"Zollie Lyons, Negro sharecropper, home from the field for dinner at noontime, with his wife and part of his family.
Note dog run. Wake County, North Carolina."
Ilargi: One (no, two) of my very dearest friends got married last night, and it all got a bit out of hand, as in the gods give beer and wine, not diet soda or snapple. First time ever without a Debt Rattle.... I apologize, kind of. And wish an eternity of happiness to Scoop and Sarah..... You are truly beautiful.
I'll leave you with Ambrose Evans-Pritchard showing the limits of his brain power. Government did it, not the economic system?! They are the same entity, Ambie. It's not the system, it's the people. We can think up great systems, that work fine in theory. But we can not execute them. We can't. We never will.
What we can do and are good at and always will be doing is this little game:
(PS RIP I mourn Bernie Mac and Isaac Hayes)
Massive US Naval Armada Heads For Iran
Operation Brimstone ended only one week ago. This was the joint US/UK/French naval war games in the Atlantic Ocean preparing for a naval blockade of Iran and the likely resulting war in the Persian Gulf area. The massive war games included a US Navy supercarrier battle group, an US Navy expeditionary carrier battle group, a Royal Navy carrier battle group, a French nuclear hunter-killer submarine plus a large number of US Navy cruisers, destroyers and frigates playing the "enemy force".
The lead American ship in these war games, the USS Theodore Roosevelt (CVN71) and its Carrier Strike Group Two (CCSG-2) are now headed towards Iran along with the USS Ronald Reagon (CVN76) and its Carrier Strike Group Seven (CCSG-7) coming from Japan.
They are joining two existing USN battle groups in the Gulf area: the USS Abraham Lincoln (CVN72) with its Carrier Strike Group Nine (CCSG-9); and the USS Peleliu (LHA-5) with its expeditionary strike group.
Likely also under way towards the Persian Gulf is the USS Iwo Jima (LHD-7) and its expeditionary strike group, the UK Royal Navy HMS Ark Royal (R07) carrier battle group, assorted French naval assets including the nuclear hunter-killer submarine Amethyste and French Naval Rafale fighter jets on-board the USS Theodore Roosevelt. These ships took part in the just completed Operation Brimstone.
The build up of naval forces in the Gulf will be one of the largest multi-national naval armadas since the First and Second Gulf Wars. The intent is to create a US/EU naval blockade (which is an Act of War under international law) around Iran (with supporting air and land elements) to prevent the shipment of benzene and certain other refined oil products headed to Iranian ports. Iran has limited domestic oil refining capacity and imports 40% of its benzene. Cutting off benzene and other key products would cripple the Iranian economy. The neo-cons are counting on such a blockade launching a war with Iran.
The US Naval forces being assembled include the following:
Carrier Strike Group Nine
USS Abraham Lincoln (CVN72) nuclear powered supercarrier
with its Carrier Air Wing Two
Destroyer Squadron Nine:
USS Mobile Bay (CG53) guided missile cruiser
USS Russell (DDG59) guided missile destroyer
USS Momsen (DDG92) guided missile destroyer
USS Shoup (DDG86) guided missile destroyer
USS Ford (FFG54) guided missile frigate
USS Ingraham (FFG61) guided missile frigate
USS Rodney M. Davis (FFG60) guided missile frigate
USS Curts (FFG38) guided missile frigate
Plus one or more nuclear hunter-killer submarines
Peleliu Expeditionary Strike Group
USS Peleliu (LHA-5) a Tarawa-class amphibious assault carrier
USS Pearl Harbor (LSD52) assult ship
USS Dubuque (LPD8) assult ship/landing dock
USS Cape St. George (CG71) guided missile cruiser
USS Halsey (DDG97) guided missile destroyer
USS Benfold (DDG65) guided missile destroyer
Carrier Strike Group Two
USS Theodore Roosevelt (DVN71) nuclear powered supercarrier
with its Carrier Air Wing Eight
Destroyer Squadron 22
USS Monterey (CG61) guided missile cruiser
USS Mason (DDG87) guided missile destroyer
USS Nitze (DDG94) guided missile destroyer
USS Sullivans (DDG68) guided missile destroyer
USS Springfield (SSN761) nuclear powered hunter-killer submarine
IWO ESG ~ Iwo Jima Expeditionary Strike Group
USS Iwo Jima (LHD7) amphibious assault carrier
with its Amphibious Squadron Four
and with its 26th Marine Expeditionary Unit
USS San Antonio (LPD17) assault ship
USS Velia Gulf (CG72) guided missile cruiser
USS Ramage (DDG61) guided missile destroyer
USS Carter Hall (LSD50) assault ship
USS Roosevelt (DDG80) guided missile destroyer
USS Hartfore (SSN768) nuclear powered hunter-killer submarine
Carrier Strike Group Seven
USS Ronald Reagan (CVN76) nuclear powered supercarrier
with its Carrier Air Wing 14
Destroyer Squadron 7
USS Chancellorsville (CG62) guided missile cruiser
USS Howard (DDG83) guided missile destroyer
USS Gridley (DDG101) guided missile destroyer
USS Decatur (DDG73) guided missile destroyer
USS Thach (FFG43) guided missile frigate
USNS Rainier (T-AOE-7) fast combat support ship
Also likely to join the battle armada:
UK Royal Navy HMS Ark Royal Carrier Strike Group with assorted guided missile destroyers and frigates, nuclear hunter-killer submarines and support ships
French Navy nuclear powered hunter-killer submarines (likely the Amethyste and perhaps others), plus French Naval Rafale fighter jets operating off of the USS Theodore Roosevelt as the French Carrier Charles de Gaulle is in dry dock, and assorted surface warships
Various other US Navy warships and submarines and support ships. The following USN ships took part (as the "enemy" forces) in Operation Brimstone and several may join in:
USS San Jacinto (CG56) guided missile cruiser
USS Anzio (CG68) guided missile cruiser
USS Normandy (CG60) guided missile cruiser
USS Carney (DDG64) guided missile destroyer
USS Oscar Austin (DDG79) guided missile destroyer
USS Winston S. Churchill (DDG81) guided missile destroyer
USS Carr (FFG52) guided missile frigate
The USS Iwo Jima and USS Peleliu Expeditionary Strike Groups have USMC Harrier jump jets and an assortment of assault and attack helicopters. The Expeditionary Strike Groups have powerful USMC Expeditionary Units with amphibious armor and ground forces trained for operating in shallow waters and in seizures of land assets, such as Qeshm Island (a 50 mile long island off of Bandar Abbas in the Gulf of Hormuz and headquarters of the Iranian Islamic Revolutionary Guards Corps).
The large and very advanced nature of the US Naval warships is not only directed at Iran. There is a great fear that Russia and China may oppose the naval and air/land blockade of Iran. If Russian and perhaps Chinese naval warships escort commercial tankers to Iran in violation of the blockade it could be the most dangerous at-sea confrontation since the Cuban Missile Crisis.
The US and allied Navies, by front loading a Naval blockade force with very powerful guided missile warships and strike carriers is attempting to have a force so powerful that Russia and China will not be tempted to mess with. This is a most serious game of military brinkmanship with major nuclear armed powers that have profound objections to the neo-con grand strategy and to western control of all of the Middle East's oil supply.
The Russian Navy this spring sent a major battle fleet into the Mediterranean headed by the modern aircraft carrier the Admiral Kuznetsov and the flagship of its Black Sea Fleet, the Guided Missile Heavy Cruiser Moskva. This powerful fleet has at least 11 surface ships and unknown numbers of subs and can use the Russian naval facility at Syria's Tartous port for resupply. The Admiral Kuznetsov carries approximately 47 warplanes and 10 helicopters.
The warplanes are mostly the powerful Su-33, a naval version (with mid-air refueling capability) of the Su-27 family. While the Su-33 is a very powerful warplane it lacks the power of the stealth USAF F-22. However, the Russians insist that they have developed a plasma based system that allows them to stealth any aircraft and a recent incident where Russian fighters were able to appear unannounced over a US Navy carrier battle group tends to confirm their claims.
The Su-33 can be armed with the 3M82 Moskit sea-skimming missile (NATO code name SS-N-22 Sunburn) and the even more powerful P-800 Oniks (also named Yakhonts; NATO code name SS-N-26 Onyx). Both missiles are designed to kill US Navy supercarriers by getting past the cruiser/destroyer screen and the USN point-defense Phalanx system by using high supersonic speeds and violent end maneuvers.
Russian subs currently use the underwater rocket VA-111 Shkval (Squall), which is fired from standard 533mm torpedo tubes and reaches a speed of 360kph (230mph) underwater. There is no effective countermeasures to this system and no western counterpart.
A strategic diversion has been created for Russia. The Republic of Georgia, with US backing, is actively preparing for war on South Ossetia. The South Ossetia capital has been shelled and a large Georgian tank force has been heading towards the border. Russia has stated that it will not sit by and allow the Georgians to attack South Ossetia. The Russians are great chess players and this game may not turn out so well for the neo-cons.
UPDATE 8 August 2008 ~ War has broken out between Georgia and South Ossetia. At least 10 Russian troops have been killed and 30 wounded and 2 Russian fighter jets downed. American Marines, a thousand of them, have recently been in Georgia training the Georgian military forces. Several European nations stopped Bush and others from allowing Georgia into NATO. Russia is moving a large military force with armor towards the area. This could get bad, and remember it is just a strategic diversion....but one that could have horrific effects. Link to story "Russia sends forces into Georgia rebel conflict".
FURTHER UPDATE ~ Russian military forces in active combat; now total of four Russian fighter jets reported downed. ADDITIONAL UPDATE ~ Georgia calls for US help; Russian Air Force bombs Georgian air bases. DEBKA, the Israeli strategy and military site, states that Israeli military officers are advising the Georgian armed forces in combat operations and that 1,000 Israelis are in-combat on the side of Georgia at this time.
Kuwait has activated its "Emergency War Plan" as it and other Gulf nations prepare for the likelihood of a major regional war in the Middle East involving weapons of mass destruction.
The two-ton elephant in the living room of the neo-con strategy is the advanced biowar (ABW) that Iran, and to a lessor extent Syria, has. This places the motherlands of the major neo-con nations (America, France, the United Kingdom), as well as Israel, in grave danger. When the Soviet Union fell the Iranians hired as many out-of-work former Soviet advanced biowar experts as possible. In the last 15 or so years they have helped to develop a truly world class ABW program utilizing recombination DNA genetic engineering technology to create a large number of man made killer viruses.
This form of weapon system does not require high tech military delivery systems. The viruses are sub-microscopic and once seeded in a population use the population itself as vectors. Seeding can be done without notice in shopping malls, churches, and other public places. The only real defense to an advanced global strategic biowar attack is to lock down the population as rapidly as possible and let those infected die off.
Unless the public gets it act together and forces the neo-cons to stop the march to yet another war in the Middle East we are apt to see a truly horrific nightmare unfold in OUR COUNTRIES.
Governments caused the credit crisis, but capitalism gets the blame
Three years ago, the world's top watchdog warned that the global economy was veering out of control. Defending orthodoxy against the easy debt policies of the Greenspan era, the Bank for International Settlements said interest rates were being held too low for safety in most of the mature economies.
America had embarked on an unprecedented experiment. The US savings rate had fallen to near zero for the first time since the Slump. The current account deficit had reached levels that were incompatible with the dollar's role as the anchor of the global system.
The rising powers of Asia were preventing adjustment by holding down their currencies, and flooding the world with cheap credit in the process. Incipient bubbles were ubiquitous. "Most industrial countries are showing symptoms of over-heating in the housing market," it said.
New-fangled securities were allowing banks to take "highly leveraged positions". It was unclear how these untested inventions would "handle a string of credit blow-ups".
"One simply cannot ignore the number of indicators that are now simultaneously exhibiting marked deviations," concluded the BIS. That was in June 2005.
Regrettably, governments did exactly that. They ignored manifest risks. Real interest rates were held near or below zero in the US and a large arc of Europe until well into 2006.
By then, the damage was done. US housing had succumbed to full-fledged mania. Variants were emerging - later in the cycle - across the Anglo-Saxon world, the Baltic, Club Med, and Eastern Europe.
What occurred was a fatal cocktail, a mix of too much and too little government intervention at the same time. Bureaucrats (central banks) held down the price of credit: other bureaucrats (regulators) turned a blind eye to the excesses that cheap money caused in mortgages and the "shadow banking system" - that $3 trillion nexus of structured credit. Northern Rock continued to offer 125pc mortgages. Honey-trap "teaser" loans continued to ensnare Americans.
Former Federal Reserve chief Alan Greenspan now says the world faces a "once or twice in a century event". Faith in the financial system has been called into question. Taxpayers will have to rescue more banks. Missing is any hint of apology for his role in incubating this crisis as monetary overlord for 20 years.
Where did it all go wrong? One could start by looking at the trajectory of total US debt, up from 130pc to 350pc of GDP since 1982. "We've had a 30-year leveraging up of America, ending in an unchecked orgy," said Charles Dumas, from Lombard Street Research.
"The final straw was the Fed's hopelessly slow tightening from 2004 onwards. There was no excuse for the interest rates of 1pc, and then they went through this ludicrous metronome dance of quarter-point hikes," he said.
Mr Dumas said the fuel for the third-stage blast of the US debt rocket came from Asia's "savings glut". China, Taiwan, Vietnam and other exporters have built up huge surpluses by holding down their currencies through dollar pegs or "dirty floats".
Together with Russia and the Mid-East petro-powers, they have accumulated a war chest of some $6 trillion in reserves. This must be recycled into foreign assets. Most went into US and European bonds, pushing down the cost of long-term capital for the entire global system.
On top of this, roughly $250bn a year fled zero-interest rates in Japan to chase better returns abroad through the "carry trade". Japan's emergency stimulus leaked everywhere.
The ensuing bond bubble depressed yields for pension funds and insurers obliged to buy "AAA" assets, leaving them struggling to match their long-term liabilities. They were easy prey when the sharks came along with sub-prime debt "sliced and diced" into irresistible blocks of "AAA" securities, promising high yields.
Rules made matters worse. Professor Peter Spencer, from York University, said the Basle code on capital adequacy ratios caused a perverse side-effect. "By making banks raise capital against their balance sheets, it gave them a strong incentive to move off balance sheets," he said.
The Fed could have done a great deal to offset the tsunami of Asian money by squeezing liquidity at home. It chose not to do so. Mr Greenspan and his protégé, Ben Bernanke, saw no need to act because inflation was tamed.
Cheap Asian goods flooded the world, keeping a lid on inflation in the West. It lulled the central banking fraternity into a false sense of security. As they slept, the excess money found its way into asset booms. This was the "Great Error".
"Policymakers interpreted the quiescence in inflation to mean that there was no good reason to raise rates when growth accelerated, and no impediment to lowering them when growth faltered," said the BIS last month.
Nobel laureate Joe Stiglitz said the new "fad" of inflation-targeting had led policymakers astray. The dogma fails to distinguish between different causes of inflation. It should be ditched. "My sympathies go to the unfortunate citizens of those countries that implement inflation targeting," he said. Britain is one of them. So are Australia, New Zealand, Sweden, and Iceland. All have property bubbles.
Mr Greenspan argued that it was not for central banks to steer asset prices. In reality, he slashed rates to rescue banks during the Russian default/LTCM crisis in 1998. He slashed them even further after the dotcom bust. Yet he always let speculative booms run their course.
This was the "Greenspan Put". Markets believed they could count on welfare for Wall Street in the end. The culture of moral hazard degenerated by degrees, culminating in a near-total disregard for risk by 2007.
The liquidation purge needed at the end of every cycle was cut short, leaving the toxins in the system. Each upswing was built on more deformed foundations. An addiction to low real interest insidiously drew down prosperity from the future - "intertemporal misallocation" in BIS lingo. The future finally arrived in 2007.
The Greenspan-Bernanke assumption was that the Fed could "clean up" after bubbles had burst. This was a risky view in light of what followed the US bubble in the 1920s and Japan's Nikkei bubble in the 1980s. It derives from the Milton Friedman doctrine that the slumps can always be avoided by monetary stimulus à l'outrance (to the utmost). If only life were so simple.
The Fed clearly had no inkling of the shock that was about to hit them last year. Mr Bernanke said on June 5 that " the troubles in the sub-prime sector seem unlikely to spill over to the broader economy or the financial system". Losses would be $50bn to $100bn. (The IMF now says nearly $1,000bn).
At the Fed's early August meeting, it issued a hawkish statement, seemingly unaware that Countrywide - America's top mortgage underwriter - had just warned house price falls were reaching "levels not seen since the Great Depression". Markets took matters into their own hands.
"The Fed was in this mental state [that] it was just a short-term problem," said Jim O'Neill, global strategist at Goldman Sachs. "Their biggest mistake was that they failed to realise how far the real estate market would fall."
Mr Bernanke has been playing catch-up ever since. He rushed through the most dramatic set of rates cuts in Fed history. He invoked Article 13 (3) of its charter, the Depression-era clause allowing it to take on direct liabilities, starting with $30bn of Bear Stearns debt. The US government bailed out Fannie Mae and Freddie Mac. This is a de facto nationalisation of the world's two biggest financial institutions.
Critics say the rescues have failed. One can only ask what would have happened if nothing had been done. There is no "solution" to this crisis. The task now is to keep the ship afloat as debt defaults run their awful course.
It will be a long work-out. Japan has suffered its Lost Decade, with the worst pain in the second half. Don't assume the Anglo-Saxons and Club Med will get off more lightly. Japan started its descent as top creditor, brimming with reserves and savings. Westerners go down empty.
Henceforth, we must design out asset bubbles. The BIS suggests a credit speed limit of sorts. Old-fashioned monetarists say the debacle could have been avoided if we had paid more heed to the M3 and M4 money supply. These aggregates blew the whistle three years ago.
At root, this crisis was caused by state error. Governments and economic ideologies rigged the system in favour of debt. City and Wall Street banks were pushed into behaving with reckless abandon. They took part shamelessly, of course. But their antics were merely symptoms of a deeper problem.
Needless to say, this is not the perception in North America or Europe. It already looks as if the political response will be a massive assault on the workings of the free market. Socialism is coming back. One wants to weep.