Syria – Trying to Understand What’s Really Happening

The latest news is that Putin has successfully convinced the Syrian Dictator Al-Assad, to give up his chemical weapons in exchange for a guarantee that “The West” will not conduct air strikes against Syria.  Why would he do that?  Why would Assad agree?  To try and understand those questions, I think we have to know a little more about how other countries and regimes are reacting to the Syrian civil war.

As much as I’d like to believe that the Syrian civil war is about a group of people overthrowing a brutal dictator.  But while that might be what many Syrians are fighting for, that is not the only thing going on here.  I think the best way to think of Syria now, is as a Proxy war between Iran, Saudi Arabia, and Qatar.

The Brutal Iranian theocracy is allies with Assad’s Syrian regime.  It has been supplying the Assad Government with money, supplies, and weapons before and during the current uprising.  This is so well known, you’ll forgive me if I don’t provide a link backing up the claim.

Here’s a lesser known fact.  The Saudi Royal dictatorship(along with Qatar) has been supplying the Syrian rebels with weapons and supplies for a long time.  First reported in June of last year(see here and here), it has been repeatedly confirmed since then over and over again (Qatar link).  So while it’s lesser known to the public, it certainly isn’t a secret.

Without getting into why the Saudi dictators and Iranian theocracy are enemies, let’s explore why these two powers would be so bent on getting a “friendly” government in Syria.  There’s the standard reasons:  Just to have another partner in the region, the country has some oil reserves – the lifeblood of economy in the middle east, is that it?  Before we answer that rhetorical question, let’s ask the same thing of Russia.  What is their interest in Syria?  Russia has access to the second highest amount of oil and natural gas fields in the world and is a routine exporter of them.  So, therefore, Russia doesn’t need Syrian (or for that matter, Iranian oil) like the U.S. and Western Europe does.  Often repeated in the media is the fact that Russia has a naval base in Syria.  This is cited as Russia’s interest in the region.  Is one military base the reason to give free food, aid, and weapons to a regime that is about to collapse?  Why not stand back, and just buy off the victor to keep your facility?

These are all possible reasons why the leaders of these countries are spending so much to support “their side”.  But the one thing almost never mentioned in all the analysis on TV news or front page papers is oil and gas.  No, it’s not about Syria’s oil reserves – they’re pretty small compared to Iran, Iraq, Saudi Arabia, and Russia.  It’s about geography.

Iran wants to build an oil and natural gas pipeline going from Iran, all the way through Syria, and Lebanon, and eventually even into Europe.  The agreement was about to be finalized back in 2011:

The deal of new pipeline to transfer Iran’s gas to Iraq, Syria and Europe will be signed on Monday between three countries in Asalouyeh port, south of Iran, Mehr news agency reported on Friday.

The primary agreement on the strategic project was reached in May in Baghdad.
Under the new deal, a gas pipeline will be constructed to transfer Iran’s gas to Iraq and Syrian territories feeding their power plants and next through southern Lebanon will extend to the Mediterranean Sea and Europe.

But guess what?  Qatar and Saudi Arabia want the same thing – especially Qatar(another Royal dictatorship government).  Since at least 2009 they’ve been trying to get a natural gas pipeline from their country to Turkey.  Syria was not open to that deal and has been a major sticking point.

Qatar has proposed a gas pipeline from the Gulf to Turkey in a sign the emirate is considering a further expansion of exports from the world’s biggest gasfield after it finishes an ambitious programme to more than double its capacity to produce liquefied natural gas (LNG).

“We are eager to have a gas pipeline from Qatar to Turkey,” Sheikh Hamad bin Khalifa Al Thani, the ruler of Qatar, said last week, following talks with the Turkish president Abdullah Gul and the prime minister Recep Tayyip Erdogan in the western Turkish resort town of Bodrum. “We discussed this matter in the framework of co-operation in the field of energy. In this regard, a working group will be set up that will come up with concrete results in the shortest possible time,” he said, according to Turkey’s Anatolia news agency.

Furthermore, even if NO pipeline was being built, Qatar probably wouldn’t care what happened in Syria.  Qatar ships natural gas to Europe and is a large player(next to Russia) in that market.  But with a cheap pipeline, they would lose their market share and profitability.

Here’s where things really start getting murky.  Saudi Arabia, the foremost player in middle east oil and gas, would love nothing more than to block their rivals Iran from building out their infrastructure.  That, combined with the prospect of weakening Iran seems to be fueling their interest in Syria.

The Saudi stance on Syria is motivated by a combination of personal, sectarian, and, above all, political factors. First, the Saudis were never head over heels about Assad and his Ba’athist secular ideology. Second, the continuous crackdown of the mostly Sunni political opposition by the Alawite-dominated regime made Riyadh very uncomfortable. Third, and most significant, Saudi Arabia perceived the decline of the Assad regime as a golden opportunity to weaken Iran, their bigger regional competitor. Moreover, supporting the opposition would also play well within Saudi Arabia while deflating some of the regional criticism regarding the KSA’s policy with respect to the Arab Spring.

So with Saudi Arabia and Qatar backing up the rebels you would think they’re allies.  But they’re not.  Saudi Arabia and Qatar Royal dictatorships could best be described as “frenemies”.  To the point that the two dicators are backing different rebel groups in Syria.

Qatar backs the Muslim Brotherhood and, it appears, would not object to a brokered deal to end the insurrection that allows the MB to get its nose in the political tent, then make its play for winning control of the new government through some combination of foreign pressure, domestic mobilization, and elections.

Saudi Arabia, it appears, has no love for the Muslim Brotherhood and is perfectly happy to crater the Assad regime through a bloody insurrection abetted by foreign jihadis,  in order to deny Iran a regional ally, score another victory for fundamentalist Sunni rollback, and increase the pressure on the Shi’a-led government of Iraq by adding the factor of a hostile, pro-Saudi and overtly Sunni Syrian regime to the increasingly disgruntled and emboldened Sunnis of western Iraq (some of whom are reportedly participating in the Syrian war).

Let’s go back to Russia.  What’s their interest?  Sure, that naval base is nice, but their interest ALSO involves natural gas lines.  Russia(or should I say, Putin?) wants the Iran\Iraq\Syria natural gas line as well.  Putin wants more control and more influence on the flow of it and his allies’ natural gas.  It is the only power that takes gas from Turkmenistan and ships it to Europe.  So a Qatar or Saudi friendly government in Syria would provide competition to Russia.  It’s no wonder Putin would continue backing Assad.

But wait, you might say, isn’t Iran going to send Natural gas through Syria to Europe?  Well, yes.  But the Iranian theocracy and Putin’s Russia are close allies.  Putin, Iran, and Turkenistan control the first, second, and fourth largest natural gas reserves.  And since they can control Turkmenistan, they can better control prices.  Russia has no leverage to control Qatar.  Besides, as stated above, Qatar already manages to ship quite a lot of natural gas to Europe.

So, to recap.  Qatar doesn’t want Iranian natural gas competition via a gas pipeline.  Iran and Russia really want it.  And Saudi Arabia just wants to weaken it’s rivals.  All three groups are backing different Syrian factions.  What started out as a popular uprising has turned into a proxy war over regional politics and oil\gas exporting economics.  All this before we even get to the possibility of U.S.\Western involvement(“involvement”  here is a euphemism for “bombing and killing a bunch of people”).

Even if we assume for the moment that the Obama administration is genuinely concerned about the use of chemical weapons, that doesn’t explain why the CIA has been supplying rebel factions from the beginning.  Fortunately, when asked about the weapons the U.S. government is sending to Syria, it is surprisingly up front about who and why.  They are trying to fund a fourth, more western friendly rebel group.

“Movement of those items [directly] to Gen. Idriss,” Kerry said, “is going to have an impact, particularly in the south,” where rebel fighters have begun to gain territory. Donor nations meeting here also pledged to funnel all future aid — weapons largely provided by Saudi Arabia and Qatar, and nonlethal assistance from the United States, Britain, France and others — through the military council to prevent it from falling into the hands of Islamist extremist groups that have grown in power within the anti-Assad ranks.

Idriss, Kerry said, could not have been more clear about “what he and the opposition are doing to separate themselves from what some of the extreme elements are doing. . . . We are quite confident that he is a strong leader with the capacity to make a difference.”

That report was from April of this year, before the Chemical weapons usage.  The goal of supporting “moderates” is repeated in this more recent Sept 11th. article.

In addition to boosting support for rebels under the command of Idriss, who speaks fluent English and taught at a military academy before defecting from the Syrian army last year, U.S. officials in southern Turkey are using aid to promote emerging moderate leaders in towns and villages in rebel-held areas. Across much of the north, Syrians have begun electing local councils and attempting to rebuild communities devastated by war.

Ward’s team — working primarily out of hotel lobbies — has spent the past few months studying the demographics and dynamics of communities where extremists are making inroads. Targeted U.S. aid, he said, can be used to empower emerging local leaders who are moderate and to jump-start basic services while dimming the appeal of extremists.

Now it becomes clear what the Obama administration is actually trying to do.  If the U.S. government does nothing in Syria, 1 of 2 things will most likely happen.  1.  Assad survives the uprising and Iran becomes stronger than ever.  Also boosting Russian economic influence  2.  Saudi Arabia or Qatar backed Muslim extremists will take over the country that are as hostile to America and the West as Iran.  Neither scenario is a good thing for America.  This is probably why Obama was going to try and act directly against Assad under the guise of responding to his use of chemical weapons.  End the war quickly and better able to coordinate action so support the so-called “moderate” factions.

I don’t agree with the reasons.  But I think it’s starting to become a lot more coherent than the excuse of “limited strikes” and chemical weapons.

 

Latest Grand Bargain is (mostly) a Grand Waste of Time

It’s so frustrating to know how the economy works(MMT), and then watch a bunch of men who don’t, try and improve the national economy. Here is a one line sentence explaining how to grow an economy.

People need to spend more money so that there will be the increased demand for new jobs and new business.

That’s it.  But let’s look at Obama’s latest Grand Bargain proposal from a critical MMT perspective.  Obama’s plan has 3 parts.

  1. Simplify the corporate tax code
  2. Try to coax companies to “repatriate” their foreign money holdings
  3. Use the tax increase to fund infrastructure jobs.

The firsObama_and_Mitch_McConnell[1]t plan is to simplify the corporate tax code in 2 steps.  First, it’s going to eliminate several deductions and so-called “special interest” loop holes.  That will increase the amount of taxes the government collects.  The second step is to lower the tax rate to the point where the money gained by closing loopholes is roughly equivalent to what’s lost by lowering the tax rate from 35% to 28%.  Overall this is “revenue” neutral.  Will this help the economy grow?  Hell no!  At best it might make the economy run more efficiently(always a good thing!), but it won’t grow.   It won’t grow because all they’re doing is changing who pays what, and not the total amount taxed.  No growth.

The second part is to get companies with foreign money holdings to bring the money into the country.  Normally, there is, apparently, a tax on doing that.  Therefore, companies leave their earnings overseas.  This estimate says there are over a trillion dollars out there.  Obama’s proposal is to try and get those companies to bring in the money by offering a one time, low tax, to do so.  From an MMT perspective this would be bad for the overall economy because it’s taking money out of the economy.

The third and final part of the Obama plan is to start funding infrastructure and job training programs.  From an MMT perspective, increasing government spending will be good for the overall economy because it will increase demand for jobs and business.  Hooray!

The reason I call this plan a waste of time is because, the first part offsets itself and the good in the third part is offset by the harm of the second part.  Making these plans revenue neutral will never give the economy the boost it needs.  Infrastructure jobs that aren’t offset with tax increases will.  Tax cuts that aren’t offset by tax decreases will also do the trick.

If there is any redeeming part of the proposed ‘grand bargain’ is the possibility that money will be shifted from those who are letting it sit, to those who will spend it.  That’s why I added the qualifier(mostly) into the title.  If that money is truly just sitting in a foreign bank, collecting low interest dust, then shifting the money to infrastructure and creating jobs for the unemployed will help some.  My guess is that only some of that money is “just sitting there”, the rest is being reinvested into other enterprises and will only end up moving around who gets it.

The thing that Obama, along with the GOP that’s already dismissed the whole thing, don’t understand is that the government doesn’t need that money to spend on infrastructure.  The government can’t run out of money anymore than a stadium can run out of points on a scoreboard.  Therefore, we can grow this economy until unemployment is back to a non-embarrassing level.

Debunking Those So-Called “revenge”/”Obamacare” Layoffs (w/Math)

Did you know that 355,000 people were laid-off last week because Obama was re-elected?  Or, at least, that’s what many Conservative activists would have you believe.  Apparently, there is this growing meme going around the internet that companies are laying people off because Obama and “Obamacare” is here to stay.  This is all likely to be typical partisan bull-crap.  I never thought I’d have to explain the inner-workings of the Free Enterprise System to the party that claims to love capitalism.  But… here we go.  We’ll start with basic concepts and then move on to “the math”.  By the end of this post, you’ll know why this meme is likely to be crap, the numbers backing up that assertion, and when (and how) we’ll have the numbers to prove it.

First of all, this is a huge country with a huge economy.  Large numbers of people are being hired and fired, laid-off and brought back every single day.  Additionally, large numbers of business are being started and bankrupted, growing and shrinking, every single day.  The beauty of free enterprise is that nothing ever stands still.  Things are moving and changing all the time which causes other things to move and change and so on.  This is the reason it is so hard to study macro-economies.  There are so many micro-economic things going on you can never be 100 percent certain of which event caused another event.

The best anyone can do to understand how an event affects the economy is to gather economic numbers(like jobs and sales data) and compare trends to certain events.  Unfortunately, even for the professionals, that is not an easy task.  Nor, can many things be definitively proven.  That’s because, as any scientist will tell you, “CORRELATION DOES NOT IMPLY CAUSATION“!.  That phrase should be tattooed on the wrists of every economist so they have to stare at that phrase while typing up papers and reports that make that very claim.

In the beginning of the post I claimed 355,000 people lost their jobs last week because of the election.  That of course was a half-truth.  In an economy as big as ours we have 100s of thousands of people losing their jobs every. single. week.  Even in a healthy and growing economy.  The fact is, we have even more people being hired every week to offset that.  But, the right-wing aren’t using employment numbers to make their current claim(we won’t actually know those numbers until Thursday).

The right-wing is pointing to companies that are announcing massive lay-offs as proof, PROOF! that Obama and “Obamacare” are killing jobs.  So let’s look at those numbers.  Fortunately, the department of labor keeps statistics on how many companies have a “mass layoff event”.  Their definition of a mass layoff event is when at least 50 initial claims are filed against an establishment during a consecutive 5-week period.  Fortunately, they have the entire archive of their past data posted online.

As it turns out, there are a lot of mass layoff events every month.  For the last year there are usually over 1,000 mass layoff events every month (not seasonally adjusted).   I add that “not seasonally adjusted” because mass layoff events tend to fluctuate depending on the time of year.  For instance, post Christmas time will have a lot of lay offs as stores get rid of their extra holiday help.  Therefore, instead of comparing month-to-month numbers, it is sometime better to compare this months number to this month of last year.  That is what we’re going to do.

November 2011 had 1393 mass layoff events.  Last I looked at a calendar there were 30 days in November.  So that means, on average, there would be at least 46 mass layoffs every single calendar day during a Normal November.  This is assuming mass layoffs happen on weekends as well.  If we assume mass layoff events only happen during the week the average would be even higher.  But since I want to give the right-wing the best chance to prove their crazy theories, I’ll stick with the lower number.

Let’s compare that number to right-wing doomsday claims.  If there are mass layoffs we should be seeing an increase over the average rate of 46 a day.  We should be seeing 50, 60, or 70 a day to register an increase in layoffs.  If there was a massive movement I would expect to see double of the average(like happened in 2008 when the Bush economy was spiraling downwards).

Exhibit A: The article I linked to earlier has a scary-sounding tweet that claimed that “45 companies announce layoffs in last 48 hours[after Obama’s re-election”.  In a 48 hour period, we should see an average of 94 mass layoff events.  That means their scary claim would be less than HALF the pace of mass layoffs during a typical November.  If their claim is true, that would be a low number and something to be celebrated.

Exhibit B:  The Blaze, home of Right-Wing Glenn Beck, has a B.S. article listing 37 layoffs and “closure” announcements in a 48 hour period.  Even smaller than the claim in exhibit A.  Additionally, they cheat by listing EVERY layoff announcements, even ones that are less than 50(my 46 number counts only those over 50).  They are still very VERY far short of an increase, let alone a doubling.

Exhibit C:  These right-wing bloggers have now setup a website to try and document supposed mass layoffs.  Here are their numbers since the Wednesday after Obama was elected(combining layoffs and storeplant closures):  Wedenseday was 25, Thursday was 23, Friday 17, Saturday 25, Sunday 1.  I don’t know if this site cheats like the Blaze and lists layoffs that are less than 50 – I’ll let somebody else click and read each announcement.

As you can see these listing are far short of even reaching the typical November rate and therefore offer absolutely ZERO proof of mass “revenge” or “Obamacare” layoffs.  I suspect that not all mass layoff events are reported.  I’m guessing the real number is higher than these articles report, but they are also likely at a typical November rate.

Unfortunately, the mass layoff event data isn’t printed quickly.  It takes time for the department of labor to compile the statistics and interview companies about their layoffs.  For instance, September’s numbers weren’t reported until October 23rd.  Which means we won’t get November’s number until around December 23rd.  (November 23rds report will be of October, before Obama’s reelection).

When the report does come up, I recommend looking at seasonally adjusted numbers, to see how much different the number is from October.  The seasonally-adjusted numbers averages out seasonal affects.  As long as that number is near October’s it will mean there was no mass “revenge” or “Obamacare” layoffs.  Additionally, you can check the raw numbers and compare them to the previous November numbers.  Unless that number is twice it was last year, it’ll mean no mass layoffs happened above and beyond normal economic activity.

My educated guess is that these layoffs would’ve happened anyways.  For those claiming they are laying off because of Obama, I think some business people are making political claims to serve a personal agenda.

 

 

 

Micro-Engineering Student Loan Help

President Obama announced yesterday his initiative to reduce student loan debt.   The plan is an admirable one.   Attending a university is expensive, and the cost of which keeps going up.   All these kids who go to school mount up huge amounts of debt while trying to prepare themselves for the future.  Now they’re all graduating during the recession only to find no jobs.  It’s like a sick joke.  We tell them how important education is, politicians, teachers, parents, guidance counselors, and they do exactly as they’re supposed to by finding a way to go to college.  Now conservatives turn on them and blame the students who did what conservatives told them to do.  Either they blame the students for being so stupid to go into so much debt, or they blame them for being so lazy for not finding a job(which is hard when there’s more than four workers for every open job).

So on the one hand, I think the President’s goal to try and reduce the student debt burden is admirable.  On the other, I think it’s solving the wrong problem because he’s trying to do government “on the cheap”.  The problem is that they can’t pay their loans because they can’t get a decent job.  If instead of trying to micro-manage student loans, he and congress concentrated on fixing the economy, the student debt burden wouldn’t be such a burden because the kids would now have jobs in their chosen fields.  If the President could get congress to institute something like Warren Mosler’s 3 point plan to increase Aggregate Demand in the economy, then jobs would appear for those kids.  The problem though, is that plan is fiscally expensive and would add to the debt.  Since he thinks the deficit is a real problem, he tries to “do government on the cheap”, by just concentrating on student loans.

There’s still the argument about the long term problem of college costing so much now.  I acknowledge that is a problem.  However, this is not the way to deal with it.  Conservatives have a point when they snarl about helping some with loans and not others.  A better long term plan would be to make college cheaper so that people can work their way through college without accumulating very much debt.  That would be a more equatable plan going forward without a moral hazard.

In short, I empathize with students who graduate with thousands of dollars in debt, but then can’t find a job in their chosen field.  However, the fair and equitable solution is to get them a job, not the “government on the cheap plan” of reducing student loan debt.  If our politicians understood how the monetary system worked, we could do this.

“American Jobs Act” is Misguided

Last week, President Obama revealed his plan to get Americans working again.  They named it the “American Jobs Act”.  A lot of what’s in it is pretty good stuff to help with the recession.  You can read about it here.  However there is one problem with it.  At the end of the rundown, I came across this:

Fully Paid for as Part of the President’s Long-Term Deficit Reduction Plan. 

  • To ensure that the American Jobs Act is fully paid for, the President will call on the Joint Committee to come up with additional deficit reduction necessary to pay for the Act and still meet its deficit target. The President will, in the coming days, release a detailed plan that will show how we can do that while achieving the additional deficit reduction necessary to meet the President’s broader goal of stabilizing our debt as a share of the economy.

Well, this was almost a good idea.  The biggest thing wrong with it is that it offsets tax cuts with spending cuts and offsets spending increases with tax increases. All that means is that, at best, some money might be better spent or spent more of due a spending multiplier effect, but overall, it isn’t going to do much to increase overall demand in the economy.

Our current recession is being caused by a lack of Demand in the economy. People aren’t spending money, and businesses aren’t making new investments. Instead, households that are employed are saving in case of job loss, households that lost their job aren’t spending because they have little to no income, and businesses are saving money because they see no profitable investments. The only way the economy will recover is when household start spending and businesses start investing. If taxes are raised, more money will be taken out of the economy, more people will be unemployed, more people will save out of fear of losing their jobs, and businesses will see even fewer profitable investments.

If the president, or anyone else in Washington wanted to get serious about ending the recession and high unemployment, they should listen to the advice of Warren Mosler.

My first proposal is for a full payroll tax suspension. That means no FICA taxes will be taken from both employees and employers. These taxes are punishing, regressive taxes that no progressive should ever support. The Tea Party, of course, is against any tax. So I expect full bipartisan support on this proposal. Suspending these taxes adds hundreds of dollars a month to the incomes of people working for a living.This is big money, not just a few pennies as in previous measures.

[snip]

My second proposal is for a one time $150 billion Federal revenue distribution to the 50 state governments on a per capita basis with no strings attached. This will help the states to fill the financial hole created by the recession, and stay afloat while the sales and jobs recovery spurred by the payroll tax holiday restores their lost revenues.

[snip]

My third proposal does not involve a lot of money, but it’s critical for the kind of recovery that fits our common vision of America. My third proposal is for a federally funded $8/hr transition job for anyone willing and able to work, to help the transition from unemployment to private sector employment. The problem is employers don’t like to hire the unemployed, and especially the long term unemployed. While at the same time, with the payroll tax holiday and the revenue distribution to the states, business is going to need to hire all the people it can get.The federally funded transition job allows the unemployed to get a transition job,and show that they are willing and able to go to work every day, which makes them good candidates for graduation to private sector employment.

The problem of the recession can be solved. Rather easily too, once you understand the monetary system. The amount of harm the recession is causing our country is astronomical. Fixing the recession should be priority number one.  It should especially be before worrying about self-imposed budget constraints like the debt ceiling.

Obama Presidency Supporting the Troops

The New York times reported earlier last week that the government is making it easier for vets to make PTSD based disability claims.  This is not the only evidence that the Obama presidency really knows what “support the troops” means.

Based on VA spending, Obama is the most pro-troops president that we have ever had.  The chart below shows that the Obama presidency has spent more for veterans than any other administration before him.  This is on top of the historically high spending of the previous administration.

va_benefits_spending_over_time

(Click chart for larger image.  Click here for the raw numbers)

Due to inflation you would probably expect that each year every administration would spend a little more on the VA than the previous.  Just to show that this increase is above and beyond the normal increase here’s another chart that shows the percentage increase of every year.

va_benefits_percentage_increase(Click chart for larger image.  Click here for the raw numbers)

As you can see the increase for Fiscal Year 2010 was the highest rise in 50 years.  I wonder if people will still say that he hates the military?  (probably not).  But if he hated them so much, why is he allowing all this money to go towards taking care of their wounds and getting them ready to re-enter civilian life?