Originally posted Jan 15, 2008. Recent updates below in the comments ~ editors

A savvy blogger over at DailyKos has discovered an announcement by the Bush Administration, which appears to be pressuring Congress to retroactively approve the sale of nuclear secrets to Turkey.

hmmm...

Siebel Edmonds leaked her story to the UK Times two weeks ago, despite a court order. It was filled with tales of American diplomats acting in a treasonous manner by selling secretes to Turkey. If Bush gets the legislation he wants, then the treason will be authorized, and everything is hunky dory.

I don't know much about Central Asian's history, outside of what I read in "Three Cups of Tea" and the histories of Alexander the great... but it seems that outsiders have always been drawing their national boundaries.

Maybe it's time to end it?

The Waziristan region of Pakistan has always been a problem for the central government. Its a part of their Federally Administered Tribal Areas, and a huge stronghold for the Taliban. Terrorists are using these people -- and their long standing distrust of outsiders -- to attack anyone who dares to oppose the Taliban... but if history is any guide, its unlikely that the Pashto people like the Taliban any more than they like the Pakistani government... or the Americans for that matter. Likely, they are only temporary allies.

Perhaps what's needed is for Pakistan, Afghanistan, and the US to broker some kind of deal with Pashto tribal leaders to create a small, independent country, with its own uniquely Pashto kind of government?

This would be in the best interests of all involved... Pakistan would lose some land, but would gain some peace. The Taliban would be cut out of the process, and lose power. The US already reduced aid to Pakistan, they could raise it back as "compensation" for the land lost. If a delegation of 3 clan leaders were flown to Kabul, Islamabad, Washington DC, and the UN, and given treatment as visiting heads of state, they might get a taste for the respect they will get as national leaders... or they might consider us all sinful, evil creatures trying to tempt them.

It may cause other groups on the Afhgan / Pakistan border to cause trouble, but it might still be a useful tradeoff.

As everything, the devil is in the details... but what to Agonistas think of an independent Waziristan?

At first when I heard that local Pakistani authorities carved out a region for Sharia Law in Pakistan, I was very upset... Now, I'm not so sure.

I was confused. The Sawat Valley is a big tourist spot in Pakistan, so you would think that the residents would be more cosmopolitan. This morning, an expert on NPR explained why they wanted Sharia law. Apparently, the legal system is so corrupt, that it takes decades for them to rule on anything. The valley residents just want to bring back a 10-year old law -- signed by Benazir Bhutto herself -- that allowed Sharia appellate courts that were required to rule within 3 months. That is the primary reason why this has popular support.

If this is a legal requirement -- everybody is forced to use Sharia law -- then this is obviously a problem. But if its just an alternative to the legal system, then it wouldn't be that much different than mediation, arbitration, or Judge Judy.

Critics claim this is a toe-hold for extremists... which may be true. However, the simple solution may be for Pakistan to streamline the legal system, and allow quick mediation by an agreed-upon third party.

Unless I'm completely wrong about all this...

Do you want to make sure the stimulus money is spent wisely? Then cast your yes/no vote for projects at StimulusWatch.org.

This site was based on a list of projects drawn up at a recent Conference of Mayors. These are not officially part of the stimulus package, but they could potentially get federal funding. But before they do so, you might want to let the government know which ones should be given top priority.

I've given a thumbs down to some obvious pork-barrel projects... like a $17 Billion office park in rural Puerto Rico... and a thumbs-up to projects that got voted down by others, like making LA county solar-powered

I've already seen buzzwords like "porculus" bandied about... so I suggest folks get over to this site and start voting before the wing nuts skew the results...

Which is your favorite project?

The term "deflation" can mean two things. One, it can mean that inflation has reversed itself, meaning products are getting cheaper to purchase. This can be very bad for factory workers, because you might be forced to sell products for less than the cost of production... which leads to layoffs. It is also bad for debtors, because future dollars are worth much less than dollars today. Coupled with compound interest, this makes it extremely difficult to get out of debt.

However, it also has another definition: a general decrease in credit and the money supply. Frequently, this lack of credit causes prices to fall overall. It will certainly reign in prices that are held artificially high because of speculators, but it might not affect other prices.

My question is this: when does this lack of credit spill over into non-speculative goods?

(Hat tip: The Big Picture)

The good folks over at SlideShare announced a new contest: The Credit Crisis In 30 Slides.

Its a chance to demonstrate your exceptional grasp of the economic situation, and your ability to explain it clearly. I'd encourage folks at The Agonist to submit entries, drive traffic here, and maybe win an iPod ;-)

In either case, I'll be watching closely... although frankly, I think these guys might be able to nail it:

In Jim Cramer's first book -- confessions of a street addict -- he mentioned how panicked he was during a recession. He was nearly out of cash, people wanted out of his hedge fund, and he was surrounded by chaos. He penned an article, "GET OUT NOW!" telling everybody to pull out of the market... much like what he said a few days ago.

He then had his wife come it to try to calm the chaos. She proceeded to take what limited capital he had, and bought huge amounts of stock.

Flabbergasted, he wanted to know why she was buying as the market was crashing, before it hit bottom.

She looked at him with disbelief. "This is the bottom," she said.

Cramer's a bull... a 100% bull. He's always boosting stock to buy, always saying there's opportunity everywhere. As soon as a guy that gung ho becomes a Bear, then we've hit bottom.

That is, if history repeats itself... and this is only a severe recession, and not a depression...

Andrew Sullivan has been asking for months for the McCain/Palin campaign to produce the birth certificate for Palin's baby Trig.

For those who don't know the controversy here, there are many rumors going around that Trig -- the baby with down syndrome -- is not actually Sara Palin's son at all. The rumor is that her eldest daughter Bristol gave birth to Trig out of wedlock.

Now, baring any evidence, there is no truth to this rumor. However, the Palin campaign has steadfastly refused to provide any evidence that the baby is actually Sarah's child. The whole birth is shrouded in a bit of mystery, which is understandable given the circumstances, but it strikes some liberal bloggers as odd.

What would I do if I were as evil as Rove? I'd do the same thing he did with Dan Rather and Bush's records in the Texas National Guard:

• Quietly encourage rumors that baby Trig is NOT Sarah Palin's child
• Before the election, create a forged birth certificate that says Trig is Bristol's baby
• One week prior to the election, leak this forgery to some semi-reputable liberal blog
• Let the press have a field day
• Get an expert to denounce it as a forgery
• Produce a second birth certificate (forged or not) proving it's Sarah's child
• Have a tearful/vengeful Sarah tear into the "liberal media" trying to tear families apart
• Score 5-10% more on sympathy in swing states

That's what I'd do...

I have no idea if this is true... so I'll defer to the experts here... According to Seeking Alpha:

The mainstream financial media has talked our heads off about “bottoms,” GDP growth, recessions and other news items. Amazingly, inflation, which is currently in the double digits (more on this later), hardly gets any mention. When it does, it’s the usual blather that it’s “better” or “worse than expected.”

A far more informative approach — and one that would be much more helpful to investors — would be to stop discussing inflation relative to expectations and start talking about inflation relative to reality. The Fed has changed its measure of inflation twice in the last 30 years; both times it chose to become more lenient. In fact, if you measured inflation today as you did when Volcker was Fed Chairman, you’d find inflation was in the double-digits.

Is there any truth to this?

No doubt you've seen the polls that pit Clinton vs. McCain, then Obama vs. McCain... typically Obama beats McCain by a large margin, whereas Clinton beats McCain by a smaller margin. That's because several Obama supporters would rather vote for McCain than Clinton.

I'm one of these people. If Clinton wins the nomination, I'll be casting my vote in Minnesota for somebody else... and several of my friends are the same way. This is why:

First, the country is in one heck of a mess... I believe both Obama and Clinton can fix it better than McCain, but Clinton's fixes will not last. She will use her typical heavy handed tactics, and every move will be criticized and marginalized by the Republicans. Then, things will just go back the way things were after she loses power. McCain will do small fixes that last, Obama will do big fixes that last, Clinton will do big fixes that won't last.

Thus, if you want lasting change, the rank is: Obama, McCain, Clinton.

(more beneath the fold...)

As mentioned by Atrios, it's difficult being Hillary these days... after so many wins by Obama, she's banging the drum that states that Obama won don't matter.

Question: if they don't matter, then why did you bother to campaign there?

That's a tough one to answer... Louisiana, Nebraska, Washington, Maine, Virgina, Missouri, Maryland, Hawaii, Wisconsin... if these states don't matter, then why bother with them at all? Why put in the effort to win, if you genuinely believed they don't matter? Why even fund your supporterd there? If only Ohio and Texas matter, why not focus 100% of your energy there?

She might have to... but the less she spends on the other states, the more it looks like a blowout by Obama... and Hillary is pulling a Guliani. She needs a winnable strategy, or an exit strategy.

I recently came across Lulu, a self-publishing site, and I thought it was about time Sean-Paul, Numerian, and the other econ folks on this blog put together a book!

You guys have taught me a lot more about economics than anywhere else, and I've read five econ books in 2007 alone. You really pierce the veil; not just describing how things should work, but also how people play the system to scheme extra cash into profits.

You could do print-on-demand books for about $20. You could also create a PDF eBook for around $2.50. I say, make a book, fix your profit margins at $5 or so, then let the people decide if they prefer a PDF or a dead tree...

Heck, even if all you did was slap together your 50 last posts, people would buy it to support you guys! Chime in the comments if you agree.

The Freakonomics boys have posted a little about the possibility of a Recession... and they brought up the concept of The Great Moderation.

The Great Moderation is an interesting phenomenon... between 1950 to 1984 there were six recessions, but since 1984 there was only one. In addition, the fluctuations between GDP are much less volitle these days... in the past we'd spike from +15% to -10%, these days we mozey between +6% and -3%.

(graphic beneath the fold)

I do not have a problem with public bailouts of private companies... some of them are vital institutions and give me valuable services. I'd be at a loss if my airline or bank went under.

However, it bothers me when we do bailouts and get nothing in return. One company begs for a bailout, and threatens us with a loss of jobs and services if we don't comply. Then they get the bailout, and proceed to cut jobs and services anyway, and a pack of CEOs get golden parachutes.

Shame on us for not insisting on a return for our investment.

read more after the jump

One thing that confuses me about the current financial crisis is this: If the banks are the losers, then who are the winners?

In the case of the mortgage crisis, the answer is clear: if a house drops in value, that money is simply gone. Whoosh! Somebody who shouldn't have gotten a loan got one, bought a home for more than it's worth, and now can't repay. The house market declines (or corrects), and nobody really wins... except for the cash-rich speculator who buys the home for 1/2 its value... then rents it back to the person who bought it in the first place.

The banks lose... which rattles the economy. Clear enough...

But what about these credit default swaps that are taking down ACA Capital Holdings, Ambac, and other bond reinsurance people? These seem kind of funny to me... somebody "bought" the risk that these loans would not default... then they defaulted... and so ACACH has to pay.

Pay whom? Who was the wise speculator buying up all this risk, and cashing in as the system crumbles? Who are the creditors who are forcing ACACH to fold, causing panic across the board?

If I had a billion dollars, I would have bet against the US economy BIG TIME. Pretty much any Agonist reader (with flexible morals) would have done the same... so why don't we see their names in the news? Or is this similar to the mortgage crisis, where the money just evaporated? Is there a cash-rich speculator who's waiting for the bottom before buying? Or is this so screwed up, that nobody knows where the bottom will be?

Can anybody enlighten me?

Ed Note: This is a good question, one I would answer, but cannot due to a project I am working on taking my time. Perhaps one of our esteemed finance guys, Numerian, Ian or Stilring can do so?

Would you like to see Obama with a katana take on Rudy with razors? Then you'll love this game:

Kung Fu Election!

Its worth it just to see Hillary's special power...

A new campaign by Downsize DC is encouraging people to demand sanity in the war on terror. Terror is the main weapon of terrorists... as such, the best thing we as Americans can do is to refuse to be terrified. Politicians and pundits do us no favors with their terrible stories of what might happen, in fact their actions help those we are supposedly fighting.

They encourage us to send the following message to politicians, and the media:

I am not afraid of terrorism, and I want you to stop being afraid on my behalf. Please start scaling back the official government war on terror. Please replace it with a smaller, more focused anti-terrorist police effort in keeping with the rule of law. Please stop overreacting. I understand that it will not be possible to stop all terrorist acts. I accept that. I am not afraid.

Sign their petition to send this message to your representatives.

Worth a chuckle:

http://www.youtube.com/watch?v=SJ_qK4g6ntM

I came across a great article on the New York Times, called In Nature's Casino. Its all about how the insurance companies are dangerously close to either going bankrupt, or not being able to pay out in the event of a catastrophe.

The essential problem is that too much of the world's wealth lies in a handul of disaster-prone areas. Earthquakes in Japan or California, hurricanes in Florida, or a severe winter in Europe could destroy an insurance company... even if they have re-insurance. If the 1926 Miami hurricane hit again, it wouldn't do $100 million in damage... it would do $100 billion!

The answer? Its hard to tell at this point... but it might be time to sell catastrophe bonds. A 1% dip in the stock market makes $590 billion disappear, which is many times more than what the typical catastrophe would do. Perhaps the global capital markets are the only place for something like this... although the latest problems in the capital markets makes me wonder if that's such a good idea...

So, what do you think, agonistas?

(hat tip OReilly)

This is how I felt all week:

You gotta give for what you take...

US News and World Report has posted an interesting article on "Blue Funds":

http://www.usnews.com/usnews/biztech/articles/061017/17bluefund.htm?s_cid=rss:site1

You have heard about "Green Funds," which are mutual funds that only invest in green technology. Well, Blue Fund is similar, but they invest in socially responsible companies that lean towards the Democrats.

Investors who put $100 in the S&P 500 five years ago would now have approximately $145, while investors who put $100 in the market-capitalization weighted blue portfolio would have approximately $230

The fund is interesting evidence that Democrats (who run such things as Apple, Costco, Starbucks, and Berkshire Hathaway) are better for business that Republicans.

Interesting theory, I'm curious if it pans out.

The Washington Post just released their vote database for all members of congress, as RSS feeds:

http://projects.washingtonpost.com/congress/109/senate/members/

man oh man... this is going to be used a lot...

Noted security analysist Bruce Schneier has posted a new article about a recent Cato Institute report on terrorism.

The central point was that people are far too frightened about terrorism. Most terrorist attacks do little if any damage, when compared to military strikes (Iraq), natural accidents (Katrina), and simple human error (Chernobyl, Bhopal).

"Terrorists can be defeated simply by not becomming terrorized -- that is, anything that enhances fear effectively gives in to them."

Essentially, if somebody tries to make you overly fearful of a terrorist attack, they are aiding and abeting terrorists. Politicians are doing Americans a terrible disservice by making us cower in fear, and not putting the danger in perspective.

Bruce Schneier is a well known security researcher, and has previously criticised the Department of Homeland Security for policies that make America less safe.

After this article was published by Harpers:

http://www.harpers.org/ExcerptNoneDare.html

I sent it to a Republican friend, along with commentary. He put together a reply and placed it here:

http://cyberecology.blogspot.com/2005/09/none-dare-call-it-rational-i-refer-of.html

Below the fold is my reply to him.