Monthly Archives: September 2013

Is Kenya The Next Syria?

Curious things are happening in Kenya.   Last year, oil was discovered in Kenya.  In the last Month or so, Kenya has signed an oil exploration agreement with Barclays Bank.  Apparently Barclays thinks there is more oil to be found.  And last month Kenya signed an agreement with China to build a pipeline and offshore oil refinery.

And this week we have  a terrorist attack inside a Kenyon mall – an attack reportedly made up of a multinational cast of terrorists.  With Syria currently at a stalemate, perhaps the proxy war is shifting to Kenya.  Kenya’s resources are up for grabs, and now is the time for countries to get a piece of this new found wealth.

Maybe the oil in Kenya isn’t enough to draw all the foreign attention that Syria is getting.  But it will be interesting to see if terrorist activity, civil war or calls for regime change start to be mentioned.  So it will be interesting to see what the next moves are in Kenya.

The Federal Reserve’s Maginot Line

So the Federal Reserve has decided that the economy is too weak to begin tightening the money supply.  What interests me most about this decision is the decision to tie this to the unemployment rate.

According to the FOMC statement:

 In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal

Coincidentally, I happened upon this great article discussing the concept of Peak Employment.   Historically the argument has always been that technological advancements have always created more jobs than they have eliminated.  This article theorizes that we have passed Peak Jobs – and we are at the point where technology is and will continue to eliminate more jobs than are created.

I think there are a couple indicators that could support this – rising worldwide unemployment rates and the shrinking of the middle class

Note this chart that is included in this article:

Rising unemployment is shifting the middle class bell curve bulge to the left (and think about how much higher unemployment int the United States would be if we weren’t spending record amounts on defense spending).  This number is also supported by the multi-year decline in median family income.  So if we as a society have passed peak employment, this economic tipping point is bigger than the Fed, perhaps bigger than one government can manage.  A new plan for capital allocation needs to be devised.

In the meantime, lacking any big ideas, the Fed is spending our capital on an outdated economic model.  Like the French that built the Maginot line after World War I, the Fed is fighting a battle using an obsolete strategy.  A look at banks excess reserves during this period of quantitative easing is an indicator that the strategy of pumping money into the economy is ineffective.   The Germans proved the Maginot line to be useless in World War II.  I hope the Feds strategy of battling the economy based on outdated ideas turns out better for the United States than it did for France.

Syria – America’s Next Mistake.

Due to the immense political theater surrounding these Syrian chemical weapons charges, I decided to re-read some of my previous posts on Syria.  That reminded me that for whatever reason, the strategy to topple Assad has not worked, so the Executive Branch of the United States had to pull out the old chemical weapons argument.

I decided to read the official US Assessment of the use of chemical weapons and am of the belief that yes, chemical weapons are being used in Syria, but I am not convinced on which side is responsible.

Where did the intelligence come from?  According to this article,

The bulk of evidence proving the Assad regime’s deployment of chemical weapons – which would provide legal grounds essential to justify any western military action – has been provided by Israeli military intelligence, the German magazine Focus has reported.

If we have learned anything from the leadup to war in Iraq, its that intelligence can be subjectively interpreted to support you desired outcomes, and Israel is hardly an objective observer in this this conflict.  Especially since they have just sold the oil rights to Syria.

One other article I stumbled across – this article references another article from July 9th, where Russia claims to have proof of a rebel chemical weapon rocket attack.

According to the Russian ambassador to the UN, Vitaly Churkin:

The ambassador said the results of the analysis indicate the Bashar 3 rocket “was not industrially manufactured and was filled with sarin.” He said the samples indicated the sarin and the projectile were produced in “cottage industry” conditions.

The absence of chemical stabilizers, which are needed for long-term storage and later use, indicated its “possibly recent production,” Churkin said.

I couldn’t find any articles where the US Government denied this accusation, yet there was no call for intervention on humanitarian grounds to intervene after this attack.

In my opinion, this call for intervention has nothing to do with humanitarian issues and all about bailing out the rebels who are losing the battle against Assad.  This proxy war is all about oil and/or oil pipeline interests in the region, and if one side punches, the other side will punch back just as hard.  This is not worth going to war over.