A Truman for our times

The received wisdom is that President Bush has been a foreign policy disaster, and that America is threatened by the rise of Asia. Both claims are wrong--Bush has successfully rolled back jihadism, and the US will benefit from Asian growth

by Edward Luttwak

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How did this same Harry Truman come to be universally viewed as a great president, especially for his foreign policy? It is all a question of time perspectives: the Korean war is half forgotten, while everyone now knows that Truman's strategy of containment was successful and finally ended with the almost peaceful disintegration of the Soviet empire.

For Bush to be recognised as a great president in the Truman mould, the Iraq war too must become half forgotten. The swift removal of the murderous Saddam Hussein was followed by years of expensive violence instead of the instant democracy that had been promised. To confuse the imam-ridden Iraqis with Danes or Norwegians under German occupation, ready to return to democracy as soon as they were liberated, was not a forgivable error: before invading a country, a US president is supposed to know if it is in the middle east or Scandinavia.

Yet the costly Iraq war must also be recognised as a sideshow in the Bush global counteroffensive against Islamist militancy, just as the far more costly Korean war was a sideshow to global cold war containment. For the Bush response to 9/11 was precisely that--a global attack against the ideology of Islamic militancy. While anti-terrorist operations have been successful here and there in a patchy way, and the fate of Afghanistan remains in doubt, the far more important ideological war has ended with a spectacular global victory for President Bush.

There's a lot more that needs to be debunked in that article, like the conclusion:

Will Russia advance towards Putin's promised authoritarianism, or will it persist as a unique specimen of centrally administered gangsterism? The US would be weakened by a coherently authoritarian Russia, with its readiness to use oil and gas reserves as diplomatic levers. But in fact the influence of the US in Europe is increasing with each passing day thanks to the gangsterism that infects Kremlin behaviour--the crude threats to supplies, the abrupt closure of highways, and even nuclear sabre-rattling.

Will the increasing decentralisation of Europe into regions and even quasi-states such as Catalonia and Scotland weaken the old national states sufficiently to allow the emergence of a strong pan-European government? That would also weaken the US, which now acts as Europe's only functioning co-ordinator for all that is military and diplomatic. It is also wildly unlikely in this century.

It is not personal shortcomings that prevent Friedman, Zakaria and co from addressing such questions. It is their method that is wrong, for it relies on two substitutes for systematic research: brief journeys to visit foreign parts that are mostly occupied by meetings with locals who speak English, and international conferences, like the Davos jamboree, which are frequented by the same locals, now on their own brief visits to foreign parts. This encourages the recirculation of clichés that usurp the place of considered thought.

In any case, not even Zakaria can discern any evidence that the spirit of discovery and invention that has made the US and the rest of the west so powerful is being relinquished. If anything, the opposite seems to be true. Even for the Olympics the Chinese relied on celebrity western architects to design the signature buildings. It is western modernity that has been emerging in spectacular fashion in China and elsewhere around the hard-working world, not any locally invented version. And the US is set to remain the chief source of western innovation, not least because its population is younger, and its society more flexible, than Europe's. On to the next boom therefore, when today's bust will be forgotten, along with the instant Davos books.

Deposit insurance that draws on City strengths

We have an opportunity to reshape the deposit insurance arrangements for UK banks using an approach that has long strengthened London as a financial centre. Applying proven models of mutuality can align the interests of banks, regulators and depositors and make our deposit insurance scheme more robust, cost-effective and capital efficient, thereby increasing London's competitive edge.

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Our preferred model for deposit insurance makes use of the "chain of security" activated in solving the recent crisis at the Society of Lloyd's, a market which has never defaulted a claim in over 300 years despite periods of huge stress. This approach recognises that deposit insurance is a backstop to protections embodied in Financial Services Authority regulation of bank capital and conduct of business, and Bank of England liquidity facilities to bridge short-term liquidity stress. Deposit insurance, when needed, should swiftly pay claims to depositors, spreading the liquidity impact and costs not only within the UK banking community but also more widely to the global insurance markets.

A Deposit Insurance Fund on the Lloyd's model would have tiered funding components: modest premium levies and subordinated debt for a cash reserve; a callable levy up to a fixed percentage of eligible bank insured deposits in the event of a claim exceeding the reserve; insurance of excess liabilities in catastrophe insurance markets, possibly combined with issuance of long-term debt; and a statutory preference against assets of the failed bank under the proposed Special Resolution Regime to repay any debt, levies and costs borne by the Deposit Insurance Fund.

One of the authors is someone I know.

In the long run, we're all dead. John Maynard Keynes

Merkel backing for Georgia

GERMANY'S Chancellor Angela Merkel assured Georgia yesterday that it would join Nato as she strongly backed the former Soviet republic in its conflict with Russia.

"Georgia will become a member of Nato if it wants to -- and it does want to," she told reporters before talks with Georgian president Mikheil Saakashvili in the capital, Tbilisi.

It was one of the strongest statements of support yet for Georgia's Nato membership bid, which is fiercely opposed by Russia.

Merkel was in Tbilisi to support Saakashvili and press for the withdrawal of Russian troops who attacked Georgia on August 8 to repulse an offensive by Georgian troops to regain control of a Moscow-backed separatist region, South Ossetia.

She was the latest world leader to visit Georgia -- which has repeatedly appealed for Western support -- after trips by French president Nicolas Sarkozy and US secretary of state Condoleezza Rice.

WORLD WITHOUT OIL, AMEN

Think $4 for a gallon of gas is screwing with your summer? Wait until you hear about something called peak oil. According to a growing number of experts--and we're not just talking about conspiracy wackos here--we're on the brink of an economic crisis that could lead to, well, the end of life as we know it. Benjamin Kunkel investigates just how scary things are about to become

A long and very good article.

In the long run, we're all dead. John Maynard Keynes

But this article on Dr Doom lays out his predictions, his methods and his history. Essential reading imo.

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

And his hero is Keynes....

You can't be me, I'm taken

"This is nothing compared to how Putin rigged Eurovision."