Hearts and Minds

It is being widely reported that A U.S. air strike in the Iraq city of Fallujah has killed at least 18 and as many as 24 Iraqis. It is being reported that women and children are amongst those killed.

The strike was ostensbly an effort to kill Abu Musab al-Zarqawi - who may or may not be linked to al-Qaeda. As we've reported previously, al-Zarqawi's group, Jamaat al-Tawhid wa'l-Jihad, was at odds with bin Laden's al-Qaeda, and a member proclaimed that al-Zarqawi's group was created to be an alternative terrorist group for "Jordanian's not wanting to join al-Qaeda."

The U.S. military hasn't said anything that I can find as of posting time that would lead one to believe that al-Zarqawi or any of his people were killed in the strike.

Stating the obvious, this is likely to further inflame anti-U.S. sentiment ahead of the 'transfer of sovereignty' to Iraq on 30 June.

It doesn't matter how we perceive this event. What matters most is how Iraqis and the Arab Street views this operation, and how they will respond.

I read the English version of Islam Online to get a perspective that the U.S. corporate media simply will not be allowed to broadcast.

A breaking story without any link I can find is that Iraqi women are marching to show support of Moktada al-Sadr.

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Random bs.

I think the U.S. should abolish the oxymoron: smart bomb

Blog Stuff

I'm working on another template for the blog. I want to really clean up the RH column, and style the LH column. I'm leaving the center column as it is....I like it just the way it is.

I'm also going to do away with the style switcher. The two upper links to pop-ups are going to get a face lift as well.

I hope it's a change for the better.

Oh yeah, the best part about this new template is that I'm going to work on it as the plane carries me to the Carribean next week.

I'll be on dial-up, but it's only nine days. Oh, the things I endure. :)

Wage Depression

There has been a lot of partisan tit-for-tat bickering over the strength, nature and yes, even the reality of the current economic expansion.

It's no secret that Bush has been actively talking up the economic recovery recently, saying the economy is in "high gear".

Equally apparent is Kerry's downplaying of the current economic expansion. Kerry is - as late as last week at least - invoking comparisons to the Great Depression of the 1930s.

Leaving aside the long term issues that ever-widening deficits and lack of spending control is likely to have, what is the current and likely near term state of the economy? How is the state of the economy affecting wage workers?

I'll make a meager and incomplete attempt to answer these two questions(please bear in mind I'm an engineer, not an economist).

I'd say it's a mixed bag. This rising tide hasn't lifted all boats. In fact, while corporate profits have been quite robust - startlingly so - the wage worker has actually lost ground.

Where's my evidence, you ask. From the Bureau of Economic Analysis. Right from the Feds.

As far as their respective statements on the economy, both Bush and Kerry are right, and also wrong.

By the numbers:

Corporate profits have risen ~62.2% since the peak, compared to average growth of ~13.9% at the same point in the last eight recoveries that have lasted as long as the current one. This is the fastest rate of profit growth in a recovery since World War II.

This certainly bolsters Bush's statements about the current state of the economy when he talks about "company profits" and so forth. I have no qualms about that. It's accurate.

Total labor compensation has also turned in a historic performance: growing only 2.8%, the slowest growth in any recovery since World War II and well under the historical average of 9.9%.

Most of the growth in labor compensation have not gone toward larger paychecks, they have gone into non-wage items. Rising health care costs and pensions account for the majority of the growth.

Growth in wage and salary income - the primary barometer of the health of wage workers - has been negative for private sector workers: -0.6%, versus the ~7.2% gain that is the average increase in private wage and salary income at this point in a recovery.

This affirms Kerry's position that the economy is currently in a rather weak phase. There is independently verifiable data to make comparisons on some data sets between the economy today, and the Great Depression. Again, I have no issue with this part of Kerry's position. It is supported by facts available to anyone.

I wish that I had ready access to historical 'real' wage data to back up what I have heard cited by commentators on the Left and a few on the Right.

That position is this: growth in corporate profits combined with a drop in wage and salary incomes suggest that the recovery has a narrow base, with most American consumers only able to increase their purchasing power through debt.

Personal debt levels are either at, or within a fraction of a percent of all time highs in the U.S.

This WaPo piece from January of this year highlights both the record levels of consumer debt, and also points out that personal debt will rise along with interest rates.

In summation, both men are right on some key elements of the economy as it is today, and they are also demonstrably errant in their rhetoric about others.

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(I'll leave the bigger picture stuff to Brad DeLong and others :)

Putin's in on the Fix

According to the NYT via Reuters, ex-KGB guy and Russian President Vladimir Putin has weighed in on the side of the White House. Sort of.

[snip]..."After the events of September 11, 2001, and before the start of the military operation in Iraq, Russian special services several times received information that the official services of the Saddam regime were preparing 'terrorist acts' on the United States and beyond its borders," he told reporters.

"This information was passed on to our American colleagues," he said. He added, however, that Russian intelligence had no proof that Saddam's agents had been involved in any particular attack..[snip]

If this was indeed the case, why hasn't this been brought up until now?

Putin, Cheney and Bush have only had what..A YEAR to allege such things?!?!

I'll bin this one until further evidence can be constructed produced.

When Putin, ex-KGB and subsequent head of Russia's Federal Security Service and secretary of the presidential Security Council, the successors to the KGB, says something with no chance of negative political fallout, I'm a bit skeptical. It's in my nature not to trust spooks.

Who will be the next to roll over for the Bush White House?

People are Dying to Know

What are those nefarious agents that the lazy media, and assorted White House and military officials now refer to as "insurgents" going to be referred to after the 'transfer of sovereignty' to Iraq on 30 June?

I'll keep this post atop the heap for the weekend awaiting your illuminated responses.

Have fun, and play safe :)

Cheney v What?

I'm glad that the ever resourceful Dick 'their sand, our oil' Cheney has found the culprits responsible for the differing conclusions between the 9-11 Commission and The White House's version is due to (drum roll) the lazy media.

Dick: "The press, with all due respect, (is) often times lazy, often times simply reports what somebody else in the press said without doing their homework."

He's absolutely right. That's what got us into the Iraq debacle in the first place.

Remember those halcyon days when the media was merely amplifier and salesman for whatever the Bush Administration was selling? Oh, to be able to turn back time a year. Life as a neocon was good, and the useful idiots were aplenty. But I digress ;)

More Dick: "There clearly was a relationship. It's been testified to. The evidence is overwhelming."

"It goes back to the early '90s. It involves a whole series of contacts, high-level contacts with Osama bin Laden and Iraqi intelligence officials."

So, how did the 9-11 Commission media get things get things so wrong this time, when they were oh so accurate in their reporting from 09/11/2001 to the present?

Well, Dick doesn't answer that 'elephant in the room,' but gives us this tantalizing tease:

Asked if he knows information that the 9/11 commission does not know, Cheney replied, "Probably."

More Dick courtesy of the "lazy" media.

I have hope that the Bush nightmare may be finally drawing to a close. Of course a lot can happen between now and November. But I am now hopeful.

If that lazy media can continue to get the most accurate reflection of objective reality packaged and sold to the American people, then hey, we just might prune the Oval Office of a certain Bush come November. Just maybe.

Umm, George. Off the Meds?

Yes, a day after the 9-11 commission finds no al-Qaeda-Hussein link, our dear leader says there is..because he says there is.

Bush: "The reason I keep insisting that there was a relationship between Iraq and Saddam and Al Qaeda, because there was a relationship between Iraq and Al Qaeda."

Maybe it's just me, but this doesn't really seem to rise to the level of credible evidence.

"Trust me, I represent the government."

I think the time has come.

Say it with me, George: cog·ni·tive dis·so·nance

Oh yeah. This man should be operating the levers of powers. I think a toothbrush is the most I'd hand him.

I grabbed Bush's unbelievable quote from the LA Times.

There is a lot more fun to be had at the LA Times article(onerous registration required).

If you do read WaPo on anything like a regular basis, Pincus and Milbank(the authors of the first article I linked to) are the journos to seek out.

On Edit: If Bush had said that there is NOW a link between Iraq and al- Qaeda, at least that would have had some degree of plausibility.

On Edit Part Deux: The reason Bush is maintaining the facade of the non-link is because of this:

...I have reluctantly concluded, along with other coalition leaders, that only the use of armed force will accomplish these objectives and restore international peace and security in the area. I have also determined that the use of armed force against Iraq is consistent with the United States and other countries continuing to take the necessary actions against international terrorists and terrorist organizations, including those nations, organiza-tions, or persons who planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001. United States objectives also support a transition to democracy in Iraq, as contemplated by the Iraq Liberation Act of 1998 (Public Law 105-338)....

Directly from Whitehouse.gov.

More Comcast woes

I'm having issues with Comcast's mail server..*sigh*

If you want to reach me via email - you know to shower me with large no-strings-attached offers of cash and the like - you can use my handy dandy GMO USDA GMail acct.

Try wright.todd {at} gmail.com

Terribly sorry for any incontinence this may cause.

al-Sadr up, U.S down

This won't make CNN.

From the Moony Times comes the following:

An opinion poll commissioned by the U.S.-led Coalition Provisional Authority (CPA) last month found more than half of Iraqis surveyed believe that they would be safer without U.S. forces and that all Americans behave like the U.S. military guards pictured in the Abu Ghraib prison abuse photos.

The survey, which was not released to the American public, also found radical cleric Muqtada al-Sadr is surging in popularity as he leads an insurrection against U.S.-led forces, but would still be a distant finisher in an election for Iraqi president. The survey was taken last month.

Iraq's representative to the United States, Rend al-Rahim, said in Washington yesterday that a premature withdrawal of coalition troops would be "catastrophic" for the country and the region.

While Mrs. al-Rahim agreed that "it appears June 30 cannot come too soon for both sides," she cautioned that a power turnover should not be accompanied by a military pullout.

"Iraq would descend into anarchy and the country would be delivered into the hands of international terrorists and fanatics," she said.

"It would be catastrophic," Mrs. al-Rahim said at a conference in the District sponsored by the Foundation for the Defense of Democracies.

In Baghdad, a career foreign service officer who is working for Ambassador L. Paul Bremer's interim government and helped oversee the CPA's polling of Iraqis, described the poll results as "pretty grim."

"While you have to be saddened that our intentions have been misunderstood by a lot of Iraqis, the truth of the matter is they have a strong inclination toward the things that have the potential to bring democracy here," Donald Hamilton told the Associated Press.

Mr. Hamilton noted the poll found 63 percent of Iraqis believed conditions will improve when an Iraqi interim government takes over June 30, and 62 percent believed it was "very likely" the Iraqi police and army will maintain security without U.S. forces.

State Department spokesman Richard Boucher said, "Let's face it. That's the goal, to build those up to the point where they can take charge in Iraq and they can maintain security in Iraq."

The poll was conducted by Iraqis in face-to-face interviews in six cities with people representing the country's various factions.

Its results conflict with the generally upbeat assessments the Bush administration continues to give Americans.

Just last week, President Bush predicted future generations of Iraqis "will come to America and say, 'Thank goodness America stood the line and was strong and did not falter in the face of the violence of a few.' "

Confidence in the coalition forces stood at 10 percent.

Ninety-two percent of the Iraqis said they considered coalition troops occupiers, while just 2 percent called them liberators.

I would know that I wasn't highly regarded by the populace when the people beat their own asses with chains to protest my rule.

So, the CPA conducts the poll using taxpayer dollars, and then when the results show a less than rosy red picture of Iraqis' opinions, the Washington-Iraq Military-industrial-media complex doesn't release the results to the funders.

I know I'm shocked. ;)

There is more at link.

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Meanwhile the IAEA, you know el-Barabei's gig..now says they were wrong about portions of Iran's nuclear program.

But wait, there's more.

Iranian president Mohammed Khatami offers that Iran has "no moral commitment anymore to suspend uranium enrichment. The IAEA resolution is very bad."

"If Europe has no commitment toward Iran, then Iran will not have a commitment toward Europe," he added.

The above via WaPo.

Read both articles concerning the Iranian nuclear development shell game.

Apparently not to be outdone in the nuclear rhetoric game, Iranian senior MP Mohammad Javad Larijani averred, "You don't have to be Einstein to create a bomb."

Game. Set. Match.

I really don't know what Iran's plans are.

I'm coming to the conclusion that the U.S is spreading something to the region - and it ain't democracy. It's fear and loathing of U.S. hegemony.

More about Iran's bomb making procilivities, or lack thereof, later.

In the interim, give Iranian Noble Peace Prize winner Shirin Ebadi a listen. It's probably especially good if you've boned up your Farsi. Not to worry, for the rest of us, there is an actively working English translator present.

That's Minister al-Sadr

In a move that shows that Bush can be pragmatic, Reuters is reporting that in exchange for the Mehdi army's laying down of weapons, al-Sadr could "create a political party that could take part in elections early next year."

I'm sure there are those on the Right that will see this as further capitulation to 'insurgents' and other demonized groups. I don't frame the issue in this way.

In a Rose Garden press conference today:

Q: Mr. President, you've referred to Muqtada al-Sadr as a thug, and your administration has promised to bring him to justice. Is it appropriate for the new interim Iraqi government to now welcome him into the political fold?

PRESIDENT BUSH: The interim Iraqi government will deal with al-Sadr in the way they see fit. That's -- they're sovereign. When we say we transfer full sovereignty, we mean we transfer full sovereignty. And they will deal with him appropriately.

Bush is doing exactly the right thing here. By putting off the the Mehdi/al-Sadr issue until after 30 June, he gives the Iraqis the impression that they'll be able to control their own destinies(the U.S. military exempted).

I think that Bush is showing some real pragmatic leadership on this issue.

Bush has no Friends

The LA Times reported yesterday that 26 former diplomats and military officials have called for regime change at home. Lest you think that this is a bunch of partisan lefties, many of the signatories to the document were Reagan and Bush I appointees.

The group, which calls itself Diplomats and Military Commanders for Change, will explicitly condemn Bush's foreign policy, according to several of those who signed the document.

"It is clear that the statement calls for the defeat of the administration," said William C. Harrop, the ambassador to Israel under President Bush's father and one of the group's principal organizers.

Those signing the document, which will be released in Washington on Wednesday, include 20 former U.S. ambassadors, appointed by presidents of both parties, to countries including Israel, the former Soviet Union and Saudi Arabia.

Others are senior State Department officials from the Carter, Reagan and Clinton administrations and former military leaders, including retired Marine Gen. Joseph P. Hoar, the former commander of U.S. forces in the Middle East under President Bush's father. Hoar is a prominent critic of the war in Iraq.

Roll call:

Avis T. Bohlen — assistant secretary of State for arms control, 1999-2002; deputy assistant secretary of State for European affairs 1989-1991.

Retired Adm. William J. Crowe Jr. — chairman, President's Foreign Intelligence Advisory Committee, 1993-94; ambassador to Britain, 1993-97; chairman of the Joint Chiefs of Staff, 1985-89.

Jeffrey S. Davidow — ambassador to Mexico, 1998-2002; assistant secretary of State for Inter-American Affairs, 1996

William A. DePree — ambassador to Bangladesh, 1987-1990.

Donald B. Easum — ambassador to Nigeria, 1975-79.

Charles W. Freeman Jr. — assistant secretary of Defense, International Security Affairs, 1993-94; ambassador to Saudi Arabia, 1989-1992.

William C. Harrop — ambassador to Israel, 1991-93; ambassador to Zaire, 1987-1991.

Arthur A. Hartman — ambassador to the Soviet Union, 1981-87; ambassador to France, 1977-1981.

Retired Marine Gen. Joseph P. Hoar — commander in chief of U.S. Central Command, overseeing forces in the Middle East, 1991-94; deputy chief of staff, Marine Corps, 1990-94.

H. Allen Holmes — assistant secretary of Defense for special operations, 1993-99; assistant secretary of State for politico-military affairs, 1986-89.

Robert V. Keeley — ambassador to Greece, 1985-89; ambassador to Zimbabwe, 1980-84.

Samuel W. Lewis — director of State Department policy and planning, 1993-94; ambassador to Israel, 1977-1985.

Princeton N. Lyman — assistant secretary of State for International Organization Affairs, 1995-98; ambassador to South Africa, 1992-95.

Jack F. Matlock Jr. — ambassador to the Soviet Union, 1987-1991; director for European and Soviet Affairs, National Security Council, 1983-86; ambassador to Czechoslovakia, 1981-83.

Donald F. McHenry — ambassador to the United Nations, 1979-1981.

Retired Air Force Gen. Merrill A. McPeak — chief of staff, U.S. Air Force, 1990-94.

George E. Moose — assistant secretary of State for African affairs, 1993-97; ambassador to Senegal, 1988-91.

David D. Newsom — acting secretary of State, 1980; undersecretary of State for political affairs, 1978-1981; ambassador to Indonesia, 1973-77

Phyllis E. Oakley — assistant secretary of State for intelligence and research, 1997-99.

James Daniel Phillips — ambassador to the Republic of Congo, 1990-93; ambassador to Burundi, 1986-1990.

John E. Reinhardt — professor of political science, University of Vermont, 1987-91; ambassador to Nigeria, 1971-75.

Retired Air Force Gen. William Y. Smith — deputy commander in chief, U.S. European Command, 1981-83.

Ronald I. Spiers — undersecretary-general of the United Nations for Political Affairs, 1989-1992; ambassador to Pakistan, 1981-83.

Michael Sterner — deputy assistant secretary of State for Near East affairs, 1977-1981; ambassador to the United Arab Emirates, 1974-76.

Retired Adm. Stansfield Turner — director of the Central Intelligence Agency, 1977-1981.

Alexander F. Watson — assistant secretary of State for Inter-American affairs, 1993-96; deputy permanent representative to the U.N., 1989-1993. Source: Diplomats and Military Commanders for Change

I'll let the reader make their own decision. I think that this is without precedent in recent history.

News and stuff

It now seems very likely that Greenspan and his cohorts at the Federal Open Market Committee(a misnomer if there ever was one) will make exceedingly cheap capital a thing of the past in the near future.

By historical standards, money will still likely remain cheap.

If you look at the volatile, but necessary, increases in the cost of fuel and food, the observed rate of 0.6% falls to 0.2%. No matter how you slice it, higher food and energy costs reduce consumers ability to buy other stuff. This coupled with record - or near record - levels of household debt to equity ratios could easily conspire to unravel this weak economic recovery.

It bears(no pun intended) to be reminded of the following facts:

Small hike in rates means big jolt

However, figures clearly show that households are loaded to the gills with debt, and even if interest rates only go up by a tad -- a highly unlikely outcome -- it will be enough to set off the worst credit crunch in decades. The more dependent on debt an economy becomes, the more harm will be done by a rise in interest rates. This was clearly seen in 2000, when it took only a 1.75-percentage-point increase in the federal funds rate to trigger the Nasdaq slump and a jolting pullback in business investment.

And the fed funds rate, currently at 1%, may have to rise by well over that amount to reach a level that dampens the inflationary pressures building in the economy. Why can we be so sure that such a move would hurt the economy?

First, it would slow mortgage-related lending and thus lead to a decline in house prices in many parts of the economy. In turn, that would damage the banking sector, which is far more exposed to mortgages than it has been in the past.

Debt growth has been heady. Outstanding household mortgages have been growing at 10% or over since the end of 2001, according to Fed statistics. All through 2003, mortgage growth was 13%-plus, which is a red-hot rate, given that the average growth rate for the last 20 years is 9%. Moreover, at the end of 1993, just before the 1994 rate hikes, mortgage debt was growing at only 6%.

The impact of this debt growth on house prices has been to push them up to ridiculous levels. House prices were rising by 8% nationally at the end of last year and at much higher rates in large states like California (13.8%), New York (11.62%) and Florida (11.34%). The 20-year average nationwide growth rate is only 4.8%, and at the end of 1993 house prices were only going up by 3%, clearly indicating that this time is different.

Those vulnerable household budgets

There are other indications that house prices are way too high. Looking at the value of residential real estate as a percentage of disposable personal income is a nice way of showing how out of whack prices have gotten with incomes. That ratio is now at 182%, which is over 20 percentage points higher than its last peak in the late '80s, just before the last real estate bubble burst, Paul Kasriel, economist at Northern Trust points out. Sure, low mortgage rates make housing seem affordable, but mortgage rates will certainly rise back up to average historical levels. In April, the average mortgage rate was only 5.83%, compared with a 20-year average of 8.69% and 7.17% at the end of 1993.

And household balance sheets are hardly strong enough to take a drop in house prices. The equity that people have in their homes has plunged as a percentage of real estate assets since the mid-1980s. It is now 55%, compared with a 20-year average of 61%. Repayments on all types of household debt and leases are at a very high percentage of disposable income, and that means any increase in rates will bring down spending on goods and services. And even if individuals wanted to carry on borrowing, banks may be reluctant to extend credit at recent rates, since mortgage-related assets now account for 59% of banks' earning assets, a record high and massively up from around 30% in the mid-'80s.

The housing market takes time to drop when the credit spigot gets turned off. But the slide in house prices in certain areas will happen. This close link between debt growth and sales can be seen in the auto market. Even though automakers such as GM and Ford still grant incentives like 0% financing to consumers, they are having real problems hitting sales targets. What clearer sign could there be that people are maxed out and that auto prices are going to have to come down before cars sell?

As you can see, consumers are pretty well tapped out. I've been down this road before. When everyone's buying, you should be sitting tight, waiting for the nearly inevitable price correction.

That was Peter Eavis, commenting on TheStreet.com. This piece was Posted by MSN's MoneyCentral. This is certainly worth watching.