Obama isn’t that bad when it comes to foreign policy

September 19, 2009 at 18:57 | Posted in Foreign Policy, Missile Defense, Obama | Leave a comment

It’s not just all doom and gloom in the presidency of Obama. While the poor fool has no clue about economics, at least he is not completely out to lunch when it comes to foreign policy. I’m not sure whether brilliant but batty Zbginiew Brzezinski has lost the President’s ear, or whether he and Henry Kissinger had the chance to talk a little bit about realty, but for the time being everybody seems to be playing nice.

The Russians were not asleep at the switch either, having just in time upped the ante so they can climb down the tree without really losing much.

And today Robert Gates took the opportunity to put some serious lipstick on the pig:


A Better Missile Defense for a Safer Europe


Published: September 19, 2009

THE future of missile defense in Europe is secure. This reality is contrary to what some critics have alleged about President Obama’s proposed shift in America’s missile-defense plans on the continent — and it is important to understand how and why.

First, to be clear, there is now no strategic missile defense in Europe. In December 2006, just days after becoming secretary of defense, I recommended to President George W. Bush that the United States place 10 ground-based interceptors in Poland and an advanced radar in the Czech Republic. This system was designed to identify and destroy up to about five long-range missiles potentially armed with nuclear warheads fired from the Middle East — the greatest and most likely danger being from Iran. At the time, it was the best plan based on the technology and threat assessment available.

That plan would have put the radar and interceptors in Central Europe by 2015 at the earliest. Delays in the Polish and Czech ratification process extended that schedule by at least two years. Which is to say, under the previous program, there would have been no missile-defense system able to protect against Iranian missiles until at least 2017 — and likely much later.

Last week, President Obama — on my recommendation and with the advice of his national-security team and the unanimous support of our senior military leadership — decided to discard that plan in favor of a vastly more suitable approach. In the first phase, to be completed by 2011, we will deploy proven, sea-based SM-3 interceptor missiles — weapons that are growing in capability — in the areas where we see the greatest threat to Europe.

The second phase, which will become operational around 2015, will involve putting upgraded SM-3s on the ground in Southern and Central Europe. All told, every phase of this plan will include scores of SM-3 missiles, as opposed to the old plan of just 10 ground-based interceptors. This will be a far more effective defense should an enemy fire many missiles simultaneously — the kind of attack most likely to occur as Iran continues to build and deploy numerous short- and medium-range weapons. At the same time, plans to defend virtually all of Europe and enhance the missile defense of the United States will continue on about the same schedule as the earlier plan as we build this system over time, creating an increasingly greater zone of protection.

Steady technological advances in our missile defense program — from kill vehicles to the abilities to network radars and sensors — give us confidence in this plan. The SM-3 has had eight successful tests since 2007, and we will continue to develop it to give it the capacity to intercept long-range missiles like ICBMs. It is now more than able to deal with the threat from multiple short- and medium-range missiles — a very real threat to our allies and some 80,000 American troops based in Europe that was not addressed by the previous plan. Even so, our military will continue research and development on a two-stage ground-based interceptor, the kind that was planned to be put in Poland, as a back-up.

Moreover, a fixed radar site like the one previously envisioned for the Czech Republic would be far less adaptable than the airborne, space- and ground-based sensors we now plan to use. These systems provide much more accurate data, offer more early warning and tracking options, and have stronger networking capacity — a key factor in any system that relies on partner countries. This system can also better use radars that are already operating across the globe, like updated cold war-era installations, our newer arrays based on high-powered X-band radar, allied systems and possibly even Russian radars.

One criticism of this plan is that we are relying too much on new intelligence holding that Iran is focusing more on short- and medium-range weapons and not progressing on intercontinental missiles. Having spent most of my career at the C.I.A., I am all too familiar with the pitfalls of over-reliance on intelligence assessments that can become outdated. As Gen. James Cartwright, the vice chairman of the Joint Chiefs of Staff, said a few days ago, we would be surprised if the assessments did not change because “the enemy gets a vote.”

The new approach to European missile defense actually provides us with greater flexibility to adapt as new threats develop and old ones recede. For example, the new proposal provides some antimissile capacity very soon — a hedge against Iran’s managing to field missiles much earlier than had been previously predicted. The old plan offered nothing for almost a decade.

Those who say we are scrapping missile defense in Europe are either misinformed or misrepresenting what we are doing. This shift has even been distorted as some sort of concession to Russia, which has fiercely opposed the old plan. Russia’s attitude and possible reaction played no part in my recommendation to the president on this issue. Of course, considering Russia’s past hostility toward American missile defense in Europe, if Russia’s leaders embrace this plan, then that will be an unexpected — and welcome — change of policy on their part. But in any case the facts are clear: American missile defense on the continent will continue, and not just in Central Europe, the most likely location for future SM-3 sites, but, we hope, in other NATO countries as well.

This proposal is, simply put, a better way forward — as was recognized by Prime Minister Donald Tusk of Poland when he called it “a chance for strengthening Europe’s security.” It is a very real manifestation of our continued commitment to our NATO allies in Europe — iron-clad proof that the United States believes that the alliance must remain firm.

I am often characterized as “pragmatic.” I believe this is a very pragmatic proposal. I have found since taking this post that when it comes to missile defense, some hold a view bordering on theology that regards any change of plans or any cancellation of a program as abandonment or even breaking faith. I encountered this in the debate over the Defense Department’s budget for the fiscal year 2010 when I ended three programs: the airborne laser, the multiple-kill vehicle and the kinetic energy interceptor. All were plainly unworkable, prohibitively expensive and could never be practically deployed — but had nonetheless acquired a devoted following.

I have been a strong supporter of missile defense ever since President Ronald Reagan first proposed it in 1983. But I want to have real capacity as soon as possible, and to take maximum advantage of new technologies to combat future threats.

The bottom line is that there will be American missile defense in Europe to protect our troops there and our NATO allies. The new proposal provides needed capacity years earlier than the original plan, and will provide even more robust protection against longer-range threats on about the same timeline as the previous program. We are strengthening — not scrapping — missile defense in Europe.

Robert M. Gates is the secretary of defense.

[Or in plain English: the original plan was stupid on every level, and now was a good opportunity to drop it. Phew. Good for you, Mr. President. Now set up a call with Peter Schiff and Ron Paul to get some equally smart advice on domestic issues. You’ve proven you can listen.]


Mark Taibbi on the American Gangster Ecoromy

June 26, 2009 at 02:11 | Posted in Al Gore, bubble, Corruption, criminal, economics, Goldman Sachs, Obama, sub-prime | Leave a comment
This deliciously scathig article by Mark Taibbi on the unbelievable shenanigans of Goldman-Sachs, Al Gore, and pretty much the entire financial ‘regulatory’ system of the United States should be read while sitting down: it’s simply too much.
Of course, Taibbi misses out on some of the economic subtleties of what transpired during the events he describes – and thereby deprives himself of some real gems – but he has the politics down pat.
[And considering that Mark cut his journalistic teeth at the irreplaceable The Exile in Moscow during some of Russia’s wilder days, he probably has good reasons for using the term “gangster economy” to describe the current day U.S.A.]
In case any of you thinks Mark is hallucinating, I’ll put up a little gem from the Atlantic Monthly as well. Same economic blind-spots, same political acuity.

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The Wall Street-Washington Complex

April 8, 2009 at 20:31 | Posted in Corruption, Larry Summers, Obama, Wallstreet | Leave a comment

This Story is definitely not getting enough play, so I’ll do my part to promote it. It’s also in my ‘shared’ items, but for some reason, Jeff’s blog seems to be down for the moment.

from The Daily Capitalist by Jeff Harding

By Jeff Harding

Larry Summers worked for hedge fund D. E. Shaw for one day a week for a year and received $5,200,000. Assuming they gave him a couple weeks off, that’s 50 days of work. $104,000 per day is pretty good work if you can get it. He also made a lot of money from speaking engagements: $2,770,000. If you average the 40 or so engagements, he got about $69,000 per speech. Most of his speeches were to financial companies like Goldman Sachs, Merrill Lynch, JP Morgan, Citigroup, Lehman Brothers, and American Express.

After getting his Ph.D. in economics from Harvard he became one of the youngest ever tenured professor at Harvard (1982). He also worked on the Reagan Council of Economic Advisers (1982-1983). In 1991 he left Harvard to be the Chief Economist for the World Bank until 1993. From 1993 to 2001 he served in the Clinton Administration in several positions, lastly being Secretary of the Treasury when his mentor Robert Rubin left for Citigroup. After Clinton he became President of Harvard University until 2005 when he resigned over an argument that deemed him sexist according to university politics.

By all accounts this son of two professors of economics at U of Penn is a brilliant man, going to MIT at age 16. Two of his uncles won Nobel prizes for economics: Paul Samuelson and Kenneth Arrow. Must be some pretty stiff competition in that family.

Mr. Summers never had what most people consider to be a real job. He made money because he was a political trophy for D. E. Shaw, not because he had some extraordinary insight into economic or financial matters. According to the NY Times:

Mr. Summers and Shaw executives say his role there was to be a sounding board for Shaw’s traders. But interviews with friends and former colleagues suggest that Mr. Summers’s role at D. E. Shaw was wider and more complex.

Mr. Summers, these people say, was a marquee hire, a prized spokesman for Shaw. He routinely made himself available for private consultations with Shaw’s clients, an attractive perk for investing with the firm, as one client put it.

Mr. Summers, who taught economics and public policy at Harvard while advising Shaw, also met with investors in the United States, as well as in the cash-rich Middle East and Asia. He spoke at industry conferences, mixing with officials from public pension funds, endowments and other large institutions with many billions of dollars to invest. …

A spokesman for Shaw said Mr. Summers’s main job was not to act as a salesman. But in the fall of 2007, as the financial crisis simmered, Mr. Summers traveled to Dubai for a series of meetings with Shaw’s marketing staff and potential investors. Bankers from across the region flew in for the event. Mr. Summers spoke at several lavish dinners and met with local parties involved in Shaw’s real estate investments in the area, people briefed on his trip said.

Mr. Summers, as Director of the National Economic Council, is now the most powerful person in the Obama Administration on economic issues.

* * * * *

President Eisenhower warned of a “military-industrial complex,” which was his term for the combination of defense contractors, the military, and politicians who’s goal was, and still is, to influence military, foreign policy, and spending decisions for their benefit. Eisenhower saw it as a threat to individual liberty since it existed to perpetuate its power and money through military spending.

This same issue was raised by Nobel Prize winner and Austrian School economist, Friedrich von Hayek in his classic 1944 book, The Road to Serfdom. His point was that central planning eventually leads to tyranny, as evidenced by the Soviet Union or Nazi Germany. The inevitable failures of central planning leads to demands for more power to accomplish the failed goals which in turn would curtail individual liberty and result in a totalitarian state. He was critical of a war machine driven by former warriors reluctant to give up power.

While we still have the military-industrial complex, we are now seeing the rise of the Wall Street-Washington complex. While not exactly a new phenomenon, actions of the Obama and Bush administrations reveal the power of Wall Street and politics in the arena of economic policy. We have the constant shuffling back and forth between government and Wall Street of very familiar faces who share common ideas and ideals.

It’s been going on for quite a while. Paul Volker (Princeton/Harvard) left the Fed to become chairman of J. Rothschild, Wolfensohn & Co, a New York investment bank. Allen Hubbard (Vanderbilt/Harvard) was a successful entrepreneur and friend of George W. Bush who became Bush’s chief economic adviser. Laura Tyson (Smith/MIT), another adviser to Clinton, has been a Director of Morgan Stanley, AT&T, and Eastman Kodak. Hank Paulson (Dartmouth/Harvard), Bush’s last Treasury secretary, was a Goldman Sachs man, like Robert Rubin. Stephan Friedman (Columbia) also came from Goldman to be another of Bush’s chief economic advisers.

Fed Chairman Ben Bernanke (Harvard/MIT) and Secretary of the Treasury Tim Geithner (Dartmouth/John Hopkins) fit into this mold, although neither has been employed in the private sector. To round it out, Christina Romer, the Chair of Obama’s Council of Economic Advisers, went to William & Mary and MIT.

Mr. Summers made a lot of money for being a trophy schmoozer for D. E. Shaw. I think he sold himself a bit short; Robert Rubin (Harvard/Yale), his predecessor at Treasury, made an estimated $115 million while at Citigroup.

* * * * *

It is well known that after spending time at certain regulatory agencies, former bureaucrats seek financial gain in private industry by dealing with the same agencies they worked for. But what I’m talking about is different.

The Wall Street-Washington complex is a relatively small political-financial-economic clique that revolves around a common orbit:

  • Degrees from Harvard and MIT;
  • Employment with Wall Street banks, especially Goldman Sachs, Merrill Lynch, and JP Morgan;
  • Economics professors, especially at Harvard and MIT;
  • A revolving door for the above to become economic policy advisers in government;
  • The politicians and their advisers who have been funded or endorsed by the above.

They share the same basic philosophies in government (interventionist), economics (Keynesian), and finance since they were educated in the same institutions and worked in the same places, public or private. They easily slip back and forth between government and Wall Street and reap the rewards of power and money. As a result they represent current mainstream thinking in economics and finance in America. They are our leaders in government and in finance and investments.

What’s wrong with this picture?

They are the same people who got us into this economic crisis and are now in charge of leading us out. The bailout is emblematic of this problem because it implements their world view: Wall Street and their friends are of prime importance and bailing them out is the key to economic recovery. You can look at the bailout as kind of a payback.

In light of what Eisenhower and von Hayek warned, here’s what the Wall Street-Washington complex is doing:

They continue to employ the same risk models of finance and investment on Wall Street that helped cause our crisis.

They are demanding more political power to “correct” the economy to save us.

They are imposing new laws to restrict the ability of entrepreneurs and businesses to create wealth and economic well being in America.

They will continue to blame “capitalism” for the crisis instead of the government intervention in the economy which caused this crisis.

They are implementing the same Keynesian “remedies” that were tried in Japan and failed with catastrophic results for them.

They will leave us with huge debt that will be a drag on the economy for generations to come.

They are creating the foundation of a new credit bubble which will bring us another boom-bust business cycle.

They are cutting their Wall Street cronies in on plum deals to buy bank “legacy” (“toxic”) assets.

They are changing the entire nature of the relationship of government to business.

* * * * *

This Wall Street-Washington complex is the most dangerous clique in America today. They are repeating the same economic mistakes that got us into this mess and are leading us into very dangerous territory.

Your reaction to this statement may be that I am exaggerating or have paranoid delusions or am a conspiracy theorist. As you know from the title of this blog, I support capitalism and the activities of free market traders in the financial markets. Despite the fact that some of my friends went to Harvard, I think I am a reasonable person and not prone to exaggeration. I don’t think they have secret meetings in the basement of the Washington Monument and I don’t think they see themselves as a clique.

There is a word for this type of cozy arrangement where a business and government elite use their power for mutual benefit. It’s a very common political system that has been used many times in many countries under different names: national corporatism, mercantilism, crony capitalism, oligarchy or plutocracy, dirigisme, and fascism. It isn’t capitalism, the free market, or the libertarian vision set forth in our constitution and Bill of Rights.

The reason that capitalism works is that it is a system that allows millions of people to act for their own financial benefit without a Gang of Four or a Gang of 500 telling them what to do. By substituting their decisions for the decisions of millions, this small powerful group can impact much of the world. When we ordinary citizens make mistakes the collateral damage is usually minimal. When the Wall Street-Washington complex makes mistakes we all suffer. This concentration of power is why they are dangerous.

Larry Summers is the poster boy for this world. He put in his time in academia and politics and cashed in big-time during the interregnum. All of his relationships in academia, Wall Street, and Washington are part of this complex and now he is at its center. It’s been good for Larry Summers and his friends. It’s bad for us. The bottom line is that we, the taxpayers, will pay for their mistakes. As will our children, grandchildren, and our great-grandchildren.

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