from nytimes.com
August 28, 2008
Op-Ed Contributor
Johnson’s Dream, Obama’s Speech
By ROBERT A. CARO
AS I watch Barack Obama’s speech to the Democratic convention tonight, I will be remembering another speech: the one that made Martin Luther King cry. And I will be thinking: Mr. Obama’s speech — and in a way his whole candidacy — might not have been possible had that other speech not been given.
That speech was President Lyndon Johnson’s address to Congress in 1965 announcing that he was about to introduce a voting rights act, and in some respects Mr. Obama’s candidacy is the climax — at least thus far — of a movement based not only on the sacrifices and heroism of the Rev. Dr. King and generations of black fighters for civil rights but also on the political genius of Lyndon Baines Johnson, who as it happens was born 100 years ago yesterday.
When, on the night of March 15, 1965, the long motorcade drove away from the White House, heading for Capitol Hill, where President Johnson would give his speech to a joint session of Congress, pickets were standing outside the gates, as they had been for weeks, and as the presidential limousine passed, they were singing the same song that was being sung that week in Selma, Ala.: “We Shall Overcome.” They were singing it in defiance of Johnson, because they didn’t trust him.
They had reasons not to trust him.
In March 1965, black Americans in the 11 Southern states were still largely unable to vote. When they tried to register, they faced not only questions impossible to answer — like the infamous “how many bubbles in a bar of soap?” — but also the humiliation of trying to answer them in front of registrars who didn’t bother to conceal their scorn. Out of six million blacks old enough to vote in those 11 states in 1965, only a small percentage — 27 percent in Georgia, 19 percent in Alabama, 6 percent in Mississippi — were registered.
What’s more, those who were registered faced not only beatings and worse but economic retaliation as well if they tried to actually cast a ballot. Black men who registered might be told by their employer that they no longer had a job; black farmers who went to the bank to renew their annual “crop loan” were turned down, and lost their farms. Some, as I have written, “had to load their wives and children into their rundown cars and drive away, sometimes with no place to go.” So the number of black men and women in the South who actually cast a vote was far smaller than the number registered; in no way were black Americans realizing their political potential.
More important, many civil rights leaders felt that President Johnson wasn’t helping them nearly as much as he could have — and that in fact he never had. He had passed a civil rights bill in 1964, but it hadn’t been a voting rights bill.
And they remembered his record, a long record. It was not merely that during his first 20 years, 1937 through 1956, in the House and Senate, he had voted against every civil rights bill — even bills aimed at ending lynching.
Leaders of the civil rights movement who had watched their bills die, year after year, in Congress — not a single civil rights bill had been enacted since 1870 — knew that Johnson had been not merely a voter but a strategist against civil rights, a tactician so successful that Richard Russell of Georgia, the leader of the Senate’s mighty “Southern caucus,” had raised him to power in the Senate, had, in fact, made him his anointed successor as the South’s legislative leader, the young hope of the elderly Southern senators in their desperate battle to maintain racial segregation.
In 1956, by which time Lyndon Johnson was majority leader, he devised and carried out the strategy that had not only crushed a civil rights bill in the Senate by a majority greater than ever before, but had done so in a way that humiliated, in a particularly vicious manner, the liberal senator who refused to bow to his wishes, Paul Douglas of Illinois.
In 1957 he had engineered the passage of a civil rights bill. The mere fact of its passage in the face of Southern senatorial power — it was the first civil rights bill to be enacted in 87 years — made it a significant benchmark in the history of American government, and the guile and determination with which Johnson drove it to passage made it a landmark of legislative mastery as well. But he was forced to weaken it to get it through, and liberals, not understanding the obstacles he had surmounted, blamed him for not making it stronger.
Some civil rights leaders who had been talking to Lyndon Johnson since he became president were now, by the spring of 1965, convinced of his good faith, but most were not, and the mass of the movement, symbolized by those protesters outside the White House gates, still distrusted him.
•
Men and women who knew Lyndon Johnson, however, felt there was another element to the story. They included the Mexican-American children of impoverished migrant workers he had taught as a 21-year-old schoolteacher in the little town of Cotulla, Tex.; to the ends of their lives they would talk about how hard he had worked to teach and inspire them. “He used to tell us this country was so free that anyone could become president who was willing to work hard enough,” one student said.
Others remember what one calls the story about the “little baby in the cradle.” As one student recalled, “He would tell us that one day we might say the baby would be a teacher. Maybe the next day we’d say the baby would be a doctor. And one day we might say the baby — any baby — might grow up to be president of the United States.”
His former students weren’t alone. Men and women at Georgetown dinner tables were also convinced of the sincerity of Johnson’s intentions. “I remember at this dinner party, Johnson talking about teaching the Mexican-American kids in Cotulla, and his frustration that they had no books,” recalls Bethine Church, the wife of Senator Frank Church of Idaho. “I remember it as one of the most passionate evenings I’ve ever spent.”
These men and women felt Johnson truly wanted to help poor people and particularly people of color, and that he was held back only by his ambition: his desire to be president, and because he was a senator from a Southern state. But when, in 1957, ambition and compassion were finally pointing in the same direction — when he realized that he would never become president unless he removed the “magnolia scent” of the South — he set out to pass a civil rights bill, he did it with a passion that showed how deeply he believed in what he was doing.
The bill he got was the weak one, and civil rights leaders blamed him because the advances it made were meager. Only a week before the March 1965 speech, Dr. King had said that at the rate voter registration was going, it would take 135 years before even half the blacks in Mississippi were registered. And as the limousines were pulling through the gates that night in March, the protesters were singing “We Shall Overcome,” as if to tell Lyndon Johnson, we’ll do it without you.
But they didn’t have to.
When Johnson stepped to the lectern on Capitol Hill that night, he adopted the great anthem of the civil rights movement as his own.
“Even if we pass this bill,” he said, “the battle will not be over. What happened in Selma is part of a far larger movement which reaches into every section and state of America. It is the effort of American Negroes to secure for themselves the full blessings of American life.”
And, Lyndon Johnson said, “Their cause must be our cause, too. Because it is not just Negroes, but really it is all of us, who must overcome the crippling legacy of bigotry and injustice.”
He paused, and then he said, “And we shall overcome.”
Martin Luther King was watching the speech at the home of a family in Selma with some of his aides, none of whom had ever, during all the hard years, seen Dr. King cry. But Lyndon Johnson said, “We shall overcome” — and they saw him cry then.
And there was another indication of the power of that speech. When the motorcade returned to the White House, the protesters were gone.
•
Another significant moment had occurred in the Capitol after the speech, as Johnson was coming down the aisle accepting congratulations.
It wasn’t just congratulations he wanted. One of the congressmen on the aisle was Emanuel Celler, the 76-year-old chairman of the House Judiciary Committee, which handled civil rights legislation. Long a rights champion but now an elderly man, Celler said he would start hearings on the bill the following week, but “I can’t push that committee or it might get out of hand.”
Suddenly, Johnson wasn’t smiling. His eyes narrowed and his face turned cold. He was still shaking Celler’s hand, but with his other hand he was jabbing at the old man. “Start them this week, Manny,” he said. “And hold night sessions, too.”
Celler did. The heroism of the march at Selma, the heroism all across the South, the almost unbelievable bravery of black men and women — and children, so many children — who marched, and were beaten, and marched again, for the right to vote, created the rising tide of national feeling behind the passage of civil rights legislation, the legislation not only of 1965 but of 1964 and 1957. That feeling did so much to make the legislation possible. It has taken me scores of pages in my books to try to describe that heroism, and all of them inadequate. But it also took Lyndon Johnson, whom the black leader James Farmer, sitting in the Oval Office, heard “cajoling, threatening, everything else, whatever was necessary” to get the 1965 bill passed and who, with his legislative genius and savage will, broke, piece by piece, in 1957 and 1964 and 1965, the long unbreakable power of the Southern bloc.
“Abraham Lincoln struck off the chains of black Americans,” I have written, “but it was Lyndon Johnson who led them into voting booths, closed democracy’s sacred curtain behind them, placed their hands upon the lever that gave them a hold on their own destiny, made them, at last and forever, a true part of American political life.”
LOOK what has been wrought! Forty-three years ago, a mere blink in history’s eye, many black Americans were unable to vote. Tonight, a black American ascends a stage as nominee for president. “Just give Negroes the vote and many of these problems will get better,” Lyndon Johnson said. “Just give them the vote,” and they can do the rest for themselves.
All during this long primary campaign, after reading, first thing every morning, newspaper articles about Barack Obama’s campaign for the presidency, I would turn, as part of the research for my next book, to newspaper articles from 1965 about Lyndon Johnson’s campaign to win for black people the right to vote.
And I would think about Johnson’s great speech, when he adopted the rallying cry of black protest as his own, when he joined his voice to the voices of all the men and women who had sung the mighty hymn of the civil rights movement. Martin Luther King cried when he heard that speech. Since I am not black, I cannot know — cannot even imagine — Dr. King’s feelings. I know mine, however. To me, Barack Obama is the inheritor of Lyndon Johnson’s civil rights legacy. As I sit listening to Mr. Obama tonight, I will be hearing other words as well. I will be hearing Lyndon Johnson saying, “We shall overcome.”
Robert A. Caro, who has won Pulitzer Prizes for his biographies of Robert Moses and Lyndon Johnson, is at work on the fourth and final volume of his Johnson biography.
Thursday, August 28, 2008
Sunday, August 24, 2008
Its is Biden
from www.nytimes.com
August 22, 2008
Op-Ed Columnist
Hoping It’s Biden
By DAVID BROOKS
Barack Obama has decided upon a vice-presidential running mate. And while I don’t know who it is as I write, for the good of the country, I hope he picked Joe Biden.
Biden’s weaknesses are on the surface. He has said a number of idiotic things over the years and, in the days following his selection, those snippets would be aired again and again.
But that won’t hurt all that much because voters are smart enough to forgive the genuine flaws of genuine people.
And over the long haul, Biden provides what Obama needs:
Working-Class Roots. Biden is a lunch-bucket Democrat. His father was rich when he was young — played polo, cavorted on yachts, drove luxury cars. But through a series of bad personal and business decisions, he was broke by the time Joe Jr. came along. They lived with their in-laws in Scranton, Pa., then moved to a dingy working-class area in Wilmington, Del. At one point, the elder Biden cleaned boilers during the week and sold pennants and knickknacks at a farmer’s market on the weekends.
His son was raised with a fierce working-class pride — no one is better than anyone else. Once, when Joe Sr. was working for a car dealership, the owner threw a Christmas party for the staff. Just as the dancing was to begin, the owner scattered silver dollars on the floor and watched from above as the mechanics and salesmen scrambled about for them. Joe Sr. quit that job on the spot.
Even today, after serving for decades in the world’s most pompous workplace, Senator Biden retains an ostentatiously unpretentious manner. He campaigns with an army of Bidens who seem to emerge by the dozens from the old neighborhood in Scranton. He has disdain for privilege and for limousine liberals — the mark of an honest, working-class Democrat.
Democrats in general, and Obama in particular, have trouble connecting with working-class voters, especially Catholic ones. Biden would be the bridge.
Honesty. Biden’s most notorious feature is his mouth. But in his youth, he had a stutter. As a freshman in high school he was exempted from public speaking because of his disability, and was ridiculed by teachers and peers. His nickname was Dash, because of his inability to finish a sentence.
He developed an odd smile as a way to relax his facial muscles (it still shows up while he’s speaking today) and he’s spent his adulthood making up for any comments that may have gone unmade during his youth.
Today, Biden’s conversational style is tiresome to some, but it has one outstanding feature. He is direct. No matter who you are, he tells you exactly what he thinks, before he tells it to you a second, third and fourth time.
Presidents need someone who will be relentlessly direct. Obama, who attracts worshippers, not just staff members, needs that more than most.
Loyalty. Just after Biden was elected to the senate in 1972, his wife, Neilia, and daughter Naomi were killed in a car crash. His career has also been marked by lesser crises. His first presidential run ended in a plagiarism scandal. He nearly died of a brain aneurism.
New administrations are dominated by the young and the arrogant, and benefit from the presence of those who have been through the worst and who have a tinge of perspective.
Moreover, there are moments when a president has to go into the cabinet room and announce a decision that nearly everyone else on his team disagrees with. In those moments, he needs a vice president who will provide absolute support. That sort of loyalty comes easiest to people who have been down themselves, and who had to rely on others in their own moments of need.
Experience. When Obama talks about postpartisanship, he talks about a grass-roots movement that will arise and sweep away the old ways of Washington. When John McCain talks about it, he describes a meeting of wise old heads who get together to craft compromises. Obama’s vision is more romantic, but McCain’s is more realistic.
When Biden was a young senator, he was mentored by Hubert Humphrey, Mike Mansfield and the like. He was schooled in senatorial procedure in the days when the Senate was less gridlocked. If Obama hopes to pass energy and health care legislation, he’s going to need someone with that kind of legislative knowledge who can bring the battered old senators together, as in days of yore.
There are other veep choices. Tim Kaine seems like a solid man, but selecting him would be disastrous. It would underline all the anxieties voters have about youth and inexperience. Evan Bayh has impeccably centrist credentials, but the country is not in the mood for dispassionate caution.
Biden’s the one. The only question is whether Obama was wise and self-aware enough to know that.
I predicted Biden as the choice a few days ago. Its the right choice although I think Kathleen Sebelius who is not mentioned here in this article would also have been a strong choice. I think Obama is smart and is well aware that he needs someone who is unafraid of expressing their opinions and someone to have contentious debates with in the wee hours of the morning. This sets stage for a Democratic administration (if Obama is elected) that will make moves that are pragmatic (a key Obama word) and well thought out. Obama intends to make the VP spot an important one but not on the lines of Dick Cheney. It will be more on the lines of a true partnership.
August 22, 2008
Op-Ed Columnist
Hoping It’s Biden
By DAVID BROOKS
Barack Obama has decided upon a vice-presidential running mate. And while I don’t know who it is as I write, for the good of the country, I hope he picked Joe Biden.
Biden’s weaknesses are on the surface. He has said a number of idiotic things over the years and, in the days following his selection, those snippets would be aired again and again.
But that won’t hurt all that much because voters are smart enough to forgive the genuine flaws of genuine people.
And over the long haul, Biden provides what Obama needs:
Working-Class Roots. Biden is a lunch-bucket Democrat. His father was rich when he was young — played polo, cavorted on yachts, drove luxury cars. But through a series of bad personal and business decisions, he was broke by the time Joe Jr. came along. They lived with their in-laws in Scranton, Pa., then moved to a dingy working-class area in Wilmington, Del. At one point, the elder Biden cleaned boilers during the week and sold pennants and knickknacks at a farmer’s market on the weekends.
His son was raised with a fierce working-class pride — no one is better than anyone else. Once, when Joe Sr. was working for a car dealership, the owner threw a Christmas party for the staff. Just as the dancing was to begin, the owner scattered silver dollars on the floor and watched from above as the mechanics and salesmen scrambled about for them. Joe Sr. quit that job on the spot.
Even today, after serving for decades in the world’s most pompous workplace, Senator Biden retains an ostentatiously unpretentious manner. He campaigns with an army of Bidens who seem to emerge by the dozens from the old neighborhood in Scranton. He has disdain for privilege and for limousine liberals — the mark of an honest, working-class Democrat.
Democrats in general, and Obama in particular, have trouble connecting with working-class voters, especially Catholic ones. Biden would be the bridge.
Honesty. Biden’s most notorious feature is his mouth. But in his youth, he had a stutter. As a freshman in high school he was exempted from public speaking because of his disability, and was ridiculed by teachers and peers. His nickname was Dash, because of his inability to finish a sentence.
He developed an odd smile as a way to relax his facial muscles (it still shows up while he’s speaking today) and he’s spent his adulthood making up for any comments that may have gone unmade during his youth.
Today, Biden’s conversational style is tiresome to some, but it has one outstanding feature. He is direct. No matter who you are, he tells you exactly what he thinks, before he tells it to you a second, third and fourth time.
Presidents need someone who will be relentlessly direct. Obama, who attracts worshippers, not just staff members, needs that more than most.
Loyalty. Just after Biden was elected to the senate in 1972, his wife, Neilia, and daughter Naomi were killed in a car crash. His career has also been marked by lesser crises. His first presidential run ended in a plagiarism scandal. He nearly died of a brain aneurism.
New administrations are dominated by the young and the arrogant, and benefit from the presence of those who have been through the worst and who have a tinge of perspective.
Moreover, there are moments when a president has to go into the cabinet room and announce a decision that nearly everyone else on his team disagrees with. In those moments, he needs a vice president who will provide absolute support. That sort of loyalty comes easiest to people who have been down themselves, and who had to rely on others in their own moments of need.
Experience. When Obama talks about postpartisanship, he talks about a grass-roots movement that will arise and sweep away the old ways of Washington. When John McCain talks about it, he describes a meeting of wise old heads who get together to craft compromises. Obama’s vision is more romantic, but McCain’s is more realistic.
When Biden was a young senator, he was mentored by Hubert Humphrey, Mike Mansfield and the like. He was schooled in senatorial procedure in the days when the Senate was less gridlocked. If Obama hopes to pass energy and health care legislation, he’s going to need someone with that kind of legislative knowledge who can bring the battered old senators together, as in days of yore.
There are other veep choices. Tim Kaine seems like a solid man, but selecting him would be disastrous. It would underline all the anxieties voters have about youth and inexperience. Evan Bayh has impeccably centrist credentials, but the country is not in the mood for dispassionate caution.
Biden’s the one. The only question is whether Obama was wise and self-aware enough to know that.
I predicted Biden as the choice a few days ago. Its the right choice although I think Kathleen Sebelius who is not mentioned here in this article would also have been a strong choice. I think Obama is smart and is well aware that he needs someone who is unafraid of expressing their opinions and someone to have contentious debates with in the wee hours of the morning. This sets stage for a Democratic administration (if Obama is elected) that will make moves that are pragmatic (a key Obama word) and well thought out. Obama intends to make the VP spot an important one but not on the lines of Dick Cheney. It will be more on the lines of a true partnership.
Thursday, August 21, 2008
from nytimes.com
August 20, 2008
Op-Ed Contributor
Russia Never Wanted a War
By MIKHAIL GORBACHEV
Moscow
THE acute phase of the crisis provoked by the Georgian forces’ assault on Tskhinvali, the capital of South Ossetia, is now behind us. But how can one erase from memory the horrifying scenes of the nighttime rocket attack on a peaceful town, the razing of entire city blocks, the deaths of people taking cover in basements, the destruction of ancient monuments and ancestral graves?
Russia did not want this crisis. The Russian leadership is in a strong enough position domestically; it did not need a little victorious war. Russia was dragged into the fray by the recklessness of the Georgian president, Mikheil Saakashvili. He would not have dared to attack without outside support. Once he did, Russia could not afford inaction.
The decision by the Russian president, Dmitri Medvedev, to now cease hostilities was the right move by a responsible leader. The Russian president acted calmly, confidently and firmly. Anyone who expected confusion in Moscow was disappointed.
The planners of this campaign clearly wanted to make sure that, whatever the outcome, Russia would be blamed for worsening the situation. The West then mounted a propaganda attack against Russia, with the American news media leading the way.
The news coverage has been far from fair and balanced, especially during the first days of the crisis. Tskhinvali was in smoking ruins and thousands of people were fleeing — before any Russian troops arrived. Yet Russia was already being accused of aggression; news reports were often an embarrassing recitation of the Georgian leader’s deceptive statements.
It is still not quite clear whether the West was aware of Mr. Saakashvili’s plans to invade South Ossetia, and this is a serious matter. What is clear is that Western assistance in training Georgian troops and shipping large supplies of arms had been pushing the region toward war rather than peace.
If this military misadventure was a surprise for the Georgian leader’s foreign patrons, so much the worse. It looks like a classic wag-the-dog story.
Mr. Saakashvili had been lavished with praise for being a staunch American ally and a real democrat — and for helping out in Iraq. Now America’s friend has wrought disorder, and all of us — the Europeans and, most important, the region’s innocent civilians — must pick up the pieces.
Those who rush to judgment on what’s happening in the Caucasus, or those who seek influence there, should first have at least some idea of this region’s complexities. The Ossetians live both in Georgia and in Russia. The region is a patchwork of ethnic groups living in close proximity. Therefore, all talk of “this is our land,” “we are liberating our land,” is meaningless. We must think about the people who live on the land.
The problems of the Caucasus region cannot be solved by force. That has been tried more than once in the past two decades, and it has always boomeranged.
What is needed is a legally binding agreement not to use force. Mr. Saakashvili has repeatedly refused to sign such an agreement, for reasons that have now become abundantly clear.
The West would be wise to help achieve such an agreement now. If, instead, it chooses to blame Russia and re-arm Georgia, as American officials are suggesting, a new crisis will be inevitable. In that case, expect the worst.
In recent days, Secretary of State Condoleezza Rice and President Bush have been promising to isolate Russia. Some American politicians have threatened to expel it from the Group of 8 industrialized nations, to abolish the NATO-Russia Council and to keep Russia out of the World Trade Organization.
These are empty threats. For some time now, Russians have been wondering: If our opinion counts for nothing in those institutions, do we really need them? Just to sit at the nicely set dinner table and listen to lectures?
Indeed, Russia has long been told to simply accept the facts. Here’s the independence of Kosovo for you. Here’s the abrogation of the Antiballistic Missile Treaty, and the American decision to place missile defenses in neighboring countries. Here’s the unending expansion of NATO. All of these moves have been set against the backdrop of sweet talk about partnership. Why would anyone put up with such a charade?
There is much talk now in the United States about rethinking relations with Russia. One thing that should definitely be rethought: the habit of talking to Russia in a condescending way, without regard for its positions and interests.
Our two countries could develop a serious agenda for genuine, rather than token, cooperation. Many Americans, as well as Russians, understand the need for this. But is the same true of the political leaders?
A bipartisan commission led by Senator Chuck Hagel and former Senator Gary Hart has recently been established at Harvard to report on American-Russian relations to Congress and the next president. It includes serious people, and, judging by the commission’s early statements, its members understand the importance of Russia and the importance of constructive bilateral relations.
But the members of this commission should be careful. Their mandate is to present “policy recommendations for a new administration to advance America’s national interests in relations with Russia.” If that alone is the goal, then I doubt that much good will come out of it. If, however, the commission is ready to also consider the interests of the other side and of common security, it may actually help rebuild trust between Russia and the United States and allow them to start doing useful work together.
Mikhail Gorbachev is the former president of the Soviet Union. This article was translated by Pavel Palazhchenko from the Russian.
Mikheil Saakashvili is a war criminal. I doubt he will ever be prosecuted at the Haag.
from www.washingtonpost.com
Russia's Strike Shows The Power Of the Pipeline
By Steven Pearlstein
Wednesday, August 13, 2008; D01
It was surely not lost on Russia's bully in chief, Vladimir Putin, that the oil giant BP decided to shut down the pipeline that runs through parts of Georgia controlled by Russian troops. Indeed, that was one of the aims of the cross-border incursion.
Putin understands better than anyone that oil and gas are the source of Russia's resurgence as a military and economic power and his own control over the Russian government and key sectors of its economy. It is oil and gas that provide the money to maintain Russia's powerful military, along with a vast internal security apparatus and network of government-controlled enterprises that allow the president-turned-premier to maintain his iron grip on the levers of political and economic power.
A little pipeline history: It was just as Putin was coming to power in 1999 that an agreement was reached to create the Baku-Tbilisi-Ceyhan (BTC) pipeline. The project would allow Azerbaijan and its production partner, BP, to bypass Russia and transport their newly drilled oil instead through Georgia and Turkey to a port in the eastern Mediterranean.
Because of its control of the only pipeline system linking former Soviet republics with the West, Russia had been able to extract most of the profit from any oil and gas that these newly independent countries could produce. But with BTC, which had the active support of the U.S. and European governments, Russia would lose its monopoly chokehold, opening the way for Western oil companies to make multibillion-dollar investments in the energy-rich Caucasus states.
No sooner was BTC completed, however, than Western officials began exploring the possibility of other pipelines that could reach beyond Georgia and Azerbaijan to Turkmenistan, which was thought to have some of the world's largest gas reserves. Their interest was not only in "energy security" and the prospect of oil riches for Western energy companies, but also in promoting Western-style democracy and free-market capitalism in the former Soviet republics.
In time, much of their efforts focused on a $12 billion project known as Nabucco, named after the Verdi opera, that would take gas across the Caspian sea, through Georgia, Turkey, Bulgaria, Romania and Hungary, finally reaching a terminal near Vienna. With Europe already dependent on Russia for a quarter of its natural gas, and that number set to rise with construction of a new northern pipeline running under the Baltic Sea to Germany, European leaders were keen to find alternative sources of natural gas. The effort took on greater urgency in winter 2006 after Russia briefly cut off supplies in its gas-pricing dispute with Ukraine.
Nabucco also became a top priority of the Bush State Department -- in particular, of Matt Bryza, a deputy assistant secretary of state, and C. Boyden Gray, a Bush family confidante who was named a special envoy for Eurasian energy, who began actively courting the leaders of Azerbaijan.
Putin, quite correctly, viewed Nabucco as part of a larger campaign by Washington to contain and isolate Russia and limit the expansion of its burgeoning energy empire. With Gazprom, the state gas monopoly, Putin launched his own competing proposal called South Stream to build a new pipeline to the Caucasus.
Suddenly the Russians were offering to pay Turkmenistan and Azerbaijan multiples of what they had previously offered to secure long-term supply deals. They penned an agreement with Italy and its oil company, Eni, to build a pipeline that would run under the Black Sea from Russia to Europe and end up at the same Austrian terminal as Nabucco. And Russian officials offered highly favorable transit agreements, ownership shares and guaranteed gas supplies to secure transit agreements from Bulgaria, Serbia and Hungary.
To industry observers like Ed Chow, a senior fellow at the Center for Strategic and International Studies, Nabucco has always looked more like a diplomats' pipe dream than a viable economic project. Its promoters had not only failed to secure supply and transit agreements but also had yet to identify an oil company eager to champion the project and finance the pipeline. Now, with its successful military incursion, Russia has raised serious doubts in the minds of Western lenders and investors that a new pipeline through Georgia would be safe from attack or beyond control of the Kremlin.
What we've been reminded once again is that Vladimir Putin is perfectly willing to sacrifice the rule of law and the good opinion of others to protect the Russian empire and the energy monopoly that sustains it. The techniques he used to bring Georgia to heel, while more lethal and destructive, have the same thuggish quality as the techniques Putin uses to silence domestic opposition and to expropriate the energy assets of Yukos, Shell and BP.
For the United States and Europe, this ought to be sufficient warning about the folly of extending membership in NATO or the European Union to every one of Russia's neighbors, particularly when they are unwilling to back it up with military action.
But it also is a reminder of the futility of trying to co-opt Putin by offering him a seat at the G-7, membership in the World Trade Organization or the honor of hosting the 2014 Winter Olympics. We may not be willing to send troops to Tbilisi, but at the least we should be willing to deny Russian companies the right to raise capital on Western stock exchanges, extend their pipelines into Western markets or use their energy profits to buy up major Western companies.
Vladimir Putin thinks he has looked into the soul of the West and discovered that we need him more than he needs us. It's time to convince him otherwise.
© 2008 The Washington Post Company
not the first and not the last of the upcoming Age of Energy Wars. Unless we heed Gore and become a non-carbon based economy. I am not holding my breath.
Russia's Strike Shows The Power Of the Pipeline
By Steven Pearlstein
Wednesday, August 13, 2008; D01
It was surely not lost on Russia's bully in chief, Vladimir Putin, that the oil giant BP decided to shut down the pipeline that runs through parts of Georgia controlled by Russian troops. Indeed, that was one of the aims of the cross-border incursion.
Putin understands better than anyone that oil and gas are the source of Russia's resurgence as a military and economic power and his own control over the Russian government and key sectors of its economy. It is oil and gas that provide the money to maintain Russia's powerful military, along with a vast internal security apparatus and network of government-controlled enterprises that allow the president-turned-premier to maintain his iron grip on the levers of political and economic power.
A little pipeline history: It was just as Putin was coming to power in 1999 that an agreement was reached to create the Baku-Tbilisi-Ceyhan (BTC) pipeline. The project would allow Azerbaijan and its production partner, BP, to bypass Russia and transport their newly drilled oil instead through Georgia and Turkey to a port in the eastern Mediterranean.
Because of its control of the only pipeline system linking former Soviet republics with the West, Russia had been able to extract most of the profit from any oil and gas that these newly independent countries could produce. But with BTC, which had the active support of the U.S. and European governments, Russia would lose its monopoly chokehold, opening the way for Western oil companies to make multibillion-dollar investments in the energy-rich Caucasus states.
No sooner was BTC completed, however, than Western officials began exploring the possibility of other pipelines that could reach beyond Georgia and Azerbaijan to Turkmenistan, which was thought to have some of the world's largest gas reserves. Their interest was not only in "energy security" and the prospect of oil riches for Western energy companies, but also in promoting Western-style democracy and free-market capitalism in the former Soviet republics.
In time, much of their efforts focused on a $12 billion project known as Nabucco, named after the Verdi opera, that would take gas across the Caspian sea, through Georgia, Turkey, Bulgaria, Romania and Hungary, finally reaching a terminal near Vienna. With Europe already dependent on Russia for a quarter of its natural gas, and that number set to rise with construction of a new northern pipeline running under the Baltic Sea to Germany, European leaders were keen to find alternative sources of natural gas. The effort took on greater urgency in winter 2006 after Russia briefly cut off supplies in its gas-pricing dispute with Ukraine.
Nabucco also became a top priority of the Bush State Department -- in particular, of Matt Bryza, a deputy assistant secretary of state, and C. Boyden Gray, a Bush family confidante who was named a special envoy for Eurasian energy, who began actively courting the leaders of Azerbaijan.
Putin, quite correctly, viewed Nabucco as part of a larger campaign by Washington to contain and isolate Russia and limit the expansion of its burgeoning energy empire. With Gazprom, the state gas monopoly, Putin launched his own competing proposal called South Stream to build a new pipeline to the Caucasus.
Suddenly the Russians were offering to pay Turkmenistan and Azerbaijan multiples of what they had previously offered to secure long-term supply deals. They penned an agreement with Italy and its oil company, Eni, to build a pipeline that would run under the Black Sea from Russia to Europe and end up at the same Austrian terminal as Nabucco. And Russian officials offered highly favorable transit agreements, ownership shares and guaranteed gas supplies to secure transit agreements from Bulgaria, Serbia and Hungary.
To industry observers like Ed Chow, a senior fellow at the Center for Strategic and International Studies, Nabucco has always looked more like a diplomats' pipe dream than a viable economic project. Its promoters had not only failed to secure supply and transit agreements but also had yet to identify an oil company eager to champion the project and finance the pipeline. Now, with its successful military incursion, Russia has raised serious doubts in the minds of Western lenders and investors that a new pipeline through Georgia would be safe from attack or beyond control of the Kremlin.
What we've been reminded once again is that Vladimir Putin is perfectly willing to sacrifice the rule of law and the good opinion of others to protect the Russian empire and the energy monopoly that sustains it. The techniques he used to bring Georgia to heel, while more lethal and destructive, have the same thuggish quality as the techniques Putin uses to silence domestic opposition and to expropriate the energy assets of Yukos, Shell and BP.
For the United States and Europe, this ought to be sufficient warning about the folly of extending membership in NATO or the European Union to every one of Russia's neighbors, particularly when they are unwilling to back it up with military action.
But it also is a reminder of the futility of trying to co-opt Putin by offering him a seat at the G-7, membership in the World Trade Organization or the honor of hosting the 2014 Winter Olympics. We may not be willing to send troops to Tbilisi, but at the least we should be willing to deny Russian companies the right to raise capital on Western stock exchanges, extend their pipelines into Western markets or use their energy profits to buy up major Western companies.
Vladimir Putin thinks he has looked into the soul of the West and discovered that we need him more than he needs us. It's time to convince him otherwise.
© 2008 The Washington Post Company
not the first and not the last of the upcoming Age of Energy Wars. Unless we heed Gore and become a non-carbon based economy. I am not holding my breath.
Tuesday, August 19, 2008
Monday, August 18, 2008
Russia is not Jamaica
from www.nytimes.com
August 17, 2008
Op-Ed Columnist
Russia Is Not Jamaica
By MAUREEN DOWD
WASHINGTON
America’s back in the cold war and W.’s back on vacation.
Talk about your fearful symmetry.
After eight years, the president’s gut remains gullible. He’ll go out as he came in — ignoring reality; failing to foresee, prevent or even prepare for disasters; misinterpreting intelligence reports; misreading people; and handling crises in ways that makes them exponentially worse.
He has spent 469 days of his presidency kicking back at his ranch, and 450 days cavorting at Camp David. And there’s still time to mountain-bike through another historic disaster.
As Russian troops continued to manhandle parts of Georgia on Friday, President Bush chastised Russian leaders that “bullying and intimidation are not acceptable ways to conduct foreign policy in the 21st century” — and then flew off to Crawford.
His words might have carried more weight if he, Cheney and Rummy had not kicked off the 21st century with a ham-fisted display of global bullying and intimidation modeled after Sherman’s march through the other Georgia.
We knew we could count on the cheerleader in chief to be jumping around like a kid in Beijing with bikini-clad beach volleyball players while the Re-Evil Empire was sending columns of tanks into its former republic. (Georgia made the mistake of baiting the bear.)
If only W. had taken the rest of his presidency as seriously as he’s taken his sports outings.
When I interviewed him at the start of his first presidential run in 1999, he took an obvious shot and told me, “I believe the big issues are going to be China and Russia.”
But after 9/11, he let Cheney, Rummy and the neocons gull him into a destructive obsession with Iraq. While America has been bogged down and bled dry, China and Russia are plumping up. China has bought so much of America that we’d be dead Peking ducks if they pulled their investments out of our market, and Russia has transformed itself from a pauper nation to a land filled with millionaires — all through our addiction to oil.
What was so galling about watching W.’s giddy sightseeing at the Olympics was that it underscored China’s rise as a superpower and, thanks to the administration’s derelict foreign and economic policies, America’s fade-out. It’s as though China has become us and we’ve become Europe. Like Russia, China has also been showing jagged authoritarian ways and ignoring America’s preaching, including W.’s tame criticism as he flew into Beijing to revel in the spectacle of China’s ascension.
Despite his 1999 prediction that Russia and China would be key to security in the world, W. never bothered to study up on them. In 2006, at the Group of Eight summit meeting in St. Petersburg, Russia, a microphone caught some of the inane remarks of W. to the Chinese president, Hu Jintao.
“This is your neighborhood,” W. said. “It doesn’t take you long to get home. How long does it take you to get home? Eight hours? Me, too. Russia’s a big country and you’re a big country.”
President Bush and his Russian “expert” Condi have played it completely wrong with Russia from the start. W. saw a “trustworthy” soul in a razor-eyed K.G.B. agent who has never been a good guy for a single hour. Now the Bush crowd, which can do nothing about it, is blustering about how Russian aggression “must not go unanswered,” as Cheney put it. (W.’s other Russian expert, Bob Gates, was, as always, the only voice of realism, noting, “I don’t see any prospect for the use of military force by the United States in this situation.”)
The Bush administration may have a sentimental attachment to Georgia because it sent 2,000 troops to Iraq as part of the fig-leaf Coalition of the Willing, and because Poppy Bush and James Baker were close to Georgia’s first president, Eduard Shevardnadze.
But with this country’s military and moral force so depleted, the Bushies can hardly tell Russia to stop doing what they themselves did in Iraq: unilaterally invade a country against the will of the world to scare the bejesus out of some leaders in the region they didn’t like.
W. and Condi are suddenly waking up to how vicious Vladimir is. In a press conference with Condi on Friday, Mikheil Saakashvili, the president of Georgia, chided the West for enabling Russia to resume its repressive tactics.
“Unfortunately, today we are looking evil directly in the eye,” he said. “And today this evil is very strong, very nasty and very dangerous, for everybody, not only for us.”
As Michael Specter, the New Yorker writer who has written extensively about Russia, observed: “There was a brief five-year period when we could get away with treating Russia like Jamaica — that’s over. Now we have to deal with them like grown-ups who have more nuclear weapons than anybody except us.”
I happen to think the Russians are the good guys in this particular episode. It was Georgia who invaded South Ossetia. Russia just said Enough's enough.
August 17, 2008
Op-Ed Columnist
Russia Is Not Jamaica
By MAUREEN DOWD
WASHINGTON
America’s back in the cold war and W.’s back on vacation.
Talk about your fearful symmetry.
After eight years, the president’s gut remains gullible. He’ll go out as he came in — ignoring reality; failing to foresee, prevent or even prepare for disasters; misinterpreting intelligence reports; misreading people; and handling crises in ways that makes them exponentially worse.
He has spent 469 days of his presidency kicking back at his ranch, and 450 days cavorting at Camp David. And there’s still time to mountain-bike through another historic disaster.
As Russian troops continued to manhandle parts of Georgia on Friday, President Bush chastised Russian leaders that “bullying and intimidation are not acceptable ways to conduct foreign policy in the 21st century” — and then flew off to Crawford.
His words might have carried more weight if he, Cheney and Rummy had not kicked off the 21st century with a ham-fisted display of global bullying and intimidation modeled after Sherman’s march through the other Georgia.
We knew we could count on the cheerleader in chief to be jumping around like a kid in Beijing with bikini-clad beach volleyball players while the Re-Evil Empire was sending columns of tanks into its former republic. (Georgia made the mistake of baiting the bear.)
If only W. had taken the rest of his presidency as seriously as he’s taken his sports outings.
When I interviewed him at the start of his first presidential run in 1999, he took an obvious shot and told me, “I believe the big issues are going to be China and Russia.”
But after 9/11, he let Cheney, Rummy and the neocons gull him into a destructive obsession with Iraq. While America has been bogged down and bled dry, China and Russia are plumping up. China has bought so much of America that we’d be dead Peking ducks if they pulled their investments out of our market, and Russia has transformed itself from a pauper nation to a land filled with millionaires — all through our addiction to oil.
What was so galling about watching W.’s giddy sightseeing at the Olympics was that it underscored China’s rise as a superpower and, thanks to the administration’s derelict foreign and economic policies, America’s fade-out. It’s as though China has become us and we’ve become Europe. Like Russia, China has also been showing jagged authoritarian ways and ignoring America’s preaching, including W.’s tame criticism as he flew into Beijing to revel in the spectacle of China’s ascension.
Despite his 1999 prediction that Russia and China would be key to security in the world, W. never bothered to study up on them. In 2006, at the Group of Eight summit meeting in St. Petersburg, Russia, a microphone caught some of the inane remarks of W. to the Chinese president, Hu Jintao.
“This is your neighborhood,” W. said. “It doesn’t take you long to get home. How long does it take you to get home? Eight hours? Me, too. Russia’s a big country and you’re a big country.”
President Bush and his Russian “expert” Condi have played it completely wrong with Russia from the start. W. saw a “trustworthy” soul in a razor-eyed K.G.B. agent who has never been a good guy for a single hour. Now the Bush crowd, which can do nothing about it, is blustering about how Russian aggression “must not go unanswered,” as Cheney put it. (W.’s other Russian expert, Bob Gates, was, as always, the only voice of realism, noting, “I don’t see any prospect for the use of military force by the United States in this situation.”)
The Bush administration may have a sentimental attachment to Georgia because it sent 2,000 troops to Iraq as part of the fig-leaf Coalition of the Willing, and because Poppy Bush and James Baker were close to Georgia’s first president, Eduard Shevardnadze.
But with this country’s military and moral force so depleted, the Bushies can hardly tell Russia to stop doing what they themselves did in Iraq: unilaterally invade a country against the will of the world to scare the bejesus out of some leaders in the region they didn’t like.
W. and Condi are suddenly waking up to how vicious Vladimir is. In a press conference with Condi on Friday, Mikheil Saakashvili, the president of Georgia, chided the West for enabling Russia to resume its repressive tactics.
“Unfortunately, today we are looking evil directly in the eye,” he said. “And today this evil is very strong, very nasty and very dangerous, for everybody, not only for us.”
As Michael Specter, the New Yorker writer who has written extensively about Russia, observed: “There was a brief five-year period when we could get away with treating Russia like Jamaica — that’s over. Now we have to deal with them like grown-ups who have more nuclear weapons than anybody except us.”
I happen to think the Russians are the good guys in this particular episode. It was Georgia who invaded South Ossetia. Russia just said Enough's enough.
Sunday, August 17, 2008
The Prophet - Nouriel Roubini
from nytimes.com
August 17, 2008
Dr. Doom
By STEPHEN MIHM
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.
The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged. There was declining employment, a deteriorating dollar, ever-increasing evidence of a huge housing bust and a growing air of panic in financial markets as the credit crisis deepened. By late summer, the Federal Reserve was rushing to the rescue, making the first of many unorthodox interventions in the economy, including cutting the lending rate by 50 basis points and buying up tens of billions of dollars in mortgage-backed securities. When Roubini returned to the I.M.F. last September, he delivered a second talk, predicting a growing crisis of solvency that would infect every sector of the financial system. This time, no one laughed. “He sounded like a madman in 2006,” recalls the I.M.F. economist Prakash Loungani, who invited Roubini on both occasions. “He was a prophet when he returned in 2007.”
Over the past year, whenever optimists have declared the worst of the economic crisis behind us, Roubini has countered with steadfast pessimism. In February, when the conventional wisdom held that the venerable investment firms of Wall Street would weather the crisis, Roubini warned that one or more of them would go “belly up” — and six weeks later, Bear Stearns collapsed. Following the Fed’s further extraordinary actions in the spring — including making lines of credit available to selected investment banks and brokerage houses — many economists made note of the ensuing economic rally and proclaimed the credit crisis over and a recession averted. Roubini, who dismissed the rally as nothing more than a “delusional complacency” encouraged by a “bunch of self-serving spinmasters,” stuck to his script of “nightmare” events: waves of corporate bankrupticies, collapses in markets like commercial real estate and municipal bonds and, most alarming, the possible bankruptcy of a large regional or national bank that would trigger a panic by depositors. Not all of these developments have come to pass (and perhaps never will), but the demise last month of the California bank IndyMac — one of the largest such failures in U.S. history — drew only more attention to Roubini’s seeming prescience.
As a result, Roubini, a respected but formerly obscure academic, has become a major figure in the public debate about the economy: the seer who saw it coming. He has been summoned to speak before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He is now a sought-after adviser, spending much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. Though he continues to issue colorful doomsday prophecies of a decidedly nonmainstream sort — especially on his popular and polemical blog, where he offers visions of “equity market slaughter” and the “Coming Systemic Bust of the U.S. Banking System” — the mainstream economic establishment appears to be moving closer, however fitfully, to his way of seeing things. “I have in the last few months become more pessimistic than the consensus,” the former Treasury secretary Lawrence Summers told me earlier this year. “Certainly, Nouriel’s writings have been a contributor to that.”
On a cold and dreary day last winter, I met Roubini over lunch in the TriBeCa neighborhood of New York City. “I’m not a pessimist by nature,” he insisted. “I’m not someone who sees things in a bleak way.” Just looking at him, I found the assertion hard to credit. With a dour manner and an aura of gloom about him, Roubini gives the impression of being permanently pained, as if the burden of what he knows is almost too much for him to bear. He rarely smiles, and when he does, his face, topped by an unruly mop of brown hair, contorts into something more closely resembling a grimace.
When I pressed him on his claim that he wasn’t pessimistic, he paused for a moment and then relented a little. “I have more concerns about potential risks and vulnerabilities than most people,” he said, with glum understatement. But these concerns, he argued, make him more of a realist than a pessimist and put him in the role of the cleareyed outsider — unsettling complacency and puncturing pieties.
Roubini, who is 50, has been an outsider his entire life. He was born in Istanbul, the child of Iranian Jews, and his family moved to Tehran when he was 2, then to Tel Aviv and finally to Italy, where he grew up and attended college. He moved to the United States to pursue his doctorate in international economics at Harvard. Along the way he became fluent in Farsi, Hebrew, Italian and English. His accent, an inimitable polyglot growl, radiates a weariness that comes with being what he calls a “global nomad.”
As a graduate student at Harvard, Roubini was an unusual talent, according to his adviser, the Columbia economist Jeffrey Sachs. He was as comfortable in the world of arcane mathematics as he was studying political and economic institutions. “It’s a mix of skills that rarely comes packaged in one person,” Sachs told me. After completing his Ph.D. in 1988, Roubini joined the economics department at Yale, where he first met and began sharing ideas with Robert Shiller, the economist now known for his prescient warnings about the 1990s tech bubble.
The ’90s were an eventful time for an international economist like Roubini. Throughout the decade, one emerging economy after another was beset by crisis, beginning with Mexico’s in 1994. Panics swept Asia, including Thailand, Indonesia and Korea, in 1997 and 1998. The economies of Brazil and Russia imploded in 1998. Argentina’s followed in 2000. Roubini began studying these countries and soon identified what he saw as their common weaknesses. On the eve of the crises that befell them, he noticed, most had huge current-account deficits (meaning, basically, that they spent far more than they made), and they typically financed these deficits by borrowing from abroad in ways that exposed them to the national equivalent of bank runs. Most of these countries also had poorly regulated banking systems plagued by excessive borrowing and reckless lending. Corporate governance was often weak, with cronyism in abundance.
Roubini’s work was distinguished not only by his conclusions but also by his approach. By making extensive use of transnational comparisons and historical analogies, he was employing a subjective, nontechnical framework, the sort embraced by popular economists like the Times Op-Ed columnist Paul Krugman and Joseph Stiglitz in order to reach a nonacademic audience. Roubini takes pains to note that he remains a rigorous scholarly economist — “When I weigh evidence,” he told me, “I’m drawing on 20 years of accumulated experience using models” — but his approach is not the contemporary scholarly ideal in which an economist builds a model in order to constrain his subjective impressions and abide by a discrete set of data. As Shiller told me, “Nouriel has a different way of seeing things than most economists: he gets into everything.”
Roubini likens his style to that of a policy maker like Alan Greenspan, the former Fed chairman who was said (perhaps apocryphally) to pore over vast quantities of technical economic data while sitting in the bathtub, looking to sniff out where the economy was headed. Roubini also cites, as a more ideologically congenial example, the sweeping, cosmopolitan approach of the legendary economist John Maynard Keynes, whom Roubini, with only slight exaggeration, calls “the most brilliant economist who never wrote down an equation.” The book that Roubini ultimately wrote (with the economist Brad Setser) on the emerging market crises, “Bailouts or Bail-Ins?” contains not a single equation in its 400-plus pages.
After analyzing the markets that collapsed in the ’90s, Roubini set out to determine which country’s economy would be the next to succumb to the same pressures. His surprising answer: the United States’. “The United States,” Roubini remembers thinking, “looked like the biggest emerging market of all.” Of course, the United States wasn’t an emerging market; it was (and still is) the largest economy in the world. But Roubini was unnerved by what he saw in the U.S. economy, in particular its 2004 current-account deficit of $600 billion. He began writing extensively about the dangers of that deficit and then branched out, researching the various effects of the credit boom — including the biggest housing bubble in the nation’s history — that began after the Federal Reserve cut rates to close to zero in 2003. Roubini became convinced that the housing bubble was going to pop.
By late 2004 he had started to write about a “nightmare hard landing scenario for the United States.” He predicted that foreign investors would stop financing the fiscal and current-account deficit and abandon the dollar, wreaking havoc on the economy. He said that these problems, which he called the “twin financial train wrecks,” might manifest themselves in 2005 or, at the latest, 2006. “You have been warned here first,” he wrote ominously on his blog. But by the end of 2006, the train wrecks hadn’t occurred.
Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.
The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can’t foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) “These are things most economists barely understand,” Roubini told me. “We’re in uncharted territory where standard economic theory isn’t helpful.”
True though this may be, Roubini’s critics do not agree that his approach is any more accurate. Anirvan Banerji, the economist who challenged Roubini’s first I.M.F. talk, points out that Roubini has been peddling pessimism for years; Banerji contends that Roubini’s apparent foresight is nothing more than an unhappy coincidence of events. “Even a stopped clock is right twice a day,” he told me. “The justification for his bearish call has evolved over the years,” Banerji went on, ticking off the different reasons that Roubini has used to justify his predictions of recessions and crises: rising trade deficits, exploding current-account deficits, Hurricane Katrina, soaring oil prices. All of Roubini’s predictions, Banerji observed, have been based on analogies with past experience. “This forecasting by analogy is a tempting thing to do,” he said. “But you have to pick the right analogy. The danger of this more subjective approach is that instead of letting the objective facts shape your views, you will choose the facts that confirm your existing views.”
Kenneth Rogoff, an economist at Harvard who has known Roubini for decades, told me that he sees great value in Roubini’s willingness to entertain possible situations that are far outside the consensus view of most economists. “If you’re sitting around at the European Central Bank,” he said, “and you’re asking what’s the worst thing that could happen, the first thing people will say is, ‘Let’s see what Nouriel says.’ ” But Rogoff cautioned against equating that skill with forecasting. Roubini, in other words, might be the kind of economist you want to consult about the possibility of the collapse of the municipal-bond market, but he is not necessarily the kind you ask to predict, say, the rise in global demand for paper clips.
His defenders contend that Roubini is not unduly pessimistic. Jeffrey Sachs, his former adviser, told me that “if the underlying conditions call for optimism, Nouriel would be optimistic.” And to be sure, Roubini is capable of being optimistic — or at least of steering clear of absolute worst-case prognostications. He agrees, for example, with the conventional economic wisdom that oil will drop below $100 a barrel in the coming months as global demand weakens. “I’m not comfortable saying that we’re going to end up in the Great Depression,” he told me. “I’m a reasonable person.”
What economic developments does Roubini see on the horizon? And what does he think we should do about them? The first step, he told me in a recent conversation, is to acknowledge the extent of the problem. “We are in a recession, and denying it is nonsense,” he said. When Jim Nussle, the White House budget director, announced last month that the nation had “avoided a recession,” Roubini was incredulous. For months, he has been predicting that the United States will suffer through an 18-month recession that will eventually rank as the “worst since the Great Depression.” Though he is confident that the economy will enter a technical recovery toward the end of next year, he says that job losses, corporate bankruptcies and other drags on growth will continue to take a toll for years.
Roubini has counseled various policy makers, including Federal Reserve governors and senior Treasury Department officials, to mount an aggressive response to the crisis. He applauded when the Federal Reserve cut interest rates to 2 percent from 5.25 percent beginning last summer. He also supported the Fed’s willingness to engineer a takeover of Bear Stearns. Roubini argues that the Fed’s actions averted catastrophe, though he says he believes that future bailouts should focus on mortgage owners, not investors. Accordingly, he sees the choice facing the United States as stark but simple: either the government backs up a trillion-plus dollars’ worth of high-risk mortgages (in exchange for the lenders’ agreement to reduce monthly mortgage payments), or the banks and other institutions holding those mortgages — or the complex securities derived from them — go under. “You either nationalize the banks or you nationalize the mortgages,” he said. “Otherwise, they’re all toast.”
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”
Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. “A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”
The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. “Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”
Stephen Mihm, an assistant professor of economic history at the University of Georgia, is the author of “A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States.” His last feature article for the magazine was about North Korean counterfeiting.
I have been following Dr. Roubini on his blog very carefully and regularly. His calls have been right on for the last year and half. Sometimes I have needed a drink after reading his work. But his work has allowed me to anticipate this recession and read more into the way things really are that what I gather from MSM (which I hardly ever read or listen to anymore). Keep up your good work Dr. Roubini - much appreciated.
August 17, 2008
Dr. Doom
By STEPHEN MIHM
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.
The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged. There was declining employment, a deteriorating dollar, ever-increasing evidence of a huge housing bust and a growing air of panic in financial markets as the credit crisis deepened. By late summer, the Federal Reserve was rushing to the rescue, making the first of many unorthodox interventions in the economy, including cutting the lending rate by 50 basis points and buying up tens of billions of dollars in mortgage-backed securities. When Roubini returned to the I.M.F. last September, he delivered a second talk, predicting a growing crisis of solvency that would infect every sector of the financial system. This time, no one laughed. “He sounded like a madman in 2006,” recalls the I.M.F. economist Prakash Loungani, who invited Roubini on both occasions. “He was a prophet when he returned in 2007.”
Over the past year, whenever optimists have declared the worst of the economic crisis behind us, Roubini has countered with steadfast pessimism. In February, when the conventional wisdom held that the venerable investment firms of Wall Street would weather the crisis, Roubini warned that one or more of them would go “belly up” — and six weeks later, Bear Stearns collapsed. Following the Fed’s further extraordinary actions in the spring — including making lines of credit available to selected investment banks and brokerage houses — many economists made note of the ensuing economic rally and proclaimed the credit crisis over and a recession averted. Roubini, who dismissed the rally as nothing more than a “delusional complacency” encouraged by a “bunch of self-serving spinmasters,” stuck to his script of “nightmare” events: waves of corporate bankrupticies, collapses in markets like commercial real estate and municipal bonds and, most alarming, the possible bankruptcy of a large regional or national bank that would trigger a panic by depositors. Not all of these developments have come to pass (and perhaps never will), but the demise last month of the California bank IndyMac — one of the largest such failures in U.S. history — drew only more attention to Roubini’s seeming prescience.
As a result, Roubini, a respected but formerly obscure academic, has become a major figure in the public debate about the economy: the seer who saw it coming. He has been summoned to speak before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He is now a sought-after adviser, spending much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. Though he continues to issue colorful doomsday prophecies of a decidedly nonmainstream sort — especially on his popular and polemical blog, where he offers visions of “equity market slaughter” and the “Coming Systemic Bust of the U.S. Banking System” — the mainstream economic establishment appears to be moving closer, however fitfully, to his way of seeing things. “I have in the last few months become more pessimistic than the consensus,” the former Treasury secretary Lawrence Summers told me earlier this year. “Certainly, Nouriel’s writings have been a contributor to that.”
On a cold and dreary day last winter, I met Roubini over lunch in the TriBeCa neighborhood of New York City. “I’m not a pessimist by nature,” he insisted. “I’m not someone who sees things in a bleak way.” Just looking at him, I found the assertion hard to credit. With a dour manner and an aura of gloom about him, Roubini gives the impression of being permanently pained, as if the burden of what he knows is almost too much for him to bear. He rarely smiles, and when he does, his face, topped by an unruly mop of brown hair, contorts into something more closely resembling a grimace.
When I pressed him on his claim that he wasn’t pessimistic, he paused for a moment and then relented a little. “I have more concerns about potential risks and vulnerabilities than most people,” he said, with glum understatement. But these concerns, he argued, make him more of a realist than a pessimist and put him in the role of the cleareyed outsider — unsettling complacency and puncturing pieties.
Roubini, who is 50, has been an outsider his entire life. He was born in Istanbul, the child of Iranian Jews, and his family moved to Tehran when he was 2, then to Tel Aviv and finally to Italy, where he grew up and attended college. He moved to the United States to pursue his doctorate in international economics at Harvard. Along the way he became fluent in Farsi, Hebrew, Italian and English. His accent, an inimitable polyglot growl, radiates a weariness that comes with being what he calls a “global nomad.”
As a graduate student at Harvard, Roubini was an unusual talent, according to his adviser, the Columbia economist Jeffrey Sachs. He was as comfortable in the world of arcane mathematics as he was studying political and economic institutions. “It’s a mix of skills that rarely comes packaged in one person,” Sachs told me. After completing his Ph.D. in 1988, Roubini joined the economics department at Yale, where he first met and began sharing ideas with Robert Shiller, the economist now known for his prescient warnings about the 1990s tech bubble.
The ’90s were an eventful time for an international economist like Roubini. Throughout the decade, one emerging economy after another was beset by crisis, beginning with Mexico’s in 1994. Panics swept Asia, including Thailand, Indonesia and Korea, in 1997 and 1998. The economies of Brazil and Russia imploded in 1998. Argentina’s followed in 2000. Roubini began studying these countries and soon identified what he saw as their common weaknesses. On the eve of the crises that befell them, he noticed, most had huge current-account deficits (meaning, basically, that they spent far more than they made), and they typically financed these deficits by borrowing from abroad in ways that exposed them to the national equivalent of bank runs. Most of these countries also had poorly regulated banking systems plagued by excessive borrowing and reckless lending. Corporate governance was often weak, with cronyism in abundance.
Roubini’s work was distinguished not only by his conclusions but also by his approach. By making extensive use of transnational comparisons and historical analogies, he was employing a subjective, nontechnical framework, the sort embraced by popular economists like the Times Op-Ed columnist Paul Krugman and Joseph Stiglitz in order to reach a nonacademic audience. Roubini takes pains to note that he remains a rigorous scholarly economist — “When I weigh evidence,” he told me, “I’m drawing on 20 years of accumulated experience using models” — but his approach is not the contemporary scholarly ideal in which an economist builds a model in order to constrain his subjective impressions and abide by a discrete set of data. As Shiller told me, “Nouriel has a different way of seeing things than most economists: he gets into everything.”
Roubini likens his style to that of a policy maker like Alan Greenspan, the former Fed chairman who was said (perhaps apocryphally) to pore over vast quantities of technical economic data while sitting in the bathtub, looking to sniff out where the economy was headed. Roubini also cites, as a more ideologically congenial example, the sweeping, cosmopolitan approach of the legendary economist John Maynard Keynes, whom Roubini, with only slight exaggeration, calls “the most brilliant economist who never wrote down an equation.” The book that Roubini ultimately wrote (with the economist Brad Setser) on the emerging market crises, “Bailouts or Bail-Ins?” contains not a single equation in its 400-plus pages.
After analyzing the markets that collapsed in the ’90s, Roubini set out to determine which country’s economy would be the next to succumb to the same pressures. His surprising answer: the United States’. “The United States,” Roubini remembers thinking, “looked like the biggest emerging market of all.” Of course, the United States wasn’t an emerging market; it was (and still is) the largest economy in the world. But Roubini was unnerved by what he saw in the U.S. economy, in particular its 2004 current-account deficit of $600 billion. He began writing extensively about the dangers of that deficit and then branched out, researching the various effects of the credit boom — including the biggest housing bubble in the nation’s history — that began after the Federal Reserve cut rates to close to zero in 2003. Roubini became convinced that the housing bubble was going to pop.
By late 2004 he had started to write about a “nightmare hard landing scenario for the United States.” He predicted that foreign investors would stop financing the fiscal and current-account deficit and abandon the dollar, wreaking havoc on the economy. He said that these problems, which he called the “twin financial train wrecks,” might manifest themselves in 2005 or, at the latest, 2006. “You have been warned here first,” he wrote ominously on his blog. But by the end of 2006, the train wrecks hadn’t occurred.
Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.
The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can’t foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) “These are things most economists barely understand,” Roubini told me. “We’re in uncharted territory where standard economic theory isn’t helpful.”
True though this may be, Roubini’s critics do not agree that his approach is any more accurate. Anirvan Banerji, the economist who challenged Roubini’s first I.M.F. talk, points out that Roubini has been peddling pessimism for years; Banerji contends that Roubini’s apparent foresight is nothing more than an unhappy coincidence of events. “Even a stopped clock is right twice a day,” he told me. “The justification for his bearish call has evolved over the years,” Banerji went on, ticking off the different reasons that Roubini has used to justify his predictions of recessions and crises: rising trade deficits, exploding current-account deficits, Hurricane Katrina, soaring oil prices. All of Roubini’s predictions, Banerji observed, have been based on analogies with past experience. “This forecasting by analogy is a tempting thing to do,” he said. “But you have to pick the right analogy. The danger of this more subjective approach is that instead of letting the objective facts shape your views, you will choose the facts that confirm your existing views.”
Kenneth Rogoff, an economist at Harvard who has known Roubini for decades, told me that he sees great value in Roubini’s willingness to entertain possible situations that are far outside the consensus view of most economists. “If you’re sitting around at the European Central Bank,” he said, “and you’re asking what’s the worst thing that could happen, the first thing people will say is, ‘Let’s see what Nouriel says.’ ” But Rogoff cautioned against equating that skill with forecasting. Roubini, in other words, might be the kind of economist you want to consult about the possibility of the collapse of the municipal-bond market, but he is not necessarily the kind you ask to predict, say, the rise in global demand for paper clips.
His defenders contend that Roubini is not unduly pessimistic. Jeffrey Sachs, his former adviser, told me that “if the underlying conditions call for optimism, Nouriel would be optimistic.” And to be sure, Roubini is capable of being optimistic — or at least of steering clear of absolute worst-case prognostications. He agrees, for example, with the conventional economic wisdom that oil will drop below $100 a barrel in the coming months as global demand weakens. “I’m not comfortable saying that we’re going to end up in the Great Depression,” he told me. “I’m a reasonable person.”
What economic developments does Roubini see on the horizon? And what does he think we should do about them? The first step, he told me in a recent conversation, is to acknowledge the extent of the problem. “We are in a recession, and denying it is nonsense,” he said. When Jim Nussle, the White House budget director, announced last month that the nation had “avoided a recession,” Roubini was incredulous. For months, he has been predicting that the United States will suffer through an 18-month recession that will eventually rank as the “worst since the Great Depression.” Though he is confident that the economy will enter a technical recovery toward the end of next year, he says that job losses, corporate bankruptcies and other drags on growth will continue to take a toll for years.
Roubini has counseled various policy makers, including Federal Reserve governors and senior Treasury Department officials, to mount an aggressive response to the crisis. He applauded when the Federal Reserve cut interest rates to 2 percent from 5.25 percent beginning last summer. He also supported the Fed’s willingness to engineer a takeover of Bear Stearns. Roubini argues that the Fed’s actions averted catastrophe, though he says he believes that future bailouts should focus on mortgage owners, not investors. Accordingly, he sees the choice facing the United States as stark but simple: either the government backs up a trillion-plus dollars’ worth of high-risk mortgages (in exchange for the lenders’ agreement to reduce monthly mortgage payments), or the banks and other institutions holding those mortgages — or the complex securities derived from them — go under. “You either nationalize the banks or you nationalize the mortgages,” he said. “Otherwise, they’re all toast.”
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”
Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. “A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”
The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. “Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”
Stephen Mihm, an assistant professor of economic history at the University of Georgia, is the author of “A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States.” His last feature article for the magazine was about North Korean counterfeiting.
I have been following Dr. Roubini on his blog very carefully and regularly. His calls have been right on for the last year and half. Sometimes I have needed a drink after reading his work. But his work has allowed me to anticipate this recession and read more into the way things really are that what I gather from MSM (which I hardly ever read or listen to anymore). Keep up your good work Dr. Roubini - much appreciated.
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