Sunday, April 1, 2007

No more Arab capitulation

Israel had finally given its conditional assent to the Arab peace initiative launched in Beirut in 2002. Ahead of his meeting with Palestinian President Abbas on 11 March, Israel's Prime Minister Olmert said that he "approved of regional negotiations on the basis of the Arab peace initiative," noting that Israel was willing to respond to that initiative, especially the positive aspects it contained. The Israeli foreign minister then advised Arab countries not to wait for peace to normalise relations with Israel, but to act sooner. Meanwhile, reports indicated that Israel demanded limited amendments in the initiative, especially with regard to the matters of borders and refugees. During her tour of the region, Condoleezza Rice hinted in the same direction.

It is hard to fathom this rapid change of heart on Israel's side. But we known that Israel, along with the US, are in the habit of engaging in such manoeuvres whenever an Arab summit is about to convene. The aim is always the same: to distract Arab leaders from the real issues at hand. In this case, Israel's aim was to prevent the summit from taking a strong anti-Israeli line. And America did the same, arranging for the Baghdad summit to be held on 10 March, a fortnight or so before the summit. The US wanted the Baghdad conference to launch a new regional policy that may bring about a solution to the Iraqi crisis. The conference, therefore, was timed to prevent the Arab summit from taking a hard-line stance on Iraq.

The Israeli move is nothing more than a diversion tactic. Israel's prime minister speaks of the "positive aspects" of the Arab initiative but his real aim is to speak of the aspects he wouldn't agree to. This is quite predictable, for Israel is unwilling to withdraw from the occupied territories and resolve the refugee problem. As for Livni's call for normalisation before talks, this is a non-starter. What Israel wants is for the Arabs to strip their initiative of content, to turn it into the "Tel Aviv initiative". Israel wants the Arabs to normalise their relations with Israel as a gesture of goodwill. Then and only then, it would engage in talks that may or may not lead to results.

Israel wants an Arab capitulation. It saw how the Arabs changed their position in the past and hopes for much the same again. Before 1967, the Arabs saw Israel as an imperialist state. After 1967, they accepted a two-state solution. Then the Arabs offered full normalisation to sweeten the deal. Now Israel wants more.

The Arab peace initiative is not a starting point for negotiations. Its wording is too clear to allow for further talks. The Arabs didn't fashion their initiative in ambiguous language that allows for give and take. Instead, they said exactly what they meant. The problem is that the initiative offers Israel not the least that the Arabs can accept, but the most they can do. This is what makes this initiative a poor starting point for negotiations. What more can the Arabs offer?

The Arabs should not alter their peace initiative. More importantly, they should admit that Israel is not in the mood to accept the Beirut initiative or even negotiate on its basis. All Israel wants is to disrupt the Riyadh summit. All it wants is for the Arabs to make more concessions. The Arabs should ignore what Israel is saying about amending the initiative. The Arabs should tilt the balance of power in their favour. The Arabs need to establish parity, not just with Israel, but also with all those who want to control their fate.

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The REAL Face of War

Sunday, April 1, 2007


"...and they shall beat their swords into plowshares, and their spears into pruning hooks: Nation shall not lift up sword against nation, neither shall they learn war any more."

War has been romanticized in innumerable books and movies, and made fortunes for those who exploited the subject well. (Clint Eastwood is still at it, among others, with his latest opus, Flags of Our Fathers). In most movies—at least until recently—soldiers died "beautifully"—no hideous wounds, no real gasping fear in their eyes, they even got to say a few noble words for posterity, proof of a charitable destiny that, despite assigning them death, did not deny them their fifteen seconds of centerstage.

"There, for the Grace of You Know What, Go I."

But war is ugly. And war is also ruthless, sordid, and ill-mannered. It doesn't give most people time to proffer pretty speeches. And like death—which is its normal and inevitable companion—war remains in some ways unfathomable. Wars can be depicted as noble only by those who are too naive, too young, too deluded, too corrupt, too sociopathic, or too stupid to understand the obscenity that killing in such an organized fashion represents. Are there "good wars"? Maybe. Nothing is absolute, not even something as heinous as war. But we'll leave that question for another day, another article. Let us say however this much: most wars in the history of our species have been useless, stupid enterprises; for all the suffering and mayhem they have caused, they have been utterly unnecessary...the instruments of knaves and the glory of fools, a massive carnage unleashed by every single form of human defect and backwardness: greed, deceit, ignorance, fanaticism and mass stupidity.

So whether a war is "good" or "bad" —while certainly an important consideration—there is one thing that all wars are, and that is they are unvelievably, obscenely ugly—as these images attest.

This is the real face of war, which our engines of mass misinformation will never show you. We owe it to them, to those who died, to look at them, and reflect upon this criminal madness, to ponder the reasons why such people were put, found themselves, in harm's way...and who put them the hope that eventually, more and more people will try to understand the actual mainsprings of war, and mobilize to make them—at last—a thing of the past.

So, why do we fight?

We, progressives, fight to ban this horror from human history, and to do so we must revolutionize society and man.

—Patrice Greanville

One last word of caution: We suggest that only adults visit this gallery.



"Let Us Beat Swords into Plowshares" was a gift from the then Soviet Union presented in 1959. Made by Evgeniy Vuchetich, this bronze statue represents the figure of a man holding a hammer in one hand and, in the other, a sword which he is making into a plowshare, symbolizing man's desire to put an end to war and convert the means of destruction into creative tools for the benefit of all humankind.

The Economy Isn't Looking That Good Right Now

Apr 1, 2007

By Bonddad

The first quarter of this year has not been good for the economy. I have written extensively about the housing market (simply do a search on my name and you'll see a plethora of articles). However, other numbers have come out that show activity is weakening on a variety of fronts. While we're not in a recession, we may be approaching one. And worst of all, inflationary pressures may prevent the Federal Reserve from lowering interest rates.

Durable Goods Orders Down 4 of the last 5 months

Durable goods are goods that last longer than 3-5 years. These goods are more expensive. Therefore, an increase in purchases is considered bullish and a decrease is considered bearish. These orders have decreased 4 of the last 5 months.

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Here's a chart of the year-over-year change in durable goods orders. It does not include the latest number, which would send the red line into negative territory.

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Increasing Inventories

Inventories are a tricky economic number to interpret. Because of improvements in supply-chain management, I would argue inventories are less important than in previous expansions. However, businesses have increased the amount of "stuff" they have on hand. This means a few things. First, a decrease in orders because businesses already have enough stuff to sell and use. In addition, it may also mean slower sales or an overestimation of sales increases. Either way, an inventory increase is a sign that future activity may decreaese.

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Oil Prices and Supplies

Gas inventories have dropped sharply for the last few weeks and oil inventories are lower now than at the same time last year.

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Gas prices are higher than this time last year.

For the eighth consecutive week, gasoline prices increased, rising 3.3 cents to 261.0 cents per gallon for the week of March 26, 2007. Prices are now 11.2 cents per gallon higher than at this time last year

Here's a chart:

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What's particularly important about gas prices is their decrease at the end of last year helped to lower inflation. Now with prices increasing they will probably add upward pressure to CPI (see inflation below).

The GDP revision

4th quarter GDP was revised up, from 2.2% to 2.5% growth. But that's not exactly good news.

The increase in real GDP in the fourth quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, state and local government spending, and federal government spending that were partly offset by negative contributions from residential fixed investment and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

Non-residential fixed investment decreased 3.1% in the 4th quarter. While nonresidential construction increased .8%, investments in equipment and software decreased (-)4.8%. There has been some discussion about how business will react to the decreasing profit environment going forward. Some are speculating the business will decrease investment. the 4th quarter number indicates this may be correct.


The latest CPI and PPI reports indicate inflation is not under control. While it's not out of control, it is above the Fed's publicly stated preferred level of 1%-2%. This means the Fed will either be boxed in from a policy perspective and be unable to lower interest rates, or they will lower rates with the possibility that inflation may increase as a result of their lowering rates. Either way, the Fed is not in a good place.

From the latest CPI report:

On a seasonally adjusted basis, the CPI-U advanced 0.4 percent in February, following a 0.2 percent increase in January. Energy costs increased 0.9 percent in February after declining 1.5 percent in January. In February, the index for petroleum-based energy increased 0.3 percent and the index for energy services rose 1.5 percent. The food index rose 0.8 percent in February, following a 0.7 percent increase in January. Grocery store foods rose 1.1 percent, largely reflecting a 4.7 percent increase in the index for fruits and vegetables. The index for all items less food and energy advanced 0.2 percent in February, following a 0.3 percent rise in January; an increase in the index for shelter accounted for about one-half of the February advance.

Bernanke made the following comments about CPI in his latest Congressional testimony:

Let me now turn to the inflation situation. Overall consumer price inflation has come down since last year, primarily as a result of the deceleration of consumers’ energy costs. The consumer price index (CPI) increased 2.4 percent over the twelve months ending in

February, down from 3.6 percent a year earlier. Core inflation slowed modestly in the second half of last year, but recent readings have been somewhat elevated and the level of core inflation remains uncomfortably high. For example, core CPI inflation over the twelve months ending in February was 2.7 percent, up from 2.1 percent a year earlier. Another measure of core inflation that we monitor closely, based on the price index for personal consumption expenditures excluding food and energy, shows a similar pattern.

Notice the attention Bernanke gives to energy prices, which have increased over the last few months. This does not bode well for future CPI readings.

The economy isn't in a recession....yet. But the bad news keeps mounting. There is only so much an economy can make.

For economic commentary and analysis, go to the Bonddad Blog

Editor's note: also see new articles at the secondary blog

And more coming up here.

The secondary blog.