Nice to see books have impact, but it's the wrong historical analogy

FRONT PAGE: "Behind Afghan War Debate, A Battle of Two Books Rages," by Peter Spiegel and Jonathan Weisman, Wall Street Journal, 7 October 2009.

Obviously, I'm more with Lewis Sorley's A Better War than the other book (Lessons in Disaster, because Sorley points out, like he did in a recent WSJ op-ed, how America did re-learn counterinsurgency by the end of the war, and was succeeding at it, only to have the plug pulled by an exhausted public.

The best brands in the world

FEATURE: "100 Best Global Brands: How BusinessWeek and Interbrand pick the winners in our annual ranking (it's way more than name recognition)," BusinessWeek, 28 September 2009.

The top ten are Coke, IBM, Microsoft, GE, Nokia, McD's, Google, Toyota, Intel and Disney--8 being American. The other two are Finnish and Japanese (you guess).

Of the top 100, 53 are North American (2 Canadian), 38 are European, and 9 are Asian (Japan 7, South Korea 2). No BRICs whatsoever.

Something to consider in a world where a rising global middle class is largely unbranded.

The self-made oil crisis in Mexico

FEATURE: "The Oil Crisis Slamming Mexico: Falling Pemex revenues are widening the budget gap, but the country can't boost output fast enough," by Geri Smith, BusinessWeek, 28 September 2009.

PEMEX contributes something like 40% of Mexico's national government's budget.

But PEMEX, according to the constitution I believe, cannot accept FDI. Without access to foreign money, production capacity dwindles, new fields aren't found, etc., and the export earnings keep falling.

There is no mystery here. Mexico is doing this all to itself--out of sheer nationalism.

And it's stunningly stupid.

What makes sense in regulating financial markets?

NEW BUSINESS: "Financial Innovation Under Fire: Can we protect consumers and still be creative?" by Peter Coy, BusinessWeek, 28 September 2009.

What attracted me: Robert Shiller from Yale saying there should be a federal agency that vets new financial products. There would be some burden of regulation, but he seems to think it's needed.

How important is consumer spending to the U.S. economy?

NUMBERS: "Reconsidering Consumers' Impact on the U.S. Economy," by Michael Mandel, BusinessWeek, 28 September 2009.

The conventional claim is 70% of GDP accounted for by consumer spending.

In truth, it's more like 40%.

The measure, called "personal consumption expenditures," is inflated because it includes imported goods such as consumer electronics, which mostly stimulate somebody else's economy--not ours. It also includes nonconsumer stuff, such as spending by religious groups.

China's sore spot on Kim: an Asian ruling communist party cannot be allowed to fall

WORLD NEWS: "China Seeks Sway in North Korea," by Evan Ramstad, Wall Street Journal, 6 October 2009.

The imagery of the recent Wen trip was Party-Party-Party!

Expectation: Chinese trade with NorKo will jump up again, like it did after the last such visit.

Meanwhile, Beijing punts on the nuke issue, asking the U.S. to conduct bilats so as to lure Kim back to the 6-party.

We should expect no help from China's current 4th-gen rulers on this one. And they remain in power--allegedly--until 2012.

Iran's biggest energy consumers--only China invited to the table

WORLD NEWS: "U.S., Allies Confer on New Iran Sanctions," by Jay Solomon, Wall Street Journal, 9 October 2009.

Good chart shows top importers of Iranian crude:

• Japan at 523k barrels per day


• China at 411k (China also imports gas, making it overall the biggest importer of Iranian energy--last I saw)


• India at 374k


• South Korea at 258k


• then Italy, France, South Africa, Greece, Netherlands, Spain combine for about 720k


• ROW = 151k

What I find interesting: only China gets invited to the table on the issue, whereas 3 of the top four (Japan, India, and Korea) are not.

Big surprise: China is unsupportive on sanctions, and all those Europeans are more willing, given their lower numbers. Most vigorous is the U.S., which gets basically nothing from Iran.

One thing for America to ask Europe to go along, but clearly another for America to ask Asia to sacrifice a good source.

Police: the natural focus for our more naturally SysAdmin-y allies

WORLD NEWS: "Allies Invest in Making Police More-Reliable Partners," by Anand Gopal, Wall Street Journal, 8 October 2009.

(I find that hyphen in the title kind of odd.)

Everyone has long said that, in Afghanistan, the police lag desperately behind the army in terms of development.

Yes, excellent to see NATO allies step up and send more trainers, but the equipment deficit here is large too, so money will have to be spent for a long-term upgrade.

This year the Afghan police have lost more than 2,000 officers, "a toll far higher than that of the Afghan army or the U.S. and NATO forces."

Only about a fifth of the Afghan police units are considered partially to fully capable at this time.

Why it's got to be about COIN versus c-terrorism: the cops are drawn from local communities, so making them feel safer and more confident is doing the same for their communities. You cannot divorce one from the other. [LAST LINE TYPO FIXED: "CAN" TO "CANNOT"--BLAME IT ON MY LATEST SINUSITIS]

Investing in China: capitalizing more mobility and more caloric intake

CORPORATE NEWS: "Goldman Invests $250 Million In Geely Auto's Expansion," by Rick Carew and Norihiko Shirouzu, Wall Street Journal, 21 September 2009.

CORPORATE NEWS: "Carlyle Invests in Chinese Dairy Sector," by Ellen Sheng, Wall Street Journal, 21 September 2009.

The return-on-investment expected must be substantial, because these two don't fool around:

Private equity funds in recent months have made more investments in Chinese listed companies that need capital. Those deals don't require the same level of government approvals and due diligence needed for investments in unlisted companies.

Hard to view this as anything but a positive form of connectivity, especially in this day and age when the flows are starting to turn the other direction in terms of equity buy-ins.

But those are positive too.

Environmental compensation for the Gap when the Core pollutes

WORLD NEWS: "Compensation for Ivory Coast," by Guy Chazan, Wall Street Journal, 21 September 2009.

Brit oil-trading firm agrees to pay 30M pounds compensation to those in Ivory Coast made ill by its illegal dumping of product.

Reality is that it was a local subcontractor who did the dirty deed, but that doesn't make the parent any less responsible.

I like plenty. This results because of legal proceedings in a Brit court.

It is time for the U.S. military to leave Japan

WORLD NEWS: "In Japan, Leading the Charge to Shrink U.S. Bases: Newly Elected Lawmaker, the Son of an American Serviceman, Presses for Reduced Military Presence in Okinawa," by Yuka Hayashi, Wall Street Journal, 21 September 2009.

Profile of new Amerasian lawmaker in Japan. He says he embodies Okinawa's postwar history, so he's the guy to drive the Americans out.

His biggest problem? Plenty of Okinawans who fear the island's economy will tank after all these years of Japan's economic decline.

This fellow knows almost nothing about his American serviceman father. He still plans to go to the U.S. to find him someday.

Symbolic indeed.

Good news from my catscan

Desperate to find out why I'm non-stop sinusitis since December (after a ramping up of infection frequency in the many months prior), I see my new ENT today and look over the CT with him (on his laptop, pulled over the web), and I get the answer I was hoping for: a big cyst in the left maxillary (cheekbone sinus cavity) just like the one I had on my right a decade and a half ago. That one way back then caused a string of infections until it was resected, then the infections went away. Hopefully we get the same outcome here.

So I sked surgery for the end of the month. Not supposed to fly before then and for two weeks after, but the timing is good on that, so I'm eager to proceed. The doc will do a lot of other clean-up that's glaringly called for by the CT (he walked me through every aspect using the laptop), giving me even more hope for the outcome.

My relief here is palpable. I was fearing an outcome where he'd say, "the CT looks great and I still have no explanation for your current woes." Instead, the causality here is fairly obvious: I complain for the last two years that I'm getting all these infections that start on the left side, with the first indication being my left teeth ache, and the CT shows a big-ass cyst right over my left upper teeth.

Life is rarely so conclusive. Knock on wood.

Day surgery that offers no difficulty in recovery. I'll do it shortly before Halloween and I'll still be handing out candy.

India over Pakistan and bear the cost

ARTICLE: Pakistan warns India to 'back off', By M K Bhadrakumar, Asia Times Online, Oct 10, 2009

Again, I say, choose India over Pakistan--no matter the cost.

Best bit:

India point blank refuses to concede that Pakistan has any "special interests" in Afghanistan similar or anywhere near to what India claims to have in Nepal or Sri Lanka. On the contrary, Indian commentators insist that Delhi has a right and an obligation to be assertive in Afghanistan, considering the overall stakes in the fight against terrorism and India's "burden" as a regional power. The argument is flawless although the hubris is highly offensive.

I say, go with the logic and screw the offense.

Vietnam lessons for Afghanistan worth reading

OP-ED: The Real Afghan Lessons From Vietnam, By LEWIS SORLEY, Wall Street Journal, OCTOBER 11, 2009

Sorley's argument is legitimate, according to every knowledgeable expert with whom I've ever interacted on the subject.

Worth reading, especially since his book is getting some good play right now in the larger debate.

(Via WPR Media Roundup)

Good Kaplan piece on China

ARTICLE: 'China's Two-Ocean Strategy', By Robert Kaplan, China's Arrival:
A Strategic Framework for a Global Relationship, Edited by Abraham Denmark and Nirav Patel, Center for a New American Security, September 2009

The Kaplan piece is good.

Great bit to which I am naturally partial:

A point that bears repeating, often and early on in this discussion, is that there is nothing illegitimate about the rise of the Chinese military. China's ascendancy can fairly be compared with that of the United States following our own consolidation of land-based power in the aftermath of the Civil War and the settlement of the American West, which culminated at the turn of the 20th century with the construction of the Panama Canal. In the years of some of our most forgettable presidents -- Hayes,
Garfield, Arthur, Harrison, and so on -- the American economy chugged quietly along with high annual growth rates. Consequently, as we traded more with the outside world, we developed for the first time complex economic and strategic interests in far-flung places that led, among other military actions, to Navy and Marine landings in South America and the Pacific. Why should China follow a radically different path?

Why indeed?

Another solid bit:

China's hydrocarbon use will double again in the next decade or two. And that oil and natural gas comes overwhelmingly -- as much as 85 percent -- from the Indian Ocean through the Malacca Strait en route to China's Pacific Ocean ports. China will become more dependent on Saudi Arabian oil and Iranian liquefied natural gas in the future. Therefore, vital sea lines of communications (SLOCs) around the southern Eurasian rimland must be protected. And given China's history as a great civilizational power
since antiquity, and its relatively recent history as a victim of Western colonialism, why would Chinese leaders want to entrust such a vital defense detail to the U.S. Navy, the self-anointed protector of the worldwide maritime commons? If you governed China, with the responsibility of lifting up hundreds of millions of Chinese into an energy-ravenous, middle-class lifestyle, you, too, would seek a credible navy in order to protect your merchant fleet across the Indian ocean and Western Pacific. But the problem is that Chinese leaders are still many years away from having such a navy.

Kaplan ends the piece by saying America's naval lead over China will erode in coming years and decades, but not disappear. He says that this shifting balance of power will be an accurate capture of the shifting nature of the bilateral relationship.

I agree with the first proposition, but discount the latter. I think advanced powers and globalization in general have left the age in which Mahanian calculations matter--at least in the way they tend to be made (counting up ships).

Overall, a very sensible, perspective-providing piece with virtually no hyperbole whatsoever--an amazing achievement given the subject matter.

Rest of the report's chapter are okay, Weitz's being the best of the remaining bunch.

(Thanks: Lexington Green)

The unarmored Humvee of Afghanistan is helicopters

WORLD NEWS: "Obama War Council Weighs Troops Request: Focus Shifts Toward Preventing al Qaeda's Return; Lack of Helicopters, Shortage of Ready Troops Could Deter Big Deployments," by Yochi Dreazen and Peter Spiegel, Wall Street Journal, 9 October 2009.

The Taliban continue to make more and more of the roads inaccessible to coalition forces, thus increasing the need for helos. The Army double the number there over the last year, but the total pool is still considered far too low.

Old theme of mine, learned from helo industry lobbyists frankly: fixed rotary is the long pole in the tent of SysAdmin ops. Once I got that message, I started to notice all manner of press stories to that effect, no matter what SysAdmin situation around the Gap was being discussed. And it's true for everybody who intervenes, whether it's the U.S., NATO, the African Union, the UN--everybody.

The most reasonable proposal on Honduras

OPINION: "A New Solution For Honduras," by Lanny J. Davis, Wall Street Journal, 9 October 2009.

We've heard it before but it bears repeating, because it's a complex package:

... the resignation, after the election, of Mr. Micheletti and renunciation by Mr. Zelaya of his intention to be restored as president; the succession, as provided by the constitution, of a caretaker president between election day and inauguration day; a conciliation government representing all segments of civil society; and most importantly, binding commitments to a series of constitutional and economic reforms aimed at a more equitable distribution of wealth.

Davis is not just another asshole with an opinion--as they say. His connections to the Clintons and to Hillary in particular tell me that this publicly floated "Plan B" is serious and worth tracking.

The futility of China trying to shut up every dissident, no matter where in the world they are found

WORLD NEWS: "German Book Fair's Dissident Guests Roil China," by Vanessa Fuhrmans," Wall Street Journal, 21 September 2009.

The guest country of honor this year at the Frankfurt Book Fair is China, and 2k Chinese industry reps were expected to attend.

Then word came out about two Chinese dissidents on a panel that examines China--perception and reality. The Chinese threaten to boycott.

Tough row for China to hoe: it wants to attend and show off, but it can hardly expect to dictate what's off limits.

The book fair has held a tough line. The fair occurs 14-18 Oct.

You know booksellers: they love controversy.

Garten on the logic of a global central bank

BUSINESS VIEWS: "The Case for a Global Central Bank: With world finance increasingly intertwined, we'll need one sooner or later," by Jeffrey E. Garten, BusinessWeek, 28 September 2009.

Not a great article, but Garten is always good enough.

First he lists all the global panics since the Latin American debt crises of the 1980s, noting that each time the great powers pledged to develop a new financial architecture and then didn't. As a result, each crisis is "worse than the last" and more globally synchronized.

Honestly, you can blow that last sentence off as being both true and irrelevant to the larger reality of globalization's rapid spread across that timeframe. Frontier integration is--by definition--a time of booms and busts.

Better point:

At the heart of this reality is a simple fact: Governmental oversight remains national, while financial institutions are more globally intertwined.

So all that additional money, traveling at high velocity around the planet, can spread contagion.

The G-20, he says, is chasing the right target--the rebalancing, but the collective responses to the emergent global biz cycle are too slow.

So why a central bank?

It would be the place where all the various regulatory approaches met (something the G-20 seems to want to send the IMF's way).

It would be the guardian against players capable of generating systemic risk--the global behemoths. He says there are about two dozen such big firms today.

Third, it would set debt-to-equity ratios.

Finally, it could run crisis simulations and have them be treated as definitive--and thus serve as a crystal ball to future dangers.

I see all this ambition in Obama's "framework" for the G-20--just not the willingness to create the global central bank. Instead, everybody, under peer pressure, will set their own goals and then be called out if they don't meet them.

Gotta crawl, then we walk.

The rebalancing has begun

BUSINESS OUTLOOK: "How the Global Economy Is Rebalancing: This time Asia, the Americas, and Europe are all accelerating together," by James C. Cooper, BusinessWeek, 28 September 2009.

In 2006 our trade deficit reached 6% of our GDP. Now it's down suddenly to 2.4%.

In 2006 our balance-of-payment deficit (essentially defining our need for foreign capital) was $215M in the second quarter. This year it's $99M.

The dollar's long slide since 2002 through 2008 was about 26%, then an uptick last year in a capital fear flight from other nations to the perceived safety of the buck. But since then the slide has resumed and it is likely to continue.