Long before Barack Obama assumed the presidency, he declared that the central front of the war on terror was Afghanistan. President Obama’s recent appointment of Richard Holbrooke as special envoy to both Afghanistan and Pakistan and the commitment to send 21,000 additional troops surely point to the present administration’s dedication to stabilize the region. President Obama is making good on his promise to focus more on Afghanistan. However, there is much work to be done, and little of it looks easy.
Khybered Expectations
Unfortunately, many voices in Washington are making calls for lowering expectations regarding what we can actually do to reform Afghanistan. Particularly troubling is the Defense Department’s recent report that building Afghanistan into a stable and functioning state will be too difficult a feat to accomplish. This has been echoed by recent comments from the Obama administration. The DoD and the administration state that America's goals in Afghanistan should be coupled with reality: that Afghanistan, because of its fractured history, lack of a real economy and its virtually non-existent educational system cannot become a stable and democratic nation any time soon. Dreams of creating a democratic and free Afghanistan following our post 9/11 invasion have now been downgraded to one goal, to “Prevent the re-emergence of Al-Qaeda after we leave.” Unfortunately, this strategy is putting the cart before the horse, as abandoning the goal of democratic stability in Afghanistan will mean the return of Islamic terrorist elements. Hoping that Al-Qaeda brand terror networks stay away from a chaotic and fractured Afghanistan will not be enough to prevent it from occurring. Only a full-fledged drive to establish stability and democracy will keep Al-Qaeda at bay.
Soviet Redux?
There is much historical precedent pointing to the fact that Afghanistan is a difficult place to control. This is why the Defense Department and present administration are downplaying the chances of success. The attitude that Afghanistan is the ‘graveyard of empires’ is a largely a relic of the failed Soviet invasion of the 1980’s. But the Soviets were working against more than just the Afghanis. Without the influx of thousands of foreign fighters, American stinger missiles and Saudi cash, the Soviets would have had a much easier time controlling and pacifying the region. Perhaps most importantly, the Soviet attempt to install a godless communist puppet regime in a land known for its dedicated adherence to Islam had little chance of success in the firstplace. Unlike the Soviets, the United states does not want to curtail Islam in Afghanistan nor install a subservient puppet regime. In fact, the United States has an 85% approval rating from Afghanis to stay in the country, a plethora of allies in the region (half of all security troops in Afghanistan are not American) and a much smaller number of enemy combatants to deal with. Most estimates state that the Afghani Taliban number no more than 30,000 troops. The Soviets contended with a number five times that. America is in not nearly as dire straits.
The Never-Ending (Presidential) Afghan Campaign
Domestic political considerations may mean that if the Afghan Surge fails to accomplish goals similar to that which were accomplished in Iraq in 2007, the Obama administration may begin pulling troops before the upcoming 2012 presidential elections. A recent Rasmussen Reports poll states that 57% percent of Americans expect that sending more troops to the region will end up changing nothing or making things worse. This will be a cornerstone foreign policy issue in the next presidential election. After running as an anti-war candidate in 2008, President Obama cannot appear to be the candidate of extending an already decade-long war in 2012.
Who would have guessed that Iraq would have seen the turnaround that it has after the February 2006 bombings in Samarra, which put the country on the brink of disaster? An American abandonment at the time surely would have left Iraq in the doldrums of a genocidal civil war, instead of the developing democracy that it is slowly becoming. Afghanistan today is in not nearly as perilous a position as Iraq was in 2006. Lowering expectations will be a self-fulfilling prophecy. President Obama needs to insist on a stable and democratic Afghanistan if he wishes to prevent the country from becoming a home to Al-Qaeda again. He has at least three years to make it work.
Tuesday, March 31, 2009
Monday, March 30, 2009
Global Recession, Global Culprit
Q: What caused the massive global recession? Was it the banks, the government, big businesses or over-litigious lawyers? Was it the lack of ‘adequate’ health care and education catching up with us, or, was it George W. Bush (The Republicans!) or Nancy Pelosi (The Democrats!)?
A: None of the above, and all of the above.
Anyone claiming to have found the singular bogeyman to blame for the worldwide recession is wrong – yes, even the execs over at AIG aren’t to blame. The globalized economy that slowed down from Singapore to Saskatchewan cannot be blamed on any singular person or even group of people. If there is one thing to keep in mind when explaining the global economic mess, keep in mind that its creation was indeed global as well.
At the heart of the recession are the global trade imbalances that exist between creditor and debtor nations. Without massive trade imbalances, there would have been little reason for the rampant lending that occurred over the past ten years in every market from real estate to consumer products. Differences in the trillions between what nations purchase and sell needs to be corrected and restructured; and the loaning and lending that was done by banks worldwide to finance this discrepancy needs to be corrected as well to make sure that when markets do again stabilize, we do not continue along the same path.
Hedge Hogging
Debt is not always bad – some debt can lead to future growth that would be hard to achieve without it. And some trade imbalances are good – France surely sells more wine than electronics to Japan and vice verse. The problem comes when the imbalances are so outrageous and the debts so huge that the only way to manage them is through wizard finance. The repeal of the Glass-Steagal act in 1999, which had previously separated investment banks and regular banks for the prior 65 years, gave the green light to repackage American debt through new financial instruments. The repeal of the act allowed regular banks and investment banks to work together to repackage and sell loans and hedge funds to other investors at alarming rates, in effect, passing the buck on debt.
The fact that banks (worldwide, not just America’s) leisurely lent money and leveraged loans based on derivatives (presumed future stock market and real estate performances, amongst other derivatives) is obvious enough. Greed and incompetence surely added to the mix. The raison d’être however, lies in the global trade imbalances that caused the global financial industry in both creditor and debtor nations to hedge outrageous debts based on future market performance.
The tipping point was reached in the American housing market in August 2007 and the global stock market in September 2008 when investors and borrowers realized their loans were essentially based on thin air. There was nothing to back assets with other than more derivatives. The cycle couldn't go on any longer.
Stimulate me
As wrong as it is to blame a singular person or group, it is as erroneous to try and find a silver-bullet solution. The global trade imbalances that tipped the world economy to the point of no return had to come along at some point. The intricate global system of financing debt based on the future earnings at unhealthy volumes could not be sustained – and is thankfully at an end.
The problem, however, is that much of the financial services industry (such as AIG) have trillions of dollars wrapped up in loans that aren’t worth a dime. This in turn affects markets all over the world – and as a result stocks plunge and investment grinds to a halt. The only plausible intermediary that can help banks and other companies from insolvency is the United States Government. Therein you have your Stimulus and Troubled Asset Relief (TARP) Programs.
When financial markets do eventually stabilize and are not allowed to repeat the mistakes of the past ten years, we will begin to see the engine of the global economy come down from the lift and begin to run smoothly. The engine won’t-be running at full speed as soon as it hits the pavement – but it will eventually down the road. Global markets are about to change for the better, so long as the bank bailouts and consumer stimulus packages are executed effectively, and the economy is restructured so as to not incur another spate of imbalance and massive debt. The oil in the engine of the world economy is being changed as we speak. Creative destruction reigns on.
A: None of the above, and all of the above.
Anyone claiming to have found the singular bogeyman to blame for the worldwide recession is wrong – yes, even the execs over at AIG aren’t to blame. The globalized economy that slowed down from Singapore to Saskatchewan cannot be blamed on any singular person or even group of people. If there is one thing to keep in mind when explaining the global economic mess, keep in mind that its creation was indeed global as well.
At the heart of the recession are the global trade imbalances that exist between creditor and debtor nations. Without massive trade imbalances, there would have been little reason for the rampant lending that occurred over the past ten years in every market from real estate to consumer products. Differences in the trillions between what nations purchase and sell needs to be corrected and restructured; and the loaning and lending that was done by banks worldwide to finance this discrepancy needs to be corrected as well to make sure that when markets do again stabilize, we do not continue along the same path.
Hedge Hogging
Debt is not always bad – some debt can lead to future growth that would be hard to achieve without it. And some trade imbalances are good – France surely sells more wine than electronics to Japan and vice verse. The problem comes when the imbalances are so outrageous and the debts so huge that the only way to manage them is through wizard finance. The repeal of the Glass-Steagal act in 1999, which had previously separated investment banks and regular banks for the prior 65 years, gave the green light to repackage American debt through new financial instruments. The repeal of the act allowed regular banks and investment banks to work together to repackage and sell loans and hedge funds to other investors at alarming rates, in effect, passing the buck on debt.
The fact that banks (worldwide, not just America’s) leisurely lent money and leveraged loans based on derivatives (presumed future stock market and real estate performances, amongst other derivatives) is obvious enough. Greed and incompetence surely added to the mix. The raison d’être however, lies in the global trade imbalances that caused the global financial industry in both creditor and debtor nations to hedge outrageous debts based on future market performance.
The tipping point was reached in the American housing market in August 2007 and the global stock market in September 2008 when investors and borrowers realized their loans were essentially based on thin air. There was nothing to back assets with other than more derivatives. The cycle couldn't go on any longer.
Stimulate me
As wrong as it is to blame a singular person or group, it is as erroneous to try and find a silver-bullet solution. The global trade imbalances that tipped the world economy to the point of no return had to come along at some point. The intricate global system of financing debt based on the future earnings at unhealthy volumes could not be sustained – and is thankfully at an end.
The problem, however, is that much of the financial services industry (such as AIG) have trillions of dollars wrapped up in loans that aren’t worth a dime. This in turn affects markets all over the world – and as a result stocks plunge and investment grinds to a halt. The only plausible intermediary that can help banks and other companies from insolvency is the United States Government. Therein you have your Stimulus and Troubled Asset Relief (TARP) Programs.
When financial markets do eventually stabilize and are not allowed to repeat the mistakes of the past ten years, we will begin to see the engine of the global economy come down from the lift and begin to run smoothly. The engine won’t-be running at full speed as soon as it hits the pavement – but it will eventually down the road. Global markets are about to change for the better, so long as the bank bailouts and consumer stimulus packages are executed effectively, and the economy is restructured so as to not incur another spate of imbalance and massive debt. The oil in the engine of the world economy is being changed as we speak. Creative destruction reigns on.
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