Bush condemns 'bullying' Russia
President Bush: "Russia must respect the freedom of its neighbours"
US President George W Bush has accused Russia of "bullying and intimidation" in its military actions inside Georgia.
Mr Bush demanded that Moscow respect Georgia's territorial integrity and withdraw the troops it sent in a week ago - or risk international isolation.
The crisis began when Georgia attacked the breakaway region of South Ossetia, sparking Russian intervention.
US Secretary of State Condoleezza Rice is visiting Georgia to present an EU-brokered ceasefire deal.
The Georgian President, Mikhail Saakashvili, has said he would need "a closer look" before signing.
The Russian President, Dmitry Medvedev, has demanded that Georgia sign the deal immediately - but said only Russia could guarantee peace in the region.
'Guarantor' of security
In a statement at the White House, Mr Bush said he would keep in close contact with Ms Rice.
"Bullying and intimidation are not acceptable ways to conduct foreign policy in the 21st Century," Mr Bush said.
 | PEACE PLAN  No more use of force Stop all military actions for good Free access to humanitarian aid Georgian troops return to their places of permanent deployment Russian troops to return to pre-conflict positions International talks about future status of South Ossetia and Abkhazia |
"Only Russia can decide whether it will now put itself back on the path of responsible nations or continue to pursue a policy that promises only confrontation and isolation."
Three days after a ceasefire was brokered to end fighting between Russia and Georgia, Russian troops remain deep inside Georgian territory.
Meanwhile, after talks with President Medvedev in the Black Sea resort of Sochi, German Chancellor Angela Merkel described the Russian response as "disproportionate".
But Mr Medvedev said Russia was the "guarantor" of the interests and lives of those in South Ossetia and Georgia's other separatist region of Abkhazia.
He said they trusted Russian troops, and that this had to be taken into account.
Mr Medvedev said the EU-brokered peace deal was key to solving the conflict
Mr Medvedev said he did not want to damage relations with other countries but that Russia had to fulfil its peacekeeping mandate, and that it would respond in the same way to any future attack.
He also added that Poland's deal - signed on Thursday - with the US to base part of a new US missile defence system on Polish soil was aimed at the Russian federation.
Washington - which says the timing is not linked to the Georgian crisis - has always assured Moscow that the shield is to protect against long-range attacks from "rogue states" such as Iran, rather than Russia.
But, says the BBC's Jonathan Beale in Washington, the US is now likely to be less worried about Russian objections and more anxious to send signals to European allies like Poland that it is prepared to guarantee their protection.
Operations continue
Moscow's troops continue to operate deep inside the Caucasus republic.
The BBC's Richard Galpin, in the Georgian port of Poti, says Russian forces have taken control of the naval dockyard - with the apparent intent to destroy or remove Georgian military and naval equipment.
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Russian forces still control Gori, which lies some 15km (10 miles) from South Ossetia and on a key route to Tbilisi, and there is also a major Russian military contingent further inland near the town of Senaki, our correspondent says.
At a news conference, the Russian army earlier said it had seized a large depot of American-made arms near Senaki.
During her trip to Tbilisi, Ms Rice is to present Mr Saakashvili with the formal ceasefire agreement, which she was given by French President Nicolas Sarkozy on Thursday.
Mr Sarkozy, who negotiated the deal on behalf of the European Union, said France planned to submit a draft UN Security Council resolution incorporating the ceasefire agreement.
The deal includes a pledge to pull troops on both sides back to their pre-conflict positions, and a plan to begin international discussions about the future status of South Ossetia and Abkhazia.
The crisis began when Georgia attacked South Ossetia on 7 August, sparking Russian retaliation. Scores of people have died in the fighting.
Aug. 15 (Bloomberg) -- Gold plunged below $800 an ounce, platinum posted the biggest drop in almost seven years and oil, corn and copper slumped as the dollar's rebound reduced the appeal of commodities after a six-year boom.
Crude fell as much as 2 percent to $112.37 a barrel, and coffee and wheat declined as the dollar headed for its longest winning streak in more than two years and on concern a spreading economic slowdown will reduce demand for raw materials.
Commodities, measured by the Standard & Poor's GSCI index, have tumbled 22 percent from their record July 3, descending into a bear market. Declining raw-materials prices may help ease global inflationary pressures. Consumer prices accelerated 5.6 percent in the U.S. during the year to July, the biggest jump in 17 years.
``Prices have made a peak,'' said investor Marc Faber, 62, who told investors to bail out of U.S. stocks before 1987's so- called Black Monday crash. ``Whether that is a final peak or an intermediate peak followed by higher prices, we don't know yet. It could go lower,'' he said by phone today from Chiang Mai, Thailand.
Gold fell as much as 4.2 percent to $772.98 an ounce, the lowest since Oct. 26, and traded at $791.69 as of 2:46 p.m. London time. Platinum dropped $125 to $1,365 an ounce, the biggest intraday loss since Sept. 25, 2001. Silver's decline of as much as 12 percent to $12.423 an ounce was the most since June 2006.
``There's a perception that demand for commodities might be weakening,'' David Jollie, editor of Johnson Matthey Plc's publication on platinum group metals, said today by phone from Royston, England. ``North America and Western Europe are struggling but the emerging economies remain strong.''
Gasoline Demand
Crude oil for September delivery dropped as much as $2.64 to $112.37 a barrel on the New York Mercantile Exchange, and traded at $112.82 at 9:47 p.m. local time.
Gasoline demand was down 2.1 percent in the first seven months of the year as record prices and slower economic growth cut consumer spending, the American Petroleum Institute said Aug. 13.
Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, a report showed yesterday. According to a UBS AG report published Aug. 6, the world is ``precariously close'' to a recession in 2009.
``It's not just a U.S. problem, it's a global problem and it's taking its toll on commodities,'' said Peter Luxton, an energy analyst at Informa Global Markets. ``What's happening elsewhere is starting to take its toll.''
U.S. Output
There are signs of a pickup in the U.S., the world's largest economy. Industrial production unexpectedly rose in July, helped by gains in automobiles, metals and machinery, the Federal Reserve reported today.
Demand for autos increased for a third month, reflecting a continued rebound from a strike at an auto-parts supplier. Gains elsewhere signal demand from overseas continued to boost orders even as U.S. consumer and business spending weaken.
Crude oil will probably fall below $100 a barrel within weeks, nearing the $90 threshold that would trigger a production cut by the Organization of Petroleum Exporting Countries, according to Alfa Bank. The supplier of more than 40 percent of the world's oil is scheduled to meet in Vienna on Sept. 9 to review production targets.
``OPEC will likely defend $90 a barrel or higher,'' Alfa analysts led by Ronald Smith in Moscow wrote in an e-mailed report today. ``OPEC will remain firmly in control of the oil market for at least the next decade.''
Investment Flows
Asset under management of commodity indexes has almost quadrupled to $297 billion as of June, from about $76.7 billion in January 2006, according to an estimate by Lehman Brothers Holdings Inc. Some investors buy commodities as a hedge against inflation and against declines in the U.S. currency.
A ``buying orgy'' in commodities was inflating prices and increasing the risk of a collapse, Paul Touradji, founder of Touradji Capital Management LLC, said in March.
Gold may rebound from the latest slump and rally through 2010 as fabrication demand rises and on expectation the dollar will resume its slide against the euro, Citigroup Inc. said. It forecasts the metal will average $950 next year and $1,000 in 2010.
``Longer term, we would not be surprised to see gold double,'' the bank's analysts John Hill and Graham Wark wrote in a report. ``We would be aggressive buyers at current levels expecting gold to work higher through 2009/10.''
Copper fell 66 percent to $7,318 a ton on the London Metal Exchange and corn declined 3.4 percent to $5.5775 a bushel. Robusta coffee for September delivery fell $41, or 1.9 percent, to $2,172 a ton on the Liffe exchange in London.
Aug. 15 (Bloomberg) -- Confidence among U.S. consumers showed the first back-to-back gain in almost two years in August as lower energy prices helped lift sentiment from a 28-year low.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 61.7, less than forecast, from 61.2 in July. The measure averaged 85.6 in 2007.
Declining gasoline prices may prevent consumer spending, the biggest part of the U.S. economy, from collapsing as Americans face a weakening labor market and the worst housing market in 26 years. The survey showed consumers expect the inflation rate over the next five years to be 3.2 percent, unchanged from last month.
``Consumers still remain pretty pessimistic,'' Arun Raha, a senior economist at Swiss Re in New York, said in an interview with Bloomberg Television. ``This little-higher number is probably the result of lower gas prices. The economy remains pretty weak and consumer sentiment reflects that.''
Economists had forecast the confidence index would rise to 62, according to the median of 64 projections in a Bloomberg News survey. Estimates ranged from 56 to 69.
The Federal Reserve today said U.S. industrial production rose in July, boosted by gains in automobiles, metals and machinery. A separate report from the Fed Bank of New York showed manufacturing in that region this month unexpectedly grew as the cost of raw materials subsided.
Price Expectations
Consumers polled by Reuters/University of Michigan said they expect an inflation rate of 4.8 percent over the next 12 months, down from a 5.1 percent forecast in the July survey.
The cost of living was up 5.6 percent in the year ended in July, the biggest jump in 17 years, the Labor Department said yesterday. So-called core prices, which exclude food and energy, also rose more than projected.
Sales at U.S. retailers dropped in July for the first time in five months, the Commerce Department said this week. Wal-Mart Stores Inc., the world's largest retailer, this week said that sales at stores open at least a year might not rise more than 1 percent in the third quarter as the boost from the federal tax rebates fades.
Today's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, improved to 56.8, the highest since March, from 53.5.
Current Concerns
A gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy cars and other big-ticket items, decreased to 69.3 from 73.1 the prior month.
Sales at U.S. auto dealers and parts stores dropped 2.4 percent in July, government figures this week showed. Industry figures showed purchases dropped to the weakest level since 1993.
Commodity costs have subsided since mid-July. Crude oil futures dropped below $112 a barrel today after peaking at $147 last month. Regular gasoline, which reached a record $4.11 a gallon on July 17, has fallen about 8 percent, according to AAA.
The final Reuters/University of Michigan consumer confidence report reflects about 500 responses, compared with 300 households for the preliminary survey.
Aug. 15 (Bloomberg) -- U.S. stocks rose, erasing a weekly drop for the Standard & Poor's 500 Index, as lower commodity prices boosted the outlook for consumer companies and the two largest bond insurers had their credit ratings affirmed.
General Motors Corp., the biggest U.S. automaker, climbed 2.4 percent as crude slid by almost $3 a barrel. Ambac Financial Corp. rallied 16 percent and MBIA Inc. advanced 9.5 percent after S&P concluded a credit review without lowering the companies' ratings. General Electric Co. gained the most in a week on a Federal Reserve report showing manufacturing in New York unexpectedly grew in August as materials prices retreated.
``It's a big positive for all the companies we invest in that use oil,'' Charles Bobrinskoy, who helps manage about $13 billion as vice chairman of Ariel Investments in Chicago, told Bloomberg Television. ``Commodities got way too high and consumer stocks in particular got too low.''
The S&P 500 rose 3.89, or 0.3 percent, to 1,296.82 as of 10:34 a.m. in New York. The Dow Jones Industrial Average increased 52.03, or 0.5 percent, to 11,667.96. The Nasdaq Composite Index added 1.21 to 2,454.88. About 11 stocks rose for every 10 that fell on the New York Stock Exchange.
The advance left the S&P 500 little changed on the week. The benchmark for American equities has lost 12 percent this year as surging commodities and credit-market losses curbed profit growth. Earnings have slumped 23 percent on average for the 445 companies in the S&P 500 that released second-quarter results since July 8, according Bloomberg data.
Today's gains in benchmark indexes were limited as the retreat in commodity prices sent energy and raw-materials producers lower.
Oil's Retreat
GM, the biggest U.S. carmaker, added 24 cents to $11.62. Crude oil retreated as the stronger dollar diminished the appeal of commodities as an inflation hedge.
The contract for September delivery dropped as much as 2 percent to $112.75 a barrel in New York.
MBIA added 63 cents to $10.95. Ambac climbed 75 cents to $5.31. Bond insurers owned by MBIA, Ambac, Syncora Holdings Ltd., FGIC Corp., and CIFG Holdings were stripped of their AAA ratings over the past six months as losses grew from collateralized debt obligations and other mortgage-linked securities.
MBIA Insurance's capital levels remain ``well above the level required for a 'AA' rating,'' S&P said. Ambac Assurance's efforts to cancel protection on mortgage-linked CDOs also ``are starting to bear fruit,'' the firm said.
Financial shares have slumped this year as the worldwide costs for the collapse of the subprime mortgage market exceeded $500 billion.
Bond Offerings
Citigroup Inc. and American International Group Inc. led the busiest week of corporate bond sales since June as record yields over benchmark rates enticed investors. Citigroup, the largest U.S. bank by assets, sold $3 billion of five-year notes at the highest spread over U.S. Treasuries since the company was formed from the merger of Travelers Group Inc. and Citicorp in 1998. AIG, the biggest U.S. insurer, sold $3.25 billion of 10-year notes at more than double the spread offered on similar debt in December.
Bank stocks rallied even after JPMorgan Chase & Co. analysts said weaker fixed-income trading revenue and decreased equity and debt offerings will cut profits for Goldman Sachs Group Inc., the largest U.S. securities firm by market value.
Goldman Sachs climbed 51 cents to $167.10. Rival investment bank Merrill Lynch & Co. gained 2.6 percent to $26.66. Lehman Brothers Holdings Inc. jumped 4 percent to $16.85.
Wal-Mart, Estee Lauder
Consumer companies in the S&P 500 that are reliant on discretionary spending surged this 2.5 percent this week after earnings reports from Wal-Mart Stores Inc. and Estee Lauder Cos. topped estimates. The S&P 500 Consumer Discretionary Index has rallied 17 percent since July 14, when the index reached the lowest since 2003.
Kohl's Corp. rose 5.9 percent to $49.40. The fourth-largest U.S. department-store chain reported better-than-estimated second-quarter profit after the company slowed new orders and cut the amount of goods on clearance. Full-year earnings may decline less than previously expected, Kohl's said.
NRG Energy Inc. rose 5.6 percent to $37.18. Billionaire Warren Buffett's Berkshire Hathaway Inc. took a stake in the second-biggest power producer in Texas, based on a regulatory filing that disclosed equity investments at the end of the second quarter.
Autodesk Inc. increased 11 percent to $38.04 for the steepest gain in the S&P 500. The biggest maker of engineering- design software forecast third-quarter and full-year revenue that topped some analysts' estimates.
U.S. stocks rose yesterday after a trade group loosened restrictions on Fannie Mae and Freddie Mac to help revive the mortgage industry. PMI Group Inc., the second-biggest mortgage insurer, rallied 49 percent on plans to raise cash by selling businesses.
Thursday, August 14, 2008
Too Eloquent and Idealistic
With just 82 days until the presidential election, one of the major-party candidates is being accused by his opponents of offering eloquent rhetoric that is just too high-flown and idealistic. That man, of course, is John McCain. A recent pronouncement of his prompted this bout of prissy literalism from liberal-left blogger Matthew Yglesias:
Common sense indicates that, no, I am not a Georgian. But John McCain says "today we are all Georgians." But does he mean it? . . . I hope John McCain doesn't think we should go to war with Russia. But insofar as he doesn't mean that we should go to war with Russia on Georgia's behalf, what's the meaning of the claim that "we are all Georgians"?
On one level, it's empty political sloganeering. But on another level it's not empty--it's downright irresponsible, and an example of the sort of irresponsible behavior that got us into this. But this stuff isn't a game--Putin, Shakashvili [sic], the Ossetes and the Abkhaz are all playing for keeps. We shouldn't imply guarantees that we don't intend to keep, which means the public statements of our officials have to be driven by realistic assessments of the situation and of American interests not by mawkish sentimentality.
In an op-ed for The Wall Street Journal, McCain explains what he means:
The Georgian people have suffered before, and they suffer today. We must help them through this tragedy, and they should know that the thoughts, prayers and support of the American people are with them. This small democracy, far away from our shores, is an inspiration to all those who cherish our deepest ideals. As I told President Saakashvili on the day the cease-fire was declared, today we are all Georgians. We mustn't forget it.
And in case you're wondering, he does not call for the U.S. to go to war with Russia. Rather, he writes, "We should work toward the establishment of an independent, international peacekeeping force in the separatist regions, and stand ready to help our Georgian partners put their country back together." Scary!
TalkingPointsMemo.com and Andrew Sullivan's blog have likewise been all atwitter with alarm over McCain's supposed war-mongering. At National Review Online, Seth Leibsohn has the best rejoinder to all this: "I think it should be noted that nothing McCain has said is as aggressive as the actions of Russia. It strikes me odd right now to complain of aggressive words in the defense of democracy rather than condemning aggressive actions against a democracy."
McCain's detractors keep pointing out that the Cold War is over, although the point they are trying to make thereby is unclear. There are, of course, differences: Russia no longer embraces a totalitarian ideology, and it no longer exercises sovereignty over the 14 other Soviet "republics," including Georgia. But it is unclear why this should mean America should not offer moral and political support to Tbilisi's pro-Western democratic regime.
Still, there are echoes of the Cold War in the criticism of McCain. Then as now, the liberal left seems to have great faith in the power of language to palliate antidemocratic adversaries and a corresponding fear of pro-democratic rhetoric, which it sees as provocative or aggressive. But didn't Reagan win that argument? He spoke in terms that unsettled the left, and the result was Soviet accommodation, then collapse.
In fairness to Barack Obama, he has not been as weak in the current crisis as some of his supporters would like. The aforementioned blogs have hand-wrung over Obama's expressed support for Georgian admission into NATO. But Obama has given ample reason to think his instincts on foreign affairs are palliative ones--most notably his pledge last year to negotiate without preconditions with such bad actors as Mahmoud Ahmadinejad.
Today's New York Times notes that another world leader tried this approach with the Russia-Georgia conflict, and seems to have failed:
It was nearly 2 a.m. on Wednesday when President Nicolas Sarkozy of France announced he had accomplished what seemed virtually impossible: Persuading the leaders of Georgia and Russia to agree to a set of principles that would stop the war.
Handshakes and congratulations were offered all around. But by the time the sun was up, Russian tanks were advancing again, this time taking positions around the strategically important city of Gori, in central Georgia.
It soon became clear that the six-point deal not only failed to slow the Russian advance, but it also allowed Russia to claim that it could push deeper into Georgia as part of so-called additional security measures it was granted in the agreement. Mr. Sarkozy, according to a senior Georgian official who witnessed the negotiations, also failed to persuade the Russians to agree to any time limit on their military action.
By mid-morning, European officials were warning of the risks of appeasing Russian aggression, while Georgian officials lamented the West's weak leverage.
Yes, the Cold War is over and Reagan is dead. But peace through strength is still a good idea.
Confidence Game
• "The collapse of the Soviet Union was deeply painful for many Russians, perhaps most of all for its military. The sudden campaign that began last week seems to have restored a sense of confidence among its officers."--New York Times, Aug. 14
Gas Heads to $19.84 a Gallon
"One of the biggest canards peddled by Big Oil is that, 'Sure, we'll need wind and solar energy, but it's just not cost effective yet.' They've been saying that for 30 years." So proclaims New York Times columnist Thomas Friedman.
Bizarrely, he tells us this right after informing us that the solar industry can't survive without subsidies:
In the solar industry today there is a rush to finish any project that would be up and running by Dec. 31--when the [tax] credits expire--and most everything beyond that is now on hold. Consider the Solana concentrated solar power plant, 70 miles southwest of Phoenix in McCain's home state. It is the biggest proposed concentrating solar energy project ever. The farsighted local utility is ready to buy its power.
But because of the Senate's refusal to extend the solar tax credits, "we cannot get our bank financing," said Fred Morse, a senior adviser for the American operations of Abengoa Solar, which is building the project. "Without the credits, the numbers don't work." Some 2,000 construction jobs are on hold.
Wait, it gets even better. Friedman fantasizes about a solution to the energy problem that "will take more than a Manhattan Project":
It will require a fundamental reshaping by government of the prices and regulations and research-and-development budgets that shape the energy market. Without taxing fossil fuels so they become more expensive and giving subsidies to renewable fuels so they become more competitive--and changing regulations so more people and companies have an interest in energy efficiency--we will not get innovation in clean power at the scale we need.
Such a massive exercise of government control over the economy is "cost effective" only in the sense that ignorance is strength and slavery is freedom.
American Exceptionalism--II
Another commentator, Harvey Araton of the New York Times weighs in on the kerfuffle over the Spanish "slit eyes" ad, which we noted yesterday:
They may still be his friends, but they have to wonder how Calderón and the Spaniards could actually believe that mimicking a people's physical characteristics could be intended as a show of solidarity and respect. These players are citizens of the global basketball community, which now stretches East to West. They should know better.
Yet Araton goes on to say that there was no sign anyone in China took offense:
An American I know who has spent much time here speculated that the Chinese reaction would naturally differ from that of Chinese people living in the West, where, as with any minority, they would understandably be more sensitive to such a display.
So why should people from a different country "know better" than to offend American notions of political correctness while in a third country? Because our so-called multiculturalists are the worst cultural imperialists around--as evidenced by this story last month from London's Mail on Sunday:
A chocolate bar advertisement featuring Mr T has been taken off the air after accusations that it is "homophobic."
In the Snickers commercial, Mr T--who played BA Baracus in the 1980s show The A Team--pulls up in a truck alongside a man exercising in tight yellow shorts and shouts: "Speed walking. I pity you fool. You are a disgrace to the man race. It's time to run like a real man."
He then forces the man to break into a sprint by taking pot shots at him with a Snickers machine gun. The commercial ends with Mr T uttering the slogan to the current Snickers campaign--"Get some nuts."
Only two people complained to Britain's Advertising Standards Authority about the ad. "However, it prompted strong protests from the U.S.--even though it was never shown on American television."
The Mail quotes gay Brits who were unperturbed. One describes himself as "fed up with the ultra-politically correct stance" of a complaining organization. Another says, "'I'm gay and I found the ad hilarious."
Should we despair that Americans are so much more humorless than the rest of the world? Or should we look on the bright side and appreciate how unwittingly funny the enforcers of political correctness are? We'll opt for the latter.
A Fruitcake for Desert--II
"An American who deserted the U.S. Army to protest the Iraq War and who has been ordered deported back home will file a new appeal in Canada's Federal Court, his lawyer said on Thursday," Reuters reports:
Jeremy Hinzman is the first U.S. deserter in recent years to apply for refugee status in Canada. Immigration authorities determined that he did not face persecution or hardship if he were returned to the United States and told him on Wednesday he had until September 23 to leave the country.
Hinzman has already managed to drag this thing out for 4½ years; we first noted his case in February 2004. And there is something of a whitewash going on. Reuters describes him as having deserted "to protest the Iraq War." Congress authorized the use of military force in October 2002, and the shooting began in March 2003, but Hinzman didn't desert until January 2004. Why? Probably because he was about to be deployed.
At the same time, Hinzman was not only against the Iraq war; he seems to have been thoroughgoingly anti-American, as described by the Toronto Globe and Mail article we quoted back in '04:
On Sept. 11, [Hinzman's wife] heard a news broadcast and knew immediately that life was going to change. The young couple suddenly found themselves amid frenetic patriotism they didn't share. They were horrified by the jetliner attacks but intellectually (Mr. Hinzman read the left-tilting Nation and Noam Chomsky) saw them as a consequence of U.S. foreign policy.
What then motivated Hinzman to join the military? He wanted to go to college, and he didn't want to go into debt for fear of, as he put it, "starting a whole cycle of middle-class existence." It is a tribute to America's freedom that the military permitted him to join even though his motives were mercenary and his loyalty to the country apparently nonexistent. But he ought to pay a heavy price for failing to keep his end of the bargain.
Weakest Linc
Yesterday we noted that former senator Lincoln Chafee made up one-third of the new "Republicans for Obama" group. We use those scare quotes advisedly, because we had forgotten that, as the Providence Journal reported, Chafee claimed in September to have quit the GOP:
Chafee said he disaffiliated from the party "in June or July," making him an unaffiliated voter. He did so quietly, and until yesterday, he said, "No one's asked me about it." He said he made the move because "I want my affiliation to accurately reflect my status."
"There's been a gradual depravation of . . . the issues the party should be strong on," and the direction of the national party, he said.
Chafee cites a predictable litany of disagreements with the party: He is against Iraq, wants to balance the budget via higher taxes, and opposes oil exploration in Alaska. But there are indications that he may be moving beyond Rockefeller Republicanism and into much weirder territory.
New York magazine reports that Chafee agreed to serve on a proposed new "9/11 commission." Gothamist.com identifies the group behind the move to create the commission via a New York City ballot measure is 911Truth.com, a crackpot conspiracy outfit. We're not sure this is the case: NYC911Initiative.com is a separate site, and it doesn't seem as nuts, although the "Truthers" seem to be favorably disposed toward the initiative. Still, this may bear watching.
Contraction
Euro-zone hopes about decoupling from the U.S. economy seem to have come true -- albeit not quite as planned.
Whereas the U.S. posted second-quarter growth of 0.5% compared to the first three months of the year, the euro zone contracted by 0.2% during the same period, Eurostat said yesterday. Like U.S. fears of a recession, the euro zone's economic resilience appears to be, if not mostly "mental," at least somewhat exaggerated.
Leading the downfall was Germany, heretofore considered resistant to the triple threats of a global slowdown, a strong euro and record energy prices. Its economy contracted by 0.5%. The French and Italian economies followed closely, down 0.3% each. Growth in Spain, the euro zone's fourth-largest economy, was flat at 0.1%.
In the wake of this bad economic news, expect louder calls for the European Central Bank to follow the U.S. example of opening the monetary spigots. Inflation is at around 4%, and some European lawmakers suggested last month that the ECB's definition of price stability (inflation rates of below but close to 2%) should be "examined," i.e. notched up a little so that the bank could pursue a looser monetary policy. That's like erasing poverty by reclassifying the poor as rich. Euro-pols would do better to raise incentives to work and invest. The outlook for such reforms, however, remains as grim as for the economy.
In Germany, there's no sign that Berlin's "grand coalition" between Social Democrats and Christian Democrats regrets having wasted its first 1,000 days in office. It apparently had hoped to ride out its term on the back of the previous government's market reforms and strong global growth.
Instead, Chancellor Angela Merkel's government has reneged on its reform promises. Rising mandatory health care contributions threaten Berlin's pledge to cut nonwage labor costs significantly below 40% of gross salaries. Instead of deregulating the labor market, it is pushing for minimum wages in several sectors. Instead of cutting income taxes, it implemented a three-percentage-point hike in the VAT.
Last month Economics Minister Michael Glos proposed income-tax cuts to boost the economy only to see his suggestion immediately shot down by Mrs. Merkel. Mr. Glos reiterated yesterday that "more growth can only be generated by lower taxes and lower payroll taxes" -- but he also conceded that such supply-side polices had no chance in the current coalition.
In Spain, the Socialist government has also largely lived off the reforms of its conservative predecessor. The government convened an emergency meeting yesterday, agreeing on a yet another stimulus package -- the third since Prime Minister José Luis RodrÃguez Zapatero's re-election in March.
Some of the measures fall into the category of dropping euros from helicopters, such as injecting €20 billion into housing and financing for small and medium-size businesses. Others may help lift growth rates permanently, such as cutting administrative costs for companies by 30%. The plan, however, is still too timid to counter the near freefall of Spain's construction sector -- the engine of its previous economic success.
Few in Europe, though, can compete with Silvio Berlusconi's economic bungling. The Italian Prime Minister used his comfortable majority in both houses of Parliament to raise taxes on oil and financial companies this month. The proceeds from these "Robin Hood" taxes are designed to help low-income families cope with higher energy prices. If he's really interested in helping the poor, Mr. Berlusconi should have honored his campaign pledge to reduce taxes.
Better economic news comes from Paris. Nicolas Sarkozy's reform efforts have been erratic but generally in the right direction. He has abolished the 35-hour workweek in all but in name, pushed through some welfare-to-work reforms and cut red tape. Now that the economy is facing stronger headwinds, perhaps he'll use the opportunity to push through the kind of "rupture" with past policies that he has been promising.
Yesterday's results mark the worst quarterly performance since the common currency's launch in 1999 and suggest Europe may be heading for a recession, meaning two consecutive quarters with negative growth rates. Leading economic indicators, such as new industrial orders and business sentiments, point to a sharp slowdown in the second half and into next year.
Despite all the talk about a U.S. recession, the economy may actually unravel faster across the Atlantic. It's not just France but all of Europe that could use some rupture from its past ways.
US sends aid, but rethinks policy
| By Richard Lister BBC News, Washington |
 Russia has deployed thousands of soldiers to the region |
Things, she said, have changed.
Certainly, the US had very few options for countering Russian tanks when they rumbled into Prague almost exactly 40 years ago.
But the present crisis suggests there is no easy solution for the West this time either.
On a whole range of issues now, from the "War On Terror" to missile proliferation, to the nuclear threat from Iran, the US has been doing its utmost - over many years - to strike a partnership with Moscow.
Throw in Russia's growing wealth, influence and confidence and American threats to isolate Moscow begin to sound a bit hollow.
So, for now, the broader question of US-Russian relations is being put to one side, while officials from the president down focus on how to contain the trouble in Georgia.
Sending out signals
The US humanitarian mission serves a range of purposes.
 The first air shipment of US aid landed in Tbilisi on Wednesday |
As well as providing aid to many thousands of displaced Georgians, it also sends a range of political messages.
It goes some way to responding to the concerns of many Georgians who believe Uncle Sam was not there for them when they needed him, and it tells the Russians that Washington is not backing away from the country it has described as a "beacon of democracy".
There is something of a military subtext too.
The US is to use its navy and air force for this mission and warned the Russians that they must keep all transport infrastructure open.
So, no more blocking major roads and no interference with ports or airspace.
There is no hint whatsoever that the US would be prepared to use military force against the Russians - far from it.
But bringing American forces into the equation on the ground is an implicit warning to the Russians to back off.
No one wants an accidental confrontation which could turn into something worse.
Russia or Georgia?
Beyond the humanitarian mission though, the Pentagon has confirmed that it will be assessing Georgia's wider military needs in the wake of the losses suffered at the hands of the Russians.
 Mr Bush received an ecstatic greeting when he visited Tbilisi in 2005 |
It has already helped revamp and re-train Georgian forces, provided more sophisticated military equipment and updated bases to meet Nato standards.
Of course, those moves may well have contributed to Russia's decision to re-assert its authority in the region in the first place.
So as well as re-assessing its relationship with Russia, Washington will have to look again at whether its policy of bolstering Georgia's independence has been entirely successful, and whether it can continue exactly the same policy in the same way while still pursuing a strategic partnership with Moscow.
Certainly the Russians believe the US faces a choice.
"At some time," said the Russian Foreign Minister, Sergei Lavrov, "it will be necessary [for the US] to chose between supporting this virtual project [Georgia] and real partnership [with Russia]".
US Secretary of State Rice rejected that as a false choice and accused some in Russia of harking back to the days of the Cold War.
But Russia is not alone in wanting to entrench its influence.
The North Atlantic powers are trying to do the same in Russia's old back yard, and Russia has clearly decided enough is enough.
Ultimately, with just a few months left of his term in office, that is a long-term problem which President Bush will be leaving on the top of his successor's in-tray.US and Poland sign defence deal
 The missiles would be similar to those based in Alaska and California |
The US and Poland have signed a preliminary deal on plans for the controversial US defence shield.
The plan is for the US to base 10 missile interceptors in Poland in exchange for help strengthening Polish air defences.
The scheme is highly controversial and has been opposed by Russia.
Poland is reported to have demanded security help as part of the deal after Moscow threatened to target its missiles at any eventual bases.
The US signed a deal with the Czech Republic in July to base tracking radars there as part of the missile defence system.
Washington says it needs the system to protect itself and Europe from missile attack by what it calls rogue states, such as Iran. The US wants the sites to be in operation by about 2012.
Russia has expressed concern about the system in the past, with one official saying the deal "complicates" global security.Bookshelf
The World of Tomorrow
![[The World of Tomorrow]](http://s.wsj.net/public/resources/images/ED-AI051_book08_20080813160742.jpg)
The Way We'll Be
By John Zogby
John Zogby is the maverick in the political polling fraternity, the guy who admits that he sometimes tweaks the rules and whose numbers are sometimes greeted with skepticism. He is also an original thinker and a perceptive observer of the American scene, especially as it is viewed from the far-outside-the- Beltway precincts of Utica, N.Y., where his Lebanese- immigrant grandfather ran a grocery store for years.
It is the social observer who comes to the fore in Mr. Zogby's "The Way We'll Be," an attempt to describe, by way of polls, the American state of mind and to imagine what it portends. Along the way, Mr. Zogby sounds several themes. One is that Americans increasingly want variety in their consumer products and entertainment offerings. "They want choice, not imposition, and they are demanding to be treated as individuals," he writes. "Today's beer drinker and movie watcher and rock music fan can personalize his or her refrigerator or DVD or iPod playlist as never before."
That's right, but it's not exactly new news. The proliferation of choice has been going on for decades, as areas of popular culture that once offered a nearly universal, limited set of possibilities -- think of movies in the 1930s and 1940s or television in the 1960s and 1970s -- have splintered into many different forms and found many different audiences. Spurred by deregulation and technological innovation, niche entertainment products appeal to ever smaller but still profitable segments of the population.
A second theme of "The Way We'll Be" asserts -- in tension with the first -- that we live in "an age defined by narrowing limits." Here Mr. Zogby seems to be talking not about a long-range process but about the economic slowdown we've experienced over the past year or so. He notes the success of discount retailers like Dollar Store and Dollar General, writing that "the public is trimming expectations, making do with less, and finding a subdued peace in the process."
I wonder about that "subdued peace." Consider what Americans say about energy policy. A 2007 Zogby Interactive poll found that Americans believed, by a 59% to 37% margin, that the government should reduce energy use "even if" it meant "significant changes" in their "lifestyle." In another poll, one that asked whether we should reduce environmental restrictions so that more oil refineries could be built to meet the demand for gasoline, Mr. Zogby's respondents rejected the proposal by 55% to 42% margin.
But these polls were taken -- and "The Way We'll Be" presumably went to press -- before gasoline prices hit $4. The jump in fuel costs produced a sharp shift in opinion, with the majorities in more recent Zogby polls -- and not only in his -- now favoring oil drilling on the outer continental shelf and in the Arctic National Wildlife Refuge. It's pretty safe to assume that majorities now favor fewer restrictions on building refineries. Americans are willing to make do with less, but only up to a point, and polls can't tell us where that point is until it has been reached.
Another of Mr. Zogby's themes: that young Americans, defined as those born since the early 1980s, differ from their elders in important ways. Some people have called this cohort the Millennial Generation; Mr. Zogby calls it the First Globals. He reports that 63% of First Globals in a 2007 Zogby Interactive poll agreed with the statement "I don't support 'my country, right or wrong.' " He notes that First Globals "have been exposed to clothing, games, and other products made all over the world" and that 56% of them have family and friends living outside the U.S.
Mr. Zogby could have added that these First Globals have been exposed to schools where patriotism is often scorned and where, as the political scientist Samuel Huntington puts it, "transnational" attitudes are inculcated. But I wonder how deeply ingrained the First Globals' alienation from American patriotism really is. Would another 9/11 -- less significant, Mr. Zogby says, than Hurricane Katrina in the minds of his respondents -- change their views as $4 gas did?
Mr. Zogby is on firmer ground, I think, when he looks at the attitude of First Globals toward cultural matters. He finds them broadly approving of same-sex marriage; somewhat less supportive of abortion than Gloria Steinem-generation feminists; and well disposed toward free trade, including (watch out, Barack Obama) the North American Free Trade Agreement.
In my view, Mr. Zogby overemphasizes our current economic travails. He needs to put them in a longer perspective -- the sort that he provides sporadically in "The Way We'll Be." At one point he notes that, among people living below the poverty line in 2002, 93% had microwave ovens, 88% had VCRs, 59% had computers and 58% had dishwashers. Mr. Zogby and I are old enough to remember when no one living in poverty -- and no one at the top of the income scale, either -- had any of those things.
The choice-profusion that he celebrates is evidence of just how vast American affluence has been. "I look on with awe," Mr. Zogby writes, "at how well tens of millions of Americans have responded to the cataclysmic events of recent decades. Instead of caving to the devastation caused by economic dislocation, corporate and job (and tax base) flight from our communities, war, and political scandal, they've weathered the bad and matured mightily in the course of adjusting to new and sometimes harsh conditions."
The terms "cataclysmic" and "devastation," I think, are over the top, though perhaps not if you live in Utica. But I share Mr. Zogby's admiration for the resilience and adaptability of Americans. "The Way We'll Be" is not a precise national roadmap, but it does offer tantalizing clues about where we're headed.
Mr. Barone is a senior writer for U.S. News & World Report and a resident fellow at the American Enterprise Institute. From 1974 to 1981 he was a vice president of Peter D. Hart Research Associates, a polling firm.
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