Thursday, March 12, 2009

US jet downs Iranian drone

Wired Magazine: An American fighter jet shot down an Iranian drone as it was flying over Iraq, U.S. military sources in Baghdad tell Danger Room.

Monday, March 9, 2009

More on Cuban policy shift

Following up on the last post, this article in The Guardian (UK) describes how the Obama administration could present this policy change formally at next month's Summit of the Americas, as an olive branch to Cuba, and indirectly, to the rest of Latin America (which has already warmed ties with Cuba).

Saturday, March 7, 2009

The loosening of the Cuban embargo?

This story came across earlier this week: The omnibus spending bill currently under Congressional consideration includes language that would allow Cuban-Americans to visit relatives in Cuba once a year, and end limits on the sale of American food and medicines in Cuba. The Obama administration backs the provision, but Sen. Robert Menendez (D-NJ) is threatening to hold up confirmation of science nominees unless the Cuban embargo continues.

We applaud the Obama administration for supporting the easing of the Cuban embargo, and agree with Arizona Rep. Jeff Flake (R-AZ), who spoke about the Cuban embargo with Flake notes how US-Cuba policy not consistent with US policies towards other authoritarian and socialist regimes, and comments "the default should be freedom; allow Americans to travel". We strongly agree.

Friday, March 6, 2009

Washington foreign policy shift

RCW posted an excellent stratfor analysis of the Obama administration's foreign policy shifts, with regards to Iran and Russia.

Read the whole thing. Here are some highlights:

  • Clinton announced that the US would like to invite Iran to a March 31 conference on Afghanistan. This is a clear break from past Bush admin policy.
  • Washington voted to restore NATO ties to Russia.
  • Washington told Georgia it "needs some space" in its relationship. Georgia membership into NATO is highly unlikely, now.

Regarding that last point, quoting:

By disappointing the Georgians at this summit, the United States just moved the line of Russian influence in the former Soviet periphery several hundred miles to the west. The United States essentially told a recently war-ravaged country on the border of Russia — whose only real protection derives from its alliance with Washington — that the need for the United States to work out a deal with Russians is a bigger priority right now than providing for Georgia’s security. That message is likely to be met with horror throughout much of central and eastern Europe and with delight in Moscow.

That said, the diplomatic stage is still being set, and there is much more to be worked out in the United States’ distrust-filled relationships with both Tehran and Moscow. We will be watching for Russia’s reaction to the U.S. gestures on Friday, when Clinton meets with her Russian counterpart, Sergei Lavrov, and for the level of actual progress in negotiations in the month before Obama and Russian President Dmitri Medvedev meet.

Regardless, Thursday’s events provided very clear indicators that Washington has — for the time being — chosen a new foreign policy path that will win some and lose some. Now is the prime moment for the major global powers to reposition themselves.

Monday, March 2, 2009

Anti-trust policy and systemic risk

Some food for thought...

If a corporation is deemed "too big to fail", that necessarily implies a government and taxpayer guarantee against failure.

Should we start considering such entities as targets to be forcibly broken up?

The alternative, a government bail-out, implies that government will rescue "too big to fail" companies — but only during the bad times. During good times, corporate managers will run the company. This leads to incredibly unbalanced incentives:

A "too big to fail" company is managed by executives who need not worry about what happens when the company fails.

Compounding the problem, political appointees and elected officials inevitably inject their own agendas into the mix during the rescue, complicating and possibly prolonging the pain (politicians are not known for their business acumen).

This happened with Freddie Mac and Fannie Mae, due to their wink-and-nod government guarantee. These incentives can arise with any company anoited publicly as posing systemic risk to the financial system.

AIG agrees to break itself up

AIG will on Monday announce a radical plan to break itself up after 90 years as a global insurance conglomerate by ceding control of its two largest divisions to the US government in exchange for a $30bn-plus lifeline. (FT link)

Interestingly, this is the recommended solution suggested for AIG by John Allison, BB&T chairman, and the longest-tenured CEO of a top-25 financial services company, in his Jan 29th lecture on the financial crisis (video) at the Ayn Rand Institute. In fact, Ayn Rand seems to be popping up everywhere recently.

One wonders if a Citi break-up is in the cards, also?