President Obama made a secret trip to Afghanistan to sign an agreement with President Karzai of Afghanistan on the US-Afghan relationship after American troops withdraw after 2014. There are two significant aspects of the agreement. First, all American forces will be based on Afghan, not US, bases. This concession is important and also extraordinary because it signals the end of US territoriality within Afghanistan. Second, the agreement outlines an economic relationship between the US and Afghanistan between 2014 and 2024, suggesting that the US is not going to leave Afghanistan in the lurch the way it did after 1985. Obama clearly wants to chart a new course that is more responsible.
The May Day rallies in Europe were quite large, but largely peaceful. Nonetheless, there was an very angry tone to most of the rallies, targeted against the austerity programs. The Occupy movement in the US also led several rallies which were also largely peaceful. There were, however, some isolated acts of violence. The police presence at the Occupy protests was quite large and substantial.
Two West Bank residents have entered the 64th day of their hunger strike protesting Israeli detention policies which afford virtually no legal protections. In sympathy, almost 1,500 other Palestinians have initiated hunger strikes. These peaceful acts of protests are designed to she light on a very common practice in the Occupied Territories.
The influence of corporations on US foreign policy is very difficult to measure. Steve Coll, who will be publishing a book on the topic in the next few weeks, offers an interesting insight into the behavior of ExxonMobil on Indonesian politics, and how the Bush Administration intervened in the matter.
Gavin Hewitt, the Europe editor for BBC news, has posted an interesting essay worrying about the possibility of spring protests in Europe. The protests will likely be motivated by the austerity programs, but will likely take on different manifestations. The pace of protests is likely to pick up soon–the International Labor Organization has published a report that chronicles the disappointingly small jobs gains worldwide.
A big campaign issue this year is over government spending. Barry Ritholz has posted a very revealing graphic that puts the issue in context.
Yet another major political protest, this time in Malaysia. The protest was aimed at the ruling party which has a near-monopoly control of political power. The protests follow recent very large protests in the Czech Republic (100,00 protesters) and Quebec (180,000 protesters). The Occupy movement continues its global march.
The former head of Israel’s domestic intelligence agency has accused the Netanyahu government of misleading the public over the nuclear threat from Iran. This assessment follows a similar assessment in March by the former head of Mossad, the Israeli intelligence agency. There appears to be a concerted effort within Israel to forestall the possibility of an attack on Iran.
Despite weeks of attacks between Sudan and South Sudan over border disputes, UN efforts at mediation have been rejected. The African Union has insisted upon its primacy in this dispute, a sign that the AU regards the UN with great suspicion. This step is a healthy one for the African Union; now, however, it has to prove that it can handle the job more effectively than the UN. Let us hope that it succeeds.
New information on the financial crisis of 2007-08 was supplied by the Financial Times. April 27, 2012 7:26 pm “Lehman paid staff millions before crash.”
By Tom Braithwaite in New York
“Lehman Brothers paid its most senior employees hundreds of millions of dollars in the run-up to its 2008 bankruptcy, according to documents that show multimillion-dollar pay packages permeating deep into the bank.
“With executive pay a controversial issue at Barclays and Citigroup, the Lehman documents, which emerged in connection with the company’s bankruptcy proceedings, show that today’s controversial awards would have looked miserly in the boom years before the financial crisis.
Robert Millard, a 32-year veteran of the broker-dealer, who ran the “global trading strategies”, was due to make $51.3m in 2007, according to a list of the 50 most highly paid employees, which he topped.
That puts into the shade the $40m package of Dick Fuld, Lehman’s chief executive, and is far more than the $15m paid last year to Vikram Pandit, Citi’s chief executive, or the £25m for Bob Diamond at Barclays, both of which sparked shareholder revolts this month.
The Lehman documents, obtained by the Financial Times and first reported by the Los Angeles Times, show the top equity analysts – traditionally less well paid than investment bankers or traders – made as much as $4m each at Lehman.
While pay of top executives is disclosed in regulatory filings, the Lehman lists are a reminder that top employees below the senior management level can surpass the pay of their bosses and escape shareholder scrutiny.”
We get this news on the same day that it was reported that nearly one Spaniard in four is unemployed.
Blind Chinese dissident Chen Guangcheng has escaped house arrest and issued a dramatic video calling upon the Chinese leadership to root out corruption. It is hard to assess the impact of this video since it is hard to know how many Chinese citizens will see the video. But the timing is designed to put pressure on the US-Chinese talks on human rights scheduled for this week. It is rumored that Chen is in the US Embassy–clearly an awkward situation for the US.
Another European government falls because of austerity policies. The Romanian government bites the dust.
Charles Taylor, the brutal warlord in the 1989-96 Liberian civil war and former President of that country, was convicted of war crimes by the International Criminal Court. There is little question that justice has been served but many are concerned that the conviction also sends a message to similar criminals that they have little to lose by attempting to stay in power (you can bet that Syria’s Assad is well aware of this conviction). Nonetheless, the conviction is also an important step in institutionalizing the international law of war crimes.
The credit rating agencies have downgraded Spain’s credit rating. The move was not unexpected, but damaging to any hope for a Spanish recovery. Spain will now have to pay higher interest rates in order to attract investors for needed funds, and the banks that hold Spanish government debt will have to protect themselves against the downgrade by raising additional capital to buffer their reserves. There probably won’t be a panicked reaction just now, but as the Greek and French elections move closer, then the downgrade will begin to resonate.
The recent political turmoil in European elections has isolated Germany as the sole remaining champion of austerity as the principal policy response to the eurozone crisis, and the Germans seem to be aware of this development. Germany’s interpretation of this change is affected by its knowledge that it remains the only real source of money for the eurozone, even if it remains isolated. The key now is how domestic politics in Germany responds to this unique circumstance. It could signal a change in the austerity policy, or it could make the Germans more adamantly opposed to any stimulus policy.
The Office of the Special Inspector General for the Troubled Asset Relief Program (TARP) issued its quarterly report today. Its conclusions are devastating. Some highlights:
- “After 3½ years, the Troubled Asset Relief Program (“TARP”) continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost).”
- “In 2008, Treasury and regulators were caught by surprise by the bursting of the housing bubble and the realization that the distress of even one too-big-to-fail institution could shake the very foundation of our financial system. The largest U.S. banks still dominate the industry – just as they did in 2008. The largest banks have gotten larger and more concentrated as a result of the financial crisis because some too-big-to-fail institutions acquired the assets of other banking institutions. According to Federal Reserve data, five financial institutions – JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. – held $8.5 trillion in assets at the end of 2011, equal to 56 percent of U.S. economic output, whereas before the financial crisis, these institutions held approximately $6.1 trillion in assets, equal to 43 percent of U.S. economic output.”
- “Additionally, many of TARP’s goals have not been met. Even though the explicit goal of TARP’s Capital Purchase Program was to increase lending to U.S. consumers and businesses, the recent Federal Reserve working paper confirmed that the largest banks that received TARP funds did not increase their lending. In fact, these institutions have been lending less than their counterparts that did not receive a bailout.”
- “Many smaller and medium-size banks are still feeling the effects of the crisis and are not exiting TARP with the same speed as the larger banks. More than 400 financial institutions remain in TARP. After 3½ years, Treasury has no concrete plan to help the remaining institutions get out of TARP and get back on their feet.”
- “During a crisis of record numbers of foreclosures and high unemployment, TARP is not reaching homeowners as was originally intended by Congress. TARP’s explicit goals of preserving homeownership and promoting jobs were evidence that Congress wanted to help homeowners during this crisis, not just banks. However, these TARP goals have not yet been met while foreclosure filings have remained high (3.8 million in 2010, 2.7 million in 2011, according to RealtyTrac).”
In short, we are worse off now than we were in 2007-08, and the “too-big-to-fail” banks are even bigger now than they were then. Not much to show for $700 billion.
Argentina has passed the necessary legislation to nationalize the oil company, YPF, which is 51% owned by the Spanish oil company, Repsol. This act is sure to set off tense relations between Argentina and many other countries. Nationalizations are perfectly permissible under international law, but the terms of repayment are always hotly contested. I am certain this case will not be an exception.
The covert war against Iran continues. This time a computer virus has attacked the oil terminals in Iran, making transport of Iranian oil virtually impossible. The timing is right on target for the oil embargo against Iran to come into effect. Iran will obviously try to get the terminals back into operation as soon as possible in case either India or China decide to ignore the embargo against Iranian oil.
One of the biggest mistakes states make about other states is believing that all other states know exactly what is going on. We are very familiar with the discord within our own states, but find it hard to believe that similar discord exists in other states, particularly competitors. THe US made this mistake time and time again with respect to the Soviet Union. It also seems to be making the same mistake with respect to China.
The election in France has highlighted the serious issues brought about by the austerity programs implemented under the European Union rules. The political backlash against these programs is making governance more and more difficult. Right now, the right-wing seems to be benefiting the most from this instability. It remains to be seen if political stability can be regained without a change in economic policies.
The quiz on 25 April 2012 will be on the news articles from 20-23 April and the Defense Department Report on Climate Change, Chapters 2 and 3, pp. 22-74.
The first round of the French election seems to have gone to the Socialist candidate, Hollande. President Sarkozy came in a close second, but the pollsters are suggesting that the second round vote (between only Hollande and Sarkozy) will lean toward Hollande. The far-right candidate, Le Pen, came in very strong with nearly 19% of the vote. The only strategy available to Sarkozy is to appeal to the far right in the second round–a strategy that will only strengthen the right wing in the near term.
We all tend to think of China in terms of its total population: it is, and remains, the most populated country in the world. But how the ages of that population are distributed has important effects on the economic growth of the country, and China is looking at a serious drop in the number of working young people. How this may affect China’s future role in world affairs, is a topic addressed by The Economist.
The politicization of the Syrian violence has been going on for some time and the Washington Post, upped the ante with a news report that the rebellion is being infiltrated by Islamic jihadists. If one reads the article carefully, there are only references to “reports” and a small number of known individuals of only rumored political affiliation crossing the border. There is, of course, always the possibility that more radical elements are moving into the country, but this report is clearly politically driven by sources who wish to heighten the fears of the West for what is happening in Syria. We should keep an eye out for more substantive reports.
The UN has approved sending 300 additional observers into Syria. It’s hard to figure out the decision since the 30 observers already there have witnessed serious breaches in the “cease-fire.” I suspect it is a signal that the Security council is serious about the cease-fire, but the UN should not commit itself to a course of action unless it is prepared to back it up. There is a possibility that back-room deals have been made between the Assad government and the UN, but it’s hard to figure out what they may include. We’ll continue to monitor the situation.
The economic crisis in Europe is beginning to affect the formerly strong northern European states. The situation in the Netherlands, once considered a country on a par with germany, is going through a difficult budget process as it tries to make sure that its budget deficit remains within the 3% EU rule. The right-wing parties once again seem to be critical to a possible coalition. We’ll see what happens in France on Sunday–that election will determine much about the future of Europe. The Czechs are also expressing great discontent.
Many people are trying to develop algorithms that can predict civil war. The effort is at least a century old, but recent quantitative techniques are making the process more reliable and usable. For those of you who are interested in a more scientific and quantitative approach to the study of world politics, this field should be of great interest.
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