PIIGS on Borrowed Time

The Eurozone is lumbered with a profound disadvantage: Diverse cultures and economic variables that can be isolated to a single country in most political structures are sorely lacking among these EU-zone member nations. If one country is severely out-of-whack economically with its neighbors, the traditional solution imposed by the global marketplace would denigrate the value of that country’s currency relative to the currency of more stable nations. Folks in the offending economy wouldn’t see hard number pay-cuts, but their buying power in the international marketplace would fall as the value of their currency tumbled. In other words, inflation would eat away at this buying-power, but the currencies would float and adjust to the perceived relative economic disparities.

Hard to think of Greece and Germany as sharing the same economy, when those two nations could not be more diverse in terms of culture, productivity, manufacturing and service sophistication, financial capacity and fiscal discipline. But they do. What’s more, all of the EU attempts to “solve the European debt crisis” fly in the face of economic reality. No matter the solution, no matter the degree of fiscal austerity imposed, no matter the purchase of bonds from weaker nations, for most of the PIIGS (particularly, Portugal, Spain and Greece), there is absolutely no possible way for them to pay their accrued national debt or even to get that debt within borrowing parameters that the rest of the world considers prudent.

Oh sure, we can pretend that they are paying their national debt by having them pledge to pay very-low-yield bonds over, say, forty years, but that would be trading bad debt for bad paper. And the only way you would get buyers to take those bonds is if they already were owed piles and piles of debt (principal and interest) and their choice would be to take a huge cut or zero… or take these crappy low-yield promises to pay. These bonds would instantly be worth less than their face value (because of the low yield) even on the day they were issued.

The other more honest approach would be simply to write down substantial portions of this debt – which is the inevitable practical effect of any solution – a reality that is currently untenable, particularly in the cold northern European nations like Germany, Austria, the Netherlands, etc. who are completely fed up with their profligate southern brethren. The lending countries and international banks (including U.S. banks) would feel the pain instantly, and they are trying everything in their power to postpone the inevitable. The impact on the euro of such a write down would be inflation and devaluation of the currency, and Germans fear both these alternatives more than a depression (their legacy attitude from their post-WWI reparation-driven economy). But a de facto write-off of much of the southern bad debt is going to happen sooner or later, and postponing the decision only allows more interest to accrue that also will not be repaid, making the problem that much worse.

Why? Why is it that United States can have soaring deficits – which have impacted our credit rating – but these PIIGS nations cannot? Doesn’t seem remotely fair, even though at some level, we too will have to pay the piper. The answer is growth. Walk around your home and tell me what products you have around that were made in Spain, Portugal or Greece. Some wine? Olive oil? Cheese? What? Take the same look for products made in Germany. Oh, you are looking in your garage, I see. Lucky you. Debt with growth potential, to a point, is a sustainable theory. Debt without growth can kill nations.

Growth is generally measured in (1) comparative productivity ratios (output per worker), and Germany and the United States are among the most productive nations on earth, as well as (2) gross domestic product (GDP) which looks at aggregated output of an entire nation. The relevant ratio, as I have noted in earlier blogs, is then aggregated debt to GDP. This debt/GDP ratio is the telling statistic, and if your debt goes down but your GDP goes down even more, the ratio still reflects a no-win economy. Growth is a function of providing sufficiently high-level skills through an infrastructure and economic delivery system that can monetize those skills or by having massive surplus high-demand natural resources with a system that can place these recourses relatively easily into the global marketplace. Portugal, Spain and Greece have neither.

What’s worse, to have growth where you don’t have stuff like vast oil reserves, you need investment, and from a government perspective, that means (1) a population with greater in-demand skills (education), (2) the ability to access those skills, power and build the requisite manufactures and move goods and services to their appropriate economic destination (infrastructure) and (3) the cutting edge systems to give your economy special values (research and exploration).

Unfortunately, for the PIIGS, austerity measures have not only deleted workers from the work force (thus heavily reducing the number of consumers who can spend money to support their economy), creating a negative ripple effect across the land, but the essentials for future growth – education, infrastructure and research – have been “baby with the bath watered” out of these fragile economies. Thus, the prospect for future growth has been curtailed if not destroyed, and hence the debt/GDP ratios will continue to tank, recessionary numbers will only continue to get worse, and the prospects for managing the European debt crisis, which most certainly impact us in the United States, are only dimming.

But the world, including Wall Street markets, is addicted to mythology. There is a path, believe most, where that European debt crisis can be solved and put behind us to enable a near-term recovery. Americans seem to believe that you can cut taxes for the rich – who don’t need the cuts – spend more on defense and less on education/infrastructure/research and somehow fix the economy with lots of new and well-paying jobs. Both of these beliefs are profoundly misguided, will only exacerbate a problem that will only get worse until global leadership begins to “get real” and understand that growth doesn’t just happen. And without that growth, there are no solutions that can create the sustainable future we believe we deserve.

I’m Peter Dekom, and the degree of “leadership mendacity” that seems to be required all over the planet to win elections is precisely the head-in-the-sand mentality that can sink entire civilizations.

I-Raconteur

If Iraq is now squarely in Iran’s camp – a less-than-subtle reality – who’s the puppet master in Tehran? The beleaguered President Mahmoud Ahmadinejad, struggling to maintain power as his nation’s currency collapses? If that were the case, the President’s likely fall would strain that puppetry severely. Unfortunately, the Iraqi manipulation is controlled directly by the “man upstairs,” supreme leader Ayatollah Ali Khamenei, through a major general heading the Iranian Quds Force, the paramilitary branch of that nation’s armed forces: Qassim Suleimani.

Sulemani could give a rat’s posterior about Ahmadinejad or his opinions. He is the man with the power, and he makes that very clear within the inner circles of government by telling folks that he is the “sole authority” when it comes to Iranian’s interests in its neighboring little brother, Iraq. “A soft-spoken, gray-haired operative who carries himself with the confidence that comes from having the backing of Ayatollah Ali Khamenei, Iran’s supreme leader, General Suleimani is the antithesis of the bombastic Iranian president. Now a major general — the highest rank in the Islamic Revolutionary Guards Corps — after a promotion last year, he has been the mastermind behind two central Iranian foreign policy initiatives, exerting and expanding Tehran’s influence in the internal politics of Iraq and providing military support for the rule of President Bashar al-Assad of Syria.

“That role has put him in direct conflict with American policy makers hoping to ensure Iraq’s future as an ally of the United States, to bring about the fall of Mr. Assad and to curb Iran’s attempt to gain influence in the region. Last year, the United States Treasury Department put General Suleimani on its sanctions list because American officials said he had been involved in a plot to kill the Saudi ambassador to Washington.” New York Times, October 2^nd. With Ahmadinejad and the Iranian economy teetering, knowing eyes are shifting to a man with no desire to step into the political limelight, but an operative who seems to be in charge of enforcing the policies of the body of religious clerics who really run Iran.

With a power struggle pitting Ahmadinejad and at least some of the Revolutionary Guards trying to trim the power at the religious top, don’t bet on the challengers. Ahmadinejad can’t run in the next election (he is termed out), and there is even talk of abolishing the office of president entirely. The clerics have a whole lot more power than any elected official plus the loyalty of folks like Suleimani, who can put a severe crimp in any serious attempts to challenge that authority. Ahmadinejad is beyond expendable. Think of the Quds Force as the highest level of special ops in the Revolutionary Guards, the best of the best.

Suleimani was war hero during the eight-year conflict back in the 1980s with Saddam Hussein’s Iraq. They say he was particularly good at infiltrating and setting up special missions behind enemy lines. He really knows the territory and the players. He moved up the ranks taking over the Quds in the 1990s, a force with a unique skill-set in fomenting revolution movements in other countries. “After the 2003 American invasion of Iraq, General Suleimani took on the mission of expanding Iran’s influence in the country, tying down the American military and, ultimately, encouraging its exit: paramount objectives for an Iranian government that was determined to be a major power in the region and that felt threatened by expanding American military presence on its western and eastern flanks…

“Gen. David H. Petraeus, who came to know the Quds Force commander’s influence when he served in Iraq, once described General Suleimani as ‘a truly evil figure’ in a letter to Robert M. Gates, then the defense secretary. In another letter, he acknowledged the influence General Suleimani had brought to bear in Iraq. ‘The most sobering surprise of the week was probably the extent of direct Iranian involvement in Iraqi political intrigue,’ General Petraeus wrote in an April 2008 letter to Mr. Gates.” NY Times. He’s good at his job, as current Iraqi politics would clearly support… and he is truly the man Americans need to worry about… not the U.N. speech-making moppet who will soon be out of a job. Iraq listens to Major General Qassim Suleimani a whole lot more than any member of the U.S. military or diplomatic corps, and that’s a very big problem for America’s aspirations in the region. It’s also a sign that it was indeed Iran who won the war in Iraq.

I’m Peter Dekom, looking through the bushes at the true men of Iran who oppose us.

Pray Tell: A Minority Report

In my August 15^th blog (The Next Generation of Conservatives), I examined the creeping social liberalism among younger Republicans which is moving these future GOP voters, if they maintain their current predilections, to levels of tolerance of gay marriage and lifestyle choices that are very much at odds with their parents’ views of traditional conservative Christian thought. GOP political handlers are increasingly instructing their candidates and canvassers to shy away from social issues and drill down on economic matters when addressing this demographic.

I’ve also noted how U.S. population growth is now driven primarily by immigration, since the average American woman is having 1.9 babies, below the 2.1 replacement rate. Immigrants are richly diverse, with faiths ranging from Hinduism, Catholicism, and Buddhism but less so Protestantism. Hmmm? There’s another powerful wind of change in the air that will impact both sides of the aisle for the foreseeable future: for the first time in U.S. history, Protestants are now a minority.

The Pew Forum on Religion and Public Life released a report on October 9^th with some fascinating results on religious trending in the United States. “The number of Americans who do not identify with any religion continues to grow at a rapid pace. One-fifth of the U.S. public – and a third of adults under 30 –are religiously unaffiliated today, the highest percentages ever in Pew Research Center polling,” says the report’s executive summary.

The Study “found that it was not just liberal mainline Protestants, like Methodists or Episcopalians, who abandoned their faith, but also more conservative evangelical and ‘born again’ Protestants. The losses were among white Protestants, but not among black or minority Protestants, the study found, based on surveys conducted during the summer.

“When they leave, instead of switching churches, they join the growing ranks who do not identify with any religion. Nearly one in five Americans say they are atheist, agnostic or ‘nothing in particular.’... This is a significant jump from only five years ago, when adults who claimed ‘no religion’ made up about 15 percent of the population. It is a seismic shift from 40 years ago, when about 7 percent of American adults said they had no religious affiliation.

“Now, more than one-third of those ages 18 to 22 are religiously unaffiliated. These ‘younger millennials’ are replacing older generations who remained far more involved with religion throughout their lives.” New York Times, October 9^th.  

These changes might not yet impact the mainstream elections since younger voters tend to shy away from the polls when compared to their elders. In time, however, fiscal conservatives seeking to create legislative and regulatory schema that favor preserving wealth and invested capital over wages and salaries by tying their needs (and they are indeed a small minority) to religiously-embraced social issues may have a bigger problem. How do you engage voters to allow financial and environmental deregulation, favorable tax rates for the rich at the expense of the vast majority, if you cannot give enough of them strong support for their religious values? How do you motivate voters to cast ballots against their own economic interests?

You can see some of the political trending in current campaigns: high taxes for the rich and strong environmental and financial regulation kill jobs say the slogans. But even in periods of exceptionally high taxation of the rich, this nation prospered like no other. The methodology, therefore, seems to be “spend amazing amounts of SuperPAC money” to repeat messages that actually convince voters that these fiscal goals are in everyone’s best interest, even if the underlying assumptions are simply untrue.

With American educational results hitting new lows, the task of convincing people who don’t understand math and are loath to read history might seem to be an easy one. Such sloganeering seems to be working when combined with the ability to rope the “Base” of those with conservative Christian values; Republican candidates can and do find serious traction in elections. But if that Base of passionate and committed Christian voters –willing to trade their own economic self-interest to embrace what is to them the religiously-mandated high moral ground – slowly erodes, the repetition of factually incorrect slogans will have to stand alone to convince voters… or the GOP is going to have to find some new ponies to ride in the coming decades. Whatever the result, it will be a fascinating change to watch.

I’m Peter Dekom, and watching the present is a definite indication of things to come.

That Was the Weed that Was II

High margins and wild profitability is what makes gangs and drug lords rich. It also provides the higher-than-average returns to the “agricultural workers” who grow “crops” that are processed to feed the narco-trade. Good for business if you don’t mind murder, turf wars, arms trafficking, armed insurrection in countries where cartels rival government forces, aids-spreading dirty needles, desperate addicts willing to do anything (add more fun crimes here), tax avoidance on the profits, bribery & corruption and way more than a trillion dollars to pay for the extra cops and prisons to address “the problem.” That half those incarcerated in the U.S. are there for drug-related crimes (and half again of those for dealing or possessing). Yup, illegal narcotics are job-creators and revenue producers par excellence.

Many argue that drugs should be legalized or at least decriminalized to take the major incentive out of the industry: too much money because trading in illegal substances pushes costs – and profits – through the roof. We can tax the proceeds and disband large segments of our criminal justice system just as well. Critics point to the harm of drug addition, to the addicts, their families and to the productivity in the workforce. Clearly! But would we have that many more addicts than we have today if we legalized and controlled the process, devoted more money to rehabilitation and prevention than wasting so much more cash with current levels of enforcement and incarceration? And exactly what is the impact of decriminalization or legalization on pricing and profits.

In 1996, California voters passed Proposition 215, the Compassionate Use Act, governing the use of medical marijuana. Subsequent legislation has created systems for the growing and dispensing of such marijuana through legal dispensaries. And even though some cities have curtailed the ability of such dispensaries to work within their city limits and notwithstanding the feds persisting on prosecuting federal marijuana laws despite state sanction, the impact on pricing has been dramatic. “Since the mid-1990s, the price of outdoor-grown marijuana has plummeted from more than $5,000 a pound to less than $2,000, and even as low as $800.

“Battered by competition from indoor cultivators around the state and industrial-size operations that have invaded the North Coast counties, many of the small-time pot farmers who created the Emerald Triangle [in northern California, featured above] fear that their way of life of the last 40 years is coming to an end… Their once-quiet communities, with their back-to-nature ethos, are being overrun by outsiders carving massive farms out of the forest. Robberies are commonplace now, and the mountains reverberate with the sounds of chain saws and heavy equipment.” Los Angeles Times, September 29^th.

But the stuff grown outdoors lacks the potency – demanded by the legal dispensaries – of indoor cultivated pot, so most of that outdoor stuff heads for the black market. And still the prices fall. “Now, with the market glutted, people are simply planting ever-larger crops to make up for the drop in price… Longtime residents complain that the newcomers cut down trees, grade hillsides, divert creeks to irrigate multi-thousand-plant crops, use heavy pesticides and rat poisons, and run giant, smog-belching diesel generators to illuminate indoor grows. They blaze around in Dodge monster trucks and Cadillac Escalades and don't contribute to upkeep of the roads or schools.” LA Times. Sounds like what happens in major oil drilling or mining operations… problems, but different problems. At least there is a reduced pressure from the smuggling operations from well-armed Mexican drug cartels who are beginning to see less value in the weed trade.

The solution to excessively cheap drugs that might come from legalization and/or decriminalization is clearly the same solution imposed on alcohol and tobacco: high excise taxes. We do not want cheap mind-numbing narcotics to be free and easy. It should be expensive, and the dispensaries need to be tightly controlled. Legal, controlled and generating tax revenues. Or we can continue to spend mountains of money we do not have to stem the drug trafficking that we have not made the slightest dent in stopping after decades and decades of efforts. Pick one.

I’m Peter Dekom, and sometimes common sense gets lost in the cacophony of slogans and mythology.

Stalemates and Tipping Points

As Turkish artillery fire responds in kind to a Syrian mortar attack on a Turkish border village, as massive explosions and car bombs take their toll in big cities with big government targets, the world outside expects a rapid end to hostilities as the Assad regime crumbles under the incessant battles, withering rear-guard attacks, continued defections, economic paralysis and diminishing resources. But upon closer examination, the war(s) in Syria are anything but clearly tilting in favor of one side or the other. Despite virtual global condemnation, support from Iran and Russia has sustained the brutal dictator, and a change in tactics may have reduced the continuing threat from one area where rebels need “more.” Defections from trained soldiers.

To win wars, you need competent soldiers and military hardware. With the United Nations sitting on the sidelines, de-powered by continuing Security Council vetoes from Russia and China, the rebels have pretty much been left to fend for themselves. They have relied heavily on massive defections from government troops, who brought their skills and weapons with them. Sensitive to this process, the Syrian leadership has changed its strategy, putting fewer of its soldiers in direct contact with civilians likely to have rebel sympathies, choosing instead to use its long-range artillery and air superiority to cleanse offending towns and neighborhoods. This reduces the contacts from house-to-house fighting, neighborhood invasions, where soldiers have to confront innocent civilians and their once-fellow soldiers who have already changed sides begging their comrades to defect.

Indiscriminate car bombings, favored by extremists in the rebel ranks, also alienate civilians who inevitably get caught in the fray. For an increasing segment of Syria, they just want it all to go away… they just want to be left alone to live their lives without fear and with the normal government services and infrastructure intact and in service. Syrian leaders have also moved their most loyal troops to the checkpoints to reduce the possibility of getting messages back and forth to potential defectors or “spies” still in government ranks. Defectors also have to deal with the ramifications of their families who remain behind, well within Syrian-government-controlled boundaries.

“[N]ow opposition commanders say defections have slowed to a trickle. Some commanders have given up trying to entice defectors, and others have resorted to more desperate measures: cajoling, duping, threatening and even drugging and kidnapping military men to get them to change sides, or at least stay out of the fight. Without defections, they say, the opposition cannot hope to grow, never mind prevail… ‘We use means only used by the devil,’ said Ahmed Qunatri, a rebel commander in northern Syria who defected from the Republican Guard…

“Some rebel commanders now fret that all the soldiers who were inclined to defect already have. The rest remain loyal to the government, or are terrified of betraying it. Others are just suspicious of an armed movement that has found extremists among its ranks. A suicide attack in Aleppo on [October 3^rd] that killed more than 40 people and devastated a government-held district drew widespread anger. Aware of just how much the violence is undermining popular support for the uprising, some rebel groups immediately tried to blame the government for staging the bombing. The government blamed the rebels. By nightfall, Jabhet al-Nusra, an insurgent group affiliated with Al Qaeda, claimed responsibility for the suicide bombings.” New York Times, October 3^rd.

If this trend continues, and if the outside world sits idly by hoping for change, several possibilities loom with ugly potential. First, this just becomes a long-standing civil war without any near-term solutions. Second, as the less-than-cohesive rebel factions begin to disagree on tactics and the end-game (so far, they have been willing to accept deals with the devil just to get Assad out), they may just turn on each other.

Popular sentiments, voiced by people just plain tired of war, may increasingly accept the continued reign of the brutal Assad government just to allow their lives to regain some semblance of stability and normalcy. In case you wondered why Assad doesn’t just step down and go live in some swanky palace in a friendly nation. We need to question exactly whose side time favors as the war rages on. And if indeed Assad remains in power – or at least his Alawite elite – how exactly does the rest of the world treat this rogue nation that has slaughtered so many of its own people? And if the world doesn’t like that possibility, then exactly what has to happen, and who has to do it?! And when?

I’m Peter Dekom, and happy endings are often relegated to mythology and fairy tales.

Two Bits, Qubits a Dollar

Analog is old. Digital is new. Quantum is next. The speed of global problem-solving is clearly accelerating as computing capacity develops to new levels. You’ve probably got more computing power on your tablet or enhanced smart phone than most of the NASA Apollo modules used on the moon missions of the late 1960s, early 1970s. Nations are competing to see who has the most elegant supercomputers in the world, where the measurement of processing speed is Floating Point Operations Per Second (FLOPS), and the speediest systems generate calculations based on a mind-numbing one thousand trillion calculations per second (Peta-FLOPS). Current systems in the United States, Japan, Australia and Western Europe are vying in the arena of 20+ Peta-FLOPS capacity. Some other systems create grids of many small computing systems, linking them for a massive unitary transactional calculation, in an effort to make greater computer power more accessible to those without huge Peta-FLOPS-capable systems.

All of these modern computing systems rely on a capacity-swallowing binary system, where every number in the world is measured by ones and zeros. Long analog numbers – the ones we learned to use in school – are expressed in incredibly longer chains of binary expressions that look more like modern art than numerical statements. If you didn’t need so much memory to express every number you wanted to use, you would need less memory and could speed up calculations with a smaller processor. And a smaller processor would be cheaper to build (not that cheap though), faster and create greater accessibility to people and institutions seeking more efficient ways of analyzing masses of data. Further, if the mathematical units of such a computer were capable of creating mini-models of real world molecular structures with increased accuracy, the value to practical applications would explode.

Enter the quantum computer, a new and evolving system that replaces the binary building blocks used in virtually every modern computing system in the world with more complex processing units – called qubits (literally quantum bits) – that have inherent problem-solving capacities (think of them as little model-simulators that can roll into each other and interact to mirror complex interactions in the real world) if they can be harnessed in appropriate software and driven in machines that provide a different kind of core memory and processing systems. These analytical machines would look at the world through the complex eyes of quantum mechanics, using quantum properties to represent data and perform operations on these data. So instead of a zero/one series of combinations, they would apply units such as depicted in the above graph (known as a Bloch sphere) to make their calculations. Yeah, I know, it’s a whole lot easier to think of them as components in a Lego structure than to understand the underlying math and physics.

Why does this matter to you? If the world were able to provide access to such computing power at significantly less cost than current Peta-FLOPS-capable supercomputers, if such computers could replicate interactions of complex experiments down to the molecular level – without actually conducting the experiment which could take years to perfect in the real world – then chemical, biological, medical and physics research could accelerate with millions and millions of virtual experiments until new cures, discoveries and solutions were readied for practical applications… and vastly fewer finalizing experiments would be required in the real world to implement the solutions.

Considered by some in the computer science world as the new Holy Grail of computing, the problem was how to harness qubits into an actual and functioning machine. It now seems that this process is no longer just a theoretical possibility thanks to nanotechnology. “[In later September,] a team of Australian and British scientists, led from the University of New South Wales, reported that they had successfully constructed one of the basic building blocks of modern quantum computing by relying on manufacturing techniques now used by the modern semiconductor industry… In February, a second group based at the University of New South Wales published an article in the journal Nature Nanotechnology reporting their advance: the construction of a single-atom transistor using a different but related design approach… In both cases, the research teams are international…

“While there is a growing consensus among scientists that working quantum computers will emerge during this decade, there is also a growing belief that they will not replace the conventional computers that are now carried in the pockets of more than half the world’s population. For one thing, most of the quantum computing approaches only worked when temperatures were cooled to near absolute zero…  Though there are only a handful of workable algorithms designed to run on quantum computers, scientists say their application may prove vastly more useful than today’s technology in simulating a wide variety of biological, chemical and physical systems. That means they could become the standard tool for a wide range of new industries, like drug and material design.” New York Times, September 28^th. Wow! This may be a little story in an isolated esoteric blog, but the ramifications for the world are staggering.

I’m Peter Dekom, and I now have to say “g’day, mate” with a great big, and very respectful, smile.

Transitions in Faith

Religious beliefs are complex, and organized religions (whatever that image may conjure up in your mind) develop, splinter, reform and change over time. The more commanding the interpretation of a deity, the stricter the rules and the more harsh the consequences for straying from the sanctioned path. The less centralized the notion of God, the less stringent the rules and the lower the consequences for deviance. Picture the difference between an Evangelical Christian and a Buddhist. Time also has an ameliorating effect, as centuries, millennia even, moderate some and polarize others.

Among the world’s oldest large-scale religions, Islam is the relative newcomer, and its spread of conversion spurted at the beginning, sputtered in the 18^th and 19^th centuries, and exploded in the 20^th and 21^st centuries, bringing new fervor from the passion of new converts. What seems to have been Islam’s greatest pull is an explanation to impoverished masses why their time on earth is not their principal relevancy – thus their condition here and now is simply a necessary part of a process to perpetual grace later (martyrdom is the fast-track to heaven, circumventing waiting for Judgment Day). The material world is just a distraction from religious preparations for later. One heck of a message in an economically slammed world.

With two thirds of a millennium head start, Christianity (which followed Judaism by almost two millennia) has already experienced the kinds of harsh and extreme treatments that seem to be embracing large section of contemporary Islam. One can look at the Spanish Inquisition for examples of Christian harshness, remembering that Jews fled to the tolerant (and Muslim) Moors in Spain to escape the wrath of the Catholic executioner’s blade or the torture that preceded death. Our own country provides examples, from the Salem witch trials to the harshness with which Protestants in the new land defined their faith.

The recent obsession with imagery involving the Prophet Muhammad – igniting many in the Islamic world to riotous malevolence and hatred of the West – had its chapter in our own history as well. “The United States was settled, in part, by radical Protestant iconoclasts from Britain who considered the creation and use of sacred imagery to be a violation of the Second Commandment against graven images. The anti-Catholic colonists at Plymouth and Massachusetts Bay refused to put images of Jesus in their churches and meetinghouses. They scratched out crosses in books. In the early 1740s, English officials even marched on an Indian community in western Connecticut, where they cross-examined Moravian missionaries who reportedly had a book with ‘the picture of our Saviour in it.’

“The colonists feared Catholic infiltration from British-controlled Canada. Shortly after the Boston Tea Party, a Connecticut pastor warned that if the British succeeded, the colonists would have their Bibles taken from them and be compelled to ‘pray to the Virgin Mary, worship images, believe the doctrine of Purgatory, and the Pope’s infallibility.’ .. It was not only Protestants who opposed sacred imagery. In the Southwest, Pueblo Indians who waged war against Spanish colonizers not only burned and dismembered some crucifixes, but even defecated on them.” Paul Harvey and Edward Blum writing in the New York Times, September 26^th. Think of American Marines urinating on Taliban corpses or the humiliations of Muslim detainees at Abu Graib prison during the Iraq War. We’re hardly above the fray, but we’ve lived through so much religious violence that we may have worn out from Christian religious wars… particularly within the faith itself. Remember, the sectarian violence in Northern Ireland – pitting Catholics against Protestants – is within the life memory of most of us. What will Islam be like with another two thirds of a millennium of history behind it?

As we sit in judgment of what we see as primitive actions of primitive people, perhaps we need to look at our own past to understand that religions often require centuries and millennia to mature and create a gentler tolerance… and tolerance is often sacrificed as new, more fundamental reactions to the world take giant steps backward. The fact that most people are born into their faiths and have little choice along the way, that believing in an interpretation of God that might not jibe with someone else’s vision is not a “fault” makes sitting in judgment, believing that “I’m right and you’re wrong” a surefire way to exacerbate hate, suborn war and conflict and increase intolerance in a world where we have enough violence to last many lifetimes.

Look at the Egyptian President Muhammad Mursi’s poignant speech at the United Nations telling the world that Islamaphobia must end and that while free speech is essential, speech that engenders hatred and religious intolerance is unacceptable. Sounds great when you hear it that way. The Islamic world cannot respond otherwise in his eyes and in the eyes of most of the governments in the Muslim world. They cannot understand how we can accept the blanket rules of our own First Amendment. They do not know why the perpetrator of the “Innocence of Muslims” film cannot be skewered and brought to justice. Yet our Bill of Rights is a reaction to the abuses in the name of religion our forefathers had witnessed. They simply didn’t want to give our government the ability to crush body and spirit in the name of God. Sounds great when you hear it that way.

I’m Peter Dekom, and I am a believer in understanding before reacting.

The Race to Get In

American’s birthrate, on average, has fallen to 1.9 per woman, less than the 2.1 rate considered necessary to sustain replacement values. Since economic growth is in part a function of population, without immigration, the United States would actually be contracting in size, representing another stopper in future economic recovery. Some countries, notably Japan, are predicted to have their birth rates fall to 1.35 by 2050, which would represent a population drop of almost a third in a country that has one of the lowest immigration rates on earth. It’s no surprise, then, that Japan’s last “good economic year” was 1991.

But the birth rates within the United States skew even more within our racial and ethnic mixes, with white births dropping below those of so-called minorities:“[Based on Census date t]he United States has reached a historic tipping point -- with Latino, Asian, mixed race and African American births constituting a majority of births for the first time… Minorities made up about 2 million, or 50.4%, of the births in the 12-month period ending July 2011, enough to create the milestone. The latest figure was up from 49.5% in the 2010 census.” Los Angeles Times, May 17^th. In short, minorities are becoming the majority in the United States.

With upward mobility almost a thing of the past in this dire economy of lost job opportunities, rising tuition with falling student aid and massive cuts to publicly-funded education at every level, our class structure may be frozen to its current state. The 1% of America that owns 42% of our wealth may not be impaired by the slam to the system, but the vast majority of Americans feel the pain in lost income and lowered expectations. So if white is becoming a minority – although no other single race has a greater U.S. population segment – is ethnic or racial minority status even relevant in college admissions standards? Is it time to abandon that criterion from the mix or has that frozen upward mobility issue made moving those in the lower socio-economic classes – overwhelmingly populated by African-Americans and Hispanics – up the ladder even more important?

It’s an issue that the Supreme Court has wrestled with from its “separate but equal” ruling (the infamous Plessy vs. Ferguson in 1896, reversed in Brown vs. Board of Education in 1954) in the first levels of public schooling to more contemporary decisions that have allowed racial considerations in college admissions in the interest of diversity as long as quotas are not used. “‘We expect that 25 years from now, the use of racial preferences will no longer be necessary to further the interest approved today,’ Justice Sandra Day O’Connor wrote [in 2003] for the majority in Grutter v. Bollinger .” Washington Post, July 31, 2011. The Supreme Court now faces a challenge (Fisher vs. University of Texas), even to that standard, from a white woman who claims she lost a place in the 2008 freshman class at the prestigious UT to a minority student.

“Under the banner of racial diversity, [Abigail] Fisher contends, the UT admissions process — which considers race as a factor in choosing one-quarter of its students — unfairly favors African Americans and Hispanics at the expense of whites and Asian Americans.” Washington Post, September 27^th. But the Supreme Court has reconfigured, and Ms. O’Connor has retired from the bench…” with a conservative majority now highly skeptical of — even hostile to — racial preferences. The justice most likely to decide the case for the divided court — Anthony M. Kennedy — has agreed in principle that diversity is important but has never voted to approve an affirmative-action plan… [O’Conner’s] successor, Justice Samuel A. Alito Jr., has proved to be a staunch opponent of race-based classifications, as has Chief Justice John G. Roberts Jr. ‘Racial balancing is not transformed from ‘patently unconstitutional’ to a compelling state interest simply by relabeling it ‘racial diversity,’ ’ Roberts wrote in a 2007 decision about K-12 education.

“Justice Elena Kagan, President Obama’s former solicitor general, is recused from the case. Kennedy is by all accounts the pivotal justice in the case — the briefs submitted by Fisher and UT mention his opinions a combined 50 times… In case of a tie vote, UT’s plan would remain in place, although the decision would not serve as a precedent. And if the majority decides against Texas, it could do so narrowly — saying that because the Top 10 plan has diversified the student body, there is no need to consider race in the rest of the admissions — or broadly, by overturning Grutter, as some have urged the court to do…

“There is little doubt that, if the court says race may not be considered, the numbers of white and Asian American students on college campuses will increase and the numbers of blacks and Hispanics will fall. The University of California submitted a brief saying it has not been able to ‘reverse the precipitous decline in minority admission and enrollment’ that followed voters’ decision in 1996 to explicitly prohibit affirmative action in higher education.” The Post. If upward mobility at the lowest socioeconomic levels becomes further encumbered, will anger and frustration accelerate in that sector? How will people react who may believe that they have little stake in this society and nothing left to lose? Or have we come so far that race realities “are what they are” and it’s time to go to a pure meritocracy system? What do you think?

I’m Peter Dekom, and in a world of complex choices, balancing individual rights can be exceptionally difficult.

Senkaku a/k/a Diaoyutai

They are a small group of islands in the East China Sea that have been Japanese-controlled for about a century. The Chinese have maintained that the Diaoyutai Islands (Senkaku in Japanese) were supposed to be transferred to China following World War II, but China’s post-war revolutionary battles prevented the implementation of that process. Now, in a year of political upheaval, economic slowdown, scandal at the top of the Communist Party and the time when the Party will meet to lay down its near-term policies and sanction the transition of power to the next generation of leaders at the top – notably the installation of Xi Jinping to replace the departing Hu Jintao – the people, the country and the party needed a distraction, a rallying point top leaders reasoned. As the Japanese government formalized its territorial claims by effecting land purchases on these islands, the PRC demanded that the islands be recognized as bona fide Chinese territory.

The little symbolic gestures followed. China withdrew its badminton team from a major tournament in Japan. A Japanese tennis player competing in the early October China Open required extra security. In the second week of October, a Chinese delegation announced they would not attend a series of international financial meetings in Tokyo because of the dispute. The not-so-little symbolic gestures made headlines. Big civil protests, carefully organized but with destruction, rocks and bottles thrown into the mix, took to the streets. In China, the 7-Eleven chain is Japanese-owned, so they prudently closed. But in mid-September, what were supposed to be peaceful protests turned ugly. For example, a mob in the ancient Chinese capital of Xi’an attacked a fellow citizen, Li Jianli, crushing his skull and leaving him paralyzed, just because he was driving a Japanese car! There’s even a theory floating around China that Japan’s move oto solidify its hold on these disputed islands is part of an American conspiracy to humiliate the PRC. The U.S. ambassador’s car was attacked in a protest outside our embassy in Beijing.

It’s not hard in China to stir up anti-Japanese sentiments. Japan’s pre-WWII invasion of China and the ensuing brutality are indelibly etched into the psyches of every Chinese citizen. There is no love lost between these two powers, and the defense treaties that the United States has with Japan continue to ruffle PRC feathers. September 18^th is a particularly sensitive date in Chinese history, because it marks the beginning of the Japanese invasion of the mainland… over an excuse known as the Mukden Incident (often referred to in Chinese history books as the “day of humiliation”): “On September 18, 1931, an explosion destroyed a section of railway track near the [northern] city of Mukden. The Japanese, who owned the railway, blamed Chinese nationalists for the incident and used the opportunity to retaliate and invade Manchuria.” U.S. Department of State.

So this past September 18^th – with the territorial island dispute on everyone’s mind – brought home the festering feelings of ill-will against Japan: “In Beijing, several thousand people brought one of the city’s diplomatic districts to a standstill as they swelled out from a crucial artery, the Third Ring Road, to beyond the Japanese Embassy. The police kept protesters separated into groups of 100 to 200 each; at the peak of the demonstration, in the early afternoon, streets were lined with at least 20 such groups.

“As the day progressed, crowds threw rocks and water bottles at the well-guarded embassy compound. Some of the banners were crude, with sexual undertones that might have reflected the Japanese military’s brutal wartime treatment of Chinese, including the systematic rape of Chinese women during its 14-year invasion and occupation of parts of the country. One banner showed a Chinese soldier castrating a Japanese soldier, while a popular image depicted Japan’s national flag as a white sanitary napkin with a spot of blood in the middle… Although the protests clearly had government support — large-scale public demonstrations are extremely rare in China — many people came on their own and appeared to be genuinely angered at what they saw as Japan’s failure to address its past behavior.” New York Times, September 18^th. The PRC demanded that the United States keep out of the regional dispute, leaving it to the Asian powers to resolve between themselves.

But now, despite an attempt to draw popular support to this territorial dispute, all eyes are turned to the next Party Congress, which is slated to begin on November 8^th, immediately after the U.S. elections. Who’s in and who’s out, how deep the Bo Xilai/Ling Jihua scandals will inflict damage among the Party’s apparatchik and exactly how the Party intends to redirect the next level of economic growth are all burning questions that have refocused popular – and global – attention.

There is a lot of cleaning house that needs to take place, lots of reconnection with the people many of whom have turned cynical over the roiling and never-ending cycles of corruption and cronyism that plague the country and a need for clear new polices that will reassure the populace after their central leaders seem to have let the entire country down. For those of us who are China-watchers, this time in China is probably the most critical period in that nation’s history since Deng Xiaoping created the face of the modern economic China beginning over three decades ago.

The new administration will begin a ten-year political administration in tough economic times. How the United States will relate in the region and how the global economy will fare in the coming years very much depends on this new government, one that seems to have already written off the United States as a power in steep and precipitous decline. The distraction of island territorial disputes may return, but right now, there is a whole lot more going on in the PRC.

I’m Peter Dekom, and next to our own Presidential election, this transition in China may be the most important process that will impact our daily lives for years to come.

Hello Dalai

If Judaism is dedicated to making the world a better place for all, Islam calls on believers to lead an honorable and dignified life in the service of God, and Christianity is about brotherly love, tolerance and forgiveness, please explain why so many fundamental adherents of each faith believe they are justified in attacking and killing followers of one or more of the other religions (or even different sects within their own faith)? Whether it is Boko Haram church bombings in Nigeria (with vengeful reprisals), a murderous assault on an American consulate in Benghazi, Sunni car bombings against Shiites in Baghdad, Israeli shelling and bombing of innocent civilians in southern Lebanon to get at the militants imbedded in their mix, a coordinated attack against buildings filled with innocents on 9/11/01… well this list could go on for pages and pages… “I’m right and you’re wrong” or “If you don’t believe you are less than me and I can kill you for your own good” religion seems to be one of the greatest source of violent death on earth.

If the Pope proselytizes peace among nations, he does so from his religious perspective, but Catholics through the ages (Spanish Inquisition, Crusades, the battle in Northern Ireland) have engaged in many murderous if religiously-justified conflicts. If the head of the Russian Orthodox Church demands President Vladimir Putin’s support of the cruel Assad regime in Syria, it is because he wants to protect the Christian minority there from Islamists with murder on the minds – which minority Assad continues to protect – regardless of the cost in human lives in the rest of the country. The Evangelical movement is firmly committed to a strong and powerful Israel out of a notion that the Second Coming will only emanate from the prophecy of Armageddon that will generate from an ultra-violent all-out war in the Holy Land. And if some extreme Muslim cleric issues a fatwah against a practitioner of legally permissible free speech in an entirely different nation thousands and thousands of miles away, with adherents admonished to implement an order to kill the offender, how can we expect global peace and harmony?

So from this cacophony of violent religiosity comes a calm voice from a supreme religious prelate – the Tibetan Buddhist Dalai Lama – who tells us that perhaps the world cannot find global peace and calm togetherness through religion and that too much of global conflict is in fact generated by the most reverent in pursuit of their religious commitments... that there must be a path “beyond religion” where cohesive harmony can be achieved on an entirely different level.

“All the world’s religions, with their emphasis on love, compassion, patience, tolerance, and forgiveness can and do promote inner values. But the reality of the world today is that grounding ethics in religion is no longer adequate. This is why I am increasingly convinced that the time has come to find a way of thinking about spirituality and ethics beyond religion altogether,” says the Dalai Lama in his 2011 book, Beyond Religion: Ethics for the Whole World.

He doesn’t negate the needs and goals of religions around the world, but points out that for religious morality to prevail sufficiently to represent a solution to global harmony would require that one core religion replace the diversity of belief we have today, a seemingly impossible occurrence. “‘Any religion-based answer to the problem of our neglect of inner values can never be universal, and so will be inadequate. What we need today is an approach to ethics which makes no recourse to religionand can be equally acceptable to those with faith and those without: a secular ethics,’ he wrote.” Huffington Post, September 13^th. In short, there is a commonality of ethical and moral precepts that are in all faiths and thus transcend any one faith to become the global values that could, theoretically, lead us all to global harmony… assuming such a feat were remotely possible.

There are those who argue that violence in the world – man’s killing man in murder and through combat – is just a tool of nature administering population control over a species that has no known superior predators… so we become our own predators. We have no choice they say. It is a harsh view that reduces mankind to numbers and macro-genomic programming, denying the humanity of moral choice. I think I like the Dalai Lama’s suggestions better, however remote and idealistic they may be. We really do need to embrace “something else,” because the cruelty that repels most of us seems only to be growing. What are your thoughts?

I’m Peter Dekom, and looking at the state of the planet, I truly do want a better world for my son, his wife and the generations to come.

The Last Temptation of Price

Assume that a stock is trading on 25 exchanges worldwide, and the price varies ever-so-slightly for ever-so-short a time, a tiny fraction of a second, between and among exchanges. Assume you are imbued with omniscience and omnipresence combined with the fastest reaction time on earth. Your mind could micro-process those minute discrepancies in a billionth of a second. Assume you can trade free and clear of any broker’s commission as often as you like… because you are a broker. Add either a cash balance sheet with billions to play with or one of the highest margin accounts on earth… but you really don’t need that. In that short span of time, repeated all day and all night, you could buy and sell on those discrepancies… knowing that every decision would produce profits without risk. Buy low and sell high… even if the discrepancy is small, if enough stock is at stake and the trades are repeated, you would be filthy, stinking rotten rich!

Yet according to Hard Talk on BBC World (September 7^th), precisely that kind of high frequency trading, implemented by linked supercomputers strategically placed near the exchanges in question, accounts for 60% of all global stock market activity. Big financial institutions with a global presence connected to these exchanges through their proprietary software to implement these automated programmed trades via their mega-expensive supercomputers. Doing what individual traders can only dream about. Creating not one red cent of true economic value for the world, not one penny of capital to employ the unemployed or fund the new next great invention… nothing but profits without any redeeming social value to anyone but themselves. Day in and day out. Because they can.

The traders who even have enough of a moral backbone to address the question of what use is this activity to society admit lamely, “it creates balance and synchronicity in the markets,” as if that result had the slightest value to humanity at any level. For all those who argue that regulation depresses the capital marketplace… and can say that with a straight face… simply do not want you to look at those aspects of their work that benefit no one but themselves. They don’t want you to think that fixing Libor rates or leveraging beyond any prudent ratio of debt to hard equity or using cheap Fed money that was supposed to be used to encourage lending in the open market is instead being diverted to bank’s trading arms to play with is wrong or should be limited.

The capital markets benefit society, theoretically, by fueling innovation, job creation and corporate growth. They are supposed to be honest and transparent, but every attempt to create that honesty and transparency is met with SuperPac furor at how such requirements are impairing America’s ability to fund that growth. Honesty and transparency are bad for us? Huh? Oh, if you call the requirement a “regulation,” you can convince those who cannot peer beneath the headlines that regulation is “mmm… bad, okay?” And that is the problem. Too much money funding campaigns provided by people with an agenda that has already proven toxic to the American economy able to fool vast pools of voters with catchy slogans that carry lies imbued with benefits only for those who envision trading without rules, profits with tax loopholes, and ill-gotten benefits without any possible threat of responsibility, civil or criminal.

How stable are these flash trades? “The May 6, 2010 Flash Crash also known as The Crash of 2:45, the 2010 Flash Crash or just simply, the Flash Crash, was a United States stock market crash on Thursday May 6, 2010 in which the Dow Jones Industrial Average plunged about 1000 points—or about nine percent—only to recover those losses within minutes. It was the second largest point swing, 1,010.14 points, and the biggest one-day point decline, 998.5 points, on an intraday basis inDow Jones Industrial Average history.”

“[The Securities and Exchange Commission and the Commodities Futures Trading Commission investigated and issued a report.] The joint report ‘portrayed a market so fragmented and fragile that a single large trade could send stocks into a sudden spiral,’ and detailed how a large mutual fund firm selling an unusually large number of E-Mini S&P 500 contracts first exhausted available buyers, and then how high-frequency traders (HFT) started aggressively selling, accelerating the effect of the mutual fund's selling and contributing to the sharp price declines that day.” Wikipedia.

We seem to be a nation of fools sometimes, believing lies that are embossed in fancy ads, repeated often enough by actors and politicians (who can tell them apart?) with passion and seeming moral conviction that they are believed by enough gullible people to believe that these recommendations are pure and good for America. Maybe that is why those with financial power want to continue to cut educational budgets… Stupid voters are a fundamental necessity for those who hate rules that benefit anyone but themselves.

I’m Peter Dekom, and I’d say it is poetic justice that it is precisely this pool of voters who get slammed the most from stupid financial tricks… but there are too many other innocents who get slaughtered along the way.