Month: October 2008

  • Medvedev Visits Armenia, First Caucasus Trip Since Georgian War

    Medvedev Visits Armenia, First Caucasus Trip Since Georgian War

    By Sebastian Alison

    Oct. 20 (Bloomberg) — Russian President Dmitry
    Medvedev today visits Armenia, the country’s
    closest ally in the South Caucasus, on his first
    trip to the region since Russia fought a war with Georgia in August.

    This will be Medvedev’s fifth meeting this year
    with Armenian President Serzh Sargsyan, and the
    first outside Russia, his office said in an
    e-mailed statement issued in Moscow ahead of the trip.

    “This is a clear demonstration of the high level
    of political dialogue aimed at further
    strengthening relations of strategic partnership
    and unity between Russia and Armenia,” it said.

    The former Soviet republic of Armenia doesn’t
    border Russia, from which it’s separated by
    Georgia and Azerbaijan. As it doesn’t have
    diplomatic relations with Azerbaijan after a war
    over the disputed region of Nagorno-Karabakh, all
    of its trade with Russia, its main foreign trade
    partner, is routed through Georgia.

    This includes natural gas, with Armenia depending
    on a Soviet- era pipeline which crosses Georgia
    for its supplies. Russian gas monopoly OAO
    Gazprom owns 67.9 percent of Armenian gas company
    ZAO ArmRosGazprom and on Sept. 16 agreed to
    gradual gas price increases as part of its policy
    of cutting subsidies to former Soviet republics.

    This gradual approach contrasts with past threats
    to cut supplies altogether to Ukraine and
    Belarus. It foresees prices rising to
    “European” levels by 2011, Gazprom said in a
    Sept. 16 statement. Russian gas continued flowing
    across Georgia to Armenia even during the war
    sparked by Georgian troops entering the breakaway
    region of South Ossetia to reclaim it on Aug. 7,
    after which the Russian army expelled them in a five-day rout.

    Russian-Armenian trade rose 13 percent in the
    first eight months of this year compared with the
    same period in 2007, reaching $536.5 million, the
    Kremlin statement said. Russia has invested more
    than $1.6 billion in Armenia since the Soviet
    Union broke up in 1991, the statement said. Of
    that, $428 million was invested in the first half of 2008.

    Medvedev is due to arrive in the Armenian
    capital, Yerevan later today and will leave tomorrow.

  • UN elects Turkey to Security Council for 2009-10

    UN elects Turkey to Security Council for 2009-10

    October 17, 2008

     

    Turkey obtained 151 votes from the 192-member General Assembly, one of the highest number of votes received in a three-way contest, with 80% of the votes cast in favor of Turkey. The election of Turkey to the UN Security Council represents the confidence reposed the country and her peaceful foreign policy based on dialogue and cooperation.
    Mavi Boncuk |

    UNITED NATIONS, Oct 17 (Reuters) – The U.N. General Assembly on Friday elected Japan, Turkey, Austria, Mexico and Uganda to seats on the powerful Security Council for 2009-10, rejecting bids by Iran and Iceland.

    As expected, heavyweight Japan defeated Iran, which is under Security Council sanctions because of its nuclear program, for an Asian seat coming vacant on Jan. 1. Japan got 158 votes from the 192-member assembly and Iran only 32.

    In a three-way contest for two European seats, Iceland — an apparent victim of its grave financial crisis — scored 87 votes, well short of the two-thirds majority required. Turkey went through easily and Austria by a narrower margin.The election of Mexico and Uganda had been virtually assured since they were unopposed in their regional groupings.The General Assembly votes once a year for five of the 10 nonpermanent seats on the 15-nation council, the powerhouse of the United Nations with the ability to impose sanctions and dispatch peacekeepers.

    The permanent members, which have veto power, are the United States, Russia, Britain, France and China, considered the victors of World War Two.

    Labels: politics

     

  • Iceland Loses Bid for UN Council Seat; Austria, Turkey Win

    Iceland Loses Bid for UN Council Seat; Austria, Turkey Win

    Austria and Turkey were elected to the United Nations Security Council today in a defeat for fellow European contender Iceland, whose financial collapse may have scuttled its quest for a seat.

    Japan beat Iran by 158 votes to 32 for a single Asian seat open on the 15-nation council, the UN’s top policy-making body. Uganda and Mexico joined as uncontested candidates for African and Latin American slots. Envoys said Iran was hurt by its defiance of UN demands for limits on its nuclear development effort out of U.S. and European concerns the work may be aimed at building a weapon.

    Turkey received 151 of 192 votes for a European seat, and Austria 133. Iceland had 87 votes. Turkey’s victory will put the Muslim ally of the U.S. on the Security Council for the first time since 1961. The Turkish government’s campaign for a European seat in the body coincided with its push for eventual European Union membership.

    The membership mix will affect how the council deals with such geopolitical issues as U.S.-led efforts to curb Iranian and North Korean nuclear ambitions, the conflict in the Darfur region of Sudan and democratic development from Asia to Africa.

    The winning countries will join as temporary members for two-year terms starting in 2009 to fill seats vacated by Belgium, Indonesia, Italy, Panama, and South Africa. To win, they took two-thirds of the votes in the secret General Assembly balloting.

    Britain, China, France, Russia and the U.S. hold the five permanent seats on the council, with the power to veto measures on international security brought before the body. Five other countries are members through the end of next year: Burkina Faso, Costa Rica, Croatia, Libya and Vietnam.

    To contact the reporter on this story: Robin Stringer at the United Nations at [email protected]; Bill Varner at the United Nations at [email protected]

    Last Updated: October 17, 2008 11:59 EDT

    By Robin Stringer and Bill Varner

    Bloomberg

  • Terror in the mountains

    Terror in the mountains

    Terribly Misleading Economist Article on PKK Terror–Please Leave Your Comments

    ykundupoglu [[email protected]]

     

    Turkey and the Kurds

    Terror in the mountains

    Oct 16th 2008 | ANKARA, DIYARBAKIR AND KARS
    From The Economist print edition

    Renewed violence raises new questions about Turkey’s treatment of its Kurds

     

    HER boots caked in cow dung, her hands in soil, 80-year-old Xaje Artuget has but one regret. “I wish all eight of my sons had gone to fight in the mountains,” she sighs. In fact, “only one” joined the Kurdistan Workers’ Party (PKK) and is now “somewhere in northern Iraq”. Similar feelings abound in many hardscrabble townships in eastern Turkey, where decades of repression and poverty have provided a steady stream of recruits since the PKK launched its violent campaign for independence in 1984.

    At least 44,000 people, mostly Kurds, have died in the conflict. The Turkish government says it has spent some $300 billion battling the terrorists. The results have been mixed. The PKK leader, Abdullah Ocalan, was captured in 1999, and several ceasefires followed. Yet the violence continues today—17 Turkish soldiers were killed in early October when some 400 PKK rebels raided a military outpost in Hakkari province, near the Iraqi border, and days later rebels killed four policemen in Diyarbakir. Sympathy for the PKK remains strong among Turkey’s 14m Kurds.

    The Turkish parliament has now extended the army’s mandate to bomb PKK targets in Kurdish-controlled northern Iraq, and Turkish aircraft have been doing just that. Yet the latest wave of PKK attacks has embarrassed the ruling Justice and Development Party (AKP) and raised new questions about the army’s competence. The cries of incompetence grew louder when Taraf, a newspaper, published a leaked internal report showing that the army knew about the planned attack in Hakkari but did little to stop it. It did not help when the air-force chief was photographed playing golf a day later.

    In an alarming twist, ethnic tensions are erupting in western parts of Turkey as well. Two people died in the town of Altinova recently when a Kurdish youth rammed a truck into a group of Turks who were taunting Kurds by playing loud nationalist tunes. The army was called in when Kurdish homes and businesses came under siege.

    The Kurds remain a huge problem for Turkey’s government. The prime minister, Recep Tayyip Erdogan, raised hopes in 2005 when he said the state had “made mistakes” in handling them. Steps to ease bans on Kurdish broadcasting and education followed, and vast sums were poured into Kurdish regions. The handouts included education subsidies for the poor, especially for girls. These helped the AKP to clobber the pro-Kurdish Democratic Society Party (DTP) in much of the south-east in the July 2007 election. Yet to many the measures smell of vote-buying. “I haven’t received a penny for my girls’ schooling since April,” complains Sabiha Celik in Sason. “I will never vote for the AKP again.”

    Indeed, Kurdish support for the AKP has been fading ever since the government yielded to army pressure to resume cross-border operations against the PKK in northern Iraq. The generals are baying for a freer hand, prompting worries of a return to the human-rights abuses of the 1990s. Ominously, the Turkish Human Rights Foundation says that, this year alone, over 30 people have been killed in alleged police violence, mostly in the Kurdish region. The government had to apologise when Engin Ceber, a left-wing activist, was tortured and beaten to death by security forces recently in an Istanbul prison.

    AKP leaders, who narrowly escaped a constitutional court ban in July, have yet to utter a word about a similar closure case that is pending against the DTP on the ground that it is propagating separatism. DTP deputies spend lots of time lobbying for better prison conditions for Mr Ocalan. Many of them were handpicked by the PKK to run for parliament. Yet just as in the AKP case, much of the prosecution’s argument rests on words rather than deeds. Moreover, any ban might just boost the DTP’s popularity.

    Turkey blames some of its Kurdish woes on the West. “We are still seeing co-operation with the PKK, they are doing fund-raising in EU countries and there are many PKK terrorists living in Europe. This really bothers us,” Ali Babacan, the foreign minister, claimed in an interview with The Economist. Similar harangues at the Americans have subsided since they agreed to let the Turks pursue the PKK in Iraq.

    There are some hopeful signs that Turkey is trying to make friends with the Iraqi Kurds. This week Turkish diplomats met Masoud Barzani, who heads the Kurdish regional government in Iraq. This has prompted speculation that Turkey could be thinking of reviving an amnesty for PKK fighters untainted by violence. As the winter cold sets in, many might be tempted. And, as Mr Babacan acknowledges, “a military solution is not a solution.”

     

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  • The Final Debate: A Minute-by-Minute Analysis

    The Final Debate: A Minute-by-Minute Analysis

    By Staff, Think Progress
    Posted on October 15, 2008, Printed on October 16, 2008

    Editor’s note: Think Progress did a great job live-blogging tonight’s debate — here’s their minute-by-minute analysis:

     

    10:33: When asked who won the debate, the New York Times’s David Brooks quipped on PBS, “Well, we’ll wait for the verdict from Joe the plumber.”

     

     

     

    DEBATE ENDS … POST-DEBATE COMMENTARY BEGINS 

     

    10:25: McCain said that Sarah Palin knows about having a child with autism “better than most.” But her son Trig doesn’t have autism. He has down syndrome.

    10:21: Although the debate isn’t even over yet, the AP’s Liz Sidoti is saying that McCain won:

    A feisty John McCain tried hard to find a lifeline Wednesday night in the final debate, challenging rival Barack Obama at every turn over his truthfulness, associations and record. Obama was on defense for much of the night. By that measure, McCain won the last debate of the 2008 campaign. But that alone may not have been enough to win the election.

    10:21: McCain talks passionately about improving education. But in 1994, he proposed “doing away” with the Department of Education.

    10:20: McCain called education the civil rights struggle of the 21st century, but he voted against the Civil Rights Act of 1990. (UPDATE: In 1983, at the age of 46, McCain voted against creating the Martin Luther King holiday. He apologized for that vote this spring.)

    10:17: McCain said he would seek to boost adoptions. However, he has taken an extreme position in opposing the right of gay couples to adopt children.

    10:16: According to McCain, concern for the health of a mother is now a position of the extreme “pro abortion movement.”

     

     

    10:15: Throughout the night, McCain has repeatedly invoked “Joe the Plumber.” For the record, the plumbers union — the United Association — has endorsed Obama, saying that his policies would “help us keep existing jobs and work to develop new, higher paying jobs here in America.”

    10:15: In attacking Obama, McCain said, “I don’t know how you vote present.” One way is to simply fail to vote, a skill he’s perfected in the last year: McCain has missed over 64 percent of the votes in the 100th Congress.

    10:12: McCain just dismissed guaranteeing equal pay for equal work as a “trial lawyer’s dream.”

    10:11: McCain says he wouldn’t have a litmus test for appointing judges to the bench, but he also recently told Pastor Rick Warren that he wouldn’t have appointed any of the liberals and moderates on the Supreme Court: “Justice Ginsberg, Justice Breyer, Justice Souter, and Justice Stevens.”

    10:09: McCain claims that Obama voted against Supreme Court Justices Roberts and Breyer. Breyer was actually nominated by President Clinton, before Obama even became a senator. Obama actually voted against Justice Alito.

    10:07: McCain said that the average health care plan costs $5,800, the size of the employer contribution. McCain has been a recipient of government health care his entire life and may not know that, according to the latest estimate, the average health care plan is actually 12,680.

    10:06: McCain just called Obama “Senator Government,” then corrected himself.

    10:06: McCain said the escalating costs of health care are inflicting pain on “working class families.” Ironically, Mccain’s plan to shift Americans from the employer-based system into the individual health insurance market would increase their out-of-pocket health expenses.

    10:04: McCain bragged that he would give every family a $5,000 tax credit to buy insurance. Unfortunately, McCain’s credit depreciates over time and would not cover the average health care premium of $12,000.

    10:03: As Atrios notes, moderator Bob Schieffer is asking questions that offer a false choice, such as “Would you favor controlling health care costs over expanding coverage?”

    10:03: McCain said that if you like Obama’s health care plan, “you’ll love Canada or England.” And indeed people do like those countries systems better: “One-third of Americans told pollsters that the U.S. health care system should be completely rebuilt, far more than residents of Australia, Canada, New Zealand, or the U.K. Just 16 percent of Americans said that the U.S. health care system needs only minor changes, the lowest number expressing approval among the countries surveyed.”

    10:01: McCain says we should have “physical fitness and nutrition programs” in our schools to reduce the number of overweight children. This seems hard to square with his plan for an across-the-board spending freeze.

    10:00: McCain said the escalating costs of health care are inflicting pain on “working class families.” Ironically, McCain’s plan to shift Americans from the employer-based system into the individual health insurance market would increase their out-of-pocket health expenses.

    9:56: Obama is arguing for better labor standards in trade agreements. Christian Weller has found that “United States can improve its trade deficit, which has been at or above 5% of gross domestic product since the middle of 2004, by calling for improved labor standards from America’s trading partners.”

    9:55: Obama said America invented the automobile industry. In fact, the first market-viable car was developed by Germany’s Karl Benz. The first automobile was invented in 18th century France and the first internal combustion engine was invented in 1806 by a French-speaking Swiss man (this is why we use the French word “automobile”).

    9:52: McCain said that if we start drilling offshore now it will lower the price of a barrel of oil. But his top economic adviser, Douglas Holtz-Eakin, admitted in June that “new offshore drilling would have no immediate effect on supplies or prices.” (UPDATE: The Energy Information Administration says expanded drilling “would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.”)

    9:50: McCain seems to think the viability of nuclear-powered naval vessels demonstrated the viability of safely storing nuclear waste. We do not, of course, actually store the waste on the ships. The two things have nothing to do with each other.

    9:48: McCain said we had to fight the first Gulf War to prevent Saddam Hussein from threatening our “world supply.” Presumably he meant “oil supply.” Alternatively, perhaps McCain is Galactus and needs to devour worlds to survive.

    9:46: McCain observed that the American people have gotten to know Sarah Palin. He didn’t mention that they don’t like her! She’s got a 32/41 favorable/unfavorable spread in the latest NYT/CBS poll.

    9:45: McCain cites Palin’s efforts to erect a pipeline to bring energy to the lower 48 states. That project exists on paper only, and Palin has actually opposed another plan to bring Alaska’s natural gas to the rest of the country.

    9:45: Touting Palin’s credentials, McCain called her “a reformer.” Like Palin, perhaps he hasn’t read the Alaska Legislative Council’s investigative report showing she “abused her power” and violated the state’s Ethics Act.

    9:45: McCain praises Palin for “giving money back to the taxpayers,” which Palin accomplished through enacting a windfall profits tax on oil companies. McCain opposes such a tax.

    9:37: After attacking Obama for his connection to Ayers, McCain declared suddenly, “My campaign is about getting this economy back on track.” Obama laughed.

    9:36: McCain brings up Ayers — “a washed up terrorist” as he calls him. (UPDATE: McCain says ACORN is “destroying the fabric of our democracy.”)

    9:35: McCain: “I’m proud of the people who come to our rallies.” (UPDATE: Obama invited McCain to bring up Ayers, saying that Palin had said he is “palling around with terrorists,” McCain again refused to engage.)

    9:34: We think the American people would probably be more interested in hearing about plans by Obama and McCain to impact the lives of ordinary Americans than hearing them critique each other’s campaign tactics.

    9:33: McCain said it’s “not true” that he’s running 100% negative ads. In fact, the Wisconsin Advertising Project recently found that his ads were 100% negative.

    9:32: McCain claimed that he’s repudiated every “out of bounds” remark by a Republican about Obama. Just this week, however, McCain demurred when asked if he would repudiate remarks made by the chairman of the Virginia Republican Party comparing Obama to bin Laden.

    McCain interrupted Obama to say that he should read what Rep. John Lewis (D-GA), who participated in the Freedom Rides to desegregate the South, said about the McCain campaign. Here’s what Lewis said:

    9:30:

    What I am seeing reminds me too much of another destructive period in American history. Sen. McCain and Gov. Palin are sowing the seeds of hatred and division, and there is no need for this hostility in our political discourse. . . .

    George Wallace never threw a bomb. He never fired a gun, but he created the climate and the conditions that encouraged vicious attacks against innocent Americans who were simply trying to exercise their constitutional rights. Because of this atmosphere of hate, four little girls were killed on Sunday morning when a church was bombed in Birmingham, Alabama.

    As public figures with the power to influence and persuade, Sen. McCain and Gov. Palin are playing with fire, and if they are not careful, that fire will consume us all. They are playing a very dangerous game that disregards the value of the political process and cheapens our entire democracy. We can do better. The American people deserve better.

    9:29: Debate moderator Bob Schieffer essentially invited McCain to talk about Bill Ayers to Obama’s face, and McCain took a pass, changing the subject to John Lewis.

    9:29: McCain is blinking maniacally during all his answers; Obama seems unbothered by the lights.

    9:28: McCain said he “vigorously opposed” President Bush’s conduct of the war in Iraq, but just this past April, he proudly said that “no one has supported President Bush on Iraq more than I have.”

    9:25: Obama noted that his support of clean coal doesn’t make him “very popular with the environmental community.” Maybe Obama should consider that if environmentalists don’t like it, it’s because there’s nothing clean about it!

    9:24: McCain defensively argued that he wasn’t President Bush, but in 2005, he declared that “on the transcendent issues, the most important issues of our day, I’ve been totally in agreement and support of President Bush.” (UPDATE: McCain said “I’m not president Bush.” But McCain has voted with Bush 95% of the time and has previously stated that he agrees with Bush on all major issues.)

    9:23: McCain says “I would fight for a line-item veto.” A line-item veto was signed into law years ago and ruled unconstitutional in 1998.

    9:21: McCain’s across-the-board, hatchet-like spending freeze is still a counterproductive pro-cyclical measure as we head into a recession, reminiscent of Herbert Hoover’s austerity budgets that deepened the Great Depression.

    9:20: McCain said that during the Great Depression “we had something called the Home Ownership Loan Corporation.” In fact, it was called the Home Owners’ Loan Corporation.

    9:19: Earlier in the debate, McCain repeatedly attacked Barack Obama for his conversation last Sunday in Ohio with “Joe the plumber,” as McCain refers to plumbing business owner Joe Wurzelbacher, whose earnings of over $250,000 a year puts him comfortably in the top five percent of earners in the United States. Watch the conversation:

  • The International Economic Crisis and Stratfor’s Methodology

    The International Economic Crisis and Stratfor’s Methodology

    The International Economic Crisis and
    Stratfor’s Methodology

    By George Friedman
    Stratfor’s focus is on geopolitics. That means that it focuses on the behavior of human societies organized into complex, geographically defined systems. In our time, that means that we study nation-states. In order to understand the behavior of nation-states, it is necessary to focus on three major dimensions: economics, war and politics. The nation has to be studied in terms of producing wealth, defending (and stealing) wealth, and the internal and external relations by which humans shape their lives.

    Economics, war and politics are not separate spheres. They are a single entity together constituting the reality of the nation-state. There are those who argue that economic life should be left alone, not interfered with by political or military power. We won’t engage in that argument. What we know, empirically, is that political and military power constantly impinge on economic life, and vice versa. It is impossible to imagine war without taking into account politics and economics. It is impossible to think of domestic or foreign policy without considering economic and military issues. By the same token, it is also impossible to think about economics without thinking about military and political matters. If it can be made otherwise, then someone will do so and then we will change our opinion. Until then, we cannot think of the free market as a meaningful independent reality. It is always shaped by other factors. Perhaps it should be otherwise. It isn’t.

    An integrated approach to social reality requires that these distinctions, so important in the organization of a university or a newspaper, be overcome. They were created in order to organize human activities into manageable pieces. Our argument is that in so doing, reality is only apparently made more manageable, and in fact is falsified. The standard approach to these issues creates distinctions that don’t exist and complexities that conceal rather than reveal the nature of the problem at hand. A general who tries to wage war without consideration of political ends and economic means is going to fail. An economist who tries to understand and predict the behavior of the economy without a comprehensive understanding of the political and military realities which shape the economy will not do particularly well.

    Geopolitics is in one sense also an abstraction, but it has the virtue of not creating artificial distinctions. The price that the geopolitician pays for a comprehensive view of reality is a forced simplification: there is just too much happening to state it comprehensively. Geopolitics is the search for the center of gravity of reality, those overwhelming forces that drive the system in the direction it is going to take. These forces are never solely political, military or economic in nature. Usually, they are in plain sight and are overlooked because, being simple, they appear insufficient. Indeed, they may be insufficient, but others can add the details. Our goal is to lay bare the essentials and identify the general direction in which things are moving.

    Take, for example, our recent analysis of the Russo-Georgian war. It derived from this central reality: Russia by the 19th century had achieved the borders essentially held by the Soviet Union. In 1992 it had collapsed to a position in which it had not been since perhaps the 17th century. That condition was untenable. Either Russia would implode or it would reassert itself fairly quickly. By early 2000s, it was our view that it would choose to assert itself. When the United States tried to make an ally of Ukraine, which Russia sees as crucial for its economic, military and political well-being, we became certain that Russia would push back. As the Americans got bogged down in Iraq and Afghanistan, a window of opportunity opened up and the Russians began the process of reassertion.

    There are, obviously, endless things left out of this analysis. People of every discipline could rip it apart as being insufficiently sophisticated. In one sense they would be right. By avoiding the complexity of sophistication, we could see the fundamental shape of things — which was that the Russian collapse, if halted, would have to reverse itself for economic, military and political reasons. There were obviously many details we could not predict and some we didn’t know. But we captured the essential geopolitical condition of Russia in order to understand what it had to do. We left it to others to do the important work of mapping the complexity. Our task was to capture the simplicity.

    In our analysis of the current financial crisis in the United States — and the world as a whole — we have sought the center of gravity of the problem. We approached that simply by asking one question: is what is going on simply another inflection point in the business cycles that have occurred since World War II, or does it represent a systemic failure such as that which happened during the Great Depression? This struck us as the urgent issue.

    We noted that in the Great Depression, the U.S. gross domestic product (GDP) contracted by nearly 50 percent over three years. It was an unprecedented calamity. Bearing this in mind, we compared the current situation to other events since World War II to see if there was a framework for measuring it. We found that framework in the Savings and Loan crisis of 1989, when an entire sector of the U.S. financial system collapsed and the federal government intervened — essentially guaranteeing or purchasing commercial real estate, whose price decline had triggered the crisis. We noted that the total amount allocated by the federal government in that crisis was about 6.5 percent of the GDP (and the amount actually spent, before recouping of costs via sales, was less than 3 percent). We noted also that in the current crisis another sector of the financial system — the investment banks — were devastated, and that the federal government intervened, this time at about 5 percent of GDP. Meanwhile, the equity markets had not declined as much as they did in 2000-2001, and as of the second quarter of this year the economy was still growing by more than 2 percent. From this we concluded that the U.S. economy was moving into a recession but that the recession would not break the framework of the postwar economy, although clearly the degree of government intervention will reshape the financial markets.

    From the point of view of many Russian experts in 2001, our analysis of the future of Russia was seen as simplistic and naïve. From the standpoint of professional economists and traders in the markets, the same is being said of our current analysis. But just as our critics among Russian experts failed to see the main thrust of Russian history, many economists fail to see the main thrust of what is now happening. The United States is a $14 trillion economy with a potential problem amounting to $1-2 trillion (and probably far less than that). If the government intervenes, it will create inequities and imbalances in the system. But between the size of the economy and the government printing press, the problem will be managed — particularly because there are underlying assets — houses — that can be monetized in the long run. The gridlock in the financial system will undoubtedly create a recession, but there hasn’t been one for seven years and it’s high time.

    One can like or dislike the outcome, and we certainly agree that this will cause long-term dislocations and imbalances. But we also know that America as a nation-state has the resources to manage its way through this crisis if the government intervenes. And that intervention is as hard-wired into the American political-economic-military system as the law of supply and demand.

    We do not speak the language of economics. There are numerous economists who can do that. And we certainly don’t speak the language of the financial markets. We speak our own language, designed to reveal the elegant essence of the problem rather than its enormous complexity. Certainly, if our analysis is wrong because we failed to identify a crucial problem, then we haven’t identified the center of gravity properly. And we will be wrong, which is far worse. But as in February 2000, when we published a piece called “Recession Time?” which forecast the market collapse that happened a few weeks later and the recession that followed it, we will be criticized for not understanding some essential point — in 2000 it was that we had no understanding of the impact of increased productivity on the business cycle. They were right. We didn’t understand it and we were right not to. The complexities of productivity did not trump the obvious, which was that the NASDAQ had reached unsupportable levels and there had been no recession in nine years and that was way too long.

    So, too, we are criticized for our failure to understand the spread between T-Bills and LIBOR or myriad other things. But we do understand this: The political reality is that the size of the American economy, deployed by the state, trumps the financial problems created by the fall of the housing markets. It will be ugly and painful for some and there will be a recession, but things are always ugly and painful when there is a recession.

    This series is about the economic problem, therefore, but is not written about the economy and certainly not by economists. Their work is valuable but it differs from ours. Rather this is about geopolitics and therefore about the different regions and nation-states of the world. It is a geopolitical analysis subsuming economics, politics and military affairs in a single system. And it is designed to extract the obvious rather than drill into the complexity.

    We hope this series has some value to our readers in clarifying the current moment. That is its intention: to highlight the main tendency, not to detail the complexity. Understanding the trees has value, but seeing the forest clearly has value as well.

    John F. Mauldin
    [email protected]