The 71%

According to a recent FPI poll, 60% of Americans want go to war with Iran to prevent them from getting nuclear weapons.

This in spite of the fact that the US intelligence community is fairy unanimous that Iran is not even currently pursuing nuclear weapons. According to Micah Zenko:

First, as Director of National Intelligence James Clapper has repeatedly reaffirmed since late January, “we don’t believe they’ve actually made the decision to go ahead with a nuclear weapon.” Just yesterday, James Risen reported in the New York Times that the IC continues to believe (based on an assessment first made in November 2007) that Iranian Supreme Leader Ayatollah Ali Khamenei halted his country’s nuclear weapons activities in 2003.

This might be hard for many to grasp, since polling has found the American people disagree with the collective judgment of the 210,000 civilian and military employees and 30,000 private contractors comprising the IC. A recent poll found that 84 percent of Americans think Iran is developing nuclear weapons, while another from February 2010 concluded that 71 percent of Americans believe that Iran currently has nuclear weapons.

So 60% of Americans believe Iran should be attacked to prevent nuclear proliferation. Simultaneously 71% of Americans — in total contradiction to the evidence recognised by both the CIA and Mossad that Iran is not currently even developing a nuclear weapon — believe that Iran currently has nuclear weapons. There is almost certainly a high degree of overlap — and that’s some severe cognitive dissonance. Where are such ideas coming from?

There are some voices in the wilderness that are expressing the view that Iran already has a nuclear weapon to anyone who will listen.

According to Reza Kahlili, who claims to be a former CIA spy who infiltrated the Iranian Revolutionary Guard:

The pressure the United States and the West is bringing to bear on Iran to keep it from acquiring nuclear weapons is all for naught. Not only does the Islamic Republic already have nuclear weapons from the old Soviet Union, but it has enough enriched uranium for more. What’s worse, it has a delivery system.

And where did Iran supposedly get those weapons?

In the early 1990s, the CIA asked me to find an Iranian scientist who would testify that Iran had the bomb. The CIA had learned that Iranian intelligence agents were visiting nuclear installations throughout the former Soviet Union, with particular interest in Kazakhstan.

Meanwhile, Paul Muenstermann, then vice president of the German Federal Intelligence Service, said Iran had received two of the three nuclear warheads and medium-range nuclear delivery systems from Kazakhstan. It also was reported that Iran had purchased four 152 mm nuclear shells from the former Soviet Union, which were reportedly stolen and sold by former Red Army officers.

To make matters worse, several years later, Russian officials stated that when comparing documents in transferring nuclear weapons from Ukraine to Russia, there was a discrepancy of 250 nuclear weapons.

Lt. Col. Tony Shaffer, an experienced intelligence officer and recipient of a Bronze Star, told me that his sources say Iran has two workable nuclear warheads

Unlike the 71%, I’m not really convinced by this — if anything, it could be Iranian disinformation to try and avoid an American or Israeli attack. More importantly, the US and Israeli intelligence community at large don’t buy it. If they had any real evidence that Iran had a bomb today, Netanyahu would have been presenting it at the UN instead of drawing red lines on Wile E. Coyote bomb diagrams.

But if it were true, it would illustrate an extremely important point — that Iran with a nuclear weapon has not tried to obliterate Israel or the United States.

And if America were to attack Iran to prevent Iran from gaining a nuclear weapon, and Iran already has a nuclear weapon, the consequence could be thousands or millions of death — an attack on Iran would be even more dangerous and misadventurous for both the West and Israel than it already seems.

That makes the fact that a majority of Americans — as well as a disturbing number of hawkish policy analysts and talking heads like Reza Kahlili — agree that Iran already has a nuclear weapon, and that Iran should be attacked even more mind-boggling. To conclude (based on rumours and hearsay) that Iran already has a nuclear weapon, and simultaneously to encourage an attack on them is the height of foolishness.

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The National Attack Authorization Act?

We all know that the National Defense Authorization Act (NDAA) signed by President Obama on New Year’s Eve contained a now-struck-down provision to authorise the indefinite detention of American citizens on US soil.

But did you know that the NDAA also paves the way for war with Iran?

From Dennis Kucinich:

Section (6) rejects any United States policy that would rely on efforts to contain a nuclear weapons-capable Iran. Section (7) urges the President to reaffirm the unacceptability of an Iran with nuclear-weapons capability and opposition to any policy that would rely on containment as an option in response to Iranian enrichment.

This language represents a significant shift in U.S. policy and would guarantee that talks with Iran, currently scheduled for May 23, would fail. Current U.S. policy is that Iran cannot acquire nuclear weapons. Instead, H. Res. 568 draws the “redline” for military action at Iran achieving a nuclear weapons “capability,” a nebulous and undefined term that could include a civilian nuclear program. Indeed, it is likely that a negotiated deal to prevent a nuclear-armed Iran and to prevent war would provide for Iranian enrichment for peaceful purposes under the framework of the Non-Proliferation of Nuclear Weapons Treaty with strict safeguards and inspections. This language makes such a negotiated solution impossible.

At the same time, the language lowers the threshold for attacking Iran. Countries with nuclear weapons “capability” could include many other countries like Japan or Brazil. It is an unrealistic threshold.

The Former Chief of Staff of Secretary of State Colin Powell has stated that this resolution “reads like the same sheet of music that got us into the Iraq war.”

The notion of a “nuclear weapons capability” seems like a dangerously low standard. Let us not forget that Mossad, the CIA and the IAEA agree that Iran does not have a bomb, is not building one and has no plans to build one.

But the bill clearly spells out its intent:

SEC. 1222. UNITED STATES MILITARY PREPAREDNESS IN THE MIDDLE EAST.

Section 2 (A) pre-positioning sufficient supplies of aircraft, munitions, fuel, and other materials for both air- and sea-based missions at key forward locations in the Middle East and Indian Ocean;

(B) maintaining sufficient naval assets in the region necessary to signal United States resolve and to bolster United States capabilities to launch a sustained sea and air campaign against a range of Iranian nuclear and military targets, to protect seaborne shipping, and to deny Iranian retaliation against United States interests in the region;

(D) conducting naval fleet exercises similar to the United States Fifth Fleet’s major exercise in the region in March 2007 to demonstrate ability to keep the Strait of Hormuz open and to counter the use of anti-ship missiles and swarming high-speed boats.

As Kucinich notes:

This is an authorization for the use of military force against Iran. It ignores the warnings of both current and former U.S. top military brass who have spoken in opposition to the use of military force against Iran, including former Secretary of Defense Robert Gates, and current Secretary of Defense Leon Panetta. A February 2012 poll demonstrated that less than 20% of the Israeli public supports an Israeli strike on Iran if approved by the United States. Congress must avoid the same mistakes it made in the Iraq war and reject any language that can be construed as authorizing war against Iran.

It seems like the framers of the bill are exceptionally keen on striking Iran as quickly as possible. Maybe they are receiving lots of money from defence contractors?

Unsurprisingly, the biggest Congressional recipient of donations from defence contractors was Howard “Buck” McKeon, the chairman of the armed services committee who also happens to be the sponsor of the NDAA:

The fact that Ron Paul is the number two recipient is a sign that not all defence contractors are keen to hit Iran. But some are.

Still, even though the bill hints very strongly toward it, it doesn’t mean that it is going to happen. Congressmen might be hungry for a war but the military — already overstretched — isn’t. Admiral Fallon was reportedly the force that kept Bush from hitting Iran, and it would not be surprising to see the Pentagon put up fierce opposition to a future war with Iran. It would be a long, expensive war, with the potential of massive negative side-effects, like dragging in other regional powers, disrupting global trade, and squeezing the US economy by spiking the oil price.

How to Predict the Future

I’ve spent most of today reading.

The modern world appears divided into two camps (no — not those who believe the world can be divided into two camps, and those who don’t): those who believe that man has mastered nature, and those who know better.

The first camp share two chief delusions:

  1. That human beings — through the use of simulations, models, mathematics and other predictive techniques — can routinely make accurate predictions about the future.
  2. That these predictions should be deployed — usually via the power of government — to advance society.

The first supposition has been shown to be largely wrong, both empirically (predictions from models and simulations routinely miss — sometimes by wild margins, as they did during the 2008 meltdown) and rationally (economies are nonlinear systems where the output is not proportional to the input, and therefore chaos will always skew predictions). The second supposition is problematic, because it is dependent upon the first one being true.

The problem is that human beings want to predict the future — and accurately. Businesses want to be able to know what products will be selling in six months, six years or sixty years, so they can make money from it. Children want to know what field to study at college, so that they can get a paying job. Governments want to know what interest rates will be in three months, six months or 10 years, so they can decide how much to borrow. Scientists want to know what amounts of greenhouse gases will be emitted over the next half century, so they can attempt to model climate change.

And most significantly, those in power want the (often-undeserved) authority granted by a “window on the future “.

The best way to come-to-terms with this problem is to treat it as an advantage and not as a disadvantage. It is inevitable that there will be some forms of mathematical, statistical and predictive modelling, just as it is inevitable that philosophers and historians will write predictive literary works. Some will be wrong, and some will be right. The key is that it must be safe to be wrong. Societies, communities, individuals and organisations should plan for the future based not on the idea that the future is predictable, but based around the fact that the future is uncertain, and fundamentally difficult to predict. This means that everything needs leeway to break.

Some crucial examples:

  1. An international financial system which is torn down via a default-cascade through default of one bank or one nation is not robust to bad predictions.
  2. A banking system which is torn down through debt-deflation during a credit contraction is not robust to bad predictions.
  3. A lifestyle in which one bad prediction leads to serious illness or injury is not robust to bad predictions.
  4. An organisation  or family whose wealth (or health) can be destroyed by uncontrollable externalities is not robust to bad predictions.
  5. A nation dependent on the import of credit, resource and goods from hostile nations is not robust to bad predictions.
This just means that economists, writers, historians, bureaucrats and just about anyone who claims that they need to predict the future (that’s all of us, occasionally) needs to frequently and honestly ask themselves the question: what happens if I am wrong?

Hemingway on Krugman

Paul Krugman — surely the most (deliberately) provocative economist in the world — thinks we need more inflation.

Why?

From Paul Krugman:

Inflation hawks, including Paul Volcker in today’s NYT, often invoke the supposed lessons of history, to the effect that inflation is always harmful and always gets out of control.

But that’s a selective reading of history, and it skips the most relevant examples.

Early on in this crisis, I began wondering why the US didn’t relapse into the Great Depression after World War II. And there’s a good case that this had something to do with it:

The big rise in prices during and after WWII arguably did a lot to eliminate the debt overhang, making it possible for the economy to enter a sustained, non-inflationary boom.

So his reasoning is that inflation is necessary for debt elimination. And when it comes to debt elimination, (for once) I agree with him. But should that be done through inflation?

Absolutely not. If a debtor cannot afford its debts, there are two paths to debt-elimination:

  1. Admitting that the mountain of debt is immovable, and giving negotiated haircuts to creditors
  2. Inflating away the debt with money printing

The second option — which is effectively what Krugman is advocating — is incredibly risky. From the perspective of the consumer, inflation coupled with stagnant wages would be painful — and the potential for a hyper-inflationary spiral is downright dangerous. A far better option is giving consumers more options to default on or renegotiate their debts, including mortgages.

But from the perspective of the US Treasury, inflation would be far worse still. Why? Money printing is increasingly seen as a sign that foreign creditors need to get out of the dollar, and into harder assets. This would result in many foreign-held dollars flooding back to America, worsening the inflationary spiral.

From alt-market:

The private Federal Reserve has been quite careful in maintaining a veil of secrecy over the full extent of dollar saturation in foreign markets in order to hide the sheer volume of greenback devaluation and inflation they have created. If for some reason the reserves of dollars held overseas by investors and creditors were to come flooding back into the U.S., we would see a hyperinflationary spiral more destructive than any in recorded history.

Conversely, a straight-forward haircut would be painful in the short term, but would do far less than money printing to undermine the dollar in the medium term — and cause far less of a flood of dollars back into America. Creditors, particularly China, would be happier to see a short-term default stopping the printing presses and safeguarding the long-term purchasing power of the dollar than they would see the dollar constantly undermined.

So, in conclusion, default achieves debt elimination in a clean and relatively one-dimensional manner, while safeguarding the value of the currency. Inflating away the debt achieves the same thing in a more dangerous fashion, because it endangers the quality of the currency. The international ramifications of such a policy are unpredictable, especially given the fact that so much of America’s economic might is built on its ability to acquire resources and energy with dollars.

As Ernest Hemingway put it:

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

No — we don’t need more inflation. We need to pay down our debts in a timely and honest fashion, and if we can’t do that we need to default.

Of course, there is another aspect to this:

Krugman thinks weak demand is eating the American economy, and that money printing and a little inflation will provide enough of a boost to juice the economy into a stronger position. But weak demand is not the problem. The biggest problem is imperial overstretch.