A "Fat Finger" Pulls the Trigger
A trader's typing error reveals the market's deep anxiety about runaway government debt.
- A "Fat Finger" Pulls the Trigger
- "Obama, Are You with Us or With Them?"
- The Non-Negotiated Settlement
- Nuke the Whales
- The Pakistan Problem Comes to Times Square
- The Lesser Part of Valor
Top News Stories
Commentary by Robert Tracinski
1. A "Fat Finger" Pulls the Trigger
The Dow Jones Industrial Average collapsed by about a thousand points in a half an hour yesterday—an ominous warning of the fragility of the current economic recovery.
There has been a lot of discussion about the role of a "fat finger" error —a trader accidentally typed "billion" instead of "million" on a sell order—but the real story is what that fat finger triggered. The accidental selloff triggered a wave of computerized sell orders waiting in automated systems, and that in turn set off a wider panic in the market.
The market largely bounced back by the end of the day, but what we learned from this incident is that there are an awful lot of people sitting around with their fingers poised over the "sell" button. In other words, there is a wide sense that the past year's market rebound may not last and that we're in for a second decline, a "double dip."
The name that sums up this fear is "Greece." It's not just the financial crisis caused by massive debt used to prop up the welfare state in Greece and in other European welfare states. It's the realization that we're all going down the same path, that it's Greece today, California tomorrow—and the United States or Britain the day after that.
"Investors Fear Uncertainty Cubed," Gillian Tett, Financial Times, May 7
[T]he one thing that was clear on Friday, amid all the confusion, was that fear and confusion stalk the financial system again; so much so, in fact, that the chatter among some financiers is that we are now witnessing a return to the type of panic last seen during the collapse of Lehman Brothers.Why? Some of last week's wild market swings can be blamed on computer malfunctions. However, the more intractable problem is that investors are now confronting a profound set of uncertainties; or, perhaps more accurately, a situation akin to "uncertainty squared"—if not cubed.
On the one hand, the outlook for the global economy is riddled with doubt, since while some modest recovery has recently been under way, it is unclear whether this can be sustained if—or when—central banks remove their liquidity support [i.e., when they stop printing money—RWT].
At the same time, there is also profound political uncertainty in much of the western world….
After all, the fiscal position of many other western countries, ranging from the UK to Portugal (and even the US) also looks pretty dire. And while investors used to ignore those bad numbers, because they trusted that governments would have the ability to act, the political and economic fog is creating new doubts. The nightmare scenario that is now haunting investors, in other words, is that the saga of Greece is only a foretaste of dramas that might soon unfold across the western world. Hence that market panic.
2. "Obama, Are You with Us or With Them?"
Thanks to the nutty aspects of a parliamentary system, the British people have just held an election—but they're still not quite sure who's going to be running the country, though it now looks likely that the next prime minister will be the Conservative Party's David Cameron.
But Britain's problems are small compared to the election crisis that is growing in Iraq. After an election that handed a narrow victory to secular Shiite Ayad Allawi, the Iraqi "de-Baathification" commission has retroactively invalidated a large number of the candidates from Allawi's slate in an attempt to wipe out Allawi's parliamentary plurality.
And who is behind this move? According to the MEMRI report below, this is Iran's attempt to quash an electoral revolt against religious politics in Iraq, just as they have quashed their own people's revolt against theocracy. They are trying to prevent a fully secular government in Iraq because they know that it would set an example that is dangerous to their own rule.
But what is most interesting is the fact that this came out of the blue, in a way. The analysis below notes that the de-Baathification Commission "was dormant for years, but suddenly and unexpectedly came to life a few days before the parliamentary elections." So what emboldened Iran to revive this attempt to derail Iraq's political system in order to save their own theocracy?
Well, perhaps it is the fact that they are now dealing with an American administration that is disengaged from Iraq and looking to withdraw all US involvement as quickly as possible, no matter what the circumstances. Maybe it's because they are dealing with an administration that basically ignored Iran's brutal suppression of anti-theocratic dissent at home. Maybe it's because they're dealing with an anti-American president who has systematically appeased our enemies while attacking our allies.
Last year, the Iranian protesters chanted a slogan that was meant to ask who Obama supported: them, or the tyrants in the Iranian regime. "Obama, are you with us or with them?" The people of Iraq—and of America—are now asking the same question.
"Iran's Trojan Horse in the Iraqi Elections," Nimrod Raphaeli, Middle East Media Research Institute, May 6
The role played by the Accountability and Justice Commission (AJC) under the chairmanship of Ahmad Chalabi, one of the most pro-Iranian politicians on the Iraqi scene, and its executive director Ali Al-Lami, is the closest thing to an Iranian Trojan horse in Iraq. This assertion is supported by a statement in February 2010 by the commanding officer of the US forces in Iraq, General Ray Odierno; he said that, based on intelligence, both Chalabi and Al-Lami were acting under Iran's influence. In fact, the US considers Al-Lami to be an agent of the Iranian intelligence service….The AJC, formerly known as the "De-Bathification Commission," was dormant for years, but suddenly and unexpectedly came to life a few days before the parliamentary elections, set for March 7, 2010, when it barred over 500 candidates from running, most of them from Ayad Allawi's Al-Iraqiya slate, for allegedly Ba'thist background or Ba'thist sympathies. Among those barred was the most senior Sunni politician, Saleh Al-Mutlak….
. The main thrust of criticism against AJC's decision to bar the alleged pro-Bathist candidates from participating in the general elections focused on the absence of a credible due process that would have allowed those accused to present evidence to the contrary, and, more significantly, on the timing of the announcement, which was viewed as an attempt to undermine the prospects of Ayad Allawi, who was viewed by Iran as too secular and too close to the Saudi regime.
The AJC again resurfaced, and this time with even greater destructive force, after the announcement of the election results, which gave Allawi a two-seat advantage over his closest rival, Prime Minister Nouri Al-Maliki's State of Law—91 seats vs. 89 seats. The AJC declared that 52 candidates who ran in the elections, including at least two who were duly elected to parliament as members of Al-Iraqiya, ought to be disqualified for alleged Ba'thist affiliation. The AJC went a step further than that by calling on the Elections Commission to discard the votes cast in favor of these 52 candidates and to recalculate the allocation of seats among the winning slates based on a new vote count. The results would mean that Al-Iraqiya could lose at least two seats, bringing it down from the group with the largest number of seats in parliament to the second ranking list, and therefore denying Ayad Allawi the opportunity to form a government as its leader….
Ali Al-Dabbagh, spokesman for the Iraqi government (who was elected to parliament under Al-Maliki's list, State of Law) expressed "unprecedented criticism" of the AJC's decision to exclude some candidates from the political process. He said that the AJC's decision would create tension between the political groups, and indeed, the "the political situation in Iraq cannot bear marginal crises that do not serve the interest of the country."
In an interview with the liberal website Elaph, Al-Dabbagh confirmed that there were efforts to restructure the AJC so that the country would not "fall under the whims of a limited number of individuals who create consecutive crises in the political situation."
3. The Non-Negotiated Settlement
Like I said, President Obama is appeasing toward our enemies—but hostile to our allies. And he is the most hostile to one of our most important allies: Israel. The article below describes the basic directly of current US policy toward Israel: an attempt to deprive Israel of its independence and sovereignty, treating it as if it were an imperial possession of the United States—and then imposing on it our preferred settlement of the conflict.
"Israel's Second War of Independence," Elyakim Haetzni, Israel Insider, April 30
It's not just Jerusalem or any particular clause in the document that Obama set before Netanyahu for his signature at their last meeting. At stake is the independence of the State of Israel. We are poised at the edge of a Second War of Independence, in which the Quartet, under America's leadership, is playing the role of the British High Commissioner….The subject of the third breach completes the process of Israel's loss of sovereignty. First by forcing Netanyahu to create in Jerusalem, Judea, and Samaria conditions under which the territory is de facto handed over to the Arabs, and then by giving him a few months to play at the farce of negotiations, with the predetermined result of arriving at the American "peace plan."
And that's not all. There's the Quartet's declared intent to base the forced "peace" on foreign armies. The Americans and Europeans are offering Israel the services of foreign troops as a beneficence in response to Israel's complaint that it will no longer be able to defend itself within the borders of the Green Line. Their answer to this is "security guarantees" backed up with a military presence in the Jordan Valley and along the Green Line. They tell us that their intention is to defend us from the Arabs while they tell the Arabs that their intention is to defend them from us. In effect, this military presence will tie our hands and will prevent the Israeli government from taking any independent military action. From then on, Israel will be a sovereign nation in name only. In fact, Israel will be a protectorate under international control, led by America….
The Arabs caught on to the new rules of the game before Netanyahu, and are acting like they don't have to do a thing since the Americans are doing it all for them. We, the Israelis, don't count, since we're not considered as having any independent power of decision. Instead of talking to the puppet, the Arabs prefer to address the one who pulls the strings.
We waged our first war of independence against the British and the Arab armies when we were very weak we had a population of 650,000, which is the same as the population of Judea, Samaria, and eastern Jerusalem today. We had almost no arms, only a nascent army, and no economy—we were like a newborn baby, naked and vulnerable. Those conditions are incomparable with our situation now. And yet, despite our current strength and resources, if we aren't now willing to undertake the risks and hardships entailed in a second war for our independence, we're likely to lose everything we achieved in our first war of independence.
4. Nuke the Whales
I found an article with some good numbers putting the Gulf oil spill in perspective. For example:
[O]il that seeps naturally from the ocean floor puts 47 million gallons of crude into US waters annually. Thus far, Deepwater Horizon has leaked about three million gallons. That sounds like a lot of oil, and it is. But the Exxon Valdez leaked 11 million gallons into Alaska's Prince William Sound.
Even better is this passage, which puts the spill in its proper moral perspective: "It's a sad measure of how much of the subsequent commentary on this disaster has focused solely on the environmental effects, thus ignoring completely the pain and suffering of the families of the 11 who died in the inferno."
The most amusing response I've heard is a suggestion to use nuclear explosives to seal the gushing wellhead. Like the old bumper sticker says, "Nuke the Whales." The use of nuclear explosives for major earthmoving is something that the Soviets apparently did quite often, and it is a very practical plan. But in this era, it will never be implemented.
But the oddest twist to this story is that its political effect is likely to be the opposite of what we would expect. It will kill the prospects for new offshore drilling by galvanizing the opposition of the left—but in so doing, it will remove a key compromise from the cap-and-trade energy rationing bill, thereby eliminating support for that bill from Republicans and moderate Democrats.
"BP Spill May Kill Hopes for Climate Deal," Susan Ferrechio, Washington Examiner, May 6
The legislation is expected to call for an expansion of drilling in coastal waters, a provision needed to lure enough votes from Republicans and moderate Democrats to pass the bill. The bill will also call for steep reductions in carbon emissions and potentially a gas tax, which many Republicans oppose.But the drilling provision inserted to draw support on the right has now caused a collapse in support on the left, as Democrats lined up to denounce any plans to widen drilling….
While the spill may have killed the appetite for new drilling, the legislation will eventually have to attract 60 votes in the Senate. And without being able to offer the incentive of expanded drilling, that may be impossible.
"We have to keep in mind that this industry drives the economy and in addition to that we are going to need more oil and natural gas for decades to come," said Erik Milito, of the American Petroleum Institute.
5. The Pakistan Problem Comes to Times Square
We now know that the Times Square car bomb plot has its origins in Pakistan—and in Yemen.
It turns out that Faizal Shahzad wasn't just depressed because his house was in foreclosure. He was actually an admirer of the Yemeni-American Muslim cleric Anwar al-Awlaki. If Awlaki's name sounds familiar, that's because he also provided religious guidance to the Fort Hood shooter, Nidal Hasan, and the underwear bomber, Umar Abdulmutallab.
In other words, he's the religious leader behind three consecutive jihadist attacks on American soil. Yet Awlaki is alive and well and living freely in Yemen. President Obama can threaten a Predator drone strike against the Jonas Brothers, but Awlaki remains untouched.
On the other hand, there is some debate in the White House about stepping up US military involvement in Pakistan and pushing the Pakistani government to invade and occupy North Waziristan, where Shahzad was trained. (Then again, given how poorly his bomb was built, maybe we should let that particular training camp stay open.)
But we're going to need to force the Pakistanis to do something that will be much more difficult. It looks like Shahzad came to North Waziristan by way of Jaish-e-Muhammed, one of the Kashmiri terrorist groups that operates more or less openly because they are used by Pakistan to strike against India. The article below indicates that there is a growing alliance between the Taliban, which Pakistan isn't supposed to tolerate, and the Kashmiri groups that they do tolerate. It's natural, of course, that if you make any compromise with terrorists, they will exploit it.
Pakistan has to make a choice between civilization and radical Islam—and that means that they are also going to have to give up their bigoted religious hatred of India.
"Pakistani Taliban Are Said to Expand Alliances," Carlotta Gall and Sabrina Tavernise, New York Times, May 6
The Pakistani Taliban, which American investigators suspect were behind the attempt to bomb Times Square, have in recent years combined forces with Al Qaeda and other groups, threatening to extend their reach and ambitions, Western diplomats, intelligence officials and experts say….Those groups have "morphed," a Western diplomat said in a recent interview. Their common agenda, training and resource sharing have made it increasingly difficult to distinguish one from another. The alliances have also added to their skills and tactics and list of shared targets.
"They trade bomb makers and people around," a senior United States intelligence official said Thursday in an interview. "It's becoming this witches' brew."…
Not least among the groups is Al Qaeda, which is exerting growing influence over the others. The Pakistani Taliban increasingly serve as its fig leaf, some experts said….
Adding to the mix, these groups have been fortified by a growing number of militants who have moved to the tribal areas from Pakistan's largest province, Punjab. The Punjabi groups were originally founded and sponsored by the Pakistani military to support the fight with India over the control of Kashmir. But many have turned against the state since the army's siege against militants at the Red Mosque in Islamabad in 2007….
Indeed, it is possible that the Times Square bombing suspect, Mr. Shahzad, began his journey to the tribal areas for training by making contact first, possibly in the southern port of Karachi, with militants from one of these groups, Jaish-e-Muhammad.
On Thursday, a Pakistani security official said four Jaish militants, whom he did not name, had been picked up and were being interrogated by American and Pakistani officials.
6. The Lesser Part of Valor
I've gotten the message on counter-insurgency war and even taken some heat in Objectivist circles for defending the principles of counter-insurgency. And that includes the idea that you're fighting in part to gain the support of the local population, which means that massive use of force can sometimes be counterproductive. One of the "paradoxes" of counter-insurgency is that sometimes the more force you use, the less secure you are—since security depends on getting useful intelligence from the locals about the identity and whereabouts of the insurgents.
But of course, counter-insurgency also involves killing the insurgents, which we did with great effectiveness in Iraq. The practice of counter-insurgency is distilled in a Marine Corps motto: "no better friend, no worse enemy." And to defeat an insurgency, you need to demonstrate both sides of that motto.
That's why I don't approve of a new proposal to give soldiers medals for "courageous restraint" for not shooting anyone. This brainwave comes from the British, who have generally had a more passive and much less effective approach to counter-insurgency than the Americans. When the British were in Basra, in Southern Iraq, "courageous restraint" might as well have been their motto, and it basically meant that they let the Mahdi Army run the whole town.
Or as one soldier quips: "Maybe if they left us all on base and never sent us out to confront the enemy, we could all be honored for valor."
"Medal for 'Courageous Restraint' Plan Gets Mixed Review from Troops," Sara A. Carter, Washington Examiner, May 7
A proposal to grant medals for "courageous restraint" to troops in Afghanistan who avoid deadly force at a risk to themselves has generated concern among US soldiers and experts who worry it could embolden enemy fighters and confuse friendly forces.Lt. Col. Edward Sholtis, a spokesman for Gen. Stanley A. McChrystal, who commands NATO forces in Afghanistan, said that no final decision has been made on the award, which is the brainchild of British Maj. Gen. Nick Carter….
"We absolutely support the right of our forces to defend themselves," he said. "Valuing restraint in a potentially dangerous situation is not the same thing as denying troops the right to employ lethal force when they determine that it is necessary."
The medals proposal is consistent with NATO rules of engagement aimed at reducing civilian casualties in Afghanistan as a way to win the support of the populace. But some soldiers say rewarding "restraint" while risking their own lives is a troubling concept….
A US Marine captain who has served in Iraq said that he understands the intentions of the award but believes "it's just a bad idea." He said, "They teach us not to second-guess our decisions in dangerous situations. When people second-guess themselves they can be putting lives at risk."…
"Unfortunately, we are being reduced to a police force," said another US soldier. "There are troops that never leave Bagram or Kandahar airfield. ... Maybe if they left us all on base and never sent us out to confront the enemy, we could all be honored [for] valor."
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