In a dying civilization, political prestige is the reward not of the shrewdest diagnostician but of the man with the best bedside manner.
Since most of history’s giant trees have already been cut down, a new Ark will have to be constructed out of the materials that a desperate humanity finds at hand in insurgent communities, pirate technologies, bootlegged media, rebel science, and forgotten utopias.
A press release emerged yesterday from USJFCOM (that is to say, United States Joint Forces Command, one of 9 Commands in the Dept. of Defense and the one that’s in charge of defense transformation). The snappy title of the release:
U.S. Joint Forces Command’s (USJFCOM) two-year cooperative research and development agreement (CRADA) with Raytheon studied non-lethal weapons and crowd behavior.
Well, I thought, this sounds fun: being interested in social network analysis and all, I’m always intrigued by computer models of social behaviour such as how crowds behave and the like.
Ah, was I in for a surprise…
There’s a great new piece by Nouriel Roubini, the economist nick-named Dr Doom for his early prediction of the extent of the losses in the US banking sector – he said $2 trillion a while back, which initially no one agreed with, though now even Goldman Sachs does.
Well, now he thinks losses may be as much as $3.6 trillion, half of them owed by US banks and half by overseas banks. However, the assets of the US banking system only amount to $1.4 trillion, so ‘the US banking system is effectively insolvent, most of the UK banking system looks insolvent too, and many other banks in continental Europe are also insolvent’.
They are what are sometimes called ‘zombie banks’ – banks that are insolvent, dead, finished, but kept in a state of living deadness by state support, when really the plug should be pulled.
Roubini, like everybody else, is a critic of the US Treasury’s new bank bail-out scheme, saying that if the government over-values toxic assets, it’s a rip off for tax-payers and an unfair bail-out of shareholders. However, if the government accurately values the toxic CDOs of banks like Citigroup, then the banks would be rendered insolvent.
He suggests the only way out might be a widescale nationalisation of the banking system, with banks cleaned up and then sold back into the private sector (to the Middle East probably. Consider this – the entire market capitalisation of the US commercial banking system is less than half the sovereign wealth fund of Abu Dhabi).
However, the ‘N Plan’, as he calls it, is ‘not yet politically feasible’ because many people still believe banks like JPMorgan and Wells Fargo are solvent. Roubini says that in the next 6-12 months, ‘the sharp rise in delinquencies and charge-off rates we are experiencing now on mortgages, commercial real estate and consumer credit’ mean that even these apparently stronger banks will also be rendered ‘near insolvent’.
Roubini concludes: ‘You can expect a similar path and an eventual government takeover of most financial institutions in other countries – such as the UK’.
Centrally planned economy, here we come.
Since Slovak diplomat Miroslav Lajcak resigned as High Representative and EU special representative in Bosnia and Herzegovina, there has been a mad scramble to fill his post. The British Government has apparently nominated Sir Emyr Jones Parry, Britain’s former UN ambassador, after having asked Rupert Smith and Jeremy Greenstock.
But Greece, Estonia, Austria and Italy are also said to have put forward candidates for the position. Italy’s candidate is said to be Renzo Daviddi, the European Commission’s man in Kosovo.
The person selected by the European Council to serve as EUSR would then need to be proposed to PIC Steering Board capitals as the EU’s nominee for high representative. Assuming the PIC concurred, the practice of ‘double-hatting’ inaugurated in 2002 would continue. This might facilitate the ‘transition’ of OHR into a EUSR office, particularly if the EU can in the meantime agree a robust mandate for a ‘reinforced’ EUSR. It is unlikely that several PIC Steering Board countries – both EU and non-EU members – would agree to close OHR in the absence of assurances that the new EUSR would have the requisite personal and institutional clout.
Other PIC capitals – both EU and non-EU – are keen, however, to close OHR as soon as possible. Opinion in BiH is likewise divided. Republika Srpska politicians see Laj?ák’s early departure as a heaven-sent opportunity to get rid of OHR altogether. Most of their counterparts in the Federation, on the other hand, still regard the maintenance of OHR in its full capacity as essential.
Whoever is elected for the job will have to arrive in Sarajevo with a plan, the centre piece of which should be constitutional change. Bosnia cannot survive in its present dysfunctional state: the country’s governance is overly complicated and the ethnicity-favoring provisions in the country’s constitution and election law too centrifugal to create lasting stability. As Judy Blatt says in a new FRIDE report:
The EU should be ready to take the lead in an active and assertive approach to mediating the constitutional reform process
Taking on constitutional issue also the right battle, as it is inimical to RS leader Milorad Dodik, whose whole political support is built on increasing the powers of the RS and diminishing the powers of the Bosnian state.
What a new constitutional set-up will look like, how to get domestic agreement on a new constitution and how to use the EU’s accession process as a goad for the reform process are questions that the EU man will have to answer. “Pob lwc”, as they say in Welsh. Good luck.
What next for ‘Chimerica’, as Niall Ferguson calls the unholy alliance of Chinese capital and US debt that has grown up over the last decade.
China is concerned about the erosion of value in US Treasuries and the dollar:
China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.
But what can China do? John Higgins, senior economist at Capital Economics: ‘It’s self-defeating for China or others to offload Treasuries. if China dumped US Treasuries, it would push up yields, slow economic activity in the US, and slow demand for imports. Is that in China’s interests? No.’
On the other hand, this from Steve Barrow, currency strategist at Standard Bank:
‘The issue of declining appetite among foreign central banks for US Treasuries is not just about supply. It’s also a protectionist issue. For us to envisage a significant rise in the yield of US Treasuries and a fall in the dollar, it would have to be because of a rise in protectionist and isolationist tit-for-tat policies. But that’s the way the world is heading. You can see creeping protectionism all the time. And that could lead to emerging market central banks keeping more of their reserves locally, to defend their currency and support their economy.’