That 70’s Show

There is no shortage
 of theories as to why Americans are finding themselves staring 
helplessly at rising gas prices, but few of them are real. In fact, much 
of the prevailing wisdom offered by television pundits is false.

He was a relative unknown when he campaigned for president of an America 
that was worn down from foreign intervention, a sick economy and
 Republican rule. His outsider status brought with him a new brand of
 hope that the media devoured allowing his star to rise quickly and shine
 brightly. Upon taking the presidency, however, the beleaguered economy
 stubbornly refused to show signs of life, energy prices rose to 
troubling levels and the Middle East began to spin wildly out of
 control. Things were so bad he even had to step in and bail out an
American car company with government funds.

After only three years, it was all over but for the counting. His star
 faded quickly as the once-media darling became anathema to an
 increasingly conservative American public that spent the last year of 
his term looking for a new “Mr. Right” in every sense.

Such was the fate of Jimmy Carter, who never had a shot at re-election;
 and a good argument can be made that Barack Obama will suffer the same 
fate under nearly identical circumstances.

There is so much involved in the making and unmaking of a president that
 it’s unfair to boil a career down to only a few factors. But in Jimmy
 Carter’s case I believe it is fair to say that three primary issues were
 the undoing of his presidency: the hostage crisis in Iran, stagflation
 and fuel prices at the pump.

Iran wasn’t a military crisis as much as it was an embarrassment to the
United States, though talk of a nuclear Iran was percolating even then.
 Prior meddling in the Middle East came back to haunt us in a situation 
we couldn’t control, with Carter ill-equipped to handle the predicament
 of Americans held hostage in Tehran. Rising oil prices—the result of the 
Iranian revolution in 1979 and the panic that ensued in the trading
 markets—brought about a second shortage within a decade and with it 
hysteria and inflation. This upward pressure from fuel prices in an
 already inflationary environment spurred the Federal Reserve to begin
 chasing inflation with high interest rates.

In his book Currency Wars, James Rickards addresses the impact of 
American monetary policy on the global economy and cites the “50 percent 
decline in the purchasing power of the dollar from 1977 to 1981.” He
 goes on to depict “a world gone mad,” noting that, “A new term, 
’stagflation,’ was used to describe the unprecedented combination of 
high inflation and stagnation happening in the United States.” 
Most people recall the moment when interest rates reached as high as 20 
percent during this period and point to it as the height of insanity
 during the Carter years. In actuality then-Fed Chairman Paul Volcker 
under Ronald Reagan did this as a one-time shock to the system.  It was
 done in conjunction with vigorous tax cuts to spark consumer spending, a 
tightening of the monetary policy to strengthen the dollar and the
 latent effect of increased oil production, both domestic and abroad.
 With the exception of the tax cuts, these policies and factors would 
likely have occurred anyway as Volcker was a Carter appointee and it was
 Carter who loosened the valve on domestic oil production. Furthermore,
 Reagan would go on to reverse many of these initial tax cuts in a way 
that would make conservatives and Tea Party activists blush today.
 Either way, Jimmy Carter was a victim of pitiful economic circumstances 
that will forever be his legacy in the White House.

Rickards draws some comparisons between the ’70s and today, most notably
 deriding Federal Reserve Chairman Ben Bernanke’s actions of Quantitative 
Easing, a fancy name for printing money—the same currency devaluation
 scheme employed by Nixon—calling them “runaway fiscal and monetary 
policies, which were flooding the world with dollars and causing global
 inflation in food and energy prices.”

This is an interesting point to hang on for a bit. There is no shortage
 of theories as to why Americans are finding themselves staring 
helplessly at rising gas prices, but few of them are real. In fact, much 
of the prevailing wisdom offered by television pundits is false. It’s
 not Obama’s refusal to “drill baby drill” or increased demand from 
China. It’s not Libya or Iran, either. It’s the abundance of liquidity 
in the markets matched with the ability of investment banks, hedge funds
 and oil companies to trade energy futures on commodities exchanges
 without any limits or transparency. And this is the result of 30 years
of deregulation beginning with Carter and continuing through Obama.

Before the commodities exchanges were deregulated there were few safe 
places to “park” excess capital during volatile periods. Today these
 exchanges are the perfect shelters for investors with excess liquidity
 because many of them are allowed to stand on all sides of the 
transaction. An investor such as an investment bank or an oil company 
can be the buyer, seller, broker and manufacturer, and can therefore
more easily predict the future behavior of pricing by both forecasting 
the future price of a commodity it owns while moving the market with
 enormous capital infusions. It’s more than the ultimate hedge. It’s a
 scam.

With a crisis brewing in Iran, the markets and pundits are once again in 
a tizzy, and consumers are bracing for the worst. This brings us to what 
might be the nail in Barack Obama’s coffin: inflation.
 When fuel prices rise, even for a brief period, it shows up within
 months in our food and other consumables. It’s a necessary evil in the
 production of nearly everything we consume on the planet, which is why
 it’s so utterly dangerous to leave the process of trading energy futures 
unregulated. Oil doesn’t have to reach $200 per barrel to destroy any
 hope of economic recovery and, worse, force mass starvation around the
 globe.

If the price is sustained at $100-plus per barrel without relief
 while we continue to suppress interest rates and flood the market with
 the dollar, Bernanke and Co. will have difficulty stemming the natural
 tide of inflation as it works its way around the globe in the things we
 buy and the food we eat.
 Bernanke’s announcement that the Fed will continue to artificially 
suppress interest rates through 2014 and the government’s steadfast
 refusal to implement any reasonable regulation in the markets is a 
self-fulfilling prophecy as investors continue to seek safe harbor for
 their funds in the only market they have any ability to control. This
 will prevent any crash in oil prices that would naturally occur, as we
 witnessed in 2008 when oil hit $147 per barrel then plummeted shortly
 thereafter.

Further fracture in relations with Iran and high oil prices 
will also crush any hopes the European Union has of recovery. And with 
the determined stance that austerity is the EU’s chosen path to
 prosperity, the United States faces the additional problem of having its 
No. 1 consumer of U.S. exports absolutely cash-strapped and constricting
 even further.
 Barack Obama’s re-election hopes are really a matter of timing more than 
anything because the conclusions above are simply common sense and
 arithmetic.

Any chance he had to calm this gathering storm has already
 passed, leaving him at the mercy of the global markets, which are
 teetering on a gigantic bubble. His oratory and confidence are outgunned
 by a conservative media machine pouring on the pressure by falsely 
blaming his energy policy for high oil prices and stoking the fire with
 Iran, thus creating all the necessary traps for his demise. Even if he 
were able to truly force real change in the oversight of the financial
 markets, it would spook Wall Street and could incite panic. And any 
attempt to quiet the saber-rattling between Washington and Tehran would
 make him appear weak compared to a bloodthirsty slate of GOP opponents.

Obama’s only option is to pray the storm doesn’t touch down between now
 and Nov. 6. If it does, instead of occupying the White House in January, 
he’ll be building houses with Jimmy Carter, while Mitt Romney tries to 
figure out where to park all of Anne’s Cadillacs.

Ides of Ramadan

Dorian Dale further contemplates conflict with Iran and imagines the screenplay that might ultimately find its way to the Silver Screen. (Inspired by real and potentially real events. Bonus points if you can identify the mystery couple.)

Coming Soon to a Theater of War Near You!

In his day job, he thinks the unthinkable
in terms of nuclear conflict.
She focuses on nuclear forensics so that,
when the unthinkable occurs, it can be sourced. 
It’s not a matter of if…. It’s a matter of when.

INT PAN: Pews in National Cathedral, Washington, DC, last Saturday in May.

WIDE SHOT FROM FIFTH PEW: Retired Archbishop Desmond Tutu, sporting a Cee Lo Green-sized cross, presides over nuptials of handsome young couple.

CUT TO SIXTH PEW, POV PARTIALLY BLOCKED:  Sam Elliot, looking all Foggy Bottom in his chargé d’affaire seersucker suit, whispers to Ryan Gosling, in conventional, slim black Armani: “Here we are close enough to the wedding party to seem like we’re invited guests – Rule #43, Wedding Crashers.”

CUT TO AERIAL SHOT: Conga-line of stretch limos heads SE on Massachusetts Ave in the direction of DuPont Circle.  It’s high noon, balmy & sunny.

ZOOM TO HIGH-ANGLE:  Just before the Iraqi Embassy, motorcyclist drives slowly down meridian, passenger appearing to touch limos as they pass and then take a quick left up 35th St.

CUT TO WIDE SHOT EXT: Limos arriving at beaux arts mansion housing Cosmos Club.

CUT TO SHOULDER-MOUNTED POV PANS: Elliot leads Gosling on head-spinning tour of Who’s Who wedding reception, starting in the patio garden where chic geeks are hanging with DC artistes and water polo teammates from the bride’s college days.  Maroon 5 is covering “99 Luftballons.”

CLOSE-UP: Karl Lagerfield of the equine pony-tail, egret-white against black suit, blackout shades and SS-issue black leather gloves holds court über alle surrounded by Capitol Movement dance troupe peacocking for a runway assignment from the great fashion designer. To the side, water polo players are trolling for modeling tips from the groom’s brother, former #1 in Lagerfield’s stable back in the designer’s Brokeback Mountain stage. Instead, they hear of his goal to be another Donald Trump.

CUT TO BIRD’S EYE: Groom, glancing furtively around, places envelope on wedding cake. The hyper-ambitious millennial groom is not quite super-model material but has been mistaken for Jude Law’s younger brother on more than one occasion. His quant skills have persuaded his moderately wealthy, newly minted father-in-law that footing the bill for a reception at DC’s venerable Cosmos Club provides value-added for attracting Beltway investors. In actuality, it is the exotically beautiful bride with the look of Gisele Bundchen’s younger sister who has persuaded daddy, but Judebro is never loath to take credit.

Judebro and Giselsis are comers in the firmament of geopolitical influence, his status affirmed by the recent publication of “Time to Attack Iran” in Foreign Affairs. In his day job, he thinks the unthinkable in terms of nuclear conflict. She focuses on nuclear forensics so that, when the unthinkable occurs, it can be sourced. It’s not a matter of whether nukes will be used, but when. Proliferation think tankers feed off this self-fulfilling prophecy. To answer how 20-something novices are positioned to weigh in on Prometheus Unbound, look to powerful patrons that make Washington the land of opportunistic oracles.

Think tanking is but one driver of conflict with Iran that has not seen the light in Gosling’s Manichaean world view. The indie media mini-mogul is consumed with an octopus of global oil manipulation—Morgan Stanley—who, by his reckoning, would foment armed conflict to profit from wild upward spirals of world crude prices.

ELLIOT: “Traders, as Trading Places reminds us, Gosling, are but bookies who profit whether the price goes up or down. Note that even a comprehensive command of applied chaos theory catches on the interconnections of string theory.”

CUT TO UPSTAIRS BALL-ROOM: Older, decidedly less hip crowd. Martina McBride is countrifying “Wooden Ships.”

GOSLING: “Who’s that wagging his finger at the balding, bearded guy and his bevy of boobalaheads?

ELLIOT: “That’s Valerie Plame’s hubby, going all Sean Penn on the self-styled Darth Vader of neo-cons who suckered Bush into featuring Saddam’s (non) purchase of yellow cake uranium in the 2003 State of the Union. And that blonde bombshell over there…”

PAN TO: Threesome clustered around bombshell.

ELLIOT: “Valerie Plame, if that really is her name.”

GOSLING: “So that’s the outed CIA op? Think I’d rather go under cover with Naomi Watts.”

CUT TO CLOSE UP: Bombshell Plame is disarming a DOE physicist, resembling Renee Zellweger with a dust-mop do, a world-weary defense analyst—picture Gary Oldman going DIA with LeCarré’s Smiley—and Judebro’s PhD thesis advisor from UC Berkeley who could be Dr. House’s alter-ego.

PLAME: “There have been at least 25 incidents of lost or stolen nuclear explosive material we know of.”

ZELLWEGER: “That’s why the personal dosimeter card I designed can be so critical in an event.”

PLAME: “Though Cold War arsenals have been reduced from 70,000 to 23,000, there remains enough highly enriched uranium to build more than 100,000 weapons. Counter-proliferation was my beat; there’s no graver threat than nuclear terrorism. We must go for Global Zero nukes!”

HOUSE: “Well, Ms. Plame, some why nots are offered in Judebro’s thesis, ‘The Enemy of My Enemy Is My Customer,” in which he provides solid, quantified data of what incentivizes weak nuclear states to transfer nuclear technology.”

OLDMAN: “From the mouth of babes. Wait till a black swan crosses his theories.”

MUTED BLAST: Emanating, seemingly, from front of club. Ballroom populace rush to windows.

AERIAL POV: Smoke rising from left rear panel of one of the limos.

OLDMAN: “Looks like a sticky bomb.”

BUMPY HAND-HELD CAM: Plame bolts downstairs and outside to smoking limo; pulls NeutronRAE II personal radiation detector from holster strapped to thigh.

PLAME: “It’s reading for weapons-grade plutonium. The area needs to be evacuated.”

GISELSIS: “Ms. Plame, you should take a look at this card from atop the wedding cake.”

CLOSE-UP: Card reads: “BEWARE IDES OF RAMADAN – anniversary 67 of Hiroshima.

FADE TO BLACK: Soundtrack: Tom Lehrer’s “Who’s Next?”

The Grammy’s, Lin-Sanity, Jon Stewart (and Iran)

This is another column about the burgeoning crisis between the US and Iran. Since I have yet to gain any traction with this issue I have decided to sprinkle gratuitous pop-culture references throughout the piece to generate interest.

This column first appeared in the February 16th, 2012 edition of the Long Island Press.

Over the past couple of weeks my frequent collaborator, Dorian Dale, and I have set the burgeoning conflict between Iran and the United States in our sights, determined to bring this potential disaster further forward in our nation’s collective consciousness. But while Whitney Houston’s body is in search of an arena large enough to hold her mourners, talk of the next Great War generates barely enough interest to fill a teacup.

Therefore, I have decided to shamelessly sprinkle gratuitous pop-culture references throughout this column in order to reach a larger audience. (References are bolded for navigational ease.)

Iran is the slow moving accident you can’t take your eyes off of. It’s LIN-sanity. For that matter, so is the global economy, the crisis in the Eurozone and the price of oil. Let’s add in the GOP primary season for good measure to bring this tainted stew to a boiling point because the decision-making process in America this year will be guided by partisan politics rather than practical policies.

New Yorkers would be wise to look up from their smartphones for a moment to see what’s really happening. Not only is New York home to the United Nations and ethnic communities from around the globe, it bears visible scars of terrorism. Many of its residents’ livelihoods are directly or indirectly tied to the world financial district, and don’t forget that The Daily Show with Jon Stewart is also taped in the city. Moreover, conventional wisdom (if there is such a thing) has it that should the wheels come off the Obama train, our current governor will be a top Democratic contender to challenge whichever GOP dipshit is lucky enough to hoodwink America into voting for him.

One way for Obama to lose the upcoming election is if oil prices continue to get out of hand. As it is, we are already experiencing higher-than-normal pricing during the winter months. Analysts are already warning that if the trend continues and conflict with Iran steers toward the inevitable, oil could hit $200 per barrel this year, translating into approximately $6 at the pump. If this were to happen, Barack Obama’s chances at re-election would be slimmer than Adrien Brody.

Many in the media have dismissed the likelihood of confrontations between the U.S. and Iran as “saber rattling,” but there have been some very real world occurrences that are beyond rhetoric. The attempted bombing of the Israeli embassy in Bangkok this week by an Iranian man and successful assassinations of nuclear engineers within Iran over the past few months have heightened tensions between Israel and Iran. For its part, the United States is positioning itself to defend against the threatened closure of the Strait of Hormuz, a key “choke point” for oil tankers in the Middle East. Along the way, the United States rescued Iranian fishing vessels twice in one week—events that garnered brief, but small international attention as opposed to George Clooney’s performance in “The Descendants,” which has received international acclaim and Oscar nominations.

While the world does its familiar dance of deadly brinksmanship, consider for a moment the case of Morgan Stanley. Never has one company had so much to say about, or perhaps to gain, from the pressing issues at hand. Morgan Stanley embodies the intersection of finance, politics, oil and war more than any other corporation on Earth. If ever there was an example of the “corporatization” of America, this is it. I’m reviving my frequent criticism of Morgan Stanley so we may, in the words of Belgian-born artist Gotye, “Walk the plank with our eyes wide open.”

First off, trying to drill down into Morgan’s structure is like jumping down the rabbit hole in search of Johnny Depp.  The list of Morgan Stanley subsidiaries is a 25-page, single-spaced document with 207 corporations registered on the Cayman Islands alone. What most people, and even some savvy investors, don’t realize is that among them you will find a host of companies directly related to or involved in the oil industry.

Take, for example, Heidmar, a global oil shipping company with 120 vessels. Or TransMontaigne, which controls a third of the oil terminal business in the United States. Both are wholly-owned subsidiaries of Morgan Stanley. Furthermore, Morgan owns $1.2 billion in shares of ExxonMobil and $900 million in shares of Chevron. Oh, and many of the oil futures contracts are traded on the Intercontinental Exchange in Atlanta, which was founded by Jay-Z. No, jk, lmfao. It was founded by Morgan Stanley, Goldman Sachs and BP.

Piece this together and you will quickly understand that there are two things of critical importance to Morgan Stanley where the oil business is concerned: price and volatility. When you add to the equation that the leading energy analysts in the world who predict the future price and volatility of oil are from… you get the point.

To borrow from the Occupy Wall Street movement—This is what democracy doesn’t look like.

Now let’s get our conspiracy freak on for a moment and take a look at whom Morgan Stanley is backing for president of the United States. No, it’s not Steven Colbert. Morgan is steadfastly behind Willard “I support military action in Iran” Romney. In fact, it is Romney’s third top contributor in the 2012 election cycle behind only Goldman Sachs and JP Morgan, two companies that also know a little bit about gaming the financial markets.

Allow me to go one step further. Conflict in the Strait of Hormuz would be the best thing to happen to Morgan’s oil interests, as they deal mostly in the Western Hemisphere and would benefit greatly from their own prognostications of skyrocketing oil prices. Because the United States is officially now a net-exporter of oil, the American petroleum business and those financial companies that profit from it would experience a boom like never before.

The very thought of gas and oil prices going even higher sends chills down the spine, especially here in New York where we rely so heavily on home-heating oil and transportation in our daily lives. But don’t worry, New Yorkers, we’re in good hands there, too: Morgan Stanley owns the majority stockpile of home-heating oil reserves in the Northeast. Charlie Sheen can only dream of “winning” as much as Morgan Stanley.

 

All photos from the Associated Press. 

Ayatollyah So!

Rosy neo-con visions of sugar plum oil fields and Jeffersonian democracy fairies transforming the Middle East have blurred beyond recognition over the past decade. So, it’s a good time to change the subject and refocus

“For lust of knowing what should not be known, We take the Golden Road to Samarkind.” 

                –James Elroy Flecker’s play Hassan

There was a mysterious blast at a manufacturing facility outside Teheran last November.  This past week the Israeli Minister for Strategic Affairs told the annual Herzliya security conference that the Iranians were setting up to produce a missile with a 10,000 kilometer range that could hit the United States. U.S. analysts were quick to point out that known Iranian missiles have but a maximum range of 1,200 miles—enough to reach Israel….  Go to the video tape to watch a “concerned” President Bush in the fall of ’02: “Iraq has a growing fleet (of UAVs) that could be used to disperse chemical or biological weapons across broad areas…for missions targeting the United States.”  

Not for the last time will we be misled by rhetorical mushroom clouds into the fog of war with its Rumsfeldian “known unknowns” and “unknown unknowns.” In the lifted lyrics of John “Beach Boy” McCain, do we “Bomb, bomb, bomb…bomb, bomb Iran”?

In The Partition of Palestine, Kermit Roosevelt (Teddy’s grandson) asked, “Will the creation of a Jewish state in Palestine jeopardize the position of the United States in the Middle East?”  He thought it would in 1948; moreover, it would “ease the path of Soviet infiltration.”  A comparable rationale was offered when, as Our CIA Man in Teheran, Kermit spearheaded TPAJAX, which ousted the country’s elected prime minister after he proposed nationalizing its oil, a sovereign assertion that would’ve placed Iran, in our estimation, “behind the Iron Curtain.” 

Gamal Abdel Nasser, the Bollywood handsome head of Egypt, made a parallel move three years later in 1956, by nationalizing the Suez Canal. Wielding Israel Defense Forces as the tip of their spear, England and France sought to regain the Canal and oust Nasser. While the U.S. applied economic pressure on the Brits and French behind the scenes, it was newly installed Soviet Premier Nikita Khrushchev who got Third World cred for threatening to use nuclear weapons in support of Egypt.  Nuclear brinkmanship didn’t work so well when Khrushchev went eyeball-to-eyeball with the U.S. over Cuba in ’62…and blinked.

Two more clashes with Egypt brought Israel and their most potent Middle East adversary to the Camp David peace accords in ’79. It would usher in more than three decades of peaceful coexistence with Egypt even as the Shah was falling to the cursed Ayatollahs. Twenty-six years of fealty and cut-rate oil out of the Shah’s regime was a darned good return on the paltry five-figure amount Kermit Roosevelt claimed in expenses. For all the scorn heaped on Jimmy Carter, Camp David remains the most sustained contribution to Israel’s security.  

Israeli intelligence didn’t anticipate the Arab Spring spreading to Egypt and, once it did, Prime Minister Netanyahu beseeched the U.S. to stand by Mubarek. Subsequent election of the Muslim Brotherhood on Israel’s passive southern front combines with the five-year old Hamas electoral victory on their western flank to make Likudniks very nervous. Netanyahu’s neo-con alter-ego, Newt Gingrinch, has weighed in: “I think we may, in fact, be having an anti-Christian spring. I think people should take this pretty soberly.”  

Rosy neo-con visions of sugar plum oil fields and Jeffersonian democracy fairies transforming the Middle East have blurred beyond recognition over the past decade. So, it’s a good time to change the subject and refocus. And where better to draw a bead on than that spinning Axle of Evil—Iran? Ever ready to play Mad Mullah to Zealous Zionists, Supreme Ayatollah Khamenei has trash-talked, yet again, about removing the “cancer” that is Israel. “So far,” Khamenei boasted to the “Islamic Awakening and Youth Conference” in Teheran last week, “the Iranian nation has kicked them in the mouth at every stage.”

One bold “Awakening” attendee held up a pesky sign—“Syria?”to remind everyone that growing numbers of Syrians will never awaken again, thanks to the brutal crackdown of Iran’s close ally, Bashar “The Butcher” al-Assad. The fall of Assad would blow a huge strategic hole in Iran’s hegemony. Add to that equation the Persian Spring, which was quickly quelled by Khamenei/Ahmadinejad in a forceful flash-freeze. Deep-seeded discomfort with the Arab Spring is one response Israelis and Iranians share in common.  

Given the rough neighborhood Israelis live in, how far off is Armageddon if the mullahs get the bomb? The specter of nuclear Iran was raised in 1992 by Israel’s then Prime Minister Peres as well as current P.M., Benjamin “Bibi” Netanyahu who predicted back then that Iran was three to five years away from getting the bomb.  Before the Shah was toppled in 1979, one intelligence report had him setting up “a clandestine nuclear weapons development program.” A looming Iranian bomb has been sighted more frequently than the Loch Ness monster and Bigfoot.  

Recently retired Mossad director Meir Dagan, reflecting substantive differences in the Israeli intelligence and defense community, said that an attack on Iran would be “a stupid idea…. The regional challenge that Israel would face would be impossible.” With last year’s exodus of Dagan along with the chief of general staff and the Shin Bet director, “there is no one to stop Bibi and (Defense Minister) Barak.” Lest one dismiss the long-serving Dagan as a weak sister, heed the words of former Prime Minister Ariel Sharon: “Dagan’s specialty is separating an Arab from his head.”

As oil hovers around the $100/bbl mark, traders have currently dismissed the saber rattling as so much bluster. But with 40 percent of world oil transported through Iran’s Strait of Hormuz, conflict would drive the current price up anywhere from 25-75 percent sending a gallon soaring close to $6. Add these sobering facts: Iran has 25 percent more people than Iraq and Afghanistan combined, and land mass nearly four times that of its neighbor, Iraq.  

In the guestimate of the current Israeli chief of staff, the Iranians possess enough fissionable material to package four nukes at some point. The Israeli nuclear arsenal is approximately two orders of magnitude greater, an order of magnitude lower than the usual Israeli eye-for-an-eyelash ratio. The South Koreans have reconciled themselves to a nuclear North whose Martian leadership makes the mullahs look like hippies. Moreover, since Nagasaki, no nuclear nation, no matter how extreme, has been reckless enough to use a bomb. That restraint won’t prevail forever.

Can the Likudniks constrain themselves, resigned to sanctions of the economic and targeted variety?  Mysterious explosions, the Stuxnet virus and elimination of a half-dozen nuclear scientists have markedly crimped Iran’s weaponization. Soon the capacity of the Iranian central bank will be SWIFT-moated, severing their capacity for secure electronic financial exchange. “Iran’s economy has always been sick, but now it seems worse than ever,” said a Teheran bank employee about the prospects of more sanctions. Nonetheless, pre-emptive strikes like the ones Israel executed against Iraq in 1981 and Syria in 2007 remain mighty tempting.

As we mull all this over, return to my formative yesteryears, when mullahs were mere whirling dervishes, and consider the following Sufi tale, the Persian variation of Aesop’s Fables:

Two clever young men sought to puncture the reputed wisdom of the Mullah Nasruddin.

“You will hide a chicken behind your back,” one clever fellow instructed his clever friend, “and we will ask the Mullah whether the chicken is alive or dead.   If he says ‘alive’, you will break its neck. If he says dead, we will produce the living chicken.”

They came upon Mullah Nasruddin and put him to the test.

Nasruddin scratched his head, offered an indulgent smile and responded, “It’s in your hands! It’s in your hands!”

 

Main Photo: Richard Williams illustration from the Mullah Nasruddin series
Photo: M-Star oil tanker damaged in an explosion in the Strait of Hormuz 7-28-10

Iran From 10,000 Feet

Simultaneously clutching his Nobel Peace Prize in one hand and George W. Bush’s preemptive strike doctrine in the other, Obama has straddled this no-man’s land about as well as any president possibly could.

This column appears in the February 2nd, 2012 edition of the Long Island Press.

Trunk to tail the elephants circle the ring while the four remaining clowns in the circus vamp, weep and honk their noses to the delight of the audience. The train travels from Iowa to New Hampshire, and then makes its way down the coast to Florida where the most recent performance went off without a hitch. With dozens more appearances planned for the upcoming weeks, the greatest show on Earth promises to keep the masses entertained for months to come.

Outside the alternate reality that is the American election season, however, a gathering storm is rapidly approaching, threatening to rip the stakes from the ground and bring the tent down upon all of us.

The deadliest game of chicken in history is being played in dark alleys with no headlights. Two cars careen toward each other, Iran in one and Israel in the other, while the world huddles close to see which one of them blinks first. But we are all more than spectators in this deadly contest, we are participants. The ever-expanding concentric circles of conflict that began with the Mossad and Hezbollah, extended to neighboring nations such as the United Arab Emirates and Syria, now encapsulate the United States, Europe, Russia and China.

In short, the stage is set for World War III. Damn, those Mayans were good!

Because the economy is still in the center ring, however, it’s the primary show the audience focuses on. We can see shadowy figures moving about in the periphery. We know they’re there, but our attention is diverted for the moment. Humanity be damned, it’s still the economy, stupid. It’s why every pronouncement of war, every threat to prevent a nuclear Iran, includes references to the disruption of the global oil supply.

But exactly how do you quantify the potential ramifications of a complete breakdown in both production and supply of oil in the Middle East, and more specifically Iran? The second oil shock of the 1970s, beginning with an Iranian oil-workers’ strike in 1978 and continuing through the Iran-Iraq War in 1980, is a useful portent of financial catastrophe. This two-year flare-up resulted in skyrocketing oil prices that reached $38 per barrel in 1980. Adjusted for today’s dollars, that’s around $90 per barrel.

Think about that for a moment. If the equivalent figure of $90 today thrust the global markets into utter chaos and drove the world deeper into recession in 1980, what effect would a new shock today have on the global economy, considering oil is consistently trading around $100 per barrel today? Obama doesn’t need to ask Jimmy Carter how that would work out.

This is why Europe and America have been rallying support to increase economic sanctions on Iran while Israel continues its effective covert assault on the power structure in Tehran. Treasury Secretary Timothy Geithner recently visited China to ask for their participation in a global embargo on trading with Iran. The problem there, of course, is that China receives approximately 10 percent of its oil from Iran—a figure projected to grow steadily over the next couple of decades as China attempts to break the coal habit. Geithner’s reception was as chilly as it was when he asked the Chinese to adjust their undervalued currency in an effort to stabilize the balance of trade between our nations. Add to the mix that China has no moral or political allegiance to Israel, and it’s easy to understand why Geithner would have had better luck talking to the Great Wall of China than its ruling class.

The political calculus in Washington is as complicated as ever. Obama has been able to walk the tightrope between America’s hawks and isolationists by surging our forces in Afghanistan while withdrawing them from Iraq, and allegedly killing Osama bin Laden while entertaining the possibility of dialogue with Tehran. Simultaneously clutching his Nobel Peace Prize in one hand and George W. Bush’s preemptive strike doctrine in the other, Obama has straddled this no-man’s land about as well as any president possibly could. But time is running out as the election draws ever nearer, which is why the war rhetoric is beginning to intensify. This diplomatic squeeze is lost only on mouth-breathing Americans whose eyes are glued to the spectacle in the center ring, as they await the outcome of each GOP primary as if it matters. The rest of the planet has adjusted to the darkness as it watches these war preparations very, very closely.

Here’s the current score. Europe has taken a decidedly aggressive stance by leading the way with harsh economic sanctions on Iran forcing the United States to follow suit perhaps more than it might have otherwise. China and Russia have little to gain by punishing Iran as they trade openly. Israel is not above taking matters into its own hands and striking Iran’s nuclear facilities but it requires more assurance from the United States that we will back its play. The less-than-cozy relationship between Obama and Israeli Prime Minister Benjamin Netanyahu thwarts Israel’s next move, because acting unilaterally without U.S. support is as suicidal as doing nothing may someday prove to be.

 Saudi Arabia, which shares access to the strategically important Strait of Hormuz, also has little patience for Iran’s shenanigans; but it, like Iran’s allies in the area, has its own political and economic issues, and can hardly afford a conflict with any of the region’s stakeholders.

We are witnessing one of the greatest standstills of all time. The deciding vote, however, will likely come from none of the nations mentioned here because a new, more powerful force has emerged in the global landscape with the ability to tip the scales: the people.

From Occupy to the Arab Spring, the past year has shown that the most influential voice in world politics is that of the people. In this new interconnected world, the Iranian government’s clandestine policies and shadowy behavior are anachronistic. That’s not to say Israel and the United States don’t understand this potential, as both admit to stoking tensions within Iran to mobilize its youth in the hopes that they will lead to yet another revolution. If a fruit vendor in Tunisia can set off a series of events that changed the Arab world forever, the same can even happen in a nation as mysterious and closed-off as Iran. Dictators can be ousted and regimes can be toppled without deploying the U.S. military.

It’s why an untimely show of force against Iran would undermine the Iranian people’s naturally occurring dissatisfaction, shown by their willingness to protest the regime’s fraudulent elections and its hard-line stances that have wrought such economic hardship. This phenomenon has been occurring even before the most recent round of rigorous sanctions. In practice, imposing more stringent sanctions or military action may have the opposite of the desired effect by coalescing support for the Iranian government from within. Given the Iranians’ already poor economic circumstances, they may in fact see little distinction between enduring harsh sanctions and a blistering show of force.

Critics of the Obama administration have likened his stance on Iran as akin to that of British Prime Minister Neville Chamberlain’s appeasement of Hitler with the Munich Pact in 1938. They claim that the United States is being hoodwinked by Iran’s leadership who will immediately use nuclear weapons against Israel once they possess the capability to do so. Most who have written about the subject, however, believe this is folly, but that it’s better to have an Iran without nukes than one with them. In the meantime, the theory of Mutually Assured Destruction might take a backseat to the mutually assured production of oil. In my mind, the specter of nuclear warfare is a singular endgame issue, not an ongoing strategic battle that dismisses the Chamberlain/Hitler analogy in favor of Kennedy/Kruschev. When both men drew their lines in the sand and realized the lines were in exactly the same spot, everyone knew where they stood during the Cuban Missile Crisis in 1962.

Because the current leaders of Iran have publicly stated that they are committed to annihilating the state of Israel, they have legitimized the world’s fear of a nuclear Iran. But I would submit that the world doesn’t have an Iran problem, it has an Ahmadinejad problem. Were the U.S. to declare unequivocally that we will use force if Iran’s president denies UN inspectors in Iran or we discover that they have developed the capacity to use nuclear technology beyond domestic energy production, we would hardly be blamed for being the aggressor. But perhaps we should re-examine the role of sanctions and look at things differently because a free and prosperous people have a much greater ability to dictate policy in Iran than we outsiders ever will.

A desperate population with nothing to lose alters the equation of Mutually Assured Destruction and interrupts the natural evolution of the Arab Spring. It’s time to reverse the antiquated notion that a forcibly impoverished nation is ultimately obsequious to those nations that suppress it. President Obama should call upon the Congress and the world to lift all economic sanctions on Iran because sanctions starve the people, not the government. Moreover, the people have proven they know how to seize the opportunity for self determination.

Then we can all go back to watching the circus.

 

Main Photo: Associated Press

Fracking: The Ultimate Scam Revealed

By touting natural gas as the clean-burning fossil fuel that is cheaper to use and helps reduce our dependence on foreign oil, the industry has nailed the PR trifecta: cheaper, cleaner and patriotic.

gas mask hydrofrackingOne of the great joys of writing, as in science, is the accidental discovery. To wit: penicillin. And while this entry hardly ranks near Alexander Fleming’s pharmaceutical breakthrough, it does relieve a particular itch that has been nagging my brain. For months I have been vexed by the discrepancy in pricing between crude oil and natural gas. (Wait, I know how tedious commodities can be but I promise you this column is worth sticking with.) Unable to settle on any fundamental market-based explanation, I placed the issue on the mental backburner. It was only when I decided to update a series of articles on the role of speculation in the commodities markets that I happened upon the most plausible solution to this puzzle.

First, a little context. Over the past couple of years New York State has been flirting with the idea of hydraulic fracturing, or “fracking.” The discovery of enormous pockets of natural gas in the Marcellus Shale formation that runs from West Virginia, Pennsylvania and New York to as far as Ohio, has led to a modern-day gold rush in the region, with Pennsylvania several years ahead of New York. While the gas has always been there, it wasn’t until the turn of the millennium when controversial chemical enhancements invented by Halliburton were added to a difficult horizontal drilling technique that accessing this gas became feasible.

Almost immediately, however, environmental concerns began to mount. Stories of contaminated groundwater, intense air pollution and, most recently, a ruptured fault line and mini-earthquake in Youngstown, Ohio, on Dec. 31, have begun leaking into public consciousness. Gasland, a documentary by Josh Fox, increasingly agitated environmental organizations, and high-profile activists such as actor Mark Ruffalo have helped fracking reach the tipping point in the media. Once seen as a panacea for rural land owners in depressed parts of the country, fracking has become a pariah in the environmental community, setting the stage for yet another battle between the oil and gas industry and environmentalists. Caught in the middle of the entire fiasco at the moment is Gov. Andrew Cuomo, who is cautiously moving toward legalizing fracking in New York, though his public reticence highlights how tenuous this decision truly is.

Early on, I came down firmly against fracking in New York, and the Long Island Press was in the vanguard of reporting on it downstate. So I’m on record quite clearly as to why I believe fracking to be a disaster for New York, or anywhere else for that matter. No need to rehash this position. Still, one piece of the broader issue was missing—until now.

Here’s the issue: Fracking is expensive. The prolonged low market price of natural gas is the most logical deterrent to increasing drilling because it barely pays to pull the gas out of the ground. Moreover, the U.S. Energy Information Administration projects that natural gas demand in the United States should rise only 11 percent over the next 25 years compared to a projected rise of more than 300 percent in China over the same period.

Here’s where the market rationale gets murky. Analysts point to increased demand for fossil fuel in developing economies as the primary reason behind the steady rise in oil prices. Goldman Sachs’ most recent forecast of Brent Crude Oil, commonly known as “sweet light crude,” is $120 a barrel for 2012, with most market analysts following suit. A weak dollar, the ongoing crisis and uncertainty in the Eurozone, a burgeoning conflict between the U.S. and Iran, and continued growth in China, India and Brazil are the oft-given reasons behind these prognostications.

Historically, natural gas and oil prices have generally moved in tandem, and with natural gas gaining momentum as the fossil fuel of choice, it only makes sense that they would continue their mirrored trajectory. Instead, the opposite has occurred. Crude oil remains stubbornly high and creeping ever higher while natural gas remains depressed.

A closer look reveals that the world has record stockpiles of both fuels, and has developed incredible potential for new sources such as the Marcellus Shale play or the tar sands in Canada. Then there are the yet-to-be-developed fields in Iraq that, according to the New York Times, are “expected to ramp up oil production faster than any other country in the next 25 years, with a capacity…more than traditional leaders like Saudi Arabia.” Or, if you prefer, the real reason we went to war in Iraq.

Excess supply, new discoveries, and sluggish demand—and yet only natural gas is acting appropriately in the markets. This behavior is undeniable proof that the invisible hand of speculation is at work, which naturally begs the question as to why traders would suppress the price of gas but not oil.

For this answer we must turn back the clock once again and revisit several acts in Congress over the past two decades that made it possible for banks to merge with investment banks and trade commodities without limits and without transparency. Much of this trading is done on the Intercontinental Exchange, a trading platform that was founded and owned by Morgan Stanley, Goldman Sachs and BP. When you understand that markets today are dominated by investment banks and oil companies, who are at times one in the same (Morgan Stanley’s direct holdings in oil companies, fossil fuel infrastructure and transportation companies make it one of the largest oil companies in America), it is possible to fully comprehend the psychology behind natural gas pricing. Oil companies and investment banks have the ability to move the market by forecasting prices and investing in their own products through opaque exchanges that they own, so no matter where prices are they are making money.

Now you’re ready for the secret behind the fracking con job.

As previously mentioned, domestic natural gas is difficult to procure. The process is devastating to human health and the environment, and the effects are irreversible. To gain momentum and influence public opinion, the oil and gas companies have launched an ingenious propaganda assault on America. By touting natural gas as the clean-burning fossil fuel that is cheaper to use and helps reduce our dependence on foreign oil, the industry has nailed the PR trifecta: cheaper, cleaner and patriotic. And with an earnest pitchman like T. Boone Pickens, who wouldn’t believe it?

The problem is none of the above is true. First, natural gas might burn cleaner than oil but the process to extract it is so harmful it doesn’t matter. And second, because the same companies who are in control of the product are in control of the pricing, once they sew up the drilling rights they can simply jack up the price. This leaves the final argument that is wrapped in the American flag and served with a side of apple pie: reducing dependence on foreign oil for the sake of the union.

For the truth, let’s check in with the rest of the world to see what they say. (This was the happy accident that prompted this column.)

According to India’s leading daily business newspaper, the Business Standard, “the increasing shale gas production in the U.S. has led to a surplus, likely to increase in the coming years. The U.S. is, therefore, eyeing export to countries like China, Japan, Korea and India… In the past, the U.S. has been an importer of gas.” The article goes on to quote A. K. Balyan, chief executive officer of Petronet LNG, India’s largest liquefied natural gas importer, who states, “With an increase in U.S. gas production, the gas receiving terminals need to be converted to exporting terminals.”

Ta-dah!

The average life of a fracking site is seven years. At best. The environmental and human health catastrophe is forever. All of the current talk of job creation and reducing dependence on oil is a sham. Our natural gas stockpiles are higher than ever and the demand for natural gas, by our own country’s admission, will remain basically flat until 2035. The oil and gas companies are planning to export gas from the Marcellus Shale region to the same developing economies we’re supposed to be competing against. How’s that for homeland security?

The real insult? American oil and gas companies are willing to risk the health and welfare of our own citizens by fracking on our land in order to export fuel they claim is more beneficial to the environment. Normally, our companies are busy screwing up other countries in pursuit of their natural resources for our own consumption. As if this isn’t bad enough, they are finally committing the cardinal sin of shitting where they eat.

Let’s do the right thing for once: Ban fracking now. There’s no other way.

JANUARY 11th – FINAL DAY FOR PUBLIC COMMENT ON DEC WEBSITE. CLICK HERE

Main Photo Image: Photograph from AP. April 22, 1970, the first Earth Day.
Long Island Press cover image. Original art by Jon Sasala
T. Boone Pickens
. AP Photo.

This article was published in the January 5th, 2012 edition of the Long Island Press.