WikiLeaks

The publication of information by the WikiLeaks organisation leaves me of two minds. On the one hand I completely understand the value of Freedom of the Press and the role investigative journalism plays in our modern society. On the other hand I question their self-proclaimed role to publish apparently whatever comes into their hands.

The next batch of documents to be released allegedly comes from messages written by officials in the US State Department. The server from which the leaks apparently come is the US Government's Secret Internet Protocol Router Network(SIPRNet), used to distribute not particularly sensitive information. It was created after 9/11 in order to facilitate the distribution of information amongst the various government departments in the hope that more information was better information.

It is surprising to me that anyone would have put anything even remotely likely to come back and bite someone in the arse, but then it is even more surprising to me that the same US Army soldier, Pfc. Bradley Manning is supposedly responsible for this leak, as he seems to be the guy responsible for two other recent leaks.

I don't know where he currently is, and why he is allowed access to the Internet, but then again it might just be another example of that most famous of oxymorons, Military Intelligence.

But back to the information and the question of publication. I don't understand how the right to privacy and the freedom of the press interact with one another.

If I write a memo intended to provide color on a person or situation to other members of my "community"-in this case the US State Department-I would assume that they are not for general consumption. Apparently I would be wrong in that assumption, and so I would stop putting anything on such a network.

Perhaps personal opinions don't belong there anyway-although even "facts" become personal as they inevitably contain a modicum of subjectivity, and so nothing could be put on what is essentially a public network-if leaks are allowed.

In this most recent download there are purportedly some potentially embarrassing comments on some foreign leaders, maybe some behind the scenes contacts, and maybe that the US does not always negotiate in good faith.

It might come as a surprise to people that diplomatic staff is human and will have personal opinions or will sometimes not be transparent in their interactions. It's called geopolitics and as such there are certainly aspects that require the complete context to be understood, and there will be cases that are opaque.

It might also come as a surprise to people how mundane and petty diplomacy can be.

In any event, I am worried that the line between public interest and prurient interest is becoming muddled, and that wikileaks should reflect on what is investigative journalism, and what is sensationalism.

You Did Buy That Cow....

Given the response first of the Greek and now the Irish populace to the European Union (EU)Bailout it is obvious that national group has a monopoly on hypocrisy or selective memory despite the Republican/Tea Party attempt to make that claim.

Anyone who thought that the European Union was intended to be anything less than an economic and therefore political federation shouldn't have joined in the first place, neither the EU nor the Euro.

The British have tried to be part of Europe yet doing the best to remaining outside it. They chose not to join the Euro out of a mixture of outright nationalism and a nationalist tinged economic view consistent with their Anglo-Saxon island mentality. Essentially they took the free-trade aspects of the EU on board, but didn't want to relinquish control over a myriad of British concerns including the value of Sterling and the level of interest rates.

So now the British are harping on about how Ireland's problems are due to the Euro, and aren't they lucky not to be a part of it.

Oh really.

British banks are the second largest lenders to Ireland after the Germans. The Royal Bank of Scotland (RBS)is almost 90% Irish. Lloyds is over 60% Irish. Need I remind you that Her Majesty's Treasury owns 84% of RBS amd over 40% of Lloyds. Even Barclays, despite not having State ownership has 16% of its net assets in Ireland.

And as for the proposition that it is all because of the Euro. Funny that. The USA, Iceland and the UK aren't part of the Euro, and their banks all required massive support. No, I think the spin in Britain is to appeal to EU/Euro skeptics and hope to slither by the fact that the UK is massively involved in the Irish situation.

But back to the Irish. For almost a decade they were the Celtic Tiger. Somehow they were allowed to have seriously low corporate tax rates to attract inward investment-from their fellow EU members-and at the same time profited from the low interest rate environment provided by the Euro.

They didn't rant and rave against their government and against foreign 'imperialism' when it was all go. They benefited from the boom in real estate, in employment and in the general new found wealth of the nation.

Now that it's all gone wrong-it's someone else's fault, starting with their own government which 'sold them to foreigners', and then of course the foreigners themselves.

No, it wasn't the others. We all bought that cow. Everyone piled into the global credit bubble. Low interest rates, regardless of from whom, the provision of cheap credit, all combined to create the frothed milk latte society.

And now everyone is whinging because surprise, surprise, the milk wasn't free.

The Tea Party:American Culture at the Breaking Point

Although I believe that the Fed is correct to have another round of Quantitative Easing (QE), it is unfortunate that they chose to highlight what is essentially a "coupon pass" and is standard monetary policy by the Fed and give it a new name.

QEII will only benefit the banks-as it should for the moment. Despite the fact that their earnings currently lead many to believe that the banking system is fine, the truth is that they are actually under extreme duress. Without a healthy banking system there will be no progress on the unemployment front, and that is what the Fed has in its sights, even if they are having to attack it indirectly.

The Fed has two mandates: To effectively promote stability of the currency and to maximise employment.

There are many who would argue that the second mandate, granted by the 95th Congress in 1977 is an example of "big government". I would not only disagree with them, but would wholeheartedly attack them for that is the catechism of the Republican Party and their idiot cousins the Tea Party.

Big Government means regulation and oversight to combat the excesses of the profit motive of extreme capitalism. The dismemberment of Regulation and the demonising of the Social Contract inherent in the "Great Society" has been the heartbeat of the right-wing ideologues begun by Reagan and personified by GW and Cheney. What is amazing is how the Republican party has been successful in brainwashing large swathes of the American population through their media arm (FoxNews)to essentially vote against themselves.

This has been one of the great political feats of the last quarter of a century with a brief respite of Clinton and now Obama.

But the march goes on, this time picked up by the Tea Party who are hypocritical and ignorant in the extreme. They rant and rave, fueled by a religiously driven hate and anger to anyone or anything perceived not to be on their side. Perceived, for their perception is reality, regardless of the facts.

They rail against the government, while maximising their Medicare usage. They rail against the government while receiving extended unemployment benefits and Social Security payments. They forget what happened yesterday twisting historical facts to fit with a belief system predicated on blatant lies and revisionism. They would destroy America to achieve their warped utopia. That is the problem. They base everything on their belief system, and you can't argue with the fervent.

Salus Publica Suprema Lex

There was a recent post by Mr Krugman castigating China, Germany and the Republican Party which was perhaps the strangest group of bedfellows one could imagine.

The thrust of the blog was that the three were trying to bully the Federal Reserve into calling off its efforts to create jobs through the means of Quantative Easing II.

Okay, let us reflect for a moment on the nature of man. There are those who think that the only way forward is to co-operate and at the extremes are willing to sacrifice oneself for the good of the community. And there are those who think the way forward is to have the community work for them and at the extreme are willing to sacrifice the community for their own good.

China is strange in that it is nominally a communist country and yet is aggressively using capitalist means to ensure that the Chinese Communist leadership stays in power. One of their key triggers to remaining in power is to try and provide for full employment. To achieve this goal they have even go so far as to send Chinese workers to work in Chinese firms abroad. They claim this is because the local workforce, wherever they are, is not skilled enough. What they are actually doing is exporting excess workers.

So let's reflect for a moment on China. They have pegged their currency to the US dollar at a rate favorable to their exports. They pay their domestic workforce relatively poorly which exacerbates the problem of their trade surpluses, and they use some of their surplus to finance foreign direct investment and export their own workforce.

This is a very interesting take on the idea that the welfare of the people is the ultimate law. It leaves one wondering who the people are, and in the case of China leaves one questioning just who is benefiting.

Then we turn to Germany. They too run large trade surpluses. But their currency is relatively strong, and their workforce is reasonably well paid. They actually run a form of market socialism, although since reunification and the cost of incorporating East Germany they have come to realise that their social system is becoming overly burdensome and so they have instituted some austerity measures.

No one is accusing the European Central Bank (ECB) or the Germans for that matter of manipulating (intentionally weakening) the Euro to further export growth.
And no one has accused the Germans of paying their workforce substandard wages.

The Germans do get accused of producing quality, precision goods; of being efficient; of being relatively thrifty; and of benefiting from the Euro in that other European nations can no longer devalue their currencies to compete with the Germans. And of course, the German State does get accused of being more concerned with the welfare of German citizens than they do of Americans.

I think it is wrong of Mr Krugman to put the Germans and the Chinese in the same pot. The Chinese elite is concerned with the Chinese elite. Everything they do is to stay in power. Admittedly to do so they need to try and keep the masses content. But this is an authoritarian government and it is incorrect to throw them together with the Germans just because they run trade surpluses.

I do however think Mr Krugman is on the money to bunch China and the Republican leadership. They are both authoritarian. And they are both only concerned with their own personal situation.

Republican self-interest is such that whatever Obama does, they will attack, unless they think it will fail. This approach extends to the Fed. If the Fed helps the economy under an Obama presidency, this will damage Republican chances. So, despite the fact that the US$ fell over 30% under Bush, and that inflation was at 5%, the Republican leadership kept quiet as long as the economy was churning. They were in power, and anything that would help keep them there was OK.

Once Obama got into power, the story changed. Suddenly it was the deficit, stimulus spending or bank bailouts. Now it's currency debasement and inflation. It doesn't matter what it is. If they think something is good for Obama, they will combat it. It's not even ideological, unless greed and power count as an ideology.

Come to think of it they do- I think it's called fascism.

Why we need Regulation.

So today the Irish are finally admitting that they are in trouble and do need help from the European Union(EU) and the International Monetary Fund(IMF). Except that the problem is not really Ireland, but rather its banks.

Yes the EU and the Euro removed the flexibility and control on interest rates and currency value, but they didn't hold a gun to the bank's heads and force them to lend like crazy into a self-created real estate bubble which has now, as do all Ponzi schemes, gone sour.

Think of it. The two main Irish banks, Anglo Irish and Allied Irish have already received something like 30 billion Euros of Irish taxpayer money-and are still teetering. That's not surprising. According to the Bank for International Settlements (BIS) total lending of non-Irish banks to Irish banks is around $170 billion, or put another way that's the total borrowing by Irish banks from those banks.

Why did these banks lend to the Irish? Well the Irish banks were cheap, Irish government bonds were cheap (and as it turns out basically an investment in Irish banks) and the non-Irish banks were greedy. Again no gun was involved.

How greedy? And how irrational? British banks provided $42bn, German banks provided $46bn, US banks $25bn and French banks $21bn. And the British banks involved? 89.5% of the net assets of the Royal Bank of Scotland are held in Irish debt. 60.2% of Lloyd's Bank. But my favourite. 92.3% of Denmark's Danske Bank.

How is it that major banks are allowed to accumulate this kind of concentration risk?
And who are we really bailing out? Is it the Irish banks-or the British, American, French and German banks? At what point do we see a restructuring, and can it hit the people making the loans first (aka bankers), then the banks, then the senior bondholders and then and only then, the taxpayers please.

The G-20. Prelude to a Protectionist War?

Last night I watched the news report on the G-20 Summit in Seoul. I was somewhat shocked by President Obama's suggestion that the big export nations, China and Germany, should impose (voluntary) limits on their exports and purchase more American goods as a way of helping correct the current imbalances in the global balance of payments .

My news source was the main German public station ARD and their focus was on the German response which was a very definite No from Frau Merkel.

I was not surprised by the her response. The Germans didn't play the financial game to the same extent as the Anglo-Saxons (except as the dumb purchasers of toxic structures). Deutsche Bank moved its global investment banking headquarters to London where the regulatory environment, both culturally and legally was much less onerous. In the UK and the US the financial sector as a percent of GNP rose to over 25% effectively crowding out other industries. In conjunction with a conservative approach to the financial industry domestically Germany also resolved to keep its manufacturing base in tact by offering precision engineering at the top end of the market.

Both the US and the UK allowed their manufacturing bases to be eroded following the misguided belief that developed nations could afford to outsource "menial" labour and maintain their high-tech superiority. I say misguided because this new form of mercantilism assumed the under-developed world remain so, just as it presumed that the developed world would continue to dominate the global economy.

The results of this fallacy is in plain view in the rust belt of New York State, Pennsylvania, Ohio, Indiana, Illinois, Michigan continuing on through even to the new high-tech industries including the new comstoke lode of environmentalism. The same desolate landscape is on show in the depressed north of the UK.

So when Mr Obama suggested that the Germans (and the Chinese) should slow down their export machine and that they should import American goods he was admitting (American) policy failure on a number of fronts.

The creation of the modern Consumer Society of America was not predicated on luxury goods but rather two cars in the garage and a chicken in every pot. It was a mass market consumer society where the price point was the trigger-the lower the better.

It was also a society brought up on the notion of the land of plenty and opportunity for all-a cultural concept ingrained in the American psyche for almost 300 years resulting in a service economy seeking instant gratification, on credit.

Times change, markets move.

With the fall of the Soviet Union the US became the only superpower in town. It is strange. We planned for the coming war and how we would win it. We don't appear to have planned for the peace that would follow, and certainly didn't appear to plan for the case where the peace would be achieved without a military war.

So we became an overconfident nation, dependent on a financial sector which in many instances resembled a Ponzi scheme that eventually crashed and burned and had to be bailed out at great expense to the public. On top of an almost nonexistant manufacturing sector which had seen jobs of almost every stripe march out the door to lower-cost producers there was a collapse of confidence sending service sector unemployment soaring so that we now have total unemployment hovering around 10%. But rather than having a rational discussion on the political and economic future of the US we have a domestic political nightmare in which President Obama is cast as a Socialist, one step away from the dreaded communists, and Sarah Palin and the Tea Party are riding into town on the ghost of Joe McCarthy.

Under those circumstances it is somehow fitting that Obama is having to deal with Germany and China. Our victory over Germany set the stage for America's rise to Superpower status and the shift from the arsenal of democracy to the cradle of consumerism. And Mao's victory in China-viewed as America's "loss" at the time- set the stage for the original Joe McCarthy's rise to prominence.

After two terms of "forward leaning" Republican leadership we elected Obama the Communicator. So when President Obama offers economic co-operation as the key to global peace and prosperity-even if that co-operation requires sacrifice by others, it is in keeping with this role looking to negotiate rather then threaten.

But there is a threat. China has subsidised its industries and managed its currency destroying external competition in an attemt to maintain employment social ease at home. Yes there had been understandings between the US and China in terms of the Americans buying Chinese goods and the Chinese buying US Debt. But that was not an agreement made by Obama, and more importantly, the credit crisis has changed the rules.

I think President Obama was genuine in his offer if somewhat naive. I think the next step will be protective tariffs.

I understand it. But I don't like it.

The Five Wise Men

The government-appointed panel of independent economic advisers nicknamed the 'Five Wise Men' otherwise known as The German Council of Economic Experts proclaimed their expectations for 2010 and 2011.

Their predictions included consistent economic growth, lower unemployment and reduced budget deficits. They spoke of a stable if relatively flat path of growth. They also spoke strongly of the dangers inherent in their forecast.

Specifically they warned the government, and actually all politicians not to revert to populist economic policies geared to win votes but render the the running of the country unmanageable.

They advised against any "rash cuts in taxes" by the government, or "excessive increases in wages" by the trade unions. The tax cut comment was clearly aiming at the junior partners in the Merkel government the FDP, whose basic campaign platform was tax cuts. The FDP is suffering in the polls and so are pushing hard to introduce cuts sooner rather than later. The comment on wages was aimed at the opposition who recently appear to be pursuing blantantly populist policies almost regardless of the consequences.

One can only hope that the government and the opposition recognises that it is explicitly in the "good times" that one should save in order to smooth out the hard times. It is interesting when the only thing a party has to offer is by pandering to the rich with tax cuts, or to push for higher wages and increased spending as a means of getting elected.

The government is currently adhering to the advice clearly stating that their priority is to reduce the budget rather than to cut taxes, and that full employment was a major goal for her government.

It's not that hard. The economy is booming in Germany. Tax revenues are higher than expected. Unemployment is falling. This is the time to fix things, so that when things take a turn for the worse, which they will, the nation is in a position to weather it.

Revising Keynes

I just read an article promoting the idea that perhaps Keynes was misunderstood. Maybe he wasn't anti-capitalist, and maybe he didn't think budget deficits were desirable. It even went so far to suggest that he believed in free markets, but realised that they often created failures that would need state intervention.

Given that many Americans feel that Obamacare is the beginning of the thin edge of the socialist wedge into the US compounded by the exaggerated impact of Keynes' association with Roosevelt's New Deal-again viewed by many as a "Socialist Plot"- it is not difficult to understand how his General Theory has been distorted by Milton Friedman's free-marketeers from the University of Chicago.

Free market hysteria and the pursuit of hyper capitalism has created an economic single mindedness which, when promulgated by people lacking a strong conviction of what is right or wrong, has resulted in blind alleys of ideology driven economic policies destroying any attempt at a rational dialogue by claiming they stand for god and country and castigating everyone else as liberal or socialist, and certainly "un-American".

Of course free markets are desirable-as are most utopian ideas. The problem arises when the private sector bases its focus on models requiring surreal conditions for their ideas to work. Theirs is not a general view, it is a personal, individual view.

Call me old-fashioned, but I always thought that Keynes' view of the economy and the private sector was similar to Clemenceau's comment "that war was too important to be left to the military".

That is the cornerstone of his argument. In the face of a liquidity trap such as we have now, where a lack of confidence on the part of the private sector stops investment and increases unemployment only the state can step in and generate employment and thereby demand which will stimulate the economy.

But this is an easy target for a group that preys on the uneducated and gullible masses. They highlight the fact that his idea are presented as a General Theory, not fact, thereby transsubstantiating Keynes' ideas into into the evil faith of big government, the doorway to socialism.

It's amazing that the whole argument about supply and demand always seems to forget that without employment, and thereby wages, all the supply in the world will just rot on the shelves.

John Boehner and the Tea Party

So John Boehner has chosen the the most obvious of newspapers for a Republican backed by the usual coterie of Big Business, Big Insurance, Big Oil and Big Banking-the WSJ- to flash his Tea Party credentials.

Given that he has been a member of Congress since 1991 his little preamble is sweet, but so is saccharin. His initial interest in politics came from seeing "firsthand how government throws obstacles in the way of job-creation and stifles our prosperity".

That's why he approved $9.8 trillion dollars in President Bush's budgets.

Now he's got religion, or at least has woken up and smelled the tea.

He outlines his "to do" list as Speaker of the House. Top of the list, pork. So he will remove all earmarks. So did Sarah Palin, while she shovelled it in so it will be interesting to see how he fares.

He will let Americans have 3 days to read all bills before they are brought to a vote. One of those great offers with little real value. By the time a bill has been published, if you actually take the time to read it, you will be too late to do anything about it-even if you wanted to. Otherwise there are numerous website that publish bills if you really want to find pork.

Then there will be no more "comprehensive" bills, and no more bills written behind closed doors. Comprehensive bills are "those with thousands of pages of legislative text that make it easy to hide spending projects and job-killing policies". I guess it's easy when all you write on the bill is "No". Otherwise, I should hope that bills are comprehensive-i.e. complete!

But my favourite is the call to insist that every bill include a cause citing where in the Constitution Congress is given the power to pass it. I am truly interested to see what bills have been passed that the Republicans think were outside of Congress's Constitutional remit.

I have to assume it that the never ending debate over State's rights versus Federal Rights is at the top of it, and everything else follows from there.

We need to combat the misplaced use of the "Don't Tread on Me" motto with "United we stand, Divided we Fall".

But that would require a rational debate in the US which has to be an oxymoron for the Tea Party.

The Return of the Entente Cordial?

For centuries there has been a competition between the Great Powers of Europe to try and be the dominant continental force.

Despite being an island nation, England was an active player during the periods when large swathes of France belonged to the English crown. But generally England played the role of the spoiler, weighing in when it appeared that one of the continentals was becoming strong enough to exercise hegemony.

That is not to say that it was only the English who meddled. The French were quite happy to get involved whenever they could at the expense of the others, even if it meant snapping at the borders of colonial interests. The Prussians weren't beyond requesting interference when it was in their interest, and the Russians were always loitering with intent, caught between fearing or wanting to join the "West".

But recently Prussia, or more politically correct Germany has been flexing its economic muscles in the aftermath of the financial crisis which has many geopolitical observers suggesting that the Germans are either entering a new stage in their development-or reverting to type.

The new generation of Germans, albeit fully aware of the deeds of their parents, or more often now their grandparents, are no longer so willing to carry the burden of collective guilt, especially with the tendency to view the two World Wars as the 20th century version of the 30 Years War.

Last week Britain and France signed a military agreement sharing nuclear simulation technology, aircraft carriers, and the formation of a joint Rapid-Response Brigade. France is also making overtures to the Russians, to counter the cosying up between the Germans and the Russians.

The recently signed Franco-British deal is being explained in the media as a result of the need for austerity in the UK and in France and there is certainly that aspect to it.

It is in the interest of both parties to push the "fiscal" explanation, for the alternative is to admit that France is a junior partner in the Franco-German marriage and that there are concerns that Germany is becoming the de-facto ruler of Europe.

It's amazing how two World Wars, the Marshall Plan and the creation of the European Union has done so little to quell the fires of European nationalism.

Learning the Hard Way

I was originally a supporter of Hillary Clinton-with reservations-and had always thought that a Clinton/Obama ticket was the correct path.

It wasn't that I didn't like Obama-I voted for him- but I was troubled by the thought that being a great speaker driven by a vision of America that coincided in the main with my own was perhaps not enough. Bluntly put, my concern with Obama was that he was too much a humanist thinker, and not enough of a realist.

Anyone with a conscience couldn't help, for example, to appreciate Jean-Jacques Rousseau's "Plan for Perpetual Peace" in which he essentially promotes the creation of a federal republic as a means of ensuring peace-in the Europe of his time.

But even Rousseau recognized the weakness in his essay highlighting the contradictions between the "humanity of maxims and the violence of the wars, a gentle religion and bloody intolerance, a 'politics so wise in books and so harsh in practice'".

Equally, anyone reading Hans Morgenthau's "Principles of Political Realism", especially if they are willing to accept the concept that political realism requires "a sharp distinction between the desirable and the possible" and is therefore only concerned with the rational, objective and unemotional can't help but appreciate the clarity of thought he presents, even if one has misgivings about the 'end justifies the means" nature of his ideas.

Mr Obama is currently caught between the two, which I describe as the battleground between utopian idealism, and the sleazy realities of power politics.

I believe the first two years of his Administration, despite the incredible progress he achieved with the enactment of the American Recovery and Reinvestment Act of 2009 ARRA- which staved off a Depression, health reform, and the Dodd-Frank financial reform law—were haunted by the belief of the electorate that thought he was going to lead the nation to the "promised land"-while forgetting even Moses took 40 years in the desert to get there.

No, these mid-term elections have been a punishing lesson on the fickleness of the electorate, on the ignorance of the electorate, and of the realities of government. I think that Mr Obama will realise that he has to move from the pulpit to the presidency-assuming a great deal of Mr Morgenthau's realism, and get re-elected in 2012.