Weekend Reading; see how the world changed last week

Contents

I.  “The Trillion-Dollar War“, Reason (May 2008) – “The War on Terror is now more expensive than Vietnam or World War I—but the dishonest way Washington is paying for it may prove costliest of all.”

II.  “The Uneven Playing Field“, New York Times Magazine  (11 May 2008) – An illustration of the militarization of our culture.  Warriors without a war.

III.  ”My ‘Racial Harassment’ Nightmare“, New York Post ( 9 May 2008) — Freedom slips away quietly, in incidents like this.

IV.  ”‘Deafening’ silence on analyst story“, Politico (8 may 208) — Pity those of our fellow-citizens who rely on the major TV networks for their news, as they learn all the news that is “fit to see.”  We are forutnate to have so many information media; this is an important bulwark of our freedom.

V.  ”Taking the War to the Mexican State, 4GW Style“, Zenpundit  (9 May 2008) — Excellent analysis of ominous trends in our southern neighbor.

VI.  “Taking stock of the dollar’s global role“, Brad Setser, RGE Monitor  (11 May 2008) — The role of the US dollar is imo one of the central geopolitical questions of our time, like the fate of the Austro-Hungarian Empire was before WWI. 

VI.  “The de facto nationalization of the global financial system“, Brad Setser  (8 May 2008) — Wave bye-bye to the global free market system.  This is imo one of the great under-covered stories of the decade.

The articles and excerpts

Some interesting reading for your weekend

Contents

1. “John McCain’s “100 Years” — putting the controversy to rest“, Moira Whelan, posted at Democracy Arsenal (30 April 2008) –  This gives McCain’s actual words on the war, at various times and places. 
2. “In France, Prisons Filled With Muslims“, Washington Post (29 April 2008) — Another decline of the State special report. 
3. “Bluff and Bloodshed“, Christopher Dickey, Newsweek  (1 May 2008) — “The Persian Gulf is more dangerous than ever. Will the U.S. and Iran go to war at sea?”
4. “Barack in Iraq“, Michael Crowley, The New Republic” (7 May 2008) — “Can he really end the war?” 
5. “At least we know how the US financed its trade deficit in April (and March too)“, Brad Setser, RGE Monitor (2 May 2008) — “Record central bank financing continues.”
6. Four important new articles about the food crisis, including one about about Wheat Leaf Rust appearing in the US.

Also — The government did not inflect African-Americans with Syphilis in the Tuskegee study.  See the Wikipedia entry for details.  How astonishing that this pernicious lie is so widely believed!

The articles, with excerpts

A recommendation to read these bulletins from the front!

In the 21st century financial wars, dollars replace bullets as shapers of the geopolitical picture.   Journalists, even analysts, do not yet see this change, hence their reports must be read with care. 

These are important articles:   Overseas Investors Buy Aggressively in U.S. (NY Times)  and China turns risk averse as capital outflows (Financial Times).   They must be read carefully to get the vital aspect of the story.  Brad Setser explains in a post today (read the full post!):

Framing current events about the global economic and geopolitical system

The daily newspapers display events as string of beads.  Discrete, unrelated.  That masks the key to understanding what is happening:  the systemic drivers at work.  This is in my opinion not a series of isolated events or even a cyclical downturn.  We are experiencing a change in the fundamental structure of the global economic regime.

You might find this series of articles of value to properly “frame” these events, listed from old to recent.  Please share your comments (brief and relevant, please), or email me at (spam-protected spelling) fabmaximus at hotmail dot com.

A brief note on the US Dollar. Is this like August 1914?  — How the current situation is as unstable financially as was Europe geopolitically in early 1914.

The post-WWII geopolitical regime is dying. Chapter One  – Why the current geopolitical order is unstable, describing the policy choices that brought us here.

We have been warned. Death of the post-WWII geopolitical regime, Chapter II – A long list of the warnings we have ignored, from individual experts and major financial institutions (links included).

Power shifts from West to East: the end of the post-WWII regime in the news – We are seeing another western industry ceding dominance to eastern competitors, one more step in a larger process.

Death of the post-WWII geopolitical regime, III — death by debt – Origins of the long economic expansion from 1982 to 2006; why the down cycle will be so severe.

A recommendation to read these bulletins from the front! – A brief note on today’s articles in the NY Times and Financial Times, with Brad Setser’s explanation of why they are important.

Power shifts from West to East: the end of the post-WWII regime in the news

Massive geopolitical changes occur in tiny increments as well as massive shifts. Look closely at your daily newspaper. The journalists report as casual news the small steps of history-making events. In the past few weeks we see tangible evidence of power shifting from West to East.

One: The Abu Dhabi Investment Authority spends $7.5 billion to buy a 4.9% stake in Citigroup (28 November 2007)

By agreeing to purchasing a $7.5 billion stake in the faltering banking giant Citigroup, the secretive, government-controlled Abu Dhabi Investment Authority is breaking with tradition. As the largest sovereign wealth fund in the world, with assets estimated at $650 billion, it poured money in the past into low-return, low-profile investments or small emerging market deals, unlike its flashy emirate neighbor, Dubai. … Flush with cash from its oil exports, Abu Dhabi turned to Wall Street, using a complicated transaction late Monday to buy 4.9 percent of Citigroup, acquiring high-yield, convertible stock that must be exchanged for common stock between March 2010 and September 2011.

Two: Singapore buys 9% stake in UBS. An unnamed Middle Eastern investor spends $1.73 billion to buy a 2% stake in UBS.

Update: Rumors point to Saudi Arabia as the home of the mystery investor.

Three: China spends $5 billion to buys a 9.9% stake in Morgan Stanley.

Power follows money. Creditors usually dominate debtors. These are just the opening rounds in the new great game, as foreign governments take non-voting stakes in major western financial institutions. Plenty of time to tighten the leash later, slowly over time. In the new era money might replace bullets as the last resort of Kings.

For a deeper perspective on this, we go to one of the world’s top experts on global capital flows: Brad Setser, of the Council on Foreign Relations. Here is an excerpt from his article of 19 December 2007:

The irony here is immense.

A few years ago the consensus view in the US financial community was that China’s state would have to relinquish control of Chinese banks in order for China’s financial sector to develop. State ownership was generally considered an impediment to a modern financial system. But rather than selling controlling stakes in China’s state banks to Wall Street firms, China’s state is now buying (non-controlling) stakes in Wall Street firms.

Talk about a change. There was a time not-so-long ago when the US was on a push to export its form of government (and its form of capitalism) around the world. Remember when the US was criticized for using the IMF to foist privatization on the world? Now both the US government and large Wall Street firms rely heavily on non-democratic governments for financing — and the US is, in a limited sense, importing other countries form of capitalism. The US government hasn’t historically owned large stakes in US banks and broker-dealers.

Update

“Is the Sun Setting on US Dominance?”, Joergen Oerstroem Moeller, YaleGlobal Online 

• Part I - Expect Asia to replace the US as the world’s dominant economic force.  (27 February 2008)
• Part II - Presiding over a network of powerful regional alliances, the US can maintain its preeminence  (29 February 2008)

Past posts about the End of the post-WWII geopolitical regime

• A brief note on the US Dollar. Is this like August 1914?  - (8 November 2007) How the current situation is as unstable financially as was Europe geopolitically in early 1914.

• The post-WWII geopolitical regime is dying. Chapter One  - (21 November 2007) Why the current geopolitical order is unstable, describing the policy choices that brought us here.

• We have been warned. Death of the post-WWII geopolitical regime, Chapter II - (28 November 2007) A long list of the warnings we have ignored, from individual experts and major financial institutions (links included).

• Death of the post-WWII geopolitical regime, III - death by debt - (8 January 2008)  Origins of the long economic expansion from 1982 to 2006; why the down cycle will be so severe.
• A recommendation to read these bulletins from the front! - (21 January 2008)  A brief note on today’s articles in the NY Times and Financial Times, with Brad Setser’s explanation of why they are important.

• Geopolitical implications of the current economic downturn – (24 January 2008)  How will this recession end?  With re-balancing of the global economy, so that the US goods and services are again competitive.  No more trade deficit, and we can pay out debts.

• Let us light a candle while we walk, lest we fear what lies ahead  (10 February 2008)  Putting the end of the post-WWII regime in a larger historical context.

• A happy ending to the current economic recession (12 February 2008) –  The political actions which might end this downturn, and their long-term implications.