Cambodia Update

I write regularly about my doings in Cambodia for a website http://khmer440.com so I forget that some of you might also be interested.

So to recap: after six years in Phnom Penh I decided I had to find an escape from the big city. No matter how great a city is there’s something about it that demands I get some respite. As cities go, especially as Asian cities go, Phnom Penh is eminently livable but that doesn’t change the imperative to find greener pastures.

I’d been to quite a few places in Cambodia and easily settled on Kampot as my second home. It’s on a wide estuary (it’s officially called a bay, we all call it a river) with a national park as a back drop: hiking trails there are an easy bike ride away. It’s got a large old town with many centenarian buildings, some of which are in a terrible state of disrepair - gives it a little character. It has only 30,000 people so everyplace is within a ten minute bike ride and there is no traffic stress whatever.

It’s also close enough to Phnom Penh – 93 miles/ 148 kilometers - to be a tolerable commute, two-and-a-half to three hours. I make about three round trips a month. Kampot is a heavenly place – quiet, green, friendly, easy, beautiful – but it has no night life to speak of. As a result, I’ve been living in both places for almost two years now.

I also made a commitment to the area by buying land: actually I have a 50 year, renewable lease; non-citizens cannot own land here. It’s a sweet little piece of Cambodia and I have long-term plans to turn it into a tropical mini-Eden.

Buying land here is a bit of a gamble, but I’m hardly alone, lots of expats are doing it. Cambodia is in a very peaceful state and we expats are very welcome here: it has the easiest visa requirements for long-term residence that I know of. On the other hand, considering its morbid past, it’s hard to predict with total assurance what might happen in the future.

It wasn’t a whole lot of money so losing it through instability or other unknowable events wouldn’t be a big deal. I paid $14,000 for 3/4 of an acre, two miles from town. Ironically enough, I purchased at the same time was I counseling others to hold off buying property saying prices were going to go down. In the event, they have gone down. I’ve heard of people offering land at much lower prices (as well as some who are still clinging to the sky high prices of the past) but Kampot is an up-and-coming place. It’s Cambodia’s equivalent to an Oregon beach town in vibes and amenities, so I expect prices will rise back up soon. The same acreage on river frontage, even miles from town, still goes for three or four times the price.

One thing that will certainly help to raise its value is the planned upgrading of my access road. It is now a dirt track, which gets very muddy in rainy season and, for my Camry, impassible. It’s 2 maybe 300 meters from the highway so I’ve been able to bring plants and tools there quite easily.

Once the road is done I can theoretically build a house there. My latest plan is for a modest 1 1/2 story octagonal house of about 60 square meters – 660 square feet – which would cost 8 to 10,000 dollars. Typical ceilings here are nearly four meters – 12 to 13 feet - so they leave lots of room for interesting mezzanine levels. Windows would be an inexpensive type but all the floors would be in ceramic tiles. That cost estimate also includes all wiring and plumbing – third world style, of course – and a full bathroom - and accompanying septic tank - with the wall tiled up to at least shoulder height.

Alternatively I could build a wooden shack for a couple grand, with another grand for a separate toilet. Problem is, I’m not ready to live there full time and anything less requires hiring a caretaker; if not, everything not firmly safeguarded will get ripped off. Not long after I put up a barbed wire fence one of the neighbors cut it to bring cows in to graze. Ripe fruit also disappears very fast. Having a caretaker also means building a shack for him.

In addition to neighbor problems is the simple idea of taking care of an ‘estate’. Maintaining property is a chore under the best circumstances. Here the task is made a might easier because of the very low wages one is able to pay for help but made much more difficult from the language barrier. I am in a very lazy lifestyle mode at present so I wonder if living out at the land is what I really want to do.

Every time I go I visualize great things that can happen there but I still have my doubts. From my rental house at the edge of Kampot everything is an easy bike ride; out there, I’d tend to use the car. Owning property ordinarily affords a lot more security but not if you suddenly become persona non grata. I think Cambodia will fare relatively well in the coming ecological/resource-depletion/economic crisis since it has a relatively small population in a fertile land with ample water supplies, but who knows. And even if it did fare well, it’s not certain where we expats would fit in.

The other great irony is that Kampot is at sea level and we all know what global warming does to sea levels. The land wouldn’t be directly affected, but with the town under water everything would change.

I have absolutely no interest in living in the states at this point (nor could I afford to if I wanted) and I can’t imagine anywhere else I’d rather be than Cambodia so for now this is it.

I am, however, going to have to make a major lifestyle change before too long since my finances are not going to allow me to continue maintaining two residences without going back to work teaching. Problem is, there’s no work in Kampot so I’d be teaching in the capitol and visiting the small town only on weekends, holidays and term breaks.

Cambodia has lots of public holidays, 26 days a year, so some months I’d be able to go quite often, but it would still be painful to spend so much time in Phnom Penh. I hate it there in the daytime. Problem is, I love being out at night in the capitol; I thrive on it.

I haven’t taught in two years and part of me would dread going back, but it isn’t that hard a job and I would manage. There are parts of it that I like. (I am however getting a little spacey lately; doing a crossword recently I spelled humid with a t and raging without the second g …)

The alternative would be to stay full-time in my green little heaven but be poor and only visit the big city on occasion. Also a painful prospect. I feel totally at ease there but would get bored silly, not to mention a little despondent, without my night-life friends.

Editing work is a possibility; I like it and I can do it from anywhere. However, I’ve tried several times to get steady work but haven’t had a lot of luck. Alternatively, Y3K may suddenly start to sell: small miracles do happen. It’s up in the air: I’ll keep you posted.

On a related note, I’ve got to mention two recent surveys done by the Economist Intelligence Unit, an arm of the Economist magazine. I’ve read the magazine occasionally and have a lot of respect for it. I also have some respect for these types of assessments in general, but their recent ratings of Cambodia are on the level of absurd.

Last March they published a survey of all the world’s countries for being at-risk for political instability in the wake of the financial crisis. I’m not sure how the dynamic would change if the qualifier of the financial crisis weren’t added. At any rate, a cursory few days on the ground in Cambodia would make them so embarrassed they might be afraid to do any more surveys. Which points up the problem with these things; they’re based totally on crunched impersonal numbers.

On that March assessment Cambodia was placed fourth from the bottom of all countries. It was level with Sudan; only Congo, Chad and Zimbabwe lower. Not even dealing with the many other basket cases of Africa and the violent unstable countries of the Caribbean and Latin America (Haiti, Guatemala, for instance) just look at Cambodia’s neighborhood.

The Philippines has an ongoing Muslim insurgency in its south, Indonesia has an insurgency in its Irian Jaya province and communal fighting between Christians and Muslims in Sulawesi. Thailand has an ongoing Muslim insurgency that’s killed thousands of people in the last few years and recently saw an elected government, that still had popular support, overthrown by elitist-backed demonstrations and control of the courts. Malaysia has angry ethnic minorities who’ve been discriminated against by law for 40 years. Burma’s military rulers killed thousands of protesters recently to maintain their grip on the country. India has several insurgencies happening at any one time. Sri Lanka has hundreds of thousands of people displaced by the recent fighting. Afghanistan, Pakistan, Iraq, all more stable than Cambodia?

Contrast that with Cambodia which hasn’t seen factional fighting in 12 years. It has a sizable Muslim minority but not the slightest hint of dissatisfaction from them. A recent poll showed 80% of the citizenry approve of the country’s direction. The last three elections have all been declared free and fair by the international community. It’s enjoyed economic growth rates of 10% or more for several years now, though of course that’s going to slow significantly. Tourism has increased tenfold since I came here in 2001. In spite of the downturn a dozen new internationally financed banks have opened in the past year alone.

Cambodia does have its violent side. A motorbike thief unfortunate enough to get caught in the act may well be beaten to death by an angry mob before the police have time to intervene. The elite often act with impunity. Recently a big-timer’s vehicle hit another from behind, prompting his bodyguards to jump out and pull a gun on the guy who was hit. It got in the news because he was a foreigner. No action was taken because no one was hurt. On the other hand, I’ve been out walking the midnight streets of the capitol for seven years without a single incident; not that it doesn’t happen occasionally, but could you do that in Detroit or Mexico City for even a few months without being robbed at gunpoint?

More recently they came up with another survey, this time ranking cities for livability which put Phnom Penh at 128th out of 140 cities. Compared to Vancouver or Vienna which had the first and second spots, Phnom Penh would necessarily be far down the list, but compared to Bangkok (100), Manila (108), Cairo (114) or Mumbai (120)? Ridiculous: believe me, I’ve been to those cities.

Phnom Penh has no public transportation, but you can hop on a motorbike taxi and get just about anywhere in town in 15 minutes; just a little more in peak hour. Contrast that with Bangkok, which has about 6 times the population: If you need to go anywhere in peak hours that is not convenient to light rail it could take hours to go a few miles. Phnom Penh is said to have some of the worst air pollution around, but look closer and you see it’s nearly all dust. I’ve never seen hazy, chemically polluted air here: give me dust any day.

In spite of rising rents you can still get a comfortable apartment in the center of town for less than $200 per month, and ceilings are nearly always at least 10 feet – 3 meters – high which gives a spacious feeling and is ideal for the tropics. It’s a low rise, human scale city that feels comfortable to be in with a population that’s generally friendly and easy to get along with. It doesn’t have the cultural offerings of those bigger cities, but it’s definitely improving.

Health care is not so great; for anything serious you need to go to Bangkok. Here is an experience a friend had. He drunkenly crashed his motorbike causing multiple fractures in his leg. You can’t take a chance on getting that properly done in Phnom Penh so he flew to Bangkok (with the help of a friend, of course) spent four nights in the hospital at a total cost, everything included, of $5000.

There are many things the city lacks but it’s still one of the most livable cities in this part of the world and the Economist’s surveyors would have seen that very easily if they’d bothered to come. Problem is, how would they rate subjective responses?

Reservoir Going Dry

Regarding the ‘reservoir of wealth’ statement I made in my last article a reader asked a question via email which I will respond to.

There is a positive aspect to the immense reservoir of wealth I referred to in the sense of their being a large tranche of money in the hands of many Americans to help keep the economy afloat (even if just barely). However, on the negative side it will merely prolong the day of reckoning.

Another point that maybe wasn’t clear was that the mother of all bubbles refers to inflation and the crash of the dollar.

The US has been living way beyond its means because the dollar’s status as the world’s reserve currency exempts it from the hard choices that every other country has to make under the same spendthrift conditions. Every other country has to raise taxes, cut expenditures and generally tighten its belt. The US only has to print more dollars.

That exemption is soon to be sorely tested since the other countries who’ve been financing America’s debt are beginning to balk. China in particular has begun to fear for the safety of its trillion and a half dollars worth of US investments and rightly so since America’s debt binge is only intensifying in the desperate attempt to restore the old economy.

What a travesty, an embarrassment to see Obama and Geithner obsequiously reassuring China that it’s investments were safe, that America was interested in a strong dollar.

A lot of countries are talking of switching their assets, or parts of them, to more stable and possibly more universal currencies, once again presenting a great challenge to the dollar and the American economy.

A big part of the run up of oil prices last summer was the corresponding fall in the dollar, it hit a low of $1.60 to the Euro. The dollar then, almost counterintuitively, rose in value last winter. With economies crashing everywhere, the dollar seemed a relatively safe bet to many people and it went up to 1.25 to the Euro. That also corresponded to a fall in oil prices down to a low of about $35 per barrel.

Now the dollar is back down to $1.40 against the Euro and still falling and oil prices have surged back to near $70 per barrel. Oil’s rise is based on two other basic reasons besides the fall in the dollar.

One is the inexorable decline in reserves. The fact that oil is currently being used up at a slower pace than during the boom doesn’t change the reality that it’s being used up. China is still growing at 8%, India at 6%. Added together they have about 40% of world population. Since transitioning to a sustainable energy world is today 99% words and 1% deeds, they are doing their best to take up the slack in consumption (and resource depletion) created by the fall in demand in the developed world.

Finally the matter of speculation rears its ugly head. As long as the wealthy are flush they have to find somewhere to play with their money. As long as those types of transactions aren’t taxed, they can play to their heart’s content: to no one’s benefit but their own. If taxed, they would be more cautious and circumspect.

The stage is set for a steep rise in oil prices in the next two or three years.

First a very short description of monetarism; the guiding principal of American economic governance for decades now. Simply put: Inflation means the economy is growing too fast so you raise interest rates to slow it down and thus dampen inflation. High unemployment, which means the economy is in the doldrums, is countered by lowering rates.

The fact that the theory has failed miserably to describe actual events has not deterred its proponents one iota. The Clinton years were characterized by low inflation and low unemployment – wasn’t supposed to happen that way.

Before that during the Carter years there was high inflation and high unemployment, but that 1970’s inflation was caused by a spike in oil prices, not a roaring economy. One way the theory falls down is not recognizing that scarcity completely changes the price paradigm. If a time of inflation is not based in any way on an overheated economy, then raising interest rates can only make it worse.

Interest rates under Carter went up to 17% to counter soaring inflation, but the high rates were themselves fueling same. Maybe interest rates fluctuating between 2 and 6% would not have an effect on underlying inflation, but 17%, for sure.

So here’s the scenario: oil prices spike, triggering inflation, which in turn calls for high interest rates to counter it, which in turn batters the economy further. Meanwhile, the US government will need to raise fantastic amounts of money on the bond market to pay for monster deficits, as well as raise large amounts for bonds that have to be redeemed and refinanced.

To do that it will have to raise the rates it pays in order to entice buyers. They are already wary, so the rates may have to go relatively high. Higher rates also mean a lot more of the budget will need to be devoted to servicing debt. The only other alternative is to print money; either way a surefire recipe for inflation.

To begin to right the budget and the nation’s priorities, the first step has to be higher taxes, including heavy taxes on the wealthy and corporations. This will curb speculation and get the debt onto a manageable level.

It’d be perfectly ok to increase debt if it were going for alternative energies, electric vehicles and fast trains because those types of investments would shield the nation somewhat from higher fossil fuel prices to come.

Raising taxes as high as necessary to insure food, shelter and health care for all should also be a no-brainer. In real life the bankers get their trillions while homeowners facing bankruptcy get almost nothing.

So sorry, but America is addicted to the cheap fix of devil-may-care debt. There’s literally no chance the political establishment would even understand the imperative of raising taxes to tackle the budget deficit, let alone actually make it happen.

So what’s the prognosis? The US will muddle along doing its best to avoid reality until the next crisis, which will be of mega proportions. It will haughtily, arrogantly depend on belief in its own exceptionalism to imagine that it has a cosmic dispensation to be irresponsible without the burden of consequences. Bumpy ride ahead, folks.

Bad Sports

The title refers to how professional sports are organized in the US, not necessarily the sports themselves or how they are played. The condition of sports is not today’s most pressing problem, but nonetheless serves as a metaphor for how much of America is dominated, for ill effect, by the corporations and the related mindset.

Back in the 1920’s professional sports in America were exempted from anti-trust laws. Normal rules against collusion, price-fixing, limits to competition and extortion do not apply.

In American sports, small cabals of owners make all relevant decisions. If they so choose, those decisions can be totally oriented towards their own personal benefit. They are not required to give any consideration whatever to the public good.

That is how the process of awarding cities with major league franchises becomes how much a city is willing to subsidize the owner. At a time when support of all manner of public services and infrastructure are suffering, owners demand and receive brand new stadiums. While Average Joe is called on to subsidize wealthy owners and spectacularly paid stars, his children go to substandard schools for lack of tax revenue. And if the people don’t cough up? They move the team to a city where they will.

A most disgusting example was the money extorted from the people of Washington State back in the 90’s by Paul Allen, owner of one of the Seattle franchises (don’t remember which one). He couldn’t get the city to meet his demand for a new $500 million stadium, so he financed a statewide ballot issue asking the people of the state to pay for it. He spent $5 million of his own money in the process of getting his subsidy enacted (it passed by a small margin).

As co-founder of Microsoft, he is one of the world’s richest men. At the time he was worth around $20 billion. So do the math: 500 million is 2.5% of 20 billion. For an amount of money that he wouldn’t even notice missing from his stash he could’ve gifted the stadium to the people: he could’ve been magnanimous, a local hero. For him it was peanuts, loose change. I don’t put him down so much for gaming the system (actually I do since I think almost everyone at his level of wealth is prima facie an asshole) it’s really the system that needs to be reinvented.

This is very similar to ‘race to the bottom’ economics. If Cambodia, which is still a very poor country by world standards, wants a factory to locate here, they have to provide infrastructure subsidies and tax breaks. So then they have a new factory, but little money to pay for the extra costs a new plant engenders nor the services needed by the workers. And here workers earn so little - $60 to $90 month – they pay no income tax, so there’s no pay back, outside of the employment itself, for the city.

Poor countries compete with subsidies for the rich so the latter can save a few pennies on their next pair of panties or cheap plastic doodads. In world trade lingo: A level playing field for all… corporations, that is. And a system totally skewed in their favor.

It works the same in America. When Boeing, not a struggling corporation by any accounting, wanted to move its headquarters, it didn’t just look around and pick the city it liked the best, it set up a bidding war between cities to see who would fork over the most cash. The Poor feeding the Rich again.

That could not happen in Europe since they have strict rules against those kinds of subsidies. Locations are chosen wholly upon their intrinsic merits. Europe also has a lesson in organizing sports that the US would well heed. In the UK, for instance, instead of having several co-equal football leagues, there is a premier league and lesser leagues. Each year the two worst performing teams in the top league get relegated down one rung to a lower group, while the two best teams in the secondary league move up.

With this type of system, there’d be no need or logic in limiting the number of teams, any city that wanted to could have one. There’d be no need to bribe wealthy owners with tax money. New teams would start at the bottom and work their way up.

The US is so big it would have to be organized differently than the UK, probably taking regions into account, but the principle would be the same.

Another negative facet of the anti-trust exemption that owners enjoy is their ability to determine what types of entities are allowed to join the club, so to speak. For instance, except for the Green Bay Packers football team which was grandfathered in; municipal, community or foundation owned teams are not allowed.

The team may be called the Chicago this or that, but the minute the owner thinks he can make more money elsewhere he won’t hesitate to move the team. His loyalty is to his bottom line, the city involved is ultimately irrelevant.

I enjoy sports and think it’s a worthy endeavor for society, but the way it’s organized in America today almost totally turns me off.

The Mother of All Bubbles

Back in the heady days of the 1990’s dot-com bubble there was a TV clip, on Nation Public Broadcasting I believe, that profiled a couple who were what I’d describe as extreme, or more appropriately mindless, investors. They had gambled their entire stash on a company they knew only by its stock market code. They had no idea what it actually did. That was four or five years before the crash, so they might well have cleaned up.



This was also about the time a true economic idiot made a bundle of money writing a book called DOW 36,000 that argued the market was actually way underpriced and was bound to triple in value even when in reality it was already seriously overpriced. It’s a new paradigm! Now the market only goes up! The boom and bust cycle is finished! Most depressing for the state of the world and the state of the American media is that that fellow, who’s name I can’t bother to remember, is still seen on TV doing his punditry thing, in spite of making one of the worst predictions of all time.



That was also about the time Greenspan made his too-smart-for-himself irrational exuberance comment. Too smart because after properly identifying a grave danger to the economy he did nothing to counteract or mitigate the certain crash to come.



You can be exuberantly irrational for limited periods of time but it defies logic, reason and common sense that you could carry on irrational behavior for very long before it results in a very rational smackdown.



I kept predicting the crash year after year; a good friend kept responding by saying, You’ve been saying that for years and it’s still going up. Well, no matter how much one might wish it otherwise, there’s no defying gravity. It’s in the nature of bubbles to burst, that’s what they do at their anointed time.



One bubble per decade seems to be America’s current pattern or need so it was important to create a housing bubble for the double oughts. In the great fear that the economy wouldn’t barrel ahead after 9-11, interest rates - for the bankers, that is - were taken down to near nothing. It’s worth pointing out that low interest rates are not good for everyone. For the savers, the people and their lifestyle that under normal circumstances - thinking of a rational world, that is - you want to encourage, low interest rates are a disaster.



In the midst of the housing insanity I pointed out to the same friend that in a market like Southern California it cost twice as much per month to own a house than it did to rent an equivalent one. An average $500,000 house might cost $5000 per month to own, but only $2500 to rent: in other words paying a $30,000 per year premium to own it. She then pointed out that property values were rising at 15% per year so that half million dollar house added $75,000 to its value and you’d still be way out ahead.



But rising values that were way out of line with reality were pricing people out of the market so mortgages had to be invented for people who couldn’t afford to pay them. NINJA loans – no income, no job, no assets – became the rage. It didn’t matter since the borrowers could always draw equity out of their houses’ rising value… until values stopped rising.



The enabler, I would argue, of both bubbles was/is the excessive wealth held by the powerful of society and the corollary belief that prosperity for the greatest number would be facilitated by placing the least restraints on those wealthy controllers. In reality, whenever they have too much money on their hands the certain result will be dangerous, and eventually destabilizing, speculation and asset bubbles.



Now, in the desperate, frantic, but also wistful and futile attempt to revive the old economy, or even a semblance of it, America is creating another bubble: this time it’s the dollar’s turn to bubbleize. It’s akin to a Reno loser story I once heard. When a gambler’s losses reach too high they feel they have to try anything to win the money back. After they max out the cash limits on their credit cards they go to a furniture store, buy a TV – the cards are still good for purchases – then turn around and hock it at the nearest pawn shop, getting probably 25 cents on the dollar.



America has already sold the farm – trillions of dollars are owed to foreign governments (China is the biggest creditor… If that doesn’t put a chill down your back, it should) – now it’s selling the furniture in the rented farmhouse; all to revive an unsustainable economy that should have been retired long ago.



Eleven trillion dollar national debt, 1.9 trillion dollar budget deficit for this year, 600 or 700 billion dollar trade deficits on an annual basis for years, one trillion dollars of personal credit card debt and now thirteen trillion dollars gambled on the big banks in the form of giveaways, loans and guarantees.



America’s the only country that could run massive trade deficits because the dollar is the world’s currency – people around the globe use dollars for things totally unrelated to the US. Eighty percent of transactions in Cambodia where I live, for instance, are in dollars. Every other country that tried to run those kinds of deficits would have been brought short pretty quickly and paid a heavy economic and social price for their spendthrift ways. Not America. At least not yet.



You know what they say; something that can’t go on indefinitely, won’t. Let me add my own postscript to that; the longer you wait to correct the imbalance the greater the impact when judgment day comes. For America comeuppance will bring catastrophe.



While all the aforementioned mentioned debts and liabilities will contribute to the crash of the dollar, the one most important factor has to be the attempt to save failed too-big-to-fail banks. Even after 13 trillion dollars of support, the Fed’s stress tests showed about half the nation’s 19 big banks will need another 70 billion dollars in new capital.



Moreover when you look at how unstressful the tests were, that 70 billion is a joke. The banks got to decide for themselves how healthy they were – doing their own pricing of their toxic assets, for instance - and their supposed solvency was based on extremely rosy economic predictions for the near future.



America’s on a years-long binge, challenging the gods, as it were, to bring it low. It’s ok to go into debt if it’s for something that has lasting value. It’s also good to go into debt if it’s used for something that brings in revenue and pays itself off. That’s sort of the thinking behind bailing out the banks: healthy banks = healthy economy = high tax revenues = debt no problem. But it’s a tremendous gamble on the order of the sad cases in Reno whose addictions result in them losing everything.



The big problem with going so deeply into debt so nonchalantly is that it has to eventually be paid back. At some point the joy ride must end and the price paid. Under any but the most benign circumstances, retiring debt is painful. It means taking from today’s advancement to pay for yesterday’s indulgence.



The only alternative to paying off the debt, which would require steep tax rises and social sacrifice – impossible to imagine in spoiled-child America - is running the money printing presses full speed ahead and hoping that doesn’t result in worst case scenarios.



There remains an immense reservoir of wealth in America in spite of the current hard times and great respect and trust in America’s strength around the world so I wouldn’t look for this dollar crash to happen tomorrow, but it’s as inevitable as the last two bursted bubbles were.

Blowback

Blowback

Blowback is a military term that refers to unintended consequences that almost always arise in combat situations.

The latest example is the swine flu pandemic. There are strong indications the virus originated at an industrial pig factory. For those unfamiliar with the process, pigs are raised in extremely stressful conditions. They spend their entire lives in cages too small for them to even turn around in in buildings that are literally full of shit and piss. All told, these pig factories are ideal breeding grounds for creation of new viruses.

The only way they can survive is through massive doses of antibiotics to the point where many American rivers now contain noticeable levels of antibiotics with the result that people are ingesting them on a regular basis. This is now resulting in new superbugs that are resistant to antibiotics.

But that’s not the only element of blowback in this situation. The Mexican pig factory suspected of originating the virus is owned by an American company, Smithfield, which was encouraged to move to Mexico by its lax environmental controls and enabled to make the change by NAFTA. The current swine flu seems relatively benign but it’s only a matter of time before much worse viruses arise.

Factory farms can produce pork cheaply, because so many of its costs are externalized. They produce the virus, everybody affected pays the costs.

The plague of Somali pirates is another case. For 15 years from 1991 till 2006 Somalia was effectively without a government: its territory was divided up and controlled by various warlords. In 2006 a fundamentalist Islamic movement called Islamic Courts defeated the warlords and took over the country. As I understand it they weren’t as radical as many other Islamists. In any case, even if many of Somalia’s people weren’t especially enamored of fundamentalists taking over they were welcomed by the populace for the stability they brought. In addition, Islamists in general are honest and devoted to public service.

But having a country run by Islamists was too much for America so it, with the assistance of Ethiopia, drove them out of power and plunged the country back into chaos. This lack of effective government is what has allowed the pirates to freely operate from Somali territory.

The country’s inability to police its waters has also resulted in factory fishing fleets from Asia and Europe mining its fishery resource and putting local fishermen out of business. Somalia has large areas of desert where food is not easily coaxed from the land. It’s also a relatively narrow country with a very long coastline. Fishing, therefore, would have to be one of its major means of sustenance. It follows then that fishermen deprived of their livelihood might turn to piracy.

The classic case, of course, is the US feeding Bin Laden with billions worth of arms and training him in insurgency-type fighting so his mujahadeen could take on the Soviets. When asked about absurdity of assisting a man who later gave the US 9-11, Kissinger and others have said that it was most important to defeat communism. They have an outsized view of an epic fight between good and evil, but the Soviet Union’s days were numbered anyway. European communism died of its own ineptitude: it’s demise was inevitable. The most America’s cold war harassment did was quicken it bit.

It would not be difficult, in addition, to link Osama’s implacable hatred of America with its absolute, totally biased support of Israel. Israel has been a dagger in the heart of every Arab since the founding of the state in 1948; they call that event, The Catastrophe. Israel, with its continuing program of confiscating Arab land so it can populate the West Bank with Jews, its indifference to Palestinian lives in its wars and assassinations, its callous refusal to consider the plight of Palestinian refugees, its essentially racist nature where Arab citizens of Israel have second class status, digs the dagger in a little deeper with each infraction.

From Bin laden down to the man in the street, Arabs have an implacable hatred of Israel. Because of America’s support a lot of that feeling carries over to it. To a lesser extent, Moslems all over the world see an injustice being done to Moslem brothers. All of that adds up to increased radicalism amongst them. To the Islamic insurgents in the Philippines it probably won’t feel like a dagger in the heart, but it might well feel like a thorn in the side.

I’ll never forget how Howard Dean was shot down for saying the US should take an evenhanded approach to the Middle East, as if there could ever be something wrong with being evenhanded, and by implication, fair.

Of course, I’ve barely scratched the surface, examples of blowback are rife.

Bizarre Twist

In the latest bizarre twist to the sordid saga of elite bankers slavering at the public coffers, the banks are planning to use the latest Obama/Geithner bailout money to repurchase the same toxic assets they are getting rid of. Well, maybe not the very same ones, but the same type for sure.

It’s not hard to understand why they might be doing that. Many of those assets are now close to worthless. The plan includes a competitive bidding process that supposedly would give a true value to the assets, but since nearly all losses will be socialized and gains privatized, they will tend to bid high. After they are bought back the former toxic trash will come with a government guarantee. How convenient.

Personally, before I gave the banks another trillion dollars I’d kind of like to know what they did with the trillions they’ve already gotten, but, seemingly, that’s too much to ask of them so we’ll just have to trust they’re doing the right thing. They’re really smart and they certainly have the best interests of the country at heart so why would we want to press them on where the money is going. Just because the US government is majority owner of those banks doesn’t mean it is clever enough to rescue them. No it’s only the idiot (oops, brilliant) bankers who understand how to make everything peachy-keen again.

And we certainly wouldn’t want to place restrictions on executive pay for bailout receivers, else they might not be willing to join the program. If they can’t get their exorbitant (oops, entirely justified) compensation they just might let their firms fail and then where would we be?

After repeated badgering by a pesky congressman, AIG finally opened up on where some of its $173 billion bailout went. What a mistake, better not to know that, for instance, six billion plus went to Societe General, France’s largest bank, another six billion plus went to Deutche Bank, Germany’s largest, and that billions more went to Barclay’s and UBS and other foreign institutions, not to mention a mountain of cash to America’s biggest banks. Knowing that would only get people angry and irate and that might lead to protests and demonstrations and result in those bailout funds being cut off and then we’d really be in trouble. No, better not to know, better to trust the smart guys.

While we might want to regulate hedge funds and derivatives and clamp down on tax havens we wouldn’t want to reinstitute the separation between retail banks where Average Sally keeps her checking account and investment banks which are purely speculative. Even though it worked mighty fine from the thirties until 1998 when the smart guys, including Geithner and Summers and others on Obama’s economic team, had the banking system deregulated, it’s not in Obama’s plans today.

Unfortunately, I can’t think of one glib, sarcastic thing to say about why the separation should not be reinstituted; but then maybe I’m not smart enough. Separation would preclude the banks buying back their toxic assets in guaranteed form as mentioned in the beginning of this rant. Maybe somebody out there has a handle on why that’s not included in Obama’s financial regulation plans. Beats me.

Israel Disowns Two-State Solution

Israel’s new Foreign Minister, Avigdor Lieberman of a far-right party, started his tenure by saying Israel wasn’t bound by the latest peace-process agreement.

Three years ago when the Palestinian people elected Hamas by a wide margin, not just in Gaza but the whole of the occupied territories, it was shunned; ostensibly for three reasons.

One was that Hamas had to accept all past agreements with Israel. Possibly they refused because past agreements had delivered exactly nothing to the Palestinians. Possibly because Israel had never abided by its past agreements to stop confiscating Palestinian land and stop building or expanding Jewish cities in the territories. Israel’s insulting final offer to the Palestinians in 2000, a West Bank divided into three Bantustans completely surrounded by Israeli territory, undoubtedly was also an important factor. Those reasons are, in fact, a large part of why Hamas won those elections.

Another was that it had to renounce violence. Kind of laughable in light of the violent nature of the Israeli nation to hold them to that standard. And that’s besides the fact that, in international law, an occupied people has the right to resist foreign domination. Why is Israel not required to renounce violence? The important point is that Hamas proposed a long term truce, and held to the short term truce, which Israel broke, prior to the Gaza assault.

Israel is worried that Hamas will use the time of a truce to become strong and 50 years in the future will come back and try to drive the Jews into the sea. (Don’t laugh, I actually read that by a reputable columnist.) It’s true that if Israel refuses over the next half century to come to a fair and equitable agreement with the Palestinians, there will continue to be hostility and strife. Look at the Tibetans and Kurds, for instance, they’ll never stop fighting for self-determination.

Finally they needed to recognize Israel’s right to exist. As I understand it they want to wait until they too are recognized as a nation. Makes sense to me.

Netanyahu, Israel’s new prime minister, is for peace, so he says, but not a two-state solution. He wants to improve Palestinian life economically, but maintain the Bantustan concept that allows total control of everything that goes in or out of Palestinian territory. Maybe he thinks they will be so thrilled with their new prosperity they’ll submit happily to foreign domination: even as they see their land continue to be confiscated and given to Jews. Both Netanyahu and Lieberman are in favor of increased settlement construction.

For those of you unfamiliar with the Bantustan concept, it was a device tried by apartheid South Africa to put all of its blacks in their own ‘sovereign’ countries (there were ten, I believe) but all completely surrounded by South African territory. Needless to say, the minority whites retained the greater part of the land and resources and total control over the blacks in that scenario. Nobody outside South Africa recognized them.

Is Obama going to accede to this new dynamic lying down or will he finally force concessions from Israel? World boycotts helped to kill South African apartheid. All the US has to do is cut off Israel’s totally unwarranted foreign aid (the largest recipient though it is a rich country) and the settlement building stops and the Israelis become a lot more adaptable. If they can no longer use US aid to subsidize colonization and the military forces necessary to protect what are essentially outposts in hostile territory they will cease their illegal activity or make a real sacrifice to continue.