October 30, 2014

Steve Keen Behavioral Finance Lectures (Full 19 Lectures)

No comments:

QE is Done (Maybe). Now What?

No comments:

Are We Just 20 Years from a Fusion-Powered World?

No comments:
Lockheed Martin says it's closing in on a compact nuclear fusion device that will be like a mini-sun, supplying vast amounts of energy from small amounts of water.

Crude to 'go the way of whale oil': Dennis Gartman. $10 Oil and More

No comments:
"Fusion is going to be the great nuclear power of the next 150 years. And finally, we are driving less and less. We are using so much less gasoline than we ever have, in global terms, in national terms, in per capital terms," he said. "All of those things, I think, are going to be weighing heavily on crude oil. And where could it go? A lot lower, a lot lower."

October 29, 2014

Principle, Rigor and Execution Matter in U.S. Foreign Policy

No comments:
"Principle, Rigor and Execution Matter in U.S. Foreign Policy is republished with permission of Stratfor."

Guest post by George Friedman
U.S. President Barack Obama has come under intense criticism for his foreign policy, along with many other things. This is not unprecedented. Former President George W. Bush was similarly attacked. Stratfor has always maintained that the behavior of nations has much to do with the impersonal forces driving it, and little to do with the leaders who are currently passing through office. To what extent should American presidents be held accountable for events in the world, and what should they be held accountable for?

Expectations and Reality

I have always been amazed when presidents take credit for creating jobs or are blamed for high interest rates. Under our Constitution, and in practice, presidents have precious little influence on either. They cannot act without Congress or the Federal Reserve concurring, and both are outside presidential control. Nor can presidents overcome the realities of the market. They are prisoners of institutional constraints and the realities of the world.

Nevertheless, we endow presidents with magical powers and impose extraordinary expectations. The president creates jobs, manages Ebola and solves the problems of the world -- or so he should. This particular president came into office with preposterous expectations from his supporters that he could not possibly fulfill. The normal campaign promises of a normal politician were taken to be prophecy. This told us more about his supporters than about him. Similarly, his enemies, at the extremes, have painted him as the devil incarnate, destroying the Republic for fiendish reasons.

He is neither savior nor demon. He is a politician. As a politician, he governs not by what he wants, nor by what he promised in the election. He governs by the reality he was handed by history and his predecessor. Obama came into office with a financial crisis well underway, along with the Iraq and Afghanistan wars. His followers might have thought that he would take a magic wand and make them go away, and his enemies might think that he would use them to destroy the country, but in point of fact he did pretty much what Bush had been doing: He hung on for dear life and guessed at the right course.

Bush came into office thinking of economic reforms and a foreign policy that would get away from nation-building. The last thing he expected was that he would invade Afghanistan during his first year in office. But it really wasn't up to him. His predecessor, Bill Clinton, and al Qaeda set his agenda. Had Clinton been more aggressive against al Qaeda, Bush might have had a different presidency. But al Qaeda did not seem to need that level of effort, and Clinton came into office as heir to the collapse of the Soviet Union. And so on back to George Washington.

Presidents are constrained by the reality they find themselves in and the limits that institutions place on them. Foreign policy is what a president wishes would happen; foreign affairs are what actually happen. The United States is enormously powerful. It is not omnipotent. There are not only limits to that power, but unexpected and undesirable consequences of its use. I have in mind the idea that had the United States not purged the Baathists in Iraq, the Sunnis might not have risen. That is possible. But had the Baathists, the party of the hated Saddam Hussein, remained in power, the sense of betrayal felt by Shiites and Kurds at the sight of the United States now supporting Baathists might have led to a greater explosion. The constraints in Iraq were such that having invaded, there was no choice that did not have a likely repercussion.

Governing a nation of more than 300 million people in a world filled with nations, the U.S. president can preside, but he hardly rules. He is confronted with enormous pressure from all directions. He knows only a fraction of the things he needs to know in the maelstrom he has entered, and in most cases he has no idea that something is happening. When he knows something is happening, he doesn't always have the power to do anything, and when he has the power to do something, he can never be sure of the consequences. Everyone not holding the office is certain that he or she would never make a mistake. Obama was certainly clear on that point, and his successor will be as well.

Obama's Goals

All that said, let us consider what Obama is trying to achieve in the current circumstances. It is now 2014, and the United States has been at war since 2001 -- nearly this entire century so far. It has not gone to war on the scale of 20th-century wars, but it has had multidivisional engagements, along with smaller operations in Africa and elsewhere.

For any nation, this is unsustainable, particularly when there is no clear end to the war. The enemy is not a conventional force that can be defeated by direct attack. It is a loose network embedded in the civilian population and difficult to distinguish. The enemy launches intermittent attacks designed to impose casualties on U.S. forces under the theory that in the long run the United States will find the cost greater than the benefit.
In addition to these wars, two other conflicts have emerged. One is in Ukraine, where a pro-Western government has formed in Kiev to the displeasure of Russia, which proceeded to work against Ukraine. In Iraq, a new Sunni force has emerged, the Islamic State, which is partly a traditional insurgency and partly a conventional army.

Under the strategy followed until the chaos that erupted after the ouster of Moammar Gadhafi in Libya, the response to both would be to send U.S. forces to stabilize the situation. Since 1999 and Kosovo, the United States has been the primary actor in military interventions. More to the point, the United States was the first actor and used military force as its first option. Given the global American presence imposed by the breadth of U.S. power, it is difficult to decline combat when problems such as these arise. It is the obvious and, in a way, easiest solution. The problem is that it is frequently not a solution.

Obama has tried to create a different principle for U.S. operations. First, the conflict must rise to the level that its outcome concerns American interests. Second, involvement must begin with non-military or limited military options. Third, the United States must operate with an alliance structure including local allies, capable of effective operation. The United States will provide aid and limited military force (such as airstrikes) but will not bear the main burden. Finally, and only if the situation is of grave significance and can be dealt with only through direct and major U.S. military intervention, the United States will allow itself to become the main force.

It is a foreign policy both elegant and historically rooted. It is also incredibly complicated. First, what constitutes the national interest? There is a wide spread of opinion in the administration. Among some, intervention to prevent human rights violations is in the national interest. To others, only a direct threat to the United States is in the national interest.

Second, the tempo of intervention is difficult to calibrate. The United States is responding to an enemy, and it is the enemy's tempo of operations that determines the degree of response needed.

Third, many traditional allies, like Germany, lack the means or inclination to involve themselves in these affairs. Turkey, with far more interest in what happens in Syria and Iraq than the United States, is withholding intervention unless the United States is also involved and, in addition, agrees to the political outcome. As Dwight D. Eisenhower learned in World War II, an alliance is desirable because it spreads the burden. It is also nightmarish to maintain because all the allies are pursuing a range of ends outside the main mission.

Finally, it is extraordinarily easy to move past the first three stages into direct interventions. This ease comes from a lack of clarity as to what the national interest is, the enemy's tempo of operations seeming to grow faster than an alliance can be created, or an alliance's failure to gel.

Obama has reasonable principles of operation. It is a response to the realities of the world. There are far more conflicts than the United States has interests. Intervention on any level requires timing. Other nations have greater interests in their future than the United States does. U.S military involvement must be the last step. The principle fits the strategic needs and constraints on the United States. Unfortunately, clear principles frequently meet a murky world, and the president finds himself needing to intervene without clarity.

Presidents' Limited Control

The president is not normally in control of the situation. The situation is in control of him. To the extent that presidents, or leaders of any sort, can gain control of a situation, it is not only in generating principles but also in rigorously defining the details of those principles, and applying them with technical precision, that enables some semblance of control.

President Richard Nixon had two major strategic visions: to enter into a relationship with China to control the Soviet Union, and to facilitate an alliance reversal by Egypt, from the Soviet Union to the United States. The first threatened the Soviet Union with a two-front war and limited Soviet options. The second destroyed a developing Mediterranean strategy that might have changed the balance of power.

Nixon's principle was to ally with nations regardless of ideology -- hence communist China and Nasserite Egypt. To do this, the national interest had to be rigorously defined so that these alliances would not seem meaningless. Second, the shift in relationships had to be carried out with meticulous care. The president does not have time for such care, nor are his talents normally suited for it, since his job is to lead rather than execute. Nixon had Henry Kissinger, who in my opinion and that of others was the lesser strategist but a superb technician.

The switch in China's alignment became inevitable once fighting broke out with the Soviets. Egypt's break with the Soviets became inevitable when it became apparent to Anwar Sadat that the Soviets would underwrite a war but could not underwrite a peace. Only the United States could. These shifts had little to do with choices. Neither Mao Zedong nor Sadat really had much of a choice.

Where choice exists is in the tactics. Kissinger was in charge of implementing both shifts, and on that level it was in fact possible to delay, disrupt or provide an opening to Soviet counters. The level at which foreign policy turns into foreign affairs is not in the enunciation of the principles but in the rigorous definition of those principles and in their implementation. Nixon had Kissinger, and that was what Kissinger was brilliant at: turning principles into successful implementation.

The problem that Obama has, which has crippled his foreign policy, is that his principles have not been defined with enough rigor to provide definitive guidance in a crisis. When the crisis comes, that's when the debate starts. What exactly is the national interest, and how does it apply in this or that case? Even if he accomplishes that, he still lacks a figure with the subtlety, deviousness and frankly ruthlessness to put it into place. I would argue that the same problem haunted the George W. Bush and Clinton administrations, although their challenges were less daunting and therefore their weakness less visible.

There is a sphere in which history sweeps a president along. The most he can do is adjust to what must be, and in the end, this is the most important sphere. In another sphere -- the sphere of principles -- he can shape events or at least clarify decisions. But the most important level, the level on which even the sweep of history is managed, is the tactical. This is where deals are made and pressure is placed, and where the president can perhaps shift the direction of history.

Since the end of the Cold War, the United States has not had a president who operated consistently and well in the deeper levels of history. This situation is understandable, since the principles of the Cold War were so powerful and then suddenly gone. Still, principles without definition and execution without precision cannot long endure.