Depression Babies

There are a few survivors of The Great Depression left, and many of us have memories of parents and grandparents who lived through that era. I watched what I perceived as the strange behavior of hard-working folks, living a relatively sparse life, and saving every penny they could. The shopped coupons for hours a day, only bought at sales, looked only at used cars, and preferred lower-paid government jobs, knowing that those pensions were unlikely to fail.

My own father was a depression baby, and I suspect that nothing, not even World War II, ever changed him like the economic hardship of that era. His modest home in an upscale neighborhood in Chadds Ford, Pennsylvania, was run down, in need of patching and painting – luxuries that he would never implement. He used newspapers for table cloths, fixed his own cars (which he always bought used), built his own computer and rarely bought clothes. Yet he was a well-known print and radio journalist in the region (Wilmington, Delaware – Philadelphia, Pennsylvania), reasonably well paid with great benefits, and managed to become the local art and food critic – free theater, free movies, free concerts and free food!

Pretty clearly, this current economic “managed depression” or “severe recession,” however you categorize this malaise, will leave more than one generation with a legacy of scars. It may not even be the severity of this meltdown that has the greatest long-term impact, but the duration. The vast majority of economists predict a sustained decline in core economics: long-term high unemployment rates, slow if any medium term growth in home prices, very limited increases in consumer demand and the contracting buying power of the U.S. dollar. No one predicts any major improvement in employment until the end of 2010, and the economy, even according to government sources like Treasury Secretary Timothy Geithner, will offer a weak and fragile, if not lethargic, recovery when it does begin.

Fear is in the numbers. The Department of Commerce notes that current savings rates are the highest that they have been in fifteen years. The June 26^th New York Times: “The personal saving rate, which dipped below zero during the housing boom as Americans tapped home-equity loans and other easy lines of credit, rose to 6.9 percent in May, the Commerce Department reported. That was its highest point since December 1993.”

Even with a surprising 1.4% rise in personal income, consumer spending reflected a scant 0.3% increase. The Times: “Steep declines in home values and individual stock portfolios have erased trillions of dollars in household wealth. Economist Joshua Shapiro of MFR noted that he was ‘clearly seeing signs of households altering their behavior in the face of large capital losses in investment and real estate portfolios, an abysmal labor market, and tight credit.’”

Increasing savings rates is normally a good thing; it increases capital availability for both the debt and equity markets, creates longer-term stability by providing what is effective an economic shock absorber and generally is viewed as creating more realistic and sustainable standards of living. Normally. But in times of severe economic contraction – what we are clearly experiencing now – opting for saving over spending can actually deepen and extend an economic downturn. Without demand for goods and services, without consumers exercising their buying power, clearly the jobs and housing picture lack the stimulus necessary to rebound. Instead, consumer demand appears to have been replaced with the government stimulus package.

The Times again: “A 1.4 percent rise in personal incomes was an indication that money from the government’s $787 stimulus program was beginning to flow through the American economy… ‘That’s the whole point — put money back in the pockets of consumers and households and they’ve accomplished that,’ Nariman Behravesh, chief economist at IHS Global Insight, said. ‘The good news is, it’s working. The question is, how much of this is a blip?’ And how much of it depends on the largess of the government? Although disposable personal income rose at a seasonally adjusted rate of $178.1 billion in May, the Commerce Department also reported that private wages and salaries decreased $12.4 billion.”

If it is the stimulus package alone that is responsible for demand, what happens when the government program comes to an end? Are the behavioral changes in savings and spending likely to keep U.S. growth in a “very slow rise” mode for the foreseeable future? Is CNBC’s Jim Cramer right? Do we really need “federal stimulus package, part 2”? And exactly who in Congress is going to propose this solution and increase the federal budget accordingly? Once again, time will tell. And we may actually have another incarnation of “Depression Babies” to deal with.

I’m Peter Dekom, and I approve this message.

Double-Edged Swords

Iran’s cry for democratic reform, the obviously brutal repression that claims legitimacy in divine spiritual guidance, is a sign of corrosion of an extremist fundamentalist militant government that has funded Hezbollah and Hamas as they have hurled rockets at Israel, threatened the United States and the Western world with ultimate destruction, denied the Holocaust, worked tirelessly to undermine any peace efforts over Palestine and promised to push Israel into the sea. That’s good, right? But all those folks beaten, injured and killed. That’s horrible.

Will Iran’s questionably elected government with more-than-questionable ties to divine leadership be forced to deal with internal dissent, amping up repression, finding ways of destroying communications technology and crushing nascent democratic movement at the expense of creating regional instability that threatens incumbent Arab governments? Or will they need to accelerate regional turmoil to distract their own constituency from the problems at home; do they need to reestablish their regional power by some terrifying grand gesture? Or both? That’s bad, right?

With traditional animosities between Shiites (the 15% of Islam who believe in a mystical, cleric-defined interpretation of the Qu’ran and a merging of state and religion, embodied in Iran’s Islamic Republic) and Sunnis (the other 85% who believe in a literal interpretation of their holy book and government only as a “protector” of Islam), the struggles within Iran provide her Sunni regional neighbors with some comfort that their nemesis may be brought down from within. Perhaps the threat of a growing Shiite power, tapping into anti-incumbent extremists wishing to topple established Arab governments, has been minimized. Iran’s allies – like Syria – and the political movements she supports – like Hezbollah and Hamas – have been tainted as their “friend” is viewed by the world as a brutal and intolerant state willing to shoot, stab, club and kill its own citizens to foster a repressive view of the earth. Good news for the local Sunnis nations, right?

Perhaps the lessons for democratic movements in autocratic Arab nations – the power of communications technology and world opinion – create a new path forward for these struggling and clearly repression factions all over the Arab world. Iran’s “powerless” masses have shown how to disrupt incumbencies with cell phones, Twitter and Internet transmissions that defy many stabs by censors to close down. If you’re a repressive dictator or trying to hang on to your monarchical dynastic reign, that’s bad news, right?

If a softer, reformist movement had been elected in Iran, clearly relations with the West, particularly the United States, would have improved. That would have been good, right? Unless you are an Arab state, where Shiite Iran is your sworn enemy and most of your “cool” high-end weapons are American made – the last thing you want is a Western world trying to create a balanced foreign policy between Shiite-Iranian and Sunni-Arab interests. But Ahmadinejad won, right? That’s good, right? The same President who foments all that regional instability and funded nascent movements to topple regional Arab powers?

The June 25^th New York Times: “One gauge of how Arab leaders are reacting to the Iran crisis is their silence. Officials seem eager to avoid even the appearance that they are trying to influence the outcome, political analysts said. The state-controlled media outlets around the region have also been relatively low key in their coverage… “When you are waiting so much for something that makes you happy, you hold your breath, you make less noise in order not to affect the outcome,” said Randa Habib, a political analyst and columnist in Amman, Jordan… Iran’s allies, on the other hand, are restive. Emad Gad, an Egyptian expert in international affairs, said that he saw evidence of Iran’s allies, especially in Syria, trying to hedge their bet on Tehran. He said that Syria had in recent days been more willing to help Egypt press for reconciliation between Palestinian factions.”

Politics is complex, never linear and never without backlash or side-effects. Change explodes, contracts, shrivels, expands, backtracks, affirms and contradicts. When we see simple paths to complex problems, perhaps we don’t see the path at all.

I’m Peter Dekom, and I approve this message.

What if Iraq Unravels?

We have all assumed that the United States can leave Iraq, one sector at a time, and that the regional warring factions – simply put: the majority Shiites who hold the bulk of the territory including the outlet to the sea, the Sunnis in the southwest who typically hate Shiites and the Kurds in the north who are held together by ethnicity more than by faith – will lay down their arms and settle into a new direction of nation-building and stability. We have even assumed that Iraq , now with a constitution and a freely elected government, is actually a country that can stand. And we have based our national policy on getting our troops out of Iraq and either bringing them home or refocusing our efforts on Afghanistan . What if we completely and totally wrong?

The harsh reality is that the factions within Iran hardly trust each other. The Kurds want the return of the Kirkuk oil fields taken away from them for being disloyal to Saddam Hussein in the 1993 Gulf War. The Shiites, who control most of the proven oil fields, have no desire to return those productive fields to the Kurds. The Sunnis, a religious minority in Iraq who crushed the Shiites during Hussein’s rule (he was a Sunni), have traditionally despised the mystical Shiites as Islamic heretics. Sunnis fear living in a country where Shiites have the bulk of political power (with Shiite militia – death squads – having gone out of their way to kill Sunnis and push them out of Baghdad neighborhoods). They are not ready to live in peace and harmony with their sworn enemies. Or are they?

Still, with all that is going on in the world, with economic reality forcing American acceptance that it has to cut its military presence sooner or later, whether or not Iraq is ready… even assuming “Iraq” would ever be ready… we have to exit eventually. It was the President’s election promise, even as some of our military leaders called the local army and police force biased and inadequate, suggesting that it might take a decade or more of American forces remaining to stabilize the country.

The original borders were drawn up in the World War I era based on political negotiations among Western powers with absolutely no concern about whether such boundaries made any sense at all to the locals. Are we prepared for resumption of the civil war? What if blood runs in the streets, reports of genocide abound and oil fields are set ablaze as they once were? Do we keep a force in the region? Let happen whatever is supposed to happen? Iraq is “old news”; we have the economy, the Iranian election chaos, the war in Afghanistan and so many other “more newsworthy” events in our sights. But Iraq did not just go away. And there are signs that our expectations for this battered nation may well not be met.

Sunni Falluja was a town that was supposed to be America ’s success story. But with days until U.S. withdrawal from Falluja, all is not well. The June 23^rd New York Times: “After all, by last year the city, a former insurgent stronghold, was considered one of the safest places in the country. Local Sunni sheiks had driven out the insurgent group Al Qaeda in Mesopotamia and held successful elections, and American engineers were hard at work on a showcase reconstruction project: a $100 million wastewater treatment plant meant to be a model for civilian advances in Iraq.

“Then a series of troubling attacks began cropping up this year. One in particular, at the end of May, seemed to drive home the possibility that things were changing for the worse. On a heavily patrolled military road between a Marine camp and the wastewater plant, a huge buried bomb tore through an armored American convoy, killing three prominent reconstruction officials and striking directly at hopes that the way was completely clear for peacetime projects.”

We’ve seen a series of suicide bombings and sniper attacks in various parts of Iraq of late. All is not quiet in Iraq , but our timetable for departure seems to be on course, come hell or high water… unless… maybe… At some level, there will be some violence. Whether the factions can accept that constant fighting actually saps each participant has yet to be determined. The big “supplier of Shiite militias” – Iran – is somewhat distracted with the nascent stages of their own possible civil war. Iraq may be back in the news in the not-too-distant future, and the reports… well… they may present a “future” we did not want, may be blamed for but sooner or later have to accept.

I’m Peter Dekom, and I approve this message.

An Army of God

Religious fundamentalists bent on conversion. Hordes of Muslim horsemen and infantry marched on the Western world, conquering all of northern Africa into Spain within 70 years of the Prophet Mohammad’s death. For 400 years, Muslim conquests hammered the Europeans, pushing the Pope out of Rome for a while, planting soldiers in the Balkans on the doorstep of Vienna. The Crusades followed for 119 years until the Islamic world pushed the Christian marauders out of their lands. Muslims proselytized Islam, some believing in “conversion by the sword,” as they pressed forward; yet other Muslim leaders gave comfort to non-conforming Christian and hated Jews as violent Catholics sought to purge heresy from their nations. That was a long time ago.

When the American forces responded to the 9/11 attacks with wars in Afghanistan and then Iraq, President Bush referred to his “war on terror” as a “crusade.” Briefings by Defense Secretary Donald Rumsfeld were laced with Biblical references. It was hardly uncommon for American officers to use references to Christian dogma as justification for American soldiers to fight their new enemies. Newsweek (June 19^th): “[P]rominent military leaders such as Lt. Gen. William Boykin described the wars in evangelical terms, casting the U.S. military as the ‘army of God.’ [Arab news channel] Al-Jazeera broadcast clips filmed in 2008 showing stacks of Bibles translated into Pashto and Dari at the U.S. air base in Bagram and featuring the chief of U.S. military chaplains in Afghanistan, Lt. Col. Gary Hensley, telling soldiers to ‘hunt people for Jesus.’

“In the aftermath of that report, the Pentagon responded that it had confiscated and destroyed the Bibles and said there was no effort to convert Afghans. But while the military dismissed the Bagram Bibles as an isolated incident, a civil-rights watchdog group, Military Religious Freedom Foundation (MRFF), says this is not the case. According to the group's president, Mikey Weinstein, a cadre of 40 U.S. chaplains took part in a 2003 project to distribute 2.4 million Arabic-language Bibles in Iraq. This would be a serious violation of U.S. military Central Command's General Order Number One forbidding active-duty troops from trying to convert people to any religion.”

The problem with introducing Christian doctrines to justify the moral basis for our military actions is not only a seeming violation of our own First Amendment ban on state-sanctioned religions but the fact that such efforts are used to rally support all over the 1.3+ billion person Muslim world against American interests. This was – in the eyes of the majority of the Muslim world – a self-admitted “crusade” (a clear reference to a religious war) pitting Christian values and attempts to convert against their view of the “true religion” – Islam.

The involvement of U.S. military chaplains in the dissemination of Bibles in Afghanistan and Iraq was simply confirming the Muslim’s world’s worst fears – that the U.S. efforts were a thinly disguised religious war. The humiliation of American captives by violating their Islamic restrictions added fuel to the fire and did huge damage as militants used this information mercilessly to recruit new soldiers, suicide bombers and fundamentalist believers. Nothing hardens a religious and pious person like a full frontal assault against his/her most personal and passionate beliefs.

As President Obama begins a process of pulling back the rhetoric of words that have become completely seared into the minds of so many Muslims – “war on terror,” “crusade,” Biblical references in mission statements and military briefings – the effort to pull religion out our defense of our country from attack is already generating positive results. Countries that were fearful that any attempt on their part to deal with fundamentalist militants in their own communities might be viewed as reinforcing the perceived war against Islam waged by the U.S. were now willing to confront local terrorist for local reasons. By letting the vast moderate majority of Muslims deal with the Islamist killers and bullies in their midst without feeling they are betraying Islam, the pressure on the U.S. and her allies to be global policemen – a very expensive mission – has most certainly relaxed.

I’m Peter Dekom, and I approve this message.

Simple Cures?

The Dartmouth Institute for Health Policy and Clinical Practice has been tracking the quality and efficiency of healthcare throughout the United States on a region-by-region basis. The studies track effectiveness against cost. One of the most targeted areas of review – and one of the most sensitive – is the accelerating cost of treating the elderly, particularly in the last two years of their lives. Americans seem to be focused on testing and cure and less on what is called “comfort care” – a decision to make life as comfortable as possible as the end is in sight… not to add physical time to life at the expense of painful and prolonged treatments with little if any enhancement to the quality of life.

This is a tough decision for most people. More time and less comfort, maybe even a lot of discomfort or less time with more comfort and less pain. The initial decision should be made by each one of us well ahead of treatment options; the patients can always change their minds. Often, when the ability to decide is clouded by age or treatment side effects, decisions are left to family members who usually opt to prolong life, even as they watch their relative squirm in obvious discomfort.

I remember my father’s feeble voice asking me to kill him as he writhed in fit of boring agony in a sea of utter uselessness. Comfort care was the right choice, but his hands could not sign the required documents, his once-brilliant mind was no longer capable of understanding. It was my choice; I wish that it had not been. He died of his own accord, of course, as comfortable as his physicians could make him.

Forcing patients to express a preference on how they want such treatment to proceed may be one of the most fundamental methods to reduce healthcare costs as we address national priorities. It also creates an easier path for relatives who want to make the right decision. Deciding to let someone die is really, really hard. Sometimes religious beliefs of one family member are imposed on a dying parent or grandparent who might not even share those views.

Dartmouth results (as reported in the June 11^th Washington Post) show that in larger cities with more specialists, higher costs and more treatment options, the price of the last two years reflects that reality: “In the final two years of a patient's life, for example, they found that Medicare spent an average of $46,412 per beneficiary nationwide, with the typical patient spending 19.6 days in the hospital, including 5.1 in the intensive-care unit. Green Bay [Wisconsin] patients cost $33,334 with 14.1 days in the hospital and just 2.1 days in the ICU, while in Miami and Los Angeles, the average cost of care exceeded $71,000, and total hospitalization was about 28 days with 12 in the ICU.” The June 13^th New York Times hits us with this somber conclusion: “The Dartmouth group estimates that up to 30 percent of Medicare spending is wasted on needless care.”

The Post adds this observation from Jeffrey Thompson, chief executive of Gundersen Lutheran Health System in La Crosse, Wisconsin: “‘At the end of life, what most people want is for their wishes to be respected,’ not to undergo an aggressive battery of tests and treatments.” The point is to encourage people to make the necessary choice in advance. I understand this reality at a level that I still find difficult to communicate. The tears still flow from time to time.

I’m Peter Dekom, and no one said these healthcare decisions are easy.

It’s Not my Fault!

A little over a year ago, a massive earthquake in China’s Sichuan Province killed tens of thousands of people, smashing buildings, cracking dams, and creating hundreds of thousands of homeless refugees. It was horrible. Could that quake have been caused in significant part by man? The Feb. 3^rd Gizmodo.com: “Some scientists are claiming that the Sichuan Earthquake, which killed over 70,000 people, might have been caused by a 511ft-high dam constructed just 550 yards from the fault line… The Zipingpu dam, located about three miles from the epicenter of the quake, holds 315 million tonnes of water. Some geologists believed that the weight of the water, and its ability to penetrate rock, could have changed the pressure on the fault line.”

It’s a question and a possible lesson for nations looking for new ways to harness alternative energy, to deemphasize our obsession with greenhouse-gas-creating fossil fuels. Dams control flood waters and provide hydroelectric power. Geothermal electrical power generation means messing with nature a whole lot more. Power companies drill deep into the earth’s crust to release pent-up reserves of heat, which is then used to generate clean electricity. But tapping that heat carries with it some pretty significant risks.

Picture a perfect Swiss city, Basel, complete with medieval Cathedrals and ancient buildings. Beautiful. Visualize a massive drilling rig, searching for “buried heat,” boring down three miles into the earth, tapping this geothermal treasure. And then feel the terror as the city began to shake causing a minor earthquake on December 8, 2006 – reminding the residents of the stories of a massive quake that shook the city, sending cathedral steeples crashing into the Rhine River over 650 years ago. The 2006 shake caused some damage, but more importantly, the drilling operations were terminated instantly. Swiss authorities clearly linked the quake to the drilling operation. That little effort disappeared into the pages of history, forgotten by most, but a clear reminder of the issues that face our nation as we explore “alternative energy.”

In early July, AltaRock Energy will begin a geothermal drilling operation in a region of northern California (about two hours north of San Francisco) laced with fault lines. The plans are to tap heat two miles beneath the surface. Seems that lots of faults also mean that the potential for heat from the earth’s core rising to the surface clearly increases. The June 23^rd New York Times: “Residents of the region, which straddles Lake and Sonoma Counties, have already been protesting swarms of smaller earthquakes set off by a less geologically invasive set of energy projects there. AltaRock officials said that they chose the spot in part because the history of mostly small quakes reassured them that the risks were limited.”

With some predicting that as much of 15% of America’s energy needs could be fulfilled by such geothermal power generation within two decades, it seems that we need to know a lot more about the relationship between drilling and tapping heat and the potential for releasing pressure and changing the underground stability in regions that might be prone to earthquakes. More disturbing may be the issue of breaking through the surface in an isolated region but triggering a chain of earthquakes that may reach hundreds of miles – along a spider web of linked fault lines – to major urban population centers. It would be a shame to learn this lesson the hard way.

I’m Peter Dekom, and I thought you might want to know.

When Americans Step Aside

One of the most difficult lessons American continue to learn is that what is our super-priority may be to us may not be the same priority to other people in other nations. When the Pentagon and the Twin Towers were slammed into on September 11, 2001, killing thousands, the world was aghast at this terrorist attack. Global sympathy was clearly with us. Most of the world wanted to help, but to most people in the world – excluding the “they staged this to garner power against Arabs” extremists – it was just another headline in the paper – a horror, but not something that had happened to them. Think of how many stories we read about genocide in distant lands, how we react with shock, but then the story fades.

As our government drew lines in the sand – telling the world that they were either with us or against us in a global war on terrorism – people actually didn’t want to get involved in a foreign war (a pretty natural human tendency – look at how long Hitler ran over parts of Europe before we decided to get involved). It just wasn’t their fight. As we invaded Iraq on the pretext of getting Al Qaeda, when most of the war did not see a connection that actually wasn’t there, as we brutalized prisoners, global sympathy was slipping away.

Increasingly, our leaders’ obsession with “terrorism” became an international turn-off for the vast majority of the earth. Sure, we had some allies fighting alongside of us, but those leaders were facing increasing opposition from their constituencies at home. Muslims who were sympathetic after the original 9/11 attack began to believe that the U.S. was blaming all Muslims for the problem; our local discrimination against American Muslims… even people who looked Muslim but weren’t… made matters worse. In the end, we were increasingly viewed as rogue nation obsessed with “terrorism.” Our unquestioning support of clear ally Israel , even when harsh tactics were applied, seemed to encourage Arabs to support horrific rocket attacks against Israel from Hamas in the south and Hezbollah in the north.

Our efforts became the recruiting tools for real terrorists to increase their ranks. The world didn’t like what we were doing; the Islamic world hated it. Unfortunately for the world, there are real terrorists out there with really harmful intentions to destroy those who do not believe as they do. They use suicide bombers to kill opposing forces, would love to nuke the U.S. and Israel and are wreaking havoc in the Middle East with incumbent governments. However, when “doing it for America ” is replaced with “doing it for ourselves,” the results are staggeringly favorable for us.

Hence Obama’s mission to Saudi Arabia and Egypt, his gestures and his speeches, his pushing Israel for movement, and his choice not to use the word “terrorism” in his recent speech. It is all part of an effort to take the U.S. out of the equation as local Muslims move their thinking away from “if we fight ‘terrorism,’ we are really fighting America’s war with Islam” to “there are extremists in our midst who threaten us that must be eliminated.” Without creating local relevance to battling terrorists, there is not much of a reason why local people want to get involved in our fight.

The best recent example of this reality is Pakistan . Since 9/11, America ’s efforts to get Pakistan involved in helping us always carried heavy local resistance, even as her leaders accepted American “aid” to join “the war on terrorism.” There simply was no grassroots support for the American effort. Rather than deal with conclaves of hotbeds of terrorism, the Pakistani government turned a blind eye, mounted occasional token efforts to comply with their U.S. treaties, and even allowed virtually autonomous regions (the Western Tribal District, the grant to the Taliban to apply Muslim law – sharia – to Swat, etc.) to be run by Muslim extremists. It really wasn’t their battle, and there were factions in the Pakistani military and intelligence services that were actually sympathetic to the Islamist causes.

That was then, and now we are seeing the beginnings of local Pakistani feelings against groups like the Taliban. There is local relevance – once “American interests” are no longer the motivation – fighting an internal force that applies brutality to force their extremist views on local people who simply want to live their lives. When the Taliban took up arms against the government after a “peace” accord allowing them to use Islamic law in Swat… literally launching an all-out attack towards the capital of Islamabad , the Pakistani people began to wake up to the enemy within. As local people lived in a war zone for a battle that was clearly not their fight, resentment against the Taliban rose.

Villagers in the remote Dir district followed suit. The June 10^th NY Times: “Villagers are rising up against the Taliban in a remote corner of northern Pakistan, a grass-roots rebellion that underscores the shift in the public mood against the militants and a growing confidence to confront them… More than a thousand villagers from the district of Dir have been fighting Taliban militants since [June 5^th], when a Taliban suicide bomber detonated his payload during prayer time at a mosque, killing at least 30 villagers.” Simply put, these locals do not want their area to become another war zone. While there have been uprisings against extremists before, this time the locals have official military support and national sympathy. They are rooting out the Taliban and their sympathizers because it is in their local best interest.

When it rains, it pours. The June 14^th Los Angeles Times: “ Pakistan announced [June 14^th] that it planned to expand its offensive against Taliban militants into the troubled South Waziristan region. The announcement came just hours after a bomb in a crowded market killed eight people and wounded 38… The area [quite far from Swat or Dir… in the southern region… by the Afghani border] is the stronghold of the country's most powerful Taliban commander, Baitullah Mahsud.” It seems that surging Taliban just became a local issue.

Look at the post-election crackdowns in Iran as protestors battle clandestine and uniformed police forces to plant the seeds of what become the ultimate unraveling of rigid control imposed by the religious leaders of this nation. Could America have done anything more effective to undermine this theocracy? Are we witnessing a revolution in its nascent state? As the violence escalates, as Iranian authorities crush demonstrators and as the government refuses to change the election results despite admitted irregularities, is this the beginning of the end?

While Americans (many of Iranian descent) gather in support to the Iranian protestors, as some American politicians demand a more powerful U.S. position of support of the opposition, President Obama is careful to limit Iran’s ability to blame the revolt on “foreign influences” (most notably the U.S. – the Iranian incumbents are naming Britain as the primary external miscreant); he sidestepped direct confrontation with the Iranian government over this post-election debacle until global condemnation of Iran’s crackdown required a stronger stand. The less such anti-extremist efforts are linked to “following American foreign policy directives,” the more effective they seem to be.

In the end, we advance against our cause against Muslim extremists by removing the convenient target of American policy as the underlying motivation. Moderates must be angry not at us but at the extremists in their midst who threaten their own way of life. As we see that reality occur, we also understand how extremism can truly be extinguished or at least minimized. If those fighting such extremism ask our support, we should give it… but it should not be an American “cause.” This has to be their fight for their own reasons.

I’m Peter Dekom, and I approve this message.

The Big Cover-Up

The U.S. has begun a policy of pulling itself out of the emotion-charged battle between Muslim and Western values. President Obama believes that it is essential to quiet a belief that fighting extremists in Muslim nations means kowtowing to American pressure to fight terrorism – Muslims are loathe to think that they are participating in a Christian “crusade”” against their faith. This step has become an essential ingredient in letting the vast moderate majority of Muslims deal with terrorism by making it a local issue.

Despite the continuous if not boring Iranian chants of “Death to America,” there have been subtle changes in anti-Western rhetoric. Ayatollah Khamenei recently focused his wrath on England in his allegations that the post-election street protests in Iran were the result of foreign interference. And it is now France that is taking up the anti-Muslim spotlight as President Nicholas Sarkozy decries Muslim dress in his own nation.

With a population of over 60 million, slightly less than 10% of which are Muslims, France appears to challenge the notion of ethnic and religious differences as tolerable in a nation whose very motto, Liberté, égalité, fraternité (liberty, equality and brotherhood), would suggest otherwise. The June 23rd The Washington Post: “‘In our country, we cannot accept that women be prisoners behind a screen, cut off from all social life, deprived of all identity,’ Sarkozy said to extended applause of the lawmakers gathered where French kings once held court [the palace at Versailles]. ‘The burqa is not a religious sign, it's a sign of subservience, a sign of debasement - I want to say it solemnly,’ he said. ‘It will not be welcome on the territory of the French Republic.’”

Because France sees itself as a nation of equality, its statistics on racial and ethnic discrimination, from jobs to housing, tend to be woefully less than the kinds of numbers that the United States has maintained for years in the governance of its racial and ethnic issues. But clearly, the pool of émigrés (and their children) from Muslim Africa – many descended from citizens of former French colonies – has been treated very much as second class citizens. Muslim enclaves (ghettos?) exist in many French cities. In 2005, three weeks of riots in different French cities over various forms of discrimination brought home the point that all is not equal in this nation that prides itself on its motto.

The battle between symbols of Islamic conservatism and Western values is not relegated to France. The same Post article: “In 2003, Sweden's National Agency for Education gave schools the right to ban pupils from wearing burqas if it interferes with the teaching or safety regulations… The Dutch government last year described the burqa and other clothing that covers the face, as ‘undesirable,’ but the ruling coalition stopped short of attempting a ban amid concerns of possible religious discrimination. But the government did say it would work toward banning burqas in schools and among public servants, saying that they stand in the way of good communication.” Germany and Italy too have had “difficulties” with Muslim immigrants who face comparable discrimination in the local job markets – the bad economy has only made the situation worse. Second generation “terrorist” cells – children of immigrants who feel they have nothing to lose – have sprung up all over the European community.

The tensions between the Muslim and Western worlds are very real. While it is gratifying that, for now at least, the United States is no longer as visible in this conflict as it had been during prior administrations, the fact that such frivolous features are the focus of world leaders remains troubling. As Al Qaeda recently announced that they would have no problem using nuclear weapons against the United States, Europe or Israel, more than ever, we need moderate Muslims to have their own local stake in rooting out and destroying such extremists in their midst. More than ever, we need such moderates to turn their heads away from the West as the “true evil” and address the real enemies in their own lands.

I’m Peter Dekom, and I approve this message.

Winners and Losers

Too big to fail gets fixed first. Reason: impact on overall economy has rippling effect (“ripple down” theory?), need to apply bandages to the core of America’s circulatory system. So we prioritize supporting insurance companies behind other insurance companies (AIG), recapitalize large financial institutions with federal money (Bank of America, CitiGroup, etc.), brace large job producing industries (automakers). Negative impact: government deficits rise to unprecedented levels, other hemorrhaging issues ignored (state defaults, small businesses ignored, overall job creation on second burner), “bad structures” allowed to continue rather than shut down, financial sector restructured to financial advantage of the rest of the business world (we are now at their mercy).

The World Bank revised their view of global contraction on June 22nd. They revised downward the shrinkage in global domestic product – from 1.7% to 2.9%. Since those nations at the bottom of the economic spectrum had lower to fall, they helped moderate the worldwide number, but the rate of decline is much higher in high income nations – 4.2%. Europe (4.5% which is a lot higher than the 2.7% they predicted earlier this year) falls behind the U.S. (3%, up from the earlier 2.4%) much farther. Numbers.

But for those of us on the ground, leading lives predicated on having a job and maybe owning a house, there’s a sense of failure, even though governmental jawboning occasionally produces an increase in consumer confidence measurements, a mild spurt at the retail level (sales from companies dumping inventory to generate capital?) and a “fools gold” stock market reacting to any “good sign” with a rally – almost always unsustainable in these times. Whoever called the markets “rationale” most certainly would be at a loss to explain a gyrating mass of money in search of a plausible story. If you missed the last bear rally spike, you’ll note the market dropped back down on the 22nd - significantly! Take heart!

What kind of job-creation do you think you’ll see in California or Michigan with huge state deficits, where the governments themselves have to slash payrolls, reduce services, increase fees and taxes and reduce preparing the next generations for a productive future by destroying educational budgets at every level? What is the long-term damage to the overall economy of such drastic actions?

The federal government has rebuffed California several times now. The June 22nd Washington Post: “With an economy larger than Canada's or Brazil's, the state is too big to fail, California officials urge… ‘This matters for the U.S., not just for California,’ said U.S. Rep. Zoe Lofgren, who chairs the state's Democratic congressional delegation. ‘I can't speak for the president, but when you've got the 8th biggest economy in the world sitting as one of your 50 states, it's hard to see how the country recovers if that state does not.’ … The administration is worried that California will enact massive cuts to close its deficit, estimated at $24 billion for the fiscal year that begins July 1, aggravating the state's recession and further dragging down the national economy.”

But the government is also worried that other states would pound the federal government for money if they favored any one state, so even after California cut $11 billion off its deficit and will run out of money by sometime in July, the feds said “no” to a federal loan guarantee of $5.5 billion additional dollars. Yes, California needs to amend its constitution to create a budgeting-tax structure necessary to repave its fiscal year, but it literally cannot survive without federal intervention.

With mid-term Congressional elections not that far off (2010), the lingering unemployment rates across the nation are likely to create a great deal of displaced anger – not just from those who have lost jobs, but from those who are underemployed, worried about losing their work or whose hours and wages have significantly contracted – which no politician can ignore for long. Since people hire new workers only when they are sure that they can support them, new jobs are always a “trailing economic indicator” – unemployment often lingers even after a recession has passed. The housing market tends to need jobs to support its growth as well.

In an article unrelated to the one referenced above, the June 22nd Washington Post notes this harsh reality: “With many forecasters projecting unemployment to remain above 10 percent next year and not return to pre-recession levels of roughly 5 percent for years after that, Obama is likely to be confronted with defending the effectiveness of his economic policies as the nation endures its worst employment situation in a generation.”

With overall U.S. numbers looking better than our European and Japanese counterparts (mature high income economies), it does appear that the proactive policies of the government are indeed producing a positive step. But Americans do not compare their lives and measure their prosperity by looking at the negative numbers in other nations; we compare what we had to what we had to give up within our own lives to come into the current circumstances. The political yellow light is flashing.

I’m Peter Dekom, and I approve this message.

The Donut Hole and Other Messy Issues

The trouble with expensive healthcare issues seems to be that people think of it as a social cost that burdens society until they are faced with the hard costs of a big medical emergency or the slow drain of a lifetime of taking expensive prescription drugs. I guess these folks could just opt to roll over and die, but there is a cost to longer life expectancies… the medicines and procedures that keep us alive are very expensive, which is literally at the heart of the various healthcare reform solutions being bandied about in Washington these days.

The Democrats have proposed a combination of private and public healthcare plans that, in theory, should cover 95% of Americans. The plan was short of specifics, there are hints that this would cost the U.S. $1.6 trillion new dollars over ten years, but here is what the broad strokes would be per the June 20th NY Times: “The proposal would establish a new public health insurance plan to compete with private plans. Republicans and insurance companies strenuously oppose such an entity, saying it could lead to a government takeover of health care. The draft bill would require all Americans to carry health insurance. Most employers would have to provide coverage to employees or pay a fee equivalent to 8 percent of their payroll. The plan would also end many insurance company practices that deny coverage or charge higher premiums to sick people… The bill would impose a new ‘tax on individuals without acceptable health care coverage.’ The tax would be based on a person’s income and could not exceed the average cost of a basic health insurance policy. People could be exempted from the tax ‘in cases of hardship.’”

Over time, gaps in Medicare – which materially impacts our seniors – would be filled as well… particularly the legendary “donut hole” of huge mega-payments for those with significant drug need. The June 27, 2008 ConsumerReports.org explains the donut hole: “[A] large gap that exists in the middle of most Medicare prescription drug plans (PDPs), officially known as Medicare Part D. A standard PDP typically requires the beneficiary to pay an initial deductible, $275 this year, after which the plan starts picking up 75 percent of the cost of approved prescription drugs—but only until the consumer’s annual drug bill reaches $2,510… The consumer then has to pay 100 percent of prescription drug costs until a second annual threshold of $5,726 ($4,050 out of pocket) is met. Once the consumer’s annual total drug bill surpasses $5,726, the PDP and Medicare typically pay a combined 95 percent of drug costs from there on. Specifically, the doughnut hole refers to the gap in coverage that exists between those two spending thresholds, where the consumer has to pay 100 percent of the cost of approved prescription drugs.”

Add this “hole” to services that insurance companies exclude in the fine print, the policies they cancel when the policy-holder is really sick and what happens when someone uses up their lifetime benefits (yes, there is an overall cap!) and you have financial disaster. Even prudent consumers, those who did not over-borrow to support a lifestyle about their apparent means, get sucked up into the unforeseen vortex of bankruptcy. Add job loss or companies’ cutting healthcare out of their benefits package because of cost, and the obvious chaos to the lives of many becomes even more glaringly apparent.

The National Coalition on Health Care Reform reports that while 68% of those Americans filing for bankruptcy had health insurance, 50% of the total filed in material part because of healthcare costs. When you have a huge medical cost, it tends to be big, sudden, exceptionally harsh and unexpected. So as we approach this complex issue, watch the potential of higher social taxes, perhaps there should be a touch of basic empathy in those who are choosing to support or deny such benefits or to fill the holes where lack of coverage can destroy a family.

The pharmaceutical industry has agreed to help seniors fill the hole part of the way: “U.S. drug makers agreed [June 20th] to shell out $80 billion over the next 10 years to lower the cost of medication for seniors and help pay for President Obama's proposed healthcare overhaul, as part of an agreement hashed out with lawmakers and administration officials.” June 20th, Los Angeles Times. But the hole needs a lot more filling to make a big difference.

I think we’d all like the benefits accorded to those in the Senate and the House, but picture yourself in a healthcare emergency… finances drained by the unexpected. How would you like to be treated? Popular support seems to be growing; a CBS/NY Times poll (reported in the NY Times on June 20th) notes: “The national telephone survey, which was conducted from June 12 to 16, found that 72 percent of those questioned supported a government-administered insurance plan — something like Medicare for those under 65 — that would compete for customers with private insurers. Twenty percent said they were opposed.” Lots of legislators are swallowing hard as they balance empathy against staggering costs… healthcare reform isn’t easy; it may not even be just around the corner as many (including the President) believe, but one way or another, it seems inevitable.

I’m Peter Dekom, and I approve this message.

Bottom’s Up

People speak about “hitting bottom” as there will be a discernable and definite day when this managed depression will end. We’ll know that we are at that bottom because… er… someone will tell us? Folks talk about “leading economic indicators” (like the stock market that trades on expectations) and “trailing economic indicators” (like unemployment, which is only impacted after real demand returns to the marketplace) and “signs of a recovery.” We’re not facing the 50% GDP contraction of the Great Depression, but with over 6.1% of annualized GDP shrinkage over the last two quarters, we haven’t seen numbers this bad since that calamity.

First, that day of bottoming will not happen. Bottoming out is a process that impacts different regions, different neighborhoods, different people and different businesses at varying degrees and at different times. Seems obvious, but it really isn’t. If the credit markets unfreeze at the highest levels for major companies, that most certainly doesn’t mean the credit markets have also unfrozen for small or even medium-sized firms. And if the stock market rises and makes the bigger companies more valuable as a result, that doesn’t produce the same result for companies that are not publicly traded. The timing could be months or even a year or more between different levels of credit availability.

Second, the very notion that recovery starts when we “hit bottom” is also overly simplistic. If we view what has occurred as a “value reset,” whatever growth that will occur has to start from this reset valuation – we’re not jumping back to where we were before this crisis began. We’re just as likely to go “sideways” as up, and if you are looking at average growth, when it does begin, try and think 2-3% per year. But that doesn’t mean that all houses, commercial real estate or business values will grow at that rate when recovery begins (and again, it will begin at different times for different people and firms).

If you are in a hot new business sector or live in a neighborhood which is in a great market, near the action and in an amazing place, that uniqueness will accelerate values well beyond the average. Likewise, if the real estate is in an unsold distant tract neighborhood or the business was just getting by, those values could presumably drop even as the averages are growing. They recently bulldozed an entire housing community in southern California (in Victorville), because the developer went bust and the homes were never likely to sell. Seems a shame with all of those homeless folks around – even displaced middle class people who lost their jobs – to waste this value, but that’s precisely what happened.

Third, there is the question of employment – that nasty trailing economic indicator. As Fortune Magazine recently noted, we live in an era where consumers have elected to postpone buying just about anything that they can postpone buying. Just because inventories are falling doesn’t mean that there will be an immediate rehiring effort “to make more.” Much of what was carried as inventory was sold at fire sale prices to generate operating capital because of the lack of credit for most of American businesses. In short, they are using that money to buy time and stay alive until the markets in their sector really do stabilize. The Commerce Department posted a ½% retail sales gain for May, but it’s hard to read too much into sales that may be based on abnormally-deep discounting.

Even our “optimistic” economic policy-makers in Washington tell us that even if the GDP stabilizes and begins to grow, until that growth hits at least an annualized 2.5%, the unemployment numbers will continue to rise… well into 2010. That’s the opinion of Christina Romer, chairwoman of the White House Council of Economic Advisers, cited in the May 10^th NY Times, but “Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on [May 10^th] that the rate of growth would have to be higher — 4.5 percent — to rev erse rising unemployment.”

Additionally, there’s a harsh underbelly to these statistics, not just the fact that the unemployment numbers don’t include people who want full time work but only get part-time or occasional work or those who have just given up (multiply the raw unemployment number by 1.86 to see this “alternative measurement” – 9.4% x 1.86 = 17.48%), but that the quality of so many of the available jobs is so marginally remunerative and hardly reflective of a society with technological growth as an employment driver. And look at those states whose unemployment is well north of 10% - California’s basic rate is 11.5%, which creates a 21.4% alternative measurement. Wow! One in five Californians falls into that category, and the state is running out of government money just as the tax base is vaporizing.

As my friend and business consultant Dennis Duitch says in his May 10^th Client Bulletin (www.duitchconsulting.com), citing the May 9^th U.S. New and World Report: “a percentage of the American workforce, as older, college-educated workers ‘are less likely to retrain or re-educate for different careers once their occupations have become automated’ or their positions get eliminated by downsizing or company shutdown. Many who ‘devoted decades to white-collar, middle-skilled work’ have no other option in a job market which is ‘hollowing out’ – their only income replacements being ‘manual jobs that are hard to automate and not highly-skilled: sweeping floors, driving trucks, mowing lawns, cleaning houses, flipping burgers.’” What’s worse, there seem to be 4 applicants for every job opening in this market, and it is going to take serious time to remedy this catastrophic reality.

Meanwhile, we’re watching commodity prices inching upwards – particularly oil – as international demand, from places like China which is much less impacted by this managed depression than most of the rest of the world, seem to be moving up just as the dollar is beginning to show signs of weakness. The International Monetary Fund thinks the U.S. will recover earlier and faster than Europe, but then there’s Asia, a freight train of future growth. It’s no longer a question of “everything” coming back at the same time or even coming back at all. The trick for those in search of a future is to apply common sense to what is likely to be the upcoming value propositions, from companies to jobs, from neighborhoods to business sectors. Pick well, and you will flourish. Pick badly and look around at others who have made similar choices.

Remember there was a time when cities banned cars from the center of town because they scared horses. Then people welcomed cars as “cleaner” than horses – they hated the dead horses left where they fell in the street, the muck from horse manure and the stench of the inner city. Who around us is making buggies for horses? And which sectors are the real “next.” You cannot legislate a halt to change… it never works. The wave that will carry many of us to the next round of prosperity will leave many behind. This “readjustment” will touch each and every one of us.

I’m Peter Dekom, and I approve this message.

Between I-rock & and a Hard Place

I blogged before about the fundamental (pun intended) difference between that form of Islam practiced by the majority (85%) of Muslims – the Sunni path – and that practiced by the minority (15%) – the Shiite view of the faith. Aside from questions of the ancestral linkage to the Prophet Mohammad, the core difference between these two sects focuses on how they view their holiest of books, the Qur’an.

Sunnis see their disciples as reading the literal words of the Qur’an, forming an individual one-on-one relationship with God, and view their legitimate leadership as “protectors of Islam,” but not as interpreters of the faith. Shiites, on the other hand, believe that the Qur’an is a mystical book, capable of interpretation only by the holiest of scholars and religious leaders, so followers are required to adhere to the dictates of such interpretations. On the Shiite path, government and religion are far more intertwined. Iran is considered the bastion of the Shiite side of the equation, with many followers in neighboring Iraq and in more distant areas within Lebanon and Syria.

Until the 10^th century AD, the Shiites were led by a spiritual leader, a Pope-like prelate, called the Imam. At that time in history, the 12^th Imam simply disappeared, and the Shiites simply fell apart, persecuted fiercely by Sunnis who saw them as heretics. In 1979, when the Shah of Iran was deposed, and an Islamic (Shiite) Republic was formed under the spiritual leadership of the Ayatollah Khomeini, many Shiite faithful perceived that Khomeini was the return of that 12^th Imam, imbued with the supreme power to interpret the faith and bring God’s will into the political structure, putting religious leadership above the elected government. While no supreme ayatollah has ever acknowledged that they have the power of the Imam, their behavior often suggests a comparable power.

Why is this remotely relevant to the modern world? Because the supreme spiritual leader of Iran, the Ayatollah Khamenei (Khomeini’s replacement) is viewed as virtually infallible, much like the Pope in the Catholic Church. So as Iran struggled to silence a large number of young reformists who backed opposition leader, Mir Hossein Mousavi, against Mahmoud Ahmadinejad, the incumbent conservative President in the recent election, as technology (like Twitter and Facebook) became tools of the opposition, Khamenei’s autocratic power came under attack in a way that the established Iranian government could never have foreseen and seems powerless to control.

Khamenei literally announced, prematurely it seems, that Ahmadinejad had won the election, despite a rising tide of popular protests in support of the opposition. Mousavi directly challenged the directives from Khamenei, who has already backed off and accepted a “traditional” ballot recount (not a deeper inquiry of how the ballots were actually “created” – he specifically eliminated “fraud” in the election in a June 19^th speech), and called for increasing demonstrations against the election. That Khamenei had backed off at all seemed to fly in the face of his purported infallibility, a challenge to the underlying basis of the Republic.

As protests increased, as electronic media seemed to evade the strict censorship policies of the government, Khamenei now faces a very difficult decision. Should he sacrifice Ahmadinejad to avoid a rising confrontation with the protestors (heavily comprised of younger urbanites) and settle the country down into complacent acceptance of the status quo (allowing Khamenei to survive to fight another day) – by finding election irregularities and accepting Mousavi as President – or should the Supreme Leader call out the Iranian Revolutionary Guard Corps (IRGC) to enforce Amahdinejad’s purported victory and suppress the protests, risking a situation that could threaten the viability of the Islamic Republic itself? Is Khamenei slowly pushing the accelerator pedal of repression to see what happens?

“Secret vigilantes,” known as the Basij, have tracked the most vocal protestors during the day, seeking them out at night – murders and beatings “happen” where the government looks the other way. This creates official plausible deniability but begins the kind of repression that may ultimately create new social “martyrs” and result in a seething underlying force that could alienate the coming generation, planting the seeds of destruction for the Islamic Republic.

The June 19^th Los Angeles Times: “Though Ayatollah Ali Khamenei criticized some of Ahmadinejad's campaign season conduct and condemned the killing of students by pro-regime loyalists earlier this week, he came down strongly on the side of the president and his faction while warning supporters of losing candidate Mir-Hossein Mousavi of consequences if they don't end their civil disobedience.” Note his separation of direct government involvement in the killings from the “loyalists” who alleged perpetrated this violence on their own.

Who are the Basij, really? The June 19^th New York Times: “ ‘It is the special brigades of the Revolutionary Guards who right now, especially at night, trap young demonstrators and kill them,’ said Mohsen Sazegara, an Iranian exile who helped write the charter for the newly formed Revolutionary Guards in 1979 when he was a young aide to Ayatollah Ruhollah Khomeini. ‘That is one way the regime avoids the responsibility for these murders. It can say, “We don’t know who they are.” … The death toll now stands at 13, said Shahram Kholdi, a graduate student at the University of Manchester in England, who is building a Web site to track all killings.”

Desperation is rising as the Basij are beginning to call for open action on the part of angry conservative Iranians to root out the hooligans in the protest movement. Is this a declaration of war by the government or another escalation in testing the waters of hardline repression? We have a very real interest in both the long and the short term outcome of this “election.” Since Amahdinejad has been very confrontational with the West over the development of Iran’s nuclear capacity, the results have global ramifications, well beyond the price of oil. But if U.S. policy intervenes too deeply in Iranian politics, this could give the government the excuse it needs to crush the protestors as a means of resisting “American interference.” This must remain an Iranian internal issue.

I’m Peter Dekom, and I approve this message.