Syria - Trying to Understand What's Really Happening

The latest news is that Putin has successfully convinced the Syrian Dictator Al-Assad, to give up his chemical weapons in exchange for a guarantee that "The West" will not conduct air strikes against Syria.  Why would he do that?  Why would Assad agree?  To try and understand those questions, I think we have to know a little more about how other countries and regimes are reacting to the Syrian civil war.

As much as I'd like to believe that the Syrian civil war is about a group of people overthrowing a brutal dictator.  But while that might be what many Syrians are fighting for, that is not the only thing going on here.  I think the best way to think of Syria now, is as a Proxy war between Iran, Saudi Arabia, and Qatar.

The Brutal Iranian theocracy is allies with Assad's Syrian regime.  It has been supplying the Assad Government with money, supplies, and weapons before and during the current uprising.  This is so well known, you'll forgive me if I don't provide a link backing up the claim.

Here's a lesser known fact.  The Saudi Royal dictatorship(along with Qatar) has been supplying the Syrian rebels with weapons and supplies for a long time.  First reported in June of last year(see here and here), it has been repeatedly confirmed since then over and over again (Qatar link).  So while it's lesser known to the public, it certainly isn't a secret.

Without getting into why the Saudi dictators and Iranian theocracy are enemies, let's explore why these two powers would be so bent on getting a "friendly" government in Syria.  There's the standard reasons:  Just to have another partner in the region, the country has some oil reserves - the lifeblood of economy in the middle east, is that it?  Before we answer that rhetorical question, let's ask the same thing of Russia.  What is their interest in Syria?  Russia has access to the second highest amount of oil and natural gas fields in the world and is a routine exporter of them.  So, therefore, Russia doesn't need Syrian (or for that matter, Iranian oil) like the U.S. and Western Europe does.  Often repeated in the media is the fact that Russia has a naval base in Syria.  This is cited as Russia's interest in the region.  Is one military base the reason to give free food, aid, and weapons to a regime that is about to collapse?  Why not stand back, and just buy off the victor to keep your facility?

These are all possible reasons why the leaders of these countries are spending so much to support "their side".  But the one thing almost never mentioned in all the analysis on TV news or front page papers is oil and gas.  No, it's not about Syria's oil reserves - they're pretty small compared to Iran, Iraq, Saudi Arabia, and Russia.  It's about geography.

Iran wants to build an oil and natural gas pipeline going from Iran, all the way through Syria, and Lebanon, and eventually even into Europe.  The agreement was about to be finalized back in 2011:

The deal of new pipeline to transfer Iran's gas to Iraq, Syria and Europe will be signed on Monday between three countries in Asalouyeh port, south of Iran, Mehr news agency reported on Friday.

The primary agreement on the strategic project was reached in May in Baghdad.

 

Under the new deal, a gas pipeline will be constructed to transfer Iran's gas to Iraq and Syrian territories feeding their power plants and next through southern Lebanon will extend to the Mediterranean Sea and Europe.

But guess what?  Qatar and Saudi Arabia want the same thing - especially Qatar(another Royal dictatorship government).  Since at least 2009 they've been trying to get a natural gas pipeline from their country to Turkey.  Syria was not open to that deal and has been a major sticking point.

Qatar has proposed a gas pipeline from the Gulf to Turkey in a sign the emirate is considering a further expansion of exports from the world's biggest gasfield after it finishes an ambitious programme to more than double its capacity to produce liquefied natural gas (LNG).
"We are eager to have a gas pipeline from Qatar to Turkey," Sheikh Hamad bin Khalifa Al Thani, the ruler of Qatar, said last week, following talks with the Turkish president Abdullah Gul and the prime minister Recep Tayyip Erdogan in the western Turkish resort town of Bodrum. "We discussed this matter in the framework of co-operation in the field of energy. In this regard, a working group will be set up that will come up with concrete results in the shortest possible time," he said, according to Turkey's Anatolia news agency.

Furthermore, even if NO pipeline was being built, Qatar probably wouldn't care what happened in Syria.  Qatar ships natural gas to Europe and is a large player(next to Russia) in that market.  But with a cheap pipeline, they would lose their market share and profitability.

Here's where things really start getting murky.  Saudi Arabia, the foremost player in middle east oil and gas, would love nothing more than to block their rivals Iran from building out their infrastructure.  That, combined with the prospect of weakening Iran seems to be fueling their interest in Syria.

The Saudi stance on Syria is motivated by a combination of personal, sectarian, and, above all, political factors. First, the Saudis were never head over heels about Assad and his Ba'athist secular ideology. Second, the continuous crackdown of the mostly Sunni political opposition by the Alawite-dominated regime made Riyadh very uncomfortable. Third, and most significant, Saudi Arabia perceived the decline of the Assad regime as a golden opportunity to weaken Iran, their bigger regional competitor. Moreover, supporting the opposition would also play well within Saudi Arabia while deflating some of the regional criticism regarding the KSA’s policy with respect to the Arab Spring.

So with Saudi Arabia and Qatar backing up the rebels you would think they're allies.  But they're not.  Saudi Arabia and Qatar Royal dictatorships could best be described as "frenemies".  To the point that the two dicators are backing different rebel groups in Syria.

Qatar backs the Muslim Brotherhood and, it appears, would not object to a brokered deal to end the insurrection that allows the MB to get its nose in the political tent, then make its play for winning control of the new government through some combination of foreign pressure, domestic mobilization, and elections.
Saudi Arabia, it appears, has no love for the Muslim Brotherhood and is perfectly happy to crater the Assad regime through a bloody insurrection abetted by foreign jihadis,  in order to deny Iran a regional ally, score another victory for fundamentalist Sunni rollback, and increase the pressure on the Shi’a-led government of Iraq by adding the factor of a hostile, pro-Saudi and overtly Sunni Syrian regime to the increasingly disgruntled and emboldened Sunnis of western Iraq (some of whom are reportedly participating in the Syrian war).

Let's go back to Russia.  What's their interest?  Sure, that naval base is nice, but their interest ALSO involves natural gas lines.  Russia(or should I say, Putin?) wants the Iran\Iraq\Syria natural gas line as well.  Putin wants more control and more influence on the flow of it and his allies' natural gas.  It is the only power that takes gas from Turkmenistan and ships it to Europe.  So a Qatar or Saudi friendly government in Syria would provide competition to Russia.  It's no wonder Putin would continue backing Assad.

But wait, you might say, isn't Iran going to send Natural gas through Syria to Europe?  Well, yes.  But the Iranian theocracy and Putin's Russia are close allies.  Putin, Iran, and Turkenistan control the first, second, and fourth largest natural gas reserves.  And since they can control Turkmenistan, they can better control prices.  Russia has no leverage to control Qatar.  Besides, as stated above, Qatar already manages to ship quite a lot of natural gas to Europe.

So, to recap.  Qatar doesn't want Iranian natural gas competition via a gas pipeline.  Iran and Russia really want it.  And Saudi Arabia just wants to weaken it's rivals.  All three groups are backing different Syrian factions.  What started out as a popular uprising has turned into a proxy war over regional politics and oil\gas exporting economics.  All this before we even get to the possibility of U.S.\Western involvement("involvement"  here is a euphemism for "bombing and killing a bunch of people").

Even if we assume for the moment that the Obama administration is genuinely concerned about the use of chemical weapons, that doesn't explain why the CIA has been supplying rebel factions from the beginning.  Fortunately, when asked about the weapons the U.S. government is sending to Syria, it is surprisingly up front about who and why.  They are trying to fund a fourth, more western friendly rebel group.

“Movement of those items [directly] to Gen. Idriss,” Kerry said, “is going to have an impact, particularly in the south,” where rebel fighters have begun to gain territory. Donor nations meeting here also pledged to funnel all future aid — weapons largely provided by Saudi Arabia and Qatar, and nonlethal assistance from the United States, Britain, France and others — through the military council to prevent it from falling into the hands of Islamist extremist groups that have grown in power within the anti-Assad ranks.
Idriss, Kerry said, could not have been more clear about “what he and the opposition are doing to separate themselves from what some of the extreme elements are doing. . . . We are quite confident that he is a strong leader with the capacity to make a difference.”

That report was from April of this year, before the Chemical weapons usage.  The goal of supporting "moderates" is repeated in this more recent Sept 11th. article.

In addition to boosting support for rebels under the command of Idriss, who speaks fluent English and taught at a military academy before defecting from the Syrian army last year, U.S. officials in southern Turkey are using aid to promote emerging moderate leaders in towns and villages in rebel-held areas. Across much of the north, Syrians have begun electing local councils and attempting to rebuild communities devastated by war.
Ward’s team — working primarily out of hotel lobbies — has spent the past few months studying the demographics and dynamics of communities where extremists are making inroads. Targeted U.S. aid, he said, can be used to empower emerging local leaders who are moderate and to jump-start basic services while dimming the appeal of extremists.

Now it becomes clear what the Obama administration is actually trying to do.  If the U.S. government does nothing in Syria, 1 of 2 things will most likely happen.  1.  Assad survives the uprising and Iran becomes stronger than ever.  Also boosting Russian economic influence  2.  Saudi Arabia or Qatar backed Muslim extremists will take over the country that are as hostile to America and the West as Iran.  Neither scenario is a good thing for America.  This is probably why Obama was going to try and act directly against Assad under the guise of responding to his use of chemical weapons.  End the war quickly and better able to coordinate action so support the so-called "moderate" factions.

I don't agree with the reasons.  But I think it's starting to become a lot more coherent than the excuse of "limited strikes" and chemical weapons.

Syria, Obama, and More Violence as the Only Option

When President George W. Bush was gearing up to launch the invasion of Iraq under the guise of the "war on terror", a common critique was that he was using only one tool.  The cliche` "When your only tool is a hammer, everything looks like a nail" was used to suggest he couldn't see beyond the military for ways of fighting Islamic extremists.  President Obama, a strong critic of the Iraq invasion is making the same mistake.

I can't imagine the amount of suffering of the Syrian people are suffering during their civil war.  Their President for life, Bashar Al-Assad, appears to be ready to hang on to power, or destroy the whole country trying.  On top of targeting civilians, hiring thugs and mercenaries, he is now using chemical weapons to try and kill all the rebels.

Obama and his administration also appears to be moved by the suffering of the Syrian civilians.  So he reached into his Presidential tool bag and pulled out... the U.S. military.

The United States military has provided Barack Obama with a range of options for launching an attack on Syria and is "ready to go" with an offensive, the US defence secretary has said.

There is now a growing belief in Washington that a US strike against Syria, possibly involving cruise missiles or long-range bombers, could take place in the next few days.

I understand people wanting to do something to stop the killing, but is sending in the U.S. military to fire million-dollar-each missiles the only way?  Military action isn't clear cut.  There's no guarentee that it'll do more good than harm.  You can't kill people without expecting blowback.

Iranian lawmakers and commanders issued stark warnings to the United States and its allies on Tuesday, saying any military strike on Syria would lead to a retaliatory attack on Israel fanned by “the flames of outrage.”

This doesn't mean that U.S. policy shouldn't act based on threats of other dictators, but it's best not to pretend that launching missiles and dropping bombs is consequence free.  Also under consideration should be "collateral damage".  "Collateral damage" is, of course, a nice clinical term for accidentally killing civilians - including children.  It is also something that the current Chairman of the Joint Chiefs recognizes.

Conducting limited “stand-off” missile and air strikes against “hundreds” of Syrian military facilities, advanced weapons depots and defense facilities. The operations would involve “hundreds” of aircraft, ships, submarines and other forces. Cost estimates would be “in the billions.” Syrian retaliatory attacks and collateral damage would be a likely byproduct;
(emphasis mine)

Even though they aren't targeted, and attempts will be made to avoid it, the cost of military action must be weighed against the fact that innocent people will die at the hands of American weapons.  So what else could the government do other than military action?

There's diplomatic pressure, helping Syrian refugees, supplying doctors without borders with medicine and supplies.  Those are all things that can save lives without resorting to violence.  There are Syrian refugees crammed into camps that could use additional supplies.  Think of the cost of 1 1.4 million dollar missile.  Now think about how many people could be fed and get medical care for that amount?  One might argue that it won't stop the killing, but in all likelihood, no military action would either, short of all-out invasion or treacherous, long-term airstrikes.

There could be other options that would be less destructive, like working to help seal the Syrian borders to keep the Al-Assad regime from bringing in his own troops and supplies.  In this case Obama might still be using the U.S. military, but at least it's in a way that might be less likely to get civilians killed.

Finally, I'd like to end with asking a few annoying rhetorical questions.  Why is reigning down death from American planes and ships the first and, really, only option being considered?  I read an article called Obama's 3 options in Syria and they were all varying degrees of military action.  Why is that?  Is this a product of our Culture?  A product of American Empire?  A result of 12 years of war in Iraq and Afghanistan?  Why?

Alternatives to blocking American-US Airways merger via Lawsuit

On Tuesday, the U.S. justice department announced that it was filing a lawsuit to prevent American Airlines and US Airways from merging.

The Justice Department and attorneys general from six states and the District of Columbia filed a lawsuit Tuesday challenging the $11 billion merger of American Airlines and US Airways, saying the combination would lead to higher prices and less service for consumers. The merger, which would create the world's largest airline, would "substantially lessen competition" for commercial air travel, contends the complaint, filed in U.S. District Court in Washington.

<snip>

A top concern is local markets, the Justice Department said. It cited the example of Ronald Reagan Washington National Airport, where the combined airline would control 69% of takeoff and landing slots, and 63% of the outbound nonstop routes.

All I can think is that the government and business are going to spend a whole lot of money and time fighting this.  Don't get me wrong, I agree with the goal of keeping the airline industry competitive and with smaller, not bigger airlines.  In the article the CEOs of the companies tried to portray the merger as "pro competitive", but that, to me, is an abuse of language.  Any time a market has fewer and bigger players, it is -almost by definition - going to be naturally less competitive.

Instead of using anti-trust law to break the increasingly large airlines, consume them by encouraging more start-ups to compete with them.  Smaller companies tend to be more nimble and better able to out compete niche areas of the market, and consume market share from the massive companies that become large and unwieldy.

The problem is that this hasn't been happening in the airline industry.  According to this site, there's only been about 1 new airline startup in the United State per year.  And just as many failing.  Why are there so few startups?  This article makes some suggestions as to why.

But getting an airline off the ground has become a lot more treacherous. High oil prices these days mean carriers must fly full planes to turn a profit, and smaller airports just do not provide enough passenger traffic. At the same time, the major domestic carriers are more entrenched than ever in their own hub airports, making it harder for a new entrant to wrangle gates there. And investors have become more cautious about lending to just any airline project.

But is that it?  I would add that the number or rules and regulations from the FAA, TSA, and other agencies piles on to the cost of startup airlines.  There are thousands and thousands of regulations on everything from plane specs, to passenger movements, and airports.

One might be tempted to think that those rules are put in place to protect passengers.  That may have been the intent, but the additional costs of compliance help further entrench the big airlines by raising the startup costs of potential competitors.

In some cases the big airlines may have helped write some of those regulations with the mind that it would cost them little to comply, but cost other's greatly.  Here a great article that goes into detail about how this has occurred in other industries.  How Regulations Help Sustain Corporate Monopolies

However, in the world which we inhabit, most in the “business community” (who are actually antithetical to true business), tend to favor the status quo where regulations are concerned. This conglomerate of business interests do their part to actually favor certain regulations, especially those that would save their huge corporate monopoly from the doomed-uncertainty and promise of competition a truly free  market would provide.

<Snip>

The example I shall be drawing from is documented on Bloomberg News, in an article published just yesterday. It is titled Accidental Death Becomes Suicide When Insurers Dodge Payouts by David Evans. Evans analyzes the case of Todd Pierce, a 46 year old cancer survivor killed in a horrific and fiery car accident. Through his employer, Todd took out accidental life insurance that would pay his wife were he to pass away unexpectedly, as did happen. Due to the pursuant contractual obligations mutually agreed upon by both parties, MetLife was expected to pay Todd’s widow an total of $224,000.  Despite the sheriff, the state medical examiner, and the official autopsy report concluding that Todd’s death had been an accident, however, MetLife made their own medical decision. They labeled the death a suicide, noting Todd’s previous battle with cancer and the toxicology reports which indicated he had a prescribed drug in his system. As any breach of contract would be submitted to, the case was brought to Federal court in Montana by Todd’s wife, Jane Pierce. What Jane didn’t know, however, is that she wasn’t just fighting for her husband’s benefits, she was fighting the corruption of the entire American corporate monopoly system.

This is but one existing example.  I'm willing to bet that the same is true with the airline industry.  It would be better, and more cost effective if the government started curtailing as many of these regulations as possible.  If it did, we might see more new competition and it wouldn't have to spend tens of millions of dollars to fighting lawsuits to keep the big guys from getting bigger.  Instead, the little guys could do that for us.

Latest Grand Bargain is (mostly) a Grand Waste of Time

It's so frustrating to know how the economy works(MMT), and then watch a bunch of men who don't, try and improve the national economy. Here is a one line sentence explaining how to grow an economy.

People need to spend more money so that there will be the increased demand for new jobs and new business.

That's it.  But let's look at Obama's latest Grand Bargain proposal from a critical MMT perspective.  Obama's plan has 3 parts.

1. Simplify the corporate tax code
2. Try to coax companies to "repatriate" their foreign money holdings
3. Use the tax increase to fund infrastructure jobs.

The first plan is to simplify the corporate tax code in 2 steps.  First, it's going to eliminate several deductions and so-called "special interest" loop holes.  That will increase the amount of taxes the government collects.  The second step is to lower the tax rate to the point where the money gained by closing loopholes is roughly equivalent to what's lost by lowering the tax rate from 35% to 28%.  Overall this is "revenue" neutral.  Will this help the economy grow?  Hell no!  At best it might make the economy run more efficiently(always a good thing!), but it won't grow.   It won't grow because all they're doing is changing who pays what, and not the total amount taxed.  No growth.

The second part is to get companies with foreign money holdings to bring the money into the country.  Normally, there is, apparently, a tax on doing that.  Therefore, companies leave their earnings overseas.  This estimate says there are over a trillion dollars out there.  Obama's proposal is to try and get those companies to bring in the money by offering a one time, low tax, to do so.  From an MMT perspective this would be bad for the overall economy because it's taking money out of the economy.

The third and final part of the Obama plan is to start funding infrastructure and job training programs.  From an MMT perspective, increasing government spending will be good for the overall economy because it will increase demand for jobs and business.  Hooray!

The reason I call this plan a waste of time is because, the first part offsets itself and the good in the third part is offset by the harm of the second part.  Making these plans revenue neutral will never give the economy the boost it needs.  Infrastructure jobs that aren't offset with tax increases will.  Tax cuts that aren't offset by tax decreases will also do the trick.

If there is any redeeming part of the proposed 'grand bargain' is the possibility that money will be shifted from those who are letting it sit, to those who will spend it.  That's why I added the qualifier(mostly) into the title.  If that money is truly just sitting in a foreign bank, collecting low interest dust, then shifting the money to infrastructure and creating jobs for the unemployed will help some.  My guess is that only some of that money is "just sitting there", the rest is being reinvested into other enterprises and will only end up moving around who gets it.

The thing that Obama, along with the GOP that's already dismissed the whole thing, don't understand is that the government doesn't need that money to spend on infrastructure.  The government can't run out of money anymore than a stadium can run out of points on a scoreboard.  Therefore, we can grow this economy until unemployment is back to a non-embarrassing level.

Who is the Next Big Winner in the Console Gaming Wars?

What do the Wii U, Playstation 4, and Xbox One have in common?  Answer:  All three run AMD processors inside.  AMD managed to find it's way into each of the three gaming consoles: Either as the Graphics processor or, Graphics AND Central processor.  That seems like a huge deal to me.

AMD has been a big player in the microchip market for a long time, but it's never been the biggest.  Currently nvidia is still the biggest player in graphics.  Providing all the graphics cards for the consoles might change that.  ExtremeTech explains how:

The real worry with AMD’s push for unified gaming is that games developers might shirk Nvidia optimizations. If it’s relatively simple to get Xbox One games up and running on PCs with AMD graphics, publishers might not see the need to spend the additional cash to optimize for Nvidia cards. This could be a huge hassle for the majority of PC gamers with existing Nvidia cards, but it would be even worse for Nvidia itself. While AMD has been lagging well behind lately, this PC-console strategy could help it leapfrog its competitors in a meaningful way.
Despite being the company that created the first x86 64 bit processor, and the first dual core x86 processor

It would be exciting if console and PC hardware started moving closer to each other.  Porting of top titles costs a lot of time.  If it's moving from one type of chip and hardware set to another will mean even more time to make sure it looks and plays the same.  But if the console hardware is similar to PC hardware, then it won't take as long.  That means more and quicker game ports.

AMD could really use the boost because right now, despite the legacy of creating the first 64bit x86 processor, and the first dual core x86 processor, AMD is getting it's butt handed to them by Intel in the x86 server market.  It's also losing ground on mobile devices.  Qualcomm and Samsung overtook AMD's second place in the mobile phone market.

Overall, I think this was one hell of a strategic coup for AMD.  One that keeps them a big player in the chip market.

Why eBooks should cost MORE than paper books

E-reader on top of books.

You will be hard pressed to find a title in the amazon store or barnes&noble that is cheaper to buy in paperback than as an ebook.  But why?  Well, presumably it is a lot cheaper to produce and upload copies of an ebook than it is to print and ship a paperback.  But, in my not-so-humble-opinion, ebooks should cost more than buying a print book.  Here's why I say that.

First of all, ebook will last for ever and never wear out.  Paperbacks start getting worn out after just the first read through.  If it's a good book that you reread or loan out it's gonna look pretty ragged.  Same thing never happens to ebooks.  They are always as good as they were on day 1.  In theory, my children's children could inherit all my ebooks and they will work just as well for them as they do for me.

Second, it's hard to lose an ebook.  Since most ebooks sellers allow you to redownload an ebook an unlimited amount of times, There is no such thing as misplacing an ebook.  You can't leave it at the beach, or on the bus.  Sure you could leave your DEVICE, but you can always re-download it.  Even if they don't let you redownload a purchase, it is easy enough to make several backups of a file.

Finally, ebooks are upgradable.  If you're used to reading brand new first edition books, you can come to expect a few typos or small grammar errors.  If the publisher releases a second edition, most ebook services will let you update those books to the latest version.  Print books you would have to buy the new edition.

I think that ebooks objectively provide more to readers than a print edition ever could.  I understand many people still prefer physical books.  But to me, eBooks provide so much more, that you would think people would be willing to pay more for them.  Fortunately, since ebooks are cheaper to produce they are cheaper to buy despite their advantages.  To me, ebooks are a real steal.

Recognizing who\what Really Controls Interest Rates

Just in case there was any doubt about what really controls interest rates, the past couple of months should dispel any lingering doubts.  The Federal Reserve(The Fed) is without a doubt in full control of interest rates going up or down.

Back in spring, the Fed hinted that it was going to ease up on "Quantitative Easing" or QE3.  Quantitative easing, for those who don't know, is the Fed trying to flood the market with dollars by buying stocks and bonds(*True Story)  They call it Quantitative Easing to make themselves sound smarter than you(*Not a true story).

So guess what happened?  Interest rates have been steadily rising this summer.  Despite that, many people mistakenly believe that interest rates are determined by a "Free Market" or by "bond vigilantes".  The only time "the market" really gets involved is when they start trying to guess at what the Fed is going to do.  That was demonstrated last Wednesday.  The Fed said nothing, the market reacted as if that meant interest rates were going to go up.

The policy implications for this are immense.  I won't get into all of them on this little post.  But let's just start at the bottom.  The Fed sets interest rates.  That is a fact, one that cannot be denied.  Whether or not that is desirable is a different argument.  But, right now, the only thing standing between a 0% interest rate, or a 40% interest rate is a whole bunch of wealthy, well-connected bankers.

No amount of budget deficits or surpluses can change that fact.  Granted, the bankers may make their decisions based on federal budgets or the health of the economy.  But the decision is still in the hands of a small number of people, not "the market".