livedevelopment

The Sunni-Shia Divide

2016-01-03T19:34:00.001-08:00

“The concentration of economic and foreign policy power on Mohammed bin Salman contains the latent danger that, in an attempt to establish himself in the royal succession while his father is still alive, he could overreach with expensive measures or reforms that would unsettle other members of the royal family and the population,"
-The Independent, BND

http://www.independent.co.uk/voices/comment/iraq-crisis-how-saudi-arabia-helped-isis-take-over-the-north-of-the-country-9602312.html

http://www.telegraph.co.uk/news/worldnews/middleeast/saudiarabia/11989196/Prince-Mohammed-bin-Salman-the-son-also-rises.html

http://www.independent.co.uk/news/world/middle-east/saudi-arabia-is-playing-an-increasingly-destabilising-role-in-the-middle-east-german-intelligence-a6760911.html

http://english.alarabiya.net/en/News/middle-east/2015/12/29/Top-ISIS-commanders-killed-in-Ramadi-who-were-they-.html

http://www.aljazeera.com/indepth/opinion/2016/01/iraq-recaptured-ramadi-matters-160103061219164.html

http://www.theguardian.com/world/2016/jan/03/how-isis-spread-its-deadly-ideology-a-timeline

http://www.nytimes.com/2016/01/04/world/middleeast/iran-saudi-arabia-execution-sheikh-nimr.html?&hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

http://www.independent.co.uk/news/world/middle-east/how-saudi-arabias-own-media-reported-on-the-execution-of-47-people-a6794516.html

Maps
http://www.news.com.au/world/middle-east/ihs-maps-islamic-states-territorial-losses-over-2015/news-story/94a659d0b38a54857d8b11dc3922ac1e

https://www.washingtonpost.com/ihs jan/on-the-front-lines-of-the-war-against-the-islamic-state-a-tangled-web/2015/12/30/d944925a-9244-11e5-befa-99ceebcbb272_story.html

IRGC:
https://en.wikipedia.org/wiki/Mohammad_Ali_Jafari

GID:
https://en.wikipedia.org/wiki/Al_Mukhabarat_Al_A%27amah

If the ECB wants more power they must take it for themselves

2015-07-05T18:32:00.001-07:00

The lender of last resort is a critical function of the US Federal Reserve. This mechanism is employed in times of crisis to stabilize economic conditions, provide capital to creditors (on debtors behalf), prevent bank runs and minimize adverse reactions by markets when it is needed most. During the recent financial crisis, the Fed provided lender of last resort facilities to a myriad of institutions, banks, foreign governments, corporations, commercial paper markets and the like in effort to stabilize the liquidity crunch as the market raced to the bottom in the price of credit.

With open market operations and asset purchases (QE), the Fed essentially created its own jurisdiction in a way that is analogous to the Supreme Court's use of judicial review in Marbury v. Madison. In the historic ruling, Chief Justice John Marshall granted the Supreme Court the power of judicial review. Today, this power is assumed and taken for granted. However, it was the Marbury case that set the precedent of the Supreme Court's ability to review matters of Constitutional debate. Without this ruling, the power and jurisdiction of the court is questionable at best.

The ECB has not had a Marbury v. Madison -- they do not have the ability to review budgetary measures by member nations. The leadership of the ECB has not established sufficient credibility to serve the lender of last resort function in the market system. Mr. Draghi was able to implement Outright Monetary Transactions (QE), albeit 4 years late. He and ECB leadership must get creative (and timely) with policy tools to handle the recent Greek crisis. If they are better off without Greece as a member, the leadership ought to set the stage and organize an orderly exit. Additionally, measures to prevent the run on the Eurozone from extending to other members is vital for the currency survival. Perhaps, it would be best to start with an accommodating monetary policy in times of crisis -- less you wish to experience self perpetuating crises.

The first rule is do no harm -- the Europeans take this a little too literally. Hence the four years it takes to implement a single policy.

If the ECB wants more power it may be best to just take it. Time is of the essence.

References:

The irony of Citizenfour

2015-03-02T20:30:00.000-08:00

After recently watching the documentary by Ms. Poitras, I could not believe the complete ironic situation that Mr. Snowden has created for himself. First, I thought the film was excellent and provided a unique perspective into the life and mind of one of the most wanted traitors on the planet. I began the film with the view that Mr. Snowden has created a meaningful debate in the US on the ever growing national security apparatus and the legality of information collected in secrecy by the NSA and CIA. However, the picture that was painted by the film, in my own narrow opinion, was that Mr. Snowden was a paranoid narcissistic freedom firefighter, who took extreme and illegal means to justify his view of the world that paid him a comfortable six figure living. I had trouble separating what I saw as his own opinion of the world and how much he had created for himself in what could be viewed as a very large and arguably successful publicity stunt.

Mr. Snowden raises vital positions regarding information and how it is collected and used in a legal framework, for which we have little precedent. Although, I get the feeling that in his work for the government, he failed to recognize that private corporations are operating in a very similar way that is also intrusive and may be in violation of our constitutional rights. The fact that the government collects vast arrays of information should not be headline news. If the bureaucratic establishment has the capability, certainly Google, Facebook, Apple, Microsoft, Verizon, AT&T, JPMorgan, Bank of America and others have the capacity to do the same level of reconnaissance. Perhaps in the future, the government's intrusion into personal lives is dwarfed by the combined ability of every single cellphone application to access your location, contacts and anything and everything that the user has "granted" permission for self enabled spying. Moreover, the incentives for corporations to use this data and license the information to third parties for profit is well beyond the legal arrangement that the NSA or CIA must utilize in the name of national security interests.

The massive amounts of information collected is effectively a public good and should be governed ethically across institutions.

The institutionalization of information theory is an incremental and balanced process that has few legal precedents. My opinion is that current judges do not have the technical skills to perform their own regression analysis to use the data to make an informed decision that governs the legal rights of end users of information- black hats do not request permission from a judge. The filmmakers did an excellent job at outlining the arguments and mixing policy with sophisticated data encryption technologies. It should not be lost on Hollywood or Mr. Snowden, that in the name of his overarching political views, Mr. Snowden has become a de facto citizen (prisoner) of Mr. Putin's republic. Mr. Snowden, for his many contributions and crimes, will ultimately mourn his beliefs in the name of freedom in exchange for his life.

Theoretical insurgency

2015-01-09T19:27:00.001-08:00

The attacks carried out by extremists in Paris are an example of an insurgency of ideology. The interpretation of literature is used as a cover for violence. Urbanization and integration of immigrant communities can become a mitigating factor. The role of education and economic development cannot be understated.

Kilcullen described the coming age of the urban guerilla as dense villages along coasts giving way to evolving forms of violence. In Mogadishu he described platoons of urban militia that move succinctly according to the environment which they operate. They accomplished this efficiently driving mounted trucks that move in columns without the modern technology deployed by militaries.

Although Paris is by no means Mogadishu, Mumbai or Jamaican slums, there exists a sizable migrant and ethnic population that lives along the train tracks riding east into the city from De Gaulle airport. This is the lowest point on the socioeconomic ladder- is not the place where tourists flock, and I am not sure what they need to survive, but the conditions are atrocious rivaling the worst ghettos I have scene in the US. I would be interested in the demographics of this population.

The Parisean version of the urban guerilla is partially similar to the Boston Marathon bombers, with strong ties to an insurgency, extreme nature and ability to operate in an urban environment. The Boston crew also received outside support in terms of operations and planning from an insurgent outpost in Russia. It is unclear from media reports regarding the extent which ISIS or Yemen may have provided operational support, while the philosophical sphere of influence is obvious. The use of philosophical beliefs to draw members to radical forms of religion represents a fundamental construct of the theoretical insurgency.

The use of proxy wars is an example of how concentrated interests are more inclined to mobilize logistical support. This is evident in Libya and Syria as failed nation-states wage conflict with rebels supported by outside groups like ISIS and AQAP. The conflict enables the insurgency to establish legitimacy as a political form of structure and provide territory for operations.

The need to assimilate migrant communities socially, culturally and economically has never been more evident, in the wake of Charlie Hebdo. Urban economics can provide a basis for the literature in terms of integrating communities of mixed income.

George Friedman refers to integration in a recent Stratfor posting from Geopolitical Weekly. Is it possible to have social integration without economic integration (entry to the middle class)? Friedman states that the killings have nothing to do with poverty. On the surface, this is true. Although, how do you promote multiculturalism with segregated housing structures based on nationality and religious affiliation? If you do not integrate economically, it might be impossible to integrate socially based on the cost of housing, which is particularly high in London and Paris. The more unequal society becomes in terms of income distribution will increase the divide of social segregation in terms of housing.

Urban economics literature discussed about benefits of social capital -- the less interaction one has outside their community can make it difficult to break the cycle of poverty. This goes for the low end - reaching up the ladder as well as the high end - reading down the ladder. My hypothesis is that if the immigrant communities are better integrated into broader society (economically and socially), they may be exposed to more opportunities and cultures outside of radical religious beliefs. You obviously cannot force people to live in diverse communities, but a starting point would be better outreach and perhaps educational integration. Brown v. Board of Education was hugely controversial, but it was instrumental in the political integration of minority communities.

One of the books we read for Oxford was about immigration in Great Britain and the EU. My assumption is that France is similar to Britain in this respect. The EU is supposed to increase migration and population movement by bringing down barriers to free movement of labor (trade). Many of the right wing (tea party like) groups in Europe have benefited from the backlash against movement of labor. The drawback from is similar to what is seen in the US - competition from an influx of low skilled workers suppresses wage growth. The economy as a whole benefits from the housing, consumption, and population growth that immigration brings.

how net neutrality mirrors the financial crisis

2014-11-16T18:38:00.000-08:00

One assumption regarding net neutrality is that access providers will inevitably limit the service they provide based upon their rational best interest - the almighty dollar. This is best scene in the negtotiations over fees Netflix paid to Comcast over bandwidth usage. Once access providers see their income streams dry up, corporate interests lobby for high barriers to entry to stifle competition, ensuring their position in the market. This is exactly what has happened as consumers, tired of high costs and lackluster service, have done in attempt to get content at a better price. Companies such as Netflix and Hulu benefit when cables subscriptions are terminated. The institutionalization of access providers to control content from media platforms in the market allows them to monopolize supply as well as pricing (technically an oligopoly). The ability of Comcast and Verizon to control bandwidth as revenue streams search for better investments is directly analogous to the movement of capital at the peak of the financial crisis. Investors could no longer rely on income from MBS as the first wave of option ARMs reset- the real price for real estate collapsed when demand was exhausted. This is exactly what happened to cable television subscriptions. The movement of capital, seeking the best return on investment, substituted internet service for cable and cash for mortgage backed securities. The fundamental survival technique is evolve or die- become acquired or parish, consolidate and reform to provide better service at a lower cost- as the new wave of youtubesphere takes over. But, if you run a 200 billion dollar corporation, it's much simpler to lobby that infratructure and bandwidth are finite, rather than innovate. The slow collapse of traditional interests gravitates to the institutionalization of market power and ultimately results in higher prices for consumers. Let's hope that the innovators can continue to provide the best choice for consumers.

does more political power lie in beijing or hong kong?

2014-10-01T19:52:00.001-07:00

The attainment of political capital in the south is viewed as existential threat to the monopolies held by the communist party in local market economies. The geographic location and purchasing power or civilians plays a central role in level of resistance, as does the draconian actions sought to control public opinion. The stronger the threat, the more intense pressure is exerted by the political establishment in order to control the response, media and opinions held by civilians. This is manifested through the communist party's control of candidates in local elections. The approval or disapproval of the democratic process is far from out of the ordinary in traditional Chinese elections. The ability of leadership to control online content is a primary concern, according to western media reports. The post reported that there was widespread belief that western governments and their allies are responsible for much of the protest in Ukraine. Unfortunately, the pattern has been established throughout the Arab world that the tighter control of internet users is prone to strengthen the dissent in the long run- given the speed of information movement is exponentially faster than the ability of governments to control the message. The institutionalization of control is prominent and even expected throughout Chinese society. One perspective views the Chinese opinion as Hong Kong students as the ones who violated Beijing's agreement with the UK in 1997. That is, historical precedents for elections already exist as a widely agreed upon process, e.g.the electoral college without the democracy part. This assumption is based on historical connotations of political power. It should be noted that the US can often appear as opposed to democracy in many parts of the world, particularly in the middle east. This is based on the fact that the US oftentimes refuses to support legitimate elections when they are won by a party that is classified as a terrorist organization. The US is only now beginning to recognize the strategic importance of organizations such as Hezbollah, given their political clout, provisions of government services as well as influence in Beirut and Damascus. The ability of protests in Hong Kong has to spread to the mainland is an ominous storm that Bejing has seen and weathered in the past. One cannot underestimate Beijing' s ability to control the message. However, it would be naive to think that opinions can be dictated by backroom dealers in the 21st century. The era has yet to be defined, but leadership will be served best by the public perception and evenly distributed wealth- it is the return on political capitalism in advanced market systems that that can define a changing of the guard. The world is witnessing the aftermath of the Arab Spring. The Hong Kong or Shanghai version has higher potential output due to the size of the economy. Well managed urbanization and continued reform of the hoku system is one place for emphasis. Another is giving civilians more choices in the products they buy and leadership that are supposed to represent their interests.

Does Scotland deserve its own independent country?

2014-09-18T19:28:00.003-07:00

That question will be answered by the Scottish people in a very short period of time(hopefully by 10:30 pm ET on 9-18-2014). However, in light of the ability of IS to control its own territory inside Iraq and Syria, I'd say the Scottish should easily qualify. Each situation is a prime example of socioeconomic development in the 21st century. he separation of market economies from nation-states will innately increase over time.

Throughout history, it has been the role of nation-state actors to: (1) control territory; (2) develop market systems; (3) fund government services; and (4) provide public goods The Industrial Revolution in the UK (r.i.p.?) was the first modern market system, beginning in the 1800s. Before the IR, it was the British control of vast ocean supply routes, development of the US colonies and superior naval force that provided the economic engine of a robust export economy.

The role of the British Navy and western style economic development-- complete with deep and liquid financial markets-- has contributed to the prosperity in Western Civilization for hundreds of years. Militias, such as IS, are able to control territory that is not supported by liquid socioeconomic market systems, in the absence of government services and public goods. The demand for political establishment to develop court systems and military capabilities is obvious --- the demand from the cities is a natural part of socioeconomic system, whereas IS profits from the demand and provides services that are in some twisted shape, a form of rent seeking.

Well, why does this happen? The success of organizations such as IS is rooted in theory of small and large concentrated interests. Small groups are more efficient, less bureaucratic, nimble entities that owe their survival to adaptation to the environment. Essentially, it is a lot easier to go to dinner and pay a bill with 5 people than it is to split it with 15 people. This enables IS to seek rents, develop military capabilities and control territory, albeit on quite a large scale. Their ideology appeals to a certain aspect of society that reads the works of Sayid Qtub, the Egyptian poet that provides the theoretical basis for modern extremism.

The Ferguson-Palestinian Parallel

2014-08-25T20:19:00.000-07:00

The excessive use of force by police officers in Ferguson, Missouri draws a distinct, yet credible connection to the disproportionate use of hellfire missiles by IDF, in their misguided efforts to put down the Palestinian uprising.

The blockade of goods and medicine, use of heavily armed checkpoints, and economic crisis in Gaza strips the freedom of ordinary citizens. In Ferguson, the tanks, tear gas and rubber bullets on display showed CNN viewers that the police were as ready for a riot as US Marines were ready for a multiethnic civil war in 2003. The show of force becomes fuel for the opposition and sets the obvious example of the have v. have- nots. Additionally, the lack of community engagement further exacerbated the divide between the all white paid officers and the predominantly black community- those they were paid to protect.

Although, police did not use laser guided bombs as IDF uses against civilian targets, the lack foresight and misuse of urban combat contributed significantly to the escalation of violence. If the Ferguson riots were equivalent to the Palestinian conflict, the police department would have characterized all citizens as terrorists that use children as shields for cover.

Insurgencies happen for a reason - they adapt dynamically to changes in the environment. Underlying tensions and conflict in urban areas can arise from distrust and misperceptions in both rich and poor communities. Bridging the socioeconomic gap, increasing social interactions, equal rights, education and a police force that knows the names of the citizens they are paid to protect will go a long way to the new deinstitutionalization of segregation and racism that exist in the US and the Gaza strip.

The institutionalization of racism is a function resulting from a combination of income inequality, homogeneous social networks, fractured cities, local government and prohibitive zoning laws that segregate populations. The proportionality of violence triggers unrest and violence in the presence of underlying tensions from segregated populations. When the violence occurs outside of St. Louis or in Gaza, the details of who was acting in good faith are irrelevant because the socio-economic forces are so far apart in terms of physical location as well as the mental state of disjointed communities- Black-and-white, Israeli-Palestinian. Natural violence occurs when segments of populations are marginalized by political elite as rational actors seek to maximize political capital in response to community reaction. The tendency for rational actors to minimize the political clout of segregated minority groups has been seen throughout history, most notably during the Civil Rights movement and riots that occurred throughout the US in the 1960s.

The most difficult aspect of this urbanized phenomenon is lack of political power- where riots and violence attempt to reverse the risk-reward calculus. In Missouri, citizens can vote. In Gaza, the people can also vote, but because one political organizations is also a terrorist organization, the democratic process becomes a hypocrisy and is not recognized when the outcome does not go accordingly. It should be noted that Hamas was only part of the coalition government- just as Hizballah represents a portion of the Lebanese Parliamentary system.

The war of 1,000 Palestinians and the Proportionality of Violence

2014-07-28T19:34:00.000-07:00

The recent Palestinian-Israeli conflict was sparked by the killing of three Israeli teens and the quid pro quo killing of a Palestinian youth. However, this conflict runs much deeper throughout history as oppression of the Palestinian people and proportionality of violence raises much concern for US interests abroad. The use of asymmetric violence is rooted in the theory of jus in bello (http://en.wikipedia.org/wiki/Just_war_theory) and has numerous implications for US Foreign Policy.

First, the missiles used by Israel are "Made in America," by US contractors. The current year estimate for US foreign aid to Israel is $3.1 to $4.0 billion (see CRS report http://fas.org/sgp/crs/mideast/RL33222.pdf). Second, the US-Israeli military aid serves as justification for Mr. Netanyahu to conduct asymmetric warfare. Without consequences of withholding aid, there is little reason for Mr. Netanyahu to compromise on settlements. Land for peace and the return to UN Security Council Resolution 242 is a cornerstone of the Palestinian insurgency. Third, the presence of U.S. troops in the Gulf and support for Israeli war crimes was a primary greivance of the attacks on September 11, 2001. Fourth, the slaughter of civilians in Gaza will only increase despair, oppression and hopelessness of the Palestinian population. This increases the likelihood of violence and uprising over the long run. Fifth, the insurgency can become significantly more complicated if Hizballah begins operations from the northern front. Israel can continue to destroy the lives of innocent civilians in Gaza, but the economic, social and opportunity cost is exponential if a multiethnic war breaks out on two fronts.

The current Israeli-Palestinian conflict is far from symmetrical. Israeli missiles have been flying into the homes of Palestinian civilians, complete with "Made in America" logos from Lockheed and Northrop Grumman. The slaughter of civilians gives the insurgency just cause, irrespective of Hamas' use of hospitals and schools for shelter. According to Boot, Byman, Killcullen, Nagl, et al, the use of hellfire missiles to combat an insurgency is a misguided strategic plan. The violation of jus ad bellum principles of warfare impedes the ability of the U.S. to conduct sound foreign policy when the time comes to clean up the mess left by Netanyahu.

Natural Gas Exports, Payment Transaction Networks and Russia

2014-04-02T18:48:00.001-07:00

Natural gas exports are a vital resource for the Russian economy. According to the EIA, Russia exported net 7.4 million bbl/d equivalents in 2012. Among this 7.4 million, 5.0 million was crude and 2.4 included other petroleum products. The EIA reports that Germany is the top recipient of crude (approx. 700,000), followed by the Netherlands (approx. 550,000), China (approx. 480,000) and Poland (approx. 470,000). The UK receives over 100,000 barrels per day.

Russia's support for the economy of EU, represents a dominant position in the market, and the Middle East, in particular. This economic clout is vital to the region's interest and represents a strong counterweight to US policy in Berlin. The EU stance on the Russian invasion is heavily influenced by the energy economy. Russia undoubtedly supplies the regimes of Bashar al-Assad and the Alawite regime in Damascus. The supply of arms is widely reported through US and British newspapers. This political clout represents an economic interest that is much stronger than the US in the region. Germany has been slow to move against Russia, given its vulnerability as the top recipient of Russian gas exports. Pipeline networks throughout the EU and Eastern Europe are vast natural resource of infrastructure development. This economic leverage ought to be diversified to support a market system that is independent of unstable Middle East and Easter European policital economies.

During the Civil War, Europe was forced to move supply routes for cotton to Egypt because Union blockades prevented the sale of cotton from southern ports. The effect was devastating, crippling the war efforts demand for financing from European economies. The payment networks and flow of goods across the globe are a key component of Russian chess moves. This includes energy supplies in Europe, which are dominated by Russia and payment processing networks by US companies such as Visa and Mastercard.

The payment networks in the developed world represent a significant and influential policy tool. They represent behavior of participants in a market, whether in Washington or Moscow. Payment networks represent an economic base, from tourism to trading of commodities and natural resources, the networks process transactions efficiently. The monies generated by the networks are real, the participants using the networks are rational and facilitation of the market system is an integral piece of the infrastructure that exists. The connection of buyers and sellers to the network creates a market system governed by the laws of the country which the transactions take place.

Eastern Europe is notorious for their utilization of the black market. This is analogous to "by any means necessary" as black markets represent an efficient form of a functioning economy and fill the void left by governments, institutions and infrastructure. The efficient use of the black market may trump legitimate corporations and crowd out market participants. The laws in much of the undeveloped world are local, the rules are local and appropriate obedience must be followed to gain access to these markets. If the costs of obtaining access are prohibitively expensive and returns not high enough to justify taking risk, the market entrenches locally, cutting off access to the global economy.

The extent which the US and EU control this infrastructure can have important influence over decisions made by countries such as Russia. The Russian elite are widely known to utilize the bailed out banking system in Cyprus. The Treasury has limited influence if the transaction payment networks are held outside of US corporations.

Mr. Putin may have already grabbed the natural resources he needed and expanded his market system. One could argue that the risk-reward decision was tilted in favor of Mr. Putin and that he acted completely rational in terms of maximizing return on political capital. The opportunity cost was huge and deterrence by the international community was weak. Mr. Putin simply repeats the pattern of Georgia in 2008, albeit without the precursor of a cyber attack and with a different US President.

(1) Ref: http://www.theguardian.com/world/bashar-al-assad.
(2) Ref: http://www.eia.gov/countries/cab.cfm?fips=rs.
(3) Ref: http://www.bbc.com/news/business-26724081.

Payment Transaction Networks and Russia

2014-03-27T19:33:00.002-07:00

The payment networks in the developed world represent a significant and influential policy tool. They represent behavior of participants in a market, whether in Washington or Moscow. Payment networks represent an economic base, from tourism to trading of commodities and natural resources, the networks process transactions efficiently. The monies generated by the networks are real, the participants using the networks are rational and facilitation of the market system is an integral piece of the infrastructure that exists. The connection of buyers and sellers to the network creates a market system governed by the laws of the country which the transactions take place.

Eastern Europe is notorious for their utilization of the black market. This is analogous to "by any means necessary" as black markets represent an efficient form of a functioning economy and fill the void left by governments, institutions and infrastructure. The efficient use of the black market may trump legitimate corporations and crowd out market participants. The laws in much of the undeveloped world are local, the rules are local and appropriate obedience must be followed to gain access to these markets. If the costs of obtaining access are prohibitively expensive and returns not high enough to justify taking risk, the market entrenches locally, cutting off access to the global economy.

The extent which the US and EU control this infrastructure can have important influence over decisions made by countries such as Russia. The Russian elite are widely known to utilize the bailed out banking system in Cyprus. The Treasury has limited influence if the transaction payment networks are held outside of US corporations.

Mr. Putin may have already grabbed the natural resources he needed and expanded his market. One could argue that the risk-reward decision was tilted in favor of Mr. Putin and that he acted completely rational in terms of maximizing return on political capital. The opportunity cost was huge and deterrence by the international community was weak. Mr. Putin simply repeats the pattern of Georgia in 2008, albeit without the precursor of a cyber attack and with a different US President.

Cyber Deterrence Theory

2013-12-28T04:51:00.000-08:00

Modern Cyber Deterrence Theory:

Norms, Assumptions and Implications

Table of Contents

I. Introduction

II. Definition

III. Stakeholders

IV. Origins

V. Norms and Assumptions

VI. Public Goods

VII. Institutional Structure

VIII. Legality

IX. Military Operations

X. Policy Implications

XI. Conclusion

I. Introduction

The theoretical view that information implies power and should be made widely available, without barriers to access, is a fundamental construct that was outlined in the Guerilla Open Access Manifesto by Aaron Swartz.[1] The technological capabilities, philosophical values and role of cyber warriors will have a prevailing effect on cyber deterrence.[2] The technologies can be used by good (white hat) and bad (black hat) hackers to express philosophical values and beliefs in cyberspace.[3] The norms in cyberspace are not always established by traditional institutions, but by freelance and organized hackers, who have the ability to retaliate for perceived grievances and injustices committed by institutions. In the aftermath of Swartz’s suicide, Anonymous hacked the MIT and Department of Justice websites as an indictment of their integrity.[4] The ability of freelance and organized hackers to indict institutions for philosophical grievances has wide-ranging implications for cyber deterrence theory and U.S. national security policy in the 21^st century.

Although the hacking of the MIT and DOJ websites were benign in nature, it can be extrapolated that the objections of individuals or groups, state or non-state actors can turn malicious. The malicious intent or violent outcome of a cyber-attack can have implications for US national security interests. An example of this would be if cyber warriors brought down US satellite communications and then sent a bombardment of surface to air missiles at strategic targets, resulting in massive losses from air defense being disabled. Additionally, the effect of satellite communications being brought down would have far reaching ramifications for transportation, navigation, military troops on the ground and commercial activity, among others.

Mokarram (2013) stated that the future of cyberspace will be occupied with cyber wars – these wars impose effects on society at large and are waged at a low cost, increasing the incentive to conduct cyber warfare operations. The purpose of this research is to analyze cyber deterrence theory and discuss implications of the economic outcomes and behaviors of stakeholders in relation to US national security policy. This research seeks to consider important constructs from the prevailing literature along with norms and assumptions that influence behavior among stakeholders involved. Cyber warfare will be discussed in a general sense, but this is meant to encompass a wide-range of operations that can be conducted in the cyber sphere, particularly those that result in negative externalities or consequences for society; including cyber terrorism, cyber-crime, cyber espionage, state and non-state sponsored cyber-attacks.

II. Definition

Deterrence theory suggests some form of retaliation or motive for prevention. Cyber deterrence can be defined as the ability of institutions and organizations to deny, protect and retaliate against cyber-attacks. In relation to nuclear arms, Gerson (2009) defined deterrence as “the threat of force intended to convince a potential aggressor not to undertake a particular action because the costs will be unacceptable or the probability of success extremely low.” The success of cyber deterrence is instrumental to US national security policy objectives. The unfortunate aspect of success in deterrence theory is that good deterrence cannot be seen or rewarded – much like preventing a terrorist attack. Adversaries who engage in cyber warfare often have psychological or political motives. These motives are subject to interpretation of ethics, morality and values. The ramifications and proportionality of retaliation that ensues is a decision that can be influenced or mitigated with applicable deterrence.[5]

III. Stakeholders

The key stakeholders in cyber deterrence encompass much, if not all of the developed world. Nation-states across the globe, represented by their government structures and institutions play a vital role in cyber deterrence – they are often targets of attacks with significant risk in deterrence if national interests are compromised. Non-state organizations are a key stakeholder in cyberspace with access to resources, fewer parameters and ethical boundaries when it comes to cyber operations. Economic stakeholders include the individuals and organizations that benefit from cyber operations – through spending on networks, security, information technology and services.

Specific to US National Security, institutional stakeholders include, but are not limited to: Strategic Command; Cyber Command; the National Security Agency; the Central Intelligence Agency; the Defense Intelligence Agency; the Defense Information Systems Agency; the National Security Council; the Joint Chiefs of Staff; the National Reconnaissance Office; the National Geospatial-Intelligence Agency; Homeland Security; the Federal Bureau of Investigation; US Treasury; The Federal Reserve; Key players in cyberspace: policymakers; militaries; professionals and service providers; hackers; hacktivists; institutions; corporations; nation-states; and non-state organizations.

IV. Origins

Historically, modern deterrence theory began during the nuclear arms race of the Cold War. According to Schelling (1966), the most successful threats are the ones that do not need to be acted on. Additionally, the use of violence to influence behavior of the population is strategic and coercive. This is most influential when it is served in close proximity or highly visible – where the annihilation, pain and violence are most apparent. After Hiroshima and Nagasaki, the capabilities and destruction of nuclear war were assumed – deterrence was embedded in the annihilation and use of maximum proportionality of violence. One of the strategic goals of nuclear deterrence was to deny the enemy access and resources.

Schelling (1966) wrote that negotiation is merely optional with enough military force. The application of this theory to cyberspace and cyber deterrence is problematic. Cyberspace does not contain a Geneva, Switzerland or Camp David to negotiate treaties. Negotiation is performed through proliferation of data, networks and information. Schelling used the example of Genghis Khan, who exploited men, women, and children as hostages to achieve a diplomatic solution.

Morgan (2012) believed that conventional deterrence was something that did not always work. It may have prevented nuclear wars, but frequently resulted in rivalry, bitterness and military conflict between nation-states abroad. In this case, it was the US and Russia that were indirectly confrontational in areas such as Afghanistan, Vietnam and Korea. Morgan argues that full-scale conflict between super powers was avoided at the expense of smaller conflicts and provocations that became more common.

V. Norms and Assumptions

Stevens (2012) argued that traditional nuclear deterrence is not always applicable in cyberspace. The fundamental rule of deterrence is that the risk (cost) is offset by the reward (benefit). Rules of engagement, norms and retaliation have yet to be defined. Stevens advanced six notions of why cyber deterrence does not conform to conventional deterrence strategies: (1) significant military based-conflict is absent; (2) non-state actors in cyberspace alter the playing field in terms of rationality; (3) the ability to retaliate in cyberspace is compounded due to the lack of geographical presence(e.g. problem of identification); (4) acquiring enemy assets (e.g. hostage taking) to facilitate negotiation is complicated; (5) rules of engagement are not commonly understood; (6) the cost of escalating a cyber-attack is cheap, increasing the likelihood of unstable conflicts with potential for physical confrontations.

Identification of the adversary in cyberspace is difficult. Mokarram (2013) stated that credible deterrence is based on efficient execution and alleged ability to respond among the parties involved. In conventional deterrence theory, Gerson (2009) wrote that in order for deterrence to be credible, the adversary must perceive the political willpower and military capabilities to be comprehensive. It can be challenging for institutions to identify the culprit of a cyber-attack while the entire network and communication system is down. From this example, the deterrence calculation is influenced based on the strategy chosen by the adversary – the network being brought down minimizes the ability to identify and retaliate against those who committed the attacks. Indirectly, this influences the cost-benefit (risk-reward) calculation of the parties involved.

The assumed retaliation by the US military is a key component of war and deterrence theory. If the aggrieved party reacts with great enough pain and violence, the action serves as a deterrent to future acts of violence. Gerson (2009) wrote that credibility in conventional deterrence is based on perception of political capital and military capabilities. The parameters that define cyber deterrence are questionable because they could involve any number of state or non-state actors. These actors can use cyber espionage, cyber-crime or cyber terrorism to violate normative values in cyberspace (Stevens 2012). The security aspect of cyberspace is engaged with a growing field of professionals that maintain networks, information systems and security protocols for government and corporate clients.

In the early 1980s, the massacre of Hama, Syria by Hafez al-Assad and interplay between political factions gave way to Hama rules – meaning that the absence of rules was prevalent in multifaceted civil war – revenge can be atrocious, unpredictable and painful.[6] This absence of rules is quintessential to understanding the development of norms in cyberspace. The freedom of thought, movement and exchange of ideas in cyberspace is the fundamental value and assumption where black and white hackers can find common ground.

This is a mutual understanding between black and white hackers, that the principle of free exchange and movement of ideas have implications for cyberspace and the political economy at-large. First, with public information, the internet allows for both parties in cyberspace to be privy of complete information. This is the opposite of what happens in the presence of asymmetric information where many market transactions take place. Second, the extent which the bureaucracy, political systems and government hinders this movement is an inherent violation of turf and grounds for conflict among hackers, leading to the rise and formation of non-state hackers such as Anonymous and information sharing networks like Wikileaks.

VI. Public Goods

Cyberspace is essentially a public good. The existence and security of cyberspace is vital to nearly all aspects of developed and modern society. The premise for a public good is that everyone benefits and it cannot be apportioned, divisible or denied. The cost of providing a public good is prohibitively expensive such that the benefit is not large enough to justify the provision by the market. Thus, the security and provision of cyberspace is in unchartered territory (with a valid internet connection) when it comes to government’s ability to distribute the benefits of cyber security to everyone. The public good is provisioned through the US military support for Cyber Command (USCYBERCOM) and the role is shaped by the institutional structure and norms within the cyber community.

Morgan (2012) used the example of the UN Security Council as a key component of “collective actor deterrence.” From collective action, the ability of nation-states to pool resources to protect the public good creates positive externalities. First, the collective action is a form of implicit deterrence. This raises the cost of cyber warfare and risk of retaliation. Second, the use of collective action to protect the public good reduces the risk of independence. In the event of an attack, collective action to protect the public space could limit the scale and allow for retaliation, while promoting deterrence for members of the group.

VII. Institutional Structure

According to an International Law Studies U.S. Naval War College article by Paul Walker (2013), the role of Cyber Command (USCYBERCOM) in national security policy was proposed based on three objectives, (1) to respond to a major breach on Department of Defense information networks, (2) to increase capabilities and proficiencies for global operations networks, and (3) to reorganize the Joint Task Force –Global Network Operations (JTF-GNO) and Joint Functional Command Component – Network Warfare (JFCC-NW) into a single unified command, enhancing the ability of DoD to defend its networks and conduct offensive operations. Walker (2013) stated that the formation of US Cyber Command was driven by the DoD response to “the most significant breach of U.S. military computers ever” (2008), with creation of Operation Buckshot Yankee.[7] The combination of these objectives was created in June 2009 and operationalized in October 2010. Following the U.S. lead, Cyber Command was announced across other countries in strategic initiatives, including China, India and Russia.

The framework and role of cyber deterrence in national security policy is shaped by USCYBERCOM and the institutional structure of US Strategic Command. In a September 2010 testimony by General Keith Alexander, he envisioned a wide-ranging role that was not limited to simply managing DoD networks and security. This implies an offensive cyber threat under the US national security apparatus. General Alexander was keenly aware of the unique challenges posed by cyberspace, stating, “the distinctions between public and private, government and commercial, military and non-military are blurred.”

US Strategic Command (USSTRATCOM) recently transitioned power from General Robert Kuehler to Admiral Cecil Haney as of November 2013. This transition took place during a publicized internal organizational battle between USCYBERCOM and the NSA, key components of the USSTRATCOM umbrella. The resource allocation to USCYBERCOM and NSA under the leadership of Strategic Command centralizes a significant power base in a single command post, and thus may warrant separate leadership. The implication was that the NSA head would be better served with a civilian leader. This was manifested in a recent Washington Post article proposing a splitting of the duties such that NSA and USCYBERCOM are under independent budgetary authority.[8] The argument for splitting the leadership was that the country was better served with a separate governance structure and less competition within USSTRATCOM.

The DoD focus on cyber deterrence and the emerging threat has led to the formation of various entities within USCYBERCOM – US Army Cyber Command, US Fleet Cyber Command, Air Forces CYBER/24^th Air Force.[9] Primarily, the focus is on deterring threats and intrusions by outside actors or nations. The US Army Cyber Command’s stated mission is to “coordinate, integrate, synchronize, direct and conduct network operations and defense of all Army networks in support of full spectrum of operations to ensure US/Allied freedom of action in cyberspace, and to deny the same to our adversaries.”[10] The mission statement implies deterrence by denial in cyberspace – a concept developed during the Cold War. However, the application of deterrence theory in cyberspace is fundamentally different than past experience.

The strategic deterrence and the role of USCYBERCOM cannot be understated. The Washington Post’s Black Budget Report (2013) reported spending of $4.3 billion for cyber operations. The increasing dependence on data, surveillance, information, networks and security has driven the demand for cyber deterrence in practice.

VIII. Legality

The legality of cyber warfare has much room for debate. Does a planned cyber-attack constitute an armed attack? To what extent does the UN Security Council regulate conflict in cyberspace? How does the Geneva Convention apply to cyberspace? What are the rules of engagement? Once general norms are understood, there is likely to be a deviation or backlash against institutions before legal experts can agree on what constitutes legality. The reason is that it is impossible to include everyone when setting the basic principles of internet freedom. Jus ad bellum implies the right to self-defend and retaliate against an “armed attack.” The violation of the free movement of information and ideas is likely to provoke organizations or hacktivists to retaliate, much like an insurgency, for perceived injustices committed by the institutions. The Swartz case, as stated earlier, exemplified this concept on a small scale.

In a research paper by Eric Posner, he stated that reciprocity has the tendency to create reinforcing engagements, breeding collective action.[11] From the international perspective, laws are commonly obeyed if the repercussion is unwavering and prompt. If the laws are not applied uniformly in cyberspace then the ability to take legal action is weak. Legality in the case of cyberspace is jus ad bellum- based on norms developed by states and institutions, widely accepted by the international community. Jus ad bellum in cyberspace derives legitimacy through collective action by the international community. Collective action from the international community is not likely to advance without a crisis that creates urgency among the European Union or United States.

IX. Military Operations: Georgia (2008)

Goodman (2010) cited the example of Georgia (2008) to illustrate how a state (Russia) can use cyber operations to facilitate or pre-empt conventional military operations. Using Twitter and Facebook networks, the Russian hackers were successful at disrupting critical network systems- so successful that communications, electrical and internet blackouts occurred. The cyber-attack in this case was followed-up with boots on the ground. Government, businesses and commercial services were severely impacted by the outages, as the Georgian government was forced to rely on allies like Poland and corporations such as Google to get their systems back on-line. Despite the deterrence failures that occurred, Georgia is a recent example of how cyber-attacks can be used as political and economic leverage in anticipation of military conflict.

X. Policy Implications

In order to deter an insurgency, the counterinsurgent must find a way to address the underlying cause and grievance of the population. In cyberspace, the bureaucratic nature of government institutions, particularly in the U.S. and Western Europe, are at an obvious disadvantage to adversaries that operate under a different set of assumptions and rules. Compounding this vulnerability, the rules and bureaucracy that hinder a response to a cyber-attack can also be the very reason for the attack in the first place. For example, the secret nature of the NSA and CIA mitigates the bureaucracy at some level, but also impose their own structure and ethical boundaries- of which, the structures and integrity of the institutions themselves can be the motive for the attack in the first place. Thus, state and non-state hackers can choose the time and place for attacks, as well as the proportionality of the attacks, much like an insurgent that utilizes guerilla warfare. Like counterinsurgent strategies, modern cyber deterrence theory ought to recognize the motive of the insurgent (hacker).

The costs and benefits of waging cyber warfare are significantly less expensive than what is waged with conventional warfare or modern insurgencies. Conversely, the cost of security and defense of these networks is astronomical. Dr. David Kilcullen stated that Al-Qaeda attacked the US for $400,000 to $500,000, while the US spent trillions of dollars creating a complex national security apparatus, military operations and resources for Iraq and Afghanistan, in addition to the loss of human capital and opportunity costs. The opportunity cost created by 9-11 was huge. This resulted in a fundamental shift in behavior, and economic assumptions underlying this behavior. Furthermore, the economic event of 9-11 resulted in symbolic attack on physical infrastructure on some of the most expensive commercial real estate in the world.

It is not far-fetched that a 9-11 of cyberspace would be economically cheaper and more expensive in terms of economic costs – with wide ranging implications. Information networks and cables could be targeted, while physical infrastructure such as the power grid and institutions such as governments, corporations, populations in global megacities could be the objective. The nuclear event in cyberspace is the halt or stoppage of the global economy - the extent which (financial) transactions are stored online has a substantial risk. Moreover, if events like a flash crash cut off access to money or financing, the US government and national security interests would be severely compromised.

As stated by Stevens (2012), the responsibility to protect cyberspace is no longer limited to network and information security professionals- it extends beyond borders to political, military and diplomatic stakeholders. Technological advantages by the US and its allies proxy as de facto deterrence – much like the Cold War. However, institutional framework and the bureaucratic nature of corporate and government resources may stifle innovation as rational actors seek to protect turf. In my opinion, it is possible that the nature of hacktivist organizations - to leverage open ended information sharing networks- may gather knowledge and technological capabilities at a rate that exceeds the government or private sector. The black market nature of hacking, lack of ethical boundaries and gap between institutional and individual norms may facilitate cyber conflict in the future. It is equally plausible that false accusations in cyberspace, due to the identification problem, may result in negative externalities and physical violence.

The practical role of cyber deterrence is inherently asymmetric. The one-sided nature implies that the burden is always on the institution – to protect, prevent and deny access to secure information sharing networks. The one-sided nature to deterrence is evident in the hacker v. institution conflict – the hacker does not have critical infrastructure to secure and therefore behaves asymmetrically. When game theory exists between institution v. institution conflict, the game is more logical- reputational risks, asset risks, legal risks, corporate risks and external actors are at play. An example of this is the Google v. China cyber espionage event in 2009-2010 (Stevens 2010). Both institutions are sufficiently large and have overarching ambitions, albeit different goals. Estonia v. Russia (2007) is more asymmetric because of size differential between the institutions.

Unlike nuclear deterrence, the domain and parameters surrounding warfare and deterrence in cyberspace are ambiguous. However, the intersection of nuclear and cyber deterrence was seen recently in use of the Stuxnet virus. Stuxnet is the virus that was used to infect Natanz Iranian nuclear centrifuges. The virus was widely believed to have been developed by Israeli and US agents.[12] The result of Stuxnet led to the institutional formation of Iran’s Cyber Command equivalent.

Large-scale hacks and cyber events will only increase in the future as the cost of obtaining internet access trends lower over time. Cyber-bullying may become more commonplace and political motivation may be the norm, as noted in Nazario’s Politically Motivated Cyber Attacks.[13] In cyberspace, the lines between states and non-states become opaque over time – political and collective action can travel exponentially faster in the era of social networking and free flow of information. It is vital that deterrence capabilities adapt proportionately and keep up with technological advancement in the black market. The cyberspace version of North Korea testing and conducting nuclear launches is not something that can be risked in a developed world- one that relies increasingly on global financial and payment networks.

XI. Conclusion

As it relates to US national security policy, the role of deterrence in cyberspace is fundamentally different than past experience. Gen. Alexander was keenly aware of the unique challenges posed by cyberspace, stating, “The distinctions between public and private, government and commercial, military and non-military are blurred.” It is not practical to deny an individual access to the internet. As opposed to denial of access, cyber deterrence ought to focus on offensive, defensive and theoretical capabilities. The formation of USCYBERCOM is one step in the right direction. A separate budgetary control and authority for USCYBERCOM will promote competition for assets and resources, leading to greater capabilities and technology. Increased information sharing with regards to cyber-security and cyberspace identification is another step that can lead to increased knowledge among the good hackers.

The extent which information is protected and secured, without regards to its utility is an economic risk as it relates to developing technological capabilities. As organizations like the FBI and CIA are walled off from each other in terms of communication, there lies a significant institutional hurdle for the US to overcome (Spears 2010). The knowledge sharing among ‘the good’ institutions promotes implicit deterrence – through more access to resources and ability to retaliate. Moreover, the ability to promote ethical knowledge sharing and utility in cyberspace can be facilitated through an international organization or NGO. The military and kinetic use of cyber capabilities are typically reserved for nation-state actors. Nation-states also set laws and legal recourse for actions taken in cyberspace. The use of traditional military operations in Georgia, combined with cyber warfare, has an extensive impact on US national security and 21^st century warfare.

Hackers can be transformed into ‘accidental guerillas’ when institutions violate philosophical values such as the free flow of information in cyberspace, raising the bar for cyber deterrence. Hacktivists reserve the right to express philosophical values while influencing norms secondarily. Furthermore, the dynamic nature of cyberspace creates historic challenges for cyber deterrence and US national security policy in the 21^st century. In the absence of cohesive norms and commonly shared principles, the only rules in cyberspace become Hama Rules.

Works Cited

Alexander, General Keith, interview by House Armed Services Subcommittee. Cyberspace Operations Testimony (September 23, 2010).

Censer, Marjorie. "From blue-collar Army base to white-hot cyber city." Washington Post Cybersecurity Special Report, Oct 2013.

Friedman, Thomas. From Beirut to Jerusalem. Picador, 1989.

Gerson, Michael S. "Conventional Deterrence in the Second Nuclear Age." Parameters, 2009: 32-48.

Goodman, Will. "Cyber Deterrence: Tougher in Theory than in Practices." Strategic Studies Quarterly, Fall 2010: 102-135.

Haley, Christopher. "A Theory of Cyber Deterrence." Georgetown University, 2013.

Kilcullen, David. The Accidental Guerrilla. Oxford University Press, 2009.

Lan, Tang, et al. "Global Cyber Deterrence: Views from China, the US, Russia, India, and Norway." East West Institute, 2010.

Lewis, James Andrew. "The arms race in cyberspace." Washington Post Cybersecurity Special Report, Oct 2013.

Mokarram, Ali. "European cyber security: a cyber deterrence approach." 2013.

Morgan, Patrick M. "The State of Deterrence in International Politics Today." Contemporary Security Policy, 2012.

Nazario, Jose. "Politically Motivated Denial of Service Attacks." NATO Cooperative Cyber Defence Center of Excellence, n.d.

Posner, Eric A. "Human Rights, the Laws of War, and Reciprocity." John M. Olin Law & Economics Working Paper No. 537, September 2010.

Spears, Austin. "United States Cyber Security in the 21st Century." Public Review, 2012.

Stevens, Tim. "A Cyberwar of Ideas? Deterrence and Norms in Cyberspace." Contemporary Security Policy, 2012.

Stone, John. "Conventional Deterrence and the Challenge of Credibility." Contemporary Security Policy, 2012.

Walker, Paul. "Organizing for Cyberspace Operations: Selected Issues." International Law Studies, Naval War College, 2013.

[1] Aaron Swartz was arrested by MIT police and indicted in September 2012 in federal court for downloading and proliferating academic journals for viewing by the public domain. His view, shared by members of the hacking group Anonymous, believed that academic research was funded using taxpayer dollars and resources, and therefore should be made freely available. Facing the possibility of multiple decades of imprisonment, Mr. Swartz committed suicide in January 2013. Charges were later dropped.

[2] This includes state and non-state actors that play a role in setting the norms in cyberspace.

[3] Hackers that operate under a set of values or code are widely known as ‘hacktivists.’ This is often specific to the organization known as Anonymous, but is generalized for the context of this research.

[4] Swartz’s suicide was followed by hacking tributes displayed on the DOJ and MIT website, implicating US Attorneys Carmen Ortiz and Stephen Heymann as partially responsible. See <http://www.telegraph.co.uk/technology/news/9800257/Anonymous-hacktivists-target-MIT-websites-over-Aaron-Swartz-suicide.html>. See USA v. Swartz timeline <http://tech.mit.edu/V132/N62/swartztimeline.html>.

[5] Retaliation is sensitive to a negative feedback loop based on interpretation of events.

[6] In the absence of rules, the only rule becomes “Hama rules”, or “there are no rules.” This was used by Thomas Friedman in reference to the ability of retaliation to be unpredictable, violent and atrocious acts committed by aggressors against their adversaries.

[7] This claim is attributed to former Deputy Secretary of Defense William Lynn. Operation Buckshot Yankee was the codename used to combat the virus that infected the U.S. military networks. See Walker (2013) and: <http://www.nytimes.com/2010/08/26/technology/26cyber.html?_r=2&ref=technology&>.

[8] See <http://www.washingtonpost.com/world/national-security/us-weighs-proposal-to-end-dual-leadership-role-at-nsa-cyber-command/2013/11/06/e64a23d8-4701-11e3-b6f8-3782ff6cb769_story.htm>.

[9] See <http://www.defense.gov/home/features/2013/0713_cyberdomain/>.

[10] See <http://www.arcyber.army.mil/org-arcyber.html>.

[11] See <http://www.law.uchicago.edu/files/file/537-eap-human-rights.pdf>.

[12] See <http://www.wired.com/threatlevel/2013/03/stuxnet-act-of-force/>.

[13] See <http://www.ccdcoe.org/publications/virtualbattlefield/12_NAZARIO%20Politically%20Motivated%20DDoS.pdf>.

TBA Market, QE and Information Theory

2013-12-27T06:06:00.001-08:00

The purpose of the TBA market in real estate finance is to allow the information from the underlying security "to-be-assigned" at settlement for the transaction. It is prohibitively difficult for small banks and institutions to participate in this market without perfect information - the only way to allow for the market to be purely competitive is for the standard uniform pricing index to exist, such that transactions between large and small banks to occur. Otherwise, the availability and absence of free information has momentous effects in the long-run. Cherry-picking and cream-skimming are models for institutions to profit from and manipulate the market system in the presence of asymmetric information.

The effect of this market system and the way transactions occur has implications for a variety of public policy related areas - consumers and mortgage finance reform in particular, along with the role of large banking institutions; small banks; the Federal Housing Finance Agency (FHFA); the Consumer Financial Protection Bureau (CFPB); the Fed (FRB); the Treasury;

Technology has increased the rate of change of transactions at an exponential rate, therefore the velocity of money in the market is an important factor in potential GDP. Regulatory capital requirements withhold money from the banking system - more capital is needed to shield against the effects of downturns, requiring the additional QE to overcome the shortfall in cash flows - once bank recoup capital on the balance sheet, only then can they facilitate lending and the money multiplier (demand). The potential demand is maximized in the market with leverage, albeit too much leverage has the recent potential to bring down the system. The stimulus was required to save thousands (or millions) of jobs because under this scenario the line insolvency and liquidity becomes blurred.

The use of the financing of home loans and housing related interventions as a valid form of economic is controversial to say the least. From the left - a free market requires perfect information for competition to legitimate and government regulation can facilitate this process. On the right - markets are never perfect and government intervention accomplishes little in achieving this goal. Housing finance reform ought to address the gray area in the TBA market - how can transactions occur, such that large institutions do not hold significant informational advantages over small banks?

Virginia Election Demographics 2013

2013-11-05T21:39:00.000-08:00

The demographic trends are the primary driver for election results in Virginia. This time around, those demographic trends were manifested in voter turnout. Historically speaking, off-year elections will depress voter turn-out which favors the Republican Party. The increasing share of Northern Virginia voters was more than enough to offset low turnout among Black voters in the South. The increasing proportion of Northern Virginia electorate base will prove to be a strong obstacle for the Republican Party in the years to come.

Geographically, Northern Virginia voters will compose an increasing share of the electorate, creating a diversified, educated and income driven-base. This happens to be the first time that Northern Virginia was able to dominate the electorate in an off year-election. Economic growth and population migration to the surrounding counties of Loudon (pop 340k), Prince William (pop 430k), Fairfax (pop 1.1 million), Alexandria (pop 145k) and Arlington (pop 220k) will surpass the rest of Virginia. Fairfax, Loudon and Prince William are generally contested areas. Arlandria makes up a strong Democratic base of urban development.

Cuccinelli did himself few favors in the areas of transportation, essentially shooting half of the state in the foot (the other foot was shot with social conservative hawkishness). It is widely assumed that the McDonnell administration did an excellent job in organizing the base - focusing on transportation issues in Northern Virginia, notably the Silver Line extension and the development of High Occupancy Toll lanes on the Beltway.

It is important that Republicans not use this (Losing result) to validate the existence of the extreme factions. In presidential elections, increased share of the population voting will strongly favor Democratic candidates. If you include the economic growth and demographic trends in Northern Virginia, then it becomes apparent that the sweet tea line exists south of the District -- along I-95 in the vicinity of Fredericksburg.

Previous Post from Sunday, July 29, 2012

Virginia politics, demographics and election trends

Income and race play a large role in the prospects for Mr. Romney and Mr. Obama. Henrico County, encircling Richmond is 57% white. To the south, Chesterfield County is 65% white, according to the 2010 Census. Blacks are the largest minority group in the Richmond metropolitan area. Whites are generally more educated and have higher incomes in Richmond's west end of Henrico, leading along the I-64 corridor toward Glen Allen and Short Pump. This is the district of Rep. Eric Cantor. The same is true of the western suburbs on the south side of the James River. To the north and east of the city, lies a demographic of predominantly African Americans, voting heavily in the favor of Obama during the 2008 election. Henrico County went 56-44 to Obama while Chesterfield County voted 54-46 in favor of Mr. McCain.

Driving directly east of Richmond to the peninsula, showed high density suburbs of Hampton Roads voting overwhelmingly in Obama's favor. Surprisingly, the Virginia Beach suburb of Chesapeake went to President Obama's favor 51-49. Virginia Beach by itself was a 50-49 split to Mr. McCain. Virginia Beach and Chesapeake are 64% and 60% white, respectively.

The affluent suburbs of Washington DC tell an interesting story regarding demographics and voting patterns. Outer suburbs of Loudon County are 54% in favor of Obama and 62% white. Prince William was 58% in favor of Obama and 49% white. Obama mopped the floor in closer in suburbs of Fairfax, Alexandria and Arlington, reaching 60%, 72% and 72% of voters, respectively. These areas are highly educated, diverse and high income. Loudon has the highest income and largest share of white voters among Northern Virginia localities.

As education increases among white voters, the probability of voting for President Obama increases. If you are Black, you will likely vote for the President regardless of education. The farther south you go, the less educated white voters go heavily in favor of Republicans. If the President is to win Virginia, it is vital for him to hold onto his margin of victory in Fairfax, Henrico, and Cheseapeake, while holding his own in Virginia Beach and Chesterfield County. If voters perceive the local economy to be on the upswing, the election will lean to Obama. However, if Romney approaches 60% of voters in Chesterfield County, it may indicate the state is ripe for a republican takeover. If the President loses ground in both Chesterfield and Henrico, then look for Chesapeake and Virginia Beach to follow suit. If the southern local economies falter (or perceive to be faltering), residents may favor traditional republican ties.

http://www.cnn.com/ELECTION/2008/results/county/#VAP00map

http://projects.nytimes.com/census/2010/map

Obama's implied policy on Syria - do nothing

2013-09-24T20:55:00.003-07:00

A practical view, based on the Washington Post op-ed written by Retired General Barno and Ret. Gen. Scales.

Dempsey disagrees completely with Kerry, based on his body language - and he is winning the argument (as stated in the op-ed). Dempsey does not need to say anything to Congress if he has the President's ear - the two of them have enough power to circumvent Congress on the policy.
Obama is clearly playing by the Cameron playbook. Cameron took the vote to Parliament knowing exactly the answer he was going to get -- and it was voted down. If Obama wanted to strike Syria, he would have already done it without consulting Congress - the US does use drones (ah)
Kerry is playing his humanitarian self. He appears to truly want action against Assad. Assuming Obama is using the Cameron playbook, then Kerry and the President are opposing sides of action - Obama against foreign action, Kerry is for it.
The speech was on national television was cover, allowing the President to take any direction on foreign policy, maximizing his source of power by laying out his line of thought.
The public does not have the stomach for a long drawn-out multifaceted civil war. The strikes would accomplish little in the form of substance - even with precision guided missile strikes. However, this would prevent the stolen donkey from becoming the stolen Porsche, adding symbolic value to other nations.

Link to article:

http://www.washingtonpost.com/opinions/us-military-planners-dont-support-war-with-syria/2013/09/05/10a07114-15bb-11e3-be6e-dc6ae8a5b3a8_story.html

http://www.washingtonpost.com/opinions/us-war-decisions-rightfully-belong-to-elected-civilian-leaders-not-the-military/2013/09/12/d31d2e9e-1a43-11e3-a628-7e6dde8f889d_story.html

Why Rich Kids Can Afford to Take Low Paying Jobs

2013-06-02T19:38:00.000-07:00

There are distinct differnces in socioeconomic upbringing, that inevitably influence the choices that we make. Take for example, one child brought up whose family income is $350,000 per year. The choices in this example, are not dictated by money as much as consumption and values. If your family income is $30,000 per year and you have two siblings and a single parent, life's choices are much different along with the child's perspective of consumption. The privileged child, would often have parents who are philanthropic and teach the child the value in giving back to the community through charitable donations and community service. The lesser privileged family typically will focus on what can be leveraged, to maximize opportunity for their children, in effort to give the appearance of being 'middle-class.' The class structure brings a mindset or psychological value to their children in the form of socioeconomic status. The children who move up the socioeconomic ladder from middle to upper class (or lower to middle) will generally have drive to do whats best for them financially in order to not fall into the same trap that plagued their parents. This may involve minimizing opportunities in areas such as teaching and public service, both of which are admirable professions. The marginal value of each dollar earned is inherently more expensive to those on the lower end of the socioeconomic spectrum. This leads to less charity as they move up the ladder. For children with more privilege, the marginal value of every dollar may be worth less (to themselves), given there status in society is more secure. The financial security provided by family is embedded in their psychological decisions, with few concerns of dropping out of the top 10%. With the former, an insecure social safety net will tend to favor less charity -- they do not have wealthy families to fall back on. The case for contributing to charity is obvious -- those who have more ought to contribute more for the greater good of society. Moreover, the socioeconomic status of one's family will generally have a profound effect on charitable contributions-- those who feel their status in society is secure will donate more.

The interaction of interest rates and house prices

2013-05-19T05:37:00.004-07:00

The rise in interest rates will have a substantial impact on the affordability and price of homes in the future. With Mr. Bernanke's Quantitative Easing, the pass through of security purchases goes directly into mortgage rates by using Agency Securities. The ability of the Fed purchases to effect the housing recovery will be diminished psychologically over an extended period. However, the Fed can raise interest rates on the back end to influence investor activity. As areas such as Washington, DC metro heat up, investment activity in construction improves, affecting the jobs picture positively. The subsequent rise in house prices following a bust are much more sensitive to rising rates, as the minimum level of interest is met to spur investment activity and business decisions. At this point, any change in rates may sway decisions, if investors are concerned with a fixed level of return associated with the corresponding interest rate. However, over time, more consumption breeds more consumption, and the money multiplier spurs investment activity. The psychological effect of borrowed money through low rates improves over an extended period of years. The housing starts create construction jobs, the home purchases create retail and service jobs. The psychological effect of housing has a significant lag, like the multiplicative effect of money borrowed. House prices do not increase until demand exceeds supply. Builders and investors need a clear sign that the recovery is real before considering new investment. Thus, by the time higher level activity improves, the effect of the interest rates have already passed through to the micro-economy. The psychological impact on housing is a large contributor to GDP in the form of jobs and consumer activity. These jobs areas are significant contributor of income to many non-college graduates. The commercial and urban-suburban development phase has even longer lag, as the population migration and new income is needed to support increased commercial services - like food, retail, grocery and banking. The divergence between cities like D.C. has a significant impact on inequality. The urban development phase goes at a much higher and robust rate, spurring more jobs and services. Areas with declining population often receive minimal commercial development (if any at all). Therefore the gap in geographic and income inequality increase with population migration.

Chi-town (fiction)

2013-04-24T20:27:00.002-07:00

One time, in September, I went to a bachelor party in Chicago. On Saturday we went to the Wrigley rooftops, and they had like 7 or 8 different Goose Islands on tap. My favorite was the Cubby Bear Blue. Second favorite was the 3-1-2, or as I say, the 'three-one-deuce', which is a Wheat Beer and is really good too. They also have a Green line beer and a Honkers ale and that is all I could remember. It was all you can drink and eat, so needless to say I drank all of them. Then me and my boy Scripps, whom I shared a bed with at hotel (it was Kosher, don't worry) made friends with a group of Puerto Ricans on the rooftop. After the game we went with our Puerto Rican friends to the Cubby Bear Bar across the street, who just happened to have the sweetest DJ in the world bumping the Bone-Thugs and Biggie at like 4:30 in the afternoon....so we took the RedLine back downtown to hotel to meet up with the group we were with that we lost at some point in afternoon. Later that evening we went to a late dinner at this place called the Admiral's Theater, which doesn't serve alcohol (you just go to bar beside place which is annoying, but effective).They put on this show at about 11:30pm and 1am where they get these two girls on stage, and there is a glass shower, and they have water that some how gets in the shower and then girls....use your imagination. I am still having trouble figuring out how on earth they get the water into the shower on stage...perhaps it was the all day drinking, but I wouldnt be so sure... I take that back, the 11:30 scene was two girls in the shower. The 1am was two girls dressed like Egyptians (post-Mubarak era) that were in a tomb that looked like King Tut and really liked each other. A lot. Kinda like what you see online but much better in person. Then the cab driver we got back that night at like 3am was either drunk or asleep or lit up or all of the above. I was shitfaced (obvi) by this point, but this mother F*kr couldnt drive a straight line to save his life and he was driving like 40mph on the interstate or like 80...no middle ground whatsoever. First I asked if he was ok then I just started talking shit to him. I wasnt as confident in his abilities as the actresses at the theater......

The Decline of the Dollar (1977-78)

2013-04-22T17:59:00.001-07:00

Case Analysis: The Decline of the Dollar

The central issue facing the Carter administration in 1977-78 was how to stop the rapidly depreciating U.S. dollar, without hurting domestic employment. The run on the dollar was primarily a function of high (relative) inflation, increased deficits in the current account, and a lack of confidence in the administration. The theory behind floating exchange rates was that the currencies would self-regulate and provide market based corrections to eliminate deficits and surpluses in the balance of payments. However, this adjustment often took place gradually, as it took time for policy makers to develop a suitable plan to increase confidence in the currency. Additionally, the support for the dollar creates a paradox as policymakers must choose between a stronger currency (implying high interest rate strategy) and easy monetary policy to promote the domestic economy.

The era of the mid to early 1970s was characterized by increased deficits in the balance of payments, high inflation and obstructionist policies regarding free trade. The Bretton Woods system of fixed exchange rates was implemented shortly after WWII and allowed countries to adjust the exchange rate to reflect structural defects in the balance of payments. In 1971, the Nixon administration reached a deficit in the BOP of $30 billion and dollar liabilities of greater than $50 billion. In anticipation of large quantities of dollar exchanges (fixed at $35 per ounce of gold), Nixon devalued the dollar by 10% and removed the U.S. from the gold standard. The Smithsonian accords led to a temporary bounded exchange rate, with a range of 2.25%. The quasi-floating exchange rate was pressured as Nixon relaxed wage and price controls and speculators anticipated inflation. By March of 1973, the industrialized countries of the West held floating exchange rate systems.

The policy of a fixed exchange rate was difficult to maintain and relied on a proactive government to constantly buy and sell currency to maintain a fixed market price. In the event that a country such as France or Britain would run a large deficit, speculators would sell that country’s currency and buy stronger ones. Speculators played an active role in promoting market based pricing, constraining the government’s ability to maintain a fixed rate. Speculators often had more access to capital than governments, forcing devaluations by buying and selling large quantities of currency. Other constraints included inflation and U.S. demand for foreign goods (oil). The result was reflected in the large deficit in the U.S. current account. The current account balance went from a surplus of $4.3 billion in 1976 to a deficit of $15.3 billion in 1977, followed by consecutive negative balances in each quarter of 1978. Meanwhile, Germany and Japan managed current account surpluses, while the United Kingdom broke even. The theory behind the floating exchange rate system was currencies would self-regulate.

President Carter’s first policy move was to obtain swap lines of credit with various central banks. According to the supplement, aggregated swap lines were approximately $30 billion. The purpose of this policy was to use borrowed money to buy dollars (and sell foreign currency), stabilizing the value of the dollar. This policy provided direct access for intervention in capital markets, much like a fixed exchange rate system. This policy did not address underlying causes of the declining value of the dollar – appetite for foreign products (oil), current account deficits and inflation. The effect of this policy is shown in Exhibit 9, as net dollar support approached $2 billion.

President Carter’s administration also announced they would sell gold and reduce the size of the federal deficit. Selling gold would imply devaluation relative to gold – using proceeds from gold sales to prop up demand for the dollar. The effects from BOP deficits and inflation outweighed the ability of the administration to intervene in gold markets. The attempt at reducing the federal deficit did little to quell market expectations for the future of dollar because neither addressed the root cause. Current account surpluses from Germany and Japan also hindered Carter’s strategy. The strong currency of Germany and Japan did not adjust ‘automatically’ as the theory suggested. The countries with the strongest currency maintained surpluses in 1977-78 as the dollar declined dramatically. U.S. consumers had a strong demand for foreign products. The ability of Japanese and German to exporters to produce quality goods supported the value of their currency, even with higher prices for their exports.

The Federal Reserve conducted monetary policy by raising interest rates (discount and fed funds rate) and increasing reserve requirements for banks, therefore increasing the amount of leakage in the system. The policy was a direct response to inflation—higher leakage in the system would imply a tighter supply of money and reduce the multiplier effect of money. Inevitably, the interest rate policy would provide confidence and support for the dollar by attracting foreign capital. Inflation in the U.S. was running about 8-10% annual growth in the CPI in 1978. The discount rate was increased to 9.5%. Fed Chairman Paul Volker was largely credited with breaking inflationary cycle and restoring faith in the dollar.

The policy of high interest rates and an independent Federal Reserve System allowed the U.S. to implement a strategy for contesting the market devaluation of the dollar. The unique independence of the Fed was vital to restoring confidence. Inevitably, devaluation of currency implies that imports become more expensive and exports will increase due to the relative affordability. As interest rates rise, foreign capital flows into the domestic economy and increases the demand for dollars. Currency speculators played a large role in the decline of the dollar, as did the strength of Japanese and German exports. The market often takes time to adjust to new policies and can act rationally or irrationally in the short run. The long run effect of supporting the dollar was shown through a stronger currency and stronger domestic economy. Ultimately, the Carter administration was troubled by the paradox of choosing between a strong dollar and a strong domestic economy.

The Barry Bonds Witch Hunt

2013-04-03T20:46:00.000-07:00

Steroid Facts:

FDA did not send Andro warning letters until March 2004: http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2004/ucm108262.htm
MLB Drug Policy on Andro, June 2004: http://mlb.mlb.com/news/article.jsp?ymd=20040629&content_id=783595&vkey=news_mlb&fext=.jsp&c_id=mlb
Barry Bonds Single Season OBP 2004: 0.609; OBP 2002: 0.589: http://www.baseball-reference.com/players/b/bondsba01.shtml
Waxman committee hearings begin Feb 2005: http://oversight-archive.waxman.house.gov/investigations.asp?start=25&ID=244, http://democrats.oversight.house.gov/index.php?option=com_content&id=2332&Itemid=2
Mark McGwire interview, USATODAY, June 2010: http://usatoday30.usatoday.com/sports/baseball/2010-01-11-mcgwire-steroids_N.htm

The United States Financial Crisis of 1931

2013-04-01T19:31:00.000-07:00

Case Analysis:

The United States Financial Crisis of 1931

The rapid deterioration of the economy in September of 1931 was sparked by Great Britain leaving the gold standard, in addition to the US policymakers’ inability to use decisive measures to combat the currency runs. Policy solutions available today such as insuring bank deposits, a floating exchange rate and the Federal Reserve’s use of open market operations are essential to the strength of the financial sector and overall economy.

Fearing a debasement of the dollar in relative terms of gold, the article highlighted the willingness of investors to exchange dollars for gold in a time of panic. The policy of refusing to exchange currency for gold in Great Britain on September 21st resulted in a direct loss of $116 million in U.S. gold reserves the following day. By the end of October, the U.S. banking system lost approximately 15% of bullion reserve, or $727 million.[1] The lack of deposit insurance was devastating to bank shareholders, leading to over 500 bank failures and a severely constrained money supply. The advent of the Federal Deposit Insurance Corporation in 1933 was a direct response to the massive bank failures that occurred during the crisis (Harvard Business School 1983).

The Federal Reserve System

The structure of the Federal Reserve System played a fundamental role during the panic. Established by the Federal Reserve Act of 1914, the Fed used a decentralized structure of member banks in each region of the country, with the Federal Reserve Board located in Washington, D.C. The relationship between the member banks and the Board was complex and undefined, with a profound effect on the way the supply of money and credit was allocated throughout the system (Moss 2007).

The Fed used three primary tools to control the supply of money- the discount rate, purchasing acceptances in international transactions and conducting open market operations. Of the three measures, the discount rate was the most widely used policy tool for controlling credit (at the time of the crisis). The discount rate was a lever used to inject liquidity. A higher discount rate would imply less borrowing in the banking system through higher interest rates. Through acceptances, the New York Fed had the autonomy to guarantee short-term loans by charging a fee, or acceptance rate. The New York Fed created friction among other Reserve banks by their unique position in the market, justifying the need to meet constantly-changing market conditions. Open market operations were an unrestricted monetary policy tool of buying (or selling) securities in the market. The open-ended nature of open market operations was the most controversial at the time and not fully realized under fixed-rate exchange system. The conflict between the New York Fed and the Board among acceptances and open market operations led to reorganization with diminished political clout and more direct control in Washington (Harvard Business School 1983).

Like other banks, the Fed’s position in providing credit was stipulated upon receiving productive assets. In turn, the Fed held a gold standard equal to a minimum of 40% of the value of bank notes, along with 35% of the deposit base. Additionally, government securities purchased in the market were not valid forms of collateral or insurance. These stringent collateral requirements were instrumental in restricting the ability of the Fed to deal with the crisis sufficiently and hindering the effectiveness of open market operations. When inevitable bank runs occurred, depositors demanded gold putting significant pressure on the Fed’s reserves. This resulted in political pressure by the Fed to raise the discount and acceptance rates to stop bank runs in October of 1931.[2]

The false sense of security in higher interest rates may have helped the Fed retain gold reserves, but it hurt the ability of commercial banks to borrow money and expand the economy. The belief that tight money was a sufficient response to a liquidity crisis proved to be a disastrous form of monetary policy, even though the Fed won approval from the Hoover administration and news organizations such as Business Week and the Commercial and Financial Chronical. The gold standard was a fixture in U.S. policy at the time, lacking the political capital to follow the British lead. The foreseeable international crisis that ensued when the British dropped the gold standard was compounded by strict regulations requiring the Federal Reserve to collateralize bank notes the Treasury issued with a deteriorating supply of commercial paper and bullion (Harvard Business School 1983).

Central Issue

The central issue for policy makers and stakeholders was how to shore up the banking system, preventing bank failure and instilling confidence in the financial system. Underlying this issue was the departure of Montagu Norman from the gold standard, sparking investors to seek safety for their money. The belief that money could be transferred into gold at a fixed value provided stability and insurance. Gold had benefit of being a desirable asset, an alternative to paper money and immune to the decisions of policymakers.[3] However, this asset class was devastating in a deflationary business cycle- the bullion supply could not be expanded quickly enough to meet the demand of central banks when the asset was needed most. Instead, central banks were forced to contract the money supply, charging higher rates of interest to keep confidence in the system and gold in the vaults.

When the Bank of England removed the gold facility, Montagu inferred a devaluing of the pound against gold. Because the pound conversion rate was previously fixed at a higher exchange rate than the dollar, the move implied that the fixed dollar rate conversion at $20.67 per ounce was not justifiable – dollars were now worth less, even though the exchange rate remained fixed. The banking system’s fixed exchange rate proved to be problematic in times of crisis. Based on current policy, the dollar exchange rate was not able to freely adjust to take into account exogenous shocks to the system. Franklin D. Roosevelt (FDR) ended the policy of exchanging dollars for gold in 1933 (Moss 2007). Moreover, the Fed lacked the necessary policy tools to maintain confidence in the banking system.

Policy Recommendation #1: Open Market Operations

One policy solution would be to let the New York Fed conduct open market operations more freely, injecting capital into the system, encourage borrowing at lower rates of interest and expanding the monetary base . This has the advantage of creating liquidity through excess reserves that the banking system desperately needed. The premise of open market operations is that lower rates will spur borrowing, investment and demand for assets as the dollars multiply throughout the system. The disadvantage is that the excess liquidity may not necessarily create new money in the form of loans and capital investment. According to the case study, borrowing from the Fed declined 83% between July of 1929 and September of 1930. Unfortunately, the widely assumed theory at the time implied that raising discount and acceptance rates would increase cash flow and earnings, albeit without additional liquidity. The political desire for open market operations was mute. The widespread belief by the committee was that money was freely available, where the New York Fed unsuccessfully lobbied for expansion through open market operations in January of 1930 (Harvard Business School 1983).

Policy Recommendation #2: Free Floating Exchange Rate

Allowing the exchange rate to float is another recommendation for improving economic conditions at the time. This policy implies that the dollar-gold exchange rate would change dynamically with market conditions. Another advantage was that it allowed the Fed to control how much money was created (Moss 2007). In reality, the demand and price of gold fluctuated because of its scarcity- indicating downward pressure on real prices (even though the nominal exchange rate remained fixed). The advantage of a floating currency is the Federal Reserve would not be required to exchange gold at the fixed rate of $20 per fine ounce. For example, a floating exchange rate from a devalued dollar would imply $35 per ounce if the shift in market expectations was drastic. This would alter investors’ decisions about whether they should exchange dollars for gold at the devalued price, since $35 per ounce would not be as attractive (Moss 2007). The effect of a floating exchange rate is the Fed would experience significantly less stress on the excess reserves in deflationary environments, increasing the ability to maintain higher levels of capital.

The disadvantage of this policy is the possibility of inflation and unpredictable consumer behavior. Consumers may fear the worse and still end up exchanging dollars for gold at the lower price (driving the price of dollars down further). Additionally, foreign investors may exchange dollars for other forms of currency with higher rates of return, causing further downward pressure. Allowing a currency to float had the ability to bring about inflation. With a gold standard, the ability to print money was limited by the amount of gold available in reserves. On the other hand, a free floating currency could print as many dollars as necessary to devalue the currency, expand the economy and facilitate inflation (or prevent deflation).

Franklin D. Roosevelt accomplished part of this policy by devaluing the dollar against gold by 40% (Moss 2007). Executive order 6102, signed in April of 1933 prohibited the hoarding of gold by private citizens. The order maintained the Federal Reserve was the only entity allowed to do so legally (Peters and Woolle n.d.). This policy had many of the same benefits as does a freely floating exchange rate system, creating excess liquidity and relieving the Fed of the stress of constantly removing dollars from the system.

Policy Recommendation #3: Insuring the Consumer Deposit Base

The insurance of consumer deposits was an instrumental policy strategy, manifesting in the creation of the Federal Deposit Insurance Corporation in 1933. The FDIC proved to be a unique strategy, aimed at providing protection to citizens in the event of bank failure. The bank runs were sparked out of fear that the customer’s money would be lost for good. The mistrust in the banking system and inability to insure citizens that their dollars were safe led to massive bank failures in the late 1920’s and early 1930’s (FDIC n.d.).

The main goal of the FDIC was to establish confidence in financial sector, limiting the bank runs and insuring consumers that their money was safe. The FDIC would be funded by premium charged to banks for insuring their deposit base. The long-run disadvantage of insuring deposits is that the corporation could go bankrupt in the event of widespread bank failure, exactly what it was designed to prevent. Moreover, it could be difficult to set guarantee fees to anticipate future crisis. It is inevitable that premiums charged to depository institutions may be too high in times of panic and too low when the economy is expanding (FDIC n.d.). Despite the disadvantages, deposit insurance could be the swiftest, least controversial and most effective policy tool if issued as Executive Order based on emergency measures.

Conclusion

The U.S. Financial Crisis of 1931 was ignited by Norman Montagu’s decision to take Great Britain off a fixed gold-pound exchange rate in September of that year. This led to momentous losses in U.S. gold reserves. Policymakers eventually implemented powerful solutions to shore up confidence in the financial sector, but were slow to react to the dynamic changes in the market economy. The gold standard hindered the ability of the Federal Reserve to conduct open market operations and devalue the dollar against the bullion. Ultimately, 1933 saw the creation of the FDIC helped prevent bank runs by insuring citizens that their money was safe. Furthermore, FDR outlawed the hoarding of gold by private citizens and devalued the dollar against the bullion using an Executive Order, creating desperately needed liquidity. The timely implementation of these solutions could have helped prevent additional bank failures, job losses and lessened the impact of the Great Depression.

Works Cited

Ahamed, Liaquat. Lords of Finance: The Bankers who Broke the World. 2009.

FDIC. History of the FDIC. n.d. http://www.fdic.gov/about/history/index.html (accessed February 2013).

Harvard Business School. "The United States Financial Crisis of 1931." Harvard Business School. http://www.hbsp.harvard.edu, 1983.

Moss, David A. A Concise Guide to Macro Economics. Boston: Harvard Business Review, 2007.

Peters, Gerhard, and John T. Woolle. Franklin D. Roosevelt: 34 - Executive Order 6102 - Requiring Gold Coin, Gold Bullion and Gold Certificates to Be Delivered to the Government. n.d. http://www.presidency.ucsb.edu/ws/index.php?pid=14611.

Salsman, Richard M. The Bank Runs of the Early 1930s and FDR's Ban on Gold. April 2011. http://www.forbes.com/sites/richardsalsman/2011/04/06/the-bank-runs-of-the-early-1930s-and-fdrs-ban-on-gold/ (accessed February 2013).

[1] Franklin Roosevelt abandoned the conversion of dollars into gold in 1933. The policy of fixed exchange rate would come back into favor again, but vanished completely during the Nixon administration in 1971.

[2] Raising the discount and acceptance rates had the effect of contracting the money supply when demand for liquidity was at its peak. This is the exact opposite of policy used today by the Federal Reserve Board.

[3] Gold was immune in the sense that it could not be created artificially through policy decisions. Germany’s crisis of hyperinflation in the early 1920’s to repay war reparations with worthless currency left a lasting impression of the dangers of hyperinflation.

Evolution of America's Cities

2013-03-31T17:38:00.000-07:00

The Urbanization of America:

Evolution of America’s Cities and the Role of Urban Policy

March 7, 2013

The evolution of cities in the United States was shaped by a confluence of economic opportunity, immigration, federal urban policy, as well as racial and ethnic tensions. The urbanization that occurred over time was direct result of the convergence of cultural norms that developed alongside economic growth opportunities and broader migration patterns. Today, urbanization in America is best described by Richard Florida’s notion of the creative class--cities that flourish focus on attracting economically ambitious individuals with advanced degrees, thus creating sustainable neighborhoods. Historically, technology has played a central role, influencing population movements and facilitating the transportation of people and goods across greater distances. This was first evident in the Industrial Revolution.

Industrialization

Urbanization in the 19^th century was facilitated by industrialization and technological advancements. The production of steel was vital to growth of industrialized cities. Steel and concrete was produced in mass, used for construction of large buildings, and transported across rail and waterways. The advancement in mass production created jobs and economic opportunity in cities across the country such as Pittsburgh and the Midwestern United States.

The advancement in transportation technology enabled the urbanization of cities as industrial manufacturing used the rail and waterways for the sale of goods across greater distances. The continental railroad system was built out, resulting in an increase from approximately 9,000 miles of track in 1950 to nearly 260,000 miles of track in 1900.[1] Cities such as Chicago created jobs and grew at breakneck speed as agricultural and manufactured goods could be produced in one location and moved using rail and waterways. The Erie Canal connected Chicago to the Great Lakes and where goods were ultimately sold in New York, the eastern continental U.S. or even Europe. Geographic location at the intersection of waterways or a large port was an important factor in the growth of cities during the Industrial Revolution. The economic growth in cities that ensued from industrialization was dependent on a growing population and labor supply.

Immigration

Immigration and the supply of cheap labor were instrumental in the growth of cities in the 19^th and 20^th centuries. At the start of the 19^th century, New York had just 60,000 residents, compared with 3.4 million by 1900. According to Judd and Swanstrom, 33.5 million foreigners migrated to America between 1820 and 1919. Population growth was needed to support the industrialized economy as well as finance trade and investments. The urban community was formed among class conflict between social and ethnic identity from immigration. For example, working-class immigrants were found to be segregated, often in slums in close proximity to downtown or near wharfs.[2] The segregation of immigrant communities was commonplace-- new migrants found familiarity among people that spoke the same language. Migrants from Ireland and Germany were among the most prevalent groups that came to the United States. New York and Chicago were noted for having over 80 percent of the population made up of first and second generation immigrants in 1870. As populations grew, so did the need for basic services such as police, fire protection, water and sewer facilities.

More recently, the rise of illegal immigration has created cultural and ethnic tension in places such as Arizona and Alabama. The legislation passed in these states has required law enforcement to check for proper documentation, threatening jail time in the event that the legal (or illegal) resident does not demonstrate their ability to be a ‘lawfully present.’ The implication of this law is that legal Hispanic residents will no longer trust or respect the legal process if they are subject to unnecessary harassment. The paradox created by immigration in urban areas is evident in the need for population and economic growth –housing consumption, labor, and services are demanded and sought by new migrants. The conflict arises when existing residents feel their political power and cultural norms threatened by the influx of new residents.

The Great Migration

Prior to the Great Depression, a period of internal migration among blacks from the South to the industrialized North was referred to as “the Great Migration.” The blacks sought many of the same opportunities that foreigners were seeking – economic opportunity and freedom from racial persecution, among others. The racially charged criminal justice system in the South and routine lynching of Blacks encouraged the Great Migration north. Even though economic opportunity was abundant in the North, it was not equal and Blacks still faced barriers in housing and employment. Blacks were not allowed in the most skilled occupations, nor were they permitted to live in exclusively white neighborhoods. Restrictive covenants to prevent the sale of real estate to Blacks were widely accepted prior to 1948. The breakthrough case, Shelley v. Kraemer, ruled that restrictive covenants to prohibit the sale of real estate based on race were in violation of the Equal Protection Clause of the 14^th amendment. Despite legislative and judicial victories for African Americans, the presence of racial tension was a persistent social issue in urban areas throughout the 20^th century.[3]

“White flight” was a term propagated by the movement of whites to the suburbs in the 1950s and 1960s. The population explosion of whites to suburbs was fed in part by the movement of the black population into the inner cities and partly by the demand for housing from returning GIs. Access to credit was plentiful (but not equal) with the creation of the Federal Housing Administration and the Veterans Administration.[4] The policy of the housing agencies was to focus construction in neighborhoods outside the inner city. Suburbanization became engrained in society, with a significant arrangement of racial segregation. According to Darden, migration of Blacks to suburbia was concentrated in areas with existing minority populations, all but shut out of newer communities. The flight to the suburbs among the African American population happened later and continued into the 1970s. Darden noted that suburbs occupied by Blacks were characterized by being closer to the central city, high in density and more impoverished than similar neighborhoods occupied by whites. The migration of whites to the suburbs left inner cities with a disproportionate share of poor residents in need of services, with little tax base to cover the costs. Discrimination in America’s cities was not impacted by legislation until the Civil Rights Act of 1964, the Housing and Urban Development Act of 1968 and the Fair Housing Act of 1968.

Urban Policy

Urban Policy was a result of the geopolitical and demographic shift to the cities. The interaction of politics, policy and people in an urban setting precipitated the need for services. The competition between rural and urban areas for finite resources at the state and federal level was at the heart of the urban policy debate. However, representation based on population was not equal. Until 1964, rural areas used legislatures to their advantage, drawing districts that were inherently unequal in population, with proportioned representation as high as 40-to-1. In Wesberry v. Sanders, the Supreme Court mandated that Congressional districts be approximately equal in representation. Going one step further, the Supreme Court also applied this ruling to state legislatures in Reynolds v. Sims. These cases drastically altered the legislative representation of rural and urban areas. Moreover, the cases improved the political capital needed to conduct urban policy at the federal and state-level.

The urbanization of America’s cities was significantly impacted by federal policy. FDR’s New Deal policies had a substantial impact on restoring confidence in America’s cities following the Great Depression. The National Industrial Recovery Act of 1933 and the Public Housing Act of 1937 was focused on improving housing conditions for low-income families. The effect of Roosevelt’s policies was that it solidified a Democratic majority in the inner cities through relief and public works projects. The overarching goal of LBJ’s Great Society programs was to cure social conflict with policies on civil rights, welfare and education, among others. The crowning achievements of Johnson’s administration were the Civil Rights Act of 1964, the Economic Opportunity Act of 1964, and the Head Start Program.[5] In the Carter administration, urban policy was concentrated in attracting jobs to distressed cities. The urban trends faced by the administration was perpetuating on a multitude of levels - dealing with an unequal share of crime, poverty and social issues, coupled with declining tax base as middle income workers sought refuge in the suburbs. In the 1980s, these problems were compounded by the Reagan administration’s policy of governing urban policy through states and local governments.[6] According to Wolman, The Reagan policy was fixated upon a market approach, emphasizing economic growth at an aggregate national-level. In Washington Abandons the Cities, Caraley hypothesized that Reagan and Bush policies had a profound effect on urbanization-- “accelerated the drift of large cities, especially the older ones of the East and Middle West, into underserviced, violence ridden, crack-infested, homeless-burdened, bankruptcy-skirting slum ghettos.” However, the unequal economic growth across geographic regions and within cities was persistent, some areas improved while others deteriorated from outward population and job migration.

Role of Gentrification

More current developments in the urbanization of America have focused on the role of gentrification and the rise of the “creative class”. Michelle Boyd suggested that mid-century urbanization had the effect of centralizing African Americans in impoverished communities and stripping them of resources, thus laying the groundwork for gentrification through racial ordering. The ‘downtown renaissance’ that has occurred in recent years is broadly based on condo and warehouse loft-developments, often using tax breaks to finance new housing construction. The new urbanization model is based on attracting the demographic of young professionals, known as the creative class. The creative class is a term proliferated by Richard Florida, used to describe the upcoming generation of artists, hipsters and young professionals whose tax base and presence is vital to creating sustainable neighborhoods and new urban development. Florida suggests that the new way to attract business is to focus on attracting the human capital. He uses San Francisco, Seattle and Austin as prime examples of cities that have been able to attract the creative class. The inevitable effect of this development pattern is that long-time residents and low-income renters often become displaced, evicted, or subject to eminent domain land acquisitions as gentrification takes place. Balancing the needs of long-time residents and creating a sustainable neighborhood for the creative class builds a cultural conflict between residents of drastically different socioeconomic backgrounds. These conflict and development patterns are likely to persist based on the growing inequality and separation of classes that exist in the U.S. today.

Conclusion

The evolution of America’s urbanization has been heavily influenced by technology, socioeconomic status, race and ethnicity, immigration and the political process. The interaction of people, politics and demographics has influenced urban policy in the executive, legislative and judicial branches. In the 19^th and early 20^th centuries, urbanization was concentrated on industrialization and transportation technologies that allowed the sale of goods across greater distances, setting the stage for a globalized economy. The 20^th century was marked by the Great Depression, the flight to suburbia and the deteriorating quality of city life. Current developments have focused on revitalizing downtown areas and attracting the creative class necessary for cities to prosper in the 21^st century. The interaction among demographic and socioeconomic shifts in population migration often creates cultural tension among long-time and new residents. Furthermore, rising income inequality in combination with cultural conflict create a significant challenge for urbanization in the 21^st century.

Works Cited

Boyd, Michelle. "Defensive Development: The Role of Racial Conflict in Gentrification." Urban Affairs Review, July 2008.

Caraley, Demetrios. "Washington Abandons the Cities." Political Science Quarterly , 1992.

CQ Researcher. Urban Issues. Sage, 2013.

Darden, Joe T. "Black Residential Segregation Since the 1948 Shelley v. Kraemer Decision." Journal of Black Studies, July 1995.

Florida, Richard. The Rise of the Creative Class. Philadelphia: Basic Books, 2002.

Judd, Dennis, and Todd Swanstrom. City Politics: The Political Economy of Urban America. Glenview, IL: Pearson, 2012.

Lichter, Daniel, and Leif Jensen. "Rurarl America in Transition: Poverty and Welfare at the Turn of the 21st Century." Conference on Poverty, Welfare and Food Assistance, May 2000.

Rich, Michael. "Riot and Reason: Crafting an Urban Policy Response." Publius, Summer 1993.

Wolman, Harold. "The Reagan Urban Policy and its Impacts." Urban Affairs Quarterly, 1986.

[1] Competition for railroad development was intense, leading to an over investment by municipalities as bond defaults and bankruptcies became prevalent. The railroad companies issued stock and bonds, as well as securing significant subsidies from state and local governments.

[2] Historically, sailors and dock workers were thought to be at the bottom of the social pyramid.

[3] Riots following the assassination of Martin Luther King, Jr. were a result of the racial tension between whites and Blacks. The tension is predicated on the basis of power and representation in the legislative and judicial branches- often disproportionately in favor of the white majority. This was and remains evident along socioeconomic status. More recently, the acquittal of four white L.A. police officers in the beating of Rodney King led to rioting in 1992.

[4] The Veterans administration home loan program was authorized in 1944, while the Federal Housing Administration was created a decade earlier.

[5] It is noted in the literature that LBJ’s Great Society and FDR’s New Deal were successful not only because they benefitted residents of urban areas, but also the whole nation.

[6] In Riot and Reason: Crafting an Urban Policy Response, Michael Rich noted a 50% reduction of federal aid to urban areas during Reagan’s first term as president.

The Palestinian Paradox

2012-08-19T19:38:00.000-07:00

The Misconception of Palestinian Values and Culture:
The Palestinian Paradox

2012
PUBP 503

Introduction

The views of the American society are often influenced by media and political discourse that occur at the highest levels of U.S. Foreign policy. Leadership plays an important role and the strength of U.S.-Israeli relations is a driver of the misconception of Palestinian values and culture. I had the privilege of learning what it is like to be a Palestinian-American from a colleague that spent the majority of his life on the Gaza strip.
Abu Yousef, or ‘father of Yousef,’ is a respected colleague and Ph. D. Statistician who studied at American University. He was one of nine children, born to a poor family in Gaza. His father worked construction in Israel, but was banned in 1987 after the first Palestinian uprising, or Intifada. The uprising led to economic sanctions that had a lasting effect on the ability of the landlocked country to provide basic necessities that Americans take for granted-water, electricity and food.
In America, jihad is frequently used to refer to a holy war. However, the meaning of jihad is much broader, including a crusade, principal belief, spiritual devotion, or simply achieving a personal goal (Yousef 2012). Abu Yousef’s jihad was education and learning to further the opportunities for his family. Despite graduating at the top of his class at Alazhar University in Gaza, it was impossible to find jobs because of economic sanctions imposed by Israel. To find work, a professor at the university persuaded him to apply to colleges in the U.S., particularly American University. Armed with a scholarship, skills in mathematics, statistics, and very little English training, Abu Yousef crossed the Atlantic in 1998.

Background

To understand the culture of Gaza, it is important to know the political climate. The occupied territory of Palestine includes the Gaza Strip and the West Bank. In 1993, President Clinton gathered PLO Head Yasser Arafat and Israeli Prime Minister Yitzhak Rabin to sign the Oslo Accords (Jones n.d.). According to the treaty, Israel agreed to give Arafat control of Gaza and the West Bank, including East Jerusalem. In return, Arafat and other factions would stop the resistance to Israeli occupation (Shah 2009). PM Rabin was assassinated by Israeli radicals shortly after the agreement and replaced by Binyamin Netanyahu in 1995. Netanyahu tightened sanctions on Palestinian territories and refused to abide by the former PM’s agreement. Clinton tried and failed once again to build peace at Camp David in 2000. To this day, Israel continues to build settlements on land that was granted to Arafat by the Oslo Accords (Counsel on Foreign Relations n.d.).
Gaza and the West Bank held free elections in 2006, pitting the two major parties of Hamas and Fatah against each other. Fatah is the party of Arafat, known for corruption and primarily concerned with receiving money and international aid. Hamas, on the other hand, focuses on helping poorer areas get support and receives little funding (from outside sources) because of ties with military factions. Israeli support for Fatah, corruption and lost hope for peace led to their defeat in the 2006 elections. Israel countered the outcome with increased economic sanctions, allowing few goods to enter and leave the occupied territory, with few exceptions such as some medical supplies and chocolate. At the expense of innocent men, women and children, the goal of these restrictions is to change the political leadership of Palestine to one that is more easily influenced by international aid.
Even though Fatah was defeated in the 2006 elections, they continue to control resources and services in the West Bank and Gaza, including teachers and police officers. Although Hamas is running the government, Fatah pays government workers to not go to work (Yousef 2012). The failure in the transition of power to Hamas benefits politically connected constituents and creates additional problems in terms of economic sanctions, government services, and foreign aid, among others.
In 2008, the Israel-Gaza conflict became a full scale war (Derfner 2008). Israeli strikes killed approximately 1,400 women and children as Egypt did not allow civilians to cross the border to seek refuge from the conflict (as required under U.N law). Hosni Mubarak , President of Egypt (at the time), relied on Israeli support to remain in power and pass control to his son. The Palestinians believe the timing of the war may have been politically motivated, coinciding with Israeli elections and the last few months before President Obama took office . Abu Yousef stated that Egypt’s support for Israel is a major motive for the uprising during the Arab Spring. Egypt is closely connected to Gaza, both in geo-political terms as well as culture (Yousef 2012).

Collectivist Culture

Family life in Gaza is a vital aspect of the culture. Family includes not only the immediate family members, but the entire community as well. Abu Yousef said it is not uncommon to know every person in the neighborhood and their family members (in a very large and dense neighborhood). It is commonplace to go to a friend’s home unannounced and have tea or coffee with them for a few hours. The opposite culture exists at Abu Yousef’s home in Sterling, Virginia. The interaction among members in the community is very limited in relative terms. It is considered rude to show up unannounced in the states. Knowing your neighbors and their family is considered a luxury in the suburbs of Washington.

In Gaza, the lack of privacy can be viewed as a positive in terms of building culture and interaction among members of the community. However, the abundance of privacy in the U.S. can also be viewed as one of the biggest advantages of living in the states. Privacy is virtually non-existent in the Gaza strip. Abu Yousef stated that it is difficult to know the importance of private life, never having experienced the personal space and freedom in the Middle East. The close knit community makes private life difficult - everyone knows the ups and downs of daily life. The social network among community members leads to gossip traveling quickly throughout the community.

The pros and cons of privacy in the U.S. versus Gaza create a paradox: the lack of privacy is beneficial to
building a community and culture; whereas the lack of privacy becomes a negative in terms of personal space that is often taken for granted in the U.S. This paradox highlights an essential difference between the collectivist culture in Gaza and the individualistic culture that exists in the U.S (Hofstede and Hofstede 2005).

Raising Children

Another difference between life in Gaza and the U.S. is seen as Abu Yousef raises his four children. Abu Yousef’s childhood in the Gaza strip (at the time) was care free. He was able to travel the large city at a very early age- about 8 or 9 years old - having a comfort zone that extended all the way to the beach. He could go as he pleased and never had to worry about being harmed or feeling insecure.
Despite the personal and economic freedoms in the U.S., safety and security is always the primary concern for parents raising children. He mentioned that parents in the U.S. think the worst if their child is gone only for a very short period of time, perhaps influenced by the role of the U.S. media.

Role of Media

Abu Yousef taught me that the least favorite country of Palestinians is Israel because of their occupation of Gaza, and the West Bank, including East Jerusalem. The ironic part is that many Palestinians view the U.S. as their favorite country, despite the deep U.S.-Israeli political connection and overwhelming favoritism in the media toward Israel. He describes the Palestinian people as very smart, educated, having a high rate of Ph.Ds, and keenly aware of the separation that exists between the American people and the politicians (Yousef 2012).
According to “Islam through Western Eyes,” Muslim values and culture represents “the Orient” or unfamiliar. The U.S. culture is known as “our world” or “the Occident” (Said 1980). As a member of the American community, Abu Yousef feels Muslims are unfairly portrayed in the media. He wants the U.S. to know ‘the true Islam,’ as opposed to the extremist version that grabs headlines and media attention, as seen after the attacks on September 11th. The unfortunate effect is that many Americans do not interact with Muslims on a regular basis, nor do they recognize the diversity of views that exist. Their only knowledge of Muslims is the fact that the September 11th hijackers were Muslim, resulting in broad-based discrimination.

Poverty

Poverty in Gaza is ingrained in the culture. In “Globalization of Postmodern Values,” Inglehart hypothesized the importance of economic development and its effect on subjective well-being (Inglehart Winter 2000). Abu Yousef recently returned to Gaza for the first time when Egypt opened the border. He said the despair among the youth is at a level that has not been seen since the Arab-Israeli War of 1948. The youth have no hope or opportunity to succeed in a modern economy. The absence of economic achievement in Gaza has created apathy and hopelessness among the people (Yousef 2012). Years of blockades and sanctions have taken a heavy toll.

In “Bad Samaritans: Rich Nations, Poor Policies, and the Threat to the Developing World,” Chang suggests a feedback loop exists between economic development and culture (Chang 2007). In Gaza, the lack of economic opportunity leads to extremism and hunger strikes as disaffected youth seek an outlet for their energy (Abdalla 2012). However, based on my interview, Chang’s generalization of uneducated Muslims does not hold when describing the people of Gaza.

Religion and Gender

With regards to religion, one of Abu Yousef’s concerns is the inability of his children to learn the true Islamic religion while growing up in the U.S. Although they practice and speak fluent Arabic, the religious culture that exists in Gaza is very different than the one in the U.S. In Gaza, religion is represented in the community, the values, culture and experiences. For example, a tradition at weddings is for the groom’s entire family to travel to the neighborhood of the bride in large buses to celebrate. During the festivities, children sometimes get separated or lost from their parents. Whoever finds the lost child (often someone who knows the bridal party) sees that the child finds transportation back to the neighborhood of his family, without hesitation. He said this is one example of a cultural experience that his children cannot have in the U.S.

Compared to other Muslim countries such as Saudi Arabia, Palestinians enjoy more religious freedoms and rights among women. Abu Yousef described an environment that was tolerant and accepting of other religious views, which is unusual for a poor Muslim country.

Abu Yousef grew up with seven sisters; each attended the University and treated with the utmost respect by the family. Education is important for females because jobs are scarce, increasing the likelihood of finding a job. Education also provides better opportunities for marriage because they are able to support a family if the husband is not able to find work. Expectations are different for sons and daughters. At an early age, boys and girls are allowed freedom in terms of going to the beach and traveling without company. As his sisters grew older, they were expected to ask permission from their husband to travel alone because of societal and cultural norms.

During Abu Yousef’s recent trip to Gaza, the traditional roles of males and females became more apparent after his cultural experiences in the U.S. In Gaza, women are expected to care for the children and prepare food for the family with little assistance from the husband. In older generations, the trends are more exaggerated in terms of female duties and male duties.

Future of Palestine

Abu Yousef will ask me, “What do I do to become more American?” My response is generally geared toward middle America- Budweiser and Ford trucks, but this does not capture the true essence of being an American. Abu Yousef is more American than me in many ways – described by his entrepreneurial spirit, work ethic, risk taking, and enjoyment of American television shows such as “Seinfeld.”
Unfortunately, the political landscape has changed dramatically since Abu Yousef left Gaza for the United States. The future of Palestine is uncertain at best with limited opportunities. Inglehart suggested that economic opportunity may have a compounding effect on emotional well-being. Chang claimed, “No country is condemned to underdevelopment because of culture.” Moreover, the U.S.-Israeli influence in the U.N., Western Culture and media portrayal creates significant barriers to changing a culture of poverty and apathy.

Figure 1 (Menon 2012)

Works Cited

Abdalla, Jihan. "Palestinian hunger strikers appeal to Israeli court." Reuters. May 2012. http://www.reuters.com/article/2012/05/03/us-palestinians-israel-prisoners-idUSBRE8420UC20120503 (accessed May 2012).
Al-Mojahed, Mamo. "Erdogan Slams Shimon Peres For Israeli Killings And Walks Off Stage." Youtube. May 2010. http://www.youtube.com/watch?v=XYa2rqT00bM (accessed May 2012).
Chang, Ha-Joon. Bad Samaritans: Rich Nations, Poor Policies, and the Threat to the Developing World. London: Random House, 2007.
Counsel on Foreign Relations. "Crisis Guide: The Israelie-Palestinian Conflict." CFR.org. n.d. http://www.cfr.org/israel/crisis-guide-israeli-palestinian-conflict/p13850 (accessed May 2012).
Derfner, Larry. "Why the Gaza War Between Israel and Hamas Broke Out Now." US News. December 2008. http://www.usnews.com/news/world/articles/2008/12/30/why-the-gaza-war-between-israel-and-hamas-broke-out-now (accessed May 2012).
Hofstede, Gert, and Geert-Jan Hofstede. Cultures and Organizations: Software of the Mind. New York: McGraw-Hill, 2005.
Inglehart, Ronald. "Globalization and Postmodern Values." The Washington Quarterly, Winter 2000: 215-228.
Jones, Steve. "What Were the Oslo Accords." US Foreign Policy (about.com). n.d. http://usforeignpolicy.about.com/od/middleeast/a/What-Were-The-Oslo-Accords.htm (accessed April 2012).
Menon, Debbie. "Palestine Map." VeteransToday.com. April 2012. http://www.veteranstoday.com/2012/04/22/to-viola-larsen-on-her-damnation-of-jim-wall/palestine-map/ (accessed April 2012).
Said, Edward. "Islam Through Western Eyes." The Nation. April 1980. http://www.thenation.com/article/islam-through-western-eyes (accessed April 2012 ).
Shah, Anup. "Palestine and Israel." Global Issues. February 2009. http://www.globalissues.org/issue/111/palestine-and-israel (accessed May 2012).
Yousef, Abu, interview. PUBP 503 Cross-Cultural Interviewing: Immigration Assignment (April 2012).

Romney chooses to double down on Republican ideology

2012-08-12T20:07:00.001-07:00

Let's be honest, does anybody vote for the Vice President? If the race were simply Mr. Biden versus Mr. Ryan, the outcome may be completely different. I read (Ezra Klein) today, stating that the VP pick could swing the vote 2% in his home state. Indeed, the selection of Rep. Paul Ryan (R-WI) has sparked a debate among political analysts and talk shows. One thing is for sure, Mr. Romney made a clear indication of the ideology he will pursue if he were to win the White House. By choosing Mr. Ryan as his VP, Mr. Romney may be leaving money on the table in a place that he may need it most.

I will certainly give Mr. Romney credit if his strategy works--leaning toward the Republican base and emphasizing economy, austerity, budget, and tax cuts. Just an FYI, it is theoretically impossible to balance the budget by simply cutting taxes (assuming constant economic growth). Tax cuts can also be viewed as a government expenditure - in the sense that less revenue is being collected, which in turn implies significant cuts across government agencies and procurement programs. It is safe to say Republicans often count President Obama's tax cuts as government expenditures when citing statistics. The truth is the president has upped the ante on President Bush's tax policies, extending the Bush tax cuts with the addition of his own policies.

Kathleen Parker summed it up in the Washington Post with the 'BWG' demographic. That is, Mr. Romney has doubled down on the conservative white coalition and failed to extend his base past the traditional 'Boring White Guy.' This may improve his chances in Ohio, which is 84% white (irrespective of ethnicity status). Florida and Virginia may be more elusive, at 79% and 71% white, respectively.

If you break down the white vote by ethnicity, the story shows a more diverse demographic. Ohio is 81% White non-Hispanic (WNH), Florida is 58%, while Virginia is 65% WNH. It is safe to say that Mr. Ryan will not poll well among non-white voters. Mr. Ryan is also known for his radical movement on privatization - Medicare and Social Security, something Mr. Obama will certainly emphasize in Florida.

The truth will prove to be translucent in Washington, as it always has. Mr. Obama's campaign for change has come up very short on his promise of a stark contrast to Mr. Bush. The selection of Mr. Ryan will be challenged to sway on the fence seniors, Hispanic voters and minority groups. The choice also doubles down on the traditional Republican ideology. As the country becomes more diverse over time, this may be the last time either party doubles down on the BWG vote. If Mr. Romney wins, he can thank the economic misery of the Eurozone and low voter turnout. Moreover, he may disappoint die hard budget hawks and tea partiers, given that change inside the Beltway is aiken to continental drift.

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/11/paul-ryan-isnt-a-deficit-hawk-hes-a-conservative-reformer/
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/11/paul-ryan-will-be-mitt-romneys-vice-presidential-pick-heres-seven-thoughts-on-what-that-means/
http://www.washingtonpost.com/opinions/kathleen-parker-a-boring-running-mate-could-be-good-for-romney/2012/08/10/5e6dcfc2-e31c-11e1-a25e-15067bb31849_story.html
http://quickfacts.census.gov/qfd/states/39000.html

Virginia politics, demographics and election trends

2012-07-29T19:14:00.000-07:00

In this election cycle, Virginia has become an intense presidential battleground state, as candidates blitzed the airwaves and crossed the state in search of undecided voters. Historically, presidential elections favored the Republican candidate, with President Obama's victory over Mr. McCain in 2008 being the recent exception. The southern suburbs of Richmond and Hampton Roads provide a diverse base of white and African-American voters.

Income and race play a large role in the prospects for Mr. Romney and Mr. Obama. Henrico County, encircling Richmond is 57% white. To the south, Chesterfield County is 65% white, according to the 2010 Census. Blacks are the largest minority group in the Richmond metropolitan area. Whites are generally more educated and have higher incomes in Richmond's west end of Henrico, leading along the I-64 corridor toward Glen Allen and Short Pump. This is the district of Rep. Eric Cantor. The same is true of the western suburbs on the south side of the James River. To the north and east of the city, lies a demographic of predominantly African Americans, voting heavily in the favor of Obama during the 2008 election. Henrico County went 56-44 to Obama while Chesterfield County voted 54-46 in favor of Mr. McCain.

Driving directly east of Richmond to the peninsula, showed high density suburbs of Hampton Roads voting overwhelmingly in Obama's favor. Surprisingly, the Virginia Beach suburb of Chesapeake went to President Obama's favor 51-49. Virginia Beach by itself was a 50-49 split to Mr. McCain. Virginia Beach and Chesapeake are 64% and 60% white, respectively.

The affluent suburbs of Washington DC tell an interesting story regarding demographics and voting patterns. Outer suburbs of Loudon County are 54% in favor of Obama and 62% white. Prince William was 58% in favor of Obama and 49% white. Obama mopped the floor in closer in suburbs of Fairfax, Alexandria and Arlington, reaching 60%, 72% and 72% of voters, respectively. These areas are highly educated, diverse and high income. Loudon has the highest income and largest share of white voters among Northern Virginia localities.

As education increases among white voters, the probability of voting for President Obama increases. If you are Black, you will likely vote for the President regardless of education. The farther south you go, the less educated white voters go heavily in favor of Republicans. If the President is to win Virginia, it is vital for him to hold onto his margin of victory in Fairfax, Henrico, and Cheseapeake, while holding his own in Virginia Beach and Chesterfield County. If voters perceive the local economy to be on the upswing, the election will lean to Obama. However, if Romney approaches 60% of voters in Chesterfield County, it may indicate the state is ripe for a republican takeover. If the President loses ground in both Chesterfield and Henrico, then look for Chesapeake and Virginia Beach to follow suit. If the southern local economies falter (or perceive to be faltering), residents may favor traditional republican ties.

http://www.cnn.com/ELECTION/2008/results/county/#VAP00map
http://projects.nytimes.com/census/2010/map