Will Iran Kill the Petrodollar?

Will Iran Kill the Petrodollar?

    Monday, January 30, 2012   No comments

by Marin Katusa, Chief Energy Investment Strategist, Casey Research

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran’s oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn’t make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar’s value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

We know where that situation led – to a US government suffocating in debt while its citizens face stubbornly high unemployment (due in part to the high value of the dollar); a failed real estate market; record personal-debt burdens; a bloated banking system; and a teetering economy. That is not the picture of a world superpower worthy of the privileges gained from having its currency back global trade. Other countries are starting to see that and are slowly but surely moving away from US dollars in their transactions, starting with oil.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar’s valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

The Petrodollar System

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Money, Politics, and Power: The Man Behind Gingrich’s Money

Money, Politics, and Power: The Man Behind Gingrich’s Money

    Sunday, January 29, 2012   No comments

By MIKE McINTIRE and MICHAEL LUO

The trip to Jordan by a group of United States congressmen was supposed to be a chance for them to meet the newly crowned King Abdullah II. But their tour guide had a more complicated agenda.

The guide was Sheldon Adelson, a Las Vegas casino magnate who helped underwrite trips to the Middle East to win support for Israel in Congress. On this occasion in 1999, as the lawmakers enjoyed a reception at the Royal Palace in Amman, Mr. Adelson and an aide retreated to a private room with the king.

There, the king listened politely as Mr. Adelson sat on a sofa and paged through his proposal for a gambling resort on the Jordan-Israel border to be called the Red Sea Kingdom.

“This was shortly after his father, King Hussein, died, and he was grateful to me,” Mr. Adelson explained later in court testimony, recalling that he had lent his plane when the ailing monarch sought treatment in the United States. “So they remembered.”

The proposal never went anywhere — Mr. Adelson later said he had feared that a Jewish-owned casino on Arab land “would have been blown to smithereens.” But his impromptu pitch to the Jordanian king highlights the boldness, if not audacity, that has propelled Mr. Adelson into the ranks of the world’s richest men and transformed him into a powerful behind-the-scenes player in American and international politics.

Those qualities may also help explain why Mr. Adelson, 78, has decided to throw his wealth behind what had once seemed to be the unlikely presidential aspirations of Newt Gingrich. Now, in no small measure because of Mr. Adelson’s deep pockets, Mr. Gingrich is locked in a struggle with Mitt Romney heading into Florida’s Republican primary on Tuesday.

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Exploring the Dark Universe

Exploring the Dark Universe

    Thursday, January 26, 2012   No comments

by Jonathan L. Feng

A college classmate of mine went to work for a prestigious management-consulting firm right after we graduated. Every month or so he would head out to advise a different Fortune 500 company. When I ran into him a year after he took the job, I asked him how he could possibly provide insights to top business executives when these same people had often spent entire careers immersed in their company’s work. His response? “I usually have no idea how to improve these companies, but they do. And when I come into their office and close the door, they’ll say things to me that they would never tell their colleagues.”

In The 4% Universe, Richard Panek has done something similar, not with business executives, but with physicists and astronomers who are confronting some of the biggest questions in science today. Want to hear a codiscoverer of dark matter say what she truly thinks of her legendary mentor? Want to be a fly on the wall as scientific history is shaped by the backroom dealings of a good-old-boy network? Want to read the e-mails scientists send as they jockey for position in the Nobel Prize queue? Scientists usually share such information only with their closest colleagues, but it’s all in Panek’s book, and it’s placed in enough historical and scientific context to be both intelligible and riveting.

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State of the Union's Foreign Policy: Unilateral Triumphalism

State of the Union's Foreign Policy: Unilateral Triumphalism

    Wednesday, January 25, 2012   No comments

By John Feffer

In his State of the Union address last night, President Barack Obama began with what is widely perceived to be his strong suit: foreign policy. The nation is safer under his watch, he reassured his audience, now that Osama bin Laden is gone, al-Qaeda is broken, and U.S. troops are out of Iraq. It’s too bad that the president couldn’t lead with diplomatic accomplishments to prove that the United States has reestablished a new relationship with the international community and gained a new level of global respect. Instead, President Obama felt the need to emphasize U.S. military power.

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A Visual History of Arabian Nights

A Visual History of Arabian Nights

    Tuesday, January 24, 2012   No comments

by Maria Popova 

Among 2011′s best sort-of-children's books was a magnificent volume culling the best illustrations from 130 years of Brothers Grimm fairy tales -- a visual history of some of the most memorable storytelling ever published. Visions of the Jinn: Illustrators of the Arabian Nights is a remarkable tome that applies a similar lens to another infinitely influential piece of timeless storytelling, whose impact spans from the poetry of Goethe and Rilke to the contemporary fiction of Borges and Proust to the visuals and narratives of video games.

Though the first edition of Arabian Nights contained no pictures, the late 18th century saw a flourishing of illustrated editions, the first of which were almost comically amiss in their visual depictions of Arab culture, most notably a widely pirated 1714 edition with engravings by Dutch artist David Coster, who had no grasp of the cultural differences between medieval European and Islamic cultures, so he portrayed the characters in European dress, on European furniture, amidst European architecture.

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The Bomb: Iran, Saudi Arabia, and Pakistan

The Bomb: Iran, Saudi Arabia, and Pakistan

    Tuesday, January 24, 2012   No comments

By Pervez Hoodbhoy

Once upon a time Iran was Pakistan’s close ally — probably its closest one. In 1947, Iran was the first to recognise the newly independent Pakistan. In the 1965 war with India, Pakistani fighter jets flew to Iranian bases in Zahedan and Mehrabad for protection and refuelling. Both countries were members of the US-led Seato and Cento defence pacts, Iran opened wide its universities to Pakistani students, and the Shah of Iran was considered Pakistan’s great friend and benefactor. Sometime around 1960, thousands of flag-waving school children lined the streets of Karachi to greet him. I was one of them.

The friendship has soured, replaced by low-level hostility and suspicion. In 1979, Ayatollah Khomenei’s Islamic revolution, and the Soviet invasion of Afghanistan, set major realignments in motion. As Iran exited the US orbit, Pakistan joined the Americans to fight the Soviets. With Saudi money, they together created and armed the hyper-religious Pashtun mujahideen. Iran too supported the mujahideen — but those of the Tajik Northern Alliance. But as religion assumed centrality in matters of state in both Pakistan and Iran, doctrinal rifts widened.

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Egypt Brothers mix pragmatism, ideology on Israel

Egypt Brothers mix pragmatism, ideology on Israel

    Friday, January 20, 2012   No comments

The Muslim Brotherhood is trying to maneuver its way between its fierce anti-Israel ideology and the realities of governing as it ascends to leadership in Egypt for the first time in its history and faces the key question of how to deal with the country's peace treaty with the Jewish state.

The fundamentalist group's stance on the accord — opposition but not renunciation — is a telling sign of its broader style of politics. It can play down its hardline doctrine in favor of short-term pragmatism as it looks to the long term, leaves its options open and engages in a degree of double-talk to pave the way.

The stance could also reflect the group's own evolution as its new political party, whose members will be the ones actually involved in governing, gradually has to distinguish itself from the hard line of the Brotherhood itself, an 83-year-old organization whose leadership worked for decades in a hive-like secrecy because of state repression.

"The Brotherhood is in a real challenge and real crisis. For the first time, they are in power, which forces them to be rational when it comes to foreign policy because any miscalculations might blow their gains," said Khalil al-Anani, an Egyptian expert on Islamic movements.

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Muhammad Ali at 70: What he meant, what he means

Muhammad Ali at 70: What he meant, what he means

    Wednesday, January 18, 2012   No comments

by Dave Zirin

Muhammad Ali

Muhammad Ali turned 70 on Tuesday, and the three-time heavyweight champion who doubled as the most famous draft resistor in U.S. history remains larger than life in the American mind, despite being ravaged by Parkinson's disease. Two years ago, on a visit to Louisville, Ky., I was reminded why.

In a cab on the way to the Muhammad Ali Center downtown, I saw that my driver had a Vietnam Veterans of America patch on display by his license. I asked him about his experience in Southeast Asia, and he started talking a mile a minute about his time "in country," how his "happiest days" were being a sniper in Vietnam. He even said: "You might not know this, being from Washington, D.C., but the most dangerous animal to hunt is man." He then described the task in detail. He wanted to make sure I left his cab fully aware of his pride, patriotism and unwavering belief in the duty of going to war when country called.

I didn't engage the driver in a debate about Vietnam or U.S. imperialism, but given my reason for being in Louisville, I couldn't resist one question. I asked: "What do you think about Muhammad Ali? He opposed the war in Vietnam. He called it an illegal war aimed at increasing oppression throughout the globe.

"Now you're in a city where there is a Muhammad Ali Street and you're taking me to the Muhammad Ali Center. Does that bother you?"

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Nigeria's Perfect Storm

Nigeria's Perfect Storm

    Tuesday, January 17, 2012   No comments

By Francis Njubi Nesbitt

Boko Haram militia member

Nigeria is facing a perfect storm of crises including a national strike, widespread protests, and sectarian violence in the north. Although the strikes, attacks, and protests raise the specter of another civil war in Africa’s biggest oil producer, the United States and the international community should avoid aggravating the situation by seeming to encourage a military solution.

Much of the violence in the north is blamed on an Islamist sect called Boko Haram, which means, “Western education is sinful.” Boko Haram emerged as a religious sect in 2002 but ramped up its antigovernment rhetoric and sectarian violence after security forces arrested and killed its founder, Mohamed Yusuf, in 2009. Hundreds of sect members died in the operation. In response, sect members killed over 800 people. Since then, the movement has adopted terrorist tactics including car bombs, drive-by shootings, and raids on churches. Its most spectacular attack was a car bombing of the UN headquarters in Abuja, the nation’s capital city in August 2010. 

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The quiet war in Saudi Arabia

The quiet war in Saudi Arabia

    Monday, January 16, 2012   No comments

by Joshua Jacobs*

Demonstrators in Qatif, eastern Saudi Arabia.

While western powers have been happy to use Saudi Arabia as an ally to ratchet up the pressure on Assad's beleaguered regime in Syria, it has not caught a whiff of the silent crackdown occurring within the kingdom. Since late November the protest movement which was largely snuffed out last spring has returned to the streets in force, largely centered on the oil rich and largely Shia Eastern Province.

The Saudi response was both brutal and predictable. Security forces shot and killed three protesters and wounded many more over several days of crackdowns in the eastern city of Qatif. Clashes continued throughout December as demonstrators battled security forces who routinely utilized live ammunition. In a series of retaliatory raids on the homes and districts of protest sympathizers hundreds were arrested and wounded. The killings along with the continued discrimination and mistreatment of the Shia of the Eastern Province has formed the basis of the current protest movement - a protest movement that has suffered heavily like its neighbour in Bahrain, but with little in the way of a headline.

The Death of Honesty

The Death of Honesty

    Saturday, January 14, 2012   No comments

by William Damon 

For a number of reasons, people do not always stick to the truth when they speak. Some of the reasons are justifiable—for example, humane considerations such as tact and the avoidance of greater harm. Reassuring an ungainly teenager that he or she looks great may be a kind embroidery of the truth. In a more consequential instance, misinforming storm troopers about the whereabouts of a hidden family during the Nazi occupation of Europe was an honorable and courageous deception.

Honesty is not a wholly detached moral virtue demanding strict allegiance at all times. Compassion, diplomacy, and life-threatening circumstances sometimes require a departure from the entire unadulterated truth. Some vocations seem to demand occasional deception for success or survival. Politicians, for example, are especially hard-pressed to tell the truth consistently. Perhaps this is because, as George Orwell once observed, the very function of political speech is to hide, soften, or misrepresent difficult truths. Orwell was clearly skeptical about any expectation to the contrary. In “Politics and the English Language,” he put it this way: “Political language—and with variations this is true of all political parties, from Conservatives to Anarchists—is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.”

Although in this case Orwell himself may have been guilty of overstatement for purposes of rhetorical effect, his claim cannot be totally dismissed. It would be naïve (or cynical) for anyone in today’s world to act shocked whenever a politician tries to hide the real truth from the public. For ordinary citizens, keeping up with the daily news means a constant process of speculating about what the politicians really meant by what they said and what they actually believe. It certainly does not mean taking what any of them say at face value.

Yet to recognize that honesty is not an absolute standard demanded for every life circumstance—and that we can expect a certain amount of deceit from even our respected public figures—is not to say that the virtue of honesty can be disregarded with impunity. A basic intent to be truthful, along with an assumption that people can be generally taken at their word, is required for all sustained civilized dealings.

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False Flag

False Flag

    Friday, January 13, 2012   No comments

A series of CIA memos describes how Israeli Mossad agents posed as American spies to recruit members of the terrorist organization Jundallah to fight their covert war against Iran.

Buried deep in the archives of America's intelligence services are a series of memos, written during the last years of President George W. Bush's administration, that describe how Israeli Mossad officers recruited operatives belonging to the terrorist group Jundallah by passing themselves off as American agents. According to two U.S. intelligence officials, the Israelis, flush with American dollars and toting U.S. passports, posed as CIA officers in recruiting Jundallah operatives -- what is commonly referred to as a "false flag" operation.

The memos, as described by the sources, one of whom has read them and another who is intimately familiar with the case, investigated and debunked reports from 2007 and 2008 accusing the CIA, at the direction of the White House, of covertly supporting Jundallah -- a Pakistan-based Sunni extremist organization. Jundallah, according to the U.S. government and published reports, is responsible for assassinating Iranian government officials and killing Iranian women and children.

But while the memos show that the United States had barred even the most incidental contact with Jundallah, according to both intelligence officers, the same was not true for Israel's Mossad. The memos also detail CIA field reports saying that Israel's recruiting activities occurred under the nose of U.S. intelligence officers, most notably in London, the capital of one of Israel's ostensible allies, where Mossad officers posing as CIA operatives met with Jundallah officials.

The officials did not know whether the Israeli program to recruit and use Jundallah is ongoing. Nevertheless, they were stunned by the brazenness of the Mossad's efforts.

"It's amazing what the Israelis thought they could get away with," the intelligence officer said. "Their recruitment activities were nearly in the open. They apparently didn't give a damn what we thought."

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Federal Court Rules That Discrimination Against Muslims Violates the First Amendment

Federal Court Rules That Discrimination Against Muslims Violates the First Amendment

    Thursday, January 12, 2012   No comments

Condemning an entire faith and singling out its followers for disfavored and unequal treatment by the government violates the Constitution, it turns out. That principle might seem obvious to anyone who has read the Constitution, but the State of Oklahoma and its voters did not get the message, prompting a federal appeals court today to affirm a decision blocking the implementation of an anti-Islam constitutional amendment.

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Pakistan defies US, speeds up pipeline project with Tehran

Pakistan defies US, speeds up pipeline project with Tehran

    Wednesday, January 11, 2012   No comments

via RCReadersFeed

With a decision to fast-track the construction of a natural gas pipeline from Iran, Pakistan is underscoring not only the energy needs of its flailing economy but also its growing estrangement from Washington.

The move came despite the objections of the United States and could put Pakistan at risk of violating US sanctions on Tehran aimed at denying Iran hard currency that it needs for its nuclear and ballistic missile programs.

But as President Asif Ali Zardari said in a rare television interview last week, Pakistan has no choice but to seek greater ties with its neighbors—Iran, China, India and Afghanistan—“because the economies of the West are in trouble and not in a position to help us.”

Zardari’s comments were the clearest enunciation yet of a change in Pakistan’s foreign policy away from the United States as Islamabad plans for 2014, when US-led Nato combat forces are expected to stand down in Afghanistan.

Zardari said Pakistan would not be drawn into new American “theaters of war” in the region—a clear reference to fresh US sanctions against Iran and tensions stemming from Tehran’s threat to close the Strait of Hormuz, a vital waterway for oil traffic. Pakistan, he said, would accelerate the construction of a natural gas pipeline from Iran to plug a supply shortfall that in December brought the economy here to a near standstill.

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The Greatness of Ron Paul

The Greatness of Ron Paul

    Monday, January 09, 2012   No comments

by ROBERT WRIGHT

By introducing moral imagination to the foreign-policy conversation, the Republican candidate is doing the nation an important service.

A dispute has broken out among fans of Ron Paul's non-interventionist foreign policy about whether he's a strategic liability. Paul, says Kevin Drum, is such a "toxic, far-right, crackpot messenger" that "the only thing he's accomplishing is to make non-interventionism even more of a fringe view in American politics than it already is."

It's certainly true that Paul's hawkish critics are using his weirder ideas and checkered past to try and make non-interventionism synonymous with creepiness. But, whatever their success,  Paul is making one contribution to the foreign policy debate that could have enduring value.

It doesn't lie in the substance of his foreign policy views (which I'm largely but not wholly in sympathy with) but in the way he explains them. Paul routinely performs a simple thought experiment: He tries to imagine how the world looks to people other than Americans.

This is such a radical departure from the prevailing American mindset that some of Paul's critics see it as more evidence of his weirdness. A video montage meant to discredit him shows him taking the perspective of Iran. After observing that Israel and America and China have nukes, he asks about Iranians, "Why wouldn't it be natural that they'd want a weapon? Internationally they'd be given more respect."

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Outlawing diplomacy with Iran comes with dangerous repercussions

Outlawing diplomacy with Iran comes with dangerous repercussions

    Sunday, January 08, 2012   No comments

By Jamal Abdi

For a bill being sold as a last best alternative to military confrontation, H.R.1905 sets a destructive precedent that will silence our diplomats, endanger our troops, and dangerously intensify the danger of war with Iran.

The bill contains a provision—inserted without debate in committee after garnering the majority of its cosponsors—that would outlaw contact between U.S. government employees and certain Iranian officials. This would not just tie the hands of our diplomats, it would prevent U.S. troops in the field—particularly members of the U.S. Navy operating in the tense Persian Gulf—from making military to military contacts with their Iranian counterparts.

Why is this so dangerous?  Because in the Persian Gulf, near run-ins between American and Iranian vessels are averted more frequently than many realize. If the no-contact provision were enacted, it would outlaw the U.S. Navy’s bridge-to-bridge communications with Iranian vessels in the Persian Gulf – communications that are crucial to enabling safe transit and preventing confrontation in the often crowded waterways through which 20% of the world’s oil supplies flow.

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Review: The Unconquered

Review: The Unconquered

    Friday, January 06, 2012   No comments

by Julia Heath

Sydney Possuelo is on a mission to find the last uncontacted tribes in the Amazon. A passionate and radical explorer and ethnographer, Possuelo has devoted his life to the preservation of indigenous and uncontacted Amazonian tribes, in addition to creating a team of likeminded activists called the Sertanistas. Possuelo is also the main character in Scott Wallace’s new book, The Unconquered, which chronicles the antics that ensued during a three-month mission into the Amazon to locate an uncontacted tribe called the Flecheiros (Arrow People). Wallace accompanied the group as a National Geographic journalist as it mapped the villages and wanderings of the Flecheiros using a Global Positioning System (GPS).

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Urging Obama to Stop Rush to Iran War

Urging Obama to Stop Rush to Iran War

    Thursday, January 05, 2012   No comments

by Ray McGovern and Elizabeth Murray

President Obama needs to put an abrupt halt to the game of Persian Roulette about to spin out of control in the Persian Gulf. If we were still on active duty at the CIA, this is what we would tell him:

This informal memorandum addresses the escalating game of chicken playing out in the waters off Iran and the more general issue of what can be done to put the exaggerated threat from Iran in some kind of perspective.

In keeping with the informality of this memo and our ethos of speaking truth to power, we may at times be rather blunt. If we bring you up short, consider it a measure of the seriousness with which we view the unfolding of yet another tragic mistake.

The stakes are quite high, and as former intelligence analysts with no axes to grind, we want to make sure you understand how fragile and volatile the situation in the Gulf has become.

We know you are briefed regularly on the play by play, and we will not attempt to replicate that. Your repeated use of the bromide that “everything is on the table,” however, gives us pause and makes us wonder whether you and your advisers fully recognize the implications, if hostilities with Iran spin out of control.

You have the power to stop the madness, and we give you some recommendations on how to lessen the likelihood of a war that would be to the advantage of no one but the arms merchants.

If your advisers have persuaded you that hostilities with Iran would bring benefit to Israel, they are badly mistaken. In our view, war with Iran is just as likely in the longer term to bring the destruction of Israel, as well as vast areas of Iran — not even to mention the disastrous consequences for the world economy, of which you must be aware.

Incendiary (but false) claims about how near Iran is to having a nuclear weapon are coming “fast and furious,” (and are as irresponsible as that ill-fated project of giving weapons to Mexican drug dealers).

In our view, the endless string of such claims now threaten to migrate from rhetoric to armed clashes to attempted “regime change,” as was the case nine years ago on Iraq. You know, we hope, that influential — but myopic — forces abound who are willing to take great risk because they believe such events would redound to the benefit of Israel.  We make reference, of course, to the reckless Likud government in Israel and its equally reckless single-issue supporters here at home.

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Devaluing the Think Tank

Devaluing the Think Tank

    Wednesday, January 04, 2012   No comments

by TEVI TROY

One of the most peculiar, and least understood, features of the Washington policy process is the extraordinary dependence of policymakers on the work of think tanks. Most Americans — even most of those who follow politics closely — would probably struggle to name a think tank or to explain precisely what a think tank does. Yet over the past half-century, think tanks have come to play a central role in policy development — and even in the surrounding political combat.

Over that period, however, the balance between those two functions — policy development and political combat — has been steadily shifting. And with that shift, the work of Washington think tanks has undergone a transformation. Today, while most think tanks continue to serve as homes for some academic-style scholarship regarding public policy, many have also come to play more active (if informal) roles in politics. Some serve as governments-in-waiting for the party out of power, providing professional perches for former officials who hope to be back in office when their party next takes control of the White House or Congress. Some serve as training grounds for young activists. Some serve as unofficial public-relations and rapid-response teams for one of the political parties — providing instant critiques of the opposition's ideas and public arguments in defense of favored policies.

Some new think tanks have even been created as direct responses to particular, narrow political exigencies. As each party has drawn lessons from various electoral failures over recent decades, their conclusions have frequently pointed to the need for new think tanks (often modeled on counterparts on the opposite side of the political aisle).

After Democrats lost the 2000 elections, for example, some liberal intellectuals and activists concluded that they were being outgunned in the arena of political communication, and created, among other institutions, the Center for American Progress — a think tank with a heavy emphasis on message development. And in 2008, after Republicans lost amid deep concern about the financial crisis and the ensuing economic downturn, some conservatives concluded that they needed more creative economic thinking, and this yielded, among other projects, e21 — a right-of-center economic-policy think tank based in Washington and New York. This trend — which might be summed up as "lose an election, gain a think tank" — has not only increased the proliferation of such institutions, but has also tended to make their work all the more responsive to political needs and developments, for better and for worse.

Today, think tanks are highly influential in our politics; their research and scholars are heavily consulted and relied on by our elected leaders. And in a time of both daunting policy challenges and highly polarized political debates, there is every reason to expect that think tanks will grow only more important in Washington.

As they become more political, however, think tanks — especially the newer and more advocacy-oriented institutions founded in the past decade or so — risk becoming both more conventional and less valuable. At a moment when we have too much noise in politics and too few constructive ideas, these institutions may simply become part of the intellectual echo chamber of our politics, rather than providing alternative sources of policy analysis and intellectual innovation. Given these concerns, it is worth reflecting on the evolution of the Washington think tank and its consequences for the nation.

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Marginal revolutionaries: The crisis and the blogosphere have opened mainstream economics up to new attack

Marginal revolutionaries: The crisis and the blogosphere have opened mainstream economics up to new attack

    Wednesday, January 04, 2012   No comments

POINT UDALL on St Croix, one of the US Virgin Islands, is a far-flung, wind-whipped spot. You cannot travel farther east without leaving the United States. Visitors can pose next to a stone sundial commemorating America’s first dawn of the third millennium. A couple named “Sigi + Ricky” have added a memento of their own, an arrowstruck heart scrawled on the perimeter wall in memory of “us”.

Warren Mosler, an innovative carmaker, a successful bond-investor and an idiosyncratic economist, moved to St Croix in 2003 to take advantage of a hospitable tax code and clement weather. From his perch on America’s periphery, Mr Mosler champions a doctrine on the edge of economics: neo-chartalism, sometimes called “Modern Monetary Theory”. The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

The neo-chartalists are not the only people telling governments mired in the aftermath of the global financial crisis that they could make things better if they would shed old inhibitions. “Market monetarists” favour more audacity in the monetary realm. Tight money caused America’s Great Recession, they argue, and easy money can end it. They do not think the federal government can or should rescue the economy, because they believe the Federal Reserve can.

The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is more sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy’s suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed.

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Trials and Errors: Why Science Is Failing Us

Trials and Errors: Why Science Is Failing Us

    Wednesday, January 04, 2012   No comments

By Jonah Lehrer

On November 30, 2006, executives at Pfizer—the largest pharmaceutical company in the world—held a meeting with investors at the firm’s research center in Groton, Connecticut. Jeff Kindler, then CEO of Pfizer, began the presentation with an upbeat assessment of the company’s efforts to bring new drugs to market. He cited “exciting approaches” to the treatment of Alzheimer’s disease, fibromyalgia, and arthritis. But that news was just a warm-up. Kindler was most excited about a new drug called torcetrapib, which had recently entered Phase III clinical trials, the last step before filing for FDA approval. He confidently declared that torcetrapib would be “one of the most important compounds of our generation.”

Kindler’s enthusiasm was understandable: The potential market for the drug was enormous. Like Pfizer’s blockbuster medication, Lipitor—the most widely prescribed branded pharmaceutical in America—torcetrapib was designed to tweak the cholesterol pathway. Although cholesterol is an essential component of cellular membranes, high levels of the compound have been consistently associated with heart disease. The accumulation of the pale yellow substance in arterial walls leads to inflammation. Clusters of white blood cells then gather around these “plaques,” which leads to even more inflammation. The end result is a blood vessel clogged with clumps of fat.

Lipitor works by inhibiting an enzyme that plays a key role in the production of cholesterol in the liver. In particular, the drug lowers the level of low-density lipoprotein (LDL), or so-called bad cholesterol. In recent years, however, scientists have begun to focus on a separate part of the cholesterol pathway, the one that produces high-density lipoproteins. One function of HDL is to transport excess LDL back to the liver, where it is broken down. In essence, HDL is a janitor of fat, cleaning up the greasy mess of the modern diet, which is why it’s often referred to as “good cholesterol.”

And this returns us to torcetrapib. It was designed to block a protein that converts HDL cholesterol into its more sinister sibling, LDL. In theory, this would cure our cholesterol problems, creating a surplus of the good stuff and a shortage of the bad. In his presentation, Kindler noted that torcetrapib had the potential to “redefine cardiovascular treatment.”

There was a vast amount of research behind Kindler’s bold proclamations. The cholesterol pathway is one of the best-understood biological feedback systems in the human body. Since 1913, when Russian pathologist Nikolai Anichkov first experimentally linked cholesterol to the buildup of plaque in arteries, scientists have mapped out the metabolism and transport of these compounds in exquisite detail. They’ve documented the interactions of nearly every molecule, the way hydroxymethylglutaryl-coenzyme A reductase catalyzes the production of mevalonate, which gets phosphorylated and condensed before undergoing a sequence of electron shifts until it becomes lanosterol and then, after another 19 chemical reactions, finally morphs into cholesterol. Furthermore, torcetrapib had already undergone a small clinical trial, which showed that the drug could increase HDL and decrease LDL. Kindler told his investors that, by the second half of 2007, Pfizer would begin applying for approval from the FDA. The success of the drug seemed like a sure thing.

And then, just two days later, on December 2, 2006, Pfizer issued a stunning announcement: The torcetrapib Phase III clinical trial was being terminated. Although the compound was supposed to prevent heart disease, it was actually triggering higher rates of chest pain and heart failure and a 60 percent increase in overall mortality. The drug appeared to be killing people.

That week, Pfizer’s value plummeted by $21 billion.

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Muslims and the Koran

Muslims and the Koran

    Monday, January 02, 2012   No comments

In the beginning were the words

Muslims revere the Koran. But its study is not taboo—and is in some quarters increasingly daring

RELIGIONS invite stereotypes, holy texts even more so. Non-Muslims often see Islam as a faith followed by people who hew so closely to an unchanging set of words that they ignore awkward new facts sooner than contradict its message. For critics, this attachment to a text encourages extremists—like Boko Haram, a group that in December attacked Nigerian churches: hotheads can generally find a passage that seems to justify their violence.

Such passages abound in the Koran, just as they do in the founding texts of Christianity, Judaism and many other religions. There is also a long tradition of interpreting such verses in reassuring ways. For example, it is often stressed that the Koran’s injunction to “slay the unbeliever wherever you find him” relates to a specific historical context, in which the first Muslims were betrayed by a pagan group who had signed a truce.

But when it comes to parsing holy writ, there is one big difference between Islam and most other text-based faiths. Barring a brief interlude in the ninth and tenth centuries, and a few modern liberals, Muslims have mostly believed that the Koran is distinct from every other communication. As God’s final revelation to man, it belongs not to earthly, created things but to an eternal realm. That is a bigger claim than other faiths usually make for their holy writings.

The Koran may be interpreted but from a believer’s viewpoint, nothing in it can be set aside. Yet, at least in the calm, superficially courteous world of Western academia, debating the precise text of the Koran is increasingly common—as at a conference hosted by the School of Oriental and African Studies (SOAS), part of the University of London, in November. One organiser was Muhammad Abdel Haleem, an Egyptian-born professor who has translated the Koran into stylish modern English, drawing acclaim from many, but grumbles from purists. Other contributors included a professor from Turkey, and a scholar based in Iran. But most were non-Muslims who study the text as they would any other written material—as prose whose evolution can be traced by comparing versions. New techniques, such as the use of digital photography, help compare variations and solve puzzles. All participants implicitly accepted the idea that methods used to analyse Homer, say, or German myths might elucidate the Koran.

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The Optimism Bias

The Optimism Bias

    Sunday, January 01, 2012   No comments

by Tali Sharot

Our brains may be hardwired to look on the bright side, says neuroscientist Tali Sharot in this extract from her new book

We like to think of ourselves as rational creatures. We watch our backs, weigh the odds, pack an umbrella. But both neuroscience and social science suggest that we are more optimistic than realistic. On average, we expect things to turn out better than they wind up being. People hugely underestimate their chances of getting divorced, losing their job or being diagnosed with cancer; expect their children to be extraordinarily gifted; envision themselves achieving more than their peers; and overestimate their likely life span (sometimes by 20 years or more).

The belief that the future will be much better than the past and present is known as the optimism bias. It abides in every race, region and socioeconomic bracket. Schoolchildren playing when-I-grow-up are rampant optimists, but so are grown-ups: a 2005 study found that adults over 60 are just as likely to see the glass half full as young adults.

You might expect optimism to erode under the tide of news about violent conflicts, high unemployment, tornadoes and floods and all the threats and failures that shape human life. Collectively we can grow pessimistic – about the direction of our country or the ability of our leaders to improve education and reduce crime. But private optimism, about our personal future, remains incredibly resilient. A survey conducted in 2007 found that while 70% thought families in general were less successful than in their parents' day, 76% of respondents were optimistic about the future of their own family.

Overly positive assumptions can lead to disastrous miscalculations – make us less likely to get health checkups, apply sunscreen or open a savings account, and more likely to bet the farm on a bad investment. But the bias also protects and inspires us: it keeps us moving forward rather than to the nearest high-rise ledge. Without optimism, our ancestors might never have ventured far from their tribes and we might all be cave dwellers, still huddled together and dreaming of light and heat.

To make progress, we need to be able to imagine alternative realities – better ones – and we need to believe that we can achieve them. Such faith helps motivate us to pursue our goals. Optimists in general work longer hours and tend to earn more. Economists at Duke University found that optimists even save more. And although they are not less likely to divorce, they are more likely to remarry – an act that is, as Samuel Johnson wrote, the triumph of hope over experience.

Even if that better future is often an illusion, optimism has clear benefits in the present. Hope keeps our minds at ease, lowers stress and improves physical health. Researchers studying heart-disease patients found that optimists were more likely than non-optimistic patients to take vitamins, eat low-fat diets and exercise, thereby reducing their overall coronary risk. A study of cancer patients revealed that pessimistic patients under 60 were more likely to die within eight months than non-pessimistic patients of the same initial health, status and age.

In fact, a growing body of scientific evidence points to the conclusion that optimism may be hardwired by evolution into the human brain. The science of optimism, once scorned as an intellectually suspect province of pep rallies and smiley faces, is opening a new window on the workings of human consciousness. What it shows could fuel a revolution in psychology, as the field comes to grips with accumulating evidence that our brains aren't just stamped by the past. They are constantly being shaped by the future.

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