Egypt: Linchpin for U.S. Foreign Policy in Middle East

It should never have been a question to support Mubarak, instead the Obama administration took the easy way out and backed the Muslim Brotherhood candidate Morsi, enraging regional allies that continued to support both U.S. regional war aims and Israeli policy goals for flyover rights, desalinization plants and more.  Obama’s political instincts continuously backfired as he sought to open relations with Iran while containing Saudi anger; our Sunni allies throughout the region sought their own advantage in having Gulf Petro-monarchies fiscally underwrite the Islamic State in Iraq.  All this happened as the Shia from Iran began hustling geopolitical advantages throughout Mesopotamia.  True to form, we played checkers to Persian chess.  This continues today with far reaching consequences for the next President.

Where is Egypt, the largest Arab nation state in this calculation?

Egypt is badly damaged, both domestically and fiscally.  Its trying to serve a balance of payments crisis brought about by exceedingly weak tourism revenue and structural flaws in its heavily subsidized economy.  Cairo is in free fall.

While Egypt’s foreign reserves drain the Central Bank, the fisc is hampered by current account deficits, zero growth and complete failure to succeed with FDI (foreign direct investment.)

Immediately after the Arab Spring, al-Sisi asked hundreds of wealthy foreign nationals to vacation in the seaside resort of Sharm el-Sheikh, a residence near Mubarak’s exile to ask for considerable investment of foreign capital.  That opportunity was squandered, and now Cairo has asked the IMF for a three year package worth $12 Billion.

An overvalued currency, double digital inflation and massive unemployment is far beyond the reach of ‘the deep state’ that characterizes Egypt’s authoritarian political economy. The proposals for tax reform, elimination of massive food, fuel subsidies, civil service reform has hampered Egypt’s political class to the point of permanent dysfunction.  As of this writing, Gulf Petro-monarchies have pulled out fiscal representatives, while Cairo dithers with the IMF, the African development bank and the World Bank.  Cairo is buying time as it discerns how best to frame its fecklessness.  What should Cairo immediately do?

It should permanently dismantle its entire food, fuel subsidy scheme that permanently raises price discovery; its Central Bank should seek to reduce inflation chiefly though the import of foreign currencies for tourism, and open its rigid domestic markets to foreign competition while dismantling Cairo’s byzantine predatory bureaucracies.  Large mega-structure projects to widen the Suez Canal while erecting special economic zones adjacent to the canal have failed.  Without addressing the politics solidifying Egypt’s “deep state”; the hoarding of its domestic markets by former military officials, Egypt is heading toward a precipice.

This can only be fixed with broad based political reform:  an Arab Spring!!


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Personhood: Moral Axis of Symmetry between the Collective & Capitalism

My first mentor, the late great Dr. Luke William McCann told me how his tenure at Columbia Universities comparative literature department was riven to engage Russian literature, especially Tolstoy and Dostoevsky.  It seems the theological, moral unpinning of Russian aesthetics was beyond the pale.  Militant secularists just couldn’t bring themselves to defend the moral reserve advocated by John Paul II.  So they ignored it.

Having been blinded by ideology, they became unwilling accomplices in shaping the aesthetic framework of many leading scholars.  Sadly, Father McCann revealed how most lost themselves in feverish pitch and became unable to respond effectively to the moral challenges of our time.

Even Solzhenitsyn remarked how the chief divide animating differences among American political parties is their view of the human person.  For Solzhenitsyn, both Communism and Capitalism have identical ends:  ameliorated people, easy prey for demagogic revolutionaries.  They key was to ground public policy in the growth of civil society.

This insight brought two great leaders, both John Paul and Solzhenitsyn to re-discover the work and insights of a great Roman Catholic, Alexis Tocqueville.  It should surprise no one that Tocqueville lined the book shelved headboard of each man’s bed.  Tocqueville was Arnold Toynbee’s mentor for the 12 volume prodigy A Study of History, he’s also responsible for shaping the thought of Marshall McLuhan.  More on that another time.

Why read Solzhenitsyn, or even Tocqueville?

Both men advocate a rare truth.  Only a return to realism can the fraught lines of intellectual engagement be rescued from satanic assertions of utopia.  This ought to shape the immediate future Reformation Islam so badly needs.  It can also prevent the Democratic party, especially its progressive wing from destroying this great Republic upon the alar of the criminalization of political differences.

That’s why you should try The House of the Dead:  Siberian Exile Under the Tzars by Daniel Beer, in it you’ll witness how penal codes, the very social institutions that Tocqueville sought to study in the United States, we’re usurped by the Bolshevik’s in the Russian Revolution and put to use in the name of Mother Russia.  Here we witness new sources of depravity tied to enlightened despotism that underwrote Christian monarchy up to World War I.  It is this satanic reality of frontier life beyond the Urals that shaped the imagination of Russia’s greatest artists.  Its what fortified the perverse ethics of Anna Karenina’s suicide and the monomania of the underground man.

In the end though, it collapsed like czarist autocracy while it fed the very moral sources that brought solidarity.  If we seek the renewal of the west by mining a moral reserve, we begin with those who survived the pit of hell itself.


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Debt Monetization, Transfer Payments, Ending a Capitalist Ethos: How Politics Drives Electoral Demography

When pundits across the nation begin eulogizing Obama’s tenure, we need to remind ourselves how we got here, for 2016 needs to be a year of democratic reckoning.

Beginning in 2008, a Democratic Senate class gave both Obama and Pelosi the desperately needed 60-vote supermajority passing pent-up generational health care reform. Every single one of those politicos now rejects Obama-care without ever having to defend such policy sentiment on the chamber floor. Remember how Alaskan Senator Ted Stevens was beaten by upstart Begich with a vote tally of barely 0.9%, only to have exculpatory evidence found favoring the incumbent Republican U.S. Senator. Remember Minnesota’s Al Franken, who became Obama’s 60th vote for Obama-care. That happened because of a strong-armed legal challenge for a vote recount tallying an additional 312 votes favoring neophyte Franken. We can count New Hampshire’s Jeanne Shaheen, another Obama-care neophyte reluctantly defending her record while calling for exemptions amid the heath care rollout. Let’s not forget Mark Udall of Colorado, North Carolina’s Kay Hagan, Arkansas’ Mark Pryor or Louisiana’s Mary Landrieu. Every single one of them owns the Obama-care blowout. And each of them talks of reform or exemption without ever having to defend such policy on the chamber floor. Why? Because according to the Wyoming Senator John Barrasso, Mr. Reid’s amendment blockade was monolithic; having blocked 1,105 Republican Senate amendments, and 847 Democratic amendments. Nevada’s Senator has blocked every single U.S. Senate amendment but 19 during Obama’s tenure. If you ask anyone following the skullduggery, they should note the comeuppance in 2016.

Why will it never happen?

Because the GOP can’t stick together.

A small note on historical, Presidential electoral ratios is needed.

From 1992 to 2012, the Democratic Party won four of the last six presidential elections. Preceding that ratio, the GOP won five of the six presidential elections between 1968 through 1988. These historical ratios breakdown in the myriad challenges presented to electoral races beginning in 2014. No amount of historical analogy can build symmetry given the fragmented nature of our candidacies and voting demography. To date, between 1994-2012, the Democratic Party has failed to win a majority in the House in eight of last ten elections. That puts into relief the dominant majority status they enjoyed from 1954-1992 winning twenty elections consecutively.

The fiscal, and demographic trends no longer fortify a Democratic ascendancy. To believe so is to endorse a backward looking paradigm.  (Mull that one over.)

In its nearly 160-year history, the GOP has managed to assemble majorities favoring white Northern Protestants. However, as of this writing, the progressives have abandoned wide swaths of social demography, favoring urbanization instead. Today’s Democratic Party isn’t monolithic; it is riddled with damaging paradoxes easily surmounted. Remember, the 1% advantage delivered to Obama’s presidency in 2012? It came from the northern Midwest.   But those margins are dangerously thin given the challenges America faces. Opposition to the Keystone XL pipeline, along with hostility to fracking has damaged Democratic appeal in historical strongholds, just ask anyone living in upstate New York! While damaging indigenous Democratic appeals in regions historically favorable to Democrats, they’ve abandoned entire manufacturing geographies; progressives have delivered into the GOP large swaths of coal territory from western Pennsylvania moving south to Tennessee, including Texas and Arkansas. Beginning in Virginia, the South has been abandoned by the Democratic Party.

Politics, the driver of electoral demography, isn’t monolithic.

Donald Trump, call your office.

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The Return of the King: David Ben-Gurion Periphery Doctrine Replaces Corrupt Peace Process

Thomas Carlyle’s overly weaned motif that history is boiled down to great men is in need of revision; for how does one make sense of Israel?

When Irving Kristol arrived in Jerusalem to deliver a lecture titled ‘On the political stupidity of the Jews’ many pondered the relevancy of his chosen topic. Like Richard Feynman’s infamous ‘There’s plenty of room at the bottom’ lecture, both faculty, administration and students ignored it, for thinking its application severely parochial. In Feynman’s case, the idea was extreme (digital, atomic) miniaturization; in realty, his audience thought his chosen topic referred to adjunct teaching. Both scored resoundingly well in foresight.

Given the depth of our current domestic and foreign challenges, I would mine the character of these men and their distinct achievements to discern how best to meet our present challenges. For Kristol, the solution to Israeli identity and national trajectory lay in its ability to absorb and apply lessons from Thucydides on the realities of power, from Adam Smith on the intrinsically ethical nature of economic liberty, from Edmund Burke an ability to discern opposing trends between politics and irreconcilable domestic political tradition(s); finally, from Tocqueville, on the need to discern satanic, genocidal trends that lay inert in democratic polities.

However, it remains to be mined how Jewish tradition, especially its Roman and Greek challenge spoke to Jewish polity about identity, mission and foreign threats. That ruse continues, albeit differently today. Somewhere deep in Ukrainian, Lithuanian or Polish eastern European philosophical tradition lay keys yet to be discerned on how best Jewish religious identity can surmount the social challenge of modernity. The truth is difficult to say, but rabbinic Judaism has had very little to offer those seeking to surmount the political crisis that envelopes Israel, post Oslo Accord.

Israel today flourishes.

It has survived the lie animating entire fiefdoms at State Department and Islamic civilization at large, namely that peace would be achieved IF Israel conceited ground favorable to Arab proxies: Palestinians.

It has now come to pass.

The knifings around the Temple Mount in Old Jerusalem reveal a deeply troubling mindset, one that has finally turned inward, and retreated from the only position favorable to Arab self-determination, namely politics. Hundreds of millions of dollars gone, Abbas and his unelected henchmen straddle an irreconcilable reality; it’s over, and the Jews after Oslo have moved on toward building an indigenous Israeli political tradition, a reinvigorated Jewish nationalism, one alloyed outside rabbinic sources. What has Abbas built? Even with global patronage Palestinians never built institutions necessary for a peaceful state. No rule of law, no room for civil society and its ‘little platoons’ (the term is Burkes), no means to measure public sentiment as electoral. Under these circumstances, the notion of a two state solution has become delusional.  With the death of the Israeli anti-war movement under the reign of Ehud Barack, Israeli’s are fortified in acknowledging permanent irreconcilability between western and Islamic revolutionary mores.  The Israeli’s have moved on, returning to Ben-Gurion’s insight that Jerusalem should pursue active diplomatic, bilateral relations in its regional periphery throughout Islamic nation states and African continents.

What does all this mean?

It means that Israel, alone in an Islamic neighborhood, must continue to build formal alliances with those on its periphery. It means, preemptive war. It means cleaning up the neighborhood. In a word: leadership. While it sells desalinization plants to Riyadh, builds envious world class air defense systems, and runs the world’s best educational facilities for Arab Israeli’s to enjoy, it lives on, each day fortifying Reagan’s polite admonition: peace through strength!


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A Faltering Continent

Its isn’t hard to see that the Continent needs a vibrant U.K. more than London needs Berlin.  Although this isn’t easy to see now, any quick glance of the emerging domestic, geopolitical challenges reveals that the entire continent is managing its affairs on a precipice.  None of this will end well.

The British people went to the polls on Thursday, June 23, 20016 for a vote of independence that rivals in magnitude to the wiles of Thatcher.  Any economist or strategist would have acknowledged that England’s short term view dominated any calculus.  Yet the people thought otherwise.  If the vast majority of English thought remaining meant influencing the continent to meet 21st century challenges, they’d be right.  Needless to say, the English seek independence.

Since Roosevelt, American interests lay in a free and prosperous Europe, one having London at the center balancing an emerging Franco-Teutonic rapprochement. It has now come to pass and with it new lines of engagement in an old civilizational conflict that merges north African political economies to northern Mediterranean welfare states.  Only a bungled migrant crisis brought this into relief.  London wagered to keep itself from both the Euro and Schengen rules of passport free Europe, delivering the strongest growth in the old world. Nevertheless, in truth, E.U. rules never stopped England from embracing free market principals that Tories so brilliantly espouse.  The obstacle to growth in England is British politics. 

The origin of new volatility and uncertainty resides in acknowledging that any new relation between London and Brussels would mean re-negotiating trade rules for re-entry into the common market.  This would mean re-accepting most E.U. rules on trade anyway.   Typical optimistic British insight was to envision London at the helm of any E.U. relation tempering German mercantilism while generally promoting global commerce.  This may never occur given Chinese prerogatives of the Silk Road and the growing threat of Islamism.

Without a doubt, the most promising Brexit argument is national sovereignty and democratic accountability.  It was this political insight that drove the English to confirm independence.

Yet political risks remain.

Only the Tories were capable of weathering a fatal fracturing that Brexit demanded.  They answered by elevating Theresa May, an advocate of remain!  It is clear that the English want Tories to promote or fix the left’s agenda.  It is also clear that Putin’s game of formatting secessionist movements close to a Trident in Scotland favors any brutal authoritarian.  Although both Tory and Labor managed to consolidate political unity over Trident, Putin’s ambitions of having not to face unified opposition for his regional ambitions over the North Sea still stand.

With Islamists at the gates, here’s what E.U. members should be thinking:  Either pursue growth and democratic accountability or face the wrath of emerging civil dissidents throughout the continent.

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Cognitive Dissonance: Iran, the Great Satan & Islamic Terror

The end of Ramadan saw Iran’s Supreme leader Ayatollah Khamenei blame the U.S. for Islamic terror.  In their eyes, it is the west and its alliance regime responsible for the rise of terror attacks throughout Iraq, Istanbul, Bangladesh, Yemen and elsewhere.  This occurred when U.S. Secretary of State John Kerry seeks open (public) ratification of the JCPOA (Joint Comprehensive Plan of Action) with Iran.  Given how Iran is a state sponsor of global terrorism, these diametrically opposed views are irreconcilable.  Except to those who reside in unassailable positions, those protected from reality.  Like the President Obama and the legions of cohorts within this administration that openly sought Iranian accommodation.  They live in the dream world of utopian policy claims.  The rest of us live, earn a living in the trenches of reality.

The disconnect will have profound strategic consequences.

As of this writing, the open border between Iran and Iraq favors the recently paid paramilitary agents of the Iranian regime.  Effectively, Iraq is dominated by Shia, Iran has succeeded in openly subverting the order won by U.S. allies in 2008.  The result is that Shiite sectarianism, actively promoted by Iranian agents, is the key driver of Sunni extremism.  The insurrection that is the Islamic state is feed by Sunni grievances exacerbated by Iranian subversion.  Aghast, the Obama administrations Iraq policy has substituted American boots with Iranian ones.  And this after the win trekked out by Petraeus & Bush in 2008.

The Syrian albatross killing over 250,000 people is clearly a human rights catastrophe, yet Iran continues to train, arm, pay and solicit Shia agents from Pakistan, Iraq and Afghanistan in assisting Iran to bolster al-Assad’s regime.  Why?  Because the Iranians view Syria as the pillar of resistance in its northern front against Israel.

The Iranians have openly challenged Saudi hegemony by actively deploying agents in Bahrain (eastern Saudi Arabia) and Yemen, effectively encircling the Saudi’s.  The indigenous Shia Houthi movement in Yemen requires robust counter-insurgency, a social military platform Arab civilization does not perform. Given its permanently weakened industrial base, weak oil prices and draining reserves, the Saudi’s are threatened having been abandoned by the White House.

Seeking to permanently threaten the House of Saud, the Iranians have sought to flank the Saudi’s only regional ally, Pakistan.  Training legions of Shia throughout Pakistan while soliciting Islamabad’s longterm ally the Taliban, Iran is playing a very long game.

All of this begs the question:  why drop off $400 million dollars in foreign currency reserves in secret to the Mullahs?  The answer may reside in the very dissonance embodied by the Obama administration.

Tehran has been emboldened to assert international hegemony in subversion.  It is winning.  Today it remains active in Iraq, Syria, Lebanon, Yemen arming Assad, Hezbollah, Hamas, Houthi and Iraqi Shia militias.  It actively seeks to destabilize every relation it touches.  It even works in collusion with other dominant powers like Russia to achieve its aims.

The unintended consequences of this deadly rapprochement have yet to unfold.  Emerging contours are closer relations between Israel and the House of Saud, even Egypt’s al-Sisi regime actively shares intelligence with Jerusalem as Iranian proxies engage Sudan, Gaza achieving tactical dominance throughout the Philadelphia corridor into Israel proper.  The Israeli’s actively promote antiballistic missile defenses while intercepting and killing Iranian agents throughout Golan.

I’m beginning to think that John Podhoretz was right, we’re going to have to confront this monster at some point in the very near future.  A more robust and nuclear armed Iran will be a deadly mission for any U.S. President.

The dissonance fervently underwriting the Obama administration believes that Iran is to be viewed as if if were a traditional Westphalian nation state.  It isn’t.  It never was.  The Iranian regime should be understood from the Revolution (1979) as a repudiation of western secular norms.

The Great Satan is growing a Great Satan.  As Podhoretz said, its either conventional war now or nuclear war later.

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The Han Masters Strike at Bretton Woods, Monetary Velocity & Survival

As the American regime moves to strengthen an alliance regime known as Trans-Pacific Partnership (TPP) in the hope of building up both the industrial base of nation states nominally aligned to the west while pushing back on Beijing’s strategic naval ambitions throughout the South China Sea.  Its a very slow go, but the American regime has been welcomed in its effort to strengthen states throughout the ring of fire; an area not known for any comity.  While we move west toward the littoral Pacific, the Han Masters in Beijing are moving west along their soft interior toward Urumqi, Almaty, embracing the southern Eurasian steppe that has long been home to Moscow.  The Silk Road is now titled One Belt-One Raod (OBOR), its a vast Eurasian steppe interior that Beijing seeks to command in its hope of replicating monetary advantages that the U.S. commanded at the end of WWII.  Its an ambitious project of linking Central Asia, the Middle East, Africa and Europe to Beijing.

The tangible benefits Bretton Woods afforded the U.S. was an ability to run continuous deficits because the world’s trade being denominated in dollars affords our regime fiscal privileges Beijing seeks.  Ignore for the moment the entire Judeo-Christian framework underwriting, animating the Bretton-Woods framework; its rule of law, the complete lack of criminalizing political/social differences, highly efficient-liquid bond markets.  Its these spheres of autonomy operating outside the commanding heights of centralized authority that Beijing cannot advance in its hopes of acquiring this exorbitant privilege.  The boys in Beijing are identical to all secular militants and positivists, they only see what can be measured, not the theologic animating the structure of faith intrinsic to Bretton-Woods.

In a word, Keynes substituted the U.S. dollar for specie.  The madmen of Beijing think they can replicate this endeavor.  They will fail.

Instead of camels and caravans Beijing has taken structural equity positions in building Greece’s second largest port Piraeus, from which China will build high speed rail linking Hungary to Germany.  China envisions positioning nuclear facilities in Pakistan linking natural gas fields throughout the land of the pure to Iran via China’s far western interior. Master Xi has recently visited Serbia, Poland and Uzbekistan positioning nearly 60 finance minsters abroad to set up the Asian Infrastructure Investment Bank (AIIB).  The AIIB is how China envisions replicating Bretton-Woods.

The first large problem its structural, political opacity.  Beijing has never listed member countries.  With over 900 public deals under way totaling nearly $890 billion, the boys in Beijing aren’t transparent about the the AIIB or how it works. If anything, China is taking advantage of a benign security environment to achieve geopolitical aims in the hope of framing out new monetary, fiscal arrangements identical to Bretton-Woods.

The thinking behind OBOR is to challenge how the U.S. positions itself as the main trading depository between Asia, Europe and Latin America.  China views Asia, Europe and the Middle East as a single space moving east positing Beijing as the final resting place for manufactured goods.

Premiere Xi first spoke of OBOR in 2013 after visiting Kazakhstan, he placed Zhang Gaoli as head of the AIIB after achieving membership in China’s Politburo Standing Committee.  His first opening salvo was to seed the AIIB in 2015 with $82 billion from the Central Bank to three state owned banks for OBOR projects.  This coupled to China’s sovereign wealth fund contributing $40 billion.  All seed monies were deployed to finance roads linking Pakistan, Tajikistan and Uzbekistan moving south to the Arabian Sea.

Given China’s need for opacity, we should anticipate a weakening of operational tempo and overall success to OBOR, for the Chinese enjoy employing competing bureaucratic interests throughout the Silk Road Project, reconciling them will challenge Beijing, especially now with weakened growth throughout the first world.

China’s strategic thinking for OBOR was to extend China’s commercial interests while reducing China’s economic dependency on domestic investment in infrastructure, all while delivering abroad Beijing’s excess capacity in steel and cement.

Inevitable tensions will emerge testing China’s strategic thinking about an Asian Bretton-Woods.

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The Power Struggle Inside Beijing

Study China long enough and everything looks like farce.  That’s because the old dictum of history repeating itself becomes nauseating when filtered through the opaque maze of the Middle Kingdom.  What’s playing out now before the world is a work of consolidation by Mr. Xi, but first  a few facts.

The sentencing of Ling Jihua to life in prison for accepting more then $11 million in bribes is only significant when seen within the hierarchical cauldron of the ‘Princelings’ that dominate Red China.  Ling Jihua was no ordinary “tiger hunt” caught in a dragnet hoisted by Xi.  Ling Jihua was the consigliere to Xi’s predecessor Hu Jintao.  Hunting game this big hasn’t been seen in China since 1989.  Having it spill out into public view is quite damaging, making governance and policy articulation difficult.

Mr. Xi rose to power in 2012 as a compromise candidate.  He was not backed by any faction.  He used that weakness as a strength by directly attacking factionalism as the source of governance problems besieging China’s Comintern.  Having made the prosecution of corruption his first public target, Xi moves now to consolidate his reign by pushing for ideological unity.  All of this rings of Mao, no one familiar with Chinese politics mistakes the sloganeering officiated by Xi, he means to actively promote soft terror by intimidating rival power bases within Beijing.  As of this writing, its to early to see how best to anticipate its trajectory.

The pinnacle of Chinese political life is entry into the seven member Politburo Standing Committee.  Xi’s only rival there is Premier Li Keqiang, a friend of Hu Jintao.  Li continues to openly confront Xi’s reluctance toward market based reforms.  Li is scheduled to serve a 10 year term ending in 2022, rumors are that Xi plans on forcing retirement upon Li.

Why is this important?

Attacking rival factions within Chinese politics is a violation of political tenants that emerged under Deng Xiaoping’s rise to power in 1979.  Chinese leaders always govern within a consensus among competing power bases; this was designed by Deng so as to prevent a repeat of Mao’s destruction purges that ultimately damaged China and spurred its movement toward capitalism.

Here’s what to look for:  the emergence of new strongmen determined to openly confront implementing market based reforms.  This will usher in new sources of volatility challenging old assumptions. The classic fix is in.

This fraught challenge is endemic to the Chinese political economy.  My monies on the challenger.


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Pakistan: Licence to Kill

I initially saw the murder of Qandeel Baloch (real name Rauzia Azeem) as just that:  sanctioned murder.  But this case cannot be viewed in isolation.  The ‘honor killings‘ cannot be reconciled to the prohibition of murder as a violation of a moral norm, something any plain reading of the Quran reveals.  But Pakistan as an Islamic Republic remains a difficult choice from which to discern this matter, the nation state never agreed to a consensus regarding Islam nor can extra-judical murders like this be reconciled to governance issue like the putative insight that Pakistan lacks the rule of law.  Any one whose visited Pakistan knows how Islamic its lawyerly class has become, it frankly sanctions this kind of behavior even to the detriment of the nation state itself.  I say this frankly because I was particularly offended by how militant Pakistan’s lawyerly class was regarding the prosecution of Musharraf.  Simply put, Pakistan’s lawyerly class is completely Islamicized.

Last year alone the Human Rights Commission on Pakistan found 1,096 cases of female Islamic sanctioned murder identical to this case.  In the past three months alone major western newspapers reported the death of a 19 year old girl burned to death after refusing marriage proposal; a 16 year old suffered an identical fate after having helped a friend elope, an 18 year old murdered by her mother after marrying a groom from a different ethnic group.  These atrocities are widely accepted in Pakistan and northern India.

Professionals reveal that these incidents are rooted in tribal and cultural cultic traditions of archaic origin, making them highly resistant to the claims of modernity even within Islam itself.  Sharia inspired customs of qisas (retribution) and diyat (blood money) enable generations to perpetuate murder under the guise of Islam.  What should not be ignored is these murders involve the participation of entire families, a conspiracy worthy of prosecution.

Outside a commanding hold on developed civil law, Pakistan’s clerical establishment is loth to encourage change.

Perhaps all we can count on are screenings of A Girl in the River”.

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The Choice Facing Chinese Leadership

When Barack Obama took the helm at the nadir of the U.S. financial crisis in 2008, no one was quite sure the policies he would seek to redress the re-capitalization of U.S. banks. Shortly before her death at the age of 93, Dr. Anna Schwartz, recalled her communique with other noted economists at the Federal Reserve that entire media networks had gotten it wrong, it wasn’t a liquidity problem but a recapitalization problem.  The banks would need to offload defaulted securitized loans to the Fed in exchange for new assets.  This was accomplished quite easily.  The next eight years saw the official Obama economic policy in permanent regulatory capture of capitalism, zero interest rate policy, quantitate easing; all to the detriment that became the canard of secular stagnation.

I point this out before I begin criticizing Chinese leadership.  Truth be told, the U.S. possesses a unique responsibility in being a reserve asset, for it permits us to run deficits that would easily kill other political economies.

Currently, Chinese leadership is paralyzed.  It has not decided whether it will privatize or seek redress toward consumption in financing state-owned enterprises.  This captures why the entire Chinese political economy is gloated in debt.  Like the American’s, the only way out is market based reform.

2016 shows that neither nation state is ready, for the concept of crony capitalism underwrites both the Communists in Beijing and the neo-liberals of both U.S. political parties.

Throughout the Middle Kingdom, state owned enterprises dominate industry, even to the detriment of the rule of law as state assets are used to provide benefits to connected company bosses and political elites.  Even the State owned Assets Supervision & Administration Commission (SASAC), the rotating party-led hierarchy of state owned enterprises; the administrative body responsible for managing China’s state owned industries, rotates industry leaders in mockery of competition.  China now has over 15,000 such enterprises, all seek to avoid market based reforms that would threaten their hold of market share.

If privatization comes about, its because Beijing’s taste for subsidies and cheap capital have ended, for it costs a fortune to keep these state owned enterprises afloat, above the fray of market discipline.  Over the last twenty years, Beijing has spent over $300 billion in subsidies.  Two market indices to watch:  the components of debt ratio that underwrite these GSE (government sponsored entities) is proportionally maxed out and returns on assets on entire industries lags far behind privatized firms.  Even with China’s central bank pumping liquidity with capital controls isn’t enough to prevent Beijing’s Communists from seeking the creation of new oligarchies in privatization.  It happened in Russia under Yeltsin, it can happen in China.

If Chinese authorities seek reform, they should remember their own history, for Chinese economic reform began in 1978 in the countryside.  Party officials (guanxi) permitted rural entrepreneurs to begin, absolutely no one sought permission from the center.  Land was de-collectivised and contracted out providing the very price signals needed for an extended order to begin.  What underwrote the success of early capitalists was boldness, transparency and long-term planning.

How best should China go forward toward privatization?

It could begin with foreign direct investment or the creation of federal competitive auctions of industries.  This would help create, strengthen legal and institutional frameworks that help sustain the creation of capital.  Putting domestic rivals on an equal footing with foreign investors requires the rule of law.

Why will none of this happen?

Any initiative that removes the role of the state in the allocation of priced capital threatens the political base of Communist leadership.

The U.S. has an identical problem with its own political parties.

Until authorities acknowledge the right of civil society to flourish outside the confines of myopic authority, we suffer.


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