A new development in the euro crisis. The European Central Bank is lending money to European banks at an interest rate of 1%–a half trillion was lent out today. In theory, the banks are turning around and buying sovereign debt (the banks are actually free to do whatever they wish with the money). The increased demand for sovereign debt reduces the interest rates of the governments, in the Spanish and Italian cases dramatically (from about 5% to around 2%). So the banks make a hefty profit (borrowing at 1% and getting 2% in return) and the ECB gets around the prohibition against lending directly to sovereign governments. A very nice strategy as long as none of the governments default, in which case both the banks and the ECB take it on the chin. The other concern is whether this scheme will reduce the incentives toward austerity programs, a development that would discourage the Germans.
Climate change is unquestionably one of the most important issues facing the world in the long run. Its effect over the short-run is less certain, but there are a number of new studies that link violent conflict with patterns associated with climate change. Obviously more work is needed in this area, but we should treat climate change as a national security issue as well as an environmental issue.
Foreign Policy has some interesting videos from North Korea on the death of Kim Jong-il. Some interesting windows into the closed society.
I try to stay abreast of the news and generally only post news reports after I think they have a solid basis. Generally this means that I wait a few days after I read some snippets of things going on to assess whether the stories are substantive. But I very often get surprised, as was this story about action in the Security Council condemning Israeli settlements in the West Bank. This report cam out of the blue and now you all get a chance to assess with me whether it develops into something more.
The less surprising news was the death of Kim Song-il in North Korea. We knew he had a stroke in 2008, and he appeared to have only partially recovered from it. But he died last Saturday, and the news was only released on Monday. It is unlikely that the external powers (the US, China, Russia, South Korea, or Japan) will take any action to destabilize the situation. We will have to see, however, how the North Korean military responds to the new 28 year old Dear Leader.
Violence in Cairo continues to escalate. Today there was massive protest by women, outraged at the treatment of female protesters at the hands of the Egyptian military. I can’t figure out what the military objectives might be–there is no clear end game to trying to repress the protests. We will have to see if the military backs off from this strategy and decides to become more conciliatory to the liberal elements of the protest movement.
A new argument is beginning to flesh out in the field of international relations: that war is diminishing as an instrument of diplomacy. Two of the most prominent theorists making this argument, Joshua Goldstein and Stephen Pinker, published a strong argument in today’s New York Times. They have an incredible array of evidence and logic supporting their point of view. I remain unconvinced at this point in time. The argument is reminiscent of one made by Norman Angell in 1913 in a book entitled The Great Illusion. Needless to say, Angell was profoundly wrong–human beings manage to confound even the most compelling feats of logic.
The last American combat troops have left Iraq (some will remain under very murky conditions, ostensibly as guards to American diplomats but not nearly enough to make much of a difference). The security vacuum will be tempting to both internal groups (Sunnis and Kurds) and to external powers (Iran in defense of the Shia and Saudi Arabia in defense of the Sunnis). I make no secret of the fact that I opposed the war when it began in March 2003 so I am hardly an objective observer. But the US spent over a trillion dollars on the war (most of which came from deficit spending) and lost over 4,000 soldiers. The losses suffered by the Iraqis have not been systematically determined–no body counts were ever done–but were clearly very high. The removal of Saddam Hussein was unquestionably a good thing, but acts such as those are better left to the people and not to outside powers. The Just War criteria–that the resulting peace be better than the peace before the war–was most likely not satisfied.
One of the truly great leaders of the 20th century, Vaclav Havel, has died. He represented the best aspirations of the Europeans and displayed a great vision for the future of Europe in a very difficult time.
The situation in Syria continues to deteriorate. Apparently, the Arab League is getting prepared to ask the UN for assistance, just as it did in the Libyan crisis. I doubt very much that the Security Council is prepared to offer any substantial assistance, given the reluctance of Russia and China to any intervention. We’ll have to watch whether the protests in Russia affect the Russian position on the matter. Putin may look at an intervention as an opportunity to score a foreign policy initiative in order to deflect criticism of his government. Or the Russian protests could stiffen his resolve to reinforce the principle of non-intervention.
Today is the one year anniversary of the beginning of what we now call the “Arab Spring.” When the turmoil in Tunisia started, few expected the protests to spread so widely or to be so decisive. The protests continue in Egypt, and the future there remains uncertain.
The French face an imminent credit downgrade by the credit ratings agencies. Right now, things have quieted down because the European Central Bank has promised to lend money at very low interest rates for a three year period. So the banks are buying the sovereign debt of Italy, Spain, and Portugal to use as collateral for those loans. The difference between the interests rates charged by the ECB and the interest rates earned by the sovereign debt is enough to make a tidy profit (as long as no state defaults). It’s a real economic game of chicken. We’ll see how it turns out.
I apologize for not posting yesterday, but I was at the State Department for the Women in Public Service Project. It was an extraordinary, but overwhelming, event. Many, many good, thoughtful, and interesting ideas. But it is hard to assimilate. There will be many more meetings and I look forward to trying to make some of these ideas real with some wonderful, inspiring people.
Analysts are assessing the results of the climate change talks at Durban. Here’s a Chinese take on the talks. A view from Malta. India. And Russia. It appears as if few are satisfied with the results of the conference.
The eurozone crisis continues to unfold. The Brussels summit appears to have bought some time, but the long-term trend is still profoundly negative. Belgium’s credit rating was downgraded.
More on the drone that landed/crashed in Iran. The story is intriguing, both plausible and implausible at the same time. I doubt that we’ll ever know the truth.
The climate talks in Durban were a classic case of kicking the can down the road: an agreement in principle is not necessarily progress when so many specific details have to be worked out before an agreement is actually reached. But here’s an interesting article assessing the talks in a more optimistic manner.
For a little sober background on the downing of the US spy drone over Iran, see this article in Foreign Policy. Appropriately, the author simply asks the question: what else would one expect? It’s not clear how long it will take Iran to decipher the drone’s secrets, but such an outcome is inevitable. After that, the information will be on sale to the highest bidder. Iran also roiled the oil markets by announcing that it was going to conduct war games near the Strait of Hormuz, an essential access route for all the oil coming out of the Persian Gulf. 
Another photograph of the pollution in Beijing. Winter is always the worst time of year, but these levels are intolerable.
The very long presence of American troops in Iraq is winding down. We will be assessing the conflict for a very long time as events unfold. Importantly, about 14,000 US troops will remain in Iraq and the US diplomatic presence there is huge. So it’s not as if the US will be leaving a huge power vacuum in the region. But the internal and external coalitions of which Iraq is a part remain unstable and fragile. One can only hope for the best since there is no center of power within Iraq right now.
Canada has withdrawn from the Kyoto Protocol, signaling a major change in attitude toward the problem of climate change. The withdrawal suggests a serious loss of confidence in the multilateral process occasioned by the poor showing at Durban. Clearly, governments no longer feel the need to respond to the threat of climate change as long as the economic situation is so unsettled.
I’ve had a little time to think more deeply about the Brussels summit and what was achieved. Germany emerges as the big winner in that tough fiscal rules will be in place in a manner consistent with a non-inflationary environment. What remains to be seen is whether these rules are truly enforced, and, if they are, what effect they will have on future economic growth in Europe. As I have indicated before, the immediate crisis facing Europe is insolvency: governments lack the money to honor their commitments to repay debts to those who own government bonds–banks, private investors, and other governments. The plan adopted on Friday essentially does nothing to address this problem.
Indeed, the plan enforces austerity as the official economic policy of the European Union. Such policies will only make the repayment of debts more difficult over time–economic activity will only decline as wages are depressed within the indebted countries. We’ll have to watch what happens to the yield rates on Italian, Spanish, Greek, and Portuguese debt as short-term indicators of how investors view the prospects for economic growth in those countries. If the rates rise, the investors are betting that economic growth will decline, thus reducing the likelihood of timely repayment of those bonds. In the longer run, we’ll have to watch the yield rates of French and German bonds as an indicator of the overall economic growth rates in Europe.
I don’t usually comment on US domestic politics, but Newt Gingrich’s comments about the Palestinians being an “invented” people deserves a small degree of attention. As we’ve discussed in class, all nations are determined by a sense of self-identity. That process, however, should not suggest that nations are not “real.” National identity is one of the most powerful emotions in politics.
The global protests against governments continue, this time in Russia. One should examine the protests that have gone on (in the Arab world, in Europe, in the United States, over the last year first in terms of the local conditions that precipitated the protests–each protest is unique. But there is also a pattern to these protests that suggests that there is a unifying, underlying current of discontent in the world, focusing on the question of political legitimacy. One can make a strong argument that many in the world are increasingly looking at their governments with a jaundiced eye. The charge of corruption crosses all these protests and it is a worrying sign. Losing faith in one’s government is a precondition of a willingness to think more seriously about alternatives that offer quick or forceful responses.
The Climate Change Conference in Durban seems to be falling apart as its end grows near. Rather than narrowing the disagreements, states seem to be widening them. Perhaps something will come together by Friday, but the outlook looks bleak for an international agreement.
The EU (with the exception of Great Britain) has agreed to enforce more rigorously its rules about government budget deficits. This solution does really address the short term pressures on the euro, but it does relieve some of the psychological pressure on the markets in that the governments can now say that a similar crisis will not happen in the future.
I did not post any articles about the recent elections in Russia–I apologize for the oversight. The elections were a stunning repudiation of Putin (although not a defeat). Putin’s reaction, however, is an interesting attack on the West which suggests that he doesn’t really know how to interpret the results. It will be interesting to see whether this pique extends to other areas of US-Russian relations. If so, the stand-off with Iran will certainly become more complex.
Tension is clearly building in the European Union. For a variety of reasons, the tension is entirely warranted. Germany has made clear that it believes that the only solution to the crisis is to legally restructure the Union, a long-term solution that addresses none of the immediate concerns in the eurozone. Mario Draghi, the head of the European Central Bank said that there was no plan to purchase European government debt, leaving all the sovereign debt up in the air.
Cyberwar has been going on for some time, but now it appears that hackers are interested in disrupting the world’s oil supplies. This particular article talks about a new virus called stuxnet as the culprit. Sutxnet is a virus allegedly designed by the US and Israel to disrupt the Iranian nuclear program. It would be a cruel irony if it turns out that the virus is turned against the most vulnerable point of the American economy.
Check out the photograph of the air quality in Beijing.
World Politics News 