Wednesday, December 31, 2008

Is Iran an Arab country?

Despite what many people may think, Iran is not an Arab country. Iran may share a religion and political and economic interests with Arab countries, but the people of Iran are primarily Persians and speak Farsi and other Persian languages, not Arabic. Iran is not a member of the Arab League and not considered an Arab state by the United Nations Development Programme.

Accoring to the Wikipedia, the Arab League has 22 member states:

    1. Algeria
    2. Bahrain
    3. Comoros
    4. Djibouti
    5. Egypt
    6. Iraq
    7. Jordan
    8. Kuwait
    9. Lebanon
    10. Libya
    11. Mauritania
    12. Morocco
    13. Oman
    14. Palestine
    15. Qatar
    16. Saudi Arabia
    17. Somalia
    18. Sudan
    19. Syria
    20. Tunisia
    21. United Arab Emirates
    22. Yemen

The UNDP says that "The Arab States region is home to some 320 million people living in 22 countries that stretch from Morocco and Algeria in the west to Yemen and Oman in the east."

Iran is not in either definition of an Arab state/country.

-- Jack Krupansky

Monday, December 29, 2008

Obama Palestine policy

It will be interesting to see Barack Obama's initial policy for Palestine. He will clearly "inherit" the current mini-crisis over Gaza, Hamas' rockets, and Israeli attempts to eradicate Hamas, but that is only the starting point. Clearly Hillary will have a major role in carrying out policy, but it is not clear how far she can go on her own and how Barack's "plans" might conflict with her own thoughts. Not to mention that Joe Biden and National Security Adviser James Jones will be in the mix as well. While we can expect some rollback of the Bush policy of total support for an aggressive and one-sided Israeli policy, we can also expect that both Barack and Hillary have to cater to substantial Jewish pro-Israel constituencies from the get-go. One might hope that the U.S. would essentially return to the policies in force at the end of the Clinton administration, but there are the simple facts that Clinton was not being terribly successful at the end and many facts have changed since then. I simply hope that we see some "fresh" thinking, otherwise we will simply continue with endless "talks" and endless recriminations. Barack's Web site says only the following:

The Obama-Biden foreign policy will ... seek a lasting peace in the Israeli-Palestinian conflict.


Israeli-Palestinian Conflict: Obama and Biden will make progress on the Israeli-Palestinian conflict a key diplomatic priority from day one. They will make a sustained push -- working with Israelis and Palestinians -- to achieve the goal of two states, a Jewish state in Israel and a Palestinian state, living side by side in peace and security.

At a practical level, Barack and Hillary have three problems on Day One: 1) defusing the Gaza mini-crisis, 2) figuring out how to get Hamas to stop firing rockets into Israeli territory, and 3) whether to continue the policy of labeling Hamas a terrorist organization and siding with Israel on its eliminination or whether to consider it to be one of the political players and negotiate or at least have some form of talks with it. And there is the question of Iranian influence with both Hamas and Hezbollah.

Longer term, the biggest issue is to recognize that Iran is a major player and major part of the problem and that improved relations with the so-called "Arab World" and the rest of the Middle East, especially Iran, is just as essential to bringing peace to Palestine as peace in Palestine is to bringing stability and normalized relations to the rest of the Middle East.

Although the incoming administration says that it supports a two-state solution, the current problem is that there are really effectively three states, with Hamas in Gaza effectively a state on its own. And then there is the fact that Hezbollah in Lebanon is effectively another "state."

I do in fact look forward to Barack Obama bringing some fresh thinking to the problems in Palestine. He has a bunch of first-rate players on his team. It will be interesting to see how he leads that team. The big question right now is whether they start with some positive progress right out of the gate or stumble and blunder for a number of months before finally hitting their stride. I would suggest the former is most likely, but the latter is certainly possible.

Another issue is whether it is best to push for a lot of rapid initial progress or whether it is better to go slow and let  the region simmer for awhile but gradually dial down the heat. "Confidence building" may be a key part of the process, so the latter may be more likely. So, I would look to a lot of low-key talks behind the scenes rather than any public big push in the first six months.

-- Jack Krupansky

Friday, December 26, 2008

What will our relations with Iraq be like under Obama?

Other than removing U.S. combat troops within 16 months, I cannot recall hearing anything about the intentions of the incoming administration of Barack Obama on relations between the U.S. and Iraq. Ultimately the question is whether the intention is for fully "normalized" relations. And then that begs the question of whether the intention is for truly friendly relations. Even if the "details" of relations with Iraq are intentionally be left to Hillary to sort out, there needs to be some high-level intention by the incoming president. Or, maybe, he honestly does not know and it all depends on how the government of Iraq evolves as the U.S. removes combat forces.

Part of the problem may be that the so-called Pro-Israel Lobby sees Iran as the deadlier concern and doesn't mind if Iraq sits there in a state of internal chaos for an extended period of time. That begs the question of intentions for relations with Iran, but we already know two things about intentions towards Iran: 1) there will be some form of "talks" after "preparations", and 2) absolutely no tolerance for advancement of Iran's so-called "nuclear ambitions", even as those ambitions continue to advance.

One thing we know about both Iraq and Iran is that both are experiencing severe pressure on their income from oil as the price of crude oil continues its steep decline. The impact on internal politics is going to be quite unpredictable.

Layering uncertain U.S. intentions on top of that internal uncertainty leaves the whole region a potential source for great volatility.

-- Jack Krupansky

Saturday, December 20, 2008

Has Detroit been rescued?

Although the so-called loans by the U.S. Treasury to the Detroit car companies are now a done deal, it is not clear what that means in terms of their long-term viability. Sure, they can pay their bills for a couple more months, but even if the economy steadies, they may be even worse off in a couple of months when they have exhausted the loan funds, and it is quite debatable whether they will have completed significant restructuring within a couple of months that will be sufficient to change their cost structure in a radical enough manner to be profitable in this weakened economy. Can it be done? Sure, it can. Is it likely to be done? That questioned will be answered by the auto workers and the holders of their debt.

I suspect what will happen is that they will make a few restructuring steps, enough to convince the Obama Treasury that they are at least on a plausible path, so that they can then be "loaned" more money.

I suspect that most of the original debt holders are long gone and that most of the debt is held by hedge funds and distressed debt specialists who have bought it at the current bankruptcy price levels or moderately higher. It may be simply a question of what level of profit these speculators want on their investments. Maybe if they are paid with government-guaranteed preferred stock they will be willing to sell the debt at a reasonable price.

The basic negotiating strategy will likely be that they will offer the auto workers and debt holders a deal with the caveat that if negotiations fail, full-blown banktuptcy is the next step.

In short, the car companies have been pointed in the direction of a rescue, but whether they will continue to progress down that path is unclear.

In any case, the deal was about as good a deal as we could have asked for given the overall situation. The message is quite clear, "restructure now or die."

-- Jack Krupansky

Wednesday, December 10, 2008

Prepackaged bankruptcy would be better for Detroit, but...

Although it does look like a short-term "bridge" bailout for Detroit will in fact occur, it is true that a prepackaged bankruptcy would be a better deal, for the simple reason that it would allow Detroit to blow away debt and other obligations which are dragging down the companies. This would let Detroit move forward in a lean and more agile way. Unfortunately, arranging the details for a prepackaged bankruptcy of the complexity of GM and Chrysler is unlikely in the near-term.

Personally, I still believe that Detroit can in fact squeak by without either government aid or bankruptcy, but some amount of "backstop" aid will help to beat back the bears and hedge funds on Wall Street who amazingly think that it is actually okay to manipulate the markets and drive companies into the ground.

The good news is that radical restructuring is now virtually assured. I had been expecting it to take a couple more years, but it looks like the short-term bridge bailout will actually require that the companies come up with a plan to restructure sufficiently by March so that a "car czar" can determine whether they are viable enough to get further bailout aid.

-- Jack Krupansky

Tuesday, December 09, 2008

Bank of America agrees to pay extortion in Chicago

Although it still seems to remain true that Bank of America does not have any obligation to extend lending to a failed Chicago firm whose ex-workers are demanding severance and vacation pay -- from the bank, the bank did in fact decide to "loan" the company enough money to pay off the workers. Yes, the workers are owed the money by the failed company, but BofA does not have any legal oblogation here. The governor of Illinois threatened to withold future state business from the bank if they did not comply with his extortion demand. Curiously, this same governor was in fact arrested toay for... extortion, demanding that companies make donations to him in exchange for state business and possibly even appointment to be the replacement for Senator Barack Obama.

BofA had little choice in this matter. Sure, they could have fought it and even won, but that would have been a classic Pyhrric victory and a public relations black eye. By caving and agreeing to "loan" the extortion demands, they can come out of this looking like the "good" guy, or at least a "victim" of Chicago politics.

Worst case, two months severance pay and, say, a month of vacation pay for 300 workers earning, say, $50,000 per year, comes out to about $3.75 million. That is chump change for BofA. It is a bad precedent, but it probably is their best option, and maybe that is simply the cost of doing business in this economic climate.

-- Jack Krupansky

Monday, December 08, 2008

What does it mean to create or save 2.5 million new jobs?

P-E Barack Obama has promised an "Economic Recovery Plan that will create or save 2.5 million new jobs." I am still baffled by the inclusion of "or save" in that phrase. Sure, economic stimulus can "save" jobs, but why would you lump job creation and job "saving" in the same number? It renders the number meaningless. As it stands, if Obama were to claim that he had "saved" 2.5 million jobs over the next two years without creating even a single new job, he could still claim that he has fulfilled his promise. Most people, myself included, would like to presume that an Economic Recovery Plan will create a net of 2.5 million new jobs, even as it "saves" countless millions of existing jobs.

It is annoying that the media has not called him out and demanded clarification on what is being promised.

It is actually rather surprising that the media has not discussed this lack of distinction between creating and saving jobs.

I am all for saving jobs, but we need to put more energy into creating new jobs for the 2 million people who lost jobs over the past year.

-- Jack Krupansky

Does Bank of America owe the Chicago sit-in workers any money?

As far as I can tell, Bank of America does not have any obligation to extend lending to a failed Chicago firm whose ex-workers are demanding severance and vacation pay -- from the bank. Sure, BofA has gotten bailout money from the government which it is expected to lend, but the theory is that lending is supposed to be to creditworthy borrowers. There was never any intention that the bank bailout investments were to be used for charity handouts.

That said, the workers' situation is a classic political "third rail." No Democratic politician is going to stand up and play the role of Mr. Scrooge three weeks before Christmas. Even a lot of Republicans, who personally think such an obligation on BofA is preposterous and outrageous, are going to keep their mouths shut.

Given that the amount at stake may be peanuts compared to the degree of blackmail that the State of Illinois is proposing to exercise against BofA, it might in fact be best for BofA to simply go ahead and make the "loan" to the dead business and simply write it off as the cost of doing business, Chicago style. The real downside of doing so is that it would create a truly horrendous precedent. There may not be a better option.

Another alternative would be to simply return the $15 billion bailout investment to the government and then watch Congress squirm and try to figure out how to bailout the workers even as they struggle how to bailout Detroit.

Obama seems to be on the workers' side, but I suspect that he also sees the situation as a classic "third rail" to be avoided and is essentially sitting on the fence and letting BofA take the heat, for now. He obviously knows how to play politics, Chicago style.

Shame on him. And double shame for failing to realize that this is a great opportunity to introduce a new government social safety net program to provide cash grants to ex-workers whose jobs have been permanently eliminated at a time when re-employment is extremely difficult. Workers in such a situation should be able to apply to have the government pay their mortgage or rent for at least six months to a year or even two, in addition to normal, temporary unemployment insurance payments. That would cushion the impact of abrupt company shutdowns such as this case. The government should also have the right to go to the head of the line as a creditor of the failed company to recoup any payments from the proceeds of any liquidation of the company.

-- Jack Krupansky

Saturday, December 06, 2008

Economic depression watch?

I am in the process of starting a new blog, Economic Depression Watch, which will focus on the factors that could determine whether the U.S. economic may or may not slip into a depression in the near future. My personal opinion is that a depression can be easily avoided and will most likely be avoided, but technically one is possible if the government behaves stupidly enough.

The new blog is at:

I have also registered with stealth redirection to the new blog, but it may take some time for the new domain name to become functional. The blog is already functional, although I have yet to start adding "real" content.

-- Jack Krupansky

Tuesday, December 02, 2008

Was Mumbai simply all about Kashmir?

I purposefully refrained from mindlessly "condemning" the terrorist attacks in Mumbai last week. I see very little productive value to such condemnations. Unless, the motivations are strictly political in nature. Now, as more details become clarified, the attacks are being attributed to a group based in Pakistan that is simply seeking to drive India out of Kashmir. In other words, this is a land dispute that has nothing to do with Islamic radicalism or al Qaeda or... 9/11... and everything to do with Kashmir, a small piece of land disputed by Pakistan and India.

Just as with Israel and the Palestinians, the "terrorist" label is being dragged out and used as a flag to salute and to rally so-called "good" against so-called "evil" rather than working to get the parties to agree to get together and resolve their disputes through diplomacy. And, once again, this is about the U.S. being all too quick to cry "Terrorism!" rather than roll up our sleeves and work as a mediator and facilitator to resolve the underlying land dispute.

Sure, it may be viscerally satisfying to battle terrorism with dramatic military force, but it would be so much more productive to address the underlying problem that led to the rise of terrorism.

-- Jack Krupansky

Bill Richardson for Secretary of Commerce?

The latest leak from Team Obama is that Bill Richardson will be nominated to be Secretary of Commerce. I would have preferred to see him as Secretary of State, but since that position is no longer open, Commerce is about all that is left for him that makes any sense and that he has not done before.

One question I have is whether P-E Barack Obama will consider Commerce to be part of his core economic team. For example, should Commerce be driving the planning for any fiscal assistance to corporations such as Detroit? I think they should, but I am not in charge.

I also think that Commerce should be leading the charge on "smart" regulation, figuring out how to rewrite federal regulations on businesses to work better and be less expensive and restrictive at the same time.

One logical fiefdom for Richardson would be promotion of U.S. economic interests around the globe. That intersects with Hillary's fiefdom, but she will probably have her hands full with security and social programs at State.

Presumably, Richardson will be looking after promotion of U.S. exports, trade policy, and international economic agreements.

In any case, I think he is qualified for the job and will probably bring enough energy to the job to effectively make Commerce a legitimate and productive part of the economic team even if it is not today.

-- Jack Krupansky