Hope is not a plan

This week has seen the release of various CCTV footage clips from the Mumbai attacks of last week. This clip from the attack on the Chhatrapati Shivaji Terminus is exceptional not for the terrorism it shows, but for the heroism of the two police officers who shared between them a total of one bolt-action rifle and nonetheless held their position against two terrorists armed with automatic weapons.

This incident has unfortunately demonstrated that the difficulty in security in India does not stem from a lack of bravery, but from underequipping and probably also insufficient training (which is just another form of equipping, really) of its security forces. These two gentleman were brave enough to hold the line, but they shouldn't have had to rely on bravery alone.

The Georgian executive just sacked four of its senior ministers, in a move that, to quote the BBC, "comes as President Mikhail Saakashvili is seeking to deflect criticism from the disastrous war with Russia in August. " Given that, it is entirely unsurprising to see current Minister of DefenseDavid Kezerashvili finally getting the boot, to be replaced by his former deputy, Batu Kutelia.

Interior Ministry spokesman Shota Utiashvili said the latest sackings had been expected, especially that of the defence minister.

"After a lost war, someone should be held responsible," the Associated Press news agency quotes him as saying.

Prior to his appointment as a Deputy Minister of Defense, Kutelia was chairman of intelligence services in Georgia's Security Ministry. Kutelia was also the voice of Georgia's plans to revise its defense policy following its crushing defeat to Russia last August, as reported here:

"Military aggression by Russia had not been discussed as a threat of high probability," Kutelia said at a press conference. "The recent developments have confirmed that this threat has come true. Hence, the national security concept and defense planning in this respect should be changed."

Really? It hadn't been discussed?

One imagines Kutelia's role in the new, restructured Georgian executive may be to grab Saakashvili by the lapel and say, "Don't be stupid until we're in NATO."

BBC article

A Ponzi scheme, if you are not familiar, is an investment fraud scheme whereby earlier investors make fantastic "returns" by being paid out with money put into the scheme by later investors. As long as new investors come in, this keeps working, and the people who are making bank on the early returns act as unwitting agents to bring in more money, as they praise the scheme's manager for his or her financial prowess.

An alleged Ponzi scheme on a fantastically grand scale has just been cracked here in the States, where former Nasdaq chair Bernard Madoff is alleged to have accrued $50 billion (that's billion) in losses as the head of a fraudulent hedge fund. The criminal complaint alleges that Madoff's hedge fund, which ostensibly managed $17.1 billion for a number of major clients was, in reality, a straight-up Ponzi operation, paying out older investors with money from more recent investors, and is, in actuality, completely insolvent.

Oops.

Mr. Madoff's lawyers don't appear to be on the same page with their client on his culpability here:

His lawyer said he would fight to get through these "unfortunate events".

...and...

On Thursday, two agents from the FBI went to his apartment.

He told them he "paid investors with money that wasn't there", that he was "broke" and "insolvent", that it "could not go on" and he expected to go to jail.

Clearly, there needs to be either better regulation or significantly more robust due diligence by major investors.

BBC article

As the proposed bailout bill for the three major automobile manufacturers in the States failed to make its way through the Senate this week, a renewed wave of calls have gone out for some form of funding for these tottering companies.

"Given the current weakened state of the US economy, we will consider other options, if necessary including use of the TARP program, to prevent a collapse of troubled automakers," White House spokeswoman Dana Perino said.

She added that it would be "irresponsible" to further weaken the economy by allowing the Detroit car companies to fail.

TARP is the current financial industry bailout, which is a good fifty times the size of the proposed automotive bailout, and which went through with, oddly enough, less debate. That said, the fact of passing one with little negotiation of debate does not require that a second bill -- even one that is significantly smaller -- without proper consideration.

I was in D.C. through most of this week, which means I had a chance to listen to C-SPAN on the radio of the frankly poorly designed Ford rental that I was driving. The mantra of those supporting the bailout was that "three million" jobs depend on the industry -- that's a quarter million employed directly by GM, Ford, and Chrysler, with the rest in the industries that support them. I agree that it would be unreasonable to let hundreds of thousands or millions of skilled manufacturers suddenly lose their jobs.

But if that's the real issue, then why do we need to have three automobile manufacturers in this country?

Other than a sense of tradition and, potentially, a lack of imagination in adapting to change over time, there's no real reason that we should have the trinity of manufacturers that we currently do. I've been told by a competent analyst whom I trust that the world should have about four major automobile manufacturers -- clearly, three of these aren't going to be in the United States. With that in mind, if the real issue is saving three million jobs, then perhaps we could put this money into supporting the sideways transfer of all these skilled manufacturers into new, twenty-first century manufacturing jobs?

Is it better to patch holes in the debt structure of failing companies than it would be to support retraining of skilled manufacturers for construction of, say, alternative fuels infrastructure? Given that the coming century will necessarily be marked by the blossoming of a new wave of energy and fuel technologies, why would we choose to be the makers of bad twentieth century technology when we could, instead, be the world-leading experts in, and exporters of, cutting-edge energy infrastructure?

The two-choice question of "bailout or economic collapse?" is a false dichotomy. We have a clear third option -- spend money to invest in our workers, to build a new manufacturing base, and to seize the coming technology wave and make it a fundamentally American product. Let the automobile companies consolidate. Two companies would be just fine. Let's free those skilled workers and put their aptitude to a incredibly good use.

This is our chance to steal a march on the rest of the world. It's time to take the third option, and prosper.

BBC article

As the Madoff scam continues to unravel, we naturally have a round of people who are involved in hedge funds pointing to governments, indicating they should have detected and stopped the fraud:

In a statement, Bramdean said: "The allegations made appear to point to a systemic failure of the regulatory and securities markets regime in the US."

(Bramdean Asset Management)

Antonio Borges, chairman of the Hedge Fund Standards Board, said the scandal highlighted the need for "robust governance practices and oversight via independent boards, which will challenge management procedures and behaviour".

I, however, am inclined to echo this sentiment:

"City figures cannot call for light touch regulation yet at the same time complain that regulators missed risks that the industry failed to spot," said Simon Morris, a partner with City law firm CMS Cameron McKenna.

"It's the unequivocal job of the fund manager to check out the bona fides of whoever they chose to pass their customers' money onto," he said.

BBC article

Oil prices dropped to below $34 a barrel today on ever-decreasing demand, as economies worldwide compress. This is a dramatic drop-off from peak prices that were approaching $150 a barrel just a bit earlier this year. Although this shift has been reflected in a welcome (and significant) reduction of retail gas prices in the U.S., it also shows how having an extreme upper demand for oil creates problems for both suppliers and users.

One fuels researcher I know points out that the trend for quite a while has been for the absolute price of oil to go down, which people tend to miss by dint of looking at and comparing prices in non-adjusted dollars. Consider this oil price chronology from DOE that's in nominal (non-adjusted) dollars:

That certainly looks horrifying. Here's the same chronology, adjusted for inflation via the consumer price index:

Once we've adjusted for inflation, you can see that we were actually just approaching the price of oil around the time of the Iran-Iraq war prior to the most recent collapse. The current $34 price tag for a barrel of oil adjusts to about $6.50 in 1970 dollars, which is lower than any point on that second graph, although the aftermath of the Asian economic crisis almost made it to that point.

Previous spikes in the absolute and nominal prices of oil have convinced our country to work on alternative fuels, but subsequent dips have just as quickly shelved those efforts. There is already major concern in the current alternative fuels community that the worldwide recession will lead to yet another shelving of those efforts. Hopefully, the current climate crisis, in combination with an understanding that oil prices will necessarily go up again, will keep us from making that kind of short-sighted decision again.

You can see those DOE energy chronologies here.

al Jazeera article.

Following winning comments like "Military aggression by Russia had not been discussed as a threat of high probability" by Georgia's newly minted Minister of Defense, the Georgian parliament has released its official report on its crushing military defeat by Russia last August. Their official conclusion?

The army screwed it up.

The Georgian parliament has decided that it did everything right, and systematic problems within its military scuppered the war effort.

"The Georgian leadership managed to halt the Russian military aggression during the August events," the parliamentary commission said. But "serious systematic and personnel failures took place".

It said civilian and military leaders had failed to foresee and prepare for Russian intervention, operations lacked strategy and co-ordination, and there were problems in military communication.

It's not clear in what way Georgian leadership 'halted' The Russian military, but it is clear that the Georgian executive isn't planning on operating in a reality-based manner anytime soon. Not everyone is on the imagination-based game plan, though:

Georgia's former ambassador to Russia, vilified in November when he told the commission he believed Tbilisi had been the aggressor, said he struggled to take the findings seriously.

"The conclusions were known from the very beginning, and say nothing about the fault of the Georgian leadership, which together with Russia led us to the catastrophe we are now in," Erosi Kitsmarishvili told Georgian Imedi television.

Clearly, Russia has been provoking the hell out of Georgia for several years now, but just as clearly, Saakashvili made a remarkably poor choice in initiating a war against a massively superior military power. His unwillingness to accept responsibility for that doesn't bode well for Georgia's near future.

al Jazeera article

As the O'Reilly show runs its "Is It Legal" segment in the hotel lobby where I'm accessing wireless, they just spent some time complaining that the SEC should have "done more" to stop Madoff, and that it "dropped the ball."

One of the commentators cogently noted that apparently none of these people did their due diligence either. I'd like to politely point back to this post and its quote that, paraphrased, says, "You wanted no regulation, you got no regulation. Live with it."

I'm not particularly happy with the culture of insane laissez-faire we've been operating with over the last eight years, but I think if you were going to whine about regulations holding you down last year, you have no place complaining that the SEC didn't "do its job" when the deregulation you desired happens to bite you.

If you called for regulations when they were unpopular, you're free to say "I told you so." If you called for deregulation, you're SOL, and should stop talking now.

An addendum to this post sparked by an O'Reilly show element. The guy guest hosting the show today asked a travel expert why flights were canceled this week when there were "four flakes" of snow where he lived.

The travel expert went on to explain the concept of how snow at a hub airport screws up the flight network.

It would make me sigh, but Fox news pretty much is the benchmark for vapid anti-intellectualism cloaked in a fragile veneer of timid self righteousness.

Although there are no reliable casualty figures from Israel's aerial assault on Gaza this week, the estimate of a few hundred dead and hundreds more injured seem depressingly plausible. Although our official national line is that the Israeli strikes are justified, and the Hamas missile attacks that led up to it were clearly a terrible idea, it's hard to point to a place in this cycle where anything reasonable has happened. It's just less than a year since Israel and Hamas traded munitions tit-for-tat, and Israel has maintained a supply blockade that by a reasonable standard is, in fact, collective punishment of the Palestinian civilians within that area. Once again, it's back to missiles and air strikes, and once again, civilians are randomly suffering.

This conflict provides an unending supply of depressing quotes:

"We took Hamas by surprise, we targeted Hamas headquarters, so this is the beginning of a successful operation, I hope, but the idea is to change realities on the ground," Israeli Foreign Minister Tzipi Livni told the BBC on Sunday.

Is there an evidence-based reason to expect that barraging the area will generate fewer people who want to kill random Israelis?

Ofir Gendelman, a spokesman for the Israeli foreign ministry, suggested that casualty figures put forward by the Palestinians were misleading and insisted that only Hamas targets had been hit.

"Hamas is using figures to attract public attention, media attention and for propaganda purposes," he told Al Jazeera.

"At the end of the day we are attacking Hamas strongholds ... No civilian targets are hit, it is very unfortunate that some civilians will be hit."

As the CIA World Factbook helpfully tells us, the Gaza strip is an area about twice the size of Washington, D.C., with a population of 1.5 million, or about 4200 people per square kilometer -- roughly the population density of Boston. I challenge you to imagine an airstrike against a Boston police station that wouldn't kill civilians.

Although the exact figures are, as stated, unreliable, we know for a fact that there is collateral damage, as nine U.N. staffers have been killed so far. We can reasonably extrapolate from there that civilians are being killed, and we can imagine that this is not making the Palestinian people more sympathetic to the Israeli cause, Fatah or no.

CNN article
BBC article
al Jazeera article