wasn’t the CW three years ago?

Milton Friedman: a long, productive life as a public intellectual

Saturday, November 18th, 2006

z.GIF

We have said that perhaps the biggest unreported story of the last decade is that a Great Depression did not occur after the Great Stock Market Crash that began in the year 2000. As you can see in the chart above, when the Internet Bubble burst, the NASDAQ plummeted from its high of 5100 to a low of 1100.

And nothing happened. When a very similar Crash happened in 1929 to the NYSE, the country suffered the worst economic calamity in its history, GDP fell precipitously, unemployment hit 25%, and the stock market didn’t recover for a quarter century — until 1954. We thought that the non-Depression in the US following the bursting of the Internet Bubble was a huge story. In our view, the non-Depression was caused by Alan Greenspan’s adoption of a expansive monetary policy, so significantly at odds with the awful performance of the Fed in the 1929-1933 time frame (and other structural issues such as the lack of deposit insurance). However, we never saw that story in print until yesterday.

Yesterday we read a piece in the WSJ called Why Money Matters, which included the following chart and analysis:

3times.gif

The prosperous ’20s in the U.S. were followed by the most severe economic contraction in its history. In our “Monetary History” (1963), Anna Schwartz and I attributed the severity of the contraction to a monetary policy that permitted the quantity of money to decline by one-third from 1929 to 1933. Since 1963, two episodes have occurred that are almost mirror images of the U.S. economy in the ’20s: the ’80s in Japan, and the ’90s in the U.S. All three episodes were marked by a long period of rapid economic growth, sparked by rapid technological change and the emergence of new industries, and accompanied by a stock market boom that terminated in a crash. Monetary policy played a role in these booms, but only a supporting role. Technological change appears to have been the major player.

These three episodes provide the equivalent of a controlled experiment to test our hypothesis about what we termed the Great Contraction. In this experiment, the quantity of money is the counterpart of the experimenter’s input. The performance of the economy and the level of the stock market are the counterpart of the experimenter’s output, i.e., the variables whose relation to input the experimenter is seeking to determine. The three boom episodes all occurred in developed private enterprise market economies, involved in international finance and trade, and with similar monetary systems, including a central bank with power to control the quantity of money. This is the counterpart of the controlled conditions of the experimenter’s laboratory…

The results of this natural experiment are clear, at least for major ups and downs: What happens to the quantity of money has a determinative effect on what happens to national income and to stock prices. The results strongly support Anna Schwartz’s and my 1963 conjecture about the role of monetary policy in the Great Contraction. They also support the view that monetary policy deserves much credit for the mildness of the recession that followed the collapse of the U.S. boom in late 2000.

It was good to finally read this story that it was monetary policy that indeed had made much of the difference in the outcomes of the Great Crash of 1929 and the Great Crash of 2000. It took a while, but it was worth the wait. It struck us as well that the author was following up on analysis that he had done 43 years earlier — that in itself is a pretty unusual bit of follow-up, after such a long period of time. But what was perhaps most amazing was that the same day that the author’s article appeared in the Wall Street Journal on the op-ed page, his obituary was the WSJ’s lead editorial.

Milton Friedman has received no shortage of tributes after dying at age 94 this week. However, it is hard for us to imagine many blessings in life greater than being actively engaged in work and the world of ideas into one’s tenth decade. The WSJ obituary of Professor Friedman included this comment of his on the role of the public intellectual:

“We do not influence the course of events by persuading people that we are right when we make what they regard as radical proposals. Rather, we exert influence by keeping options available when something has to be done at a time of crisis.”

Crises of course recur with some regularity. The hard part to achieve is the long, engaged life of a Milton Friedman. It is just one of many ways in which he stands as an inspiration.

Something like civil war seems to be coming to the West

Saturday, November 11th, 2006

Reader Larwyn sent us a link to a thoughtful article on Iraq in The National Interest called Is This Victory? by Tommy Franks, Stephen Biddle, Peter Charles Choharis, John M. Owen IV, Daniel Pipes, Gary Rosen and Dov S. Zakheim. It’s an interesting piece; Wretchard has a good discussion. There is no doubt that a successful Iraq would be a model for a successful Middle East. However, there’s a lot of evidence that much of the Middle East doesn’t want to be successful, perhaps because being successful, like China’s rise from nothing, means adapting to and embracing modernity, and casting off the detritus of traditional society. Spengler has argued that Islam is the antithesis of modernity.

One premise of the Iraq War is that those making war against America were a small group of extremists, and if we could tie them up fighting way over there and pick them off, so much the better. Meanwhile, decent Iraqis would create a decent society and then they could kill the remaining thugs. This was a nice idea. However, something fundamental has changed in the last three years, moving the locus of the war away from Iraq.

In 2006, there are in the UK 30 active plots by men claiming to represent the heart of Islam. These men number between 1600 and 100,000 at least. In France last year there were riots in 300 cities; this year, a night when a young woman was immolated and 277 cars were torched was called one of “relative calm.” Meanwhile, the Dutch are attempting the “banning the wearing of burqas and other Muslim face veils in public places, possibly becoming the first European country to impose such a ruling.” In 2006, Catholic priests and nuns were killed, English Catholics were harrassed, and the Pope’s life was threatened, for his daring to question the holiness of Jihad. Equilibrium is gone.

Mark Steyn is worried about what will happen in Europe with the demographic changes over the next generation or two. Steve Warshawsky is worried that the West might not have what it takes in the “coming decades” to oppose what he calls “a totalitarian political ideology, akin to communism, that is fundamentally inconsistent with Western understandings of individual freedom, sexual equality, material prosperity, and representative government, not to mention our Judeo-Christian heritage,” that is to say, Islam. We don’t think that it will take decades or generations for this matter to come to a head.

It is our view that the future appears to be now — or at least very soon. Fjordman mused earlier this year about an impending “global civil war.” We think this may happen in a matter of years, not decades. (We wrote on this previously.) If there are 30 known plots in England now, what happens when there are 300? If 300 cars burn on a French evening, what happens when there are 3000? These events are not far away — three years, five years? At some point, the West will have to get serious about capituation or crackdown.

Nobody in the West (except the men who claim to represent Islam) wants to see this happen, and everyone still wishes that it just would go away. But the violent men who plot and kill (and openly advertise their burning desire to do so) are increasing their efforts daily. The weak responses of the West encourage them to increase their work exponentially, which is a good thing in that it shortens the time until the problem must be confronted. Last month London’s police chief predicted grave attacks after which “people would be talking quite openly about internment.” That sounds a lot like civil war to us.

VDH: conventional wisdom on immigration is 180 degrees out of phase

Friday, November 10th, 2006

Hanson:

Libertarian supporters of relatively open borders, for example, have long argued that illegal immigration is a safety valve for Mexico, one that prevents violent revolution south of our border. By allowing millions of poor people to cross illegally into the United States, we supposedly stabilize Mexico. Billions of dollars in remittances are sent back home to the needy left behind…Yet the state of Oaxaca is also one of the chief sources of illegal immigration to the United States. Hundreds of thousands of dissatisfied Oaxacans have fled to the U.S. and now send millions of dollars back southward. Why, then, is the city on the brink of chaos? Could it be that far from stabilizing Mexico, the continual flight of millions of Mexico’s disenchanted – one in 10 currently live in the U.S. – has only made things worse?…

Some U.S. counties with higher than average unemployment rates – such as California’s Central Valley, where the unemployment rate often has been in the double digits – are a favored destination of illegal aliens. That suggests that there are already enough American laborers to meet job needs, but a fundamental failure to attract such manpower back into the workplace….

The evidence suggests that massive illegal immigration causes as much upheaval inside Mexico as it supposedly prevents – while aggravating, not solving, problems in the United States.

Yes, but will anyone care if this is true? The President is on his glide path to citizenship, and will be eagerly supported by the new Congress. Meanwhile, the salons are full of bright folks like Gerard Baker who say that one lesson of the election was that the “ugly call to nativist sentiment was rejected in many places.”

While we’re trying on election analogies, why not 1976?

Saturday, October 14th, 2006

The polls show that Americans may well prefer Democrats in 2006 in many races nationwide. We have plenty of problems with polls, but it is certainly possible that the average findings of the polls are correct, and that would be understandable in many ways. It is ridiculous, after all, to fight a weak and wobbly war, and to pretend that Hamas and the forces behind and related ideologically to it want anything other than our destruction, as has been the course sometimes chosen by the Bush administration. Such matters, along with the fecklessness of the administration on immigration and its maddening refusal to engage the ideological and religious elements of this war, are sufficient cause for the GOP to lose.

Since our enemy will come after us until he and his ideology are wiped out or kept out of and away from the civilized world, it really doesn’t matter, in one sense, what the doves on the Left say. Experience, that most brutal of teachers, will one day perhaps teach even them. [It won't happen anytime soon, however -- ed.]

Americans may objectively turn left in November, but it won’t be because of Mark Foley. To use an analogy, Jimmy Carter beat Gerry Ford in 1976, but it wasn’t because America wanted Carter’s wrongheadedness and weakness. Americans showed that pretty decisively in 1980 when they elected Ronald Reagan.

Iraq as Vietnam — the enemy’s Vietnam

Monday, September 11th, 2006

Ralph Peters counts the many victories since 9-11, and adds an unexpected perspective:

– Islamist fanatics have not been able to stage a single additional attack on our homeland…

– Al Qaeda is badly crippled…

– Terrorists no longer operate in freedom…

– Our enemies fear our military again…

– Iraq has become al Qaeda’s Vietnam. No end of lies have been broadcast about our liberation of Iraq and Afghanistan “creating more terrorists.” The terrorists were already there, recruited during the decades we looked away. Our arrival on their turf just brought them out of the woodwork. As for Iraq, Osama & Co. realized full well how high we’d raised the stakes. They had to fight to prevent the emergence of a Middle Eastern democracy. As a result, they’ve thrown in their reserves – who’ve been slaughtered by our soldiers and Marines. The media obsesses on the price of this fight for us, but the terrorists have been forced to pay a terrible cost in trained fighters – while alienating fellow Muslims with their tactics. Pundits will argue forever over whether deposing Saddam was a diversion from the War on Terror, but the proof of its relevance – even if unexpected – is the unaffordable cost we’ve forced on al Qaeda…

– We’ve achieved new levels of domestic security without compromising civil liberties…

– America is much stronger today than we were five years ago.

We know all the arguments and issues that counsel pessimism. But let’s focus on the positive achievements of the good guys today.

Malthus, Eurabia, and the vagaries of mathematical projections

Friday, August 18th, 2006

The English demographer and economist TR Malthus became famous by being wrong. He pointed out in 1798 that populations can increase at a geometric rate, while food production increases at an arithmetic rate. If you project the lines out for a couple of generations, the result is starvation. He was spectacularly incorrect of course, but he gave people the gift of having a great issue they could obsess over without being able to do anything about it. In that sense, he is the father of environmentalist hysteria, the overpopulation fanatics, the global warming crowd (and the global cooling crowd) — as well as daytime television and cable news.

The coming of Eurabia in a couple of generations is among the latest projections of the Malthusian sort. Originally conceived as a political term, Eurabia has taken on a flavor of demographic inevitability in recent years, with the mathematical projection of ever-increasing European Muslim populations and declines in the Christian population. This has led to well-credentialed commentators warning of a “Muslim Oxford” and such things sometime in this century. No doubt if present trends continue unabated, Eurabia will emerge as predicted. The question is whether the straight-line projections are accurate.

We would do well to treat such projections with skepticism for a couple of reasons. For one thing, a cheery reason, as Spengler has pointed out, Muslim birthrates tend to decline sharply everywhere when women’s literacy rates rise. For a darker reason, consider that the Muslim populations of Germany, France and England are pretty small at present. How might the Christian and secular populations of Europe react at some point if economic conditions in Europe plummet, jobs become scarce, and these populations feel far more put upon than they do today?

There are no guarantees in life, and there are no guarantees in mathematical projections either. The vast secular and Christian populations of Europe are not uniformly represented by their vapid and cowardly elites, as Alexander Solzhenitsyn pointed out almost three decades ago at Harvard: “The Western world has lost its civil courage, both as a whole and separately, in each country, each government, each political party and of course in the United Nations. Such a decline in courage is particularly noticeable among the ruling groups and the intellectual elite, causing an impression of loss of courage by the entire society.” Neither are the populations of Europe entirely represented by the images of the MSM, who are the lickspittles and vassals of the elites. There are soccer thugs and soccer thugs in-waiting all over Europe — remember: virtually no one in Germany in 1930 imagined Germany in 1940.

The vast secular and Christian populations of Europe appear pretty docile at present. But how much of that is an illusion, or a result of the unsustainable welfare benefits of the decaying European economic machine? What happens if times get tough?

You see, there are some mathematical facts that are worth paying attention to, and they underscore the possibility of a very different future. For many years now, Europe has taken on characteristics of an economic fantasy land. Structural unemployment has increased to terrible levels, and vast sums of GDP are channeled through government (57% in France — 3x USA) in order to maintain huge welfare benefits to the people of Western Europe.

So far Europe has been bailed out of its coming problems by the massive productivity increases of the last several generations, the willingness to live with unsustainable levels of government spending, and the importation of cheap labor. Projecting that trend indefinitely is risky. As we have pointed out regarding the US’s own Social Security system, it has precisely the structure of a Ponzi scheme — what happens if the bubble bursts, or the wheel stops, even if only for a few years? It’s happened before; don’t say it can’t happen again — discontinuities are the hardest things of all to forecast, but they happen all the time.

The projections of Eurabia are based on assumptions about the underlying docility of the supposedly enervated populations of Western Europe. That assumption of docility is in turn, in our view, based on potentially questionable projections of economic growth and prosperity. Our point is this: Europeans have among the nastiest histories of brutality, barbarism and genocide on the planet. From the 1790′s in France, through the 1930′s in Germany, and, to pick a tiny example, 1290 – 1656 in England, Europeans have shown themselves to be every bit as bloodthirsty and ruthless as anyone on the planet. It is unwise to assume that these characteristics can be bred out of peoples so quickly, no matter what the doddering elites and their court jesters in the MSM seek to portray.

Eurabia may well emerge. It is, however, our expectation that upheavals far worse than anyone is currently forecasting lie ahead for Europe and America in the intervening years.

How the progressives in the Arab establishment want to be seen

Tuesday, July 18th, 2006

Youssef Ibrahim’s remarkable piece in the NY Sun:

[T]here is a silent Arab majority that believes that seventh-century Islam is not fit for 21st-century challenges. That women do not have to look like walking black tents. That men do not have to wear beards and robes, act like lunatics, and run around blowing themselves up in order to enjoy 72 virgins in paradise. And that secular laws, not Islamic Shariah, should rule our day-to-day lives.

And yes, we, the silent Arab majority, do not believe that writers, secular or otherwise, should be killed or banned for expressing their views. Or that the rest of our creative elite – from moviemakers to playwrights, actors, painters, sculptors, and fashion models – should be vetted by Neanderthal Muslim imams who have never read a book in their dim, miserable lives.

Nor do we believe that little men with head wraps and disheveled beards can run amok in Lebanon, Saudi Arabia, Iran, and Iraq making decisions on our behalf, dragging us to war whenever they please, confiscating our rights to be adults, and flogging us for not praying five times a day or even for not believing in God. More important, we are not silent any longer.

Rarely have I seen such an uprising, indeed an intifada, against those little turbaned, bearded men across the Muslim landscape as the one that took place last week. The leader of Hezbollah, Sheik Hassan Nasrallah, received a resounding “no” to pulling 350 million Arabs into a war with Israel on his clerical coattails.

The collective “nyet” was spoken by presidents, emirs, and kings at the highest level of government in Saudi Arabia, Egypt, Bahrain, Qatar, Jordan, Morocco, and at the Arab League’s meeting of 22 foreign ministers in Cairo on Saturday. But it was even louder from pundits and ordinary people.

Perhaps the most remarkable and unexpected reaction came from Saudi Arabia, whose foreign minister, Prince Saud Al-Faisal, said bluntly and publicly that Hezbollah’s decision to cross the Lebanese border, attack Israel, and kidnap its soldiers has left the Shiite group on its own to face Israel. The unspoken message here was, “We hope they blow you away.”

Mr. Ibrahim is an optimist. Last year he identified the Kifaya or “Enough” Movement, an Arab or Muslim spring from people who had had Enough of totalitarianism and corruption. Evidence for the Enough Movement was to be found in the Cedar Revolution and other outpourings of people power. So far the movement, to the extent it exists, has potentiated the rise to power of certain of the more thuggish political groups in the Islamic world.

Ibrahim has also been expressing the view for some time that the Arab elites are tired of the complaints of the Palestinians, and that this elite thinks they should stop their warmaking and get on with lifemaking. He famously said that last week, but has been making similar statements for at least the past couple of years. These sentiments too have yet to make their way into official Arab policy.

Mr. Ibrahim also does not explain how the Arab and Muslim world can take such a grandly secular view of issues like apostasy and other doctrinal matters, as evidenced in the bit of his piece we italicized above. He could find himself in deep trouble in many corners of the Islamic world for such sentiments.

Notwithstanding these problems, Mr. Ibrahim’s bold statements are as welcome as they are startling. He is certainly a member of the Arab intellectual and business elite, so it is perhaps meaningful that he voices such liberal sentiments. Frankly, it appears obvious to us that many in the rich and educated Arab elites who live in cosmopolitan places like Dubai and London would have somewhat secular views — it often goes with the territory. We wonder what it portends that these elites appear to now have a spokesman who opposes many of the official policies of their own countries. It seems like good news to us.

In war, the point is to be “totally disproportionate” – if you like winning

Monday, July 17th, 2006

Jacques Chirac (and many others) have called Israel’s military force “totally disproportionate,” as if that’s a bad thing. Maybe it is to France — the evidence would suggest it (HT: CQ). In the US, isn’t “totally disproprtionate” called the Powell Doctrine?