Friday, December 13, 2002

Applying Knee To Spine

Iran's "reformers" and "hardliners" have begun a crack-down on the student movement. Arrests and torture of student leaders have begun. Student protests have been met with excalating force. If the suppression forces can overwhelm the demonstrations, it will begin a long process of weeding out the malcontents, where the student leadership will start to disappear. The longer the conflict persists the more likely the demonstrator's leadership ranks will be thinned by arrests and executions. If the demonstrators manage to survive such a phase the out come is hard to predict, because a new student leadership will emerge which may not have shared the vision of the prior.

There is the possibility that the demonstrators overwhelm the suppressing forces. But if that happens it will happen soon, within the next couple of weeks. If the students get access to arms the game is over. For that to happen you need defections in the government, like the police force.

Wednesday, December 11, 2002

Halabja 1988

Often in debates that center around Iraq the use of chemical weapons against civilians is brought up as evidence of Hussein's ruthlessness. Often these claims are contradicted with citations from a report published by the US Army War College in 1990. The report was commissioned as an analysis of the Iran-Iraq war and one of the conclusions made by the authors is that there is no evidence Iraq used chemical weapons against civilians.

There was an exchange in the NY Review of Books in 1990 between the report's authors (Douglas Johnson and Stephen Pelletiere) and Edward Mortimer.

Summarizing the War College's report:
All accounts of this incident agree that the victims' mouths and extremities were blue. This is consonant with the use of a blood agent. Iraq never used blood agents throughout the war; Iran did. The U.S. State Department said at the time of the Hallabjah attack that both Iran and Iraq had used gas in this instance. Hence, we concluded it was the Iranians' gas that killed the Kurds.
The only evidence that gas was used is the eye-witness testimony of the Kurds who fled to Turkey, collected by staffers of the U.S. Senate. We showed this testimony to experts in the military who told us it was worthless. The symptoms described by the Kurds do not conform to any known chemical or combination of chemicals.
Mortimer challenges these conclusions...

First, George Shultz an Iraqi ally in the State Dept at the time criticized Iraq over this very issue.
State Department officials said on September 8, 1988, that US intelligence agencies had confirmed Iraq's use of chemicals in its recent drive against Kurdish civilians in Northern Iraq. The same information prompted Secretary of State George Shultz, a man who had presided over a strong pro-Iraq tilt in US policy, and who continued to oppose sanctions against Iraq, to accuse Iraq of "unjustifiable and abhorrent" use of poison gas against the Kurds in a meeting on the same day with Iraqi Minister of State for Foreign Affairs Saadoun Hammadi.
Second, Kurdish refugees from many locations gave identical accounts of the attacks.
Many eyewitness accounts were collected in Turkey between September 11 and 17, 1988, by a Senate Foreign Relations Committee staff mission led by professional staff member Peter W. Galbraith and including a representative of the State Department as well as a Kurdish-speaking US government employee. This team interviewed refugees (men, women, and children) from more than thirty villages—some selected by Kurdish refugee leaders but many others chosen at random by the team itself. Most refugees said that they had seen the attacks and resulting deaths. Their accounts were striking for their detail and consistency: people from the same village who had found refuge in different parts of Turkey gave similar accounts of the attacks on their village; and survivors from different villages described a similar pattern of Iraqi attack and victim symptoms.
Doctors examined refugees in Turkey and found their injuries consistent with blistering agent.
These findings were supported in congressional testimony by Dr. Robert Cook-Deegan of Physicians for Human Rights, who led a medical team to eastern Turkey. Contrary to the assertion of the War College authors, this team of doctors was able to examine actual victims of the attacks, and found injuries resulting from blistering agents.
There were similar stories from refugees in Iran.
Survivors described a massacre at Bassay Gorge, in northern Iraq, on August 29, 1988, in which something between 1,500 and 4,000 people, mainly women and children, were killed by what appears to have been a mixture of various nerve gasses while trying to reach the Turkish border. Their bodies were piled up and burnt by Iraqi troops wearing gas masks the following morning.
The critique also points out
(Nerve gas would not have left traces so long after the event.) In my review I drew attention to the fact that Roberts's evidence was completely ignored in the report of the War College authors, and I note that it is still completely ignored in their letter.
The War College report was a long time ago. Lots of new info has become public since than. For example, in 1991 one of Mr Hussein's "lieutenants", Izzat Ibrahim, publicly threatened the remaining Iraqi Kurdish population.
If you have forgotten Halabja, we are ready to repeat the operation
Human Rights Watch has much of the latest info on Iraq's attacks on civilians.
In some quarters, there remains a dispute over whether Iraq -- or both Iran and Iraq -- were responsible for the chemical bombings. Most of those pointing the finger at Iran as being the guilty party, despite the enormous propaganda advantage it made of the incident at the time, cite a recent study by the U.S. Army War College, an army-funded military research institute. The study states that:

Iraq was blamed for the Halabja attack, even though it was subsequently brought out that Iran, too, had used chemicals in this operation, and it seemed likely that it was the Iranian bombardment that actually killed the Kurds.

However, the authors of that internal study, leaked at a time when the Bush Administration was strenuously resisting renewed Congressional efforts to introduce comprehensive trade sanctions against Iraq, cite no authority for their key allegations. In an earlier footnote, the report even notes that Iraq admitted using poison gas at Halabja.
What made Halabja stand out was the scope.
The war between Iran and Iraq was in its eighth year when, on March 16 and 17, 1988, Iraq dropped poison gas on the Kurdish city of Halabja, then held by Iranian troops and Iraqi Kurdish guerrillas allied with Tehran. According to the testimony of survivors, the chemical weapons employed in Halabja were dropped from airplanes well after the town had been captured by Iranians and Iraqi Kurdish rebel forces allied with them, and after fighting in the immediate area had ceased.

The city's 70,000 or so inhabitants, many of whom were refugees from outlying areas, had already been pounded for two days from the surrounding mountain heights by conventional artillery, mortars and rockets. Many families had spent the night in their basements to escape the bombs. When the gas came, however, that was the worst place to be since the toxic chemicals, heavier than air, concentrated in low-lying areas. Between and 4,000 and 5,000 people, almost all civilians, died either at the time or shortly thereafter.
Debating the wisdom of escalating the conflict with Iraq is useful, but using the Army College Report as a backdoor to discredit the "hawk's" case does not stand up.

Want 17% Return

Sorry for the bait and switch. But you if you want 17% return on your money (official inflation is at 13.5% and unofficial at 30%) you must use an Iranian bank. Mr Shahzad reports on the problems with the economy and banking system in Iran.

Generally speaking the article affirms the similarity between "reformers" and "hardline" groups (remember). The Iranian govm't has "passed" legislation to coax foreigners (Asians and Europeans) to invest in Iran. But...
The ratification of the so-called "Law on Attraction and Support of Foreign Investments" was passed for the purpose of encouraging investors to partake in Iran's economic projects. However, the way these programs were implemented by the government of President Mohammad Khatami left little difference between the reformists and hardliners.
"Little difference" imagine that.

The economy is in shambles, unemployment is at 25%. Why is that? Poor use of capital and a constant debasement of money is a start. The banks are used as part of the political patronage machine.
State-run banks are the patronage centres for all those in power, whether they belong to hard line Basij force or any of the moderate reformist parties. The criteria to provide jobs in these institutions are not professional, but purely political. Employees in these banks are given exorbitant benefits. Every year they are given a salary raise (last year it was 26 percent), beside bonuses and other benefits.
Also loans given by banks are awarded ... to business men, professionals, nope... to "those who served the revolution and in the Iran-Iraq war". Normally, a bank that fails to invest money in enough profitable and productive ventures goes out of business, not so when the state allows you to issue as much money as you want. Efficacy is not an issue.

The best part is that "the World Bank has warned the Iranian government about these problems and advised it to privatize the financial sector". I love that. Its like telling a rapist to have some respect for his victim.

Some people have tried to make a go of it despite these challenges. Three new banks were sanctioned to operate. Presumably these banks are owned by private citizens because they are struggling. I cannot imagine how a private bank can survive in an environment where your competitors can issue as much money as they need. Its like playing a game where the rules are constantly being changed by your opponent. Several foreign banks have offices in Iran.
But they offer no mainstream banking business; they are all mere representative offices. Thirty-four are European, 10 are Asian and one is Australian. Their operations are restricted to refinancing of lines of credit, discounts and confirmations.
So basically they facilitate foreign trade, ie exports: oil, rugs, caviar.

Its strange that Malaysia's plan for a gold dinar was going to start with settlements with Iran. Since the settlement was going to occur in Iranian gold deposits, inflation of the settlement media is not an issue. But it is an odd counterparty to start the ball rolling.

Rockets We Don't Need No Stinking Rockets

So apparently the North Koreans have a food for SCUDS agreement with somebody. This ship capture is timely, remember back in January the Israeli's caught an Iranian smuggler with a boat full of weapons going to the PLO (Peace, Love and Oligarchy). The boat was called the Karina-A. The US and the Brits negotiated an out for the PLO, the smugglers were "imprissoned" in Jericho (PLO controlled territory). The prison was basically an apartment with cameras (kind of like the Big Brother TV show). The US and Brits were watching this incredibly boring show. The reason the show was so boring was because the cameras were constantly being covered with dirty underwear and who wants to stare at that all day.

Well apparently the PLO is tired of "sneaking around" so the Palestinian high court (bet you didn't know they had a court, they have a president and a parliament also, and a police force and banks) ordered the release of the alleged mastermind, Fuad Shobaki. But...
Aides to Yasser Arafat said it was unlikely the Palestinian leader would go along with the court order to release Shobaki because of Israeli and international pressure.
Apparently the problem is that the Israelis are constantly meddling in Palestinian enforcement of their laws (no wonder those folks are in such a mess).
"We respect the decision of the high court but the circumstances are difficult because of Israeli blackmail,'' said Palestinian Cabinet minister Saeb Erekat. "If we remove Shobaki from where he is right now, he may be abducted or killed by the Israelis.''

Strike Strike Strike

OK, if you find yourself in NYC in the next few days. There will be a MTA (Mass Transit Authority) strike. Subways and Busses are toast. I have spoken with people, who know people, that know a guy, who went to elementary school with a conductor. And the word is, its happening. No seriously, it really is going to happen. So make plans accordingly.

Tuesday, December 10, 2002


Thank god for UPI.
Fresh from their triumph in blocking a reform of their swollen pay scales, Members of the European Parliament have found an agreeable all-expenses-paid way to take a break from the grim, gray skies of Brussels this winter. Yes, it's two "fact-finding" trips to the sunny Caribbean to inform themselves about "agricultural produce and macro-economic policies in the light of world trade negotiations." This is clearly a topic close to socialist hearts. French MEP Jean-Claude Fruteau has invited 17 colleagues from the Socialist farm, policy working group to visit Guadeloupe and Martinique at a cost to EU taxpayers of around $100,000, but then nothing is too good for the working classes, Comrades! This could get tricky, if they run into another delegation from the right-wing "Union of Nations" group in the Parliament, which are also heading for sunny Martinique for what is formally described as "a study week." These conservative nationalists include Italy's ex-Fascist Alleanza Nazionale party, but it is heartwarming to see how Europe's old ideological divisions can be blurred by a common love of free trips to the sun.

More Snow

Been looking for more info and opinions on Snow. Kudlow, the perpetual optimist, likes Snow and does not like Friedman. In fact regarding Snow he writes
"Very good!" Jack Kemp told me. The supply-side father said that as a member of the Kemp Commission on tax reform in the mid 1990s, Snow bought into the economic-incentive model, understood the link between risk and reward, and fully supported the flat-tax recommendations of rate reduction, simplification, and reform that were proposed by the commission.
Unfortunately, another article finds Kemp a bit less enthusiastic.
Many supply-side Republicans said they welcomed the choice of Snow, saying he is an effective political player who knows how to promote Bush's agenda even if he is less than passionate about tax cuts.

"I don't want to say that John Snow is a follower of Jack Kemp's precise philosophy," Jack Kemp, a former cabinet secretary and an ardent advocate of tax cuts, said on Monday. "I am saying that he is an outstanding choice, and he wants to do what Bush wants to do."
Kudlow also mentions Snow worked on some flat tax proposals at the Heritage Foundation. And worked on the deregulation of the airline industry. Of course, the flip side of this is that Snow has advocated using the "surplus" to build a new national rail infrastructure. I am not particularly concerned with him advocating such a plan as Treasury Secretary, but it smells of Big Business Socialism instead of a commitment to freedom and free-markets.

CATO's economist, Chris Edwards, likes Snow, in a short press release.
"I expect Mr. Snow will particularly understand the importance of an investment-friendly tax code given that firms such as CSX form the backbone of a productive economy with large investments in capital equipment.

"Snow will be an excellent spokesperson for the administration's upcoming stimulus bill that is expected to include a depreciation tax cut component that will spur growth in a wide range of industries that need to continually purchase new machinery and equipment to stay competitive.

"Cato's economists look forward to working with the administration's new economic leaders to craft both short-term and long-term tax reform policies."
Stephen Moore, founding member of the Club For Growth, had en editorial in the FT explaining
Mr Bush and Karl Rove, his chief political strategist, are keenly aware that the only thing that stands in the way of this enormously popular president being re-elected in a landslide in 2004 is the economy slipping into a double dip recession. Mr Bush's father was thrown out of office 10 years ago despite foreign policy successes because he seemed to be inattentive to the ailments of the economy. And the truth is that Mr Bush Senior was guilty as charged.
The trouble for Bush has been that the not all tax-cuts are equal. Taxes on economic activity, like capital gains, have a more direct impact on economic activity, and the "tax-rebates" that Bush implemented last year are nothing more than welfare payments, and we know how effective welfare is.

Many economists have been advocating capital gains tax reduction or elimination (even Greenspan has said so in almost every Congressional testimony) for years, but Bush seems to be deaf. Moore continues to push that point home.
First, Congress should reduce the capital gains tax from 20 per cent to 10 per cent on all new investment. Any share purchase made after January 1, 2003 should be taxed at a new lower rate in order to incentivise new business creation and lift stock values.

Second, Congress should chop the payroll tax on all workers from 15.3 per cent to 13.3 per cent. The payroll tax cut should remain in place until economic growth is resumed to 4 per cent and the unemployment rate falls back to the level of full employment. This would allow all workers to keep more of their pay cheques and lower the cost of labour so businesses would start hiring again. Third, implementation of the Bush tax cut from last year should be accelerated. Seventy per cent of the Bush tax cut has not yet taken effect. There is no point in delaying income tax cuts until 2005 and later years. The economy needs an adrenalin shot now.
I could not find any nice things about Friedman. Kudlow writes
In a half dozen phone calls I couldn't find a positive word for Friedman. Naturally, no one wanted to be quoted. But from deep-background interviews I can report comments like "nasty," "arrogant," "ineffective," "not a detail guy," and "unpopular." One former Goldman partner told me he still can't understand why Friedman abruptly left the lucrative partnership in the mid 1990s. "He just walked out the door one day," he said. A money manager who knows Friedman said he jumped ship because Goldman's earnings were imploding. This individual, a conservative, said, "Look, I may not have agreed with him, but [Clinton's Treasury chief] Bob Rubin was a smart guy. Friedman was not."
Friedman is closely associated with the Concord Coalition which is known as a club for Big Business (read that status-quo).

Of course, Bush is not King and cannot will his policies. Hopefully, the increasing number of Representatives in the House that understand these issues better than Bush can push things in the right direction. The situation in the Senate is not as encouraging, with the exodus of Phil Gramm(R) and the marginaling of John Breaux(D) it is not going to be easy.

Monday, December 09, 2002

Snow's Job

John Snow, CEO of CSX, has been named the new Treasury Secretary, succeeding Paul O'Neill.

On the bright side he worked to deregulate the airlines by abolishing Civil Aeronautics Board. Snow got a PHD in Economics from Univ of Virginia. Where he studied under two Nobel laureates Coase and Buchanan.

Ronald Coase, was London born immigrated to the US 1951. Nobel Laureate (does not mean what it used to) best known for changing the FCC's management of spectrum to the "market-pricing" auction system we know of today.

James Buchanan nobel laureate 1986. Studied how economic incentives and other market mechanisms can be used in the application of public policy.

On the negative side, he may end up being a garden variety Big Business candidate.
"This will be a Big Business team, as it is almost impossible to get perspectives as distant from entrepreneurial capitalism as Snow and Friedman," complained Jude Wanniski, one of the architects of the supply-side experiment of the Reagan years and a colleague of Snow's at the American Enterprise Institute in the late 1970s. "The [Business] Roundtable is the purest distillation of Top Down capitalism, a determined foe of supply-side economics in general and a lower capital-gains tax in particular."
Plus we have this ridiculous bit (via Drudge).
White House spokesman Ari Fleischer told reporters Monday morning before Bush's announcement that such a membership would not be a ''disqualification'' for a nominee.

Three hours later, Fleischer announced Snow was leaving the club. But, he added: ''The president does not judge that to be a disqualifying factor.''

Augusta National spokesman Glenn Greenspan said the club would have no comment.
The resignation tells me something about the man's character. No spine. This is probably a bit unfair judgement for a man that has achieved so much. But what the hell is he thinking compromising over such a trivial issue, an issue that nobody cares about. If this is what we can expect from this clown, you can imagine the kind of nonsense we can expect over something serious.

When Reagan was running against Bush for the Republican nomination, Bush had the support of all the Fotune 100. Reagan's response was something like "let him keep the fortune 100, I'll take the rest of America". The rest is history. I like Bush Jr foreign policy (mostly) but it seems Jr is following Dad's pattern on economics. I hope I am wrong.

If the Democrats field a candidate in 2004 that is just as hawkish as Bush and smarter on the economy he'll win.