Tag Archives: global politics

Germany Is Delusional To The Point Of Insanity

global investingMy Comments: Assertive headlines such as what you see here are usually outside my comfort zone. For one it implies a pathology that I’m not trained to comment on and two, Europe and European values are different from mine, given that I’ve lived here in the US for the past 65 years. (Warning: this post is LONG.)

That being said, what goes on in Europe does influence what happens to our markets, and since investing money is an expertise I have, then knowing and trying to understand this sort of thing is important to me. And perhaps to you.

The Mercenary Trader / Jan. 21, 2015

“It is as if it’s accepted that the euro area’s modus operandi is to clear things with Germany, and for the ECB to constrain its actions to what is best for Germany.” ~ Athanasios Orphanides, former member of the ECB governing council

Most of the eurozone is experiencing deflation. Even the countries who aren’t – Germany etc. – are well below the ECB’s official 2% inflation target.

This is dangerous because deflationary conditions can tip into recession… and depression… and political extremism born of civil unrest. Deflation – or rather the extreme results of such, in the aftermath of harsh slowdown – brought us the Nazis in the 1930s. Post-Weimar economic implosion, not currency erosion, enabled the political conditions for Hitler’s rise to power.
Need we say more?

Apart from political unrest, deflation is like having no fuel in the emergency flight tank.

A lot of people will say “what’s wrong with deflation,” e.g. why is it so bad?

It’s important to clarify there is a big difference between falling inflation levels (disinflation) and inflation falling below zero. Think of a plane that stalls out.
When an economy goes negative, the risk is that the plane fails to overcome the stall… and crashes before it can pull up. Deflation (as opposed to disinflation) can lead to compounding “downward spiral” impacts, not unlike gravity’s increasing pull on a nosediving airplane.

The German attitude toward inflation, and debt, is pathological (indicative of mental disorder).

Germany is paranoid of inflation on a pathological level. Germany is also pathologically allergic to debt. Consider, for example, that Germany as a country has serious infrastructure needs… and there is real risk that Germany’s economy will slow in future. Right now, German interest rates hover above zero (or even dip below it). This is a historic opportunity for “good” financing… for logical spending on real needs, financed by incredibly low-cost debt.

Yet Germany is so debt averse, they aren’t willing to borrow for the future – not even for themselves – even with rates in the zero to one percent range. That’s almost the equivalent of turning down free money, even when it is badly needed for repairs… even when it has obvious strategic use. That is not frugality as a virtue, it’s more like a miser complex worthy of therapy.

Worse still, Germany is delusional about its own economy and dangers.

Think about this: What happens to the German economy when China really and truly slows? And what happens to the German economy when Japan goes “next level” in its competitive devaluation plan?

China is slow-motion imploding. No matter what happens, China has to switch from an infrastructure led economy to a consumer led one. This is very bad news for Germany, one of the world’s largest exporters. As is the increasingly competitive currency stance of Japan. Bottom line: Germany’s present economic strength could easily evaporate… for strong reasons that make logical sense. And how much cushion would they have in that event? None…

Bottom line: Germany would rather slit its own throat, economically speaking, than allow for a rational approach to inflation and debt.

That is a deliberately harsh phrase, it’s true. But the writing is on the wall. Germany’s commitment to austerity is not just pathological, it is economically suicidal.
The entire eurozone is at risk… and Germany’s own economy is too… and the lessons of history speak loudly. Yet Germany continues to live in a bizarro dream world where saving money has been elevated to a fetish regardless of surrounding circumstances.

We don’t choose to pick on Germany. We have friends who are German… family members and loved ones with German roots. It simply “is what it is.” The pathologies of a country, to the degree they go separate ways from rationality, are leading to economic disaster (and who knows what in the aftermath).

There are questions as to whether German provisions will “neuter” euro QE.

Draghi and the European Central Bank will announce some kind of quantitative easing on Thursday (sic). There is no question of it now. If they tried for another stall – more “wait and see” – European equity markets would simply go into freefall. Investors would start betting on accelerated odds of euro break-up.

But it remains possible that the “shock and awe” of euro QE will be neutered by German demands. Via the FT: To appease QE’s German opponents, which include the chancellor Angela Merkel herself, Mr. Draghi is expected to say that bonds bought will remain with national central banks, so losses will not be spread among eurozone members. But other eurozone countries, as well as the International Monetary Fund, fear the concession could reduce QE’s effectiveness…

OF COURSE giving Germany what it wants would reduce euro QE effectiveness!

• Germany wants to reduce fiscal exposure to weaker eurozone members.
• But establishing a united support front is the whole idea in the first place!
• The house is on fire and liquidity crisis measures (firehoses) are needed…
• But Germany wants to avoid charges for the water…
• And make sure any fires are segregated away from itself…
• Thus increasing the odds the whole thing burns down.

The German justification for not wanting to participate is ridiculous.

The stance of Germany is essentially, “Why should we pay for these bums? Why should we create more risk exposure for ourselves? We are savers, they are spenders… why should we waste money on them?”

The answer is that Germany should have asked those questions SEVENTEEN YEARS AGO. Saying “Nein!” to an insanely stupid monetary union would have been very logical, and the best thing for all… circa 1998 before the euro actually launched! But now it is too late to avoid responsibility for actions.

What’s more, it is no longer a “moral” question… but a question of WHAT THE RISKS ARE.

This is the other amazing / maddening thing about the German stance. Germany still acts as if there is room to say “no” on moral grounds… when the final question is what will happen, not what is right or wrong. When a course of action is highly likely to invite DISASTER, the question of right or wrong has to be put aside…

Because of Germany, we don’t know how euro QE will come across… but we are willing to short more FEZ against our euro position. Our EURUSD position has a sort of partial absolute hedge in short European equities. If Germany throws a spanner in the QE works, and “Super Mario” disappoints, EURUSD could spike in a big short squeeze. But European Equities (NYSEARCA:FEZ) would fall hard in that instance. Conversely, if Draghi and the ECB come through in a big way, the reverse could occur – EURUSD goes into freefall, FEZ rockets higher. So they act as de facto hedges of each other…

Another scary thing… even if Draghi gets his “big bazooka” QE… what good will it do?
The other frightening thing to consider: It may be too little, too late for Europe no matter what size of QE they get. There is little point in lowering eurozone bond yields (already pressing zero). And there is little real hope in stimulating bank lending. So the true point of euro QE would be… what? Making the euro a hell of a lot weaker to stimulate exports one supposes. What else is QE supposed to do?

One argument is that, once euro QE starts, it never stops… until it goes nuclear…
Some argue it doesn’t really matter how much QE the ECB starts with… because QE just gets bigger from that point no matter what. We can’t be sure this is true. Germany might try to stop a “failed” QE program. Then again, if things get really ugly – e.g. if Germany falls into recession too – then maybe it keeps going and going…
And the ECB finally winds up going “nuclear,” taking a page from Japan. Understand this: There are plausible scenarios where the euro goes to 85 cents before all is said and done. That outcome would not be too hot for risk assets. (Hello understatement!)

Division and Crisis Risk Sapping the West’s Power

My Comments: I make no apologies for having supported and voted for Barack Obama in 2008 and 2012. Much of the pressure from the right, in my opinion, is irrational and disguised racism.

Here is an opinion from England, my birthplace and true friend of America. It’s an interesting perspective and to the extent you are interested in understanding the dynamics of global economics, a helpful thing to read.

By Gideon Rachman / September 1, 2014

The people who prepare President Barack Obama’s national security briefing must be wondering what to put at the top of the pile. Should it be the Russian assault on Ukraine, or the advance of the Islamic State of Iraq and the Levant (known as Isis) in Iraq and Syria? And what items should go just below that?

The violent anarchy in Libya, the dangerous stalemate in Afghanistan, the looming political crisis in Hong Kong, or a confrontation between Chinese and US planes, near Hainan island? The US president might reasonably ask why all these crises are breaking out at the same time.

His critics have a ready answer. They argue that the Obama administration has shown itself to be weak and indecisive. As a result, America’s adversaries are testing its limits and the US-led security order is under challenge in Europe, the Middle East and Asia.

There is no doubt that the US is war-weary after the conflicts in Iraq and Afghanistan. However, the multiplication of security crises around the world is not just about Mr Obama and the US. In fact, the obsession with what the Americans are doing points to the underlying problem. Its allies have come to rely excessively on the US to guarantee their security.

As a result, the biggest weakness in the global security system is not a lack of resolve in Washington, but the learned helplessness of America’s regional allies. The Nato summit this week in Wales represents a crucial opportunity for America’s most important allies to start doing more to share the burden. If they fail, the inability of the US to police the world alone will become increasingly apparent, and the various global security crises will intensify.

The pattern of Nato spending reflects Europe’s increasing reliance on the US. At the height of the cold war, America accounted for roughly half the military spending of the alliance, with the rest of Nato accounting for the other 50 per cent.

Now, however, the US accounts for some 75 per cent of Nato spending. Last year, of the 28 Nato members, only the US, Britain, Greece and Estonia met the alliance’s target of spending at least 2 per cent of gross domestic product on defence. Even the UK may soon slip below 2 per cent, with the British army on course to shrink to about 80,000, its smallest size since just after the Napoleonic wars.

Even when it comes to the non-military side of security, the Europeans have lagged well behind. The US was quicker to push through sanctions on Russia, and its measures have been tougher, despite the fact that Russia’s undeclared war in Ukraine is a much more direct threat to Europe.

This same over-reliance on the US is evident in the Middle East. The rise of Isis is a massive threat to the dwindling band of stable regimes in the region, above all Saudi Arabia and the Gulf states. In recent years, these countries have spent lavishly on their armies and air forces. And yet it has been left to the US to wage the bombing campaign against Isis, while the nations of the Gulf Co-operation Council keep their 600 combat planes on the tarmac and complain about American weakness.

A similar pattern is on display in Asia, where US allies such as Japan and the Philippines agitate for the US to increase its military commitment to the region in response to an increasingly assertive China. And yet, even as they call for US help, America’s allies in east Asia have been unable to present a united front, in opposition to China’s maritime claims.

This litany of allied weakness is dangerous precisely because America is indeed more reluctant to “bear any burden” (in President John F Kennedy’s famous words) to uphold the international order. The Iraq and Afghanistan wars have left their marks. So has the financial crisis of 2008. Mr Obama’s reluctance to deploy military force is not an aberration or a personal folly. It is an accurate reflection of the mood of the American people, with opinion polls showing the highest levels of isolationism in more than 50 years.

That mood could shift in response to Russian aggression and to the chaos in the Middle East. However, even if it does, the days when the US was capable of being the world’s super-cop – with relatively little assistance – are coming to a close.

The World Bank estimates that this year, China will probably become the world’s largest economy, measured by purchasing power. America’s defence budget is falling, as the US struggles to control its national debt. The gradual relative decline of the US is a much worse problem than it might otherwise be, because America’s closest allies in the EU are in the grip of severe economic crises, which are eroding their ability to exercise power.

Collectively, the west now accounts for a decreasing share of the world economy – as new sources of power and wealth rise up in Asia. A western-dominated world is therefore in danger of looking increasingly like an anachronism – and that is the proposition that, in their different ways, President Vladimir Putin of Russia, Isis and the Chinese military are testing.

The perception of declining western power now threatens to become a self-fulfilling prophecy. The only way for North Americans and Europeans to stop that happening is to work together with greater determination and purpose to combat the crises burning out of control on the fringes of Europe, in Ukraine and the Middle East. That work needs to start at this week’s Nato summit.

As Benjamin Franklin put it: “We must all hang together or, assuredly, we will all hang separately.”

Boehner’s Lawsuit Is Betrayal Of Congress

babelMy Comments: I don’t normally upload any posts on the weekend. I’m usually distracted by other matters and assume you are too.

However, I happened across this and it resonated with me. It’s another example, in my opinion, of a dysfunctional Congress that is leading us down a path that I don’t want to follow.

As a naturalized American, mostly educated in this country, I’m sensitive to immigration matters and the needs of those folks on the lower end of the economic spectrum. I lived in India in the early 1950’s and abject poverty was the norm, especially in the cities. I can tell you stories that would curl your hair. I suspect it influenced some of my later thinking.

If this effort by the House Republicans is to be believed, there are enough people elected to lead that have no clue. This past election saw over 90% of incumbents re-elected, in spite of an approval rating by the general public of less than 20%. At some point, enough of us have to say “end this crap” or the light at the end of the tunnel will not be the future, but a large oncoming locomotive.

By Jonathan Bernstein November 21, 2014

Nov. 21 (Bloomberg View) — Republicans have finally filed their lawsuit against the president over implementation of the Affordable Care Act. Actually, the president isn’t a respondent; the suit names the Secretary of Health and Human Services and the Treasury Secretary. It’s still a horrible idea.

Michael Lynch and Rachel Surminsky at the Monkey Cage provide one reason: The suit is likely to fail. The first issue is “standing.” To get into court, the House would have to prove that it was damaged by the way the administration carried out the ACA, and courts have consistently rejected that idea. Beyond that, it’s far from clear that the administration’s actions, including the delay of the employer mandate and cost sharing for insurance companies, were beyond the normal discretion the executive branch has to carry out laws. Just because some Republicans want to pretend that before January 2009 presidential power had been limited to pardoning Thanksgiving turkeys doesn’t mean they are right.

And if Republicans win, it would be terrible for Congress.

I’ll say it again: Speaker John Boehner and House Republicans aren’t asking for authority to be returned from the White House to Congress. They want an imperial judiciary that could trump either of the elected branches.

In a system of separated institutions sharing powers, which is what the Constitution created, all three branches do things that look a lot like legislating, but laws can trump administrative or judicial rule making. That gives Congress serious clout within the system. This lawsuit, however, is an abdication of that clout. In effect, it says that the courts, not Congress, should have the last word when there’s a dispute between branches.

Filing this lawsuit amounts to institutional treason. Boehner and House Republicans should be ashamed. The rest of us can only hope that the courts rescue them by keeping to precedent and tossing this lawsuit into the garbage. Then, perhaps, the House could consider getting back to legislating.

Impossible Germany

Pieter_Bruegel_d._Ä._037My Comments: I’ve mentioned before how easy it is for us to discount the economic influence of Europe on the world stage. But it’s a mistake to do so. Collectively, the European Union is an economic engine that is just as critical to the economic welfare of the world as we are. If they go down the tubes, so do we, just not so far. But down is down and not a fun place to be.

One reason Europe has been reluctant to respond aggressively to what Russia has been doing to Ukraine and it’s environs is because Germany, and much of the rest of Europe, know they are already walking on thin ice. Shutting out Russia means pissing in your own well, to borrow a phrase.

And, of course, Russia is happy to push those buttons as long as they can get away with it. What makes it troubling for me is that it might simply be delaying the inevitable. And I for one don’t want that inevitable to be known 25 years from now, as World War III.

Nov. 16, 2014 Eric Parnell, CFA

Summary
• The economic and market outlook appears impossible for Germany over the next few years.
• The world’s fourth-largest, heavily export-dependent economy is facing a fundamental problem.
• With future growth prospects increasingly fading, this bodes ill for the future performance of the German equity market.

The economic and market outlook appears impossible for Germany over the next few years. The world’s fourth-largest, heavily export dependent economy is facing the fundamental problem of struggling to thrive within the currency union it went to such lengths to help form over the last several decades. Future growth prospects are increasingly fading, and this bodes ill for the future performance of the German equity market.

German economic growth has effectively ground to a halt in recent years. After what was initially a fairly solid bounce in the early years of the “post-crisis” period, real GDP growth in Germany slowed to +0.7% in 2012 and +0.4% in 2013.

As for 2014, German real GDP growth projections for the year were recently revised meaningfully lower from 1.9% to 1.2%. More specifically, the economy just barely skirted past entering a technical recession by generating +0.1% growth in the third quarter, after having posted a negative -0.3% growth reading in the second quarter. It is worth noting that Germany managed to clear the bar into positive territory thanks to a surprisingly solid export number to non-Euro trading partners in September, a outcome that may not prove repeatable in future months. And despite the fact that Germany just barely avoided officially having the dreaded “R” word tied to their economy, these are still hardly growth numbers about which to get excited.

As for 2015, the growth projections have already been reduced to just 1.0%. And experience in the post-crisis world has repeatedly shown us that future economic and corporate earnings growth projections are simply made today to be lowered in the future. As a result, a final number for 2015 that is closer to 0%, if not outright negative, should not be completely ruled out.

Economic growth is grinding to a halt in Germany. But so what? Economic growth has been sluggish in the United States for years, yet the stock markets in both countries are now well above their pre-crisis highs. Can’t we simply expect the same degree of perpetually blind optimism among German stock investors to bid their own stocks to the stratosphere as well, fundamentals be damned? After all, it has worked well so far, as both the U.S. S&P 500 Index (NYSEARCA:SPY) and the German DAX have moved in virtual lockstep with each other in local currency terms dating back to the very beginning of the financial crisis in July 2007. That is, of course, until this past July, when these markets suddenly started to diverge widely from one another.

It is worth noting that currency effects have amplified the return differences between the U.S. and Germany since the summer of 2011. This is due to two specific periods – the first from the summer of 2011 to the summer of 2012, and the second since April 2014 – where the euro currency weakened sharply relative to the U.S. dollar. Thus, for those investors that have not hedged the currency, exposures associated with their German stock investments through vehicles such as the iShares MSCI Germany ETF (NYSEARCA:EWG) have not performed nearly as well.

But what about a monetary policy rescue in Germany and across the eurozone? Unfortunately for stock investors in the region, Germany does not claim to want such stimulus, and even if the European Central Bank decided that it wanted to provide it, they, unlike their American and Japanese counterparts, do not have a central bank that has the unchecked power to decide to print a few trillion euros out of thin air simply because their central bank head thinks that it is a good idea over his cereal one morning. Instead, ECB President Mario Draghi faces far more restrictions on his ability to engage in outright quantitative easing, and that includes getting clearance from German policymakers that have stated they do not want it.

What has been absolutely extraordinary to this point is how Mr. Draghi has been able to repeatedly boost regional stock and bond markets including Germany for years by doing nothing more than making promises about things he intends to do (and may not technically be able to do), without actually doing much of anything. How much longer his power of the podium can sustain itself remains to be seen, but the recent performance of stocks across the region suggest that equity investors both in Germany and elsewhere may be growing increasingly tired at this stage, particularly now that the spillover tailwind from the Fed’s quantitative easing has finally gone away.

Looking forward, the German stock market faces a fundamental problem that investors would be well served to confront sooner rather than later. In short, the German economy has experienced real growth of only 3% above pre-crisis levels from late 2007 and early 2008. Yet, the German DAX is nearly 20% above pre-crisis levels. More specifically, the German economy has posted a real GDP increase of just 1.4% since the summer of 2012, yet the DAX is up nearly 50% over this same time period. Put more simply, German stocks have skyrocketed over the last two years based on virtually nothing fundamental. Such are not the strong foundations of sustainable stock market gains into the future.

Adding to the forward-looking challenges for German stocks is the highly cyclical and economically sensitive make-up of the market. German stocks are more heavily concentrated in the variety of cyclical industries, including consumer discretionary, financials, industrials and materials. Overall, the allocation of the German stock market to cyclical industries is a notably high 82%. This is well above the U.S. reading at just over 70%. As a result, the German stock market is expected face more pronounced downside pressure if economic conditions in Germany deteriorate as we move into 2015.

Yet another issue for German stocks is valuation. For example, Germany’s 10-year cyclically adjusted price-to-earnings ratio is 16.4. While this reading is not the extraordinarily high 26.6 reading currently hanging over the United States, it is still a fairly lofty number in its own right. Moreover, Germany’s trailing 12-month price-to-earnings ratio is a notable 17.1, which is fairly reasonable but not necessarily what would be considered cheap. As a result, German stock investors should not expect to find comfort and support in deeply discounted valuations, as we are far from such an outcome at this point.

For those possibly interested in exploring individual German stock themes as an alternative to a broader exchange traded fund, it is worth noting they will find a limited selection of stocks from which to choose. At present, only six companies that are domiciled in Germany trade on the U.S. exchanges. And only three – SAP (NYSE:SAP), Deutsche Bank (NYSE:DB) and Fresenius Medical Care (NYSE:FMS) – are of any meaningful size from a market capitalization standpoint. Other larger names such as Siemens (OTCPK:SIEGY) and BASF (OTCQX:BASFY) that once traded in the U.S. have since departed from the American exchanges back to Germany.

For reasons discussed here and more, owning German stocks is less than desirable at the present time even after the recent pullback, given the persistent potential downside risks. And while U.S. may not be listening, what is unfolding in Europe along with many other global stock markets is important, for it is foreshadowing what is likely to arrive on U.S. market shores someday. For while U.S. stock investors can continue to ride off of “the best house on a bad block” theme, if conditions on the block continue to deteriorate, it is only a matter of time before the spillover effects begin to adversely and directly drag down this remaining “best house”.

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.

America’s Perpetual War on Terror By Any Other Name

FT 11FEB13My Comments: This has nothing to do with financial planning. However, for me it has a lot to do with my perception of myself as a contributing member of society. I vote at every opportunity, which I think gives me the right to voice my opinions, which sometimes includes a lot of bitching and moaning.

Decaptitating American citizens in a mideastern desert, while appalling, does not in and of itself constitute a threat to these United States. But…

Like it or not we live and breathe, both physically and economically, in an increasingly integrated world. And like it or not, maybe by accident of birth, we are the lead dog in the human pack when it comes to sustaining civilized society. Which means we cannot sit on our side of the ocean and hope it all works out for everyone else.

By Edward Luce / September 14, 2014

If you embark on something with your eyes half-open, you are likely to lose sight of reality

Few have given as much thought as Barack Obama to the pitfalls of waging open-ended war on an abstract noun. On top of its impracticalities – how can you ever declare victory? – fighting a nebulous enemy exacts an insidious toll. Mr Obama built much of his presidential appeal on such a critique – the global war on terror was eroding America’s legal rights at home and its moral capital abroad. The term “GWOT” was purged the moment he took over from George W Bush. In his pledge last week to “degrade and ultimately destroy” the Islamic State in Iraq and the Levant, known as Isis, he has travelled almost full circle. It is precisely because Mr Obama is a reluctant warrior that his legacy will be enduring.

The reality is the US war on terror has succeeded where it was supposed to. Mr Bush’s biggest innovation was to set up the Department of Homeland Security. If you chart domestic terror attempts in the US since September 11 2001, they have become increasingly low-tech and ineffectual. From the foiled Detroit airliner attack in Mr Obama’s first year to the Boston marathon bombings in his fifth, each attempt has been more amateur than the last. The same is true of America’s allies. There has been no significant attack in Europe since London’s July 7 bombings nine years ago. Western publics have acclimatised to an era of tighter security.

If this is the balance sheet of the US war on terror, why lose sleep? Chiefly because it understates the costs. The biggest of these is the damage an undeclared war is doing to the west’s grasp on reality. Myopic thinking leads to bad decisions. Mr Obama pointedly avoided using the word “war” last week. Although there are more than 1,000 US military personnel in Iraq, and more than 160 US air strikes in the past month, he insisted on calling his plan to destroy Isis a “campaign”. Likewise, the US uniforms are those of “advisers” and “trainers”. These kinds of euphemism lead to mission creep. If you embark on something with your eyes half-open, you are likelier to lose your way.

In 2011 Mr Obama inadvertently helped to lay the ground for today’s vicious insurgency by withdrawing US forces from Iraq too soon. He left a vacuum and called it peace. Now he is tiptoeing back with his fingers crossed. The same reluctance to look down the road may well be repeating itself in Afghanistan. Mr Obama went out of his way last week to say that the Isis campaign would have no impact on his timetable to end the US combat mission in Afghanistan. The only difference between Iraq in 2011 and Afghanistan today is that you can see the Taliban coming. Nor does it take great insight to picture the destabilisation of Pakistan. In contrast to the Isis insurgency, which very few predicted, full-blown crises in Afghanistan and Pakistan are easy to imagine. So too is the gradual escalation of America’s re-engagement in Iraq.

Mr Obama’s detractors on both right and left want him to come clean – the US has declared war on Isis. Why else would his administration vow to follow it “to the gates of hell”, in the words of Joe Biden, the vice-president? Last year, Mr Obama called on Congress to repeal the law authorising military action against al-Qaeda that was passed just after 9/11. “Unless we discipline our thinking . . . we may be drawn into more wars we don’t need to fight,” he said. Mr Obama is already vulnerable to what he warned against. His administration is basing its authority to attack Isis on the same unrepealed 2001 law.

Why does America need to destroy Isis? The case for containment – as opposed to war – has received little airing. But it is persuasive. The main objection is that destroying Isis will be impossible without a far larger US land force, which would be a cure worse than the disease. Fewer than 1,000 Isis insurgents were able to banish an Iraqi army force of 30,000 from Mosul in June – and they were welcomed by its inhabitants. Last week Mr Obama hailed the formation of a more inclusive Iraqi government under Haider al-Abadi. But it has fewer Sunni members than the last one. Nouri al-Maliki, the former prime minister, has been kept on in government.

The task of conjuring a legitimate Iraqi government looks like child’s play against that of building up a friendly Syrian army. Mr Obama has asked Congress for money to train 3,000 Syrian rebels – a goal that will take months to bear fruit. Isis now commands at least 20,000 fighters. Then there are America’s reluctant allies. Turkey does not want to help in any serious way. Saudi Arabia’s support is lukewarm. Israel is sceptical. Iran, whose partnership Mr Obama has not sought, is waiting for whatever windfalls drop in its lap. The same applies to Bashar al-Assad, Syria’s president.

Whose army – if not America’s – will chase Isis to the “gates of hell”? Which takes us back to where we started. Mr Obama wants to destroy an entity he says does not yet pose a direct threat to the US. Mr Bush called that pre-emptive war. Mr Obama’s administration calls it a counterinsurgency campaign. Is it a distinction without a difference?

The US president’s aim is to stop Isis before it becomes a threat to the homeland. History suggests the bigger risk is the severe downside of another Middle Eastern adventure.

It is hard to doubt Mr Obama’s sincerity. It is his capacity to wade through the fog of war that is in question.

YOU WORRY ME!

CharityMy Comments: I’m very conflicted by current events in the Middle East. On one hand I’m a dove, sick and tired of the hatred and death and tribal motivations of the people involved. It also reinforces my discomfort about religion since the conflict always seems to be driven by a false belief that “my God is better than your God!”. What a crock of hoooey.

I joined this world in 1941, at a time when another evil became manifest, thanks to a certain Adolph Hitler and his band of merry men. If ever there was an ideology that was cancerous and needed to be excised before it left the barn, that was it. We did eventually, but it took millions of lives and countless treasure.

ISIS is the 21st century equivalent of that cancer. Left alone, it will metastasize and and while I don’t expect it to bring Western civilization to its knees as it believes, it will be a pain the ass, to put it mildly. So somehow this ideology has to be stopped. And I’m inclined to think it will be better to make the effort sooner rather than later, and worry about the consequences after the fact. It cannot be allowed to grow.

These following comments come from someone who expresses the entire issue in well paced words. And while today is a holiday for some, Labor Day, if you have time read his words and make a comment. Thanks.

By Captain John Maniscalco, American Airlines Pilot

I’ve been trying to say this since 911, but you worry me. I wish you didn’t. I wish when I walked down the streets of this country that I love, that your colour and culture still blended with the beautiful human landscape we enjoy in this country. But you don’t blend in anymore. I notice you, and it worries me.

I notice you because I can’t help it anymore. People from your homelands, professing to be Muslims, have been attacking and killing my fellow citizens and our friends for more than 20 years now. I don’t fully understand their grievances and hate, but I know that nothing can justify the inhumanity of their attacks.

On September 11, ARAB-MUSLIMS hijacked four jetliners in my country. They cut the throats of women in front of children and brutally stabbed to death others. They took control of those planes and crashed them into buildings, killing thousands of proud fathers, loving sons, wise grandparents, elegant daughters, best friends, favourite coaches, fearless public servants, and children’s mothers.

The Palestinians celebrated, the Iraqis were overjoyed as was most of the Arab world. So, I notice you now. I don’t want to be worried. I don’t want to be consumed by the same rage, hate and prejudice that has destroyed the soul of these terrorists. But I need your help. As a rational American, trying to protect my country and family in an irrational and unsafe world, I must know how to tell the difference between you, and the Arab/Muslim terrorist.

How do I differentiate between the true Arab/Muslim Americans and the Arab/Muslim terrorists in our communities who are attending our schools, enjoying our parks, and living in OUR communities under the protection of OUR constitution, while they plot the next attack that will slaughter MORE of the same good neighbours and children?

The events of September 11 changed the answer. It is not MY responsibility to determine which of you embraces our great country, with ALL of its religions, with ALL of its different citizens, with all of its faults. It is time for every Arab/Muslim in this country to determine it for me.

I want to know, I DEMAND to know and I have a right to know, whether or not you love America ….. Do you pledge allegiance to its flag? Do you proudly display it in front of your house, or on your car? Do you pray in your many daily prayers that Allah will bless this nation; that He will protect it and let it prosper? Or do you pray that Allah will destroy it in one of your Jihads? Are you thankful for the freedom that this nation affords? A freedom that was paid for by the blood of hundreds of thousands of patriots who gave their lives for this country? Are you willing to preserve this freedom by also paying the ultimate sacrifice? Do you love America?? If this is your commitment, then I need YOU to start letting ME know about it

Your Muslim leaders in this nation should be flooding the media at this time with hard facts on your faith, and what hard actions YOU are taking as a community and as a religion to protect the United States of America. Please, no more benign overtures of regret for the death of the innocent, because I worry about who you regard as innocent…. No more benign overtures of condemnation for the unprovoked attacks, because I worry about what is unprovoked to you. I am not interested in any more sympathy; I am interested only in action. What will you do for America – our great country – at this time of crisis, at this time of war?

I want to see Arab-Muslims waving the AMERICAN flag in the streets. I want to hear you chanting ‘Allah Bless America’. I want to see young Arab/Muslim men enlisting in the military. I want to see a commitment of money, time and emotion to the victims of this butchering and to this nation as a whole.

The FBI has a list of over 400 people they want to talk to regarding the WTC attack. Many of these people live and socialize right now in Muslim communities. You know them. You know where they are. Hand them over to us, NOW! But I have seen little even approaching this sort of action. Instead I have seen an already closed and secretive community close even tighter. You have disappeared from the streets. You have posted armed security guards at your facilities. You have threatened lawsuits. You have screamed for protection from reprisals.

The very few Arab/Muslim representatives that HAVE appeared in the media were defensive and equivocating. They seemed more concerned with making sure that the United States proves who was responsible before taking action. They seemed more concerned with protecting their fellow Muslims from violence directed towards them in the United States and abroad than they did with supporting our country and denouncing ‘leaders’ like Khadafi, Hussein, Farrakhan, and Arafat.

IF the true teachings of Islam proclaim tolerance and peace and love for all people, then I want chapter and verse from the Koran and statements from popular Muslim leaders to back it up. What good is it if the teachings in the Koran are good, pure, and true, when your ‘leaders’ ARE teaching fanatical interpretations, terrorism, and intolerance? It matters little how good Islam SHOULD BE if huge numbers of the world’s Muslims interpret the teachings of Mohammed incorrectly and adhere to a degenerative form of the religion. A form that has been demonstrated to us over and over again. A form whose structure is built upon a foundation of violence, death, and suicide. A form whose members are recruited from the prisons around the world. A form whose members (some as young as five years old) are seen day after day, week in and week out, year after year, marching in the streets around the world, burning effigies of our presidents, burning the American flag, shooting weapons into the air. A form whose members convert from a peaceful religion, only to take up arms against the great United States of America, the country of their birth. A form whose rules are so twisted, that their traveling members refuse to show their faces at airport security checkpoints, in the name of Islam.

We will NEVER allow the attacks of September 11, or any others for that matter, to take away that which is so precious to us — our rights under the greatest constitution in the world. I want to know where every Arab Muslim in this country stands and I think it is my right and the right of every true citizen of this country to DEMAND it. A right paid for by the blood of thousands of my brothers and sisters who died protecting the very constitution that is protecting you and your family.

I am pleading with you to let me know. I want you here as my brother, my neighbour, my friend, as a fellow American…… But there can be no grey areas or ambivalence regarding your allegiance, and it is up to YOU, to show ME, where YOU stand. Until then, “YOU WORRY ME!”