Category Archives: Global Economics

Cameron’s Cunning Plan for Bombing ISIS in Syria

My Thoughts: Now that Thanksgiving Day has passed, and Black Friday is upon us, it’s time to come back to earth. BTW, I hope you had a great Thanksgiving with family and friends; let’s do it again next year.

The subtitle of this article, which comes from The Financial Times, reads as follows: The questions over extending air raids answered in 43 key points. I’ve added a couple of edits since most of them apply to the US as well as Great Britain.

November 26, 2015 by Robert Shrimsley

David Cameron has announced his intention to seek parliamentary approval for Britain to join the international forces bombing Isis strongholds in Syria. Assuming the prime minister wins that vote, raids will start in the next few weeks.

He has wanted to do this for some time and feels the Paris attacks have turned public opinion and parliamentary arithmetic in his favour.
Here, then, are the key things you need to know about UK intervention in Syria.

1. British contributions to the air campaign against the Islamist militants will make absolutely no difference at all.
2. No, really, none.
3. You know all those bombs already being dropped on Isis? Well, now there will be a few more.
4. But not that many more.
5. And many of those that will be dropped on Isis in Syria would have been dropped on Isis in Iraq instead.
6. What do you think we are — made of bombs?
7. But even though it will make no difference, we are going to do this anyway because Britain ( also the US ) is not a country that stands on the sidelines.
8. It is important to stress that, before the decision to bomb Syria, there was absolutely no plan on how to defeat Isis.
9. And there still isn’t.
10. But something must be done.
11. And this is that something.
12. These people are really evil.
13. I mean super-evil. Horrible.
14. So we are all going to feel a lot better about ourselves because now we are going to be in there socking it to them as well.
15. I cannot say this will beat them but I can say it will degrade them, which sounds like something.
16. We are doing this to make Britain ( also the US ) safer from the threat of Isis.
17. Even though we cannot offer a single reason whatsoever to believe it will achieve that goal.
18. Some will say that Britain ( also the US ) may make itself more of a target for Isis terror attacks.
19. But we are a target already so whatever is going to happen was going to happen anyway and doesn’t it feel better to know we’ve landed a few punches in advance?
20. We do realize that air strikes alone cannot defeat Isis.
21. But that’s all we’ve got at the moment.

France has been courting US and Russian support for a war on Isis in the wake of the Paris terror attacks. But while Russia and Turkey, a Nato member, claim to be fighting the same foe, they themselves saw armed combat this week when Turkey shot down a Russian jet on its border with Syria. Mark Vandevelde asks Gideon Rachman and Geoff Dyer whether world powers are capable of making common cause against Isis.

22. We know that these attacks have to be part of a clear and coherent strategy for isolating and defeating Isis. But we do not have the luxury of waiting for one to emerge.
23. So any ideas on a postcard please.
24. Our military strategists make clear that there can be no ultimate victory over those foul butchers in Isis without “boots on the ground”.
25. But none of those boots are going to be ours.
26. We think that stuff is best left to the military forces in Iraq and Syria that have been doing such a bang-up job fighting Isis up till now.
27. We do recognize that ultimately only a negotiated political settlement can create the conditions in which Isis can be permanently defeated.
28. That’s why we are negotiating with other countries to try to work out what that settlement should be.
29. We’re not quite there yet.
30. In the meantime, bombs away.
31. We are absolutely clear that the long-term political settlement for Syria does not include Bashar al-Assad.
32. Which is a bit of a pity because Russia and Iran are clear that it does.
33. Syria’s future must lie with the moderate anti-Assad opposition.
34. The ones that Russia has been bombing.
35. We are doing this because Britain ( also the US ) is not a country that stands on the sidelines in the face of evil.
36. We step up to the plate and play our part.
37. Like we did in Libya.
38. Which worked out well.
39. We recognize that there are people in this country with doubts about the wisdom of this action.
40. But, since those doubts are going to be articulated by Labour’s Jeremy Corbyn, ( Bernie Sanders? ) we are not too worried about that.
41. We further recognize that stepping up bombing raids could increase the number of refugees fleeing Syria.
42. But they’re not coming here.
43. Because this regional problem requires a regional solution.

Very Strong Jobs Numbers Underpinned By Wages

Bruegel-village-sceneMy Comments: Politicians of all stripes consider employment numbers relevant, and well they should. Right now we have the lowest unemployment numbers in this country that we’ve seen for a long time. And it’s all because of that idiot in the White House.

This came from a group called Bespoke Investment Group, a name I am not familiar with. Also, there are several charts that I’ve chosen not to replicate here. But if you want to see them, here’s the URL where I found this article:

Nov. 8, 2015

Friday’s Employment Situation Report delivered an extremely strong Nonfarm Payrolls print (+271,000 vs +185,000 expected and 142,000 previous, revised down to +135,000). While that headline number is extremely strong, the “guts” of the report were even stronger. Unemployment fell to 5.0%, the U6 measure of broader unemployment came in at 9.8% versus 9.9% expected and 10.0% previous, and the labor force participation rate held steady.

But the real story, in our view, was wages, which were boosted in part by a recovery from an extremely weak reading in September. Even still, the gains were nothing short of breathtaking. Below we show MoM annualized wage changes, along with the level for each industry.

As shown, there were broad-based wage gains across the economy in October, with Construction leading the way, up 18.2% MoM annualized. Other “low pre-requisite” industries also had steady gains, with Leisure and Hospitality printing a steady +4.82% MoM annualized level. The strength wasn’t universal (notable weakness in Manufacturing, Retail Trade, and Other Services) but overall this was a solid wage print. Looking at Construction, below we show the MoM annualized Construction Production and Nonsupervisory wage series, MoM annualized. This was the second-best print for that series in over 20 years, eclipsing one of the worst prints in years last month.

To get an idea of the broader trend in average hourly earnings, we show the YoY change in AHE for the last 10 years. Total private wages are +2.48%, while production and nonsupervisory earnings are +2.22%. The former is the best print of the recovery and a notable move above the range that had prevailed since the recovery began. Production and Nonsupervisory wages are still underperforming, but the spread between the two YoY series moved from 0.32% in July to 0.26% this month, notable progress.

Brazil Heads Closer To Total Collapse

My Comments: Many are waiting for the penny to drop indicating a new global recession and collapse of the stock markets. Is this it?

Oct. 19, 2015 by Ian Bezek


  • Brazil’s economic “Superman” may have resigned Friday, according to conflicting media reports.
  • Brazilian shares and currency fell sharply after Friday’s market close.
    His departure would bring close parallels to Argentina’s collapse in 2001.
    Investors should avoid or short sell Brazil as the country comes closer to catastrophe.
  • It’s just about over for Brazil. The signs are clearly in place that the country is in the midst of a historic implosion.
  • Brazil is following almost precisely the same script that Argentina did between 1999 and 2001. The outcome there was a 75% devaluation of the Argentine currency, the total dissolution of the government, and a black hole of losses for foreign investors.

It’s almost eerie how close these two tales are playing out. Friday brought Brazil’s “The savior throws in the towel” moment as conflicting media reports suggest the nation’s respected economic minister may have resigned. Brazil’s stocks (NYSEARCA:EWZ) and currency knifed lower in Friday’s after hours session.

First, let’s remember what happened in Argentina so we can see what’s in store for Brazil.

Up until the 1990s, Argentina’s economy was a chronic basket case, wracked by constant hyperinflation and repeated total failures of the country’s currency and budget.

All this changed in 1991, when Domingo Cavallo was appointed Minister of the Economy. He immediately and boldly pegged the Argentine currency to the dollar 1 to 1, and prevented the government from floating more currency than it had dollars in reserve.

This sharp break with the past revived the economy, which took off at lightspeed, growing more than 50% over the ensuing 8 year period. Cavallo was widely credited with saving the economy. He exited the government in 1996 following political in-fighting.

All continued well for Argentina until 1998, when various emerging market crises in Brazil, Russia and Southeast Asia started to weigh heavily. Argentina remained firm with its ironclad 1:1 peg to the dollar, newly elected president Fernando de la Rúa campaigned specifically on maintaining the peg despite mounting international instability.

During this time, the Brazilian currency devalued sharply, as did other Latin American currencies and various European monies. As such, Argentina was tied to the increasingly overvalued US dollar. Argentina had increasing difficulty competing with its peers. Brazil, in particular wa, as its leading trading partner garned a huge advantage from the currency devaluation.

By early 2001, the Argentine economy was in year 3 of a bitter recession, and questions were mounting as to whether it could service its debts. Then Argentine-President de la Rúa, after watching various economic ministers resign eventually felt compelled to ask Cavallo to be his economic minister. This was a shocking move, since Cavallo had run against de la Rúa for the presidency in 1999.

But desperate times call for desperate measures, and it was widely viewed that only Cavallo, as the economy’s “savior” had the ability to convince the IMF and foreign investors that Argentine was able to make it through the crisis.

Take this article from March 2001 in Fortune:

Argentineans are probably feeling a sense of déjà vu right now after Argentine President Fernando de la Rua’s bold and possibly threatening move of appointing Domingo Cavallo as Argentina’s economy minister for the second time in a decade.

Domingo Cavallo stepped in as Argentina’s third economy minister in the last three weeks, taking over from Ricardo Lopez Murphy, who served a controversial two weeks before resigning Monday after outraged opposition to his ambitious cost-cutting plans.

Cavallo served as economy minister in 1991 and guided the economy out of a period of hyperinflation and spiraling currency devaluation, becoming a Wall Street darling in the process. Rua’s move is being viewed by most as the return of the savior of Argentina’s economy […]

The one thing that has been lacking in Rua’s administration is political credibility. Rua was hanging by the skin of his teeth, and selecting Cavallo was an act of desperation but a good move. (emphasis added) But it wouldn’t end up being enough. Cavallo, despite being the “savior” was unable to fix Argentina’s core problems. Its currency was dramatically overvalued, further budget cuts were simply shrinking the economy and thus never closing the fiscal hole, and investor sentiment soured again after a quarter-long uptick following Cavallo’s return.

Following the September 11th attacks and increasing global economic tensions, the IMF cut Argentina loose, denying further loans. Argentina devalued the Peso 75%, the government collapsed, the capital was paralyzed by riots for months, and finally a new socialist government took over and made the country an international investing pariah – where it remains stuck even today, 13 years later.

Brazil’s Similar Trajectory

Brazil, seeing neighboring Argentina’s success in the early 1990s, tried a dollar peg to revive their economy starting in 1994. However the upturn didn’t really gain traction until 2003. Luiz Inácio Lula da Silva was elected president, and despite campaigning on a leftist platform, ended up handling the economy more moderately than expected.

His market-friendly policies, among them picking a former Bankboston CEO (now part of Bank of America) to run the central bank, drew investor interest. The country was upgraded to investment grade, commodity exports boomed catching the Chinese wave perfectly. Millions of Brazilians were lifted out of poverty and the country’s investments boomed.

After working at the ECB, Levy in 2003 was appointed Treasury Secretary by President Lula. Levy, a University of Chicago trained economist, had all the fiscal hawk credentials and orthodox economic views that make foreign investors swoon.

Under Levy’s leadership, Brazil secured the all-important investment grade credit rating and ushered in Brazil’s investment boom. Levy left the government in 2010 and went into wealth management at Bradesco (NYSE:BBD).

Fast forward to 2014 and the Brazilian economy finds itself on the ropes. The government is now headed not by the charismatic Lula but his incompetent and ever more socialist successor Rousseff.

Brazil’s economy overheated around 2007 as the Chinese boom stimulated overinvestment in Brazil. The Brazilian Real rose too sharply, making the country’s goods uncompetitive, again repeating Argentina’s sad experience.

A key sign of an investing bubble was spotted, in that Brazil’s productivity rate almost didn’t move during the boom. Unemployment fell as sharply as it did simply because the economy was so inefficient that it had to hire excess workers to complete even basic tasks.

The overstimulated economy allowed Brazilian companies to take on too much debt, much of it denominated in dollars. Once the Real went from undervalued to overvalued, the uncompetitive nature of the economy was exposed and the growth miracle suddenly went into reverse. The falling commodity market has now moved the situation from dour to dire.

In Venezuela, the dung didn’t hit the fan until the enigmatic Chavez was replaced by the thoroughly ordinary and deficient Maduro. Similarly, the Brazilian economy immediately headed south once President Lula gave way to Dilma Rousseff. The economy was already in recession by the time Rousseff felt compelled to beg for Levy, the renowned free-market austerity hawk to fix the mess.

Like with Cavallo in March 2001, another unpopular president was forced to appoint an intellectual opponent viewed by markets as a “savior” to try to head off crisis.

When Ms. Rousseff, a leftist former guerrilla who has favored a strong state hand in the economy, announced last year that a free-market “Chicago boy” would run her finance team starting Jan. 1, it was widely viewed as a shotgun marriage. But with Brazil’s economy and public accounts deteriorating fast after years of heavy government spending, the president was under pressure to change course.

Mr. Levy, whose background includes stints with the International Monetary Fund, the European Central Bank and the asset-management arm of Brazilian banking giant Bradesco, was seen as a market-friendly face to reassure investors and mollify jittery credit agencies. He had political experience as well, having earned high marks as treasury secretary under former President Luiz Inácio Lula da Silva and as a budget-cutting finance secretary in Rio de Janeiro state.

News of his appointment initially boosted markets and Brazil’s currency strengthened, a phenomenon local media dubbed the “Levy effect.” One glowing profile late last year compared the new finance minister to Superman. (emphasis added)

10 months after Caballo was appointed in March 2001, Argentina totally collapsed.

10 months after Levy was appointed last winter, Levy is now on the brink of being kicked out and the Brazilian economy is facing an Argentine-like cliff. Levy was particularly brought in to save the country’s credit rating from going to junk and reassuring nervous investors.

He failed on all counts. Brazil has been cut to junk, investors are bailing, the Real just hit all-time lows, and now the only market friendly face in an otherwise corrupt anti-capitalist and wildly unpopular government is about to leave the government.

With Rousseff taking heat from her own supporters for allowing a tax-hiking budget-cutting “Chicago boy” to handle the economy, it’s unlikely the next finance minister will be nearly as investor-friendly.

Rousseff’s own approval rating is under 10%. The country’s institutions are completely discredited following massive corruption scandals. The country’s former crown jewel, Petrobras (NYSE:PBR), is rapidly heading toward bankruptcy.

It’s hard to see many outcomes here much different from Argentina in 2001. The government called in the economic “savior” or “superman” to save the day. They failed. Then the sitting government is booted from power and the currency is devalued sharply.

Needless to say, there’s no “buy-the-dip” opportunity here. Brazil’s Debt-to-GDP ratio has mushroomed to 65%, well above the threshold that often gets emerging market nations into trouble. The economic recession is deepening with GDP shrinkage accelerating.

The country, for the first time in ages can’t even manage a primary surplus (that is, your budget before interest payments). CDS spreads are exploding. The country’s exports for hard dollars, such as iron ore are collapsing in value thanks to the global slowdown.

Even if you thought the country was about to turn, its stocks aren’t cheap. This is no Greek sale. The median Brazilian stock trades at a – considering the situation – surprisingly high 14 PE ratio.

Brazil: The Investment Takeaway

For aggressive investors, Brazil is a perfect short sale, which can be played by shorting the Real, shorting individual stocks heading lower such as Petrobras or Vale (NYSE:VALE). I’m personally heavily short the country’s main ETF, EWZ.

A more sophisticated investor might try shorting Banco Santander Brasil (NYSE:BSBR) and buying the parent Santander (NYSE:SAN) since they’re both down around 40% over the past year and may diverge at some point.
For investors wanting to buy the dip in Latin America, Brazil is simply the wrong country. Better alternatives include Peru (NYSEARCA:EPU) with its 20% Debt/GDP rating and moderately growing economy. Mexico (NYSEARCA:EWW), also investment grade, is more insulated from regional troubles as its economy becomes ever-more tied to exporting goods to the US rather than South America in the post-NAFTA world.

For the closest Brazilian proxy, try Colombia (NYSEARCA:GXG) which remains the region’s fastest growing major economy. Despite being investment grade, having a market-friendly government, and continuing to grow GDP at more than 3% a year, investors have lumped Colombia into the same boat as Brazil pricing both commodity-exporting nations similarly.

Colombia does face, like Brazil, a massive slump in its exports and its currency has sharply devalued. Unlike Brazil, it remains comfortably in investment grade territory with a much more reasonable 40% Debt/GDP reading.

The economy is largely insular and never overly relied, like Brazil, on FDI to boom in the first place. And Colombia just announced a long-awaited peace deal with the FARC terrorists that (finally!) takes geopolitical risk off the country’s table.

Both Colombia and Brazil are down 47% over the past 12 months in dollar terms. The single largest position in my portfolio is long Colombia and short Brazil and I fully expect this will be my home run investment of 2016.
The possible resignation of Brazil’s economic “superman” will usher in the next chaotic break lower in Brazilian equities as the grand finale – a fiery bankruptcy/devaluation/government collapse – looms larger and larger.

Desperate in Damascus

CharityMy Comments: The world is ‘a changin’. This was written just a little over two weeks ago. And now we hear Russia has sent cruise missiles from its’ navy ships into Syria. NATO is paying very close attention, given that Turkey is a member nation; this could get really ugly before its over.

By Fred Kaplan Sept. 22 2015

The presence of Russian troops, tanks, and planes in Syria isn’t something to shrug off, but it’s not worth a lot of worry, either—or, to the extent it might be, it’s not for the reasons that the neo-Cold Warriors find so alarming.

It’s true that, much as Russian officials claim they merely want to help the world fight ISIS, their main motive is to shore up the regime of their ally, Syrian President Bashar al-Assad. However, those two goals are not mutually exclusive: Moscow does have an interest in crushing radical Islamist groups that might spread to the heavily Muslim regions of southern Russia. Either way, the uptick in military supplies to Syria (on top of the billions of dollars in arms sales and aid over many years) marks not an expansion of Russia’s influence in the Middle East but rather a last-ditch effort to preserve its one last bastion—an extremely shaky bastion, at that.

In the past decade, Russia has lost erstwhile footholds in Libya and Iraq, failed in its attempt to regain Egypt as an ally after the fall of Hosni Mubarak, and would have lost Syria as well except for its supply of arms and advisers to Assad—whom it still may lose, despite its desperate measures.

The portrayal of Vladimir Putin as a grand chess master, shrewdly rebuilding the Russian empire through strength and wiles, is laughable. Syria is just one of two countries outside the former Soviet Union where Russia has a military base (the other being Vietnam, and its naval facility there, at Cam Ranh Bay, has shrunk considerably). His annexation of Crimea has proved a financial drain. His incursion into eastern Ukraine (where many ethnic Russians would welcome re-absorption into the Motherland) has stalled after a thin slice was taken at the cost of 3,000 soldiers. His plan for a Eurasian Economic Union, to counter the influence of the west’s European Union, has failed to materialize. His energy deal with China, designed to counter the west’s sanctions against Russian companies, has c One school of thought contends that Putin is seeking a way back in to the international community—the sanctions seem to be hurting his cronies, as well as certain sectors of the Russian economy—and that his moves in Syria, along with rumors of a conciliatory speech at the upcoming session of the U.N. General Assembly, are meant to be part of this campaign. At best, though, this is only part of the story: Even if Putin joins the fight against ISIS (which is in his interest to do), and even if he’s willing to let Assad go, he will want a say in choosing a successor—another reason for putting more boots, treads, and wheels on the ground.

Or maybe his motives are entirely cynical. One way to find out is to talk with him—to scope out the possibilities of cooperation (or at least of exploiting our converging interests) and to spell out the consequences if his actions turn hostile. This is clearly what Israeli Prime Minister Benjamin Netanyahudid when he spoke with Putin on Monday, arriving in Moscow with his top general and intelligence chief in tow. (The general and his Russian counterpart set up a coordination group to prevent unintended confrontations between the two countries during military actions over Syria.)

It’s what Secretary of State John Kerry did when he talked with his counterpart, Sergei Lavrov, over the weekend. It’s what President Obama may do if and when he talks with Putin at the U.N. next week. Max Boot laments all this as “genuflecting”; a better description would be “cautious engagement,” and there’s nothing wrong with that, especially since it’s Putin who’s holding the weak hand here.

The notion, expressed by some of the candidates at the last Republican presidential debate, that Putin might use his strengthened position in Syria as leverage to pry the Saudis, Jordanians, and Egyptians into his fold—how to begin toting the absurdities? His position in Syria is hardly strong; if these Sunni Arab leaders were remotely inclined to go in with Moscow (which they aren’t), they would hardly find Putin’s ramped-up alliance with Assad as cause to reconsider.

There are, however, three genuinely worrisome things about Putin’s latest move, even assuming less-than-hostile intentions. First, after the first reports last week of Russian troops and weapons moving into Syria, a senior administration official told me that he would be concerned if those weapons included anti-aircraft missiles, since neither ISIS nor the other rebel groups have airplanes. Two days later, it turned out that the weapons did include such weapons. So who are the Russians’ intended targets? If they mean to assure Assad that they will shoot down American, Turkish, Israeli, or Gulf State airplanes that try to bomb the Syrian government’s assets (or Hezbollah targets), it’s worthwhile to spell out, to Putin or his generals, the consequences.

Second, if the Russians do join the fight against ISIS, they are likely to fight against other anti-Assad rebels too—including rebels (among them Syrian Kurds) that the United States is supporting. If Russia really does want some form of partnership in this, it must agree not to cross certain lines in the sand; even if Putin really doesn’t want to be partners, it’s worth letting him know what lines not to cross, if he doesn’t want to provoke a larger conflict, with us or other countries.

Third, it’s possible that Russia’s entry could set back the war on ISIS by galvanizing new waves of jihadists—especially from the area around Chechnya and the heavily Muslim states on Russia’s southern border whose hatred of Moscow dates back to their decades of subjugation under the Soviet Union. In other words, under the best possible scenario, Putin’s urge to help could, on balance, hurt. Aimen Dean, a Saudi-born security analyst with deep background in the region’s conflicts, goes so far as to predict that, for these reasons, “Russia’s mission creep in Syria will only produce catastrophic results across the region and beyond.”

Plutonium Is Unsung Concession in Iran Nuclear Deal

My Comments: I think I’m beating a dead horse here but I’m going ahead anyway. This new article points out something I’ve missed in every single argument I’ve read that argued either in favor of or against the agreement on Iran.

As a financial professional, I often hear arguments in favor of or against the use of professional help to achieve the desired outcome. Almost invariably, an amateur approach results in missed opportunities or worse.

If what appears below is accurate, and I’m going to assume it is, then the comments by Dick Cheney, Donald Trump et al follow the same lack of understanding as do clients who believe they don’t need professionals to help them manage their money. Sometimes they can, at least for a while, or until something comes along that they had no clue was relevant.


At first glance, the metals that give atom bombs their destructive fury might seem interchangeable: Uranium and plutonium are both more valuable than gold. Both captivate would-be atomic powers. And both fueled bombs that leveled Japanese cities — uranium at Hiroshima and plutonium at Nagasaki.
But to see them as equal is to ignore a crucial difference: Of the 15,000 or so nuclear warheads on the planet, atomic experts say, more than 95 percent rely on plutonium to ignite their firestorms.

As a fuel for weapons, plutonium packs a far greater punch than uranium, and in bulk can be easier and cheaper to produce. Which is why some nuclear experts voice incomprehension at what they see as a lopsided focus on uranium in evaluations of the deal reached with Iran — under which Tehran would forsake the production of plutonium.

“It was an incredibly big breakthrough,” said Siegfried S. Hecker, a Stanford professor and former director of the Los Alamos weapons lab in New Mexico, the birthplace of the bomb. “But nobody seems to care.”

Nearly two years of negotiations went into the landmark deal, which would limit Iran’s production of uranium and plutonium in exchange for the end of international oil and financial sanctions. It was finalized in July and is set for a congressional vote this month. Last week, President Obama secured commitments for enough votes to put the agreement in place over fierce Republican opposition.

But in the dauntingly complex analyses that preceded that political alignment, questions and criticism revolved almost exclusively around uranium — how much of it Iran would be allowed to enrich and stockpile, and how compliance would be verified.

Atomic experts call the uranium focus potentially misleading, because it is the lesser path to the bomb.

In secret, three decades ago, Iran began exploring the plutonium path and was perhaps only months from inaugurating a plant for its production when, last year, as negotiations gained momentum, it abruptly agreed to a fundamental redesign that would end the facility’s potential for making substantial amounts of bomb fuel.

The nuclear reactor complex near Arak, Iran, is ringed with antiaircraft guns and missiles. Last year, the complex was nearly ready to begin converting uranium fuel into weapons-grade plutonium. But as part of the nuclear deal between Iran and the West, Tehran agreed to redesign the reactor and not to build other plutonium reactors for at least 15 years.

Tehran’s vow was a major turnaround, say nuclear experts, who express frustration that political jousting and technical naïveté have largely obscured what they call one of the accord’s main triumphs.

“It’s a real success,” said Frank N. von Hippel, a physicist who advised the Clinton administration and now teaches at Princeton. “I was surprised that they were willing to give it up.”

Richard L. Garwin, a principal designer of the world’s first hydrogen bomb and a longtime adviser to Washington on nuclear weapons and arms control, called the redesign “a great achievement.” He and other scientists signed a letter to President Obama last month praising the Iran deal as innovative and stringent.

Bomb veterans say the central importance of Tehran’s plutonium concession becomes strikingly clear in the light of history.

After the Manhattan Project began, in 1942, plutonium became a superstar and uranium a sideshow. Purifying uranium into bomb fuel turned out to be extraordinarily difficult, whereas plutonium was an atomic byproduct, easing its manufacture. Moreover, it took far less plutonium to produce a blast of equal size. “It’s got twice the punch,” said Ray E. Kidder, a retired arms designer at the Livermore weapons lab in California. “All things being equal, it makes for a more powerful weapon.”

The plutonium was made in reactors. Tiny particles known as neutrons would zip through fuel rods, splitting atoms of uranium in two. That released energy and more neutrons in multiplying chain reactions.

In a kind of modern alchemy, some of the uranium atoms would also absorb neutrons and turn into plutonium. The Manhattan engineers refined that process so plutonium became the main product. The work was far more dangerous than purifying uranium, in part because the fresh plutonium had to be scavenged from highly radioactive fuel rods. But the results were spectacular.

On July 16, 1945, the world’s first atom bomb lit up the New Mexico desert. Its plutonium core was 3.6 inches wide. In his diary, President Harry S. Truman called the blast “startling — to put it mildly.” The shock wave, he said, knocked down men nearly six miles away.

The nature of a detonating atom bomb is that it rapidly tears itself apart, stopping the chain reactions long before all the atoms are split in energetic bursts.

In New Mexico that day, the bomb’s core started with 6.2 kilograms of plutonium. About a fifth of those atoms split in two, producing waves of smaller atoms as well as a gargantuan flash of pure energy. The plutonium behind that flash is estimated at one gram – the weight of a dollar bill.

The secret, and that of all nuclear arms, lies in the colossal divide between matter and energy that Einstein laid out decades earlier in his famous E = mc², where energy equals mass times the speed of light squared, a staggeringly large number.

On Aug. 9, 1945, when the United States dropped a plutonium bomb on Nagasaki, a gram of matter again flashed into energy. Some 75,000 people died. More plutonium bombs were in preparation as Japan surrendered.

The Soviet Union, Britain and France used plutonium to power their first atom bombs. The metal liberates more energy than uranium in part because its atoms emit more neutrons when split, speeding chain reactions and increasing the weapon’s explosive yield. The high multiplication factor also means that plutonium warheads can be smaller and lighter, so missiles can fire them over longer distances.

Experts say India, North Korea, Israel and Pakistan have used reactors to make plutonium for nuclear arms.

Advanced states use plutonium mainly for hydrogen weapons, which dominate their arsenals. A small mass of the silvery metal, typically no bigger than a baseball, acts as a superhot match to light the thermonuclear fuel. The resulting warhead is up to a thousand times more powerful than an atomic bomb.

Tehran’s bid for plutonium was revealed publicly in late 2002, at the start of Iran’s standoff with the West. Attention focused on a sprawling, half-built reactor complex, named Arak after a nearby city. The isolated site was ringed by miles of barbed wire.

Tehran claimed that Arak would make radioisotopes for such humanitarian purposes as treating cancer. But as work on the complex progressed, nearby valleys and mountaintops came to bristle with scores of antiaircraft weapons.

“It’s pretty well defended for something that’s supposedly peaceful,” said Forbes McKenzie, managing director of McKenzie Intelligence, a private firm in London that examined satellite images of the remote site.

Experts say Arak’s antiaircraft guns are primed for Israeli jets, which have twice hit emerging plutonium threats. In 1981, Israel bombed an unfinished reactor in Iraq and, in 2007, smashed another in Syria.

The most palpable roots of Iran’s plutonium reversal go back to 2012, when arms control experts began discussing Arak’s redesign. Early last year, as part of the interim diplomatic accord, Iran agreed to stop making improvements at its three nuclear fuel plants, including the unfinished reactor.

“Progress,” Secretary of State John Kerry told reporters, “is frozen in place.” The reactor was said to have been months from commissioning.

By mid-2014, Iranian officials surprised Western experts by agreeing to scrap two decades of planning and redo the Arak reactor. They pledged a fundamental redesign so the finished plant would focus exclusively on medical isotopes rather than also producing what Western experts estimated as up to two bombs worth of weapons-grade plutonium each year. With an eye to diplomatic ambiguity, Tehran never admitted that it had sought plutonium for weapons.

A year ago, at the New York City residence of Iran’s ambassador to the United Nations, Iranian reactor designers laid out for American experts a summary of the detailed plan. “It was a remarkably good redesign,” recalled R. Scott Kemp, a nuclear expert at M.I.T. who formerly worked at the State Department.

In selling the Iran deal, the White House has stressed the plutonium step. Tehran does the opposite, telling home audiences that it will still purify uranium. In April this year, when diplomats announced the preliminary accord, Mr. Obama put Arak atop his list of selling points. “First, Iran will not be able to pursue a bomb using plutonium,” he told reporters in the Rose Garden. “The core of its reactor at Arak will be dismantled and replaced.”

¬Siegfried S. Hecker, a former director of the Los Alamos weapons lab, called Iran’s concession “an incredibly big breakthrough.” The final accord, announced in Vienna on July 14, detailed the curbs on uranium before those on plutonium – perhaps as a gesture to Tehran. Mr. Obama, in his Aug. 5 speech at American University, flipped the order. Iran, he said in his first technical point, “cannot acquire the plutonium needed for a bomb.”

Critics fault the deal as leaving Iran free to speed ahead after the accord’s main provisions expire. Its ban on plutonium reactors is to remain in place for at least 15 years. The Obama administration says the deal is better than the alternatives, including war.

Why did Iran’s reversal on Arak fall off the public radar so quickly? Nuclear experts list a number of possible factors.

They note that the military threat from an unfinished plutonium complex can be viewed as abstract compared with Iran’s success at purifying uranium in its two underground plants. Worst-case estimates say Iran could enrich enough uranium for a bomb in as little as two or three months.

The plutonium deal, experts add, displayed no loose ends. It basically ended Iran’s longtime bid, leaving few openings for opponents and doubters of the accord.

“There’s nothing left to discuss,” Dr. von Hippel said.

In contrast, the overall deal let Iran keep thousands of centrifuges spinning to purify uranium. Diplomats see that as a defensible concession to Tehran. But in Washington, it has fueled opposition to the agreement, with some critics questioning whether inspectors will be able to adequately verify the uranium curbs.

Why did Iran give up plutonium? Dr. Hecker, the former director of Los Alamos, said Tehran had probably decided to abandon its push for an arsenal. But he argued that the nation’s hard bargaining to save much of its uranium complex suggested that it still wanted to hedge its bets.

“I think, at this point, Iran really doesn’t want to develop nuclear weapons,” he said in an interview. “But they’ve kept the option.”

Dr. von Hippel of Princeton agreed. He said it appeared that Iran had been aggressively pursuing two pathways to bomb fuel and decided that one was enough.

“They don’t want an arsenal,” he said. “They want the U.S. to know that they could still go for a bomb.”

If the deal goes through, experts say, the redesign and rebuilding of the Arak reactor could take up to a decade.

And if the accord falls apart? Experts say the Arak reactor could soon become a plutonium factory. Iranian troops, they add, appear to have long exercised the nearby guns and missiles, preparing for war.

5 Events of Significance

flag USMy Comments: Students are back in school, the morning air is fresher, a stray dog showed up yesterday, I have no doctors appointments this week, and we’re having a garage sale on the 19th. Not significant enough you say?

Well, here are five more that confirm my faith in my fellow countrymen. Yes, there are those who’d rather recapture the glories of the past and I’ve pretty much given up on them. I’d rather spend time and energy and control some of the present and pretend to influence the future. The following five events are nothing to sneeze at and are reasons to be more optimistic about the future.

September 7, 2015

What will you remember about the summer of 2015?

Will it be the GOP tying its fate to the most divisive, thin-skinned and clownish Republican frontrunner/birther in American history? Will it be an amorphous Benghazi investigation that has been impaneled longer than the investigation into Iran-Contra — an actual Constitutional crisis that saw a sitting vice president/candidate for president refuse to release relevant diary entries that may have implicated him in the crime — yielding nothing but questions about administrative vagaries of classified email? Will we remember how the right and a complicit media machine that invented Whitewater, summoned a ridiculous impeachment, and misled us into war deployed every argument at its disposal to destroy the strongest non-incumbent and first female frontrunner for president in American history?

Or will these daffy distractions go the way of the media’s illusory concern for Ebola, the missing plane, and President Obama’s tan suit?
Who knows? But what we can say for sure is that truly historic things have unfolded this summer, and been only glanced at by a media transfixed on conflict and personality. Here are five events that history will definitely have to reckon with, even if the media would rather not.

1. The Iran deal.
On Sunday, Colin Powell joined Richard Lugar and Brent Scowcroft to support the deal the U.S., its European allies, China, and Russia reached with Iran to bring the nation under compliance with the Nuclear Non-Proliferation Treaty. These three former high-ranking Republicans represent the last remaining rinds of right-wing realism, and they join with 38 Democratic senators who have vowed to support the president’s veto on any attempt to undermine the agreement. Legitimate fears and concerns about Iran’s conduct have been overwhelmed by a calculus that assumes the rogue state is both canny enough to evade the laws of physics and suicidal enough to secretly build a bomb, knowing that would invite the world to destroy its economy and possibly the entire existence of the regime. This deal could be the first successful attempt in history to use diplomacy to dissuade a nation that has defied the world to swear off the pursuit of a nuclear weapon. It does not eliminate Iran’s ability to fund terrorism any more than our long relationship with Saudi Arabia prevented that nation and its citizens from funding terrorism, including the seeds of al Qaeda and ISIS. But it does stand in sharp contrast to the way America approached Iraq’s alleged nuclear program. This caution and realignment of strategies makes sense given the incredible humanitarian disaster that was fueled by the failures of the neoconservative approach to Iraq. If America were to suddenly shift back to the chauvinism of the recent past, either by choice or force, history would distinctly note how profoundly disappointing the collapse of this noble effort was.

2. Syrian refugee crisis.
No disaster has gone more ignored by the American media than the ongoing refugee crisis in the countries surrounding Syria. And that probably would have continued forever if a small percentage of those fleeing the war-torn nation had not begun to seep into Europe, and the world had not been shocked by the image of a dead toddler on a beach. Predictably, the right has advanced fantasies that more western interventionism could have fixed a problem ignited by western interventionism. There’s no doubt that the nations that have done the most to fuel the catastrophe—which include the United States, Iran, Russia and Saudi Arabia—have done little to nothing to take responsibility for the brunt of this humanitarian crisis. From Europe, we’ve seen both images that conjure the vile specter of how Jews were treated in the 1930s and incredible acts of enlightened graciousness. Both will play a role in the European perception of the costs of a belief that the west can reshape the Middle East by force. But for America, the agony is still distant. And, for many, so are the lessons.

3. Climate change.
We joke that President Obama has done more to fight climate change than all other U.S. presidents combined because it’s impossible to multiply by zero. His stimulus was a ginormous green-energy bonanza that manifested an American renewables industry from almost nothing, leading us to a revolution that has now seen clean energy become cheaper in some instances than its dirty competitors. The president’s deal with China, the world’s largest carbon polluter, to limit emissions neutered the strongest argument against persistent climate action. This summer, the president presented his finalized plan for demanding power producers reduce their carbon output by 32 percent from what it was a decade ago, by 2032. This new rule is tougher on the states that have been the most recalcitrant in pursuing limitations on emissions, and arrives as we have increasing evidence that fighting climate change is actually helping the economy. This rule still needs to survive legal challenges, which seems likely given the current makeup of the Supreme Court, which rejected a Bush administration attack on regulating CO2 under the Clean Air Act in 2007. So like much of Obama’s legacy, this will truly be decided by the outcome of the 2016 election.

4. Record job growth.
We’ve finally recovered all the full-time jobs lost in the Great Recession and it only took a record 66 months of private-sector job growth. That Obama has gone from the president who prevented a greater depression to the steward of a genuine boom is too much to handle for many Republicans. They argue that his unemployment rate is only lower than anything ever achieved by Reagan because so many people have left the job market out of fear of contracting a bad case of Obama’s Muslim atheism. To make this argument, they have to ignore trends that have been going on for decades or reveal that they’re really upset that Baby Boomers are actually getting to retire. This isn’t to say the economy is perfect, at all. Wage growth is far too slow and too much of the recovery is going to the richest Americans, and this is a problem that Marco Rubio, for instance, wants to solve by cutting Mitt Romney’s taxes to zero. The economy is definitely not as good as we should demand. It’s just better than it’s been all century, and it’s showing great resilience despite persistent claims it would be destroyed by inflation, food stamps and — of course — Obamacare.

5. Obamacare wins.
Perhaps the most underreported story of the summer of 2015 is that Obamacare won again.

This wasn’t proven by the uninsured rate dropping below 10 percent for the first time in decades. Though that’s impressive. And it wasn’t proven by Obamacare spending its first two straight months receiving higher favorable than unfavorable ratings in the Kaiser Foundation’s tracking poll. That’s good, but nope.

This was proven by Scott Walker — the Koch brothers’ mascot — actually producing an Obamacare alternative that resembles… OBAMACARE. “At the talking-point level, Governor Walker’s plan sounds an awful lot like Obamacare,” said Larry Levitt, a senior vice president of Kaiser Family Foundation.

The big difference? It protects way fewer people, and the people it does protect aren’t those who need it the most. This isn’t surprising, but it’s proof that after a half-decade of vowing the destruction of Obamacare, even the most right-wing Republicans recognize that the American public will refuse to give up much of what the law offers. You can see why Republicans aren’t eager to have that story get out.

Israel: The Case Against Attacking Iran

bumper stickerMy Comments: George Friedman has an international reputation for his knowledge about how the world works and his ability to articulate credible analyses of what is going on. This is a fascinating article that’s very relevant to the current questions about Iran and how the world needs to respond to the existential threat they pose.

The Democrats and Republicans, mindful that most of us can only understand 5th grade words, attempt to create an “either or” decision in black and white. These words from George Friedman show how incredibly complex the issue is.  I have no clue how this is all going to play out, but I’m inclined to let professionals decide, mindful that they face the same ultimate risks you and I face. 75 years ago we were at war with Japan, but now co-exist as friends and allies. Freiedmans comments here are kinda long, so if you don’t give a damn about any of this, then simply ignore this post.

August 25, 2015 By George Friedman

On Aug. 21, Israeli Channel 2 Television aired a recording of Ehud Barak, Israel’s former defense minister and former prime minister, saying that on three separate occasions, Israel had planned to attack Iran’s nuclear facilities but canceled the attacks. According to Barak, in 2010 Israel’s chief of staff at the time, Gabi Ashkenazi, refused to approve an attack plan. Israeli Cabinet members Moshe Yaalon and Yuval Steinitz backed out of another plan, and in 2012 an attack was canceled because it coincided with planned U.S.-Israeli military exercises and a visit from then-U.S. Defense Secretary Leon Panetta.
The fact that the interview was released at all is odd. Barak claimed to have believed that the tape would not be aired, and he supposedly tried unsuccessfully to stop the broadcast. It would seem that Barak didn’t have enough clout to pressure the censor to block it, which I suppose is possible.
Yaalon, like Ashkenazi, was once chief of staff of Israel Defense Forces but was also vice premier and Barak’s successor as defense minister. Steinitz had been finance minister and was vocal in his concerns about Iran. What Barak is saying, therefore, is that a chief of staff and a vice premier and former chief of staff blocked the planned attacks. As to the coinciding of a U.S.-Israeli exercise with a planned attack, that is quite puzzling, because such exercises are planned well in advance. Perhaps there was some weakness in Iranian defenses that opened and closed periodically, and that drove the timing of the attack. Or perhaps Barak was just confusing the issue.

A number of points are worth noting: Ehud Barak is not a man to speak casually about highly classified matters, certainly not while being recorded. Moreover, the idea that Barak was unable to persuade the military censor to block the airing of the recording is highly improbable. For some reason, Barak wanted to say this, and he wanted it broadcast.

Part of the reason might have been to explain why Israel, so concerned about Iran, didn’t take action against Iran’s nuclear facilities. Given the current debate in the U.S. Congress, that is a question that is undoubtedly being asked. The explanation Barak is giving seems to be that senior military and defense officials blocked the plans and that the Israelis didn’t want to upset the Americans by attacking during a joint exercise. The problem with this explanation is that it is well known that Israeli military and intelligence officials had argued against an Israeli strike and that the United States would have been upset whether or not joint exercises were occurring.

It would seem, intentionally or unintentionally, that Barak is calling Israeli attention to two facts. The first is that militarily taking out Iranian facilities would be difficult, and the second is that attempting to do so would affect relations with Israel’s indispensible ally, the United States. Military leaders’ opposition to the strikes had been rumored and hinted at in public statements by retired military and intelligence heads; Barak is confirming that those objections were the decisive reason Israel did not attack. The military was not sure it could succeed.

The Potential for Disastrous Failure

A military operation, like anything else in life, must be judged in two ways. First, what are the consequences of failure? Second, how likely is failure? Take, for example, the failure of the U.S. hostage rescue operation in 1980. Apart from the obvious costs, the failure gave the Iranian government reason to reduce its respect for U.S. power and thus potentially emboldened Iran to take more risks. Even more important, it enhanced the reputation of the Iranian government in the eyes of its people, both demonstrating that the United States threatened Iranian sovereignty and increasing the credibility of the government’s ability to defend Iran. Finally, it eroded confidence in U.S. political and military leaders among the U.S. public. In reducing the threat and the perception of threat, the failure of the operation gave the Iranian regime more room to maneuver.

For the Israelis, the price of failure in an attack on Iranian nuclear sites would have been substantial. One of Israel’s major strategic political assets is the public’s belief in its military competence. Forged during the 1967 war, the IDF’s public image has survived a number of stalemates and setbacks. A failure in Iran would damage that image even if, in reality, the military’s strength remained intact. Far more important, it would, as the failed U.S. operation did in 1980, enhance Iran’s position. Given the nature of the targets, any attack would likely require a special operations component along with airstrikes, and any casualties, downed pilots or commandos taken prisoner would create an impression of Israeli weakness contrasting with Iranian strength. That perception would be an immeasurable advantage for Iran in its efforts to accrue power in the region. Thus for Israel, the cost of failure would be extreme.

This must be measured against the possibility of success. In war, as in everything, the most obvious successes can evolve into failure. There were several potential points for failure in an attack on Iran. How confident were the Israelis that their intelligence on locations, fortifications and defenses were accurate? How confident were they that they could destroy the right targets? More important, perhaps, how certain could they be that the strikes had destroyed the targets? Finally, and most important, did they know what Iran’s recuperative capabilities were? How quickly could the Iranians restore their program? Frequently, an operationally successful assault does not deal with the strategic problem. The goal of an attack was to make Iran incapable of building a nuclear weapon; would destroying all known targets achieve that strategic goal?

One of the things to bear in mind is that the Iranians were as obsessed with Israeli and U.S. intelligence efforts as the Israelis and Americans were obsessed with the Iranian programs. Iran’s facilities were built to be protected from attack. The Iranians were also sophisticated in deception; knowing that they were being watched, they made efforts to confuse and mislead their observers. The Israelis could never be certain that they were not deceived by every supposedly reliable source, every satellite image and every intercepted phone call. Even if only one or two sources of information were actually misleading, which sources were they?

A failed Israeli assault on Iran would cause a major readjustment among other regional players in the way they perceive Israel and Iran. And for Israel, the perception of its military effectiveness is a strategic asset. There was a high risk of damaging that strategic asset in a failed operation, coupled with a strong chance that Israeli actions could unintentionally bolster Iran’s power in the region. The likelihood of success was thrown into question by Israel’s dependence on intelligence. In war, intelligence failure is a given. The issue is how great the failure will be — and there is no way to know until after the strike. Furthermore, operational success may not yield strategic success. Therefore, the ratio of potential risk versus reward argued against an attack.

Considering Iran’s Capabilities

There is another side to this equation: What exactly were the Iranians capable of? As I have argued before, enriched uranium is a necessary but insufficient component for a nuclear weapon. It is enough to create a device that can be detonated underground in controlled conditions. But the development of a weapon, as opposed to a device, requires extensive technology in miniaturization and ruggedization to ensure the weapon reaches its target. Those who fixated on progress in uranium enrichment failed to consider the other technologies necessary to create nuclear weaponry. Some, including myself, argued that the constant delays in completing a weapon were rooted both in the lack of critical technologies and in Iranian concerns about the consequence of failure.

Then there is the question of timing. A nuclear weapon would be most vulnerable at the moment it was completed and mounted on its delivery system. At that point, it would no longer be underground, and the Israelis would have an opportunity to strike when Iranians were in the process of marrying the weapon to the delivery device. Israel, and to an even greater extent the United States, has reconnaissance capabilities. The Iranians know that the final phase of weapon development is when they most risk detection and attack. The Israelis may have felt that, as risky as a future operation may seem, it was far less likely to fail than a premature attack.

Barak’s Motivations

Whether intentionally or not (and I suspect intentionally) Barak was calling attention, not to prior plans for an attack on Iran, but to the decision to abandon those plans. He pointed out that an Israeli chief of staff blocked one plan, a former chief of staff blocked a second plan and concern for U.S. sensibilities blocked a third. To put it in different terms, the Israelis considered and abandoned attacks on Iran on several occasions, when senior commanders or Cabinet members with significant military experience refused to approve the plan. Unmentioned was that neither the prime minister nor the Cabinet overruled them. Their judgment — and the judgment of many others — was that an attack shouldn’t be executed, at least not at that time.

Barak’s statement can be read as an argument for sanctions. If the generals have insufficient confidence in an attack, or if an attack can be permanently canceled because of an exercise with the Americans, then the only option is to increase sanctions. But Barak also knows that pain will not always bring capitulation. Sanctions might be politically satisfying to countries unable to achieve their ends through military action or covert means. As Barak undoubtedly knows, imposing further restrictions on Iran’s economy makes everyone feel something useful is being done. But sanctions, like military action, can produce unwelcome results. Measures far more painful than economic sanctions still failed to force capitulation in the United Kingdom or Germany, and did so in Japan only after atomic weapons were used. The bombing of North Vietnam did not cause capitulation. Sanctions on South Africa did work, but that was a deeply split nation with a majority in favor of the economic measures. Sanctions have not prompted Russia to change its policy. Imposing pain frequently unites a country and empowers the government. Moreover, unless sanctions rapidly lead to a collapse, they would not give Iran any motivation not to complete a nuclear weapon.

I don’t think Barak was making the case for sanctions. What he was saying is that every time the Israelis thought of military action against Iran, they decided not to do it. And he wasn’t really saying that the generals, ministers or the Americans blocked it. In actuality, he was saying that ultimately, Prime Minister Benjamin Netanyahu blocked it, because in the end, Netanyahu was in a position to force the issue if he wanted to. Barak was saying that Israel did not have a military option. He was not attacking Netanyahu for this decision; he was simply making it known.

It’s unlikely that Barak believes sanctions will compel Iran to abandon its nuclear program, any more the current agreement does. My guess is that for him, both are irrelevant. Either the Iranians do not have the ability or desire to build a bomb, or there will come a point when they can no longer hide the program — and that is the point when they will be most vulnerable to attack. It is at that moment, when the Iranians are seen arming a delivery system, that an Israeli or U.S. submarine will fire a missile and end the issue.

If Barak didn’t want a strike on Iran, if Netanyahu didn’t want a strike and if Barak has no confidence in agreements or sanctions, then Barak must have something in mind for dealing with an Iranian nuclear weapon — if it ever does appear. Barak is an old soldier who knows how to refrain from firing until he is most certain of success, even if the delay makes everyone else nervous. He is not a believer in diplomatic solutions, gestures to indirectly inflict pain or operations destined for failure. At any rate, he has revealed that Israel did not have an effective military option to hamper Iran’s nuclear program. And I find it impossible to believe he would rely on sanctions or diplomacy. Rather, he would wait to strike until Iran had committed to arming a delivery system, leaving itself wide open to attack — a nerve-racking solution, but one with the best chance of success.