Category Archives: Global Economics

4 Lessons For Us From a Century Ago

My Comments: As a nation we are on the horns of a dilemma regarding our role as the sole surviving superpower from the last century. I embraced Obama’s assertion that our national focus should revert to what is in our best interest domestically. At the time we were embroiled in Iraq and other places and I was sick and tired of the cost in terms of lives and dollars.

This article, which appeared recently in The Financial Times, tells us this is not a new dilemma. That roughly 100 years ago Britain was caught in the same issues as we face today. The comment about “spending money and men to try and civilize those who don’t want to be civilized” rings a bell with me.

However, if I want to leave this planet with some assurance it will be a better and safer place for my grandchildren, I don’t want us to hide in the shadows and hope for a better outcome. Hope is NOT a global strategy for success.

America, Britain and The Perils of Empire, By Gideon Rachman / October 13, 2014 / The Financial Times / Middle East turmoil of 1919 offers important lessons for today

General Sir Philip Chetwode, deputy chief of Britain’s Imperial General Staff, warned in 1919: “The habit of interfering with other people’s business and making what is euphoniously called ‘peace’ is like buggery; once you take to it, you cannot stop.”

It is difficult to imagine any member of the Obama administration making such an eyebrow-raising comparison. But, as the US struggles to cope with turmoil across the Middle East, Sir Philip’s complaint – quoted in David Reynolds’s recent book, The Long Shadow – has a contemporary ring to it. Even more so the lament of his boss, Sir Henry Wilson, the chief of Britain’s Imperial General Staff, who complained in 1919 that -”we have between 20 and 30 wars raging in the world” and blamed the chaotic international situation on political leaders who were “totally unfit and unable to govern”.

Britain was directly or indirectly involved in the fighting in many of these wars during the years 1919-1920. Their locations sound familiar: Afghanistan, Waziristan, Iraq, Ukraine, the Baltic states. Only Britain’s involvement in a war in Ireland would ring no bells in the modern White House. The British debates, and recriminations of the time are also strongly reminiscent of the arguments that are taking place in modern America. And how events panned out holds some important lessons for today’s policy makers.

The British military effort in Iraq in 1920, like the allied effort today, was conducted largely through aerial bombing. Then, as now, there was strong scepticism about the long-term chances of achieving political stability in such an unpromising environment. AJ Balfour, the British foreign secretary complained – “We are not going to spend all our money and men in civilising a few people who do not want to be civilised.” In an echo of America’s current Middle East confusion, even British policy makers knew that they were pursuing contradictory goals. As Professor Reynolds points out – “The British had got themselves into a monumental mess in the Middle East, signing agreements that, as Balfour later admitted, were ‘not consistent with each other’.”

Then, as now, even the people making policy seemed confused about the motives for military intervention in the Middle East – was it “making peace” as Gen Chetwode suggested, was it the rich oil reserves of the area, was it the protection of another territory (India for the British, Israel for the Americans), or was it simply a vague sense that imperial prestige was at stake? The debates in London, almost a century ago, as in Washington today, suggested that all these motives were mixed together in ways that no one could completely disentangle.

Military leaders’ complaints about incompetent politicians also echo down the ages. Sir Henry’s lament about British political leaders who are “unable to govern” is matched by the increasing rumble of complaint about the leadership of Barack Obama. Even Mr Obama’s former defence secretary, Leon Panetta, has just complained that the US president “too often relies on the logic of a law professor rather than the passion of a leader”.

These comparisons between the British and American dilemmas, almost a century apart, are intriguing – but do they offer lessons? I would point to four.

First, while it is always tempting to blame political leaders, the problems often run far deeper than that. The British prime minister in 1919 was David Lloyd George, who most historians now regard as a decisive and dynamic leader. That did not prevent the imperial staff from complaining about the torpor and confusion of his administration. The real problem, however, was the intractable nature of the problems that Britain was facing, and the limits of the resources it could bring to bear.

Second, it is much harder to be a global policeman if your government’s finances are stretched and your country is war-weary. In 1919, after the collapse of the Ottoman Empire, British imperial possessions were more extensive than ever. But the UK was exhausted after the first world war and had little appetite for further conflict. The Iraq and Afghanistan wars of the past decade were small affairs, by comparison. But they left a similar reluctance in the US to get involved in further conflicts.

Third, the uncanny similarity between the trouble spots of a century ago and those of today suggests that there are some parts of the world where geography or culture create a permanent risk of political instability and war: the frontiers between Russia and the West, Afghanistan, Iraq. The idea that ‘twas ever thus’ may comfort contemporary policy makers in Washington, as they struggle to cope with multiple crises.

Yet the fourth lesson derived from Britain’s travails in 1919 is less comforting. Many of the conflicts that the Imperial General Staff were struggling with did get resolved fairly swiftly. The western allies’ involvement in the Russian civil war was over by 1920, as the Bolsheviks moved towards victory. An uneasy peace was also re-established in Iraq. But Britain’s ability to impose its will on the world was waning. The political turmoil of 1919 was, in retrospect, an early sign that the world was entering a new period of instability that – within a generation – would lead to another shattering world war. Once the dominant global power loses its grip, the world can quickly become much less orderly.

Washington’s Hawks Have Usurped the Huntsmen

My Comments: If you are unsure what is meant by the headline above, you are not alone.

However, a reading of the comments that appeared in the Financial Times tends to reinforce in my mind the discomfort all of us should feel about the US Government agency known as NSA or the National Security Agency and others whose responsibility it is to spy, as they say in the movies.

At some point someone has to take responsibility for this crap, put it in context, and then put people in charge that have a fundamental understanding that in this age of instant news and technology, ANYTHING and EVERYTHING you do might have public consequences.

Some of it is probably justified, but to simply say OK to all of it means we are already far down that ubiquitous slippery slope. Time for some new rules.

By Constanze Stelzenmüller / July 9, 2014

The unspeakable in pursuit of the uneatable.” This was Oscar Wilde on fox hunting. Spying is hunting, of sorts. But in the latest instalment of the saga of US spying on the Germans, it is beginning to look more like the irresponsible in pursuit of the incompetent.

First, the prey. A low-level registry clerk at the Bavarian headquarters of the BND, the German federal intelligence service, offers his services to the Americans by mail. He sells them more than 200 documents over several years for a five-figure sum. His handlers are especially interested in the parliamentary committee investigating the US National Security Agency’s efforts to spy on Germany; according to Der Spiegel, a news magazine, they tell him to send everything he can find on the committee.

Then our man in Pullach sends another email, this time to the Russians. Would they be interested in his wares as well? To prove that he is not bogus, he attaches a handful of secret papers.

How could this have happened in a section of the federal intelligence service that has access to information about the Bundestag’s most sensitive committee? Susceptibility to greed or treason may be difficult to test for. But surely this man was either dim, lacking a survival instinct, or both. Who vetted him? Who hired him? Who watched him? Germany can guard the space between its goalposts as though it housed a nuclear bomb. Apparently, however, it cannot guard a parliamentary committee on intelligence.

Next: the pursuers. This was a tempting offer. But did no one in the US embassy say: “Hold it one second, guys. Remember how upset Angela Merkel was when we tapped her cellphone? What if this comes out, and the ambassador has to dine alone with his family for the rest of his tenure?” They might have reflected that, in his speech in Berlin in June last year, President Barack Obama sort of said the US would not resort to such tactics again.

They might have considered that Edward Snowden’s disclosures of NSA documents have made him a folk hero for many Germans. They might have done well to weigh the benefits of espionage against the potential costs. They could even have contemplated telling the German authorities that they had a little problem, in a bid to repair trust.

But evidently they thought none of these things. John Emerson, the US ambassador, was duly summoned to the foreign ministry in Berlin. And not on just any day; he was invited to a “conversation” on July 4, when the American community throws a party for Berliners, who munch on hot dogs while their children bury their noses in ice-cream cones, and gratefully remember the “Luftbrücke”, when the US Air Force flew in food and medicine to sustain the city during the Russian blockade of 1948-49. German displeasure might have been inferred.

All that was missing was news that Germany learnt of the leak through a friendly tipoff from Russian intelligence. This news reached the chancellor during a trip to Beijing (her seventh). Standing next to Premier Li Keqiang, she acknowledged grimly that this incident was “very serious”. Her host’s response was to say that Germany and China are “both victims of hacking”.

The large business contingent in Ms Merkel’s delegation will have taken note. The head of Germany’s domestic intelligence service, Hans Georg Maassen, had despatched them with a public warning that the country’s small and medium-sized Mittelstand firms are the “easy prey” of systematic cyberespionage by Chinese intelligence, which he called an “overpowering foe”. All that was missing was news that German authorities learnt of the leak through a friendly tipoff from Russian intelligence.

Cue wild harrumphing in Berlin, from justice minister Heiko Maas mulling criminal action, via interior minister Thomas de Maizière threatening “360-degree” counter-espionage, to mutterings about expelling US diplomats. The Americans, meanwhile, are issuing limp promises to “work with” the Germans.

Both reactions are off the mark. But they ought to serve as a warning. Just a year after the first revelations about NSA spying in Germany, resentment still runs high in Berlin; a rare case in which elites are in sync with the public mood. And Washington’s feeble response is not so much a sign of guilt – though it is probably that, too – as of helplessness in the face of a secret state that appears to have outgrown political judgment or control.

Yesterday, German media were reporting that a new espionage case was being investigated – this time in the defence ministry. Mr Emerson promptly made another visit to the foreign ministry.

There is no time to lose. A nasty US-German spat on Nato’s role in the Ukraine crisis is brewing. Negotiations on a US-European free- trade agreement face bitter public resistance. Add a breakdown of trust over espionage and you could have a transatlantic trifecta of disaster by the autumn.

The writer is a senior transatlantic fellow with the German Marshall Fund

World Weather Gone Haywire – Effects On… CRB Index and The Economy

My Comments: No, we are not doomed. But I can’t recall this much rain every day, some of it at night, when there wasn’t a hurricane. I’m sure it happened, but I don’t remember.

Does it have an effect on the economy? Experts agree last winters’ storms had an effect. So it’s worth paying attention to from time to time. If you are looking for solace, you won’t find it here. My cousin in England just wrote to tell me their weather is noxious and unpleasant. Have you thought about the price of vegetables and fruit in the coming months, stuff that we normally get from California? No rain there at all.

The people who give us economic data now say that the first quarter of 2014 saw really bad numbers. Early on it was an assumption that the economy was poised to enter another recession. Now, the powers that be say it was largely the weather. That’s a mixed blessing.

If you insist on keeping your head where the sun never shines, sooner or later it won’t matter how hot it is. Regardless of whether this is Gods’ plan, if the oceans continue to rise life is going to be more difficult for my grandchildren. But I guess if God hasn’t yet told you the plan can be changed by paying attention to CO2 levels, you don’t have to worry about consequences. And anyway, I’ll be dead by then and my Tea Party brethren can get all the credit.

James Roemer / Feb. 19, 2014

Cold U.S. Winter Affecting Nation’s Economy

You have heard it on your local news for weeks, read about it in dozens of newspapers around the world and if you live in the deep south, Midwest or Northeast, have “felt” it first hand—the most severe U.S. winter since 1982, at a time when much of the rest of the planet continues to see overall warmer than normal weather.

Look for another potential big storm in the east around February 26th and at the very least, record cold weather next week into early March.

You can hear a broadcast on Bloomberg a while back talking about natural gas prices possibly going over $6.00 and discussing global warming, the Brazilian drought, etc.

The adverse weather is having a multi-billion dollar affect on our nation’s economy. Pipes are bursting in the Northeast, salt companies are running out of supplies to remove snow, and various businesses are running into more economic hardship, as a result of the weather. Florists saw national revenues fall 60% during the Valentine’s Day period, unable to deliver flowers to tens of thousands of loved ones.

Our $16 trillion economy can usually ward off a couple of snowstorms, but NOT the incessant nature of 3 consecutive months of brutal cold and near record snowfall, in which tens of thousands of flights are being cancelled every other week. Other industries such as plastic and rubber products, auto sales, etc. are also being hurt.

The drought in California (one of the top 8 economies in the world), could also have a trillion dollar affect on our nation’s economy as food bills could soar without widespread rains and winter snow cover in the next winter or two. If El Nino forms, this could all change. It’s something I am arduously looking into.

TK – the balance of this article is full of charts and comments that may influence you if you are a short term trader. My primary interest is the long term performance of clients money (and mine) so I tend to ignore short term issues as they are largely noise. But global warming is going to have a long term influence on virtually everything, including our money. To get to the site where you can see the charts and read the rest…

http://seekingalpha.com/article/2032701-world-weather-gone-haywire-effects-on-brazil-natural-gas-crb-index-and-the-economy?source=email_macro_view_edi_pic_2_2&ifp=0

The Outlook for Yields

My Comments: Guggenheim Partners has recently been sending periodic macro insights about investments and opportunities for investors. Good stuff, so if investments interest you, I encourage you to grasp as much of it as you can.

global investingGlobal CIO Commentary by Scott Minerd of Guggenheim Partners – July 03, 2014

As U.S. economic growth gathers pace, yields on 10-year U.S. Treasuries should shift higher over the next two-three years, eventually moving as high as 3.25 – 4 percent.

While a broad-based secular increase in inflation will be a problem that comes most likely in the next decade, a number of technical and cyclical forces, such as healthcare and shelter costs, are working to push consumer prices higher over the next six months or so.

However, these forces are unlikely to spark sustained inflation in the near term, given that the U.S. unemployment rate is still quite high, the labor force participation rate has been on a downward trend for a number of years, and capacity utilization is still significantly lower than the threshold associated with a broad increase in consumer prices. In the medium-term, wage pressure will continue to rise and aggregate demand should improve. Rather than being the harbinger of an inflationary spiral many investors fear, that should be positive for economic activity.

Our research suggests that the yield on the U.S. 10-year Treasury bond should now be 3-3.25 percent, yet yields have been hovering around 2.6 percent. Keeping rates low in the near term are technical factors such as central bank accommodation flooding global markets with liquidity and some form of quantitative easing likely coming in Europe.

This week’s ADP report showing U.S. firms added 281,000 jobs in June, the most since November 2012, is the latest sign that the U.S. economic recovery is picking up steam. Over the next two to three years, given that economic growth is likely to be stronger, unemployment is likely to be lower, and inflation is likely to be higher, we will eventually start seeing fundamentals take over, resulting in higher yields on U.S. Treasuries. Assuming the U.S. Federal Reserve starts raising interest rates mid to late next year, we could see the U.S. 10-year Treasury bond reaching a cyclical high of somewhere around 3.75-4 percent.

U.S. Wage Pressure Approaching, But Not Here Yet

An improving labor market, brighter growth prospects, and higher capacity utilization are pointing to a U.S. economy approaching equilibrium. Historically, once the economy moves past equilibrium, whether defined by unemployment, output, or capacity, significant wage inflation tends to follow. Though we are drawing nearer to these levels, it is likely to take one year or longer before the gap is closed and broad-based wage inflation emerges.

Source: Haver, Guggenheim Investments. Data as of 7/2/2014. Note: We define the output gap using Congressional Budget Office (CBO) data on potential GDP, where the gap is the difference between actual and potential GDP as a percentage of potential GDP. We define the capacity utilization gap in the same way, using 82 percent as the natural rate. We define the unemployment gap using CBO data estimates of the natural rate of unemployment.

U.S. Data Points to Strong Second Quarter

• The ISM manufacturing index cooled slightly in June but remained well in expansion territory, inching down to 55.3 from 55.4.
• Personal Consumption Expenditures (PCE) rose less than expected in May, up 0.2 percent after April’s flat reading.
• The University of Michigan consumer confidence increased in June to the highest level this year, to 82.5 from 81.9.
• Pending home sales increased in May for a third consecutive month, rising by 6.1 percent from a month earlier, making it the best month in over four years.
• Construction spending rose for a second month in May but was below expectations, rising just 0.1 percent from April.
• Initial jobless claims inched down by 2,000 for the week ended June 21, to 314,000.
• Factory orders fell by 0.5 percent in May after rising during the previous three months.
• The core PCE deflator, the Fed’s preferred measure of inflation, rose in May for a third straight month, to 1.5 percent — the highest since January 2013.

China Manufacturing Positive, European Prices Muted

• Euro zone consumer prices rose 0.5 percent year over year in June, equaling May’s gain.
• Euro zone economic confidence unexpectedly declined in June to 102.0 from 102.6.
• Retail sales in Germany unexpectedly fell for a second consecutive month in May, decreasing 0.6 percent.
• Germany’s CPI accelerated to 1.0 percent year over year in June, the highest in four months.
• Spain’s manufacturing PMI rose to 54.6 in June, a seven-year high.
• The manufacturing PMI in the United Kingdom expanded to 57.5 in June, the best level this year.
• China’s official manufacturing PMI showed a faster pace of expansion for a fourth straight month in June, rising to 51.0.
• Japan’s Tankan survey of large manufacturers dropped to 12 from 17 in the second quarter. The outlook index, however, reached its highest level since 2007.
• Japan’s industrial production showed a small rebound in May, rising 0.5 percent after a 2.8 percent drop.
• Japan’s CPI climbed higher in May to 3.7 percent year over year, reflecting the recent sales tax hike. Core prices rose 3.4 percent, the highest since 1982.

Moscow’s Moves and Your Investments

My Comments: Geopolotical events almost always influence the world of investments. Today, global economic health, or lack of it, dictates to some extent how we invest our money, where we invest our money, and what we can expect going forward.

All of us saw recently how the ISIS jihadists in Iraq caused the price of gas at the pumps in far away Gainesville to jump upward. That means that if your business involves moving stuff from point A to point B, somewhere in the continuum from start to finish, the cost of transportation increased. Either you absorbed the increase, meaning you made less money, or you passed it on the next guy, which means somewhere in the chain, the final price went up also.

Don’t for a minute disregard the events going in Russia and the Ukraine. That doesn’t mean we should obsess about it, but it will affect our lives, and the lives of those around us. If you ignore it, that too will have consequences, however small. It’s just that the outcome in Ukraine is and will remain a part of the fabric of our financial future.

By Dmitri Trenin / July 1, 2014

Russia needs people and should think of the Eurasian Union as a Nafta, says Dmitri Trenin. It needs to build a nation, not an empire.

If the Maidan protests and their aftermath did not disabuse Russia of the hope of a Eurasian Union that includes Ukraine, the signing last week of EU association agreements on economics and trade with Ukraine, Georgia and Moldova should have done so. Three former Soviet republics are now linked, however loosely, to the EU.

President Vladimir Putin is discovering that the “Russian world” he often refers to is a soft-power category – geocultural rather than geopolitical or geoeconomic, and that Ukrainians and Russians are not “one people”.

At this point, rather than worrying about what it sees as its losses, Moscow should consolidate its gains.

It has managed to reincorporate Crimea, arguably the only part of post-Soviet Ukraine that had a strong affinity with the Russian state. It should work hard to turn the peninsula, particularly its southern coast, into a thriving region, economically on a par with the Greater Sochi area, making it a showcase of Russia’s capacity to develop depressed areas with significant potential for tourism.

It also needs to keep Crimea’s diverse population happy, including the ethnic Russian majority; the ethnic Ukrainian minority (about 25 per cent); and, particularly, the Crimean Tatars (more than 10 per cent), Muslims who regard the territory as their ancestral homeland.

Next, its main strategic interest lies in keeping Ukraine out of Nato – and here the prospects are good. Washington has to balance its global commitments, from the South China Sea to Iraq, and Ukraine is nowhere near the top. Berlin and Paris are adamant neither Ukraine nor Georgia and Moldova should join. London sees no reason to extend the borders of common defence to Russia’s heartland.

Moscow should shift to a longer-term approach to relations with Kiev, switching from using armed rebellion in the eastern region of Donbass as a means of protecting its interests to a broader political strategy involving all of Ukraine. As the Russian defence industry’s ties with Ukrainian contractors grow unreliable, it should seize the chance to create a fully sustainable defence industry within own borders. Russia will also need to adjust its overall trade relations with Ukraine, and do so in full compliance with World Trade Organisation norms and principles.

One clear gain, besides Crimea and Sevastopol, may be the Ukrainians who cross the border into Russia. Sharing a common language and culture, they can be perfectly integrated. Rather than gathering further lands, Moscow needs to gather people from the former Soviet Union who would help it build a motivated and younger workforce, and a greater consumer base. Such a policy should favour those who can contribute the most to its wellbeing – primarily the engineers and other workers producing aircraft engines and missiles, enterprises that used to be important to Russia but face contraction or extinction as Ukraine adapts to the EU’s trading requirements.

The Russian Federation needs to continue its transition from an empire to a continent-size nation state. While it needs more people, it does not need more land. It should not think of the Eurasian Union as a replica of the EU but rather as a kind of North American Free Trade treaty. Economic interest, rather than common ethnicity or shared history, is the glue to seal the new association.

Moscow’s longing, in the past quarter century, to be admitted into the west has suffered a setback: it should see this as a blessing in disguise. With its occidental option closed for now, its choices are clearer than ever. If it embraces a “fortress Russia” concept and practises economic isolation and political repression, it will head for a catastrophe on the scale of the Soviet Union’s. If it turns east, it will make itself a raw materials appendage and a tributary of China, destroying its self-image as a strategically independent power.

If it wants to stay in the game of global competition, it has no choice but to work towards becoming a civic nation, a rules-based polity and a modern economy.

Countries, like people, often do the right thing when all other options are closed. For Russia, the choices have rarely been starker.

The writer is director of the Carnegie Moscow Center

Removing Saddam Hussein Did Not Cause This Crisis

global econMy Comments: The price of oil is increasing. The news is full of both the World Cup and Iraq. How will any of this affect our investments? And, of course, as always, it depends.

At first glance one might dismiss the author as expressing a self-serving platitude. On second glance, you remember he rose to prominence in global politics because he is intelligent, charismatic and a formidable thought leader. You don’t last ten years as the political leader of a major world player if you don’t have your act together.

It would be nice if we could simply let the folks in the middle east solve their own problems, but it’s more complicated than that, and I, for one, have no clue how to force a resolution. There probably isn’t one. But I add my voice to those who say NO to further military involvement by the US without a clear threat to our national best interests.

By Tony Blair / June 22, 2014

The Middle East’s problems lie in the toxic mix of bad politics and bad religion, writes Tony Blair

For the avoidance of doubt, of course the Iraq of 2014 bears, in part, the imprint of the removal of Saddam Hussein 11 years ago. To say otherwise, as a recent editorial in this newspaper implies that I do, would be absurd. However, there are two important points that must also be recognised.

We cannot ignore the fact that Isis, the jihadist group advancing across Iraq, rebuilt itself and organised the Iraq operation from the chaos in Syria. Isis and other al-Qaeda-type groups in Iraq were flat on their back four years ago, having been comprehensively beaten by a combination of US and UK forces and Sunni tribes. The civil war in Syria allowed them to get back on their feet.

So the first point is that non-intervention is also a decision with consequences. In the case of Syria those consequences have been dire, and as security chiefs in the UK and Europe are warning, they pose a real threat to our security.

Second, no analysis of the Middle East today makes sense unless we examine the impact of the Arab revolutions overturning the old regimes. It is odd to argue that revolution would not have come to Iraq. And surely Saddam Hussein’s response would have been more like that of Bashar al-Assad in Syria, than that of Hosni Mubarak. Whatever decision had been taken in 2003, in 2014 we would be facing a major challenge.

There is a tendency to write off the Saddam Hussein time in Iraq as if he were a force for stability and peace. Just to remind ourselves: he began the Iraq-Iran war in which there were more than 1m casualties, many dying from chemical weapons, something which then played a part in pushing Iran towards its nuclear programme; he invaded Kuwait; he used chemical weapons in a genocidal attack against the Kurds; he excluded the Shia majority; and he persecuted the Marsh Arabs. The region’s problems are the result of deep-seated issues that, with the removal of those regimes, have now come to the surface.

That is the point I am making. I am not seeking to persuade people about the decision in 2003. I am trying to convince them that the fundamental challenge is not the product of that decision or indeed the decision in Syria. It is a challenge of immense complexity that has not originated in anything we have done since this challenge burst fully on to our consciousness after the attacks of September 11 2001. Its origin lies in the toxic mix of bad politics and bad religion that is not confined to Iraq or Syria but is spread across not just the Middle East but also the world.

The reason we got into such difficulty in Iraq, as in Afghanistan, was precisely because once the dictatorship was removed, extremist Islamist forces then made progress extraordinarily difficult. That is their hideous impact the world over. The fundamental challenge today arises not from the decisions of 2003 or those of 2014. It is the challenge of Islamist extremism and it is global.

It is a challenge we cannot avoid. Its outcome will dramatically affect our own security. We may be war weary and want to disengage but the people we are fighting do not share that weariness. Leave aside Iraq or Syria; look at Pakistan today. It has powerful institutions; it has a functioning democracy. Yet be in no doubt, the struggle it is waging is existential. Nigeria was two decades ago a model of religious tolerance. Today it is on the rack of extremism. Even in western societies, there are tensions that are real and dangerous.

The bad news is that this issue is not going away. That is why I am speaking about it. Since leaving office I have spent a large part of my time studying it and through my foundation trying to counter it.

Short term, we have to do what we can to rescue the situation in Iraq and Syria. In Iraq, without inclusive government this will be hard to do. The US is right in demanding political change as the price of its engagement. In Syria, an outright win for either side is no longer sensible; the majority of Syrians just want the torment to end.

Long term, we have to have the right mixture of soft and hard power responses, which fights this extremism wherever it is conducting its terror campaigns. We must deal with the root cause of the problem which lies in the formal and informal systems that educate young people in a closed-minded approach to religion and culture.

The good news is that this extremism does not represent the majority of Muslims. As the recent elections in both Iraq and Afghanistan show, where despite threats, violence and terror, people came out to vote in their millions.

These people want to be free: free of dictators and free of terror. We should help them. It is in our interests that they succeed.

The writer was prime minister of Britain from 1997 to 2007

Obama: Prevaricating On Foreign Policy

My Comments: It’s hard not to be tired and uninterested in the speeches of a President now well into his second and last term as President. Never mind that I voted for him twice and have a generally favorable opinion of his efforts on our behalf.

Foreign policy is not something that does much for the economic fortunes of those of us in the great unwashed middle class of America. Not unless and until we find ourselves at war with various groups across the planet who have vowed to bring us to our knees and have us die a painful death.

When that happens, I get more involved. Like it or not, we are the world’s policeman. We’ve been that since the end of the Cold War and Russia dissolved into something resembling a third world country. But the death of American lives in support of those around the planet who, for the most part simply argue their God is better than my God, is not something I want to see.

As a financial planner, I’m accustomed to thinking about the future and what is likely to be in my clients best interests, things they have little use for as they live and work today. Same with the President. It’s not just who is trying to kick someone else’s ass today, it’s who is likely to be kicking who tomorrow and whether that will impact the planet to our detriment.

I don’t know the answer, and it appears as if Obama and his team don’t either. At least they don’t seem to, and I find that troubling.

By Richard Haass / May 29, 2014 6:38 pm

US president’s speech tells us what he opposes not what he favours, writes Richard Haass

Barack Obama’s long-anticipated speech on Wednesday at West Point, the US Military Academy, was designed to answer a growing number of domestic critics of his foreign policy, who believe he is not doing enough to advance American interests around the world. It was also intended to push back against the growing tide of isolationism in a country preoccupied with domestic challenges and disillusioned with the results of long wars in Iraq and Afghanistan. And the address was meant to reassure America’s friends around the world.

Not surprisingly so ambitious a speech, aimed at so many audiences, failed to meet any, much less all, of its goals.

A big part of the problem resulted from a speech that told us more about what the president opposed than what he favoured. He is against too much military intervention, but he is also against too little of it. America must avoid choosing between realism and idealism in its global conduct. It must be multilateral, except when it must act alone. All arguably true, but such generalities are more fitting for someone starting out in office than for an incumbent in his sixth year.

It did not help that, one day before the speech, Mr Obama laid out his new policy toward Afghanistan. US military forces are to come down to just below 10,000 by the end of this year, and to be removed entirely a month before he leaves office in early 2017. But this is a calendar-based policy, not one determined by conditions. It is an exit without a strategy, one that increases the odds the new Afghan government will struggle – much as has happened in Iraq in the aftermath of the complete US military departure from that country.

It would have been far better for the president to make the case for long-term presence in which the probable results justified the anticipated costs. This calculation is what lies behind the wise decisions to maintain US forces in Europe, Japan and South Korea for more than half a century. Instead, Mr Obama reinforced the very trend towards avoiding responsibility that he criticised a day later.

Elsewhere, the president did suggest that he favoured providing more help to those countries surrounding Syria that risk being overwhelmed by the flow of refugees. And he declared he would approach Congress to increase help to those opponents of the Assad regime that held agendas the US could live with. This is to be welcomed, although details were left unsaid.

Mr Obama is smart to limit direct military involvement in Syria’s civil war, but he has not made the case why the US has done so little indirectly over the past three years. Nor has he said why it should not use military force when Syria’s government clearly violates international norms, as it has done by using chemical weapons.

The president also neglected to mention Libya, where a modest military intervention by the US and others helped to create a vacuum, now mostly filled by terrorists. What we were to learn from this, Mr Obama did not say.

The president defended his policies towards Ukraine and Iran, although major tests lie ahead for both. In the meantime, he largely ignored the part of the world most likely to shape this century, the Asia Pacific.

What makes this omission more glaring is that in his first term Mr Obama called for a pivot, or rebalancing, of US foreign policy towards that part of the world. This makes great strategic sense given US interests and commitments, the rise of China, the surge in local nationalism and the weakness of regional diplomatic arrangements. One part of this pivot is a commitment to increase the presence and role of US military forces, the ostensible subject of Wednesday’s address. This has yet to happen. For now, the pivot remains mostly rhetorical. On this occasion it was not even that.

Another part of the pivot also went unmentioned – the goal of bringing about a regional trade pact. Here the greatest problem might not be in the region but back at home, where Democrats and, to some extent, Republicans in Congress have abandoned the country’s commitment to free trade. Protectionism and isolationism tend to go hand in hand, and here, too, an opportunity to make a point as to the strategic and economic benefits of expanding trade was forfeited.

The president is right to warn against the folly of isolationism in today’s world, that what happens beyond the country’s borders can and will affect what takes place within them.

And he is right to suggest that American leadership is indispensable, that international order will not come about without it.

However this requires that the American people are prepared to back such a role for their country, and that American friends and foes alike see it as predictable and steadfast.

Unfortunately, Mr Obama’s statements this week will do little to help accomplish these tasks.

The writer is president of the Council on Foreign Relations and author of ‘Foreign Policy Begins at Home’