Streetwise Professor

March 1, 2015

The Clayton Rule on Speed

Filed under: Commodities,Derivatives,Economics,Exchanges,HFT,Politics,Regulation — The Professor @ 1:12 pm

I have written often of the Clayton Rule of Manipulation, named after a cotton broker who, in testimony before Congress, uttered these wise words:

“The word ‘manipulation’ . . . in its use is so broad as to include any operation of the cotton market that does not suit the gentleman who is speaking at the moment.”

High Frequency Trading has created the possibility of the promiscuous application of the Clayton Rule, because there is a lot of things about HFT that do not suit a lot of gentlemen at this moment, and a lot of ladies for that matter. The CFTC’s Frankendodd-based Disruptive Practices Rule, plus the fraud based manipulation Rule 180.1 (also a product of Dodd-Frank) provide the agency’s enforcement staff with the tools to pursue a pretty much anything that does not suit them at any particular moment.

At present, the thing that least suits government enforcers-including not just CFTC but the Department of Justice as well-is spoofing. As I discussed late last year, the DOJ has filed criminal charges in a spoofing case.

Here’s my description of spoofing:

What is spoofing? It’s the futures market equivalent of Lucy and the football. A trader submits buy (sell) orders above (below) the inside market in the hope that this convinces other market participants that there is strong demand (supply) for (of) the futures contract. If others are so fooled, they will raise their bids (lower their offers). Right before they do this, the spoofer pulls his orders just like Lucy pulls the football away from Charlie Brown, and then hits (lifts) the higher (lower) bids (offers). If the pre-spoof prices are “right”, the post-spoof bids (offers) are too high (too low), which means the spoofer sells high and buys low.

Order cancellation is a crucial component of the spoofing strategy, and this has created widespread suspicion about the legitimacy of order cancellation generally. Whatever you think about spoofing, if such futures market rule enforcers (exchanges, the CFTC, or the dreaded DOJ) begin to believe that traders who cancel orders at a high rate are doing something nefarious, and begin applying the Clayton Rule to such traders, the potential for mischief-and far worse-is great.

Many legitimate strategies involve high rates of order cancellation. In particular, market making strategies, including market making strategies pursued by HFT firms, typically involve high cancellation rates, especially in markets with small ticks, narrow spreads, and high volatility. Market makers can quote tighter spreads if they can adjust their quotes rapidly in response to new information. High volatility essentially means a high rate of information flow, and a need to adjust quotes frequently. Moreover, HFT traders can condition their quotes in a given market based on information (e.g., trades or quote changes) in other markets. Thus, to be able to quote tight markets in these conditions, market makers need to be able to adjust quotes frequently, and this in turn requires frequent order cancellations.

Order cancellation is also a means of protecting market making HFTs from being picked off by traders with better information. HFTs attempt to identify when order flow becomes “toxic” (i.e., is characterized by a large proportion of better-informed traders) and rationally cancel orders when this occurs. This reduces the cost of making markets.

This creates a considerable tension if order cancellation rates are used as a metric to detect potential manipulative conduct. Tweaking strategies to reduce cancellation rates to reduce the probability of getting caught in an enforcement dragnet increases the frequency that a trader is picked off and thereby raises trading costs: the rational response is to quote less aggressively, which reduces market liquidity. But not doing so raises the risk of a torturous investigation, or worse.

What’s more, the complexity of HFT strategies will make ex post forensic analyses of traders’ activities fraught with potential error. There is likely to be a high rate of false positives-the identification of legitimate strategies as manipulative. This is particularly true for firms that trade intensively in multiple markets. With some frequency, such firms will quote one side of the market, cancel, and then take liquidity from the other side of the market (the pattern that is symptomatic of spoofing). They will do that because that can be the rational response to some patterns of information arrival. But try explaining that to a suspicious regulator.

The problem here inheres in large part in the inductive nature of legal reasoning, which generalizes from specific cases and relies heavily on analogy. With such reasoning there is always a danger that a necessary condition (“all spoofing strategies involve high rates of order cancellation”) morphs into a sufficient condition (“high rates of order cancellation indicate manipulation”). This danger is particularly acute in complex environments in which subtle differences in strategies that are difficult for laymen to grasp (and may even be difficult for the strategist or experts to explain) can lead to very different conclusions about their legitimacy.

The potential for a regulatory dragnet directed against spoofing catching legitimate strategies by mistake is probably the greatest near-term concern that traders should have, because such a dragnet is underway. But the widespread misunderstanding and suspicion of HFT more generally means that over the medium to long term, the scope of the Clayton Rule may expand dramatically.

This is particularly worrisome given that suspected offenders are at risk to criminal charges. This dramatic escalation in the stakes raises compliance costs because every inquiry, even from an exchange, demands a fully-lawyered response. Moreover, it will make firms avoid some perfectly rational strategies that reduce the costs of making markets, thereby reducing liquidity and inflating trading costs for everyone.

The vagueness of the statute and the regulations that derive from it pose a huge risk to HFT firms. The only saving grace is that this vagueness may result in the law being declared unconstitutional and preventing it from being used in criminal prosecutions.

Although he wrote in a non-official capacity, an article by CFTC attorney Gregory Scopino illustrates how expansive regulators may become in their criminalization of HFT strategies. In a Connecticut Law Review article, Scopino questions the legality of “high-speed ‘pinging’ and ‘front running’ in futures markets.” It’s frightening to watch him stretch the concepts of fraud and “deceptive contrivance or device” to cover a variety of defensible practices which he seems not to understand.

In particular, he is very exercised by “pinging”, that is, the submission of small orders in an attempt to detect large orders. As remarkable as it might sound, his understanding of this seems to be even more limited than Michael Lewis’s: see Peter Kovac’s demolition of Lewis in his Not so Fast.

When there is hidden liquidity (due to non-displayed orders or iceberg orders), it makes perfect sense for traders to attempt to learn about market depth. This can be valuable information for liquidity providers, who get to know about competitive conditions in the market and can gauge better the potential profitability of supply ing liquidity. It can also be valuable to informed strategic traders, whose optimal trading strategy depends on market depth (as Pete Kyle showed more than 30 years ago): see a nice paper by Clark-Joseph on such “exploratory trading”, which sadly has been misrepresented by many (including Lewis and Scopino) to mean that HFT firms front run, a conclusion that Clark-Joseph explicitly denies. To call either of these strategies front running, or deem them deceptive or fraudulent is disturbing, to say the least.

Scopino and other critics of HFT also criticize the alleged practice of order anticipation, whereby a trader infers the existence of a large order being executed in pieces as soon as the first pieces trade. I say alleged, because as Kovac points out, the noisiness of order flow sharply limits the ability to detect a large latent order on the basis of a few trades.

What’s more, as I wrote in some posts on HFT just about a year ago, and in a piece in the Journal of Applied Corporate Finance, it’s by no means clear that order anticipation is inefficient, due to the equivocal nature of informed trading. Informed trading reduces liquidity, making it particularly perverse that Scopino wants to treat order anticipation as a form of insider trading (i.e., trading on non-public information). Talk about getting things totally backwards: this would criminalize a type of trading that actually impedes liquidity-reducing informed trading. Maybe there’s a planet on which that makes sense, but its sky ain’t blue.

Fortunately, these are now just gleams in an ambitious attorney’s eye. But from such gleams often come regulatory progeny. Indeed, since there is a strong and vocal constituency to impede HFT, the political economy of regulation tends to favor such an outcome. Regulators gonna regulate, especially when importuned by interested parties. Look no further than the net neutrality debacle.

In sum, the Clayton Rule has been around for the good part of a century, but I fear we ain’t seen nothing yet. HFT doesn’t suit a lot of people, often because of ignorance or self-interest, and as Mr. Clayton observed so long ago, it’s a short step from that to an accusation of manipulation. Regulators armed with broad, vague, and elastic authority (and things don’t get much broader, vaguer, or more elastic than “deceptive contrivance or device”) pose a great danger of running amok and impairing market performance in the name of improving it.

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February 28, 2015

Vladimir Putin: Cynical Prophet

Filed under: Politics,Russia — The Professor @ 12:22 pm

In 2012, Putin said this:

In 2012, Nemtsov spoke to Foreign Policy, calling for sanctions against officials in Putin’s government for human rights violations.

That year, Putin warned during a speech that a leader of the opposition might be targeted for assassination. “They are looking for a so-called sacrificial victim among some prominent figures,” Putin said. “They will knock him off, I beg your pardon, and then blame the authorities for that.”

This was the line Putin’s creature Peskov was peddling immediately after Nemtsov was murdered, and of course it will be the primary argument made to defend Putin, attack critics, and to justify the mass targeting of the opposition. A very flexible weapon, that: useful in both defense and offense.

So interesting to know that it had been prepared in advance, ready to be whipped out at the appropriate moment.

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February 27, 2015

Is Nato a Threat to Russia? If Only.

Filed under: Economics,Military,Politics,Russia — The Professor @ 8:53 pm

Putin and Lavrov and the Russian leadership  routinely rant about Nato and the threat it poses to Russia. They demand that Ukraine pledge not to join Nato as a condition for a resolution of the Russian invasion of the country. Sadly, numerous “realists” in the West just as routinely repeat and rationalize the Russian fears, and blame the current parlous state of Russo-Western relations on the post-1991 eastward expansion of Nato. (Yeah. I’m looking at you Stephen Walt and Ian Bremmer.)

This raises the question: Are the Russians and their Western apologists serious? If so, it calls into question their mental state.

The idea that Nato qua Nato poses a threat to invade Russia is risible. Hell, Nato’s ability to defend its eastern marches is quite uncertain.

Even if one ignores the fact that Nato has no intent to engage in a land war against Russia, on the basis of military capability Russia would have nothing to fear from Nato even if it was hard on Russia’s borders. Virtually all of Nato’s ground combat power is embodied in American units, which have almost totally withdrawn from Europe to CONUS. They pose no threat to Russia from Fort Hood or Fort Stewart or Fort Riley or Fort Bliss, and even if they moved into Poland-and hell, into Ukraine-they would not threaten Russia. Their numbers are insufficient, and the logistic obstacles of attacking Russia  are beyond daunting.

As for the rest of Nato, it as become a mockery of a military alliance. Only France spends more than 2 percent of GDP on defense. The Germans have stinted on defense: its military expenditures are closer to 1 percent of GDP than the Nato “standard” (honored more in the breach than the promise) of 2 percent. They have sold off a large portion of their modern armor. Recent reports state that a large fraction of its aircraft are inoperable. A particularly shocking story states that a supposedly elite unit attached to Nato’s rapid reaction force had to train with broomsticks at a recent exercise, due to the lack of machine guns. As for the Dutch, Belgians, and other assorted Lilliputians, they couldn’t threaten anybody.

Out of area operations are unthinkable. Even modest efforts in Libya (carried out almost entirely by airpower) and Africa (e.g., Mali) were dependent on US airlift, refueling, and reconnaissance assets.

European navies are similarly shrunken and incapable of projecting power.

Yes, the US has the capability of inflicting huge damage on Russia, but other Nato countries enhance that capability not by one whit. And virtually all of that capability is based in the United States proper.

So why are the Russians always on about Nato? Do Putin and the military realize that the alliance presents no danger, but just hype the threat because it gulls the domestic hoi polloi and credulous Westerners? Or are they so paranoid that they see threats where none exist?

I think it may well be some of both, but more of the former. By claiming Nato is a military threat, Russia gets to play the victim, an act which many at home and abroad fall for, and which provides a cover for the real reasons for Russia’s hostility. Putin et al fear the West, but more because they know that Russia cannot compete against it economically, politically, and culturally. They want to exploit, in a colonialist way, the ex-Soviet space. Ukraine was a classic example. Corrupt ties between Russia and Ukraine enriched Russian and Ukrainian thugs alike. Maidan threatened all that.

Note that what precipitated the crisis with Russia was not a Ukrainian move towards Nato-that was not on the table, and the very idea did not garner majority support in the country last year. Rather, it was Ukraine’s move towards greater economic integration with Europe that sparked Putin’s ferocious reaction. In addition to threatening the loss of markets for Russia’s non-competitive products, greater integration with Europe would have helped nudge the country down the path towards better governance and less corruption. This threatened the interests of Russia’s kleptocracy (over which Putin reigns) as as much as it did Ukraine’s. To that must be added an indirect threat that the example of an ex-Sovok republic moving towards political and economic modernity would  pose to a retrograde Russia.

At least that’s what I think is the most likely explanation for Russia’s unrelenting drumbeat against Nato. But I cannot rule out rampant paranoia. The Nemtsov murder also betrays considerable paranoia, as the opposition poses no real political threat to Putin.

What I can rule out metaphysically is that Nato is an actual military threat to Russia. To quote Patton, European forces in Nato couldn’t fight their way out of a piss-soaked paper bag even if attacked, let alone pose an offensive threat to a vast continental nation like Russia. And the Americans are very, very far away. Which means that Russian ranting about Nato is either camouflage for their well-grounded insecurity about their ability to compete economically, socially, and politically with the West, or the product of colossal paranoia, or both.

Regardless, it means that the only way that Russia can conceive of co-existing with the West is along the lines of the Yalta model, with the only question being where the lines are drawn. The sooner the West recognizes this, and moves beyond its romantic notion of a “special”, or even non-adversarial, relationship with Russia, the better. But the persistence of these romantic ideas even in the face of Russian aggression in Ukraine and the threat of more in the Baltics and elsewhere suggests that this won’t happen soon enough.

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Putin Reenacts the Kirov Assassination

Filed under: Military,Politics,Russia — The Professor @ 6:15 pm

Russian opposition figure Boris Nemtsov has been gunned down literally in the dark shadows of the Kremlin’s spires.

Just when you thought that Russia could not become more twisted and disturbing, something like this happens.

With a chutzpah that puts  OJ Simpson’s pledge to track down the real killers to shame, Putin announced that he is putting his Chekist skilz to work and taking personal charge of the investigation. This is to ensure that no mistakes are made that could result in the identification of the real executioners. There are frames to be fitted.

Through his creature Peskov, Putin denounced the crime as a “provocation,” fulfilling a prediction I had made on Twitter only moments before that he would use this killing to eliminate many enemies, not just one. This assassination will not be a two-fer. It will be an N-fer. Nemtsov will not be the only enemy eliminated: his death will be the pretext for eliminating many more, on the model of “for my friends, everything: for my enemies, the law!”

The narrative will be that this was part of a plot to blacken Putin’s name, and every-and I mean every-perceived enemy foreign and domestic will be implicated. Numerous, mutually contradictory conspiracy theories will be advanced and pursued simultaneously. These will permit the investigation, arrest, and prosecution of myriad Putin enemies, and the intimidation of many more.

In other words, we are going to see a reprise of the Kirov murder, which Stalin exploited to justify the purges that began soon thereafter. Note the similarity:

“Comrade Stalin personally directed the investigation of Kirov’s assassination. He questioned Nikolayev at length. The leaders of the Opposition placed the gun in Nikolayev’s hand!” (Barmine, Alexander, One Who Survived, New York: G.P. Putnam’s Sons, 1945.)

Why Nemtsov? He had long been a thorn in Putin’s side, authoring (along with Vladimir Milov) several white papers accusing Putin of gargantuan corruption. Recently, he had been an outspoken opponent of the war in Ukraine. He was organizing a peace rally to take place Sunday, and was allegedly on the verge of releasing another white paper documenting Russian participation in the Ukraine war.

Perhaps the anti-war activities and revelations about Putin’s lies about Ukraine were the proximate cause of Nemtsov’s killing. But I think that the murder serves a far larger purpose for Putin. It eliminates a gadfly, yes, but Nemtsov was hardly a threat. But a la Stalin and Kirov, the murder gives Putin a pretext to unleash a full-scale repression.

Will Obama, Merkel, and the other assorted cringers finally be forced to face up to the reality of what they are dealing with in the Kremlin? Call me a cynic, but I seriously doubt it.

Do not underestimate how bad things can get in Russia. And consider this happy thought. Stalin wasn’t embroiled in an international confrontation, and didn’t have nukes, when Kirov was killed (likely on his orders). Putin is, and does.

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Anna Chapman’s Bank Says: “I Don’t Want to Go on the Cart!”

Filed under: Economics,Politics,Russia — The Professor @ 10:37 am

The past months have been chock full of episodes of Russian absurdity. Some of them are quite disturbing. Some are rather amusing. This story involving the Central Bank of Russia’s seizure of Russian lender FundServisBank is a particularly good example. The absurdity begins-but only begins-with the fact that it counts Anna Chapman as one of its “top executives.” What better signal of top notch leadership could you ask for?

The linked article includes a photograph of Anna delivering deep thoughts on “entreprenurship” (complete with diagrams!): apparently spelling was not something that Anna quite nailed during her soiree in the US.

But that’s only the beginning. The bank apparently is furious at the CBR for depriving it of its option to gamble for resurrection:

FundServisBank claimed Wednesday that it had no financial problems.

“From a purely economic point of view the bank has no problems … you start to wonder who is behind this,” FundServisBank spokesman Grigory Belkin told The Moscow Times.

“Novikombank is taking the place of FundServisBank,” Belkin said.

“It’s like there is an experienced doctor who appears and says you are ill, fatally ill. You say ‘I am alive,’ but he says ‘no, no, no!'”

This brings to mind the classic bit from Monty Python and the Holy Grail, with FundServisBank doing a turn in the role of Dead Person, Novikombank playing Customer, and the CBR playing Mortician:

MORTICIAN: Bring out your dead!
CUSTOMER: Here’s one — nine pence.
DEAD PERSON: I’m not dead!
MORTICIAN: What?
CUSTOMER: Nothing — here’s your nine pence.
DEAD PERSON: I’m not dead!
MORTICIAN: Here — he says he’s not dead!
CUSTOMER: Yes, he is.
DEAD PERSON: I’m not!
MORTICIAN: He isn’t.
CUSTOMER: Well, he will be soon, he’s very ill.
DEAD PERSON: I’m getting better!
CUSTOMER: No, you’re not — you’ll be stone dead in a moment.
MORTICIAN: Oh, I can’t take him like that — it’s against regulations.
DEAD PERSON: I don’t want to go in the cart!
CUSTOMER: Oh, don’t be such a baby.
MORTICIAN: I can’t take him…
DEAD PERSON: I feel fine!
CUSTOMER: Oh, do us a favor…
MORTICIAN: I can’t.
CUSTOMER: Well, can you hang around a couple of minutes? He won’t
be long.
MORTICIAN: Naaah, I got to go on to Robinson’s — they’ve lost nine
today.
CUSTOMER: Well, when is your next round?
MORTICIAN: Thursday.
DEAD PERSON: I think I’ll go for a walk.
CUSTOMER: You’re not fooling anyone y’know. Look, isn’t there
something you can do?
DEAD PERSON: I feel happy… I feel happy.
[whop]
CUSTOMER: Ah, thanks very much.

First the Bruce Willis Bank. Now the Anna Chapman Bank. Is there nothing sacred that Russia’s creeping financial crisis will spare?

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February 24, 2015

Incoherence on Display: The FSB Head Transformed From Interlocutor to Persona Non Grata in a Week

Filed under: Military,Politics,Russia — The Professor @ 3:22 pm

John Kerry has criticized Russian actions in and lies about Ukraine. He hinted that further sanctions could be forthcoming, and that the head of the FSB could be targeted.

Wait a minute. Just last week the head of the FSB was considered a worthy participant in the debate on the subject of terrorism: he headed the Russian delegation to the Countering Violent Extremism Summit. How ludicrous, and schizo, is that? The guy goes from interlocutor to persona non grata in a period of mere days. To quote Casey Stengel: can’t anybody here play this game?

Any sanctions forthcoming will likely have the opposite of the intended effect. Putin will interpret them as demonstrating a lack of seriousness, a token response meant to keep up appearances, rather than as a serious challenge. He will view such actions as a green light, not a yellow let alone a flashing red. He will understand that he faces an irresolute, incoherent, and timorous opposition, and will act accordingly.

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Omar the Storyteller Edits His Tale Yet Again

Filed under: History,Military,Politics — The Professor @ 3:02 pm

Omar the storyteller is back at it, with another eager scribe, this time from the Guardian. The basic contours of his tale remain the same, but a crucial detail has shifted yet again, and the story has gotten yet more elaborate. Most annoyingly, he still escapes any serious questioning about the problematic features of his narrative.

The crucial detail that changes relates to Kayla Mueller’s denial that she was his wife:

After being interrogated, beaten and released, Alkhani returned to Aleppo – not Raqqa, as previously reported – to try win Mueller’s release, claiming she was his wife for more leverage. When allowed to see her briefly, she appeared unhurt and a little plumper. She cried. Apparently unaware of his ruse, she denied being his wife, foiling the plot.

In previous tellings, al Khani and Mueller had planned the marriage ruse for the very purpose of using in the event that they were taken captive. So she forgot? That would be pretty remarkable. In another telling, Omar hypothesized that she denied being his wife to save him. In another telling, he didn’t know why she denied it. The many versions of this crucial detail in the story raise some serious questions about Omar’s veracity. Not that anyone from he steno pool has bothered to point out these inconsistencies to him.

The story of the reason for their trip to Aleppo has become more elaborate. Versions 1.0-3.0 (I work from memory: the story has more versions than Windows) had him going to repair the broken WiFi at the Medicins sans Frontiers hospital in Aleppo. This time is is not going to fix it, he’s installing the whole damn thing:

Instead of taking photographs, Alkhani says his mission was to bring and install internet equipment at a hospital run by aid agency Médecins Sans Frontières (MSF), using IT skills he learned while working with foreign journalists in Damascus several years earlier, he said.

Funny that he never mentioned that before. It’s not like “bringing and installing internet equipment” is a small detail, and it certainly entails much more effort and planning that a quick trip to fix a connection. I also wonder whether he enhanced the magnitude of the task and dropped in the the stuff about his IT skilz  because of questions that some people (cough, cough) had raised about why MSF would have relied on him, and why he would have run such huge risks to be a repair guy.

Another key change in detail. In previous versions, he ventured to the center of the Isis snake pit-al Raqqa. In this version, he went to Aleppo. Something of a difference, and not the kind of detail one would forget. Why the change? Has someone expressed incredulity that he could waltz into Raqqa-which Isis runs with a  crazed, bloody grip-so he is backing off from that claim?

Further elaborations include Mueller venturing into Aleppo in a hijab to conceal her identity, which she discarded in the hospital because she felt so at ease there. Funny he left that out before.

Curiouser and curiouser.

Of course, like all of the other reporters hanging on Omar’s every word, the Guardian’s Rory Carroll apparently did not ask one serious question along the lines of what I posted earlier. Nor did he point out the inconsistencies and progressive growth in the tale, even though such increasing vividness is often a major tell of a fabrication.

Most importantly, Carroll did not ask how it was possible that al Khani emerged unscathed from the Isis snake pit not once, but twice, despite his high profile in the Syrian resistance and extensive contact with western journalists. Hell, Isis can’t even get along with Al Qaeda, let alone the other disparate branches of the Syrian resistance, and is deeply suspicious of westerners and contacts with them. What magic words did Omar utter to convince them that he wasn’t a spy? Must have been pretty powerful words, given the paranoia and hatred that characterizes Isis.

In other words, another story, and no sense of being closer to the actual truth. The reverse, actually.

One more word about the Mueller murder. Her family blames the Obama administration’s ransoming Beau Bergdahl for making Isis more obdurate in its negotiations for Kayla’s release. Not that you’ll see this get much attention, given how it makes Obama look bad in multiple ways.

And speaking about Bergdahl, a few weeks ago there were reports that the Army had reached a decision regarding a court martial. The Pentagon threw a fit, and since then there has been radio silence. The Army has more than enough time to decide how to proceed. The lack of action reeks of command influence and the subversion of military justice for political reasons.

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February 18, 2015

Ukraine Grieves: Putin Gloats

Filed under: Military,Politics,Russia — The Professor @ 9:55 pm

Ukraine bowed to military reality and hastily withdrew its remaining forces from Debaltsevo. There are only so many Alamos that one country can survive. It was unwise in the extreme to have attempted to defend that salient for so long.

Yes, an earlier withdrawal would have damaged Ukrainian morale, but the flight under the current circumstances has harmed morale far more than would have been the case earlier. Not least because it has given Putin the opportunity to gloat. Twisted little man that he is, he seized upon it:

“Of course, it’s always bad to lose,” Putin told reporters. “Of course it’s always a hardship when you lose to yesterday’s miners or yesterday’s tractor drivers. But life is life. It’ll surely go on.”

Not only is this an unchivalrous swipe at Ukraine (which he despises as much as he covets), it is a gratuitous insult directed at Merkel and Obama and the West generally. The reference to “miners and . . . tractor drivers” implies that Russian forces had nothing to do with Ukraine’s humiliation at Debaltsevo, when he knows, and knows that everyone else knows, that they had everything to do with it. Putin is saying, in essence: “Yeah. I’m shamelessly lying about Russian troops and equipment being in Donbas. What are you going to do about it? I know exactly what you are going to do about it: nothing.”

And in that, he’s correct. Today “Germany said it was too early to call the broader Minsk peace plan dead or ratchet up sanctions against Moscow.” It’s not dead. It’s resting. It’s stunned. It’s pining for the steppes. Extend and pretend is the European response to Russian depredations, just as it has been to fiscal profligacy in the south.

One can only hope that these words come back to haunt him. That his hubris calls forth nemesis.

No eulogist will say of Putin: “He was magnanimous in victory.” Well, given that the eulogist will be Russian, and perfectly capable of saying up is down with the straightest of faces, he probably will.

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Obama Delivers Another Speech From the Banks of Denial

Filed under: History,Military,Politics — The Professor @ 8:00 pm

Very early in his first term, Obama stood near the banks of the Nile and delivered a speech on the relationship between the west and Islam that was praised effusively. It was widely predicted that this speech would heal the civilizational rift that had long existed, and had been cracked wide open by the evil Bush and his tribe of neocons.

That’s surely worked out well, hasn’t it?

If you read the speech, it is full of banalities, bromides, false history, criticism of the west, and condescending portrayals of Muslims as victims of outside forces. And we are witnessing the consequences of that vision put into presidential action.

Not to be deterred by reality, Obama spoke at his Summit on Violent Extremism, and basically expounded the same vision, tweaked slightly to address the current situation. That is, it was yet another speech delivered on the banks of denial.

There’s no transcript yet, but you can get the idea from this LA Times oped that ran under his name. It’s what Marie Harf said, only longer, basically.

Obama’s diagnosis of the causes of “violent extremism” is fundamentally flawed, and predictably progressive and materialist. In his view, it is caused by economic deprivation, corruption, and poor governance. Economic development, the eradication of corruptionm and reforming government to allow the disaffected to “address legitimate grievances through the democratic process” are essential in combating terrorism.

A few comments.

First, this is a very dubious prediction as an empirical matter. Corruption, poverty, and undemocratic governments are the rule, rather than the exception, throughout a good portion of the globe. Most of these benighted areas are not afflicted by “violent extremism” of the kind that is threatening the Middle East, parts of Africa, and even Europe (although they may be violent places, e.g., Venezuela or South Africa). Thus, these variables have little explanatory power.

What does? The very thing Obama is at great pains to deny: Salafist strains of Islam tracing their origins to Ibn Taymiyyah.

Intra-country comparisons make this plain. Take Nigeria, a notoriously corrupt, wretchedly governed, poor country. These conditions prevail throughout the entire country, but although violence is ubiquitous, extremist movements are found almost exclusively in the Muslim north, and are Islamist. They are not found in the non-Muslim south, even though it is also poor, corrupt, undemocratic and abysmally governed.

Similarly, Thailand’s and the Philippine’s insurrectionary movements are concentrated in Muslim regions, and are Muslim supremacist in nature.

These intra-country comparisons show that holding governance, corruption, and poverty roughly constant, the variation in the prevalence of extremist political movements across regions is explained by variations in the religious makeup of these regions.

Second, it is beyond rich to claim that democratic reforms will tamp down violent political movements. Islamist movements detest democracy with a passion. In their minds, it is an un-Islamic “innovation” (in the formulation of Taymiyyah). It is something that they are fighting to destroy, not fighting to create. Attempts to democratize, or to impose democracy, would only spur these people to greater violence.

Islamists use democracy mainly as an instrument to destroy it, and to obtain power. The “Freedom and Justice Party” (aka the Muslim Brotherhood) in Egypt is an excellent example. As soon as Morsi had been voted in, he and the Brotherhood began a systematic campaign to make sure they could not be voted out. Ditto with Hamas in Gaza. Democracy was purely a means to power, and something to be destroyed after power had been achieved.

Third, even if Obama’s diagnosis was correct, if success against terrorism requires making Middle Eastern nations democratic, uncorrupt, tolerant, and governed by the rule of law, we might as well give up now. It’s more likely that I will ride a unicorn to Mars than that these things will happen.

Fourth, Obama’s prescription is neocon to the core. Bring democracy and freedom to the Middle East, and peace and prosperity will flourish. How bizarre is that?

Obama hit all of his usual notes. All religions are violent: Islam is not unique in this regard. He even managed to bring Timothy McVeigh into it. Muslims have been “woven in the fabric of America since the founding.” Fun fact that I bet you didn’t know: Muslims helped build our railroads! And you just thought it was Irishmen and Chinese, you bigot you.

He also inveighed against Islamophobia, capped with a treacly story about getting a Valentine from an 11 year old Muslim girl who expressed fear that people hated all Muslims. (He didn’t mention that if the girl attempted to celebrate Valentine’s Day in ISIS territory, she risked a flogging or a stoning.) This is incredibly condescending, and insults hundreds of millions of Americans who are more than capable of judging people on individual behavior, and who do not lump all Muslims together.

He reprised his role as the determinant of what is and what isn’t legitimate Islam, effectively declaring ISIS and al Qaeda et al takfiri. Kind of presumptuous for a kafir, especially since takfir is reserved for Mohammed or the caliph.

In making this declaration he used his usual argument that most Muslims reject Salafism (though he did not use that word).  This is another of his straw men. Even if true, it does not change the fact that ISIS, the Muslim Brotherhood, and all the other Islamist groups ardently believe themselves to be extremely faithful adherents to the truth revealed by Mohammed. They are fundamentalists in the truest sense of the word, and view those Muslims who reject their vision as blasphemers and apostates: anything that is not in the Koran, or which post-dates Mohammed and his companions, is un-Islamic. In their eyes, they are the true followers of Mohammed, and nothing Barack Obama says is going to convince them otherwise.  Put differently, Obama’s opinion on the legitimacy of their claims to be Muslims means exactly squat.

In practical terms, Obama endorsed restrictions on government surveillance of Muslims, thereby buying into an agenda being pushed hard by CAIR, which just happens to be a Muslim Brotherhood offshoot. In so doing, he knocked down another of his straw men, and in the process, slurred law enforcement: “Nobody should be profiled or put under a cloud of suspicion simply because of their faith.” Of course not. Who said otherwise? Is he suggesting that has happened? It sure sounds like it.

All in all, just what you should have expected. An exegesis on “violent extremism” that denies the fundamental nature of the threat, and denies the undeniable roots of movements that are ripping apart vast swathes of the Middle East and Africa in one specific religion, which posits causes that are present where the alleged effects are not, and which denies the cause that is as plain as the nose on your face. Such a fundamental-and willful-misunderstanding of the nature of the threat and its causes will inevitably undermine efforts to fight it. Indeed, it is already doing so.

As Mark Twain said, “denial ain’t just a river in Egypt.” No, it ain’t. It is the foundation of Obama’s beliefs about terrorism and how to combat it.

 

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February 17, 2015

Questions no journalists (like those at Daily Beast) are asking

Filed under: History,Politics — The Professor @ 8:32 pm

The Daily Beast has added to the Omar-Kayla story, with an interview with Omar. So has the AP. These pieces cannot be called journalism, really. They are just stenography. When journalists decide to go beyond being merely transcribers, and ask some serious questions, here are some that need answering. I am skeptical this will happen, because many journalists obviously know al Khani, and seem to be intent on protecting him.

I will update as ideas come to mind. And you all can feel free to play at home, and submit questions via the comments.

Someone purporting to be Omar al Khani dropped a comment saying that he would answer questions. Here’s your chance: some proof of identity is necessary to make answers credible.

  1. How many ISIS prisoners have been released just once, let alone twice?
  2. Did ISIS know Omar’s identity and previous activities? When he was initially captured? If not, did they learn during his period of captivity (perhaps through torture)? Was he questioned about his activities in Syria? What identification did he have in his possession?
  3. Is it really credible to believe that ISIS did not know his identity and activities, or would release him before they did? After all, al Khani was an extremely well-known and connected (not to say self-promoting) presence in Syrian opposition circles, and on social media in particular: Google searches turn up considerable information about him. (We know of ISIS’s intense interest in exploiting social media.) As a photographer he spent considerable time in Syria. Surely he attracted attention. He was not just some guy.
  4. ISIS is notorious for the ferocity with which it deals with any other group in Syria, be they secular (by Syrian standards) oppositionists, rival Salafist groups, or the Muslim Brotherhood. They are noted for takfir. They are also notoriously paranoid, and al Khani’s activities were certain to excite that paranoia. How was al Khani able to persuade them, not once, but twice, that he was not a spy, or a threat, or merely an apostate?
  5. During his work in Syria, did al Khani have any dealings with ISIS? With whom? What was the nature of these dealings?
  6. Who funded al Khani’s operations in Syria 2011-2013? He made an allusion to assistance from individual members of the Muslim Brotherhood but seemed at pains to deny an MB connection. He also referred to help from Turkey. Was ISIS interested in how he was funded?
  7. Were there other prisoners that were held with al Khani who were (a) released, and (b) could corroborate his story?
  8. The various articles (other than the AP) state he was held two months on each occasion. Yet he had Facebook posts less than one month after his capture in August of 2013. The AP article says he was held “about 20 days.” What explains the discrepancies?
  9. In some versions of the story, al Khani says he does not know why Mueller did not follow their pre-arranged plan to claim she was his wife. In another version, he says she denied she was his wife in order to save him. Why the different versions?
  10. Why would it have made a difference if they were married, or just engaged? If she wasn’t Muslim, wouldn’t claiming that he was married to her have put Omar into jeopardy with ISIS? Or had she converted?
  11. Omar claims that Kayla Mueller was the love of his life. But he alluded to her only once on Facebook prior to his recent statement, even though he was actively posting about his photographs and his film. Why the silence? Did he make any statements about her at his public appearances? Was he continuing to attempt to secure her release? What was he doing?
  12. In the recent articles, al Khani claims that he believed that it was too dangerous for Mueller to go to Syria but that she persisted and he relented. The most obvious inference to draw from these accounts is that she had not been to Syria before. But she had posted two photographs from “Souria” on Facebook. How can this discrepancy be explained?
  13. The various articles contain chronologies of Omar’s life from 2010-2014 that are not consistent. Exactly when did he go to Sudan? When did he leave Sudan for Cairo? Where did he go when after leaving Cairo? Where/when was he with Mueller? Did he participate in, organize, or assist in the Tahrir Square protests?
  14. Why would he, of all people, be recruited to fix an internet connection in Aleppo? Aleppo was one of the most dangerous cities on earth at the time. Why would someone run such a huge risk to perform such a trivial task? Why would someone endanger their girlfriend in the bargain? Or was there another reason to go to Aleppo?
  15. Is al Khani in discussions with anyone for a book or movie deal?
  16. Ruth Sherlock of the Telegraph says she knew Kayla Mueller. Moreover, she quoted Omar frequently.  Does she know his real name? Why conceal it? Rebel groups must know. Did she attempt to verify any of his claims, about the periods of captivity, the attempted rescue, or his biography more generally? Sherlock included al Khani in a book, which she states is “a collaboration with a BBC journo & a theatre director for a play. Not all is literal.” Is there anything in the book about al Khani that is fictionalized (i.e., not “literal”)? If so, what? Is it really a good idea for a journalist to include people she interviewed frequently in a semi-fictional book?

Like a say, just a start. But it’s necessary to start somewhere.

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