Libya – Where Do We Go From Here?

About 200km east of the Egypt-Libya border begins the Qattara Depression, a vast low-lying stretch of desert banked by steep cliffs to the North. It’s essentially an impassable, virtually uninhabited world of soft, sinking sand, brittle salt-lakes, and sucking swamps. During WW2 it was regarded as a no-mans land through which any heavy vehicle would disappear into the abyss. Essentially once you were in you’d be lucky to get out.

It’s a useful metaphor for NATO’s involvement in Libya. Four months after our glorious entry in that nasty little desert dogfight, it’s starting to look like we wandered into a military and diplomatic equivalent of the Qattara Depression. By now, it’s beginning to become painfully clear that unless the “Rebels” get real lucky, we’re looking at a massive stalemate. Reports of successful bombing runs by NATO jets have reduced to a trickle. Gaddafi has almost completely adapted to not having air-superiority. Indeed his shift to non-uniformed forces operating out of pick-ups and covered Katusha trucks pretty much leaves NATO air support blind to who is and who isn’t a bad guy. NATO frequently get it wrong and their propaganda war takes a big hit every time.

It helps Gaddafi that the Rebels are essentially militarily useless. They’re poorly equipped, have little or no training, little or no command cohesion, break quickly under fire, and do minimal damage. And each time they fail to make any real headway they shore up the Gaddafi regime, which seems to be showing remarkable longevity under assault, its morale seemingly very high. To make matters worse, NATO has shown little or no interest in sending in advisors to help build up the rebels. Turning around that rabble would be near impossible, and Europe, not exactly settled just now, would start whining – rightly – about mission creep.

NATO’s last ditch effort was to wish the problem away with cash. By recognizing the rebels ‘transitional council’ and handing them access to a big chunk of Gaddafi’s stash they’re basically hoping that the Libyans will organize, energize, and use the money to oust Gaddafi. History tells us that when a large group of disorganized, fragmented guys in a never democratic desert country get a boat-load of money, things don’t end well.

Which leaves NATO in an awkward spot. Do they halt airstrikes and negotiate with Gaddafi? That may be out of the question. Not only would they be handing him a huge victory, but the ICC indictment hanging over the Colonel would be a good enough reason to tell NATO to sit and stew.

And just to make matters a little worse, Syria’s body count seems to rising even higher than Libya’s, and all we’re doing there is messing around with a few offshore bank accounts.

Finally, Italy has a debt crisis brewing, and the desperation to avoid a refugee crisis would have been better served by keeping Gaddafi in the hot-seat rather than bombing the bejesus out of his compound every night.

It all boils down to a very simple thought. Before you let the neo-con blood rush to your head, have a think about the consequences. Another six months of this and we’re going to own a problem that we really want nothing to do with.

Is this a mess or what?

The Debt Crisis – A Polite Message to the Ratings Agencies

Who The Fuck Do You Think You Are!?

Let me get this straight, Moody’s, Fitch’s, Standard and Poors, etc. Back in 2006-8, you were the guys who gave AAA ratings to toxic mortgage junk because you were paid handsomely to do so by the very institutions that, at the same time, were hawking these time-bombs to investors.

Pardon little old me for suggesting that perhaps being paid was – I don’t know – a conflict of interest. That maybe, just maybe, you let the dough go to your heads and chose to make this shit smell good to please the piper. No? Not possible, right?  Clients pay for ‘independent’ advice, right? At the time you rated those securities they were strong and the fundamentals were good, right?  I get it.  I mean, why rate multi-year bonds, you know, over the long term. Silly idea. Silly, silly, silly.

Thereisnoplan is thoroughly convinced. The ratings agencies would clearly never let that new cash smell get in the way of their bona-fides, even if downgrading those ratings on the mortgages securities would mean that the guys holding them would shop around for a better rating to pump the sticker price and your competitors would get rich on your back.  Of course, not!  Never!  Perish the thought!

And now here we are in 2011, and with the debt crisis in full flow, the incorrigible Ratings Agencies fanning the flames by threatening to downgrade US debt if we default. You guys know what would happen if you did?  Interest rates would rise, probably for years.  Hundreds of thousands of people would lose their jobs. “US” corporations would accelerate their outsourcing for cheap labor.  The housing crisis of 2008-11 would look like a blip next to the slump that followed. Oh, and consumer demand would drop like a stone, shrinking revenues further, and making our debt….even bigger. Thanks, guys.

Now, I’m not sure exactly why anyone listens to the ratings agencies. They are private companies riven with massive conflicts of interest, huge hunks of uselessness that somehow manage to be at the nexus of all that goes financially pear-shaped in this great country of ours. It’s a mystery to me that they have any credibility at all after the debacle of 2008. But here they are again, doing their damnedest to turn a non-crisis into a calamity, partly, no doubt because they’re ‘fiscal conservatives’ putting their political oar in where they’ve no business putting it. Wall Street has traded on its thin veneer of brainiac respectability for a long time now, and it’s still fucking working.

But wait. Surely, this latest downgrade threat might be bad for business, boys. Surely there’s a risk that people might finally say, enough and have the rules governing what you do changed on your asses, after the Great Recession truly does become a new Great Depression – with your stamp on it.

People might even make the following simple calculation about the “Ratings” that the Ratings agencies shit out.

Pay for ratings =  AAA on Toxic Mortgage Securities.

Don’t pay for ratings = AA down to D on the Good Faith of the United States of America.

Are you trying to tell us something?  Because a brown envelope full of cash is not forthcoming.

Murdoch Gets Facked By His Hacking Hacks

A few isolated hacking instances could have been and were contained. But then the problem spread. The catalyst was Milly Dowler.

Suddenly what was just sleazy (and therefore pretty normal for the News of the World) became something akin to grave-robbing. The bleatings of a former prime minister meant nothing next to it. After all, even though hacking was illegal, somehow public figures were fair game. But after Dowler the public got involved and the issue became profoundly political. Miliband saw his chance to get some ink, and pry the Tories apart from their Liberal lackeys. It also helped that a ton of the hacking targets were Labour MPs.

What has turned this into a national crisis is – of course – Cameron’s utterly craven attempt to curry favor with Murdoch by hiring one of the big man’s favorite lieutenants as communication advisor. You can imagine the screams of outrage from Ken Clarke and the other grandees at this Faustian bargain, knowing that the hacking scandal was odds on likely to be bigger than Coulson had admitted. The second chance that Cameron gave Coulson, was a second chance to crack the Conservative ship below the waterline.  Cameron has already turned on Murdoch, and will have to go further. You can bet Rupert won’t take to that too kindly as his empire crumbles. His UK holdings are utterly toxic now. Nobody will want to do business with him. Is this hypocrisy? Definitely. Did everyone think he was a saint before this all went down? Not at all. But up until last week his power was feared. Now he’s out in the biting cold in his briefs. In short (excuse the pun), he’s had it.

To make matters worse for Rupert, the Met is now forced to turn on him too. The cozy relationship is over and Scotland Yard can only rebuild its reputation by going Medieval on News International, after Stephenson’s timely resignation over his own Coulson – Wallis. They’re sure to build some pretty strong cases against the company now their own good names are on the line, and you can bet your boots the public and parliament will demand these cases be prosecuted to the full extent of the law.  All this leaves Murdoch with nowhere to look for protection. His army of loyal lieutenants are either going to jump ship voluntarily, or be forced to walk the plank, either way ready to spill their guts to protect themselves. A den of vipers turns quickly upon itself.

Could it bring Cameron down? Probably not. The Tories have no choice but to hold tight, and hope the dust settles before the next General, which is likely (even though the Cons won’t have Murdoch’s help in creating distractions). But there are threats to this strategy. Firstly, Clegg seizes the opportunity to claw back some of the lost ground he’s ceded to his erstwhile Conservative friends. If he pulls the plug now, he risks letting an invigorated Labour Party win on the back of the crisis – outright. If he doesn’t he looks like he’s yet again allowing the good name of his party to be dragged through the mud. And secondly, that the public mood turns to profoundly forcing Tory backbenchers to try and save their necks by joining with Labor and Liberals to no-confidence the government. But that would really be something.

In the US, the most likely outcome is that Murdoch and News Corp survives, but pays a hefty price in investor lawsuits, and fines for illegal activities conducted abroad by a US corporation. They may have to sell off some serious assets to survive, and should be taken down a notch for a good long while to come. But the knuckledragger constituency that soaks up the Fox News Channel is unlikely to be swayed by events over the pond. And as for Fox’s Entertainment divisions, they do very well, and unlikely to be affected by the scandal and answer to Wall Street – a thoroughly amoral bunch which cares only for the bottom line – rather than the public

At the end other end of this tunnel, a bright light shines.  The crisis engulfing the Murdoch Empire in the UK signals a shot in the arm for wider British political discourse. With News International’s reputation in tatters, tabloid journalism will become far less malevolent, and a nasty cloud of power-coddling press propaganda will no longer hang over British democracy.

Google Plus Pushes Facebook To Wrong Side Of Tracks

The real threat that Google Plus represents for Facebook is not that it’ll outsize it anytime soon, but that it outclasses it in short order. At a billion minus users, Facebook is the internet equivalent of Shanghai (with its puny real life population of thirty million), a shiny, boosterist, creation which is mostly facade (pardon the pun). Google Plus represents something that – in the short term at least seems to have more, dare one say it, integrity. Certainly Facebook’s apparent amorality doesn’t help. It seems too bent on exploiting its users. G+ doesn’t appear to be so brazen.

Last year Myspace was the wrong side of the tracks and FB was the high-rent district. But now the tracks have shifted ever so subtly. Myspace is now the internet version of the municipal dump. FB is the formerly wealthy neighborhood that’s now getting a little seedy at the edges, and G+ is the shiny new district on the hill, full of hope, and definitely less gaudy (i.e. no ads as yet). If Google can maintain the shine on it’s brand upgrade (born of a new cohesion and better leadership), it might just solidify its long term better than anyone could have anticipated.

More from the Debt Ceiling Dumbass…

I’m probably digging myself an even deeper hole here, but hear me out.

Look at the fluctuations in 10 year bond rates in this chart from Krugman’s blog, and note that interest rates on those bonds are at historic lows. Remember, Krugs is always banging on about mythological “bond vigilantes”.  And you have to wonder, if things were so bad in the US, wouldn’t the interest rates on these bonds have spiked by now?

Now consider Bruce Bartlett’s Armageddon scenario if we miss the debt ceiling cut off on August 2.

The bond-rating agencies have repeatedly warned that any failure to pay interest or principal on a Treasury security exactly when due could cause the U.S. credit rating to be downgraded, which would push interest rates up as investors demand higher rates to compensate for the increased risk.

J.P. Morgan recently surveyed its clients and asked how much rates would rise if there was a delay in payments, even a very brief one. Domestic investors thought they would go up by 0.37 percentage points, but foreign buyers — who own close to half the publicly held debt — predicted an increase of more than half a percentage point. Any increase in this range would raise Treasury’s borrowing costs by tens of billions of dollars per year.

Now add in Dean Baker’s analysis that the people who will really get pounded by a market run on crossing the debt ceiling will be Wall Street, and it all adds up to some food for thought to temper the Armageddon scenario.

While the country will still be left standing after a debt default, there is one important sector that will not be standing: Wall Street. A debt default would almost certainly make all the major banks insolvent as they would have to mark down the value of U.S. government debt, which had been held as a completely safe asset. The loss of value would also apply to all the assets backed by the government, such as the mortgage backed securities issued by Fannie Mae and Freddie Mac.

Even when the economy revived, the U.S. financial sector would never hold the same place in the world as it does today. Without the ironclad financial backing of the U.S. government standing behind them, the Wall Street gang could never again be the dominant actor in international financial markets.

In short, Krugman’s chart says interest rates on 10 year bonds fluctuate wildly and are all time lows. Bartlett says that 0.5% would be a decent place to start in determining the price we’d pay for missing the deadline – which seems like a blip on Krugman’s chart, and Baker’s analysis tells us that Wall Street may not like the idea of trashing their own safest assets just because the Government delays a few payments.

Again, I’m a debt ceiling dumbass who don’t know nothing, but I just can’t help thinking that maybe the President is working the debt ceiling card so much the meltdown might just become a self-fulfilling prophecy.

Maybe I’m A Debt Ceiling Dumbass…But

So I just read this and it got me thinking.

Maybe I’m just an economically-challenged idiot, but it seems to Thereisnoplan in all his utter naivite, that the “markets” have spent most of the last 2 years making out like gangbusters while the rest of us just get by if we’re lucky.

And before they doubled their money, they predicted that the housing market was as solid as the triple A mortgage securities they’d all jumped into during the housing boom. We know how well that one went, and yet we still trust the “markets”?

Cut to: we don’t meet the supposed deadline to raise the debt ceiling on August 2, a hitherto technicality, and now the sky is going to fall in, not because America isn’t fundamentally strong, which it is, and not because it’s debt isn’t sustainable because it is, and not because of anything on that day at that hour gets worse, but because the “markets” decide the United States is no longer a good bet.

If that happens, sure, we’re all going straight to hell. America first, followed by Europe and China and Japan and everyone else.  But the people who’ll have to send us there, and suffer the consequences will be – you’ve guessed it – the bond markets, who in their rating agency wisdom that the joint which drives 25% of the world’s GDP is busted no-goodnik that can’t pay its bills.

And what happens then?

Well, them’s what’s in the “markets” with their expensive suits and hand-made shoes lose all their ill-gotten gains of the last two years, as they suck the last shreds of demand out of the world economy by trashing its main generator – here in the good old US of A.

Will they do it?

I dunno, but if I was in the markets with my bespoke shoes and bottles of Cristal at lunchtime, I’d be doing my damnedest to pump up the US economy and keep buying its debt. Because if the Wall Street suits don’t, those bonus checks go bye-bye and it’s 2008 all over again, except way, way, worse.

Now, the “markets” have shown in the past they have all the savvy of a bunch of meerkats on meth, but in the unlikely event that they go a little cold turkey, it’s just possible that maybe, just maybe they’ll be smart enough to jump over the cliff – again.

But then again, they clearly have no plan, so we’re probably fucked for that reason alone. Which is another good reason for the President and Geithner not to whip them into a frenzy by suggesting that a deal has to be done or else.

Like I said, I’m a dunce. Feel free to explain why I’m wrong.