A draft of a document that could see the extension of the longest foreign war in US history was released today by the Afghan Ministry of Foreign Affairs, just hours before Afghan tribal figures are set to meet to vote on the document.
The so-called Bilateral Security Agreement between the US and Afghanistan would govern the rights and responsibilities of US troops in Asia's poorest country beyond the end of next year, when the current legal arrangement expires. The current draft envisions a robust US military presence in Afghanistan until the end of 2024.
For the past year, Afghan President Hamid Karzai has played coy with agreeing to a new deal with the US, seeking to extract maximum concessions, including transfers of cash and material. He has repeatedly groused that giving US troops complete immunity from Afghan prosecution - a dealbreaker for the Obama administration - would be a hard pill for proud Afghanis to swallow.
That pill is now half way down.
Article 13 of the draft (or "pre-decisional" document in its own language) that Afghanistan released today says that US troops won't be at risk of prosecution in the country's politically-compromised and incompetent courts. "Afghanistan, while retaining its sovereignty, recognizes the particular importance of disciplinary control, including judicial and non-judicial measures, by the United States forces authorities over members of the force and of the civilian component," it reads. "Afghanistan therefore agrees that the United States shall have the exclusive right to exercise jurisdiction over such persons in respect of any criminal or civil offenses committed in the territory of Afghanistan."
The article also promises that US troops will not be placed at risk of being handed over to any international body like the International Criminal Court in The Hague. "Afghanistan and the United States agree that members of the force and of the civilian component may not be surrendered to, or otherwise transferred to, the custody of an international tribunal or any other entity or state without the express consent of the United States."
So far, so good, from the perspective of the Obama administration. But the deal will still require the agreement of the Loya Jirga scheduled to start tomorrow.
That meeting of tribal figures was given formal responsibility for approving a deal with the US by Karzai. The reason is that the president doesn't want be on the hook for what may prove an unpopular decision. The men and women (note: an earlier version of this piece incorrectly stated there are no women on the jirga) on the council have a tough choice to make. Do they want the presumed indignity of a large contingent of US troops, not subject to Afghan law, remaining in the country? Or do they want to turn off the spigot of US money, which greases the Afghan government and goes into the pockets of various warlords and businessmen?
There is also the small problem of the Taliban, who remain powerful and undefeated throughout much of the country and would have a much better shot of gaining territory if the Afghan military was denied US training, logistical support and funding.
The agreement makes it clear that Afghanistan will get a lot in return for allowing US troops - likely to be around 10,000 - to stay.
"The United States shall have an obligation to seek funds on a yearly basis to support the training, equipping, advising and sustaining of (Afghan security forces), so that Afghanistan can independently secure and defend it self against internal and external threats, and help ensure that terrorists never again encroach on Afghan soil and threaten Afghanistan, the region, and the world."
Leaving aside the irony of the US being obligated to pay and "sustain" an Afghan military that is described as "independently security." For the past decade, the US has spent over $55 billion on a military that can't be sustained out of an organic Afghan government budget and doesn't currently have the logistical ability to operate on its own. The US is spending about $5 billion on Afghan security forces in the current fiscal year. Absent that money, the wheels would come off the Afghan military almost immediately, leaving the position of President Karzai - and many of the men gathered for the Loya Jirga - extremely tenuous.
To be sure, Obama hasn't got everything he wanted. Karzai has made a big show of concern about US raids of Afghan homes and accused US troops of war crimes. He had insisted that any new agreement would deprive US commanders of the authority to raid Afghan homes any longer - and appears to have carried the day.
"Unless otherwise mutually agreed, United States forces shall not conduct combat operations in Afghanistan," the document says. "Parties acknowledge that US military operations to defeat al-Qaida and its affiliates may be appropriate in the common fight against terrorism. The Parties agree to continue their close cooperation and coordination toward those ends, with the intention of protecting U.S. and Afghan national interests without unilateral US military counter-terrorism operations."
Now the ball is in the Loya Jirga's court. The presumption is that they'll stare into the abyss that would be an end of direct US military involvement and sign. But anything is possible.
The killing of Nasiruddin Haqqani, an important fundraiser for an Al Qaeda aligned militant network in Pakistan that bears the name of his father, the notorious warlord Jalaluddin Haqqani, in an Islamabad Pakistan suburb last week makes one wonder if the country's hard-earned reputation as a safe spot for mortal enemies of the US is coming to an end.
The Pakistani military may have received $17 billion in US aid since 2001, largely in the name of fighting terrorism, but that didn't stop the garrison town of Abbottabad near Islamabad from playing home to Osama bin Laden and his entourage.
The US-government funded Radio Free Europe carries a piece today that asserts that Haqqani had a better deal than Bin Laden, who was reported at least to never leave his compound and to avoid contact with outsiders.
Even compared to bin Laden, who hid in a safe house within sight of a prestigious military academy in Abbottabad, Haqqani's case stands out. He appears to have been living luxuriously in Islamabad, with several homes there, and often frequented the capital's markets and restaurants.
Retired Pakistani Army Brigadier General Mehmood Shah says the circumstances of Nasiruddin Haqqani's death -- he was shot on the street as he bought bread at a bakery -- are deeply troubling for Pakistan.
"The big question now is what was he doing in Islamabad?" Shah says. "We were assuming that the Haqqani network only operated in [the remote tribal region of] North Waziristan. And even there they were thought to be based close to the border with Afghanistan."
What's going on here? The Killing of Haqqani on Nov. 10 was just a week after a US drone strike killed Pakistani Taliban leader Hakimullah Mehsud - a killing that infuriated the Pakistani government, at least in public. Interior Minister Chaudhry Nisar Ali Khan said the US killing of Mehsud would get in the way of peace talks between Pakistan and the Taliban.
But while the government says it wants to end the war with Taliban militants in the country's lawless northwest, it seems that Al Qaeda fellow travelers who operated mostly in Afghanistan find the convenes of Islamabad more congenial.
Haqqani's death is a reminder that Pakistan remains a safe and happy place for finance and resupply for the Afghan militants determined to kill NATO forces in Afghanistan and upend their plans - $17 billion a year or no $17 billion a year.
Financial losses from tropical cyclones and other severe weather have surged in the past few decades, even as the man-caused release of carbon into the atmosphere has similarly increased and the science for why we're living on a warming planet has been nailed down.
So global warming is causing stronger, more frequent storms right? Wrong. At least, as far as anyone can make out, there's no evidence of that yet.
Historical Global Tropical Cyclone Landfalls, an article in the July 2012 Journal of Climate, argues that no evidence yet exists that climate change is to blame for more dangerous tropical cyclones – the generic name for hurricanes and typhoons. The authors constructed a database of hurricane-strength landfalls of tropical cyclones over the years, but found that "The analysis does not indicate significant long-period global or individual basin trends in the frequency or intensity of landfalling (tropical cyclones) of minor or major hurricane strength."
In other words, no consistent pattern, and no evidence that storms are growing stronger or more destructive globally. Why more damage? Because more people are living in flood plains and near the coast and building more things there. Also, there's a lot more of us around today: In 1960, the planet held 3 billion people. Today, it's more than 7 billion.
This is not to say that a warmer climate won't lead to more powerful and damaging tropical cyclones. Warm surface ocean temperatures are linked to stronger cyclones. But it's just that it doesn't appear to have done so yet. While the conventional wisdom on this often feels driven by people seeking to use to the latest storm headline to push back on global-warming denialists, the ends still don't justify the misuse-of-information means.
It's a popular position that tropical cyclones are more damaging now. For instance Jeffrey Sachs, the economist and director of Columbia University's Earth Institute, wrote this morning:
"Increasing Intensity of the Strongest Tropical Cyclones," published 2008, demonstrated that disasters like Haiyan becoming more common.— Jeffrey D. Sachs (@JeffDSachs) November 12, 2013
That prompted a response from Roger Pielke, one of the authors of the paper referenced at the top of this post. In a blog post on the matter, he acknowledges the paper referenced by Dr. Sachs found some change in some places, but not the sort of evidence of a global trend claimed. He also teases out regional data from the Landfalls paper for the western North Pacific basin, where Haiyan formed and which he writes is the most active for tropical cyclone formation.
If anything, the trend since 1950 has been towards fewer strong tropical cyclones in the area (though he warns that doesn't mean much either since there's such high year-to-year variability).
The paper Dr. Pielke contributed to (the lead author was Jessica Weinkle of the Center for Science and Technology Policy Research at the University of Colorado) isn't exactly an outlier. The Intergovernmental Panel on Climate Change (IPCC) surveyed the scientific literature on stronger or more frequent cyclones in a working paper in September of this year. It found:
Current datasets indicate no significant observed trends in global tropical cyclone frequency over the past century and it remains uncertain whether any reported long-term increases in tropical cyclone frequency are robust, after accounting for past changes in observing capabilities (Knutson et al., 2010). Regional trends in tropical cyclone frequency and the frequency of very intense tropical cyclones have been identified in the North Atlantic and these appear robust since the 1970s (Kossin et al. 2007) (very high confidence). However, argument reigns over the cause of the increase and on longer time scales the fidelity of these trends is debated (Landsea et al., 2006; Holland and Webster, 2007; Landsea, 2007; Mann et al., 2007b)... No robust trends in annual numbers of tropical storms, hurricanes and major hurricanes counts have been identified over the past 100 years in the North Atlantic basin.
None of this should suggest a warmer climate isn't a threat – or won't very clearly threaten more lives and livelihoods when powerful storms strike land. Rising sea-levels will make more and more places inhabited by people flood prone – which means more devastating storm surges. And human beings continue to love to live along the coast – whether for livelihood reasons for the poorer among us, or for the views and lifestyle among the rich.
But Haiyan isn't provably a result of a warmer planet. Nor is there yet strong evidence that global storms are more destructive.
That's when a national meeting of tribal leaders and other notable Afghans will hold a so-called loya jirga and vote on whether to meet the Obama administration's terms for keeping troops in the country beyond the end of 2014.
If they vote no, it will all be over but the packing, shipping, and destroying of military infrastructure. Whatever the Afghans decide about an extended US presence, the US involvement in offensive operations is sure to decline, just as its role in "nation building" is winding down. That means Afghans have gaps to fill when it comes to influence and power projection.
As the New York Times reported on Tuesday, the US-installed and -supported Afghan government is wasting little time. The plan? Make friends with the Pakistani Taliban and what's left of Al Qaeda's network in Pakistan.
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According to the article, which cites unnamed US and Afghan officials, the government of President Hamid Karzai is courting the Pakistani Taliban, who are close to what's left of Al Qaeda in region, as a way to counterbalance the Pakistani military's support for the Afghan Taliban.
The story began with the US military's arrest of Latif Mehsud, a senior Pakistani Taliban member. At the time the arrest was announced earlier this month, the Karzai government put out the story that Mr. Mehsud was in Afghanistan to negotiate a prisoner swap. There were also suggestions that he was being approached as go-between for peace talks.
But the Times story says the actual purpose of Mehsud's visit was to promise aid to the Pakistani Taliban in their fight. It's a cheap way for Afghanistan to project force and influcence inside Pakistan and, in theory, make Pakistan more amenable to Afghan positions at future negotiations.
Now, not content to be merely the target of a proxy war, the Afghan government decided to recruit proxies of its own by seeking to aid the Pakistan Taliban in their fight against Pakistan’s security forces, according to Afghan officials. And they were beginning to make progress over the past year, they say, before the American raid exposed them.
Although Afghan anger over the raid has been an open issue since it was revealed in news reports this month, it is only now that the full purpose of the Afghan operation that prompted the raid has been detailed by American and Afghan officials. Those officials spoke on the condition of anonymity to discuss secret intelligence matters.
The story is thoroughly plausible. Karzai's fear about Pakistani designs in Afghanistan has been one of the issues in the drawn-out negotiations over an extended US military presence. Karzai has been pressing for US security guarantees with respect to the Pakistanis. While talks have not really gotten anywhere yet, Karzai and others in the government have been more than happy to reach out to the Afghan Taliban, recognizing them as a political force and military force that aren't going away. Earlier this month Karzai said he'd like to bring the Taliban into a power-sharing government in Kabul.
America's and Karzai's interests haven't been aligned for years. The US said it wanted to establish a democracy in Afghanistan, but what's resulted has been rigged elections awash in drug money and the halls of parliament filled with warlords.
Even so, you'd be hard-pressed to come up with a better illustration of the futility and dysfunction of the current US effort than the Afghan government up to a direct Al Qaeda ally. The Pakistani Taliban have sought to hit US interests abroad: the US government has accused the group of being behind a failed car-bomb attack on New York's Times Square in 2010, and has also claimed that Mehsud was personally involved.
The stated purpose of the US war against the Taliban following Al Qaeda's attacks on New York and Washington in 2001 was to remove the Afghan government that had given safe-haven to Al Qaeda and replace it with one that would never harbor a movement bent on attacking the US again. Now, the Afghan government, installed on the back of US tanks, is negotiating a friendship with precisely those sorts of people.
To be sure, it all makes a certain amount of sense from an Afghan perspective. They'll seek advantage in their tough and violent neighborhood wherever they can find it. Looking to Pakistan, they probably find few reasons not to.
During the long US-led war in Afghanistan, Pakistan's military has provided aid and occasionally direct support to Taliban units who were killing US troops, yet the flow of US military aid to Pakistan - and intelligence cooperation on going after militants inside Pakistan - was unabated. When the US determined that Osama bin Laden was hiding it in the Pakistani garrison town of Abbottabad, a short distance from the country's capital, it couldn't trust Pakistan enough to inform them of a pending raid. Yet doubts about possible Pakistani military assistance to Bin Laden have not curtailed the relationship with the US.
So Karzai's bet is that there wouldn't be much in the way of repercussions for working with the Pakistani Taliban. Going on the history of the last decade, he's probably right.
The Washington Post has a scoop today about the extent of cooperation between Pakistan and the US on the drone campaign against alleged militants in that country.
Though "Pakistan is involved with the drone campaign" is about as surprising as "Revealed: Pope found to be Catholic" the Pakistani government has nevertheless frequently pretended for domestic political reasons that all drone strikes have happened without its involvement. The Post story, built using documents provided from unnamed people, nevertheless provides a useful degree of detail.
While there's lots to consider when it comes to the drone program, it's worth highlighting something from the CIA's own documents: Its claims that it knows civilians are rarely the victims of assassination abroad don't hold water.
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The Post reports that the US has decided to kill people in Pakistan because they were exercising in an organized fashion, were shifty in their traveling habits, or were shown inordinate amounts of respect in public. The Post writes:
On Jan. 14, 2010, a gathering of 17 people at a suspected Taliban training camp was struck after the men were observed conducting “assassination training, sparring, push-ups and running.” The compound was linked “by vehicle” to an al-Qaeda facility hit three years earlier. On March 23, 2010, the CIA launched missiles at a “person of interest” in a suspected al-Qaeda compound. The man caught the agency’s attention after he had “held two in-car meetings, and swapped vehicles three times along the way.” Other accounts describe militants targeted because of the extent of “deference” they were shown when arriving at a suspect site. A May 11, 2010, entry noted the likely deaths of 12 men who were “probably” involved in cross-border attacks against the U.S. military in Afghanistan.
The Post continues: "Although often uncertain about the identities of its targets, the CIA expresses remarkable confidence in its accuracy, repeatedly ruling out the possibility that any civilians were killed. One table estimates that as many as 152 'combatants' were killed and 26 were injured during the first six months of 2011. Lengthy columns with spaces to record civilian deaths or injuries contain nothing but zeroes."
Nothing but zeros. Setting aside the slippery meaning of words like "combatant" and whether it's wise to kill people in foreign countries the US is not at war with absent evidence they're planning an attack on US interests, that is not a remotely credible claim. Particularly since the documents show the government admitted to bumping off guys based on their being treated with too much respect in public. Frequently a target is at home with family, or meeting with local tribal figures who aren't remotely interested in attacking US interests, when the hellfire missiles come knocking.
The Obama administration has insisted that it decides who to kill in Pakistan based on tough criteria. But strong doubts should be raised by documents obtained by the Post. In war zones in general, people involved in carrying out deadly missions have huge incentives for downplaying civilian casualties. Consider the 11 Iraqi civilians, two of whom worked for Reuters, who were killed by a US helicopter in Baghdad in 2007. At the time of the incident, the US military first said that armed men had been attacked, and later said that the men were killed only after the helicopter came under fire from the ground. The truth - that no weapons were present and there were no signs of attack from the ground - only came out after Bradley Manning leaked footage from a helicopters gun camera to Wikileaks in 2010.
Saudi Arabia's announcement last week that it refused to take a seat on the United Nations Security Council that it had campaigned long and hard for was the diplomatic equivalent of a baby throwing its toys out of a pram – an expression of displeasure, sure, but not one likely to garner much respect or support.
This week Saudi Arabia went further, claiming that it refused the position not as a sign of displeasure with the UN, but as a way of signaling its unhappiness with the US for refusing to toe the Saudi Arabian line on Syria. The Saudis have been desperate for the US to go to war with Syria (private Saudi money is one of the reason that jihadi opponents of Bashar al-Assad have been in the ascendant among the rebellion) and have also been unhappy at signs of a possible rapprochement between the US and Iran.
Shiite Iran is Sunni Saudi Arabia's great rival in the region, and while a negotiated solution to end sanctions against Iran in return for assurances that it won't be able to build a nuclear bomb is in the interests of the US and much of the world, the Saudis don't see it that way. They, like Israel, want Iran to be economically and ultimately militarily crushed – not freed of the shackles of sanctions.
Yet in some corners Saudi Arabia's anger at the US over Syria, over Iran, and over the American failure to pull out all the stops to save the dictatorship of Hosni Mubarak in Egypt in 2011, is being treated as some kind of catastrophe. A column today from the Washington Post's David Ignatius is a case in point. Following a certain type of DC conventional wisdom, he writes that the US-Saudi relationship is "cracking up" and has reached "a dramatic tipping point."
What should worry the Obama administration is that Saudi concern about US policy in the Middle East is shared by the four other traditional US allies in the region: Egypt, Jordan, the United Arab Emirates and Israel. They argue (mostly privately) that Obama has shredded US influence by dumping President Hosni Mubarak in Egypt, backing the Muslim Brotherhood’s Mohamed Morsi, opposing the coup that toppled Morsi, vacillating in its Syria policy, and now embarking on negotiations with Iran — all without consulting close Arab allies.
...The bad feeling that developed after Mubarak’s ouster deepened month by month: The US supported Morsi’s election as president; opposed a crackdown by the monarchy in Bahrain against Shiites protesters; cut aid to the Egyptian military after it toppled Morsi and crushed the Brotherhood; promised covert aid to the Syrian rebels it never delivered; threatened to bomb Syria and then allied with Russia, instead; and finally embarked on a diplomatic opening to Iran, Saudi Arabia’s deadly rival in the Gulf.
The policies were upsetting; but the deeper damage resulted from the Saudi feeling that they were being ignored — and even, in their minds, double crossed. In the traditional Gulf societies, any such sense of betrayal can do lasting damage, yet the administration let the problems fester.
Ignatius has all this badly wrong (starting with the description of Israel, Egypt, Jordan and the UAE as US "allies;" the US is not in a treaty of alliance with any of those states). While it's possible that the US could have helped Mr. Mubarak survive, perhaps by telling the Egyptian military the US would support the bloodbath that probably would have been necessary to save Mubarak's regime in February 2011, that would obviously not have served US interests. And while the US did in fact support the democratic election of Mr. Morsi in Egypt, the Obama administration's response to the military coup that removed him has been tepid – even as Saudi Arabia has emerged as a key financial backer of the new interim government, which it hopes will put the democracy genie back in the bottle for good.
Likewise the US response to the bloody repression in Bahrain, which the Saudis backed. Was the US unhappy about it? Sure. When you peddle global democracy promotion in public but have close relations with repressive monarchies, it puts you in an awkward position. But unhappy enough to do anything about it? No.
Finally there's the notion that Saudi Arabia's king and princes feel "double-crossed." This is a country that, after all, fueled the rise of the jihadi militants in Afghanistan that morphed into Al Qaeda; that allowed private donors to funnel financial support to Sunni militants during the US occupation of Iraq (who then attacked US troops); and has done more than any other nation to export a variety of Islam that is deeply hostile to US interests.
Meanwhile, the US has always looked the other way on Saudi Arabia's human rights abuses and medieval treatment of women in the interests of "friendship." The Obama administration has been happy to carry on that tradition. So Saudi claims of feeling "double-crossed" should be seen in context – an attempt to manipulate the US into behaving as Saudi Arabia wishes. But is it really going to amount to anything?
It's possible that Saudi Arabia will look to buy more weapons from others some day (Saudi Arabia's vast purchases of US weapons back into the 1950s have been a sort of guarantee of US support for the oil rich monarchy), but that isn't happening yet. Just last month, an $11 billion arms contract involving Saudi Arabia was announced by the Pentagon. The US and Saudi interest in a stable global oil market remains the same as ever (and no matter how much new oil and gas the US produces, it will still be interested in Saudi Arabia because of the effects its production has on the global price of petroleum products).
And for all the bellyaching from Saudi Arabia about the US refusal to topple Assad by force, the Obama administration has given no signs that the days of Saudi Arabia's free pass on its repressive practices are coming to an end.
On balance, the interests the two sides have in common remain much stronger than the interests they don't. A breakup would certainly be interesting – and welcomed by fans of democracy promotion. But a catastrophic shift in the relationship doesn't seem likely yet, whatever the pundits say.
When Egypt's military ousted the Muslim Brotherhood's Mohamed Morsi from the presidency in early June, it was based on a simple public presence. Hordes of protesters against his government had demonstrated he'd lost any mandate to lead, and Egypt risked a period of prolonged instability and violence if they didn't step in.
Gen. Abdel Fattah al-Sisi's pitch was essentially: "We're the military, our job is to protect Egypt from all external and internal threats, and we're going to restore order."
But since then, the interim government installed by the generals has moved aggressively against not only the top tier of Muslim Brotherhood leaders, but against the very existence of the group, for decades the largest and best-organized social movement in the country. The worry has been that a winner-takes-all approach to Egypt's political development, with the losers facing annihilation, could spawn even worse instability than Egypt has endured since the end of the military-backed dictatorship of Hosni Mubarak in Feb. 2011.
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Lately, there are signs that those fears are becoming reality. This week, a drive-by shooting targeted a Coptic Christian wedding at a church in Giza, just across the Nile from Cairo, leaving four dead, two of them little girls, and 17 wounded. Egypt's Coptic minority has been targeted both before Morsi was deposed and since, usually by Islamist supporters (though there's no evidence yet of who carried out the church attack). Also interesting about the attack were persistent complaints from parishioners at the church that police protection for the facility was withdrawn in June.
Egypt is now a country of little trust and great fear. Incompetence in providing security is frequently interpreted as malice, and conspiracies rage around the humble cafes of Cairo much as they do on social media sites like Facebook and Twitter. But if whatever legitimacy Sisi and his fellow generals have is based on providing security – and protecting the "dignity" of all Egyptians – how are they doing?
So far, not so good. A lot of blood has been spilled since the takeover, and there's been a widespread crackdown on political. Like the alleged murder of 39 Muslim Brotherhood captives by the police in the back of a van. Or the detention of most of the senior leadership of the movement about about 2,000 supporters since. Or the attempted assassination of Egypt's Interior Minister in September. Or attacks on 47 churches and monasteries in the middle of August alone. Or the rocket-propelled grenade attack in October on a government installation in the Cairo suburb of Maadi, once a leafy enclave favored by Egypt's dwindling community of well-heeled expatriates.
Are these outliers, or inevitable hiccups in a chaotic country in the middle of just the latest iteration of its seemingly interminable transition? Or signs of worse to come?
My guess is that worse is coming. Morsi is in detention, as are at least six other senior Muslim Brotherhood figures, according to the movement's press operation, which has moved out of Egypt to avoid arrests. In September, an Egyptian court banned the group from any social, political, or religious activities in Egypt. On Monday, an interim government committee formed to take control of the Brotherhood's finances said about 1 billion Egyptian pounds ($150 million) in bank accounts and property had been seized and recommended that all the money simply be rolled over into the government's budget. The government is also planning on placing 15 schools run by the group under the control of the education ministry.
All of this is leaving the rank and file of the movement leaderless, and with its leaders looking at an organization that has few resources to fight for its survival – let alone for political influence – aside from violence and protest. While it's true that many Egyptians were frightened by the prospect of a forced Muslim Brotherhood Islamicization of the society, a key reason that vast public protests preceded the military takeover in July, it remains the case that many millions of Egyptians support the movement, and few current events as an anti-Islamic conspiracy.
When people's backs are against the wall, they often fight with the only tools available to them.
Google's share price topped $1,000 for the first time, sparking a flurry of reporting on this unimportant milestone. Sure, there are only four companies with share prices that high on US stock markets, but that's because Google, Warren Buffet's Berkshire Hathaway, the retailer Priceline and pork processor Seaboard eschew the common Wall Street practice of stock splits to keep the nominal price of their shares low.
Warren Buffett is famously opposed to the practice, and that's the reason that directly owning shares in his successful investment business is out of reach for all but the wealthiest (Berkshire Hathaway stock is currently trading at around $175,000 a share). But what put Google into the $1,000 a share club today is interesting: Surging profits, which saw the stock leap as much as 10 percent today. Google reported third quarter profits of $3 billion yesterday, up 36 percent from the same period a year ago. How did the company do it?
In the words of USA Today's Matt Krantz: "The Internet company showed again late Thursday just how lucrative its business of collecting and selling consumers' personal data to the highest bidder has become." That's right, Google is in the same business as the reviled National Security Agency. But rather than collecting reams of online data supposedly in the name of national security, Google collects data for sale to whoever has the money to pay.
Google is one of America's most admired companies, and tens of millions of people visit its online search engine, browse the internet with its Chrome browser, look at funny cat clips on YouTube, and navigate their cell phones with its Android software every day. And if you're worried about online privacy and data collection, there's no particular reason to trust a private, profit-motivated corporation with your information more than the grey suits over at the NSA.
The company is always on the lookout for new ways to monetize the personal information of its users.
For instance last Friday Google said that it would soon begin using some users pictures and comments in targeted advertising at their friends and family members. They way it would work is if a user has shared the information the he likes a restaurant or a store, Google would display the users picture and endorsement for ads for that business, targeted at people that belong to his online social network. Facebook has already moved in that direction, and Twitter is expected to start looking at similar approaches as it gears up for its IPO later this year.
The New York Times characterized the change as "the latest example of the continual push by Web companies to collate the reams of personal information shared online in the chase for profits."
A lot can be learned about a person by what videos they watch, whose addresses are in their online contact lists, what they search for and what they talk about online. That's why the NSA has been so interested in monitoring internet activity - and why Google is.
Is the US dollar's position as the reserve currency of the world imperiled as a result of the debt limit showdown in Washington?
The argument for "yes" has already grown stronger as a consequence of Republican use of the debt ceiling – which needs to be raised in order for the government to pay existing debts and other commitments like funding social security and medicare – as leverage to demand budget changes.
The federal government has been shut down for over two weeks now and the US Treasury says it may run out of money after midnight if a deal isn't struck in Congress. That looming deadline, which could trigger a default that would have catastrophic consequences for the US economy and all the foreign governments who have treated US bonds as the safest of safe havens in an uncertain world since World War II, is likely to focus the minds of US politicians. So a decision to avoid this self-inflicted wound is probably more likely than not (in the early afternoon, Senate Republicans said they've found a way to strike a deal.)
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But the tragedy of default averted doesn't mean there's no tragedy. There's an argument to be made that profound damage has already been done to America's financial standing in the eyes of the world. The simple choice of dancing right up to the blink of the cliff over what looks like the pettiest of politicking to foreigners has sent a message that the assumption that US treasuries are a rock-solid place to park your money needs to be reevaluated.
To be sure, the US has defaulted before. After British troops sacked Washington during the War of 1812, the US government defaulted in 1814. And in 1979 the US briefly defaulted due to paper work error – though the error was quickly rectified.
But a political choice to default, enabled by a harshly divided House and Senate, was until now unthinkable. Financially, the US and its elected leaders were the grownups in the room, aware both of the advantages America's preeminent position provides in cheaper borrowing and the responsibility for the health of a globalizing financial system. That assumption can be no longer made.
Michael Casey at the Wall Street Journal writes today that the US no longer deserves its gold standard AAA credit ratings from agencies like S&P, Fitch, and Moody's. He tells of how BlackRock Inc. CEO Laurence Fink, whose firm – the largest money manager in the world, with $4 trillion in assets – told a conference last week that the US is not a “principled nation.”
When men and women who control tens of trillions of dollars in US investments are indicating they’ve lost their faith in America, it goes to the very question of whether the US deserves to be at the center of world finance. So, whether or not Fitch Ratings follows through on the “Negative Watch” status that it placed on its top-notch US rating Tuesday, it’s clear now that the dysfunctional American political system no longer justifies a Triple-A rating from anyone.
It matters not whether the US is actually forced into a devastating default – still an extremely unlikely event. Triple-A credits do not behave like this.
In top-rated countries, politicians do not use instruments like the federal debt ceiling as an extortionist political tool. In allowing that to happen, the US is abrogating its responsibilities as issuer of the world’s reserve currency and as protector of the “risk-free rate.”
Rock-ribbed American capitalists like BlackRock's Mr. Fink aren't alone. Over the weekend, the Chinese government news service Xinhua ran a commentary arguing "it is perhaps a good time for the befuddled world to start considering building a de-Americanized world." The piece is filled with pot shots at America's standing in the world that are standard for Xinhua, but also reflects the real concern that the US and its rogue politicians are no longer safe trustees of the global financial commons.
Most recently, the cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations' tremendous dollar assets in jeopardy and the international community highly agonized.
Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated, and a new world order should be put in place, according to which all nations, big or small, poor or rich, can have their key interests respected and protected on an equal footing.
... What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant US dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.
China is believed to have more than half of its financial reserves in dollar-denominated debt – well over $1.5 trillion. The US Treasury said as of July that China held nearly $1.3 trillion in federal government debt, making it the largest foreign lender to the US, closely followed by Japan, with $1.2 trillion. In all, foreign countries have about $5.6 trillion parked in US Treasury securities – something that has helped keep US borrowing rates at among the lowest levels in the world and helped the country weather the economic storm of the past few years. Of late, both China and Japan have been pulling out of US debt at a near-record clip, a reflection of the fact that the assumption that the US isn't crazy enough to default over politics is no longer a safe one.
Reuters columnist Felix Salmon wrote a good piece on the inevitable loss of trust in America on Monday. He rightly points out that "if you really do expect zombies to start roaming the streets the minute that the US misses a payment on its Treasury obligations, you’re likely to be disappointed." Yes, the world will not come to an end. But:
The harm done to the global financial system by a Treasury debt default would not be caused by cash losses to bond investors. If you needed that interest payment, you could always just sell your Treasury bill instead, for an amount extremely close to the total principal and interest due. Rather, the harm done would be a function of the way in which the Treasury market is the risk-free vaseline which greases the entire financial system. If Treasury payments can’t be trusted entirely, then not only do all risk instruments need to be repriced, but so does the most basic counterparty risk of all. The US government, in one form or another, is a counterparty to every single financial player in the world. Its payments have to be certain, or else the whole house of cards risks collapsing — starting with the multi-trillion-dollar interest-rate derivatives market, and moving rapidly from there.
And here’s the problem: we’re already well past the point at which that certainty has been called into question.
There are signs that the ratings agencies, rarely leading indicators, are catching up to this reality. Fitch said yesterday it's considering cutting the US government's AAA credit rating. Why?
"The US authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The US Treasury Secretary has said that extraordinary measures will be exhausted by 17 October, leaving cash reserves of just $30 billion. Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," the agency wrote. "The repeated brinkmanship over raising the debt ceiling also dents confidence in the effectiveness of the US government and political institutions, and in the coherence and credibility of economic policy. It will also have some detrimental effect on the US economy."
S&P downgraded US debt from its highest grade during the last debt-showdown in 2011. Moody's still pegs US debt at its highest rating, and is not currently considering a downgrade.
Make no mistake. If almost any other country in the world had flirted with voluntary default twice in the span of two years (the least debt ceiling crisis was in August 2011), their rating would have been cut already. The US still maintains a preeminent global financial position, and as the travails of the eurozone have shown, there is not as yet a good alternative to the good old greenback.
But other countries are thinking hard about alternatives. Whatever is or isn't resolved in DC today, that is a fact that US and the rest of the world will now have to live with.
The latest scoop to come out of the documents that former National Security Agency contractor Edward Snowden has been providing to journalists is that the NSA has been harvesting vast numbers of emails and other contacts from online contact lists around the world.
The Washington Post reported yesterday that "hundreds of millions of contact lists" are being sucked up from web servers abroad, many of them inevitably of American citizens. It's the sort of bulk data collection that privacy activists have been angry about. The US isn't going after, say, the contact lists of identified potential terrorists or other foreign intelligence targets. Rather, it appears to be hoovering up everything it can get its hands on.
But given past Snowden revelations about NSA practices, the fact that the NSA was likely to be doing this kind of thing isn't a surprise. Which is why I find this sentence in the thorough article so interesting: "The collection depends on secret arrangements with foreign telecommunications companies or allied intelligence services in control of facilities that direct traffic along the Internet’s main data routes."
In the debate about NSA data-mining from telecommunications companies and popular Web services like Google, the US has often been framed as a sort of rogue actor - a big bully spying willy nilly on people around the globe simply because it can. For instance, Guardian columnist Glenn Greenwald, who broke the first Snowden stories, has crafted his pieces to make the US look as bad as possible, while generally neglecting the spying of other nations.
In a story for Brazil's O Globo based off Snowden material, for instance, Greenwald wrote about US spying on the Brazilian government, while neglecting to mention Brazil's own spying on foreigners and its own citizens. Greenwald resides in Brazil.
In the broader Internet discussion about the revelations, there's been talk about ending the key US role in routing global Internet traffic. Brazilian President Dilma Rousseff is considering measures requiring Brazilian Internet users' information to be stored only on servers in the country. The move is ostensibly to make it harder for the NSA to get at it. Deutsche Telekom of Germany has said it will start channeling all domestic Internet traffic through servers in the country (emails within a country are often bounced through servers abroad), and says it wants an agreement with other telecommunications companies in Germany to do the same.
But it's clear that while the US is a data-mining heavyweight, large numbers of other governments are in on the act. A recent story in Ars Technica points out that Germany has legal measures that require email and other Internet services to provide customer data if handed a court order. They're also legally bound from saying if they've received an order for data. While laws vary from country to country, Europe in general does not, at first glance at least, seem like a haven from surveillance.
European Union "law does not explicitly protect against access by European intelligence services, but member states law and practice does," Ralf Bendrath, the senior policy adviser to a German member of the European Parliament, told Ars.
Elsewhere? Russia maintains a vast domestic surveillance state of its own. A report in Russia last week alleged that the government's FSB security service has installed a surveillance system that will enable them to intercept and read virtually every digital communication in Sochi during the 2014 winter Olympics.
Returning to the Washington Post story, who are the foreign telecommunications companies and foreign governments assisting the NSA? Regarding the first group, the article doesn't say. The story does refer to data collection by an "Australian intelligence service on the NSA’s behalf" but doesn't name any other countries. There are certainly many more. And if foreign governments are willing to collect Internet data on behalf of the US, you can count on it that they're collecting for themselves.
This is not to suggest the expansion of surveillance enabled by the Internet age isn't troubling. It's just that the US is not alone, with many partners and enemies abroad doing much the same. And those countries haven't found their Snowden yet.