Thursday, September 30, 2010

The Old Man and the Oil Under the Cuban Sea

It takes a lot to keep a bootheel on the necks of every Cuban. That's one reason Fidel gets along without an oil industry. However, life in Cuba is getting tougher. Partly because life in those nations that have been Cuba's benefactors is getting tougher too. Especially Venezuela, where Chavez will soon begin to struggle over how to finance his failing socialist experiment.

Cuba needs oil but lacks the competence to find it. Moreover, the Cuban leaders trust no Cubans out on the open sea in boats that might sprint for the US. Hence, Fidel has tried to force his 11 million island prisoners to live an oil-free life. Too bad he and his comrades lack the expertise to convert Cuba's sugar crop into ethanol. But, that's what happens when the state spends everything on perpetuating itself.

Castro is 84, and his health is slipping. Thus, one of these days, he'll croak and his brother Raul will most likely liberalize the economy. Drilling for oil will hlep. But the lack of refineries in Cuba means the only way to convert oil into something useful is to sell it for cash and buy refined products which will power the antique vehicles that still provide most individual transportation. Then, if the state can buy enough diesel fuel, it can unhitch the mules from the city buses and once again use the engines to power them.

Cheap energy is essential to building a prospering economy. But it's not possible to produce and use cheap energy when dictatorships rule.

HOUSTON — Five months after the BP oil spill, a federal moratorium still prohibits new deepwater drilling in the American waters of the Gulf of Mexico. And under longstanding federal law, drilling is also banned near the coast of Florida.

Cuba currently produces little oil. But oil experts say the country might have reserves along its north coast as plentiful as that of the international oil middleweights, Ecuador and Colombia — enough to bolster its faltering economy and cut its dependence on Venezuela for its energy needs.

The advent of drilling in Cuban waters poses risks both to the island nation and the United States.

Ocean scientists warn that a well blowout similar to the BP disaster could send oil spewing onto Cuban beaches and then the Florida Keys in as little as three days. If the oil reached the Gulf Stream, a powerful ocean current that passes through the region, oil could flow up the coast to Miami and beyond.

The nascent oil industry in Cuba is far less prepared to handle a major spill than even the American industry was at the time of the BP spill. Cuba has neither the submarine robots needed to fix deepwater rig equipment nor the platforms available to begin drilling relief wells on short notice.

And marshaling help from American oil companies to fight a Cuban spill would be greatly complicated by the trade embargo on Cuba imposed by the United States government 48 years ago, according to industry officials. Under that embargo, American companies face severe restrictions on the business they can conduct with Cuba.

The prospect of an accident is emboldening American drilling companies, backed by some critics of the embargo, to seek permission from the United States government to participate in Cuba’s nascent industry, even if only to protect against an accident.

“This isn’t about ideology. It’s about oil spills,” said Lee Hunt, president of the International Association of Drilling Contractors, a trade group that is trying to broaden bilateral contacts to promote drilling safety. “Political attitudes have to change in order to protect the gulf.”

Any opening could provide a convenient wedge for big American oil companies that have quietly lobbied Congress for years to allow them to bid for oil and natural gas deposits in waters off Cuba. Representatives of Exxon Mobil and Valero Energy attended an energy conference on Cuba in Mexico City in 2006, where they met Cuban oil officials.

Right now, Cuba’s oil industry is served almost exclusively by non-American companies. Repsol, a Spanish oil company, has contracted with an Italian operator to build a rig in China that is scheduled to begin drilling several deepwater test wells next year. Other companies, from Norway, India, Malaysia, Venezuela, Vietnam and Brazil, have taken exploration leases.

New Mexico’s governor, Bill Richardson, a Democrat who regularly visits Cuba, said Cuba’s offshore drilling plans are a “potential inroad” for loosening the embargo. During a recent humanitarian trip to Cuba, he said, he bumped into a number of American drilling contractors — “all Republicans who could eventually convince the Congress to make the embargo flexible in this area of oil spills.”

“I think you will see the administration be more forward-moving after the election,” Mr. Richardson said.

Despite several requests in the last week, Cuban officials declined to make anyone available for an interview.

Currently, the United States, Mexico and Cuba are signatories to several international protocols in which they agreed to cooperate to contain any oil spill. In practice, there is little cooperation between Washington and Havana on oil matters, although American officials did hold low-level meetings with Cuban officials after the BP blowout.

“What is needed is for international oil companies in Cuba to have full access to U.S. technology and personnel in order to prevent and/or manage a blowout,” said Jorge Piñón, a former executive of BP and Amoco. Mr. Piñón, who fled Cuba as a child and now briefs American companies on Cuban oil prospects, said the two governments must create a plan for managing a spill.

Several American oil and oil service companies are eager to do business in Cuba, Mr. Piñón said, but they are careful not to identify themselves publicly because they want to “protect their brand image in South Florida,” where Cuban-Americans who support the embargo could boycott their gasoline stations and other products.

There are signs the Obama administration is aware of the safety issues. Shortly after the BP accident, the Office of Foreign Assets Control, the agency that regulates the embargo, said it would make licenses available to American service companies to provide oil spill prevention and containment support.

Charles Luoma-Overstreet, a State Department spokesman, said licenses would be granted on a “application-by-application basis,” but he would not comment on the criteria.

Mr. Piñón said it appeared that an American company could apply for a license before an emergency but that a license would be issued only after an accident had occurred. “We’re jumping up and down for clarification,” he said.

One group — Clean Caribbean & Americas, a Fort Lauderdale cooperative of several oil companies — has received licenses to send technical advisers, dispersants, containment booms and skimmers to Cuba since 2003. But it can only serve the member companies Repsol and Petrobras, not Cuba’s government.

Economic sanctions on Cuba have been in effect in one form or another since 1960, although the embargo has been loosened to allow the sale of agricultural goods and medicines and travel by Cuban-Americans to the island.

Mr. Hunt of the drillers’ group said that the association had sent a delegation to Cuba in late August and had held talks with government officials and Cupet, the Cuban national oil company.

He said that Cuban officials, including Tomás Benítez Hernández, the vice minister of basic industry, asked him to take a message back to the United States. “Senior officials told us they are going ahead with their deepwater drilling program, that they are utilizing every reliable non-U.S. source that they can for technology and information, but they would prefer to work directly with the United States in matters of safe drilling practices,” Mr. Hunt said.

Mr. Benítez became the acting minister last week when the minister of basic industry, the agency that oversees the oil industry, was fired for reasons still unclear.

Donald Van Nieuwenhuise, director of petroleum geoscience programs at the University of Houston, said that if an accident occurred in Cuban waters, Repsol or other companies could mobilize equipment from the North Sea, Brazil, Japan or China. But “a one-week delay could be disastrous,” he said, and it would be better for Havana, Washington and major oil companies to coordinate in advance.

Opponents of the Cuban regime warn that assisting the Cubans with their oil industry could help prop up Communist rule. Instead of making the drilling safer, some want to stop it altogether.

Senator Bill Nelson, Democrat of Florida, is urging President Obama to recall a diplomatic note to Havana reinforcing a 1977 boundary agreement that gives Cuba jurisdiction up to 45 miles from Florida. “I am sure you agree that we cannot allow Cuba to put at risk Florida’s major business and irreplaceable environment,” he wrote the president shortly after the BP accident.

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Monday, September 27, 2010

Castro's Useful Idiots

Weekend at Fidel's Jeffrey Goldberg is not the first American journalist to cuddle up to Castro.


At most marine parks in the world the animals provide the entertainment. But at the Havana aquarium last month, Fidel Castro had a couple of humans eating out of his hand and clapping like trained seals.

I refer here to the Atlantic Monthly's Jeffrey Goldberg, who traveled recently to Cuba at Castro's invitation with his friend Julia Sweig of the Council on Foreign Relations. Mr. Goldberg has posted a two-part report from his lengthy conversations with the dictator online for the magazine. One part includes details of a day at the aquarium, where Mr. Goldberg, accompanied by Ms. Sweig, seems to have experienced more than one "thrill going up [his] leg" in the presence of Fidel.

The reporter "hope[s] to be publishing a more comprehensive article about the subject in a forthcoming print edition of the Atlantic." I'm guessing that anyone who actually knows something about Castro's Cuba is not the target audience.

Castro again has an urgent need to put a smiley face on his dictatorship. The economy is in dire straits. Food is scarce, electricity is a rarity, and soap and toilet paper are luxuries. Cuba produces almost nothing and this makes it difficult to get hard currency—aka real money—which in turn makes it tough to buy from abroad. Lending sources have dried up.

If the regime is to stay in power, it needs a new source of income to pay the secret police and keep the masses in rice. The best bet is the American tourist, last seen circa 1950 exploiting the locals, according to revolutionary lore, but now needed by the regime. It wants the U.S. travel ban lifted. To prevail, Castro needs to counteract rumors that he is a dictator. Solution: a makeover in the Atlantic. In Mr. Goldberg, he no doubt recognized the perfect candidate for the job.

Fidel's step one was to tell Mr. Goldberg that he is outraged by anti-Semitism. "I don't think that anyone has been slandered more than the Jews," the old man proclaims to his guests. And by the way, Mahmoud Ahmadinejad should "stop picking on the Jews." When Mr. Goldberg asks whether Castro will tell the Iranian himself, Castro says, "I am saying this so you can communicate it." Translation: This should be the headline of your piece so that the American people will recognize my benevolence. Mr. Goldberg complied.

We are supposed to conclude that Cuba is no longer a threat to global stability and that Fidel is a reformed tyrant. But how believable is a guy whose revolution all but wiped out Cuba's tiny Jewish community of 15,000, and who spent the past 50 years supporting the terrorism of the Palestinian Liberation Organization, Syria, Libya and Iran? And how does Castro explain Venezuela, where Cuban intelligence agents run things, Iran is an ally and anti-Semitism has been state policy in recent years? Mr. Goldberg doesn't go there with Fidel.

It also is passing strange that we hear nothing from Mr. Goldberg about poor Alan Gross. Mr. Gross, a U.S. government contractor and a Jew, has been languishing in a Cuban prison since December. His crime: distributing computers to a handful of Cuban Jews who want to establish contact with the diaspora. Is that any way to show love for the Jewish people?

It never seems to cross Mr. Goldberg's mind that he is being used in a manner Communists first learned at Lenin's knee. Or perhaps he is happy to be useful. In a follow-up post he explains that since Fidel is not as bad as Pol Pot, Cubans should stop complaining. And to demonstrate further how little he knows about the plight of the Cuban people, he says that the "release" of political prisoners "is currently being negotiated." Wrong. Some have been exiled; some others may receive conditional parole meaning that they can be returned to prison at any time if the regime disapproves of their activities.

Mr. Goldberg is peddling his Castro interviews as serious journalism. But while he was "curious" to get a "glimpse of the great man," he was ill-prepared for the job. Presumably he knew this, which is why he allowed Ms. Sweig to lead him around Havana by the nose.

This set him up for failure because Ms. Sweig—an academic with easy access to the island while critics are banned—is a trusted friend of the dictatorship. "Fidel greeted Julia warmly; they have known each other for more than twenty years," Mr. Goldberg reports.

When Castro declares that the Cuban model no longer works, Mr. Goldberg turns to Ms. Sweig, as if there is something profound to be grasped. He is not saying "the ideas of the Revolution" have failed, she explains, but only that the state "has much too big a role" in the economy. Right, except that the state-owned economy is the idea of the revolution.

It is hardly surprising, then, that what we get from this interview is warmed-over Barbara Walters, another whose heart went pitter patter when she got close to the Cuban despot. This encounter also produced nothing of substance.

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Saturday, September 25, 2010

Oil Panic of 2008? Who Remembers?

Soon the summer of 2008, when the price of oil hit $147 a barrel, will be forgotten. Just like the two points in the 1990s when oil was selling for $10 a barrel. How about Y2K? When the clocks ticked in the the new year, the year that was supposed to send the world's computers into chaos and confusion, the first day of that year began, as most do, bright and sunny. Just another day on Planet Earth.

We're going to burn oil until there's none left to burn. Meanwhile, over time, energy technology will advance and we will get more and more of our supplies from the sun, the wind, coal and nuclear. There's no mystery about these things. But fear, panic, complacency and arrogance will always cycle through the pricing of oil.

What Happened to $150 a Barrel Oil?

With the reporting of financial markets, there is only one truth: First price, then news. When oil exploded through $100.00 and raced up towards $150.00 in 2008, then and only then, did stories about peak oil erupt all over the web. People took note and some began to prepare for the end of the world as we know it. Solar and wind power farms gained massive and rapid funding. Individuals loaded up storage facilities with canned goods and toilet paper. Panic ensued at the pump. And for a time, automobiles the size of a barbecue grills were seen puttering along the road, careful to avoid being smashed by the army of SUVs.

First price. Then news. Then extreme reactions. Now with oil hovering near $75.00 a barrel, there is nary a trickle about the coming world's demise. In fact, the energy markets are downright quiet and boring these days. And there is plenty of toilet paper in stock at stores all over the world -- no need to hoard the stuff. What gives and how to play this "quiet news?"

Oil prices have been quietly falling lower, much to the chagrin of those who have been longing to say, "I told you so." What's happening? Take a look around and you will note that economic growth is currently a tepid beast without much of an appetite for all things energy. As a result, oil supply is comfortably outpacing demand. Inflation concerns are also on the quiet side. When inflation is a concern, nature's "black gold" will rise as money flees into tangible investments. During inflationary times, cash is trash as inflation reeks havoc on the buying power of fiat currency. But for now, that is not a huge concern and oil prices are trending lower.

There are four main energy related ETFs that I like to use in my own trading. For oil, the best bet is the United States Oil Fund and for natural gas, the United States Natural Gas Fund. These are good for faster markets that are trending nicely. However, when things get slow, as they are now, I like to get a little more bang for my buck. In this case, I will look at the either the PowerShares DB Crude Oil Double Long ETN or the PowerShares DB Crude Oil Dble Short ETN. Since oil prices are currently headed lower and are not showing any signs of strength, I like the double short DTO as a way to participate in any continued downward price movement.

When playing a leveraged ETF, it is important to understand that these instruments can move fast. Traders and investors must use appropriate risk/reward parameters. I typically like to take a position and trail a stop once per week, using the low of the weekly bar. In this case, by purchasing DTO (which rises as the price of oil falls) I can lock in gains each week that oil is moving lower, getting stopped out of my position only when oil has decided to reverse itself. This way, I do not have to know how low oil will go. I can simply participate in its decline for as long as it falls.

If I am able to close out this trade profitably, I can use the money to load up a storage shed full of survival gear. In the event the end of the world does come to pass, at least my neighbor will not have the satisfaction of saying, "See, I told you so."

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Friday, September 24, 2010

Buffett Bets on America

Warren Buffett cuts to the heart of the matter. Despite current troubles, he's sure the economy is heading for a recovery, and no doubt he's right. However, it's too bad for America that Obama is the president in charge during these rough times.

Buffett to taxpayers: Get over your anger

Bloomberg News

Taxpayer anger against President Barack Obama and Congress is counterproductive because policy makers took measures including deficit spending to stimulate the economy, billionaire investor Warren Buffett told CNBC.

“Sentiment has turned very sour in the last three or four or five months,” the chairman and CEO of Omaha-based Berkshire Hathaway Inc. said in an interview broadcast Thursday.

“I hope we get over it pretty soon, because it’s not productive,’’ Buffett said. “We will come back regardless of how people feel about Washington, but it is not helpful to have people as unhappy as they are about what’s going on in Washington.”

More than three-quarters of U.S. investors view Obama as anti-business and are pessimistic about his policies, a Bloomberg survey this month indicated.

The U.S. unemployment rate is 9.6 percent, even after an $814 billion stimulus measure enacted last year and other government actions.

The Federal Reserve has kept the benchmark overnight lending rate target close to zero and said this week that it was prepared to ease policy further.

“The truth is we’re running a federal deficit that’s 9 percent of gross domestic product,” Buffett said. “That’s stimulative as all get out. It’s more stimulative than any policy we’ve followed since World War II.”

Buffett also said that the economy remains in a recession, by his definition, because most people and businesses still aren’t doing as well as they were before the financial crisis.

Buffett’s assessment of the economy contradicts the view of experts who announced this week that the recession officially ended in June 2009.

Buffett said he uses a common sense standard to evaluate the economy. Buffett gets insight into the health of the economy through the performance of Berkshire’s many subsidiaries.

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GM Stock Offering -- No Longer a Big Deal. Now a Compact

Does the government really believe the market value of a Large Cap stock is as easy to manipulate as the shares of a Micro-Cap issue in the hands of a Pump-and-Dump brokerage? Or has it dawned on the Obama team that GM is miles away from producing the metrics that are needed to push the stock to the $134-per-share breakeven price the government is sweating for?

U.S. Is Said to Rein in G.M. Stock Offering


September 23, 2010

DETROIT — The initial public stock offering by General Motors will be smaller than previously suggested, and the federal government will most likely sell a relatively small portion of its 61 percent stake in the company, according to people with knowledge of the preparations.

To fetch the highest possible price for the government, G.M. is planning an overall offering of stock valued at $8 billion to $10 billion, which is lower than previous internal targets, according to the people, who spoke on the condition of anonymity because of restrictions on public comments before an offering.

Earlier, there were suggestions the stock offering could rival the largest in United States history, when the credit card giant Visa raised more than $19 billion in 2008. G.M. and its bankers had been pushing for the largest possible offering because that would mean higher fees for the bankers and a larger pool of investors for G.M.

But the Treasury Department has made it clear to G.M. and its underwriters that the government is more interested in setting the highest price possible for the stock rather than maximizing the size of the offering. While both G.M. and the Treasury still hope to reduce the government’s stake in the company to less than 50 percent and rid the company of its Government Motors nickname, that goal may not be met, one of the people said.

The market for initial public offerings has been weak this year, causing concern by Treasury officials that the G.M. stock sale would struggle if it were too large.

Auto analysts are increasingly projecting that G.M. shares could be priced high enough for the government eventually to get back most or all of its remaining $43 billion investment in the automaker. But everyone agrees that will take years.

The offering, which is expected as early as November, will set a benchmark for the stock’s value.

In order to recover all of the government’s investment, the Treasury would have to sell its 304 million shares at an average price of $133.78 a share, before any splits, according to Neil M. Barofsky, the special inspector general for the Troubled Assets Relief Program of the Treasury.

Mr. Barofsky cited that figure in a letter last month to Senator Charles E. Grassley, Republican of Iowa, who asked Mr. Barofsky to audit the stock sale.

In the letter, Mr. Barofsky pledged to review G.M.’s stock offering after its approval by federal regulators to ensure that it produced “the highest return for the American taxpayers.”

The price cited by Mr. Barofsky might not be unrealistic, said David Whiston, an automotive equity analyst with Morningstar in Chicago. Mr. Whiston said on Thursday that a G.M. share could be worth $134, though he believed it would sell for less than that.

He said that G.M., after last year’s government-sponsored bankruptcy, had made changes that would help it thrive as demand for new vehicles recovers from today’s levels, which most industry experts consider to be unsustainably low.

“It really is a new G.M.,” Mr. Whiston said. “The cynics of this deal, I don’t think they really understand the billions of cost savings that G.M. has made.”

G.M.’s stock peaked in April 2000 at $94.63 a share.

Although President Obama has said he wants the government to divest as quickly as practical, the Treasury is expected to sell off its interest over at least two to three years. That would allow it to take advantage of increases in the value of its shares, assuming G.M. operates profitably.

“If G.M. continues to improve and the industry continues to improve, they have a shot at getting it all back,” said Michael Ward, an analyst with Soleil Securities.

There is considerable interest about the G.M. offering among potential investors, and the sale is likely to do well, Mr. Ward told members of the Society of Automotive Analysts on Thursday in Southfield, Mich.

“Wall Street is going to be in love with General Motors,” he said.

The size and the price of the stock offering have not yet been decided, the people with knowledge of the preparations said. But the Treasury intends to reserve a large portion of the stock for retail investors.

As part of that push, G.M. intends to split the stock so that it is priced about $20 to $25 a share, these people said.

The Treasury has also declined to set specific limits on where the stock will be sold and to whom. In a statement last week, the Treasury said it expected the bulk of the stock to be sold in North America.

The government would not expressly restrict sales to foreign buyers, these people said, but they added that acquisitions by foreign investors would be limited.

In a related matter, G.M. filed an amended version of the registration paperwork for its offering with the Securities and Exchange Commission on Thursday, but it did not reveal details.

The filing included a letter to the Treasury in which company executives committed to using “commercially reasonable best efforts” to manufacture at least 1.6 million vehicles in the United States this year and an increased number in each of the next four years.

The figures are 90 percent of what G.M. had previously agreed to produce under its loan agreements with the Treasury.

The letter also says that AmeriCredit, a subprime financing company that G.M. is buying, plans to sell its private plane in accordance with restrictions placed on companies that received aid from the Treasury’s bailout program.

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Thursday, September 23, 2010

General Electric gets Specific

It's troubling enough that America is mismanaging energy. But things are far worse in other parts of the world, mainly among the poorest nations. Cheap, available energy is a key element for lifting nations out of poverty. Without cheap and abundant energy, the poor will burn every piece of wood that can be found. Deforestation is the result.

Despite having enormous oil wealth, Nigeria has an extreme poverty problem. About half its population of 155 million live in homes without electricity. Almost as many as still waiting for indoor plumbing.

Cheap energy changes everything for the better. But even though Nigeria has the oil wealth to pay the bills, the country remains a poverty-stricken backwater. What's the answer? The same as here in the US -- better and more responsive government.

GE CEO Says U.S. Is Falling Behind in Energy

General Electric Co. Chief Executive Jeff Immelt said the lack of a U.S. energy policy and the "stupid" current structure of the industry are causing the nation to fall behind in new energy fields.

In sharply worded comments at an energy event in Washington on Thursday, Mr. Immelt praised China's energy policy and criticized the U.S.'s stalled energy reforms.

"The rest of the world is moving 10 times faster than we are," said Mr. Immelt in a speech at the Gridwise Global Forum. "That is going to mean fewer jobs, less energy security and a lot of other things."

The head of the Fairfield, Conn., conglomerate said China is moving faster to develop clean technologies such as nuclear power, electric vehicles and wind power than the U.S. He also said China has the right mix of a big local market, innovation in technology, a low-cost supply chain and national policy support. The country's State Grid utility, he said, is larger than nearly all U.S. utilities combined.

"This [the U.S.] is a great country," he said. "But, you know, we have to have an energy policy. This is just stupid what we have today."

Power generation, including wind and gas turbines, generators and nuclear energy, is a big business for GE, which also sells products aimed at making energy use more efficient.

Mr. Immelt criticized the current energy regulatory system in the U.S.—split between federal and state authorities—as "a relic of 1860 or something" and said "it has fundamentally no basis in the modern world." He said countries such as Canada, Australia and China have much simpler regulatory structures for energy and are moving more quickly.

The U.S. must decide, he said, if it is serious about updating the 100-year-old "antiquated grid" and whether the much-talked-about "smart grid" is "a hobby shop or a real business."

Mr. Immelt repeatedly talked about the nuclear power industry and how the U.S. has failed to maintain and expand its nuclear industry. "There should be a nuclear renaissance in this country," he said. "The nuclear industry is here because government supported it in the United States. This notion that government is not a catalyst in this industry has no basis in fact."

He joked that the U.S. nuclear industry's "most important output these days is press releases." He said most Americans probably don't realize the U.S. is building only one nuclear power plant, and at a slow pace, while the rest of the world is building nearly 50.

Mr. Immelt also said most Americans don't realize how slowly the U.S. is moving on electric vehicles, clean coal plants and other technologies. "That's kind of the state of play," he said.

Circumstances outside Americans' control could easily send oil back to $150 a barrel, the CEO said. "We would have done nothing in the last three years to prepare ourselves for this."

Mr. Immelt said GE in the past aimed to produce only the "quality, expensive, high end" products to sell around the world, but that strategy is changing in nearly every product, from wind turbines to health scanners for sale in rural and urban areas of both emerging and developed markets.

"Now, I want to occupy every corner of an industry. I want to have the value product all the way up to the high-end product," he said. "We don't want to give any space to a competitor" from places like China and India.

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Cuban Capitalism is Coming

Fidel can call it whatever he likes, but the word is capitalism. The Cuban dictator may not admit it, but capitalism is the force that puts food on the table, a roof over one's head and a little money in the bank. He can continue his failing experiment in Marxist madness till he dies. But after he's gone, the US is likely to end the embargo of Cuba and thereby start a capitalist revolution on the island. That might bring McDonalds to Havana, but it will also bring Cubans everything they've lived without for 50 years. For example, common US products such as house paint. And cars built after the 1950s.

Remarkably, Obama is positioned to defeat Cuban communism by simply declaring an end to the US embargo. By putting Cuba on the same footing as China, the Cuban government would crumble as American tourists and opportunists swarmed over the island, making it impossible for Castro to police the economic activities inside his national prison. Even though Obama has the opportunity to win a war with a pen rather than a sword, he is doing nothing.

Cuba Resets the Revolution

Cuba allows private enterprise, but on a very restricted scale.

September 18, 2010

For first-time visitors, one of the most striking things about Cuba is the lack of advertising on the landscape. The Socialist government has billboards bearing Fidel Castro’s likeness and his most quotable quotations. But one does not see roadside signs pitching much else.

Could the Cuba of the not-too-distant future feature signs touting “Joel’s Moving Company,” “Dayana’s Furniture Repair,” “Julio’s Boutique”?

Probably. And there will be other changes, bigger and more wrenching, if harder to see. On a scale not known for half a century, Cubans will be hiring other Cubans for small-scale enterprises, creating boss-employee relationships without the direct involvement of the Communist Party. The idea of receiving a paycheck whether one loafs, sleeps or shows up at all will be under a new challenge. And it is possible that creating a cadre of quasi-capitalists could unleash forces that the Castros or their successors will prove unable to control.

But is Cuba approaching a transformation of the kind that swept Russia and China? It is tempting to imagine so, if only because the news about a move to private employment seems so startling.

Nevertheless, experts on Cuba warn against reading any such far-reaching expectations into last week’s announcement, no matter how ambitious a task it seems to recondition Cubans for a system that will require some to sink or swim.

Yes, the Castro government is acknowledging a deep problem. But it has also always linked its core ideology to its fear and disdain of the United States and the American economic system. So its ferocious pursuit of independence from American economic influence — even as it denounces Washington’s embargo on trade — would make a radical shift to joining the global free-trade system that the United States dominates particularly difficult to explain.

A Cuban sociologist, Haroldo Dilla, predicts that in the end the new system will not enable Cubans to rise too far out of poverty, and that the government will resist a true economic opening with the world.

Which is not to say that the leadership wants no change at all. Over the two decades since Communism collapsed in the Soviet Union, Cuban officials have visited Russia, Vietnam and China and undoubtedly have taken some lessons from each. President Raúl Castro has made it plain that he views Mikhail Gorbachev’s efforts to reinvigorate the Soviet political system, which led to Communism’s collapse, as a cautionary tale. The mix of consumerism and authoritarianism that one finds in Vietnam and China is presumably a more palatable model — privatization, but with the state in firm control.

Still, the plan announced so far is much more modest than what the Asian countries have done. Instead, it seems designed simply to boost Cuba’s economic productivity in small-scale enterprises and thus loosen up a state-run economy and work force that have been sputtering for more than a decade. That goal is in line with what Raúl Castro himself said last month: “We have to erase forever the notion that Cuba is the only country in the world where one can live without working.”

The announcement of layoffs also does not represent the first time that Cuba has experimented with privatization. A host of small-scale occupations is already allowed on the island, including pizza deliverymen and party clowns. And Cubans can, if they jump through enough bureaucratic hoops, open restaurants in their homes or house guests in spare bedrooms.

It would be far more difficult for either Fidel or Raúl Castro to emulate their neighbors in the Caribbean, without challenging the basic precepts of the Cuban revolution. For decades now, many of those countries have been taking advantage of their ties to the West and the United States to diversify their economies. Cuba, instead, continued to rely on one export commodity — sugar — which the Soviet Union bought at subsidized prices. Only relatively recently has it invited some European partners for joint ventures; for example, in tourism.

But a broad opening to new manufacturing, for example, would be different. That would presumably mean welcoming an influx of private capital from abroad to produce export goods on Cuban soil. It would also probably require normalizing trade and diplomatic relations with the world’s biggest consumer market, the United States. And it might even invite efforts to return to Cuba by exiles who still have claims on industrial enterprises they left — or were forced to leave — as enemies of the revolution.

What’s more, in China and Vietnam the path toward a modern economy was carefully coordinated with a series of steps toward normalization of relations with the United States. Could Cuba’s new economic strategy be a signal of readiness for such a package? That would be difficult to say this early. Some Cuba-watchers suggest that a mass release of political prisoners from Cuban jails in recent months is such a signal. But the history of Cuban-American communication since 1958 is rife with the misreading of oblique signals, even if the prisoner release qualifies as one.

Of course, Cuba and the United States are more linked than government officials in both capitals like to admit — through family bonds, for example.

“If fully carried out, a major expansion of Cuba’s private sector will benefit many thousands of Cuban families and give Cuban-Americans opportunities through remittances to help relatives in Cuba who will be working on their own,” Philip Peters, who follows economic matters in Cuba for the security- and free-market-oriented Lexington Institute in Arlington, Va., wrote in a post on his blog, the Cuban Triangle, on Thursday.

Ted Henken, a professor at Baruch College who studies private enterprise in Cuba, epitomizes the ambivalence with which prudent Cuba-watchers are assessing the latest news. He said he was thrilled by it, but was hedging his bets on how transformative the change would be.

“This is the beginning of what we’ve all been waiting for,” he said. “It’s a major change in the way the Cuban economic system will work. It will be felt by every Cuban.” But, he added, “they still want to maintain state control. We’ll see how this plays out.”

The real test of Cuba’s latest experiment will be in how it is implemented and whether work will have a correlation with wealth, Professor Henken and other experts said. Under previous privatization campaigns, he said, “people were so hobbled by regulations that self-employment was rife with illegality and corruption because that’s the only way people could make their businesses float.”

They also had to keep wary, as all Cubans do, of the secret police, given the regime’s attitude toward private property and enterprise in general. Yoani Sánchez, a dissident Cuban blogger, cited this when she wrote the other day: “Under the strict canons of the socialist economy — planned, centralized and subsidized — self-employment has always been seen as an undesirable species of pest that periodically needs to be abated and occasionally even exterminated.”

The result has been the development of a singularly Cuban style of being enterprising — somewhere between furtive and legitimate, with the real object being to simply get along. Ms. Sánchez described one man who runs a restaurant in his house and had outlawed items on his menu. He tried to persuade his daughter to marry a top chef, the blogger wrote, to get around a rule that employees must be family members.

Earlier this month, when Jeffrey Goldberg interviewed Fidel Castro for The Atlantic magazine, one comment — hinting that the Cuban system wasn’t working for Cubans any more — drew the most attention. The former president later said that he had been misinterpreted, but within days came the announcement of the layoffs and the opening toward private employment.

Still, none of the power brokers in Cuba were calling this capitalism, and most close observers don’t expect them to use that word, whatever other changes unfold. “Overhauling their model does not necessarily mean they are importing ours,” was the way Julia Sweig, a Cuba expert at the Council on Foreign Relations who was at the interview, interpreted Mr. Castro’s comments.

Which brings us back to the matter of public relations, and those billboards: Even their presence could raise issues that Cuba’s economic planners probably have not fully thought through: Is a billboard company legal in the new Cuba? Would residents living along highways be able to rent out the land alongside their home for such advertising?

And, above all, could a privately run restaurant advertise that its rice and beans were better than those offered down the street by the state-run competition?

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Wednesday, September 22, 2010

Obama Bamboozles Taxpayers

Here it is. Being stupid, or simply looking stupid. That's a core element of hoodwinkery.

Obama Tricks Voters as Enron Hoodwinked Public: Amity Shlaes

By Amity Shlaes - Sep 21, 2010

The debate concerning the top tax rate for wealthier Americans is so difficult in part because most people only pretend to know the actual figure.

Sure, we all know Republicans want to keep the top rate at its current level while Democrats prefer to let the George W. Bush-era rate cuts expire. And some of us may even know that the tax code’s current 35 percent figure would rise to 39.6 percent if President Barack Obama gets his way.

Beyond that, we get hazy. And no wonder: other sections of the tax code combine with the statutory rate in mysterious ways, creating a different effective top marginal rate. These include, for example, phaseouts known as Pease and PEP, under which itemized deductions and personal exemptions fade. If you really want to capture the top taxpayer’s situation, you have to add state taxes into the mix. So what’s the exact top rate? Nobody knows. Or, maybe, nobody wants to know.

I asked the biggest, baddest tax mind I know, former Congressional Budget Office director Douglas Holtz-Eakin, to tell what he thinks the top tax is. Even Holtz-Eakin approximated, texting back a formula that might serve as the theme song for tax year 2011: “39.6 + 2 (phaseout of pep and pease) + 3.8 (Medicare net investment income tax) = 45.4. Add in state-level taxes and 50 is easy to reach.”

Holtz-Eakin is a genius. If he’s approximating, it’s because he can’t bear to feel the pain of the precise reality.

Illusion of Fairness

So how did we get here? Politicians love progressive rate structures. First, they appear to be fair. We’ve all heard President Obama invoking fairness in defense of the 39.6 rate he seeks. A second, greater advantage of progressive rates is their complexity. The staircase concept of rates rising on successive income tranches is hard enough. Add in all the traps and breaks and taxpayers become truly confused and give up protesting.

What’s at work here is the same phenomenon that caused otherwise sentient members of Enron’s audit committee to go along with executives Andrew Fastow and Jeff Skilling: fear of looking stupid. Given a choice between seeming like dummies or paying more money than they think they should, people often choose the latter.

For the first quarter century or so of its existence, lawmakers didn’t dare impose the income tax on the average earner. Only when World War II broke out did this class tax become a mass tax. And then two extra tricks were necessary for the transition. First, many taxpayers were hardly in a position to resist a shift in the code since they were already government captives: draftees. Second, withholding was introduced. Soldiers never knew how much they were taxed because part of their income never even made it into their pockets.

Selling the Structure

After the war, the feds found new ways to justify and complicate our tax system. They marketed progressivity as a necessity for the nation’s general welfare. The very name itself helped. Many people don’t want to oppose political progressives, so they go along with the idea of a progressive tax structure. Even those who reject progressive politics may not want to be caught opposing something that sounds like progress. The progressivity brand was so successful that government was able to keep the top rate at more than 70 percent for decades.

But did postwar Americans really endorse, or even understand, that progressive principle? This was less clear. Two skeptics were Harry Kalven and Walter Blum of the University of Chicago. They set out to make the case for progressivity but found the argument so weak they titled their 1953 book “The Uneasy Case for Progressive Taxation.”

Taxing Experiment

In the 1990s, scholars designed an experiment to see whether people understood the difference between progressive structures, under which rates go up as people earn more, and proportional ones, under which higher earners pay taxes at the same rate as lower earners.

Michael Roberts, Cassie Bradley and Peggy Hite asked college students abstract questions: “Are progressive tax rates more or less fair than flat tax rates?” By a margin of almost 4 to 1, students said they preferred a progressive rate system for society. Next the researchers gave the same students concrete examples of a paired set of two earners with different salaries and possible tax bills for those earners, asking which tax amount the earners should pay. By a margin of 4 to 1, the same students picked tax amounts for the higher earner that corresponded to a flat rate, or even a regressive, system. Remarkably, these subjects were accounting students who had already studied these various systems.

The point isn’t that taxpayers are stupid. Rather, they are stupefied and conflicted. On a gut level, they may not necessarily agree with the basic principle of modern taxation. “Overall, our results indicate the existence of a norm for proportionality…” concluded Roberts, Bradley and Hite. Lawmakers may want to drag the country into a new higher tax era. But they shouldn’t console themselves that there’s consensus for such a change, when there may not be.

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Obama -- Still Getting it Wrong

When it comes to reinvigorating the economy, Obama says spend more. When it comes to winning wars, Obama says send fewer troops. He seem unable to decide if he wants to actually reach the right goals or simply appear to be trying. In both cases, he's going in the wrong direction.

Bob Woodward book details Obama battles with advisers over exit plan for Afghan war

By Steve Luxenberg
Washington Post Staff Writer
Wednesday, September 22, 2010

President Obama urgently looked for a way out of the war in Afghanistan last year, repeatedly pressing his top military advisers for an exit plan that they never gave him, according to secret meeting notes and documents cited in a new book by journalist Bob Woodward.

Frustrated with his military commanders for consistently offering only options that required significantly more troops, Obama finally crafted his own strategy, dictating a classified six-page "terms sheet" that sought to limit U.S. involvement, Woodward reports in "Obama's Wars," to be released on Monday.

According to Woodward's meeting-by-meeting, memo-by-memo account of the 2009 Afghan strategy review, the president avoided talk of victory as he described his objectives.

"This needs to be a plan about how we're going to hand it off and get out of Afghanistan," Obama is quoted as telling White House aides as he laid out his reasons for adding 30,000 troops in a short-term escalation. "Everything we're doing has to be focused on how we're going to get to the point where we can reduce our footprint. It's in our national security interest. There cannot be any wiggle room."

Obama rejected the military's request for 40,000 troops as part of an expansive mission that had no foreseeable end. "I'm not doing 10 years," he told Secretary of Defense Robert M. Gates and Secretary of State Hillary Rodham Clinton at a meeting on Oct. 26, 2009. "I'm not doing long-term nation-building. I am not spending a trillion dollars."

Woodward's book portrays Obama and the White House as barraged by warnings about the threat of terrorist attacks on U.S. soil and confronted with the difficulty in preventing them. During an interview with Woodward in July, the president said, "We can absorb a terrorist attack. We'll do everything we can to prevent it, but even a 9/11, even the biggest attack ever . . . we absorbed it and we are stronger."

But most of the book centers on the strategy review, and the dissension, distrust and infighting that consumed Obama's national security team as it was locked in a fierce and emotional struggle over the direction, goals, timetable, troop levels and the chances of success for a war that is almost certain to be one of the defining events of this presidency.

Obama is shown at odds with his uniformed military commanders, particularly Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, and Gen. David H. Petraeus, head of U.S. Central Command during the 2009 strategy review and now the top U.S. and NATO commander in Afghanistan.

Woodward reveals their conflicts through detailed accounts of two dozen closed-door secret strategy sessions and nearly 40 private conversations between Obama and Cabinet officers, key aides and intelligence officials.

Tensions often turned personal. National security adviser James L. Jones privately referred to Obama's political aides as "the water bugs," the "Politburo," the "Mafia," or the "campaign set." Petraeus, who felt shut out by the new administration, told an aide that he considered the president's senior adviser David Axelrod to be "a complete spin doctor."

During a flight in May, after a glass of wine, Petraeus told his own staffers that the administration was "[expletive] with the wrong guy." Gates was tempted to walk out of an Oval Office meeting after being offended by comments made by deputy national security adviser Thomas E. Donilon about a general not named in the book.

Suspicion lingered among some from the 2008 presidential campaign as well. When Obama floated the idea of naming Clinton to a high-profile post, Axelrod asked him, "How could you trust Hillary?"

'Can't afford any mistakes'

"Obama's Wars" marks the 16th book by Woodward, 67, a Washington Post associate editor. Woodward's reporting with Carl Bernstein on the Watergate coverup in the early 1970s led to their bestselling book "All the President's Men."

Among the book's other disclosures:

-- Obama told Woodward in the July interview that he didn't think about the Afghan war in the "classic" terms of the United States winning or losing. "I think about it more in terms of: Do you successfully prosecute a strategy that results in the country being stronger rather than weaker at the end?" he said.

-- The CIA created, controls and pays for a clandestine 3,000-man paramilitary army of local Afghans, known as Counterterrorism Pursuit Teams. Woodward describes these teams as elite, well-trained units that conduct highly sensitive covert operations into Pakistan as part of a stepped-up campaign against al-Qaeda and Afghan Taliban havens there.

-- Obama has kept in place or expanded 14 intelligence orders, known as findings, issued by his predecessor, George W. Bush. The orders provide the legal basis for the CIA's worldwide covert operations.

-- A new capability developed by the National Security Agency has dramatically increased the speed at which intercepted communications can be turned around into useful information for intelligence analysts and covert operators. "They talk, we listen. They move, we observe. Given the opportunity, we react operationally," then-Director of National Intelligence Mike McConnell explained to Obama at a briefing two days after he was elected president.

-- A classified exercise in May showed that the government was woefully unprepared to deal with a nuclear terrorist attack in the United States. The scenario involved the detonation of a small, crude nuclear weapon in Indianapolis and the simultaneous threat of a second blast in Los Angeles. Obama, in the interview with Woodward, called a nuclear attack here "a potential game changer." He said: "When I go down the list of things I have to worry about all the time, that is at the top, because that's one where you can't afford any mistakes."

-- Afghan President Hamid Karzai was diagnosed as manic depressive, according to U.S. intelligence reports. "He's on his meds, he's off his meds," Woodward quotes U.S. Ambassador Karl W. Eikenberry as saying.

'The cancer is in Pakistan'

Obama campaigned on a promise to extract U.S. forces from Iraq and focus on Afghanistan and Pakistan, which he described as the greater threat to American security. At McConnell's top-secret briefing for Obama, the intelligence chief told the president-elect that Pakistan is a dishonest partner, unwilling or unable to stop elements of the Pakistani intelligence service from giving clandestine aid, weapons and money to the Afghan Taliban, Woodward writes.

By the end of the 2009 strategy review, Woodward reports, Obama concluded that no mission in Afghanistan could be successful without attacking the al-Qaeda and Afghan Taliban havens operating with impunity in Pakistan's remote tribal regions.

"We need to make clear to people that the cancer is in Pakistan," Obama is quoted as saying at an Oval Office meeting on Nov. 25, 2009. Creating a more secure Afghanistan is imperative, the president said, "so the cancer doesn't spread" there.

The war in Iraq draws no attention in the book, except as a reference point for considering and developing a new Afghanistan strategy. The book's title, "Obama's Wars," appears to refer to the conflict in Afghanistan and the conflicts among the president's national security team.

An older war - the Vietnam conflict - does figure prominently in the minds of Obama and his advisers. When Vice President Biden rushed to the White House on a Sunday morning to make one last appeal for a narrowly defined mission, he warned Obama that a major escalation would mean "we're locked into Vietnam."

Obama kept asking for "an exit plan" to go along with any further troop commitment, and is shown growing increasingly frustrated with the military hierarchy for not providing one. At one strategy session, the president waved a memo from the Office of Management and Budget, which put a price tag of $889 billion over 10 years on the military's open-ended approach.

In the end, Obama essentially designed his own strategy for the 30,000 troops, which some aides considered a compromise between the military command's request for 40,000 and Biden's relentless efforts to limit the escalation to 20,000 as part of a "hybrid option" that he had developed with Gen. James E. Cartwright, the vice chairman of the Joint Chiefs of Staff.

In a dramatic scene at the White House on Sunday, Nov. 29, 2009, Obama summoned the national security team to outline his decision and distribute his six-page terms sheet. He went around the room, one by one, asking each participant whether he or she had any objections - to "say so now," Woodward reports.

The document - a copy of which is reprinted in the book - took the unusual step of stating, along with the strategy's objectives, what the military was not supposed to do. The president went into detail, according to Woodward, to make sure that the military wouldn't attempt to expand the mission.

After Obama informed the military of his decision, Woodward writes, the Pentagon kept trying to reopen the decision, peppering the White House with new questions. Obama, in exasperation, reacted by asking, "Why do we keep having these meetings?"

Along with Gen. Stanley A. McChrystal, the top U.S. commander in Afghanistan at the time, they kept pushing for their 40,000-troop option as part of a broad counterinsurgency plan along the lines of what Petraeus had developed for Iraq.

The president is quoted as telling Mullen, Petraeus and Gates: "In 2010, we will not be having a conversation about how to do more. I will not want to hear, 'We're doing fine, Mr. President, but we'd be better if we just do more.' We're not going to be having a conversation about how to change [the mission] . . . unless we're talking about how to draw down faster than anticipated in 2011."

Petraeus took Obama's decision as a personal repudiation, Woodward writes. Petraeus continued to believe that a "protect-the-Afghan-people" counterinsurgency was the best plan. When the president tapped Petraeus this year to replace McChrystal as the head of U.S. and NATO forces in Afghanistan, Petraeus found himself in charge of making Obama's more limited strategy a success.

Woodward quotes Petraeus as saying, "You have to recognize also that I don't think you win this war. I think you keep fighting. It's a little bit like Iraq, actually. . . . Yes, there has been enormous progress in Iraq. But there are still horrific attacks in Iraq, and you have to stay vigilant. You have to stay after it. This is the kind of fight we're in for the rest of our lives and probably our kids' lives."

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Sunday, September 19, 2010

The New GM -- Made in China, Owned by China

Whe GM brings its stock to market, will the shares be hot? No. The company has got a lot of work to do before investors have something to get excited about.

Government could seek foreign investors for GM

DETROIT – Investment bankers handling the upcoming General Motors Co. stock sale are expected to court foreign investors as well as those in North America, according to a U.S. Treasury Department statement.

GM and the Treasury Department would not comment Sunday on reports that the automaker is in talks with its current partner in China, SAIC, about buying a stake in the Detroit company. SAIC is owned by the Chinese government.

The Treasury Department, in a statement issued late Friday, said investors in GM would be sought across "multiple geographies," with a focus on North America.

The U.S. Treasury loaned GM about $50 billion to help it through bankruptcy protection last year. GM has repaid $6.7 billion. The rest of the bailout money was converted to a 61 percent government stake in the company.

The government hopes to get the remaining $43 billion back with stock sales that could start in mid-November.

Foreign investment in U.S. automakers and other companies is common. Before the stock sale, GM will put on a two-week "road show" of presentations for investors, and several stops are expected to be in cities outside the U.S.

The Treasury statement also said banks underwriting the GM stock sale will be expected to balance getting the maximum price per share and return for taxpayers with having a stable base of shareholders and keeping up interest in several sales that will occur after the initial public offering.

Individual investors will get "ample opportunity" to buy GM shares, but institutional investors such as mutual funds, hedge funds and pension funds will be sought out, the statement said.

"We expect that a large and diverse group of institutional investors will be offered an opportunity to participate, with no single investor or group of investors receiving a disproportionate share or unusual treatment," the statement said.

The government will make ensure general guidelines are followed in the sale "but will not involve itself in decisions regarding allocation of shares to specific buyers," the statement said.

Last week, new GM CEO Daniel Akerson said it will take a couple years for the government to get its money back, but GM has a goal of returning the cash.

Akerson, a former telecommunications industry executive who took over from Ed Whitacre Sept. 1, said the government bailout saved a lot of jobs at GM and helped to preserve the U.S. manufacturing base.

The bailout has bred resentment with some car buyers and hurt GM's sales, however. The automaker hopes the stock sale will end its government ownership and raise money for investment and to reduce debt.

GM filed paperwork in August starting the process to sell stock to the public.

Akerson indicated that it would take consistent earnings from GM and several stock sales before the money is returned.

President Obama also has said all taxpayer money will be returned, but spokesmen later said he meant the money his administration pumped into GM, not bailouts made by the Bush Administration.

GM made $2.2 billion in the first half of the year, a strong sign to investors that it is much leaner and healthier than it was before bankruptcy, when it was losing billions.

The company will not sell any shares of common stock, leaving that to the government and its three other shareholders. But it plans to sell preferred stock, which pays a dividend and will be converted to common shares in 2013.

Chrysler's top executive, CEO Sergio Marchionne, said last week he expects Chrysler's IPO to take place in the second half of next year. Chrysler got $12.5 billion in bailout money from the government in exchange for $7.1 billion in loans and a 9.9 percent ownership stake.

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Saturday, September 18, 2010

GM Cruze -- Built to Lose

GM is "testing" another electric vehicle. This time, in South Korea. In other words, a place far from US automotive journalists who will rarely get near this vehicle. The Cruze will serve as a useful PR tool until it's no longer necessary to pretend that electric cars are about to arrive.

The Cruze experiment will continue until its safe for GM to say that electric-car batteries are still years from commercial viability.Then, the Cruze experiment can shift to the back burner where it will stay until our next Einstein has the flash of insight that leads to the development of a battery that packs the energy density and recharge speed to make it a winner.

General Motors to test battery-powered models of its Cruze in South Korea

September 18, 2010

NEW YORK (AP) -- General Motors says it will launch a test fleet of electric cars in South Korea as it continues to develop battery-powered models of its Chevrolet Cruze.

The automaker will begin the project at the end of October. It is working with LG Electronics on the project.

The Cruze EV demo fleet will be GM's first compact sedan electric vehicles to hit the road and will be powered by batteries from LG Chemical and propulsion systems from LG Electronics.

The demo fleet in South Korea will consist of Chevrolet Cruzes and GM Daewoo Lacetti Premieres. GM currently markets the vehicle under the local brand in South Korea. The project is aimed at providing data on customer acceptance and battery range.

GM says there's no plan to sell an electric Cruze in the U.S.

By testing an all-electric Cruze that has no gas engine, it's clear that GM is developing a fully electric compact.

"There's no plan to put an electric Cruze in the U.S. market," spokesman Rob Peterson said. "As battery technology matures and that (charging) infrastructure increases as well, battery-electric vehicles could hold a great deal of potential."

GM executives have said repeatedly that the power system from the rechargeable electric Chevrolet Volt will be used in more models.

The Volt can go about 40 miles on battery power, and after that, a small gas engine kicks in to generate power for the car.

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Wednesday, September 15, 2010

Sun and Money

Solar-Panel Prices May Decline Less Than Expected

Sep 15, 2010

Prices for photovoltaic panels that convert sunlight into electricity may fall about 10 percent next year, less than analysts forecast, as European demand increases.

First-quarter prices will drop to an average of $1.65 a watt compared with $1.50 in the previous median estimate of five analysts surveyed by Bloomberg News. Analysts who contributed to the surveys included John Hardy at Gleacher & Co. in Connecticut and Sanjay Shrestha at Lazard Capital Markets.

This year, contracts may average $1.80 to $1.85 a watt, they forecast.

Prices have fallen for years as Chinese manufacturers such as Trina Solar Ltd. undercut European producers including Germany’s Solarworld AG. The forecast means $2.55 billion more in global revenue for manufacturers, based on expected sales of 17,000 megawatts of the devices. Sales may total $28 billion next year, calculations show, matching Exxon Mobil Corp.’s planned investment in oil and gas production in 2010.

“There will be price declines in the first half of 2011, though much less severe than last year given a healthier, globally diverse demand situation,” Hardy said in an interview.

That may increase the profit potential of the biggest low- cost producers, from Changzhou-based Trina Solar to First Solar Inc. of Tempe, Arizona, analysts said. Investors have begun to anticipate better earnings for some of the companies.

Shares Climb

Trina and Shanghai-based competitor JA Solar Holdings Co. have climbed 28 percent and 26 percent, respectively, in the last month, compared with the 7 percent gain of the 38-member Bloomberg Global Leaders Solar Index in the period. JA Solar rose 12 cents, or 1.6 percent, to $7.30 as of 12:17 p.m. today in Nasdaq Stock Market composite trading.

Developers have rushed to complete solar-energy projects ahead of planned declines in government incentives in Germany and Spain. At the same time, smaller markets expanded in France, the Czech Republic and the U.S. Increased orders will extend to 2011, when the analysts forecast sales to increase 20 percent.

Demand growth in Europe and North America will outpace higher production in Asia, Hardy and Shrestha said.

Evidence of currently reduced supply can be found in inventories and in some order terms.

Solar inventories fell 19 percent in the second quarter to 84 days and shipments “remained strong” in the third quarter, Hardy said.

Prepaid Contracts

JA Solar, a China-based manufacturer of solar cells and modules, last week agreed to supply 500 megawatts to customers in 2011 at undisclosed prices. The customers, who weren’t named, prepaid a portion of the contracts, JA Solar said.

“We’re a little surprised by the prepayments,” Paul Clegg at Mizuho Securities USA in New York, said in an interview. “That’s a bullish signal -- it indicates developers are concerned that shortages next year could drive prices higher.”

Spot prices for solar modules in Europe, of about $1.90 per watt, are trading higher than contract prices, indicating that demand continues to outstrip supply, said Dan Ries, an analyst at Collins Stewart in New York. That’s boosted sales from July to August at the six largest Taiwan-based cell makers, he said.

Concerns that sales in Germany, which accounts for about half the global market, will drop next year have faded as developers expand projects in France, Italy and North America.

“Demand in non-German markets appears to be much stronger than investor expectations,” Vishal Shah, an analyst at Barclays Capital in New York, said in a note to clients. “Activity in Germany has picked up over the last two weeks.”

Forecasts Tempered

Some analysts tempered their forecasts, saying that governments could change incentives and Asian factories can ramp up new production quickly.

France could set a cap on new solar installations next year that would limit growth in that market, and the Czech Republic can control solar costs and development through its licensing process, said Jenny Chase, head of solar research for Bloomberg New Energy Finance in Zurich.

“While European markets are stronger than we had thought, next year there continues to be a lot of uncertainty,” Chase said in an interview. “Chinese companies can add capacity very quickly to meet demand, which could push prices lower.”

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Tuesday, September 14, 2010

Derek Fenton, a Critic of islam -- NJ Transit Authority, just Hypocritical

Derek Fenton, an opponent of islam, a religion/political doctrine that enslaves women, forbids Freedom of Speech, forbids Freedom of Religion, opposes democracy, opposes plurality and despises capitalism, lost his job because of his public display. He lost his job because he disapproves of a death cult that aims to convert America into an islamic sharia state.

At the time he burned the Koran, he was dressed in a blue polo shirt, blue jeans and a baseball cap. Not a New Jersey Transit uniform. He was an anonymous citizen acting on his own beliefs. Yet the NJ Transit Authority fired him for his off-hours activities that were in no way connected to his employment or his employer. Seems extreme.

He committed no crime. Violated no law and brought no unwarranted criticism upon his employer. But he was fired. Does his firing mean the NJ Transit Authority favors islam? Does the NJ Transit Authority support the enslavement of women? Female genital mutilation? Marriage of pre-pubescent girls? Is the NJ Transit Authority opposed to Freedom of Religion? Opposed to Freedom of Speech? Seems that way.

People may approve or disapprove of the way he expressed his anti-islamic feelings, but he has the right to do what he did. In response, his employer went way overboard.

Koran burner Derek Fenton fired from his job at NJ Transit

BY Alison Gendar and Pete Donohue

Tuesday, September 14th 2010, 7:55 PM

A radical who burned pages from the Koran outside a planned mosque near Ground Zero was fired from his job at NJ Transit, sources and authorities confirmed.

Derek Fenton, an 11-year employee at NJ Transit, was fired Monday, the agency said in a statement, two days after he was photographed burning the Koran.

"Mr. Fenton's public actions violated New Jersey Transit's code of ethics," NJ Transit said.

"NJ Transit concluded that Mr. Fenton violated his trust as a state employee and therefore was dismissed."

Fenton's hate-filled display occurred during a protest against the mosque on the ninth anniversary of Sept. 11.

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Cuba: The Bill for the Free Lunch has Arrived

Cuba’s Public-Sector Layoffs Signal Major Shift

September 13, 2010

MEXICO CITY — In perhaps the clearest sign yet that economic change is gathering pace in Cuba, the government plans to lay off more than half a million people from the public sector in the expectation that they will move into private businesses, Cuba’s labor federation said Monday.

Over the past several months, President Raúl Castro has given stern warnings that Cuba’s economy needs a radical overhaul, beginning with its workers. With as many as one million excess employees on the state payroll, Mr. Castro has said, the government is supporting a bloated bureaucracy that has sapped motivation and long sheltered a huge swath of the nation’s workers.

“We have to erase forever the notion that Cuba is the only country in the world where one can live without working,” he told the National Assembly last month.

Since permanently taking over from his brother Fidel two years ago, Mr. Castro has often pledged to make Cuba’s centralized, Soviet-style economy more efficient and open up opportunities for people. The government has handed tens of thousands of acres of state-held farmland to private farmers and begun freeing up a market for agricultural supplies. It has loosened restrictions on cellphones and other electronics, and created a few areas for private business, allowing barbers’ shops to become cooperatives and giving more licenses to private taxi drivers.

But these initial reforms have been comparatively limited, many analysts contend, and Cuba’s economy — grappling with the fallout from the global financial crisis and the aftermath of devastating hurricanes in 2008 — appears to be in dire shape.

Tourism revenues have flagged, the country has faced rice shortages and its sugar crop has been disastrous. Last year, as the government tried to hold onto desperately needed hard currency, imports fell by 37 percent.

In its statement Monday, the Cuban Workers’ Central, the country’s only recognized labor federation, openly acknowledged the nation’s troubled economy, saying that changes were “necessary and could not be delayed.”

“Cuba faces the urgency to advance economically,” the statement said. “Our state cannot and should not continue supporting companies” and other state entities, “with inflated payrolls, losses that damage the economy, which are counterproductive, generate bad habits and deform the workers’ conduct,” the labor federation added.

To that end, the government has previously said that it would grant new licenses to entrepreneurs, vastly expanding the kinds of businesses that can be run privately. But the announcement on Monday — saying that the layoffs would be completed by next March — suggested that Mr. Castro now intended to move ahead vigorously.

“What’s stunning today is that they put a date and they put a number on it — 500,000,” said Philip Peters, who follows Cuba for the Lexington Institute. “It’s a very substantial decision,” he added. “It’s a major shift towards a larger private sector in a socialist economy.”

New openings in the private sector would be welcomed by many Cubans, who are weary of the island’s stagnation and desperate for new opportunities.

Even so, the disappearance of hundreds of thousands of jobs — and with them the security of a salary, workplace meals and the chance to make extra money through tips in some cases — would come as a shock.

While Cubans have access to free health care, education and subsidized food and housing, the government has already cut some of the subsidies that many Cubans rely on to supplement their average monthly wage of about $20. And given the government’s record of introducing new areas for enterprise only haltingly, it is unclear that new jobs can be created as quickly as the public sector positions will be cut.

“They are in the process of massively reducing the size and participation of the state in Cuban life,” said Julia E. Sweig, a Cuba expert at the Council on Foreign Relations who was in Havana a couple of weeks ago. “There is a belief that there is so much pent-up demand on the one hand and so much skill on the other that the private sector will absorb them pretty rapidly.”

Ms. Sweig said that it appeared the government was preparing to open up a vast range of activities, including light manufacturing like furniture making and garment production. Cuba’s underground economy already provides a broad array of products, she said, but under the new arrangement the government would begin to tax those new businesses.

To absorb all those workers who will be laid off, the federation said that hundreds of thousands were expected to move into some form of private enterprise over the next few years.

Just how strongly the government plans to hold onto its traditional economic philosophies are a matter of debate.

In an interview published online by the Atlantic last week, Fidel Castro said that the Cuban model no longer worked. But in a speech at the University of Havana shortly after his remarks were published, he said that he had been misinterpreted and that what he meant was that capitalism did not work.

Ms. Sweig, who was present for the first interview, said that Mr. Castro’s speech correcting himself was not backtracking. Instead, she said his words were most likely intended to reassure Cubans that he did not intend to import American-style capitalism. “It is a hybrid that is evolving,” she said.

Still, John Kavulich, a senior adviser for the U.S.-Cuba Trade and Economic Council, warned that it would be difficult for Cuba to follow through on the full scale of its announcement. On a practical level, he asked, would the government be able to import all the tools the new entrepreneurs or small manufacturing cooperatives will need?

There is also a larger question that goes to the heart of Cuba’s ideology, Mr. Kavulich said. “The Cuban government is going to allow and by definition encourage people to go into private sector opportunities,” he said. “What happens when some people get rich?”

“The government is going to have to determine whether it will allow and embrace success, not just opportunity,” he said.

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Monday, September 13, 2010

BP -- Soon to become a Dividend Play

The media hysteria over the Gulf of Mexico oil leak led to shrieks and wails about extraordinary damages and overwhelming clean-up costs. However, with the leak sealed and most of the oil already removed from the water, it's clear the costs of the episode will drop well below $20 billion. All the affected businesses will resume relatively normal operations more quickly than expected. Interestingly, with an end to the clean-up, many boat operators will see their incomes drop. One of the ironies of the oil leak is this: the pay for removing oil was higher than the pay most operators were earning from fishing and their other maritime enterprises.

BP Tells Analysts Spill Claims May Be Lower Than $20 Billion

Sep 13, 2010 7:29 AM ET

BP Plc, responsible for the largest oil spill in U.S. history, told analysts that legal claims may be lower than the $20 billion it is setting aside for victims of the Gulf of Mexico disaster.

Robert Dudley, who takes over as chief executive officer from Tony Hayward on Oct. 1, said that the $32 billion provision for the spill is still the most reasonable estimate of the total cost, according to Mark C. Fletcher, an analyst at Citigroup Inc. who attended the meeting with Dudley last week.

Dudley said that given current estimates of claims the $20 billion Independent Claim Fund probably exceeds calls, Fletcher wrote in an e-mailed note today. Dudley also told analysts that state claims, which aren’t included in the fund, shouldn’t be too high, Fletcher said.

BP may resume paying dividends for the fourth quarter of this year after canceling three quarters of payouts to shareholders to free up funds for the spill, though they won’t be as much as before the incident, according to Fletcher. Dudley said July 27 that the company won’t “rush back into the same dividend philosophy” and didn’t indicate whether the company would make a payout for the fourth quarter of 2010.

Toby Odone, a spokesman for BP, said he couldn’t confirm Dudley’s statements. BP executives regularly meet with investors throughout the year, Odone said.

The company may wait until the first quarter to resume dividends, Sanford C. Bernstein & Co. said today in a separate note. BP will also need to complete the sale of as much as $30 billion of assets over the next 18 months to start making payouts, Bernstein said.

“BP’s cashflow position should be just strong enough to support restoration of dividends by the first quarter of 2011, under an $80 a barrel oil price scenario based on estimates,” analysts Oswald Clint and Iain Pyle wrote. “This assumes divestments are completed and the spill costs do not climb much above BP’s $32.2 billion estimate.”

BP is unlikely to sell more assets than announced or break up the company, Bernstein said. The analysts rate BP “market perform,” though production growth will probably lag behind peers Royal Dutch Shell Plc and Total SA, according to the note.

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Pitney Bowes: The Dividend Check is in the Mail

Pitney Bowes: A Very Attractive Yield and a Promising Future

Pitney Bowes (PBI), with a yield of more than 7%, offers investors the fourth highest yield among S&P 500 stocks. At over 7%, the yield is at junk-bond levels. But the company is far more solid than its high yield suggests.

PBI is well known for providing businesses with equipment to handle their mail, both incoming and outgoing. It's true that Pitney Bowes has felt the impact of email and computer-related mail services. The traditional mail business is declining, but is far from disappearing like the Pony Express. Companies are managing their mail more efficiently and they're managing with software, hardware and services from Pitney Bowes.

PBI is working with leading companies, such as Hewlett-Packard (HPQ) and Kodak (EK), to help customers reduce paper volumes and improve productivity. Last year PBI announced a new distribution agreement with Digital China. The new alliance is bringing mailing solutions from PBI to Chinese businesses though more than 5000 resellers in 600 cities in China (after signing similar agreements in Japan and India).

Last year was a down year. Sales dropped 11% to $5.6 billion and EPS fell to the low $2 area. However, the company's balance sheet is strong. Healthy cash flow has allowed PBI to repurchase its stoack and increase the dividend. Last year the company reduced long term debt by $250 million.

After a disappointing Q2, full-year 2010 results were guided lower. The global economy and business environment have not stabilized fast enough for the company to see improved results this year. The company believes 2010 revenue will, at best, match last year's figure. However, analysts have suggested the top line might decline by 3%. Excluding non-recurring items, earnings per-share for the year are estimated at $2.10-2.30, while GAAP earnings should fall between $1.49-1.85 (the bulk of the difference is due to a one time restructuring and asset impairments recognized in Q2).

However, for 2010 cash flow guidance was increased $50 million to $700 million-$800 million. The company is optimistic about long term growth. PBI is forecasting revenues will grow 2-5% annually (2009 to 2013) and Earnings Before Interest and Taxes (EBIT) is forecasted to grow 6-8% annually. If these projections prove accurate then it is likely EPS will rise to $2.75 EPS in 2013.

Nevertheless, this stock, as the high dividend suggests, carries some risks. If the economy remains in a weakened state, the company may decide it must conserve cash, which implies it may cut the dividend. Moreover, it appears that EPS above $2 is the threshold for increasing the dividend. Those earnings may not arrive soon enough.

However, the key to higher growth is likely to be found in opening new markets. Many corporations expect to profit from operations in China and India, which are home to a total of almost 3 billion people, most of whom will send letters through their national Post Offices for a long time before they switch to e-mail.

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Saturday, September 11, 2010

Islam IS at War with the US

President Obama said "We are not at war against Islam."

That's a terrifyingly naive admission. Why? Because islam is at war with us -- Americans, Israel and the West. A person must be deaf, blind and dumb to miss the obvious intentions and goals of islam and the people who are advancing it around the world.

Islam controversies cast shadow over 9/11 events

Sep 10, 2010


NEW YORK (AP) - They will read the names, of course, the names of every victim who died in the Sept. 11 attacks. The bells will ring. And then that moment of unity will give way to division as activists hoist signs and march, some for and some against a planned mosque two blocks from ground zero.

This 9/11 is more political and contentious than the eight before it, with grieving family members on opposite sides of the mosque battle.

The debate became so heated that President Barack Obama felt the need to remind Americans: "We are not at war against Islam."

It was uncertain Friday whether hushed tones would replace the harsh rhetoric that threatened to overshadow the commemoration of the terrorist attacks that killed nearly 3,000 people in New York, Washington and Shanksville, Pa.

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Thursday, September 09, 2010

Muslims: Do What We Say, Or Else!

Burning books is symbolic. There's no chance that burning books will reduce the global supply. If book-burning is symbolic, what does burning a Koran symbolize? Many things. For one, burning a Koran symbolizes the end of female enslavement that defines the life of every woman who lives in an islamic nation and the lives of muslim women who live in free countries too.

Muslims -- muslim men -- oppose, violently oppose the idea of freedom for women. A muslim woman enjoying the sexual freedom of Western women is likely to become the victim of an honor killing.

Should people who love freedom burn a book that teaches the enslavement of women?

Quran burning plan stirs outrage in Muslim world

KABUL, Afghanistan – Hundreds of angry Afghans burned an American flag and chanted "Death to the Christians" on Thursday to protest plans by a small American church to torch copies of the Muslim holy book on the anniversary of the Sept. 11 terror attacks.

Local officials in Mahmud Raqi, the capital of the Kapisa province some 100 kilometers (60 miles) northeast of Kabul, estimated that up to 4,000 people took part in the protest. But NATO spokesman James Judge said the protest numbered between 500 to 700 people.

"The Afghan national police prevented the protest from overwhelming an Afghan military outpost," and dispersed the demonstration, he told The Associated Press.

Judge added that the Quran burning is "precisely the kind of activity the Taliban uses to fuel their propaganda efforts to reduce support" for coalition forces.

Abdul Hadi Rostaqi, a cleric council in Afghanistan's largely peaceful Balkh province, also said Thursday that, if the burning goes ahead, "a big protest will be held" in the provincial capital Mazar-i-Sharif next Monday. Protesters would hurl stones at NATO-led troops stationed in the city — one of the country's main centers of the Islamic teaching.

Religious and political leaders across the Muslim world, as well as several U.S. officials, have asked the church to call off the plan, warning it would lead to violence against Americans.

The Rev. Terry Jones, of the Dove Outreach Center in Gainesville, Florida, has vowed to go ahead with the bonfire on Saturday, even though he has been denied the required permit.

About 200 people marched and burned a U.S. flag in the central Pakistani city of Multan.

"If Quran is burned it would be beginning of destruction of America," read one English-language banner held up by the protesters, who chanted "Down with America!"

Iran's Foreign Minister Manouchehr Mottaki also warned of repercussions, saying the burning would "face reactions by the world's Muslims as well as followers of other religions," according to the official IRNA news agency.

Secretary of State Hillary Rodham Clinton has denounced the planned burning and Gen. David Petraeus, the top U.S. and NATO commander in Afghanistan, has said it could lead to attacks on international troops.

There are also fears of a backlash against Christians in predominantly Muslim countries. Canon Andrew White, the chaplain of an Anglican church in Baghdad, said the Iraqi military had warned him that his church had been threatened.

Security was beefed up around the Church of Virgin Mary in central Baghdad on Thursday, with military vehicles blocking the entrance to the church and more soldiers were deployed to guard it.

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Wednesday, September 08, 2010

It's Official: Castro admits Cuban Economics are a failure

As if we didn't know. Maybe now Fidel is going to tell the world he was just a young idealist who wanted to give Marxism the old college try before it was too late. Here we are, fifty years down the road, and everyone who's looked at the Cuban model has pronounced it a failure. What else do we need to know?

Should we examine every aspect of the Cuban economy? Should we ask why an island nation sitting in an oil-rich body of water has no oil? Should we ask why this island nation has no fishing industry? Should we ask why a nation capable of producing huge quantities of sugar cane is not in the ethanol business?

We know why. The cost of maintaining a dictatorship is high. It takes a lot to keep a tight squeeze on the necks of 11 million prisoner-citizens. After protecting itself from any hints of opposition, there's no money around to build the nation. Thus, Cuba languishes.

However, by the time the Castros are gone, the biggest land boom of the 21st century will have begun in Havana.

Report: Castro says Cuban model doesn't work
September 7, 2010

HAVANA – Fidel Castro told a visiting American journalist that Cuba's communist economic model doesn't work, a rare comment on domestic affairs from a man who has conspicuously steered clear of local issues since stepping down four years ago.

The fact that things are not working efficiently on this cash-strapped Caribbean island is hardly news. Fidel's brother Raul, the country's president, has said the same thing repeatedly. But the blunt assessment by the father of Cuba's 1959 revolution is sure to raise eyebrows.

Jeffrey Goldberg, a national correspondent for The Atlantic magazine, asked if Cuba's economic system was still worth exporting to other countries, and Castro replied: "The Cuban model doesn't even work for us anymore" Goldberg wrote Wednesday in a post on his Atlantic blog.

He said Castro made the comment casually over lunch following a long talk about the Middle East, and did not elaborate. The Cuban government had no immediate comment on Goldberg's account.

Since stepping down from power in 2006, the ex-president has focused almost entirely on international affairs and said very little about Cuba and its politics, perhaps to limit the perception he is stepping on his brother's toes.

Goldberg, who traveled to Cuba at Castro's invitation last week to discuss a recent Atlantic article he wrote about Iran's nuclear program, also reported on Tuesday that Castro questioned his own actions during the 1962 Cuban Missile Crisis, including his recommendation to Soviet leaders that they use nuclear weapons against the United States.

Even after the fall of the Soviet Union, Cuba has clung to its communist system.

The state controls well over 90 percent of the economy, paying workers salaries of about $20 a month in return for free health care and education, and nearly free transportation and housing. At least a portion of every citizen's food needs are sold to them through ration books at heavily subsidized prices.

President Raul Castro and others have instituted a series of limited economic reforms, and have warned Cubans that they need to start working harder and expecting less from the government. But the president has also made it clear he has no desire to depart from Cuba's socialist system or embrace capitalism.

Fidel Castro stepped down temporarily in July 2006 due to a serious illness that nearly killed him.

He resigned permanently two years later, but remains head of the Communist Party. After staying almost entirely out of the spotlight for four years, he re-emerged in July and now speaks frequently about international affairs. He has been warning for weeks of the threat of a nuclear war over Iran.

Castro's interview with Goldberg is the only one he has given to an American journalist since he left office.

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General Petraeus tries to put out a Fire

A number of American leaders want Reverend Jones to drop his plan to burn Korans. They complain that burning Korans is a bad idea, though they admit it's legal. The complainers, General Petraeus among them, have listed the negative consequences and ill will that are likely to follow.

The complaints sound remarkably similar to those emerging from the debate about building a mosque on Park Place next to Ground Zero. In one case, Americans are imploring other Americans to put their displeasure and anger aside, and show instead that Americans are tolerant people who can solve problems rather than express hate, even though they have the Constitutional right to express themselves as Reverend Jones hopes they will.

However, in the other case, muslims are telling America they can build a mosque wherever the law permits, because, well, because they can. And if America doesn't like it, then America can lump it. Tough noogies. Are any muslims telling the leader of the mosque that maybe it would show good faith to build the mosque somewhere else? No.

It seems this is how things always go with muslims. Last week, when the leader of Israel and the leader of some Palestinians were preparing to meet, Palestinian gunmen from Hamas murdered four Israelis in the West Bank. One of the dead was a pregnant woman. Did Israel launch an attack on Hamas, the governing body of Gaza? No. Did the Hamas government begin an investigation and attempt to catch the killers? No.

Instead, cheers and praise. To commemorate the killings, about 3,000 muslims gathered in Gaza to celebrate the slaughter, hailing it as a heroic deed. They handed out sweets to passersby, the usual muslim celebratory practice. And so it goes.

From the New York Times -- September 8, 2010

Gen. David H. Petraeus warned on Tuesday that any video of Americans burning the Koran “would undoubtedly be used by extremists in Afghanistan — and around the world — to inflame public opinion and incite violence,” endangering the lives of American soldiers.

A State Department spokesman called Mr. Jones’s plan “un-American.” Robert Gibbs, the White House spokesman, said any activity “that puts our troops in harm’s way would be a concern to this administration.”

Several clergy members in Washington and Florida said that there were efforts to dissuade Mr. Jones from proceeding with the event, but that he appeared unlikely to relent.

The religious leaders in Washington said in their statement, “We are appalled by such disrespect for a sacred text that for centuries has shaped many of the great cultures of our world.”

Interfaith events are not unusual, but this one was extraordinary for the urgency and passion expressed by the participants. Some of the same religious leaders later met with Attorney General Eric H. Holder Jr. to urge him to prosecute religious hate crimes aggressively.

Rabbi David Saperstein, director of the Religious Action Center of Reform Judaism, said: “We know what it is like when people have attacked us physically, have attacked us verbally, and others have remained silent. It cannot happen here in America in 2010.”

The clergy members said that those responsible for a poisoned climate included politicians manipulating a wedge issue in an election year, self-styled “experts” on Islam who denigrate the faith for religious or political reasons and some conservative evangelical Christian pastors.

The Rev. Richard Cizik, president of the New Evangelical Partnership for the Common Good, said: “To those who would exercise derision, bigotry, open rejection of our fellow Americans of a different faith, I say, shame on you. As an evangelical, I say to those who do this, you bring dishonor to those who love Jesus Christ.”

The summit meeting was initiated by leaders of the Islamic Society of North America, an umbrella group of mosques and Muslim groups, who contacted Jewish and Christian leaders they know from years of joint interfaith projects.

A Catholic priest, the Rev. Mark Massa, executive director of ecumenical and interreligious affairs of the United States Conference of Catholic Bishops, wrote the draft of the statement. About three dozen clergy members representing Jewish, Muslim, Protestant, Catholic, evangelical and Orthodox Christian groups refined it at the meeting.

They did not take a stand on whether to support the proposed mosque and community center near ground zero in Manhattan, saying, “Persons of conscience have taken different positions on the wisdom of the location of this project, even if the legal right to build on the site appears to be unassailable.”

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Saturday, September 04, 2010

Not an Act of God

Why God Did Not Create the Universe
There is a sound scientific explanation for the making of our world—no gods required


According to Viking mythology, eclipses occur when two wolves, Skoll and Hati, catch the sun or moon. At the onset of an eclipse people would make lots of noise, hoping to scare the wolves away. After some time, people must have noticed that the eclipses ended regardless of whether they ran around banging on pots.

Ignorance of nature's ways led people in ancient times to postulate many myths in an effort to make sense of their world. But eventually, people turned to philosophy, that is, to the use of reason—with a good dose of intuition—to decipher their universe. Today we use reason, mathematics and experimental test—in other words, modern science.

Albert Einstein said, "The most incomprehensible thing about the universe is that it is comprehensible." He meant that, unlike our homes on a bad day, the universe is not just a conglomeration of objects each going its own way. Everything in the universe follows laws, without exception.

Newton believed that our strangely habitable solar system did not "arise out of chaos by the mere laws of nature." Instead, he maintained that the order in the universe was "created by God at first and conserved by him to this Day in the same state and condition." The discovery recently of the extreme fine-tuning of so many laws of nature could lead some back to the idea that this grand design is the work of some grand Designer. Yet the latest advances in cosmology explain why the laws of the universe seem tailor-made for humans, without the need for a benevolent creator.

Many improbable occurrences conspired to create Earth's human-friendly design, and they would indeed be puzzling if ours were the only solar system in the universe. But today we know of hundreds of other solar systems, and few doubt that there exist countless more among the billions of stars in our galaxy. Planets of all sorts exist, and obviously, when the beings on a planet that supports life examine the world around them, they are bound to find that their environment satisfies the conditions they require to exist.

It is possible to turn that last statement into a scientific principle: The fact of our being restricts the characteristics of the kind of environment in which we find ourselves.

For example, if we did not know the distance from the Earth to the sun, the fact that beings like us exist would allow us to put bounds on how small or great the Earth-sun separation could be. We need liquid water to exist, and if the Earth were too close, it would all boil off; if it were too far, it would freeze. That principle is called the "weak" anthropic principle.

The weak anthropic principle is not very controversial. But there is a stronger form that is regarded with disdain among some physicists. The strong anthropic principle suggests that the fact that we exist imposes constraints, not just on our environment, but on the possible form and content of the laws of nature themselves.

The idea arose because it is not only the peculiar characteristics of our solar system that seem oddly conducive to the development of human life, but also the characteristics of our entire universe—and its laws. They appear to have a design that is both tailor-made to support us and, if we are to exist, leaves little room for alteration. That is much more difficult to explain.

The tale of how the primordial universe of hydrogen, helium and a bit of lithium evolved to a universe harboring at least one world with intelligent life like us is a tale of many chapters. The forces of nature had to be such that heavier elements—especially carbon—could be produced from the primordial elements, and remain stable for at least billions of years. Those heavy elements were formed in the furnaces we call stars, so the forces first had to allow stars and galaxies to form. Those in turn grew from the seeds of tiny inhomogeneities in the early universe.

Even all that is not enough:

The dynamics of the stars had to be such that some would eventually explode, precisely in a way that could disperse the heavier elements through space. In addition, the laws of nature had to dictate that those remnants could recondense into a new generation of stars, these surrounded by planets incorporating the newly formed heavy elements.

By examining the model universes we generate when the theories of physics are altered in certain ways, one can study the effect of changes to physical law in a methodical manner. Such calculations show that a change of as little as 0.5% in the strength of the strong nuclear force, or 4% in the electric force, would destroy either nearly all carbon or all oxygen in every star, and hence the possibility of life as we know it. Also, most of the fundamental constants appearing in our theories appear fine-tuned in the sense that if they were altered by only modest amounts, the universe would be qualitatively different, and in many cases unsuitable for the development of life. For example, if protons were 0.2% heavier, they would decay into neutrons, destabilizing atoms.

If one assumes that a few hundred million years in stable orbit is necessary for planetary life to evolve, the number of space dimensions is also fixed by our existence. That is because, according to the laws of gravity, it is only in three dimensions that stable elliptical orbits are possible. In any but three dimensions even a small disturbance, such as that produced by the pull of the other planets, would send a planet off its circular orbit, and cause it to spiral either into or away from the sun.

The emergence of the complex structures capable of supporting intelligent observers seems to be very fragile. The laws of nature form a system that is extremely fine-tuned. What can we make of these coincidences? Luck in the precise form and nature of fundamental physical law is a different kind of luck from the luck we find in environmental factors. It raises the natural question of why it is that way.

Many people would like us to use these coincidences as evidence of the work of God. The idea that the universe was designed to accommodate mankind appears in theologies and mythologies dating from thousands of years ago. In Western culture the Old Testament contains the idea of providential design, but the traditional Christian viewpoint was also greatly influenced by Aristotle, who believed "in an intelligent natural world that functions according to some deliberate design."

That is not the answer of modern science. As recent advances in cosmology suggest, the laws of gravity and quantum theory allow universes to appear spontaneously from nothing. Spontaneous creation is the reason there is something rather than nothing, why the universe exists, why we exist. It is not necessary to invoke God to light the blue touch paper and set the universe going.

Our universe seems to be one of many, each with different laws. That multiverse idea is not a notion invented to account for the miracle of fine tuning. It is a consequence predicted by many theories in modern cosmology. If it is true it reduces the strong anthropic principle to the weak one, putting the fine tunings of physical law on the same footing as the environmental factors, for it means that our cosmic habitat—now the entire observable universe—is just one of many.

Each universe has many possible histories and many possible states. Only a very few would allow creatures like us to exist. Although we are puny and insignificant on the scale of the cosmos, this makes us in a sense the lords of creation.

—Stephen Hawking is a professor at the University of Cambridge. Leonard Mlodinow is a physicist who teaches at Caltech. Adapted from "The Grand Design" by Stephen Hawking and Leonard Mlodinow, to be published by Bantam Books on Sept. 7.

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