FM newswire for 11 January, hot articles for your morning reading

Today’s links to interesting news and analysis…

1. The UK government’s frame continues to unravel:  “‘Flaws’ in key Lockerbie evidence“, BBC, 6 January 2010
2. “The mini ice age starts here“, Daily Mail, 10 January 2010 — This is exaggerated.  Tomorrow’s post will explain.
3. A must-read for those who want to understand our wars:  “The Shadow War – Making Sense of the New CIA Battlefield in Afghanistan“, Tom Engelhardt and Nick Turse, TomDispatch, 10 January 2010
4. More hidden history:  “Saint Elizabeth and the Ego Monster“, John Heilemann & Mark Halperin, New York Magazine, January 2010 — After Edwards was elected, then it would have become news.  This is a tombstone for today’s news media.  They knew these things, but kept it hidden least it spoil their narrative.
5. Revelation of the blindingly obvious:  BusinessWeek discovers that low quality mineral reserves are greater than high-quality reserves, and higher prices allow utilization of poor reserves:  “Endless Oil – Technology, politics, and lower demand will yield a bumper crop of crude“, 7 January 2010
6. “The COIN myth“, Jeff Huber, AntiWar, 10 January 2010

Today’s special features, appearing below:

(a)  A disturbing analysis by Juan Cole
(b)  Global financial imbalances are near the critical point; currencies (as always) are the relief value

(a)  A disturbing analysis

“Iraq, Gaza, Drone Strikes in Pakistan– the Radicalization of CIA Assassin Humam al-Balawi“, Juan Cole, Informed Comment, 9 January 2010 — Excerpt:

What is fascinating is the way al-Balawi’s grievances tie together the Iraq War, the ongoing Gaza atrocity, and the Western military presence in the Pushtun regions– the geography of the Bush ‘war on terror’ was inscribed on his tortured mind. … from a social science, explanatory point of view, what we have to remember is that there can be a handful of al-Balawis, or there can be thousands or hundreds of thousands. It depends on how many Abu Ghraibs, Fallujahs, Lebanons and Gazas the United States initiates or supports to the hilt. Unjust wars and occupations radicalize people.

The American Right wing secretly knows this, but likes the vicious circle it produces. Wars make profits for the military-industrial complex, and the resulting terrorism terrifies the clueless US public and helps hawks win elections, allowing them to pursue further wars. And so it goes, until the Republic is bankrupted and in ruins and its unemployed have to live in tent cities.

(b)  Global financial imbalances are near the critical point; currencies as always are the relief value

This year might be the point at which the stresses grow too great, and the world changes.

1. Revelation of the blindingly obvious (but still disputed):  “Are Chinese Exports Sensitive to Changes in the Exchange Rate?“, Shaghil Ahmed, Federal Researve, December 2009
2. Asian currencies are pegged to the US dollar, so euro takes the brunt of the stress.  Europe is not happy:  “Sarkozy says currency disorder ‘unacceptable’“, Financial Times, 7 Janaury 2010
3. Everyone wants to talk about currencies, Michael Pettis, 9 January 2010

Pettis goes to the heart of the problem:

The dominance of the dollar in reserve accumulation has little to do with a lack of an alternative currency and a lot to do with the inability of any country but the US to absorb the trade deficits created by export-dependent development strategies. Trade-surplus countries buy dollars because when they buy euros, they cause angry reactions from European businessmen and politicians who are uncomfortable with the impact of a rising euro on domestic manufacturing and employment. In fact, the rise of the euro against the dollar is precisely what Sarkozy claims to oppose in the first part of his statement and to support in the second part.

The spark to a massive currency revaluation might be inflation in China.  Here’s a good look at the issue, with excellent links:   “Inflation in China“, James Hamilton, Econobrowser, 3 January 2010.  Brad Delong gives introduction to Hamilton’s article:

Every month the People’s Bank of China pays 200 billion renminbi to China’s exporters to buy up the dollar-denominated assets they have accumulated and so prevent those assets from generating upward pressure on the value of the renminbi. It gets those 200 billion renminbi by borrowing them from the good burghers of Shanghai. By now the central bank owes the good burghers of Shanghai some 16 trillion renminbi. To them, this wealth is nearly as good as cash. It has been piling up for years–and because it is nearly as good as cash, the good burghers of Shanghai should be spending it.

They should be spending it. But the goods that are the counterparts of this financial wealth have been shipped via container to Long Beach. So demand in China should be massively outrunning supply, and China should be seeing strong and rising inflation.

Afterword

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