Intervention in the Middle East and the Maghreb?

"[The Palestinians] are beasts walking on two legs."

Israeli past Prime Minister Menachem Begin

"We Palestinians will take over everything, including all of Jerusalem....All the rich Jews who will get compensation will travel to America....We of the PLO will now concentrate all our efforts on splitting Israel psychologically into two camps. Within five years we will have six to seven million Arabs living in the West Bank and in Jerusalem....You understand that we plan to eliminate the State of Israel and establish a purely Palestinian State....I have no use for Jews; they are and remain Jews."

Yasser Arafat, 1996

With all the human suffering in Libya during the current period of unrest, calls are being made for intervention from the West. We always like to meddle in the desert. While people in Zimbabwe or North Korea have been subject to the same humanitarian injustices over longer periods of time the West never seem to intervene. The Islamic nations have for as long as many of us can remember, had troubles, but it wasn't always like this. It began with a war in Europe, nearly 100 years ago. 

The First World War erupted and split Europe in two. Britain decided to opt on the side of France, a country who it had been in war with for hundreds of years prior to the events of 1914. We had more in common with Germany, but our Government had created a vast empire, therefore France and Russia were seen as a better ally in order to protect the kingdom. Who knows how history would have turned out had we sided with our more natural allies the Germans. A quick war? No Russian Communist Revolution? No Adolf Hitler? No Joseph Stalin? Historically counterfactuals are always an interesting area of discussion but instead two balanced alliances slogged it out for 4 plus years. Various fronts were fought. One such front was in the middle east that the British created, the famous Lawrence of Arabia rallying the people of the middle east against the Ottoman empire.

At the same time with Britain desperate to recruit support, it promised Jewish volunteers land in the middle east for their efforts. They also made promises to the Arabs fighting against the Turks for the land in the same area.

After the war Arabs and Jews lived side by side in the early days during the British Mandate. During the post war years an explosion of Jewish immigrants flooded the area, so much so that the economy could not absorb the extra labour. Discrimination became common. Divisions became more visible. The British exacerbated the problem they had started. With the rise of Fascism in Europe, more Jewish people fled towards Israel. In the past America would have been able to absorb the numbers, but now with its strict immigration laws, it was no longer possible. America had closed its borders as it was no longer as scarcely populated as it once had been. 

With the Second World War Hitler spread anti-semitic propaganda in the region. The Jewish secret security forces, Haganah, fought alongside the British. After the war Britain was exhausted. Overstretched with its crumbling empire and the sensitivity of the genocide that took place during the war, America stood into the breach to act as peacemaker. For decades tensions have increased, never abating. All because the West intervened.

Nearby during the war a political party was being formed, the Ba'ath party. Saddam Hussein admired European leaders such as Hitler and Stalin and seeked to emulate their methods. Despite the party being ideologically opposed to Western influence, Saddam was seen as an ally to many Western leaders during the time. 

Another country in the region, Iran, had been a key oil exporter to Britain during the 1950's and 1960's with British oil companies operating in the region. The Shah at the time allowed the West to export oil out of his country to keep the peace. However he wasted billions from the oil money and attempted to implement secular politics. Iranian patience was running thin, revolution was on the cards. 1979, the Khomeini was installed, a religious revolution. 

Meanwhile Saddam was fearfull of Iran, a Shia majority nation that could ignite further revolutionary actions towards Iraq. Saddam being a Sunni decided to 'pre-empt' such an event and so began the Iran-Iraq war. Saddam got backing from the US and the Soviets along with other middle eastern countries. A long, brutal war ensued. Civilians were massacred. Our governments gave Saddam the weapons to perform such acts of terror, our dirty work and we called him our friend. 

Eight years on a stalemate was declared. Iraq was in poor nick. The commodity bull market since the war began back in 1980 had turned into a bear market. Oil prices were falling. Saddam owned huge sums of money. During these days Saddam asked if the debts could be written off from Saudi Arabia and Kuwait. No such luck. Being the risk taker he was, his next master plan was to invade Kuwait, hold it to ransom and write off the debt. However his friends, the Americans didn't like this one bit. With UN backing, a swift war, the Gulf, was fought. George Bush Snr decided against toppling Saddam fearing it would cost more lives or the coalition forces would break up. So the West decided to try topple Saddam with sanctions, the infamous oil for food program was implemented by Bush's successor Clinton. The Iraqi people suffered greatly with such policies, more so then if Bush had finished the job. We love to meddle but always get it wrong. Saddam meanwhile prospered. He was able to maintain control and persecute his people. A younger George W. Bush was critical of such policies that the Clinton administration had taken, setting the scene for the invasion when he became President.

With the 9/11 bombings it was the green light for Bush to invade Afghanistan. A Nation that was an ally of the West during the Soviet invasion, perversely our governments had trained many of the people who made the 9/11 bombings possible. With all the history our Governments also gave them a motive. The Mujahideen was once labelled by President Regan as 'Freedom Fighters', now they are seen as terrorists to people of the West. We trained them. We had betrayed them. Now we invaded their land. 

Why stop there with interfering? Iraq was next, the mass weapons of destruction was the next scare story told to the public. Saddam may have been a risk taker or stupid, but he would never pose a threat to the West. If he did have such weapons he would never use them, given the arsenal we posses. North Korea under Kim Jong il have Nuclear capabilities but we can ignore that nation. It's too near China. Theres no oil. It's far easier to meddle in our 20th Century laboratory, the middle east.

You don't make allies with such a checkered history. Are we surprised that there is so much Western resentment? If my country was invaded, if I'd lost a family member, if I'd witnessed the contradictory policies of this foreign country, if I'd had no job prospects, could you understand if I was a little mad?

With Libya again people in the UK are demanding intervention. The right want a coalition force to oust Gaddafi. The Left say no intervention, although again in their contradictory manner, they say we should help the rebels. I say we should do nothing. If the Libyan people want Socialism or another dictator or Democracy then we should let them choose and let them fight their own battles. 

Arab people in Islamic nations are not crazy suicide bombers portrayed by the media. They are people with feelings and thoughts. Just like us they want future generations to have a better life. Our leaders shock us with fear to induce support to take such actions. If we don't act now, then it will be a risk to national security. All it does is create the next 'martyrs' of suicide bombers. It creates further tensions between cultures and people. Despite the fact that we are all the same.

Once again we feel compulsion to interfere. The state can only create more problems. Let individuals work these things out. The only reason we have problems in the middle east is from past state intervention. In order to solve this we need to stop swallowing the lies that the Government can solve such a problems. They were the ones that caused it. History, as detailed above, can give answers as to why events happen. People are rational. Government actions make people act irrational, just like with the recent economic bust. Just like the next financial disaster. They tell us they are here to help solve such issues. All smoke and mirrors. They cause them and with it take further liberties away from us all. Anyone for Intervention in Libya? 

Hung Parliaments

The British people have spoken electing a hung parliament. Negotiations began. Speculation was rife. Media groups with 24 hour coverage. It was 36 years since the UK had the last hung parliament the same time we last entered a period of stagflation. This time a coalition government was the outcome, a marriage between the Conservatives and Liberals. Labours bubble has burst with the 'no more Tory boom and bust' happening on their watch, ending the Utopian mirage the general public believed the party had delivered them. Despite the election defeat the party is still in good condition for the next leader with a sizeable number of seats and share of the vote. I said that if we got a Conservative Government the UK was in trouble (and not under the conventional wisdom), well we got two of the parties so my bets are for a Labour Landslide victory at the next election. David Milliband has put his hat in the ring for the leadership contest, another possible Blair but I get the sense he has more political beliefs than the later PM. Speaking of Prime Ministers, Gordon Brown had a dramatic exit on Tuesday evening. Despite having all the wrong polices I liked Brown. I think he genuinely believed in what he did, was obviously a highly intelligent person and had a strong work ethic who believes he is doing the right thing. There's not many like him in any more in Parliament that is a real politician not a PR Guru such as the other two leaders.

While all the electioneering has taken place we've barely even noticed the carnage in the markets. The DOW crashing 9% at one point. Major stock indices all around the world looking shaky. Markets continue to worry about Greece, Spain, Portugal the UK. A bailout was announced but they can't kid the market who is playing the game but knows that the Government have set up the next disaster. Reports of relative safe 'havens' such as the US is like telling someone the boat they are in is safer than the next one because they've only sprung half as many leaks. Over the long term all boats are sinking just at different rates.

As the wheeling and dealing of the parties took place a hot topic was electoral reform, with the liberals trying to move towards proportional representation. In my view it will be a dark day if the UK was to loose the first past the post system, especially in these choppy waters the world finds itself in now. Its the political system that ensured Britain has historically maintained one of the most liberal and open societies in the world.

The end of the First World War sparked great political upheaval. The old empires - Habsburg, Ottoman, 2nd Reich - all collapsed and with it a scramble for the power vacuums they left behind. Democracy was imposed on many European nations, nations that were not acquainted with democracy. Not only did they get democracy but many got it in the form of proportional representation. The newly drawn boarders of the continent further exacerbated the issue of trying to dictate common policy. History views Fascism in rightly a dark context, however people in such countries didn't vote for the perverse beliefs such parties were associated with as the Second World War drew to an end, such extreme views had evolved during their time in power. Such extreme parties were formed from coalition governments that aligned themselves with traditional pillars of society.

Many European nations contained fragmented parliaments during the interwar period. Governments would come and go in months, for example the Reichstag in Germany had 16 parties all contradicting one another making laws almost impossible to pass. Many parliamentary members were radicals compounding the lack of common ground to be found giving huge variance towards policy. When the 'Crisis in Capitalism' struck in 1929, so did the crisis in democracy within many such European countries. The public began to believe that democracy was too ineffective to solve their problems thus seeking more radical alternatives. As extremes were given platforms in the context detailed above, nation after nation succumbed to the far right. All the above never occurred in Britain, the most mature democracy in the world. We had our share Fascism, but the first past the post never favoured Oswald Mosley.

Italian Fascism began like this, opportunities created by PR and the alliances they were able to obtain. Over time it gradually morphed into the political party it became infamous for. Hitler rose to power under exactly the same circumstances, again aligning himself with traditional pillars of society that could agree on some aspects of common policy but ignored other more radical views, believing these could be controlled. As Hitler and others increased their grip on power, they also abolished democracy and so began the dictatorships that they have become synonymous with.

Now I'm not saying that PR means we are going to elect a Fascist government, times have changed and I think the majority of Europe is a far more tolerant place. But PR gives rise to radical groups and fragmented weak governments. When the economies ticking over and everything seems fine this isn't so much of an issue, but when we have a persistent crisis then things can get messy.

I realise that our current first past the post system has produced a hung parliament, however the majority of seats are held by mainstream progressive parties. If we had PR then the Fascist BNP would have gained around 12 seats. Our current system ensures no such political base for them. UKIP would have around 18, the Greens 6. I understand what people say when parties get a greater share of the vote but don't get a proportional amount of seats, but first past the post generally ensures a moderate parliament. First past the post has its flaws but I would prefer it to other suggested alternatives out there.

With the new policy of fixed term parliaments I currently can't see the current Government lasting the five years. Splits are already emerging and when tough choices are to be made, finger pointing will begin, deals and U-turns will take place, garnishing further support for the opposition. Another Labour Government within five years? I think so and with it, further relative decline for the UK.

The Run on the Global Financial System

The systematic liquidation of the financial system has truly gripped the worlds attention this week, as fear has spread to all facets of society. Global Stock markets have been crashing. As prices fall, margin calls are being made ensuring further deleveraging of positions. Comparisons with the Great Depression have become widespread in the mainstream media. World leaders and Central Banks have been meeting to try solve the issues, with co-ordinated interest rate cuts and monetary packages. Iceland, a whole country, is on the verge of collapse. Citizens everywhere have been withdrawing savings from banks, feeling safer holding cash themselves. Physical precious metal dealers are running out of gold and silver. The American mint has stopped issuing certain gold coins. All assets are in free fall with no place to go, apart from cash. Libor is rising, the Fed's balance sheet has exploded, talk of the CDS meltdown has begun as positions at Lehman, the recently collapsed investment bank, are unwound. The US debt clock in New York has run out of digits. The UK has part nationalised it's remaining banking system, after the full nationalisations of Bradford and Bingley and Northern Rock. If the general public didn't realise the severity of the situation before, they do now, after a week of paralysis and sheer terror caused by decades of high finance prominence, as savings and production were side lined for the new age. The public will pay dearly for the misallocation of capital, the loss of private savings and the end of cheap energy in the years to come. To illustrate what an unusual week it was, we saw Gordon Brown making banking jokes. It was a week of many surprises.

The years to come will be more of the same with many mini crisis to come. And in times of crisis, history has always shown there is great change. Politicians and governments always intervene in a panic stricken manner when all around them seems to be crashing and failing. Emergency laws are enacted for the 'good' of the nation. Normality of the past, has been replaced with the normality of the foreseeable future. This brings me to the point of what could possibly happen over the next decade. There are many interesting and viable possibilities that could occur and I will explain my thoughts on what actions could be taken, in order to try and stem the future crisis that will take place.

• Confiscation of gold is more than plausible or the suspension of moving from paper assets into gold and silver. Precious metals are always seen as a safe haven when finance is in trouble. As the mistrust of paper based money becomes more prevalent after years of financial incompetence, people will start looking for tangible assets, ones outside the system. It would be an irrational decision and make no sense, but our leaders always seem to endorse those types of ideas.
  
  
• I still believe in inflation in medium to long term. Prices may be falling currently but this is deleveraging not deflation. The governments and authorities are embarking on the great reflation, slashing interest rates, pumping future earnings into the system. Therefore I can see certain key commodities becoming very expensive and price controls at some point seem likely. Of course an idiotic policy, but they did it in the seventies.
  
  
• Rationing is also a policy I can see been implemented at some point in the future. Food and energy rationing may become standard.
  
  
• Further nationalisation of the system. The banks are gradually relying heavily on governments, but it won't stop in the finance sector. You will probably see airlines, car makers, other key industries handing out the begging bowl for government intervention. If we begin drinking vodka and producing fine cigars, then we know we really are in trouble.
  
  
• Higher taxes sometime in the future are inevitable in my opinion. We are accumulating huge amounts of debt, more future promises to pay based on future earnings, with no current capital now. Western governments can't manage the books, and were running deficits well before the slowdown in the global economy. All of these future earnings may be severely impeded by our ageing populations and the end of cheap energy. I think Colin Campbell, a prominent proponent on the peaking of Oil, summarises it well in a speech he gave to Parliament in 2004 about the coming oil depletion, where only 3 MEPs bothered turning up.
  
  "The perception of looming decline may be worse than the decline itself. There will be panic. The market over-reacts to even small imbalances. Prices are set to soar in the absense of spare capacity until demand is cut by recessions. We will enter a volatile epoch of price shocks and recessions in increasingly vicious circles. A stock market crash is inevitable."
  
  And this from a geologist, someone not specialised in the details of economics and finance.
  
  
• Further government borrowing will have further consequences on how much money our governments can keep borrowing, and if they can find a buyer. As Robert Preston, a mainstream journalist states:
  
  "Possibly the biggest risk for the US is that in bailing out the finances of the private sector, Paulson would dent international investors' confidence in the American government's balance sheet - which could ultimately undermine the dollar, push up inflation even more and raise the cost of servicing debt for the US authorities."
  
  What happens if the Saudis, Japanese and Chinese don't want to keep lending money to the West? We have little capital in our own societies. The prices of government bonds will go up, as investors suddenly realise certain institutions have no intent on making good on their promises as the currency devalues further.
  
  
• Interest rate cuts have been used progressively over the past year. The trend will continue. They will fight the inflationary boom, that has just occurred, with more inflationist policies during the bust. Don't expect to be living on easy street though. Debt is far too high and the last thing banks are thinking about are more risky loans, just as defaults are rising and capital is being destroyed at a rapid rate.
  
  
• I heard recently that bonuses in the city this year are due to decline 60-70% this year. As I have said in a previous post, finance will be in big decline for years to come. The age of excessive rewards are over, and in my opinion finance will become a middle earning job, with places like New York and London, that were heavily reliant on high finance to be in a state of terminal decline. For how long who knows. We may have seen a top, for the rest of our life times.
  
  
• It may be all hands to the pump, co-ordinated action, on the current events, but this may turn as time goes on. Protectionist policies and the hoarding of certain assets will become more and more common between countries.
  
  
• Regarding the above, if the flight of investors from certain countries does occur then governments may freeze assets to try and keep them within their borders, enacting emergency laws.
  
  
• Wars regarding resources are bound to become more prominent. We have already had the invasion of Iraq and Afghanistan, which was the establishment of a middle east police station for the West. With more shortages to come, these areas will be of critical importance to many economies, with countries organising themselves into coalitions. China has already been in agreements with Venezuela regarding Oil supplies to name one of many relationships that are being formed. Water will become more important, with the potential for conflict between Israel and Palestine, Pakistan and India to name a couple. The Twentieth Century was the most bloody Century in human history, with the second half involving more deaths. I expect the first half of the twenty first century to continue this trend and be even more bloody, although I do hope I'm wrong on this point.

I suspect there will be a rally in the markets next week. The governments should be able to calm investors fears in the short term. More runs and panics will happen over the following years. With these events will come great changes. We are all in uncharted waters. Governments have the buckets at hand, but will it be enough to save the sinking ship? Or is the ship destined to sink as the damage done so far, is irreversible?