Reinvigorating USAID

It occurred to me that I might have a great way to inject some vitality and vigor into USAID.  Granted, this is somewhat of a flippant post and doesn’t address all the serious policy issues that USAID has to deal with.  But I figure with all the problems USAID is having, what with most Americans not even knowing what USAID is (!), what harm would this idea do?

So USAID, or the United States Agency for International Development, is in charge of aid programs to emerging and undeveloped countries.  Its staff has been greatly reduced in the last two decades or so, and Dubya managed to behead USAID of its key management in the same way that Reagan did to the EPA.  The USAID has such a poor image problem that SecDef Gates and SecState Clinton seem to be the ones defending the agency these days, saying that more funding and hiring energy should go into USAID.

USAID needs a lot more people.  But it doesn’t necessarily have a lot of money, especially right now.  USAID also needs a brand makeover.  It has almost no awareness in the US, and has a sketchy reputation abroad.  International development as a whole is taking some knocks.

So here’s what we do.  Send in the young entrepreneurs.  Tons of them.  Screen kids in high school and college for problem-solving curiosity and initiative.  Even throw camps to bring those qualities out of them.  Then send them to DC or to development areas worldwide.  Peace Corps on the cheap but with entrepreneurs instead of “do-gooders”.

Most of the kids wouldn’t be safe abroad, so leave them to work on projects in the US.  But here’s the rub.  Let them figure out what the problems are, and let them use their problem-solving skills to organize the projects.  That is, social entrepreneurs do best when they know their environment well and see all the problems within that society and then seek ways to fix them.  What they need is a structure around them to encourage them to solve those problems.  USAID’s goal would be to use its excellent senior managers and junior workers (apparently USAID’s main liability is its mid-career vacuum) to supervise those social entrepreneurs.

So what you get is a self-organizing insurgent initiative within USAID that is encouraging the next generation of international development/engineering social entrepreneurs to get some field experience and some hands-on time.  With very little cost and a lot of upside, not requiring large investments in career capital.

The underlying principle is that there is a whole generation of people out there ready to do something fun, cool, interesting, and helpful, but they really have no way to do it.  Let these problem-solvers do what they do best, and encourage it from an early age.

USAID can market itself this way:  sucking up young future leaders into its orbit and taking on a vibrant entrepreneurial spirit.  The boring current USAID logo says much about its decaying position within the US budget and policy priority list.  At this point it needs to take on some insurgent qualities and juggle up its DNA.

USAID’s role as an agency for development not only could take on more life abroad, but also at home, at a time when the economy is getting crushed and innovation is stagnating relative to past generations’ perceptions.

So how’s about it, USAID?  Let’s see some fire in your belly.  Let our people do what they do best.

Recruitment

I was having lunch with a couple buddies of mine, one of whom took Michael Scheuer’s “Al-Qaeda and the Global Jihad” class with me.  He reminded me of one of Professor Scheuer’s best points made during the semester.

I might have forgotten some of the details, so I apologize, but I hope to capture the main crux of his argument.

Scheuer was in the Agency during the days of the Cold War, and so recruitment of Soviets was of course a large priority.

Scheuer drew a large circle with a much smaller circle in the middle of it.  The large circle represented all the Soviet military members.  The smaller one was the top brass, the tight inner circle.

He said that the higher a servicemember got in the hierarchy within the Soviet system, the easier he was to recruit.  The reason for this was that he had more access and could see the faults with the system, how flawed it was and how vaporous it was.  The grand promises extolled by the privates and the junior servicemembers were never delivered, and after promotions and receiving more responsibilities, it became an alienating experience.

Thus the US could recruit them, no doubt in part because the US had a healthy economic and political model to confront the Communist model with.

But Al-Qaeda and the mujaheddin movement is something else entirely.  The US can’t find defectors or agents in the same way.

Scheuer used the same diagram, and then explained that it was in fact those on the periphery of the mujaheddin movement who were easiest to pick off, because they were the least indoctrinated and the most conflicted about trying to earn money versus taking up the jihad against injustice, anti-Muslim policies, etc.

Once people had been through the training camps and had seen how the senior leaders lived and led by example, eschewing comfort and wealth and the pride and glory of the world of the infidels, they in fact became even more hardened.  The inner circle of the mujaheddin are even more devout, even more disciplined in their worship of Islam, even more devoted to their cause.  They are tied together by common suffering and hardship in the camps.  They become even more incorruptible by outside attempts of recruitment.

For more, read Omar Nasiri’s “Inside the Jihad”.

The Commons as the Missing Piece?

There’s some really fascinating reading out there about what’s going to happen next.

The financial crisis and American imperial overreach has prompted some interesting discussion of the Zakarian post-American world, and whether the US will continue to be the clear hegemon in a multipolar world or just a bruised hegemon that needs to collect itself for a bit after some costly imperial wars within a larger, endless, fruitless global war.  Like mortgages and loans, risk has been so divided up and re-distributed that no one was responsible for it all…until now.  Americans, so consumption-crazy and divorced from their own government that they seek people outside the beltway and a life free of obligation from serving in the armed forces, have also parceled away their civic duties so much that no one is responsible for the still-to-come falling out in government budgeting and social services, and in consumer credit.

Bolder claims by a couple Russian authors discuss whether the US will break into several parts, or whether it’s less prepared for a crisis than the Soviet Union was when it collapsed.

At any rate, Francis Fukuyama’s call for an end of history, where democratic capitalism would become the only model, has seemed to fall dully on its face as democracies have struggled and authoritarian governments have consolidated their power while allowing for economic growth, creating a hybrid model that post-Cold War idealists did not anticipate.  As Robert Kagan wrote, history has returned and dreams have ended.

Others place a lot of the blame for upheaval on the finally delivered effects of the internet age.  One term, which I like very much, is “The Great Disruption”.  Scott Anthony at the Harvard blog writes,

“The Great Disruption didn’t start in 2008. Over the past decade, technological improvements have made starting and scaling businesses easier than ever. The rise of China, India, Brazil, and Russia mean market leaders have to deal with more sharp-elbowed competitors than ever before. And industries are frantically converging and colliding.

“Certainly the pace of change has accelerated over the past few months, but leaders in media, retail, defense, health care, automotive, and high-tech can attest that they have been grappling with the Great Disruption for some time.”

Funnily enough, I googled “great disruption” and found an article by none other than Francis Fukuyama, entitled “The Great Disruption” as well, written in 1999.  Much of the article is pretty boring, and Fukuyama was clearly wrong about the end of history, but he correctly identified massive social upheaval far before the current blame game that’s been put squarely upon internet disruptiveness:

“People associate the information age with the advent of the Internet, in the 1990s but the shift from the industrial era started more than a generation earlier, with the deindustrialization of the Rust Belt in the United States and comparable movements away from manufacturing in other industrialized countries.

“But there is a bright side, too: social order, once disrupted, tends to get remade, and there are many indications that this is happening today. We can expect a new social order for a simple reason: human beings are by nature social creatures, whose most basic drives and instincts lead them to create moral rules that bind them together into communities. They are also by nature rational, and their rationality allows them to spontaneously create ways of cooperating with one another. Religion, though often helpful to this process, is not the sine qua non of social order, as many conservatives believe. Neither is a strong and expansive state, as many on the left argue. Man’s natural condition is not the war of “every man against every man” envisioned by Thomas Hobbes but rather a civil society made orderly by the presence of a host of moral rules. These assertions, moreover, are empirically supported by a tremendous amount of research coming out of the life sciences in recent years, in fields as diverse as neurophysiology, behavioral genetics, evolutionary biology, ethology, and biologically informed approaches to psychology and anthropology. The study of how order arises – not as the result of a top-down mandate by hierarchical authority, whether political or religious, but as the result of self-organization on the part of decentralized individuals – is one of the most interesting and important intellectual developments of our time.”

Perhaps Obama’s campaign and the grassroots/netroots movements are early signs of a re-ordering.

All these factors seem quite fair to me to discuss and they all probably play key roles.  But, as I’ve been writing about for a while, there is also talk about the end of radical free market ideology that became codified after Reagan and Greenspan were anointed gods among us.  Greenspan has since admitted that there were errors in his analysis.  A whole generation of Americans who grew up fearing Communism reacted against it by turning to corporatism in its extreme forms, in the process removing the key aspects behind successful democratic capitalism (accountability, sustainability, competition).

What we have now in the US is hardly a democratic, capitalist system, what with protected trade, voter suppression, weakened individual rights, rampant oligopolies, and little oversight to nurture markets.

I just started reading Michael Heller‘s “The Gridlock Economy”, in which Heller coins the term, “the tragedy of the anti-commons”.  This was a Christmas gift from my parents.  My fellow Georgetown colleague Kevin has read it and recommended it to me.  What’s struck me so far is this diagram:

gridlockdiagram

[This diagram is not representative of Heller’s whole argument.  He later adds the “anti-commons”, an off-shoot of “private” property.]

Heller argues that the yearning for private property rights has led to dividing things up so much that they become underutilized.  We know this to be true from egregious examples like the war for spectrum and intellectual property rights controversies and the duplication of music and movies for piracy.

What I see above is where the future is going.  The late 19th century and early 20th century gave rise to stateism, socialism, and communism.  State command of the economy, top-down solutions.  What came next was a move towards private control of resources, within the popularized desire for capitalism in the west.  That may have reached its zenith now that such carved-up property rights have been found to be unsustainable for future growth, forming an “anti-commons”.

Now authors like Heller and Lawrence Lessig are talking about the commons, allowing for what is essentially a way to democratize, incentivize, and innovate for individuals.

Of course, you could shred this argument to threads but I think that what’s left for us to actively explore legally and socially is the move towards promoting more commons.  That much seems fair to say.  We’ve tried to prevent overuse of the commons, and we went too far.  Now we will try to prevent underuse of the anti-commons.

Some questions:  where were we before all this?  Monarchies, despots, highly top-down efforts?  And before that?  Small tribes exhibiting shared, collective, cooperative behavior, competing for resources against other tribes?  How far have we actually come?

Will we go too far in promoting a commons before finding a happy medium between state, private, and commons?  Will the commons finally allow for many of the best hopes for democracy such as individual empowerment and self-actualization?  What of Marx’s claims that capitalism gives way to socialism because capitalism is inherently unsustainable?  Have we finally discovered all the core components towards a sustainable way of life, and now we just need to fine tune the balance?

US Forces "Volunteer" to Leave Iraq

It’s interesting to live through the times of American occupation of Iraq.  What the Bush Administration sees as a necessary move, not without its faults, that has eventually led to a nascent democracy, is nothing short of tragically comic.  What we see as “giving peace in the Middle East a chance” will in future history books be seen as imperial overreach, classic quest for respect, influence, and resources, and geopolitics.

It’s clear Americans long gave up on this “war” and no longer want any part of it in any sense except to support the troops, whatever that means anymore. (I suspect “support the troops” is akin to wishing a homeless guy well when you see him but walk on by nervously, hoping he doesn’t attack you).  It’s clear the rest of the world thinks our occupation of Iraq is foolish and naive, and some countries and non-state actors think it’s wonderful that we’re willingly spending blood and treasure on an endeavor that’s going to hurt us for decades to come.

It’s also clear that we’ve learned nothing about Islam, Arabs, history in the Middle East, the international system, or democracy as a result of meddling with Iraq.  Which is perhaps the most tragic thing, given that we’ve invested so much in the damn place.  But I guess when Madoff, the Big 3, big banks, and the Bush Administration take us for fools and we hardly put up a fight, we deserve the pains of our own negligence and ignorance.

So what’s going on in Iraq now?

The US and Iraq “agreed” on the terms of American military withdrawal from Iraq recently.  The full document of the agreement between the US and Iraq can be read on Scribd.

The US is required to leave all Iraqi cities by June 30, 2009.  It is then required to remove all military forces (in which the document goes into elaborate definition of what that consists of) by the end of 2011.  Which is still a full 3 years from now, I might add.

Sounds great, right?  Pretty simple and realistic?

Well, the Sadrists refuse to acknowledge the passing of this agreement by the Iraqi Parliament and Al-Maliki.  Their logic is that the deal would be legitimizing American presence in Iraq, and therefore they disapprove.  Juan Cole has a further breakdown of the various Iraqi parties’ takes on the agreement and on federalism vs. central government.

Real Iraqis do not want us in their country (although they do want security).  The only ones who want us there have interests in keeping us there.

Everyone knows this deal is a farce.  The US does indeed want to remove most of its troops, and thankfully through electing Obama, this seems more of a reality.  But there is no way the US is giving up too much of its military presence in Iraq.  It will continue to provide “technical advisors” and “trainers” for Iraq’s military, air force, and intelligence.  Intel and the central government will undoubtedly be strongly influenced by the CIA and other covert operations.  The US has built massive bases and is still working on a brand-new embassy.  These will require logistics, support, and maintenance.

Iraqis know that the US isn’t going away soon.  It may not be clear (even to Americans) what the US wants from Iraq, but it’s pretty clear nothing good or stable will come out of it.

Meanwhile, Iraq is not going to improve.  If someone says the surge worked, you can just stop trusting anything else they say.  Baghdad is “calmer” now because it’s been walled off and because ethnic separation has already occurred.  The number of troops that were added are not commensurate with numbers needed to be able to quell violence — through the rest of the world or through the rest of history.  It seems as though the US bought off the Sunnis to get them to play ball in getting rid of Al-Qaeda, who should have always been an unwelcome presence in Iraq.

People still don’t get why Bush was so bad.  This guy is dumb.  He is happy watching the illusion of elections and democratic government, but he has no understanding of what all that actually entails.  As long as people go through the motions of voting, he thinks it’s progress.  When it comes to what happens afterwards, like the election of someone he doesn’t like, or massive violence and calls of fraud, he doesn’t know what to do with it.

This is why we’re supposed to elect people who understand politics, regional sensitivities and political levers, and maybe even a little knowledge of economics.  It bothers me that people claim Bush is devious and sneaky; he’s clearly not.  He’s a well-meaning buffoon who’s a puppet of the long-time buddy network he installed underneath him (look at how long Cheney, Rumsfeld, Negroponte, et al have been in the game of Machiavellian imperialism).

He’s happy with Iraq, even though Al-Maliki’s Iraq is somewhat akin to a banana republic, without the bananas.  Al-Maliki is on shaky ground and you can bet as soon as he can, he’s going to wipe out any resistance within his government as soon as the US looks the other way (as he did with “former Ba’athists”, the new red-headed stepchild in Iraq and, more recently, with Sunni coup collaborators).  So if you’re Sunni, better watch out.  If you’re Iranian, welcome!  If you’re Kurdish, you’re hoping everyone ignores you so you can continue to slink on by and come closer to a modern Kurdistan.  Until Turkey decides it’s going to take the same opportunity to throw Kurdistan against the wall like Russia did with Georgia.

Doesn’t it piss you off that Bush is clueless about this stuff?  When has he talked about how the Sunnis in Saudi (his friends, I might add) and the Gulf states and Pakistan feel threatened by the strongly Iranian-influenced Iraq?  Bush has completely depleted all of our political capital and armament to do anything more in the Middle East.  The US public won’t stand for further meddling in the Middle East, and all the international players involved in the region realize that the US has no sway there once its military leaves.

In other words, it’s going to be a bloody, messy fight in the Middle East once we leave.  And we will watch cluelessly with our mouthes agape, wondering why those damn Ay-rabs can’t all just get along.  Al-Maliki and the Sunnis will go at it after we leave.  Any vacuum of power will invite Al-Qaeda and other global insurgency groups back in.

The irony is that it seems as though Iraqi politics is pretty interesting on its own, and the most powerful interests in Iraq (like, for instance, the highest grand cleric, Al-Sistani) are trying to push for a sovereign, independent, democratic government.  But the US is determined to be the “peacekeeper” and state-builder, so it’s decided to stay.  The biggest railroading issue in Iraqi politics is, of course, American occupation, but from our lens, we see it as keeping the place from descending into chaos.

As Bill Easterly, development economist, would call it, this is the white man’s burden.  We feel as though it’s upon us to fix everyone else so they can be perfect just like us.  We spend trillions of dollars on other countries, with no accountability from those who are affected by it, and let the automotive industry in our own country eat it.  Not that we should bailout the automakers, but we sure do wrangle a lot more with smaller amounts of money for our own peoples’ education and well-being than we do about the trillions spent fixing countries we don’t understand.

This shit is never-ending.  When will we realize that the best thing we can do is to not get involved?  Are you looking forward to two decades from now when we’re stuck with a bunch of damaged, hurting veterans and an Iraq situation that’s still chaotic?  This is the same stuff you read about in foreign policy history books where the colonizers drew arbitrary borders for entire peoples and then wondered why it didn’t work out.

I hope that this all will not happen, but the underlying currents of neo-imperialism, interventionism, paternalism, love for war and oil, and more, still run strong and are indefatigible in American politics, even after Obama’s being selected president.

Again, I have to be amazed at how we’re now willfully “leaving” Iraq under an “agreement”, which basically, when translated, amounts to us running with our tail between our legs now that the US public wouldn’t take it anymore (after even a Democratic Congress refused to answer the peoples’ wishes to withdraw).

Of course, the warmongerers (most of whom have never been in a combat environment) out there will call this cowardice and emboldening the enemy.  Well, too bad.  If employing the democratic support of your people to support your foreign wars is too difficult, then maybe the point is that the war isn’t actually worth it?  To argue differently is to question democratic rule by the people.  The flip side of that, if you are a pragmatic warmongerer, is that you shouldn’t start a fight you know you won’t be able to finish, even if you think it’s worth it.

I thought it was fitting that an Iraqi journalist threw his shoes at Bush.  An educated Iraqi who’s in a professional line of work throws whatever he can, given the opportunity.  That’s about as much of a condemnation as you can get.  Bush may see it as bizarre and an outlier event, but that shows how out of touch he is with the world he should be the most powerful leader of.  I would venture to say that a high percentage of the people who saw the event (regardless of nationality, color, creed, etc.) identified instantly with the journalist and knew EXACTLY what he meant.

Are we going to be ready for the pent-up resentment and hostility that will come out after we “withdraw”?  History shows that it’s never pretty when the lid comes off a boiling political pot.  An Iraqi journalist got his ribs cracked and sustained other injuries.  Saddam was filmed during what was basically a Shi’ite execution.  And these events were under US supervision!

My Tech Policy Memo to President-Elect Obama

For my excellent “What’s Shaping the Internet?” class with Professor Michael Nelson, we had to write a 6-page memorandum to either President-Elect Obama, Google CEO Eric Schmidt, or some other organization head, using three main policy points.

I chose to advocate for an innovation commons, a push for open-source government interfaces, and a national identity system.

I posted the memo online at Scribd, which hosts my other academic papers as well.  Scribd is awesome — it embeds papers within Flash so you can see the original format, and also export to PDF or crowdshare it. I would embed it here but WordPress.com doesn’t let you embed most content. =(

Again, READ THE MEMO HERE.

I know that my memo does not have a conclusion. =)  I opted to leave the explanation to the executive summary, so it’s not a proper structure…  Memorandums are sometimes the hardest papers to write, because they need to be very brief, concise, and appealing.  That’s why our program stresses it so much.  But I strayed from it here.  Hopefully the content carries the weak structure.

What the Memo Said

My logic in the memo was that the government should create an innovation- and business- enabling environment by ensuring universal broadband access, net neutrality, a hybrid public commons/privately auctioned spectrum, and increased R&D with clustering through universities and companies.

After we get more people online and collaborating, we can call upon them to help build and inspect open-source applications to allow everyone to interface with the government more efficiently as befitting a digital 21st century.

And finally I called for a national ID system to help unify all the databases, ensure personal privacy and access controls, and allow us to fix our own information and use it better within the government.

The national ID system would use a social reputation system, part of which I’m hoping to create through my start-up, Galapag.us — see the research blog if you haven’t already.

Underground Warblogging

Warblogging died in 2006.  It died when the military and US government decided that ANY servicemember’s content online must be approved through the chain of command, AFTER informing the command that that content MAY exist. (i.e. registering one’s blog even without posting content to it)

The message coming out of Iraq was warped after this decision.  Crowdsourcing what was happening in Iraq and Afghanistan halted.  We had to rely on embeds and independent journalists (Michael Yon continues to be excellent), and of course, brutal, savage terrorist/insurgent attacks to figure out what was really going on.

I attended the senior Yahoo! fellow Gaurav Mishra’s talk at the Institute for the Study of Diplomacy last week, on the subject of citizen journalism/media during the Mumbai Attacks.  You can read about Gaurav’s coverage of the Mumbai attacks on his own blog.  Gaurav talked about how people were now able to report instantly from the scene.

He had me say some words about my own situation, where I had to remove content from my web site to include photos from Iraq and my journal on my deployment to Iraq, after my command found out and I got in heaps of trouble for it.

This “war” is going to be over soon, yet not as quickly as I’d like.  But I guarantee you, when the smoke clears, there will be a TON of stuff coming online written by the troops on what has been happening over there.  That the military said we couldn’t post it online didn’t mean that soldiers weren’t still lying in their hooches, writing long rants on how fucked up or how successful it was over there to their loved ones.  Soldiers, Marines, and others were still snapping photos and taking video of what they saw.  All that stuff is out there NOW, but it is underground.

It will bubble to the surface once all these people feel that it is safe to do so.  You will probably see more books published again.  Few would be worth reading.  But that’s not the point.  The point is that they will have the ability to express themselves again.

About the best we’ve had lately is a book written by a pseudonymous former Army interrogator who decried US torture practices, and a 60 Minutes interview by a pseudonymous former Delta operator who said his team could have had a good shot at killing Osama bin Laden in the early stages of the “war” in Afghanistan.

Pseudonymity, anonymity…both are great ways to circumvent broken systems.

You can also expect revelations, scandals, and investigations to come soon for other related reasons.  The changing of the political appointees and DC guard will bring out exposés on the Bush Administration.  The financial crisis will expose the corruption in Wall Street (like the latest hedge fund/NYC investor scam).  Much of the rot that’s spread as a result of Dubya will get exposed.  I should add that it’s not that the Democrats are not a part of it too — the politicians all had their hand in the till.

The flood of information that people didn’t want you to hear is coming.

[

edit:  Newsweek just did a great story about Thomas Tamm, the guy who gave the New York Times a heads-up on the wiretapping scandal that would later emerge as a collage of different whistleblowers’ reports.  People won’t be as afraid to report, once the horrible Bush Administration leaves.

My buddy d14n wrote a blog post about Tamm also, and he verified the info on how and where to contribute to the Thomas Tamm Legal Defense Trust.

]

Interesting Economic Datapoints

So I’m done with this semester and I was just watching C-SPAN2, which was covering the Senate vote on the automaker bailout.  The vote failed 52-35 or so.  Dow futures were down -325 around the time of the vote.

I am still cash but am getting a bit more antsy to buy than I was before.  I have an “I know it when I see it” approach to bottoms and tops, so I’m waiting for that feeling again.

But it’s clear that the economic outlook is not good, with record unemployment numbers, commodity and energy shocks, and real bloodshed within the old American industries like media, auto, and finance.  Tech and internet has not been immune, but their companies are still announcing improvements and new products…

AMZN

I bought AMZN at 36.5 one day but got shaken out at the end of the day by climax selling.  Since then, AMZN rallied and touched 54-55 as the market bounced off fresh lows a few weeks ago.  What a pain that was to watch.  The rally came off Obama’s announcement of the next economic team, but it’s unclear whether there’s correlation there.

AMZN should announce the next Kindle soon, and it has been opening up its web services platform up even more.  The next generation of Kindle will suck people like me in to buying digital books (and probably be the last time I buy actual books en masse) and any increase in consumer demand will grease all of AMZN’s cloudy wheels.

TED Spread

The TED spread tracks the spread between inter-bank loans and US treasury bills and is a measure of liquidity in the credit markets — if there’s a high spread, then banks aren’t lending because it costs too much to do so.  Here’s the chart:

08_12_11_ted

After the initial credit shock when Bear Stearns folded in Augustish, 2007, you can see that the spread spiked up to about 200 basis points.  From then, the market stabilized until Septemberish of this year, when all the Fannie, Freddie, Lehman, AIG, etc. crap happened.

The market was on the brink of collapse until the Fed and Treasury decided to do whatever it took along with a massive finance bailout.  Until the public money was sure to flow in, the TED spread spiked up to 450 basis points — essentially no money was flowing anywhere within the private banking sector.

The spread then fell and has stabilized as the market’s continued to sink.  Now 200 basis points seems to be an agreed-upon number, but note that it is only back to where we were after the first credit shocks.  The normal TED spread was well below 100 basis points up until 2007.

In other words, there’s still substantial risk and unwillingness to lend.

[Note:  On Tuesday, Dec. 17th, the Fed cut rates essentially to 0%, which should reduce the usefulness of looking at the TED spread since the Fed is essentially acting like another lender…]

Treasury Bills

On Tuesday, for the first time ever, three-month treasury bill interest rates went negative!  This means that, for a brief period, people were willing to PAY the government to hold their money instead of seeking a return elsewhere.  That is, people didn’t even want a return ON their money; they just wanted a return OF their money!

Later, the government managed to sell $30bil worth of T-bills at 0% interest.  Which is still ridiculous.  Here’s the chart:

08_12_11_tbills

From The Sun's Financial Diary

These are rare times…we keep seeing records being broken, aberrances being observed for the first time, red-flag indicators going off everywhere.

Iceland

Iceland’s finance-dominated stock market completely collapsed.  Here’s the chart:

08_12_11_iceland

Icelanders are devastated.  There’s pretty much nothing left.  But to add insult to injury, the index, which had been hovering in the 600’s, just plunged down to the 300’s this week after another major bank failed.

Oil

Here’s the thing about oil.  Everyone who’s been predicting peak oil soon and all these ridiculously paranoid and apocalyptic scenarios were made to look like experts over the summer when oil prices spiked to the $140’s and gas hit $4/gallon.  A lot of financial risk management and analysis reports were written up until now, assuming continued high oil prices.

Of course, oil has since crashed.

08_12_11_oil

In other words, these knuckleheads don’t know what they’re talking about, or where oil prices are going next.  The term “black swan”, I should add, really pisses me off.  Geez.  Enough with Taleb!

Certainly the shock of oil prices has everyone rattled.  The instability of prices along with Obama being elected will hopefully be enough to spur long-term energy innovations to get us out of this fucking mess.  The time for US energy independence is now.  Especially if we really believe in protecting national security, not to mention national (and global) stability.

My position on oil is that its days are numbered as the major energy source, but it will still be needed for many products and as one of many sources of energy, even after we’ve converted heavily away from petroleum.

I also do not believe peak oil is soon.  I believe oil bedevils much of our foreign policy and is tied to our adventures with Israel and the Middle East and South America.  I believe we have in our own hands the ability to rid ourselves of these albatrosses.

I believe the chart above correlates extremely well with the “war” in Iraq, starting in 2003.  I am not sure what happened this summer in 2008.  I know that the Status of Forces agreement started hitting Iraqi politics around the same time but the massive oil spike could have been a climax of worldwide fear.  I don’t know.  The Iraq “war” seems to be all but over now that the SOFA passed and Obama is in, and I think oil is pricing that news in.  Oil has always correlated well with foreign wars.

What Next?

It’s amazing what we as Americans are willing to inflict upon ourselves.  All of this is solvable, and we know approximately what the causes are.  Until Obama got elected, we refused to acknowledge it.  Here’s hoping that Obama can translate a good plan into action. But it will be hard to generate political action when so many interests are set against it, even if it means saving our economy.

In the meantime, the economy and financial markets are still a mess, even after a bunch of layoffs have helped companies streamline.  Will those frictionally unemployed turn into structurally unemployed?  With little emphasis on job re-training, and a prolonged recession, one might think so.

Something does not feel right at all out there in my gut, making me suspicious to put my money forth, and we have yet to deal with the next big financial bomb:  consumer credit.  What happens when people, many of whom have lost jobs and have lost a safety net because of Republican idiocy, run out of money to pay back creditors?

[60 Minutes just did a report on the upcoming 2nd mortgage shock:  option arms resets.  They will balloon homeowners’ monthly expenses and look to be as bad as the first shock.  Watch the entire video for more.

07-10-24d_mortgage-resets-comprehensive

The light-green reflects the damage we’ve dealt with already, and the light-yellow and yellow are what’s still to come.  Sobering.]

Hawai'i Trying to Be a Better Place

[NOTE:  Some of the stats used in this article are outdated but I think they still capture the depth of Hawai’i’s energy risks.]

Hawai’i wants greater energy independence and is taking active steps and forming policies to do so.

This has fascinated me since this summer when I went to visit my brother on O’ahu.  I stayed with him for a few days in Honolulu and we got a good chance to catch up, since Hawai’i and DC are quite far apart.  I went to Hawai’i to attend the International Achievement Summit on the Big Island (my write-up here).

My brother, who is a programmer for a project for NOAA, is always particularly well-informed.

We were driving to the airport and he was telling me how much the oil price crisis was hurting Hawai’i, back when oil was heading for $140/barrel.  The impact of higher oil prices is particularly significant to Hawai’i, since most of its imports must be petroleum from Alaska and the Pacific Rim to support its own economy (I was unable to find the exact percentage of the total trade balance spent on petroleum imports, but oil costs them $7bil/year to import).  My brother told me the taxi drivers were hurting in particular, but also anyone in the logistics and transportation sectors.  Even here in DC, there was a $1 surcharge on all cab rides to account for higher gas prices — they only recently removed it again after oil prices dipped into the $40’s.

Hawai’i in other words is highly dependent on energy imports, moreso than any other state in the union.  Petroleum in particular takes up 90% of all energy usage, 40% being imported from Alaska.  Hawai’i’s demand is highly inelastic for energy since it is a basic requirement for economic operations there.  However, in looking at the stats in depth, most of that oil demand comes from jet fuel and military operations.  Around 60% is used for transportation purposes, and about 1/3 of that oil is used on jet fuel alone, according to some sources.

A Better Place?

So when I read an article yesterday in the NYTimes describing Hawai’i’s electric company and government endorsements (whatever that means) of Better Place (press release here), a new automotive energy infrastructure start-up, I was excited but skeptical.

Better Place is a company started by an amazing salesman, Shai Agassi.  He recently had a long write-up in Wired Magazine (which, I should add, should be a must-read for anyone — it posts all its magazine articles online for free, but subscriptions run super-cheap).  And I saw Mr. Agassi speak on a panel for an electric car conference in downtown DC over the summer, featuring a Tesla Roadster and Jim Woolsey.  Agassi is considered to be (fairly over-optimistically) the leader in pushing for the future of automotive energy.

His plan for Better Place is to build an infrastructure of charge-up stations and battery-swapping stations using existing gas station infrastructure.  Combined with electric cars, which he sees as appealing to car companies because his company can separate the battery and energy production from the car design itself (which will allow car companies to execute on what they know (or should know) best), people will be able to drive longer distances and just swap out batteries interchangeably with ones at the stations.

“Agassi dealt with the battery issue by simply swatting it away. Previous approaches relied on a traditional manufacturing formula: We make the cars, you buy them. Agassi reimagined the entire automotive ecosystem by proposing a new concept he called the Electric Recharge Grid Operator. It was an unorthodox mashup of the automotive and mobile phone industries. Instead of gas stations on every corner, the ERGO would blanket a country with a network of “smart” charge spots. Drivers could plug in anywhere, anytime, and would subscribe to a specific plan—unlimited miles, a maximum number of miles each month, or pay as you go—all for less than the equivalent cost for gas. They’d buy their car from the operator, who would offer steep discounts, perhaps even give the cars away. The profit would come from selling electricity—the minutes.” (Daniel Roth, Wired)

Very ambitious.  And hard to get off the ground, apparently.

Electric Cars in Hawai’i:  The Holy Grail and a Prototype?

But Hawai’i poses a unique environment that might be perfect as an Agassi prototype.  This is the sort of shit that an international affairs grad student such as myself really enjoys analyzing.

It is a small collection of islands with a diverse ethnic composition of mainlanders and haolis, native Hawai’ians, and many Japanese and other Pacific Islanders.  It is one of the most progressive states in the union (probably second only to DC in unanimity in voting for Barack Obama in 2008’s election).  It is a major hub for civilian and military travel.  It has the largest protected natural reserve under monument status in the country, which is what my brother is working on for NOAA.  As said before, it is highly dependent on energy imports.

So it is a highly progressive state that exists somewhat outside of the rest of US politics, its budget made frail by reliance on energy imports, and is geographically suited for not only a small-scale electric car prototype project and to rid itself of continued energy dependence.

Caveats

Interestingly, Agassi’s first attempt to install a Better Place infrastructure has been Israel.  It also has interesting characteristics, being a highly-modernized nation dependent on oil, which it imports from its “enemies” (although it cuts deals with them all the time, normally) in surrounding Muslim countries.  It is essentially isolated by geography, and is small enough for electric cars’ limited ranges.

But in Hawai’i’s case, if much of its actual oil consumption is constituted by jet fuel, then Hawai’i is ages away from ridding itself of that energy hurdle.  Electric car models cannot be transferred to airplane models yet.  We won’t have “green planes” for a while.

So one has to be realistic about the ultimate impact switching to electric cars would provide to Hawai’i.  The other component is that electric cars will increase the demand for electricity production, which is also to some degree reliant on energy imports.

Hawai’i Policy

Hopefully the Hawai’ian government understands this with its more holistic solution for electric cars within a broader energy policy (read about it here).  It instituted the Hawai’i Clean Energy Initiative (HCEI) recently as an agreement with the local utilities as of October 20, 2008, to end up receiving 70% of its energy needs from clean alternatives by 2030 as opposed to the 92-95% dependence on petroleum as of now.

So there seems to be a lot of political traction right now.  My brother informed me that Lanai is trying to build large wind and photovoltaic farms and the islands are trying to unify their electricity grids, hopefully towards the smart grid that Agassi would like in order to distribute power and conserve it during peak times versus inactive times.  So the increase in demand for electricity could be off-set by a shift from dirty energy to clean, alternative energies, facilitated by Hawai’i’s policies and initiatives.

[My buddy Monkey Pope (just returning from O’ahu) in his comment below rightly pointed out that I left out the rail transit plan in Honolulu.  My brother mentioned this to me and said it was a highly-contested debate between people concerned about budget and environmental damage and people who want to remove the burden of cars on the gridlocked roads.  As it turned out, the last election day found that the rail plan passed a vote.  So this new railway may assist in removing pollution and energy burdens too.]

Politics

All of this is also interesting within the context of the automotive industry lobbying for a government bailout in DC.  Better Place and Tesla Motors are two companies started out of Silicon Valley circles of entrepreneurs and not out of Detroit.  Hawai’i and San Francisco have signed on to the Better Place project.  Tesla’s popular among the rich investors in California.  These projects may fail, but it’s sad that they receive so little support; in fact, the tech sector seems to be the only thriving source of innovation within the US right now save for its university research (pharma, auto, media, etc. are crumbling and are full of old minds that don’t understand why they’re losing) and if the US loses that, then we’re fucked.  On top of that, the Republican party and its masters and lapdogs make fun of the fags in San Francisco and Massachusetts and the cocktail-drinking elite in DC…all the people who are busy creating real value in this country instead of peddling old garbage in strip malls that no one wants to buy now that they’re having to pay off their overpriced mortgages and credit card bills.

Here’s hoping for an innovation commons promoted by Barack Obama (a Hawai’ian) that leads to more of these companies!

Thanks to my bro for getting me to think about this stuff.

Emergence of New Systems

Last week the National Intelligence Council released its 2025 Global Trends report and naturally our Georgetown MSFS program was pretty interested in looking at it.  The report considers what the major themes and trends will be of the next couple decades and assesses how they will affect different countries, power structures, and ideologies.

It must have sucked for the NIC because at first the report was issued at 33MB and didn’t seem to be uploaded correctly.  It wasn’t until this weekend that the report was fixed and was only 8MB to download.  Lost a lot of readership that way.

Some of the report’s assessments I didn’t exactly agree with.  I felt that it sold international institutions short, saying countries and regions would seek pragmatic concerns — a return to a “mercantilist” and realist perspective — over recommitting to international institutions.  At the very least I think it’s up in the air on that count; Obama’s presence alone (see his calm, thoughtful interview on 60 Minutes) might bring people back to the table, especially with Europe seeking to reassert itself in the midst of its own internal problems with population and economic stagnation and with filling a power vacuum from America’s absence the last 8 years.

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How Bush and Obama Have Shaped My Last Eight Years

Thankfully, the eight years of Bush rule are almost over.  It has been a dark period for the American soul, spirit, and Dream.  Here is a synopsis of the Bush presidency years as seen through my life, documented through my web site and blog.

Pre-Dubya

In 2000, my mind certainly wasn’t thinking about international terrorism, financial crises, gas prices, or the like.  According to my site’s news archives from 2000, when I was 22, the most important topics in my life at that point were Napster and the dotcom bubble.  The bubble had not yet burst, although it started having some rough days.  Oil was hovering around $25-40/barrel.  I had just graduated from college and went to Italy with my dad, and France with my mom.  The dollar was strong and the Euro would continue to get weaker until about 2002, facilitating American travel abroad.  I would daytrade the market for another year and a half.

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