Monday, November 30, 2009

Death N’ Things

Some states have eliminated the death penalty simply because all of the special appeals and custodial requirements have made capital punishment simply too expensive, a huge factor in times of budgetary restrictions. With a 2008 Gallup poll telling us that 64% of Americans believe in governmental executions, clearly all of the humanitarian arguments in favor of banning this form of justice are going to fall on deaf legislative ears in major swaths across the country. If there is going to be a ban on death sentences, then it’s going to be about the money.

We executed 37 prisoners last year (Texas alone killed 18), and while we aren’t even close to the 1178 executions that took place in China last year, we do make the “top five” list of countries that execute criminals, joining such notable nations (in addition to China) as Iran, Pakistan and Saudi Arabia. Two thirds of the world, 189 nations to be exact, have banned capital punishment, and the European Union countries look at the U.S. practices are fairly primitive and barbaric.

The Christian Science Monitor (, Oct. 20) provides a litany of facts concerning this economic analysis noting that approximately 3,300 American inmates are currently sitting on death row: “A 2008 study in California found that the state was spending $137 million a year on capital cases. A comparable system that instead sentenced the same offenders to life without parole would cost $11.5 million, says the [Death Penalty Information Center] report, citing the study's estimates… New York spent $170 million over nine years on capital cases before repealing the death penalty. No executions were carried out there…. New Jersey spent $253 million over 25 years with no executions. That state also repealed capital punishment. [ New Mexico also recently abolished the death penalty.]

“Some officials may be tempted to try to cut capital-punishment costs, notes the DPIC report, but many of those costs reflect Supreme Court-mandated protections at the trial and appeals-court levels. ‘The choice today is between a very expensive death penalty and one that risks falling below constitutional standards,’ the report says… Nationwide, the report estimates, at least $2 billion has been spent since 1976 for costs that wouldn't have been incurred if the severest penalty were life in prison. The figure is based on an estimate in a 1993 North Carolina study that found the average extra cost of a death sentence in this state was $300,000 [and that was 1993 dollars – some folks think it is now in serious seven or even eight figures; see below]. The average extra cost of capital punishment is significantly higher in several other states like California , Florida , and Maryland , the report says.”

According to a report in the October 20 news, the DPIC believes that the actual cost per death row execution is more like $25 million and that capital cases cost $1 million more than ordinary cases to prosecute; since, the death penalty is given in only one out of three of such cases, this increases the number up to $3 million average of extra prosecution cost per death penalty conviction. 57% of police chiefs even doubt that the death penalty has any serious deterrent value (39% believe that it does), so are we really getting, you should pardon my expression, enough “bang” for our buck?

Saving money these days is a good thing, no matter which side of the issue you may be on. So, by the way, is making sure that you don’t execute innocent prisoners. Amnesty International tells us that 4 U.S. prisoners on death row were released in 2008 based on subsequent findings of innocence, bringing to more than 120 the number of such cases in the US since 1975. And while I do get riled up over terrorists, serial killers and mass murderers, I get even more riled up when I think those bastards are costing me bucket-loads of cash! I suspect we might actually have a better use for all that cash – like educating our children well in enough in the first place to actually reduce the number of psycho-killers we are sentencing to death today.

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

Sunday, November 29, 2009

Car, Jack?

“Cash for clunkers” worked, if increasing car sales was the only goal. The United Auto Workers members at Ford looked at the numbers and seem to have bought into the mythology that the crisis for automakers must be over. Unfortunately, the “cash for clunkers” program is over; now the car-makers have to prove that even in this impaired economy – where consumers are most certainly putting off the “big-ticket” items absent some very strong incentive to the contrary – they can actually sell enough cars to survive. The prognosis is anything but clear.

To make matters worse for Ford, their local competitors, General Motors and Chrysler/ Fiat, have had the advantage – at least when it comes to union compensation and benefits – to have been able to restructure their union agreements through the bankruptcy process. While Ford avoided filing for Chapter 11 bankruptcy (reorganization) like its brethren, it most certainly faces the same harsh economic climate and consumer resistance without the benefit of being able for force an alternation in the impact of its collective bargaining agreements with the UAW. From a simply labor/fringe benefits cost perspective, going forward, GM and Chrysler/Fiat have a clear advantage over Ford.

Union leaders have sympathized with Ford’s plight and understand that what is at stake may be the very survival of a viable American car industry. They have supported Ford’s desire to match GM/Chrysler agreements, even though the proposed changes would represent the third round of concessions granted by the Ford UAW locals over the past two years. Unfortunately for Ford and the UAW leadership, these requests seem to have fallen on the deaf ears of the rank and file union membership that seems unwilling to budge any further.

The October 28th New York Times: “Members of at least five local chapters of the United Automobile Workers union have turned down the proposed changes, which include a six-year wage freeze for newly hired workers, some job-classification changes and a provision that bars the union from striking over demands for better pay and benefits through 2015… The U.A.W.’s president, Ron Gettelfinger, has been urging workers to approve changing their contract, arguing that Ford is still heavily in debt and that workers could end up worse off if they do not agree to the deal. If ratified, the deal gives all hourly workers a $1,000 bonus in March and assigns new products to some plants, in some cases adding jobs.” The ratification vote by the Ford UAW locals, however, appears headed for defeat.

The big issue is, of course, the “no-strike” language that the U.S. government forced into the agreements with Chrysler and GM as a precondition to government investment into these failing companies, but it is hard to reconcile Ford having unions ready to strike while GM and Chrysler are assured of labor piece. The U.S. car business is teetering on the brink of total extinction. Will Ford be forced into Chapter 11 reorganization? Will one of more of the big three automakers take the bigger and final step of filing for total liquidation under Chapter 7 – vitiating warranties, eliminating the continued manufacture of the necessary replacement parts and decimating the resale value of cars made by defunct manufacturers? Time will tell, but the signs are not particularly good right now.

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

Saturday, November 28, 2009

Dubai or Nothing?

There are a pile of debtor nations; the United States is at the top of that list with over $12 trillion (adding a lovely average of $3.81 billion a day since September of 2007 – just short of $40K per citizen), but at least the debt is payable in U.S. dollars. For lots of the rest of the world, most of the debtor nations can tread water as long as interest rates stay really low. But, er, we know that sooner or later, interest rates have to soar or no one will be covering all this debt.

You can get a pretty good view of the risks involved by looking that those lovely credit default swaps or simply at the direct cost (to a bond holder) of insuring a nation’s debt obligations. For example, folks are terrified of Lithuania and Greece, staggering under unmanageable debt loads, and in the past week, these insurance costs jumped up 6% for Lithuania and a whopping 16% for Greece. Spain and Holland are not too far behind.

But who would’ve thunk that that little financial center in the oil rich Middle East, Dubai, would be completely unable to meet its debt service obligations. You know, the place with the mega-tall super-buildings and those incredible, palm-leaf-shaped artificial islands. Apparently, in this real estate meltdown, there really aren’t enough people to rent or buy the underlying space or even occupy the glitzy hotels at the required rates. So the this little Emirate’s investment arm, Dubai World, that built most of this stuff, has asked its lenders to accept a six month moratorium on interest payments. It’s like asking your mortgage lender to let you stop paying interest for half a year… except you might be more likely to resume payment than Dubai World, which is still very unlikely to find people to rent their massively over-built residences, hotels and office towers even in six months.

Dubai has built its fortunes on being the progressive regional financial center (with a tourist twist), since this Emirate has not been blessed with the oil reserves of its neighboring Emirates, like Abu Dhabi. And while oil rich Abu Dhabi may in fact bail out its profligate neighbor, they are more likely willing to let Dubai World twist in the wind for a while, a painful reminder of frothy excess. Just as economists are patting themselves on the back for declaring this recession over, perhaps they are about to eat their words, if in fact this “canary in the coal mine” is a harbinger of things to come.

The November 27th New York Times: “In a worst-case contagion, Bank of America analysts wrote Friday, ‘One cannot rule out — as a tail-risk — a case where this would escalate into a major sovereign [read: governments of heavily indebted nations] default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.’… And not just emerging markets. ‘Dubai shows us that what we are now facing is a solvency issue, not a liquidity issue,’ said Jonathan Tepper, a partner at Variant Perception, a research house in London that has been outspoken on the debt problems facing European economies.”

Yeah, well, liquidity means you have the values, you just don’t have the cash. Solvency challenges both whether you have the cash and if the values are really there. We’re only looking at $59 billion of debt in Dubai World, only about .04% of the world’s cross border obligations, not much by global standards. “Still, one concern is that some British banks with large credit exposure to the United Arab Emirates are already troubled. Royal Bank of Scotland, majority-controlled by the British government, was one of the largest lenders to Dubai World, having secured $2.3 billion worth of loans to it since early 2007, according to a report by J.P. Morgan. Standard Chartered and Barclays were also large lenders to the region, with more than $10 billion between them, analysts said. HSBC has $17 billion exposure to the United Arab Emirates.” The Times.

But the global stock markets, even the Dow, plunged at the news. I suspect it was not over the relatively minimal exposure from the potential Dubai default. “The Dow Jones industrial average fell 154.48 points, to 10,309.92 Friday, as markets in Europe and Asia closed slightly higher after opening sharply down for the third consecutive day. Crude oil prices fell to a six-week low; gold fell as investors sought havens.” The Times. So for all those folks who are telling us the worst is over, there may be some serious explaining to do.

I’m Peter Dekom, and I think someone is missing the obvious.

Friday, November 27, 2009

“Fat, Dumb or Dishonest”

Americans are going to have to work extra-hard in the future to pay down that massive deficit we have already incurred to get us out of economic dire straits we got ourselves into by over-borrowing. We need new value-added skills and abilities. With a crumbling dollar (18% fall against the Euro, 40% against the Australian dollar, etc. over the past year) and the crumbling public primary and secondary school system (we are 19th in recent testing of countries with modern schooling), it’s really hard to see exactly how we are going to accomplish this feat.

And the United States Army – the purveyor of the “Army strong” slogan – seems to agree. To them, the youth of America present basically a nation of slobs. According to the November 4th, “The latest Army statistics show a stunning 70 percent of military-age youth are ineligible to join the military because they are overweight, can't pass entrance exams, have dropped out of high school or had run-ins with the law.”

A nation of porky idiots? Not a good place from which to build a future. “So many young people between the prime recruiting ages of 17 and 24 cannot meet minimum standards that a group of retired military leaders is calling for more investment in early childhood education to combat the insidious effects of junk food and inadequate education…

“[Former Chairman of the Joint Chiefs of Staff, General John] Shalikashvili is among dozens of retired generals, admirals and civilian Pentagon officials who have banded together as Mission Readiness: Military Leaders for Kids. The group, which includes former NATO commander and presidential candidate Wesley Clark, will appear with Secretary of Education Arne Duncan at the National Press Club on Thursday to urge immediate action to reduce dropout rates and improve the physical and moral fitness of the nation's youth.” Sphere.

Until the recent soaring unemployment rates which have had a beneficial impact on recruiting, the military has had to more than double the number of “conduct waivers” (for criminal records!) over the preceding four years just to get enough soldiers. Wow, that’s unpleasant. I’m picturing gang members getting sniper training and expertise in explosives, because they are more qualified for military service than the average American youth! I’m not feeling good about this.

So if our enemy is reading this, what can they do to defeat our soldiers? Banana cream pie fake-outs? Soda machines with infinitely free sugar-laden soft drinks? Soft fluffy couches with lots of videogame options? Blaring “Are You Smarter than a Fifth Grader” questions over loudspeakers to demoralize the troops?

For those of us who like studying history, the parallels to the years that preceded the fall of Rome in 476 A.D. or the life of the average Chinese citizens before the Mongol conquest of China in the 12th and 13th centuries are scary. I guess if you cherish your country and believe in America , it takes a bit of effort to make “ America ” continue to work. Taking our life in this great nation for granted is no longer viable.

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

Thursday, November 26, 2009

There’s Gold in Them Thar Thrills!

As the dollar remains under siege, the price of gold has soared. Folks will put their cash in stocks, commodities, precious metals… anywhere other than in the depreciating greenback. With rising oil prices that increase our trade deficit, and as our huge deficit-enhancing stimulus package makes the United States a humbled “supplicant” debtor nation, unable to mount any credible negotiation with the Chinese– who hold $2.3 trillion in dollar reserves – over any number of key issues, America is in arguably the worst financial condition since the Civil War. Pull the stimulus out of the economy – which would vastly reduce the deficit – and does the condition of our private economy fall into the abyss? There are no good choices, but it does appear that we, as a nation, face a near-term future of less.

Less (“fewer” if you insist on grammatical purity) jobs, less dynamic growth, less in the quality of life, less economic clout and less political sway. The dollar is likely to fall out of favor as the global reserve currency – the currency nations use to maintain international accounts and which is used to value the world’s commodities, particularly oil. We will be lucky if the dollar maintains the majority of value in the probable new “aggregated and virtual” special drawing right currency, if that does in fact replace the dollar in international circles. If the world’s major oil producers instead elect to go directly into an existing currency, like the Euro where the dollar has no part, expect a dramatic further fall in the value of the dollar, which has dropped, over the past year, 18% against currencies like the Euro and a whopping 40% against the Australian dollar or the South African rand.

The U.S. has been riding the wave of favorable low interest rates for its massive national debt, but there is little doubt that the international community, faced with a falling dollar, and the Federal Reserve, which adopted a near-zero percent interest rate only as a short-term emergency measure, are expecting normal to higher rates in the very near term. The November 22nd New York Times: “With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher… In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan…

“ ‘The government is on teaser rates,’ said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. ‘We’re taking out a huge mortgage right now, but we won’t feel the pain until later.’” And folks are not cooperating with us the way they used to. The Chinese have refused to budge on maintaining a lockstep parity with the dollar (making their exports consistently valuable in the U.S., and continuing the dollar’s lack of export value in that market), and the Europeans are desperately trying to shore up the dollar so that we will continue to buy their exports (which improves their job growth at the expense of U.S. exporting companies.). Gold futures have pushed the value of that precious metal well past the $1100 mark, and prognosticators are suggesting that this value could more than double in the coming year.

Speculators are going crazy for gold, but that actual purchase of gold itself – for private or industrial use – has plunged. The November 21st Los Angeles Times: “Gold bought as jewelry, for example, reached 673.3 tons in the third quarter of 2008, when gold's price was mostly below $900 an ounce. In the third quarter of this year, with the price mostly above $900 and on its way to $1,009 by the quarter's end, the amount of the metal bought as jewelry totaled 473.5 tons, down 30%.” In simple terms, jewelers are not having a good time, and holiday sales are likely to see a serious shift away from gold jewelry. I can see smart wives and girlfriends arguing that giving them more gold for the holidays is actually a hedge against the inevitable further erosion of the dollar.

How do governments approach the physical use of gold? The LA Times: “Interestingly, the Austrian government mint is betting otherwise, at least in the near term: The mint, the world's biggest producer of gold coins, recently said it planned to cut output by 32% in 2010, figuring that an improving global financial system will slash gold demand from investors… The U.S. Mint, however, is siding with the bulls: On Dec. 3 it plans to resume production of American Eagle gold coins in half-ounce, quarter-ounce and one-tenth-ounce sizes to supplement its production of one-ounce coins.”

Okay, husbands and boyfriends, assume the brace position and prepare! The holidays approach! Okay, those of you who still have jobs, have not experienced a cut in pay, and are feeling generous in perilous times.

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

Wednesday, November 25, 2009

Ever Get that Sinking Feeling

The November 24th Los Angeles Times reports that home prices have begun to crawl ever-so-slightly up this September: “The Standard & Poor's/Case-Shiller index increased 0.3% from the prior month on a seasonally adjusted basis, after a 1.1% rise in August. The index fell 9.4% from September 2008 and marked the narrowest year-over-year decline since the end of 2007.” Whew! I’d be jumping up and down, screaming for joy, if not for the headline in the Wall Street Journal the same day: “1 in 4 Borrowers Under Water.” The lead paragraph on page one puts it like this: “The proportion of U.S. home-owners who owe more on their mortgages that the properties are worth has swelled to about 23%, threatening the prospects for a sustained housing recovery.” Argh!

The New York Times (Nov. 24th) looked at the same Case-Shiller data and observed, taking the government’s first-time homebuyer tax credit into consideration and the seasonal nature of real estate sales, “That hope is giving way to pessimism. The housing market traditionally slows during the winter. This year, it will have to confront an abundance of inventory, high unemployment, devastated household balance sheets and an economy that remains wobbly… Instead of housing having a slow ‘V’-shaped recovery, [Maureen Maitland, vice president for index services at Standard & Poor’s] speculated, it might instead look more like a ‘W,’ as the price lows plumbed last spring are tested again this winter.”

I’m having this visualization problem about the “recovery.” I’m seeing the stock market rise based on cost-cutting (mostly getting rid of workers, the folks you need in the economy to start spending again to effect a genuine recovery)… and the fact that the market is apparently better place to keep your money as the falling dollar makes low-yield debt instruments particularly unattractive. I am looking for the other numbers that suggest growth and recovery. Unemployment is soaring and unlikely to correct anytime soon. Economists’ explanation: employment is a trailing economic indicator, and it can take years.

Sorry, economists, I’m not buying the “same-old, same-old.” You are not making any room for a societal paradigm shift, one in which a country, embroiled in expensive military conflicts abroad, borrows itself silly while lowering it future core competencies by hacking away at educational funding, just as other countries, particularly China, are providing the most basic and effective competition to our country in decades. You don’t take into account a crumbling infrastructure that has suffered from “deferred maintenance” for decades and city and state governments that have just plain run out of money. You only point to the stock market and try and convince the American people that this one “leading economic” indicator is enough. Heck, the stock market itself doesn’t believe you, economists, because they trade up and down based on the latest news.

The Wall Street Journal goes on, noting: “Nearly 10.7 million households had negative equity in the homes in the third quarter… These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market.” But wait, there’s more. The Federal Reserve, while clinging to the existing near-zero fed rate, is beginning to send signals that rates are going to rise, not only because higher rates are necessary to attract foreign buyers of U.S. debt instruments (to fund our deficit), but because the Fed believes that cheap money available to the big financial institutions has fueled “excessive risk-taking.”

The Federal Reserve report also predicts unemployment rates well over 9 percent through 2010 and beyond: “It paints a grim picture. Top Fed officials expect the unemployment rate to remain in the 6.8 to 7.5 percent range at the end of 2012 and said it could take ‘about five or six years’ from now for economic activity to return to normal. The jobless rate was 10.2 percent in October.” November 25th Washington Post.

On November 24th, the FDIC – the agency charged with protecting (“insuring”) consumer deposits in federally insured banks – reported that it had a negative balance (the first since 1992) of $8.2 billion in the third quarter. They added that the nation’s 8,100 banks remain in fragile condition and that the number of banks (“problem banks”) in imminent danger of failure grew from 416 to 552 due primarily to credit card defaults, continued failures in residential mortgages and collapsing commercial real estate loans.

Are you with me, America? Is the emperor still naked, while economists are busy giving glowing fashion reviews, or am I missing something? Between Santa Claus and the Easter Bunny, I am torn at whom to believe. And I’d like to see someone begin to address the grassroots issues that seem to be ignored in any meaningful stimulus or re-ignition of our economy. The big boys have hog-slopped at the trough long enough… move over and let us piglets in!

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

Tuesday, November 24, 2009

Old Idea + Internet = New Patent?

Most folks know about the “business method patent” that allows a registered buyer to purchase an item with “just one click.” Anyone infringing on that “creation” (by having a one-click option on your commercial Website) can get zapped and slapped with a patent infringement lawsuit from one really big, powerful company. Unlike design patents and what we traditionally think of patents for new physical inventions, these patents for “processes” were originally created by judge-made law – they did not originate in a Congressionally-authorized bill(s), signed by the President, that became a federal statute or two.

And with the flood of patented methods, people trying to wade through the Internet with their new businesses are constantly tripping over processes that are so basic that they never even think that they may be infringing on someone else’s patent and wouldn’t even begin to know how to check on exactly what patents they may be stepping on. Further, they could not afford to do a thorough patent search if their lives depended on it; it’s just too expensive. There is a movement afoot to reign in patenting the obvious, and in a world of hideous unemployment, cutting off some of the most basic, entrepreneurial self-help, job-creating efforts with business-stopping stupid business method patents would seem to be a non-starter.

On Monday, the U.S. Supreme court heard oral arguments in the case of Bilski vs. Kappos; the Court will consider whether a new standard should apply to this nefarious world of business method patents. It may not sound earth-shattering, but the decision could have far-reaching effects on your life. Writing for (Nov. 17), lawyers Eric Hutchins and Gary Ritchey addressed this watershed case: “In 1997, Bernard Bilski filed a patent application with claims directed to a method for hedging risk in commodities trading.” A federal appeals court upheld the denial saying: “[T]he proper inquiry under section 101 [the actual statute] is not whether the process claim recites sufficient ‘physical steps,’ but rather whether the claim meets the machine-or-transformation test. As a result, even a claim that recites ‘physical steps’ but neither recites a particular machine or apparatus, nor transforms any article into a different state or thing, is not drawn to patent-eligible subject matter.”

In English? Patent statutes and the resulting case law have been moving steadily away from letting people with pretty mundane ideas get profoundly restrictive rights for really ordinary processes. The old test, set out in State Street Bank & Trust Co. v. Signature Financial Group, Inc. (Fed. Cir. 1998), had been the more permissive "useful, concrete and tangible result” (pretty low threshold!) was being changed in Bilski into a tighter showing that you’ve either created a new machine or that your “process” really transforms your input into something entirely new and useful.

The impact on technology growth – increasingly found in software and complex processes as opposed to mechanical or electrical inventions – will be extreme. “[T]he Court was aware of the consequences a broad ruling could have not just for claims for business methods, but also in other areas such as computer software and diagnostic methods. The problem which the Court seemed to be confronting was one of line drawing, and the unintended and undesired consequences if the line for patentability were drawn too narrowly.” Above article.

It’s clear that Congress needs to act to “fix” the litany of anomalies that have grown within the system; a new era requires our elected representatives to take a new look at patents. As we get ever-increasingly complex, it is equally clear that many patent examiners are way over their heads in evaluating new applications. But as the Nov. 17 New York Times points out, there are, once again, special interests that have put the “lobbying” brakes on statutory patent reform: “Gary Locke, the secretary of commerce, has urged Congress to overhaul the nation’s patent law by the end of the year. Although a bill has been circulating since 2005, a fierce fight involving the high-tech and drug industries on a technical issue — how to measure damages when a company violates a patent applying to one component of a larger product — has kept it from reaching a vote.”

Patents, trademarks and copyrights effectively grant a monopoly to the rights creator at the expense of the general public. It is a calculated formula. While patents are necessary to spur inventors to push the technology envelope, and in so doing, to create great value to themselves, allowing protection for the obvious, for analytical thought itself, clearly has the very opposite effect. What the Court decides – since Congress appears to be stymied from doing its job – will change America’s competitiveness and will have a significant long-term effect on job creation and economic growth.

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

Monday, November 23, 2009

Community Defense Initiative

As the ads says, “There’s smart, and there’s K-Mart smart.” The President needs rabbits out of hats, the luck of the Irish and the ability to leap tall buildings in a single bound to solve his “get rid of the al Qaeda/Taliban” drive in central Asia. Our military offensive in Afghanistan is not working. The government we installed in Kabul is not only hopelessly corrupt, but it controls only the limited territory around that nation’s capital. We have not lived up to our pledge to the people of Afghanistan by building infrastructure and bringing peace and a quality of life to the Afghan people – choosing instead to deploy those recourses to a misguided war in Iraq. And Pakistan, which was willing to attack Taliban forces – for only a limited time – only when they attacked Pakistani troops and government officials, is a nation with too many hardline, anti-American constituents, from voters to the highest levels of their Inter-Services Intelligence (the dreaded ISI – their NSA, CIA and FBI).

As our military screams for more troops, the President must be thinking of the Afghan war that Russia fought, a losing effort ending in the late 1980s just before the Soviet regime collapsed, our failed Vietnam incursion that ended in the 1970s and how little we actually accomplished in Iraq, the land of perpetual suicide bombings, internecine warfare among and between political and religious factions and murderous disputes over oil-production. He has to think of the benchmarks he set out in September for Afghanistan to reduce corruption, create a functioning government with a credible legal system and train a domestic police from body of super-corrupt incompetents… none of which is remotely on track, punctuated with the recent “reelection” of President Hamid Karzai, amid clear and convincing proof of massive voter fraud and rigged polling stations.

Probably more for the American people, who are staggering under the worst economic collapse since the Great Depression and watching over a trillion dollars (maybe two) of their tax dollars go towards what most are seeing as an unwinnable military effort in the region, Obama is once again setting out new benchmarks to the Karzai government to generate “measureable results,” knowing that without a U.S. military presence in Afghanistan, the Karzai government would likely fall as the country sinks into total anarchy that the Taliban (with the foreign and disliked al Qaeda forces’ support) would clearly take advantage of.

Obama in an NBC interview during his recent trip in Asia: “The task here is making sure that Afghanistan is sufficiently stable so that we can make that handoff… So my goal is exactly what you described — creating a situation in which our footprint is smaller and Afghan security forces can do the job of keeping their country together. They’re not there yet. They need help from us.” An understatement of alarming proportions.

There are those in our government who maintain that the only way for Karzai to patch together the support of the various war lords that really control local areas is for him to appear not to be the lackey of American policy… that Karzai must be seen as his own man with his own agenda. In short, Karzai’s most effective technique would be to use “managed cronyism” to effect a stable, albeit corrupt, peace across the land… to reward the corrupt allies who helped him rig the last election. Wow! America put this guy in charge.

But there is another alternative, likely to resonate with the Obama administration, that recognizes that Afghanistan is not truly a unitary functioning political entity, a “nation” with a sufficiently unifying political identity; Afghanistan is a nation of tribes and independent villages and towns. The November 21st New York Times: “The American and Afghan officials say they are hoping the plan, called the Community Defense Initiative, will bring together thousands of gunmen to protect their neighborhoods from Taliban insurgents. Already there are hundreds of Afghans who are acting on their own against the Taliban, officials say… The growth of the anti-Taliban militias runs the risk that they could turn on one another, or against the Afghan and American governments… The Americans say they will keep the groups small and will limit the scope of their activities to protecting villages and manning checkpoints… For now, they are not arming the groups because they already have guns.”

During the Soviet Afghan War (1979-1989), the American government supplied huge shipments of weapons and other assistance to the mujahedeen (the local “freedom fighters”) through Pakistan’s ISI to resist the Soviets. It must’ve worked, because the Soviets left in defeat. A good plan, no? Unfortunately, those local “freedom fighters” still had the weapons when the Soviet forces left; the Muslim fundamentalists used those weapons to subdue the local war lords and install a new government in Kabul: the Taliban! And these Taliban gave shelter and support to those al Qaeda forces that ultimately brought down the Twin Towers and blasted into the Pentagon on September 11, 2001. We called the result “blow back.”

Even as the new policy favoring such local militias is beginning, there are signs that we are completely unable to control the results, that we will experience “blow back” in new and exciting forms. The Times again: “So far, there appears to be some divergence in the American and Afghan efforts. While American Special Forces units have focused on helping smaller militias, Afghan officials have been channeling assistance to larger armed groups, including those around the northern city of Kunduz. In that city, several armed groups, led by ethnic Uzbek commanders as well as Pashtuns, are confronting the Taliban… ‘In Kunduz, after they defeated the Taliban in their villages, they became the power and they took money and taxes from the people,’ Mr. [Hanif] Atmar, the interior minister, said. ‘This is not legal, and this is warlordism.’ [Kabul-based, U.S.] Colonel [Christopher] Kolenda said, ‘In the long run, that is destabilizing.’”

Roger that, Colonel. Mr. Obama, exactly what do you have planned that will stabilize this country, defeat the Taliban and al Qaeda forces (keeping them from fleeing into the safe harbors in the Western Tribal District in Pakistan so that they can fight another day) and stop the hemorrhaging flow of U.S. tax dollars to fight what appears to be an unwinnable war? Although the Pentagon uses a lower “per troop” average cost analysis, the Office of Management and Budget tells us that each additional soldier in Afghanistan adds about one million dollars to our annual costs in that war (the OMB looks at the cost of the equipment, weapons, support staff, housing, as well as the simple extra pay). And, Mr. President, if you cannot give that assurance (with real substance) to the American and Afghani people, exactly how fast can you extract our forces from that beleaguered zone?

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

Sunday, November 22, 2009

The Decline and Fall

I lectured part-time at the Haas School of Business at the University of California at Berkeley over the course of three years, a few years before the economy collapsed. The Governator was (and still remains) in charge of a profoundly dysfunctional state, where frenzied popular ballot initiatives with little concern for long-term issues, could overturn the thoughtful reasoning of a legislative session… Oh, I guess with term limits (another ballot initiative), by the time California legislators learn their jobs, they are termed out. And with yet another popular ballot initiative requiring a 2/3 majority of a disharmonious legislature, reeking with inexperience, every year was another budget crisis.

But I could see the economic stress at Berkeley in the gradual “wear and tear” in the buildings as we walked from our cars passed the depreciating engineering and science buildings by the well-maintained law school to Haas, which had lots of private money supporting it. Every year, those buildings that depended on taxpayer support deteriorated a bit more. Engineering professors lamented how their “state of the art” equipment, essential in teaching students to prosper in a world that was constantly embracing increasingly new frontiers, was hopelessly obsolete. That was then, and today, the jewel in this nation’s public educational crown – the 10 campus University of California system of some of the finest schools on earth – is teetering and unraveling in California’s budget crisis.

Eight out of ten of the UC campuses have made the annual US News & World Report’s top 100 American universities, with UCLA and Berkeley pretty typically in the top 15. In international circles, rankings have changed dramatically of late. The November 20th New York Times made this sobering analysis: “In 2004, international rankings by the London-based Times Higher Education named Berkeley the No. 2 research university in the world, behind only Harvard. This year, Berkeley plummeted to No. 39, mostly because of its high faculty-to-student ratio. The other international rankings, by Shanghai Jiao Tong University, rated Berkeley No. 3 this month.”

Already, almost every clerk, administrator and professor in the UC system is forced to take an unpaid “furlough” – the equivalent of an 8% pay cut. As a whole, the California has ripped $2.8 billion dollars from its educational budget, $813 million from the university system alone. “Across the 10 campuses, instructional budgets are being reduced by $139 million, with 1,900 employees laid off, 3,800 positions eliminated and hiring deferred for nearly 1,600 positions, most of them faculty.” NY Times. With an overall state budgetary shortfall of 49.3%, and new projections putting fiscal 2009 at an additional $6 billion below projections and 2010 revealing another $14 billion in further projected shortfalls, the state’s momentary delusion that it “solved” its most recent budget crisis is soberingly gone.

Echoes of the Vietnam War protests in the 1960s returned, as picketing students took over buildings and chained themselves to fixtures as the governing board of the UC system, the Regents, met to consider the unthinkable: raising UC tuition by a whopping 32%. The measure passed on November 19th. While the increase won’t be assessed against students whose families earned less than $70 thousand, California’s parallel high unemployment and foreclosure rates made even families in these income brackets unable to met current debt service obligations. Students were being forced out of school because they simply could not pay; the careful savings over years was destroyed by an absurdly high tuition increase (to $10K a year for state residents starting next fall – much higher for out-of-state applicants; room and board adds another average $14,000 per year).

The November 21st Los Angeles Times provides these additional observations: “UC has long drawn the best and brightest from all the socioeconomic strata in California, especially among the middle class, whose incomes were too high for financial aid at private universities… [But] UC also has been reducing class offerings to the point where students are finding it hard to get into courses they need. And … some private colleges already are using the cutbacks to recruit students away from the state's public universities.”

The UC system has been a driver of economic growth all over the state. Entire sectors of cutting edge industry have grown up around UC campuses, but if the businesses of tomorrow see that California’s top educational institutions have little extra to offer, the long-term prognosis for growth in California, the essential seed of recovery, seems to be much more negative than anyone can truly calculate. “‘Dismantling this institution, which is a huge economic driver for the state, is a stupendously stupid thing to do, but that’s the path the Legislature has embarked on,’ said Richard A. Mathies, dean of the College of Chemistry here at Berkeley, long the system’s premier campus. ‘When you pull resources from an institution like this, faculty leave, the best grad students don’t come, and the discoveries go down.’” NY Times

As President Obama met with Chinese leaders on his recent Asian trip, he was met with polite words but stiff resistance to his suggested policies. The U.S. was seen as the profligate child with little credibility to make demands on anyone else. As we take down the engine that drives our future – education – it does seem as if our bargaining power can only decrease further. It is indeed a question of priorities, and that’s what leadership is all about.

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

Saturday, November 21, 2009

Unemployed with Conviction!

Numbers. Cold. Lifeless. Sometimes numbing. Being out of work, desperate for a job, a paycheck. Cold. Life-killing. Spirit-destroying. 10.2% national unemployment (15.7 million Americans out of work), but when you add those who want full time jobs but have given up or only can find part-time or occasional work, it flies up to 17.5% (the “alternative measurement”). Worse: District of Columbia – 11.9%; South Carolina – 12.1%; California – 12.5%; Rhode Island – 12.9%; Nevada – 13%; Michigan – 15.1%. And in almost all these states, the alternative measurement pushes the numbers out so that more than one in every five members in the labor force are under- or unemployed! The worst employment numbers in over a quarter of a century.

Terrible times and terrible numbers, likely to be that way for several years. (Nov. 13th): “Unemployment… won't begin to show signs of improvement until the second quarter of 2010. Even then, it will take until 2013 for half the states to regain their previous peak employment levels. That's according to analysis from economic forecasting firm IHS Global Insight… IHS argues that the U.S. economy is recovering, albeit at a glacial pace. It sees Texas, Virginia, Arkansas, Montana and North and South Dakota returning to their previous peak employment levels in 2010 to 2011… New York, Pennsylvania and New Hampshire are among the states that will make a comeback in 2012, while California, New Jersey, North Carolina and Georgia are among those expected to recover the following year. IHS doesn't expect Connecticut, Ohio and Michigan are laggards to recover until after 2015.” Tough times ahead.

But if you’ve been convicted of a felony? Served your time? Fo’getaboutit! Try this little blurb from (Nov. 13th): “That is really bad news for the hundreds of thousands of ex-convicts who are released from prison every year. ‘They're always at the back of the line, and the line just got a lot longer,’ said Glenn Martin, vice president of the Fortune Society in Queens, a nonprofit that trains ex-convicts in job hunting skills. ‘On top of that, our folks are losing jobs just like anyone else, but it's more difficult to replace those jobs, because of the stigma of criminal conviction. Our folks can't get through the door these days.’

“In the most recent available figures from the U.S. Department of Justice, 713,473 prisoners were released from incarceration in 2006. There are no nationwide numbers reflecting unemployment rates among ex-convicts… But up to 60% of the formerly incarcerated in New York state are unemployed after one year of their release, according to a study from the Independent Committee on Reentry and Employment, of which Martin is a member. The number is even higher for parole violators, at 89%.”

Most folks who are out of work are likely to think that they should be hired long before an ex-felon is considered, and it seems that most employers are agreeing with them. However, we already know that, as one Department of Justice study points out, “over two-thirds of released prisoners [are] rearrested within three years.” Maybe that’s an argument for not hiring ex-felons in the first place, but I suspect that it’s much more an indication of the hopelessness of rebuilding a life after a serious conviction. If anything, the incredibly high jobless rate among ex-felons seems to be an open invitation to turn back to criminal activity to make a living.

How many of us would be willing to give an ex-felon a break, to feel comfortable working with someone who crossed the line and served time? How many of us would even think of hiring someone with this background to work for or with us? It’s even harder for us to feel charitable when unemployment is generally so bad, but if we do not…. They are no easy choices, particularly in such economically impaired times.

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

Friday, November 20, 2009

Foreign Fighters

American soldiers joined forces in Anbar Province , Iraq with locals who were tired of foreign fighters – al Qaeda-linked soldiers – who had come to run roughshod over the area Sunnis. It was a real alliance and it worked, for a while, until U.S. forces began to pull out, and the heavily Shiite-loaded government took over the mission of policing the country. The Sunni minority, once the rulers of Iraq under Saddam Hussein, were now the repressed minority under majority Shiite rule. But they surely didn’t want al Qaeda’s arrogant foreigners in their midst.

If there weren’t Americans and NATO allies roaming about in Afghanistan , the main “foreigners” – al Qeada fighters recruited from throughout the Islamic world –would be equally unwelcome. But NATO forces are just entirely too visible – religiously and culturally polar opposites to the indigenous populations – such that al Qaeda fighters can be a “necessary evil” in ousting the real aliens from deep under the Afghan skin. After all, Afghanistan is a land of tribal territories and local warlords; al Qaeda doesn’t fit particularly well into this paradigm. But Americans stick out even worse!

So as Americans continue to afford al Qaeda its Web-material and recruitment materials, as drones take out another village of innocents in the border region of Pakistan and trounce small villages in Afghan highlands, imposing “collateral damage” on civilians in search of high-ranking Taliban and al Qaeda operatives, al Qaeda clings to its anti-Western raison d’être. We were supposed to build roads, schools, hospitals and power grids. Oh well.

So what happens to countries when there are no NATO forces or ugly Americans to oust? What do local Islamic militants think about al Qaeda’s techniques where there aren’t any pink-skinned enemies to evict? CNN has been asking that exact question in “a two-year CNN investigative report into peace talks held between the Libyan Islamic Fighting Group (LIFG) and the Libyan Government which recently culminated in the LIFG, a militant jihadist group once close to Osama bin Laden, repudiating al Qaeda. ‘The Jihadi Code.’” November 10th,

Let’s face it; when they really watch al Qaeda killing innocents, blasting civilian targets with suicide bombs, proselytizing their über-Muslim-unity against the world mantra, and arrogantly pushing villagers around under their thinly disguised elitism, al Qaeda’s early luster has vaporized significantly in the face of their unsupportable cruelty. We may not be making friends among the remaining Muslims in the world, but then neither is al Qaeda.

We just need to stop being the obvious main target in our military exploits and let the locals discover exactly how much they despise al Qaeda’s tactics. They almost always do. CNN: “Although they'd been brothers in arms with bin Laden, the LIFG never merged its operations with al Qaeda due to differences in approach. In particular the Libyan group never endorsed bin Laden's global jihad, preferring to concentrate their attention on overthrowing [ Libya ’s Col. Moammar] Gadhafi regime and replacing it with an Islamic state. From the mid-1990s the Libyan Islamic Fighting Group's Afghan-trained fighters waged a fierce insurgency against the Libyan regime.” The schism between al Qaeda and other Islamists is really beginning to widen as the new code is being increasingly adopted.

CNN again: “The new code, a 417-page religious document entitled ‘Corrective Studies’ is the result of more than two years of intense and secret talks between the leaders of the LIFG and Libyan security officials... The code's most direct challenge to al Qaeda is this: ‘Jihad has ethics and morals because it is for God. That means it is forbidden to kill women, children, elderly people, priests, messengers, traders and the like. Betrayal is prohibited and it is vital to keep promises and treat prisoners of war in a good way. Standing by those ethics is what distinguishes Muslims' jihad from the wars of other nations.... The code has been circulated among some of the most respected religious scholars in the Middle East and has been given widespread backing. It is being debated by politicians in the U.S. and studied by western intelligence agencies.’”

The President has been struggling with a request by the military for a significant increase in U.S./NATO troop strength in Afghanistan and on-the-ground questions by our own ambassador there: “Gen. Stanley A. McChrystal, the top U.S. and NATO commander in Afghanistan, has stated that without the deployment of up to 40,000 additional of troops within the next year, the mission ‘will likely result in failure.’ But some aides are arguing for a much smaller troop increase, and the U.S. ambassador in Kabul , Karl W. Eikenberry, has questioned whether the Afghan government can be a reliable partner.” November 19 Washington Post.

General, exactly what is success? And why should the Taliban and al Qaeda operatives cringe in fear when, if the pressure gets too great, they can always find safe haven in the tribal districts of Pakistan … and wait us out? Sometimes, freelancing as a target doesn’t really get you where you want to go. Okay, America , let’s make al Qaeda the main target there!

Technology has been America ’s “ace in the hole” when dealing with our enemies, and whatever plans may be put forward in the next few weeks, it appears that high tech weapons will be used even more. "‘We expect [close air support missions] to increase. As ground forces become more dispersed and separated from their supporting forces, air power is going to be that capability that allows them to have that kinetic or non-kinetic effect as required,'’ said Air Force Lt. Col. John Edwards, deputy chief of plans for the command, known as AFCENT… ‘Kinetic’ is the military's polite term for ‘explosive.'” (Nov. 20)

Unfortunately, that reliance on high tech weapons, because we couldn’t possibly deploy a large enough ground force, is a profoundly effective recruiting tool for al Qaeda and the Taliban: “‘The blind bombardment on [sic] civilian targets, night raids on people's houses, murder, tortures, bombardments on funeral and wedding ceremonies are some of the crimes the invaders have perpetuated during the past eight years,' said a Nov. 5 Taliban communiqué, according to a translation by the NEFA Foundation, which monitors extremist Web sites.

The White House has indicated that no decision is likely before Thanksgiving. As Afghan President Hamid Karzai, the recent “victor” in a very questionable election, began his second term in office – with dignitaries like U.S. Secretary of State Hillary Clinton in town – exactly why are we the champions of a regime that redefines corruption? Is there anything more we can do to make al Qaeda and the Taliban look any more sympathetic? Ms. Clinton conveyed President Obama’s requirement that the Karzai government show “measurable results” in reducing corruption to justify U.S. efforts in the region.

Hey, U.S. government, did you ever hear the one about the frog and the scorpion? You know, the one where the frog rescues the pleading scorpion from a sandbar in a rising river… where the scorpion promises not to bite, kill and eat the generous frog if he will just save the scorpion by taking him out of harm’s way (a short swim on the frog’s back)? And at the end of the rescue, the scorpion kills his savior, saying to the incredulous frog, “Hey, what do you expect? I’m a scorpion!” Helloooooo, Mr. Karzai!

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

Thursday, November 19, 2009

“Hey, Look At All the Money We're Saving You!”

It’s an old trick, often used by trustees in bankruptcy knowing that vulture-consumers will often descend on a retailer filing bankruptcy looking for super-bargains: just prior to or even immediately after the bankruptcy filing, they will jack up all of the retail prices to their highest levels so that the ultimate discount tags make it appear as if the consumer is making out like a bandit. And you can pretty much spot an industry that is about to experience some form of governmental regulation that will impact consumer pricing structures: they’re the ones pushing their retail prices and their consumer fees through the roof in anticipation of the new rules.

The credit card companies did it – pushing their interest rates, collection practices and fees to the limit before new federal statutes froze or reduced their consumer charges and credit practices. Banks have jacked up their overdraft fees, knowing that they would have to back off under pressure. They just wanted to start from a higher plain so that their concessions would look bigger, and politicians can make more outrageous claims for “success” when in fact, they wind up locking in the high rates and bad practices that the regulations and statutes were intended to defeat in the first place.

And so it is with the Achilles heel of healthcare reform: figuring out not just how to take care of 30 million consumers who truly were excluded from the system because of cost (there are about 46 million Americans without healthcare insurance all tolled)… but how to place a lid on this sector of our economy where costs have been increasing at multiple of the cost of living for a very long time. Cost control seems elusive as huge lobbying efforts from medical industry incumbents – those who control 16% of our total economy (the next largest percentage of any nation’s economy spent on healthcare is 10%!) and do not want to let go – pressure Congress to relent.

With the support of only two Republicans in Congress so far, the massive campaign contributions from healthcare companies seem to be taking root in the steamroller of opposition to what is currently before the U.S. Senate… oh, and don’t think that these campaign contributions have been relegated to Republicans; virtually every member of Congress, on both sides of the aisle, has been a beneficiary of campaign contributions from one of America’s richest business sectors.

So where are the price-increases most painfully coming from? Try the giant pharmaceutical companies who have recently jacked up their costs to the consumers – in a period of deflationary price reductions – by a whopping 9% average, the largest such increase since 1992. Fearing that their pricing structure will be subject to serious governmentally-mandated reductions, the giant pharmas are pushing the limits now. Analysts suggest that this will add another $10 billion to this year’s cost of pharmaceuticals (which is already pushing $300 billion).

The November 16 New York Times looked at both sides of the issue. The drug companies’ explanation: “[T]hey are having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs are set to expire over the next few years… ‘Price adjustments for our products have no connection to health care reform,’ said Ron Rogers, a spokesman for Merck, which raised its prices about 8.9 percent in the last year, according to a stock analyst’s report.”

The critics? “ ‘When we have major legislation anticipated, we see a run-up in price increases,’ says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes… A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years...”

“The drug industry has actively opposed some of the cost-cutting provisions in the House legislation, which passed Nov. 7 and aims to cut drug spending by about $14 billion a year over a decade… But the drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks… But this year’s price increases would effectively cancel out the savings from at least the first year of the Senate Finance agreement. And some critics say the surge in drug prices could change the dynamics of the entire 10-year deal.”

Interesting. And let me guess which side you think is telling you the truth.

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