Stopping the Syria Contagion

Anne-Marie Slaughter

JAN 18, 2014

Newsart for Stopping the Syria Contagion

WASHINGTON, DCSyria’s civil war has become a wretchedly complicated problem. As the parties prepare to meet in Geneva for the second round of United Nations-sponsored peace talks, the government has launched vicious barrel-bomb attacks on Aleppo and other cities; more moderate Islamist rebel groups, including the Free Syrian Army, are openly at war with Al Qaeda affiliates; and Al Qaeda-linked groups are now fighting among themselves.

Meanwhile, the war’s spillover effects are worsening. The fighting has heightened instability in the region; US and European citizens are streaming into Syria to take up jihad; and there is a growing consensus that the post-World War I Middle East boundaries are coming undone. Indeed, the viability of Syria, a multi-ethnic state, is being threatened by multiple armed groups supported by external sponsorsIran, Saudi Arabia, Qatar, Russia, the United States, Turkey, France, and many private donorswho themselves have conflicting aims.

Here are three ways to simplify the equation and maximize the chances that the parties to the Geneva II peace conference will be able to agree on more than the desirability of someday holding a Geneva III.

First, the most important contribution that this conference can make to the possibility of a negotiated settlement and a political transition in Syria is to change the principal parties’ incentives. In the run-up to Geneva II, each party has sought to strengthen its hand at the negotiating table by killing as many adversaries and holding or regaining as much ground as possible. The task now for would-be peace brokers is to halt that dynamic by agreeing on criteria for participation in whatever elections will eventually be held, regardless of whether President Bashar al-Assad remains in power until then.

Those criteria must include the parties’ willingness to allow humanitarian aid to flow to all Syrian civilians under their control and an end to war crimes and crimes against humanity, including systematic targeting of medical personnel, starvation of populations under siege, and executions of war prisoners. Here the UN must reaffirm its “responsibility to protectdoctrine, not as a justification for military intervention, but as a fundamental principle agreed by all countries: governments must protect their citizens. If Assad’s Ba’ath party cannot uphold that responsibility, it forfeits its own legitimacy as a participant in any future government.

Second, the international community must re-establish the basis for its engagement. When the Syrian conflict began, it was an internal matter, with UN involvement limited to humanitarian and refugee issues.

But now the conflict has spread across the Middle East, destabilizing Lebanon and Jordan and threatening to fracture Iraq. The UN Security Council is charged with addressing breaches or threats to international peace, a criterion that is now clearly met.

As a permanent member of the Security Council, Russia thus has an obligation to act; it (and China) can no longer hide behind the argument that the UN should not be engaged in Syria’s internal affairs. At a time when the Winter Olympic Games in Sochi put Russia squarely on the international stage, the US and other Security Council members should plan a series of resolutions that confront the Kremlin with the choice of meeting its responsibility or applying its own leverage to bring the conflict to an end.

Finally, the single most important step that US President Barack Obama could take is to put the credible threat of force back on the table. In three years of increasingly bloody conflict, the only diplomatic success was achieved when Assad believed that he faced US missile strikes. He suddenly saw the desirability of getting rid of his chemical weapons.

But most experts believe that military force is off the table. The US public sharply rejected Obama’s planned missile strikes to punish Assad for the repeated use of chemical weapons, and a recent Pew poll indicates that a majority of Americans believe that the US should mind its own business internationally and let other countries get along the best they can on their own.”

Obama’s job, however, is to look beyond opinion polls, particularly when it comes to safeguarding national security. The US has withdrawn from Afghanistan and Iraq, but the gains so painfully won are being reversed. Al Qaeda is back and is fighting for its own proto-state in western Iraq and eastern Syria, which is far closer to Europe and the US than the caves of Afghanistan.

Perhaps Obama thinks that he or his successor can deal with that threat down the road. If Al Qaeda operatives begin threatening the US from the Islamic State of Iraq and Syria, the US will just take them out with drones, as it has done in Afghanistan, Pakistan, and Yemen. But if he is willing to contemplate using force against Al Qaeda without international authorization in the future, why not use drones now to strengthen the moderate Syrian opposition and force Assad into serious negotiations?

The threat of cruise-missile strikes last September was enough to send Al Qaeda members in Syria scrambling for the hills. A strike designed to destroy Assad’s air force and prevent him from dropping bombs full of nails on his people would concentrate his mind on a diplomatic solution.

Obama should announce that the US is committed to a political solution in Syria, and that his government will do whatever it can to bring about such a solution through next week’s peace conference and follow-up action. But if a ceasefire has not been achieved in the next three months, the US should work with regional organizations and all friends of the Syrian people to authorize a set of military strikes on Al Qaeda-linked forces and on the killing machine that Assad’s government has aimed at civilians.

The Obama administration should make the case for this to the American people in terms of straightforward US security interests. After all, if Geneva II fails, Geneva III will not be about Syria alone. It will be about how to end a war raging across the entire Middle East.

Anne-Marie Slaughter, a former director of policy planning in the US State Department (2009-2011), is President and CEO of the New America Foundation and Professor Emerita of Politics and International Affairs at Princeton University. She is the author of The Idea That Is America: Keeping Faith with Our Values in a Dangerous World.

Last updated: January 19, 2014 6:48 pm

The rise of a new US federalism

By Edward Luce

With federal government largely paralysed, the future is being shaped in the cities

Matt Kenyon Illustration

Barack Obama will deliver his sixth annual State of the Union to Congress next week. He will beseech lawmakers to enact many things, few of which will happen

The same will probably be true of his seventh and eighth. Meanwhile, for good or for ill, a rising generation of city leaders across the US are pushing ahead with their agendas. At a time when US federal government is largely paralysed, it is in the states – and particularly the citieswhere America’s future is being played out. Call it the new US federalism.

The term can befuddle foreigners and even Americans. At the start of the republic, it was the federalists, led by Alexander Hamilton, who centralised powers, such as the right to issue debt and maintain a standing army. In the 1850s it was the confederates who challenged Washington’s right to impose federal laws limiting slavery. But the abiding lesson of most of US history is that when Washington fails to function, the action moves to the states, cities and municipalities. It is federalism, rather than the separation of powers at the federal level, that keeps the US moving.

This is particularly true of cities. Mr Obama’s agenda is stalled chiefly because of the fierce intensity of polarisation in Washington. But polarisation diminishes as you move further down. It is still visible at the state level – there are Republicans in Austin, Texas and Democrats in Sacramento, California who are every bit as ideological as their Washington counterparts. But it is rarely paralysing. Only in the cities does gridlock largely cease to exist. And it is in the cities where America’s most significant 21st century trends – from deep inequality to cutting-edge innovation – are most vividly on display. They are also where the most interesting politics is taking place. Since Republicans control no US city of any significant size, the battles are largely intra-Democratic.

In the Big Apple, Bill de Blasio came to power on a promise to address the “tale of two New Yorks” – one for the philanthropic elites and their charter schools, another for those living in ghettos such as Harlem (home both to Bill Clinton’s Global Initiative and New York’s poorest inhabitants). Mr de Blasio is sceptical of charter schools and wants to raise taxes on those earning more than $500,000 a year

Some of his wealthier fellow Democrats see him as a potential foe. Few, however, would dispute that it is in New York, rather than Washington, where the politics will be decided

Unaffordable property is a familiar story for young and middle class Americans generally. But it is being fought out neighbourhood by neighbourhood.

Much the same is true in Rahm Emanuel’s Chicago and Eric Garcetti’s Los Angeles but with variations. Messrs Emanuel and Garcetti are more centrist Democrats who support charter schools and have forged close collaborations with downtown business leaders. One of Mr Emanuel’s goals is reducing crime by whatever means will work. Mr de Blasio’s focus is on reducing the alleged racial bias behind the “stop and search methods championed by Michael Bloomberg, his (nominally independent) predecessor. Crime is higher in LA and considerably more so in Chicago, so Mr Blasio has more room to experiment. Either way, he is taking action. Meanwhile, Washington cannot pass a law that would moderately strengthen background checks on gun buyers.

States and cities are an increasingly important battleground of the new fiscal era. A century ago it was the city bosses who built high-rise America. Their spoils system was not pretty. But it was unaffected by federal government. It is no coincidence the era of restless urban politics was also the most polarised in Washington’s history. 

Only in recent years has Washington plumbed those depths again. Today, mayors and governors must budget on the fact that Washington’s declining largesse will only dwindle further. Austerity is here to stay. The task of building roads, modernising ports and dredging harbours is increasingly local

So, too, is trade promotion and research and development.If it was 50 per cent local financing and 50 per cent federal in the past, today it is more like 75:25,” says Bruce Katz of the Brookings Metropolitan Policy programme. “Washington is less and less relevant.”

A rising share of the economic action is also urban. Even in the tech sector, which is traditionally suburban, capital is following talent to the city. The newest social media companies, such as Twitter, Zynga and Pinterest, have chosen San Francisco rather than Silicon Valley as their headquarters. And in manufacturing, the suburban factory is becoming a thing of the past. New technologies such as 3D printing mean it is easier to make things in smaller locations and with fewer people. The latter tend to be better educated and prefer to live in the city, with its bike lanes and microbreweries

Entrepreneurialism and social liberalism tend to go together. The city is the place for serendipity.

Not every US urban trend is positive – and not every city mayor can tackle it. But they have the means to try. They also have the leeway to innovate. Many do. Innovation is a mantra that is chanted in Washington in inverse proportion to the degree that it is practised. Everyone loves it

Few have direct experience of making innovative policy. America’s most talented politicians are increasingly spurning Washington. Others are pulling out. In politics, as in business, we should follow the talent to where it lives.

Copyright The Financial Times Limited 2014.

January 20, 2014

The two trend reversals everyone has been waiting a year for are about to take place, but they have not yet started.

While I do think 2014 is the year we see gold, silver, miners and many other commodities rally, it is important to follow the trend and wait for a reversal to form before getting overly excited and long commodities.

Each time we see the daily charts form some type of bullish pattern gold market traders become instantly bullish. And each time this happens they get another reality check about their trading technique of trying to pick a bottom.

I just published a book in December which teaches readers how to identify trends and stages in the market - "Technical Trading Mastery - 7 Steps to Win With Logic". Buying into a bear market rally is not a high probability winning position. Odds favor that sellers will pull the price down and likely to new lows.

This January is one of these times and gold market traders are getting excited and long positions. While the bottom may be in for precious metals, buying a bounce in a bear market is tricky and you better have some trading discipline to exit if price starts to sell back down.

Eventually we will see the stock market rollover and breakdown below its support trendline and gold will rally. But keep in mind, some of the largest percentage based moves take place just before a reversal. What does this mean

It means that the stock market could easily go parabolic and rally for a few more weeks, then reverse down sharply. And precious metals would do the opposite, sell off, make new lows, then reverse back up and start a new bull market.

Stock Market VS. Gold - Gold Market Traders Be Aware!
Gold Market Traders - Newsletter

Below are a few more charts showing my big picture trend analysis for silver and gold miners.

Silver Market Traders - Newsletter

Gold Stock Market Traders - Trend Analysis
Gold Market Traders Conclusion:

In short, the precious metals sector is still in a bear market and has not yet reversed to the upside. As you know I don't pick bottoms or tops which go against the longer term trend. In this case the trend is down for precious metals so I am not trying to pick a bottom.

While I am starting to get excited about the eventual bottom in gold, I am still sitting on the fence with my cash.

Bitcoin: miracle or madness?

January 19, 2014 2:46 pm

by Gavyn Davies

The first ATM machine dispensing Bitcoins is apparently opening this month in Asia. So what exactly is the Bitcoin phenomenon

Variously described as a digital Gold Standard, an internet miracle, a means of conducting illegal transactions, a tulip bubble and much else besides, it is a subject that is irresistibly attractive to the blogosphere.
However, when you add the fact that the founder of the digital currency is known only under the pseudonym Satoshi Nakamoto, the mystery surrounding the whole activity has been enough to dissuade most sensible and honest investors from taking it seriously.

Until now, I have therefore largely ignored it. But John Authers and Tim Harford, after explaining the phenomenon very clearly, conclude that it is time to pay attention. Furthermore, the major private banks and regulatory agencies have started to express serious interest in it.

The Chicago Fed has said that, warts and all, “it represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions or even by governments themselves”. And even the conservative ECB argues that, if it is not Bitcoin, then another virtual currency may soon start to grow extremely rapidly.

In recent weeks, the authorities in Germany
, France, China, India and Malaysia have all taken steps to discourage speculation in Bitcoins. So it is time to ask whether we should be worried about the economic consequences of virtual currencies.

How Bitcoin Works

A quick way to grasp the basics of Bitcoin is to imagine that it provides people with little bags of gold coins (digitalwallets”) which can be used to keep savings, or to spend on goods and services. The “mining” of Bitcoins (again, think of gold) is undertaken by prospectors or “miners” that solve algorithmic puzzles on their computers, and are allocated new Bitcoins when they succeed. There is a pre-determined schedule for the creation of new Bitcoins, shown in the graph, so long-term supply is limited.

A new medium of exchange…

The rest of the world acquires Bitcoins from exchanges, where the initial sales of the currency come from the successful miners. Once in circulation, the technology allows Bitcoins to be transferred from one wallet to another very cheaply, so the virtual currency could become an efficient medium of exchange. (The best simple explanation of all this is in the Chicago Fed Letter.)

There seems to be some risk of digital theft, but the benefits of conducting transactions quickly and easily on a mobile phone is considerable. Even Ben Bernanke has said that this could “hold long term promise”. The likely success or failure of this activity should be judged like any other venture capital business, in competition with alternative providers, of whom there will be many. One, and probably only one, such venture could perhaps succeed.

If the virtual currencies develop simply into a better medium of exchange, then the economy as a whole will gain, and less efficient alternatives (Paypal, the banks) may lose out. But the potential economic consequences go further than that. The success of a new global currency, created by the private sector, would clearly undermine the monopoly of governments in monetary creation, which is why it is such an attractive concept to Hayekians and other libertarians.

…and a store of value

One early consequence has been that the firstminers” of the new currency have already gained seignioragefor creating a valuable asset with very low marginal costs, a process conceptually identical to that which the central bank printing presses have monopolised until now. The present value of the Bitcoins created so far is about $10bn. Although that represents a great deal of money in the hands of a few people, it is an almost complete irrelevance in a global economic context. For comparison, $1.2tn circulates in US currency alone.

Still, it is not clear why the distribution of these gains to a few technology wizards, and maybe some illicit traders in drugs and other undesirable activities, instead of to society at large, should be regarded as a good thing. And, if the virtual currency displaces existing national currencies, further very large seigniorage gains would be transferred away from society as a whole. Governments will certainly not welcome this at all.

Regulators are also worried that unsuspecting private individuals may be sucked into a bubble in an asset that has no underpinning for its price. Decades ago, Milton Friedman established that, if private currency creation were to be permitted, then competing providers of new currencies would emerge until the price of the currency had been reduced to the marginal cost of its creation, which for paper currencies is close to nil.

Tyler Cowen and Brad DeLong say the same could happen to Bitcoin, with new market entrants offering similar capabilities and driving the price towards zero. Supporters reply that this misses the network advantages that Bitcoin already enjoys from its first mover status, giving it the ability to fend off competition in the same way that the winning social networks have done. The outcome is extremely unpredictable

Regulators are concerned about small investors becoming exposed to these risks, especially since the entire legal framework applying to virtual currencies is also highly uncertain.

Issues for monetary policy

These micro-economic regulatory issues have driven the response of the authorities so far but, in the longer term, the successful emergence of a major virtual currency would raise issues for monetary policy more widely. It is possible to imagine Bitcoin displacing some failing currencies completely, like the US dollar did in Zimbabwe.

In an extreme case, this could even happen to the major currencies. We would then need to contemplate a future where many transactions in the major economies might be denominated and transacted in virtual currencies. We would have entered Paul Krugman’s nightmare world of a virtual Gold Standard (a dreamland for libertarians), with discretionary domestic monetary policy ceasing to exist.

But this looks very far fetched. The list of businesses currently accepting Bitcoins is estimated by Brian Wesbury to be only one hundredth of one per cent of US GDP. The current dominance of the dollar and the euro in their respective jurisdictions represents a very stable behavioural equilibrium that will be extremely hard to shift, unless a calamity like hyper-inflation or a political upheaval intervenes first. Such disruptions are, we must hope, not a realistic possibility.

What is perhaps a little more realistic is an interim world, in which a virtual currency is used as a vehicle that enables efficient exchange for many transactions, but where prices and wages throughout the economy continue to be denominated in traditional currencies. This would be a major inconvenience for the central banks, with their power and seigniorage revenue declining, but it would not put them out of business altogether.

To get even that far, however, the winning virtual currency would need to be stable against the dollar and the euro, so that people are happy to hold the newcomers in their virtual wallets [1]. This stability has certainly eluded Bitcoin so far:


Can such a volatile virtual currency really threaten the status quo of the global monetary system, all the way down to its very core? We have learned never to say never in the extraordinary world of the internet. But the combined governments and central banks of the major economies control the legal systems, financial regulation and legal tender laws. They represent a extraordinarily powerful set of interest groups for the techies to overcome.


[1] Many economists have pointed out that there is a contradiction between the rapidly rising price of Bitcoin, as a store of value, and its likely success as a medium of exchange. See Jean-Pierre Landau for example.