Streetwise Professor

One of the most revealing, and bizarre, aspects of the Paris aftermath is the frenzied attempt to explain away the reports that a Syrian passport had been found near the pieces of one of the suicide bombers. This would raise the possibility that terrorists were infiltrating Europe under the cover of the flood of refugees. This would pose a serious challenge to those invested in the grandiose humanitarian gesture of opening Europe’s borders.

The straw that most of the rationalizers grasped was that the passport was evidently forged, and not well.

How this somehow undercuts the possibility that a terrorist made his way from Syria is beyond me. All that matters is whether the passport was used to secure entry into Europe. And apparently it was. Greek officials verify that the passport was so used. Indeed, the Greeks now report that it is likely that a second attacker passed through Greece.

If a terrorist used a (bad) forgery to obtain entry to Europe, that would make things worse, not better. It would mean that European borders can be breached by amateur counterfeiters.

One of the most risible attempts to deny the possibility that a Syrian cell infiltrated Paris was made by the appalling Anne Applebaum. Applebaum argues-in all seriousness, apparently-that terrorists couldn’t have come from outside, because they knew Paris too well.

Um, it’s known that hundreds, and perhaps thousands, of French Muslims have traveled to Syria, many to fight with the Islamic State. Many of these would be from Paris, and know the city quite well, thank you. Francophone fighters familiar with Paris trained in the heart of darkness of Syria would be the perfect perpetrators of mass terror in the City of Light.

And how the hell were they supposed to get back to France? Flying Air France on their French passports (likely known to French authorities)? No, obviously. But submerging themselves in the tide of migrants and traveling on false documents would be the perfect way to move from Syria to France.

What’s more, having a core team move from Syria would reduce the amount of communication needed to carry out the operation. All the planning could be done in the security of Raqqa, and those coming from Syria could confer face-to-face with their collaborators in France once they arrived. Much reduced need to send orders or plans over communication channels that could be monitored by the DGSE or NSA or GCHQ.

There have been warnings for months about the risks posed by returning jihadis. Those risks have apparently been realized, and it is just disgusting that those invested with accommodating the refugee flood refuse to accept that reality, because their unicorn dreams are so much more important.

This is not to say that all of the attackers came from abroad. Several were apparently French and Belgian. The irony that the Arab neighborhoods of Brussels are out of control of the authorities is too rich (though sick). As if on cue, European Commission President Jean-Claude Juncker said (presumably between drinks), that EU immigration policy would not change as a result of Paris.

So Brussels, the capital of the nanny superstate that claims competence over the most minute aspects of human existence is incapable of performing the most basic function of a state: securing the physical security of its residents. And it is unwilling to admit its failures, and indeed, is committed to compounding them.

Merkel is doubling down too, despite a swelling rebellion in her own party, and Germany at large. Yet another example of the complete disconnect between the European “elites” and the hoi polloi they deign to rule.

Yes. There is a humanitarian catastrophe in Syria. But there are well known ways of addressing it that do not involve throwing open Europe to all comers, terrorists included. Refugee camps could be expanded in Turkey, Lebanon and Jordan. They could be funded much more liberally.

And here’s a wild idea. Why not force the Gulf state oil ticks, the Saudis, Emiratis, Kuwaitis, and Qataris, to (a) pay to support refugees, and (b) actually take in refugees, something they have adamantly refused to do?

They are pouring money into Syria to arm fighters. They should spend even more money to deal with the fallout of their actions.

And it is not just Europe that is willing to take on huge numbers of refugees. The US is as well. Speaking through the appalling incompetent throne-sniffer and toady Ben Rhodes, the administration says it is not reconsidering plans to admit 10,000 refugees from Syria.

“We have very robust vetting procedures for those refugees. It involves our intelligence community, our national counter-terrorism center, extensive interviews, vetting them against all information.”

“What we need to be able to do, frankly, is sort out that foreign fighter flow, those who have gone into Syria and come out and want to launch attacks or those who have connections with ISIL in Syria,” Rhodes said. “We need to be able to have the intelligence base to identify and target those people.”

Why should we have the slightest confidence that the US government will have the ability to do this? It only takes a few errors by the magical intelligence sorting hat to create a Paris-like disaster here in the US.

Europe (and the US) can deal with the way things are, or the way they wish they could be. Grasping at straws about forged passports would mean they are doing the latter. Keep that up, and there will be many more Parises to come.

The Paris attack is obviously dominating the news. It has been claimed by ISIS and the French have formally blamed ISIS.

It of course cannot be determined definitively whether the desultory US campaign against ISIS contributed to the onslaught (to which must be added the downing of the Russian jet, in all likelihood), but it cannot have helped. The first principle of war is The Offensive. Maintain the initiative. Dictate to your enemy, not the other way around.

But for some reason that altogether escapes me, this administration and the Pentagon think it is a virtue to forego the initiative, and implement a “slow burn” strategy. Slowness–a cardinal military sin, according to Napoleon (“The reason I beat the Austrians is, they did not known the value of five minutes”), is somehow part of the Obama plan:

Administration officials described the battlefield additions as incremental boosts to a strategy that remains focused on slowly degrading the Islamic State in its heartland and continuing the slow process of building up local forces that can ultimately defeat the group.

Slowly twice in one paragraph. Incremental. ISIS has seized the initiative. The consequences are predictable.

That is a military abomination.

But let the boss speak for himself. Mere hours before the Paris attack, Obama said that the campaign is working, and that ISIS is contained:

President Barack Obama said that the U.S. strategy against ISIS has “contained them,” but not yet succeeded in its effort to “decapitate” ISIS leadership.

This is his idiocy in a nutshell. Containment has obviously not worked. They have broken out from their sanctuaries in Iraq and Syria to Egypt and Libya and to the heart of Europe.

Further, note the focus on “decapitation.” This is his measure of success.

Decapitation of the ISIS leadership is not a sufficient condition for its defeat. It is also unlikely to be a necessary one. Leaders can be replaced. Decapitation can be part of an operational plan if  an attack takes advantage of the disruption of leadership. But just killing one guy, then killing his replacement, then killing his replacement, accomplishes squat.

Truth be told, our options were highly limited once ISIS rolled into cities. During May-June 2014, they were vulnerable, but Obama, dismissing them as the JV with no extra-regional ambitions, stayed our air power.

Now, since a major ground commitment is not a realistic or desirable option, only an intensified air campaign that will result in substantially more civilian casualties, combined with Kurdish forces, is the only real option to expedite the process of the war. And even that will be unlikely to wrest the initiative away from ISIS.

The West is reaping what it–and most importantly, Obama–have sown.

The Europeans are also confronted with a consequence that many warned against: the possibility that a few terrorist fish would swim in with the sea of refugees. Initial reports imply those fears were realized. But many Europeans are so invested in the refugee narrative that they are unwilling to admit that opening the borders was an insane idea. They cling to the fantasy that humanitarian good motives produce desirable results.

And so they too are reaping what they have sown.

“Supreme Leader” Ayatollah Khamenei has been on the warpath since the signing of the Iran nuclear deal. He has ramped up the vitriolic anti-US rhetoric. He is demanding that all sanctions be lifted before Iran will comply with the terms of the Iran deal. Several Americans-including notably a strong supporter of the Iran deal-have been arrested. He has announced a blockade against US imports. Perhaps most importantly, he is apparently mounting an offensive against President Rouhani, and Foreign Minister Zarif, who were the point men in negotiating the nuclear deal. Khamenei and the mullahs have rejected many pro-Rouhani candidates for the legislature, and made it plain that the Guardian Council has an executive role, rather than merely an advisory one, as Rouhani stated.

So much for Obama’s and Kerry’s publicly stated hope that the nuclear deal would be the first step to moderating Iran’s revolutionary fervor and transforming it from a revisionist power to a responsible one.

But (as @libertylynx has suggested) that may be exactly what is driving Khamenei’s stridency and aggressiveness. Obama and Kerry have clearly placed their bets on Rouhani and other alleged moderates in Iran. Rouhani and the alleged moderates may be indeed making a play for power.

To someone like Khamenei, a dedicated Islamist revolutionary who hates the United States and everything it stands for, this is an anathema and a mortal threat. Furthermore, the US’s role in fomenting the uprisings in Egypt (with some temporary success followed by a Thermidor that still rankles Obama) and Libya and Syria (with catastrophic results) would immediately lead Khamenei and his ilk to conclude that the United States is up to the same thing in Iran. Indeed, a paranoid revolutionary steeped in a belief that the United States controlled Iran prior to the 1979 revolution (and was behind the anti-Mossedegh coup in 1953) likely views an American plot lurking behind every bush.

And he may well have grounds for these beliefs. Obama has repeatedly played the the role of the Sorcerer’s Apprentice in the Middle East, and even though (like the Sorcerer’s Apprentice’s efforts), Obama’s machinations have turned out disastrously, Obama is not known for admitting failure and changing course.   (To Iraq, Syria, Libya, and Egypt, one could also add Turkey, though with a twist: there, Erdogan, with whom Obama claimed to share a bond, is descending into Islamist fascism.) One last grandiose, world-changing scheme may be his last, best hope for a legacy.

But Khamenei’s Iran is not Mubarak’s Egypt. Khamenei, the ayatollahs, and the Iranian Revolutionary Guard Corps are hardened totalitarians and revolutionaries, not corrupt autocrats. They know that the first rule of the dictator is crush the opposition, and that hesitation and weakness are usually fatal. In these circumstances, bet on the hard men with the guns and money (no lawyers necessary) to prevail. And that would be Khamenei, the ayatollahs, and the IRGC.

Churchill is quoted as saying that following Russian politics was like watching dogs fight under the carpet. Churchill may not have actually said that, but even if he didn’t, it is a good description of what seems to be going on now in Iran. I know which dog to bet on, and his name ain’t Moderate.

Fred Hof, former “special advisor for transition in Syria at the U.S. Department of State,” has written a self-flaggelating flagellating piece about his-and the United States’-failure in Syria. It is part damning indictment of himself and the State Department, and part damning indictment of Obama.

A recurrent theme-implicit, not explicit-is Hof’s incredible naiveté. He was repeatedly fooled by the man he was supposedly working with-Bashir al-Assad-and the man he was working for-Barack Obama. He was fooled because he romantically projected his own beliefs on them, and because he engaged in wishful thinking, when he would have been better served to live by Lily Tomlin’s credo: “We try to be cynical, but it’s hard to keep up.”

Hof was-and remains-genuinely shocked that Assad reacted brutally to the first outbreak of opposition to his regime:

I did not think it inevitable that Assad—a computer-savvy individual who knew mass murder could not remain hidden from view in the 21st century—would react to peaceful protest as violently as he did, with no accompanying political outreach.

. . . .

By firing on peaceful demonstrators protesting police brutality in the southern Syrian city of Deraa, gunmen of the Syrian security services shredded any claim Assad had to governing legitimately. Indeed, Assad himself—as president of the Syrian Arab Republic and commander in chief of the armed forces—was fully responsible for the shoot-to-kill atrocities.

Hof actually believed that computer savviness was some marker for civilized values? He believed that Assad would actually care if his crimes were witnessed by the world? Cringemaking.

Look. Dictum 1 of the Dictator’s Handbook says, in bold, italicized type: “Every dictator who has attempted ‘political outreach’ to opponents has ended up at the end of a rope or bleeding in the dirt. Crush all dissent mercilessly.”

Furthermore, Hof’s optimistic view was completely oblivious to Syria’s history. In the 1970s and early-1980s, Assad’s father faced an extreme threat from the Muslim Brotherhood. The Brotherhood came close to assassinating him, and he responded by extirpating the organization in Syria, most infamously by attacking Hama with armor, artillery, and air power, resulting in the deaths of thousands (which Brotherhood propaganda has succeeded in inflating to 40-50,000). Assad no doubt had intelligence about the resurgence of the MB within Syria, and throughout the Middle East generally. He no doubt understood that the “Arab Spring” was largely the Muslim Brotherhood Spring-something that those in the West generally and the US in particular still fail to grasp. Even if he didn’t know these things, he certainly feared them, and was not going to take any chances that the protests in Deraa were fronting for, or would be exploited by, the Brotherhood.

In other words, the chances he would not have responded to any protest with extreme force were somewhere between zero and none.

But the US, and this administration in particular, not only seems oblivious to the Muslim Brotherhood’s malignity, it actually thinks that it is a progressive force in the Middle East.

Hof also took at face value Assad’s representation that he would sever all ties with Hezbollah in exchange for a return of the Golan heights. This was wishful thinking in the extreme. Just how far did Hof think that the Iranians would let Assad proceed down this path? Iran’s interest in Syria is primarily because it is their vital bridge to Hezbollah. Iran is dedicated to Israel’s destruction. If he had tried to sell out Hezbollah to achieve a deal with Israel, the Iranians would have been in a race with the Brotherhood to kill him.

Indeed, Hof understood this at some level, but chose to ignore it:

Fully complicit in the Assad regime’s impressive portfolio of war crimes and crimes against humanity, Iran relies on its client to secure its overland reach into Lebanon.

As for the man he worked for, Hof reminds me of Flounder in Animal House: “You fucked up! You trusted us!“:

My failure to predict the extent of Syria’s fall was, in large measure, a failure to understand the home team. In August 2011, Barack Obama said Assad should step aside. Believing the president’s words guaranteed decisive follow-up, I told a congressional committee in December 2011 that the regime was a dead man walking. When the president issued his red-line warning, I fearlessly predicted (as a newly private citizen) that crossing the line would bring the Assad regime a debilitating body blow. I still do not understand how such a gap between word and deed could have been permitted. It is an error that transcends Syria.

“Such a gap between word and deed” is the essence of the Obama way. And please. Obama ran in 2008 on disengaging militarily from the Middle East. He ran on the view that US military intervention was inevitably counterproductive. He ran in 2012 bragging about ending the war in Iraq, and took the opportunity to remind the world yet again of his belief of the futility of American military engagement in the Middle East.

You see, there are some words that Obama utters that conform to his deeds almost exactly. The key is understanding which words he means, and which ones he doesn’t. Hof again let his magical thinking delude him into believing that Obama meant the things he said that Hof agreed with, instead of realizing that these words contradicted Obama’s core beliefs, and were uttered for the sole purpose of meeting “a communications challenge: getting Obama on “the right side of history” in terms of his public pronouncements.”

Hof deserves credit for admitting his failures so openly, and I can sympathize on a human level. What is disturbing is that his failure is symptomatic of deeper institutional failures in the United States foreign policy establishment. The examples are many, but Syria alone provides some particularly damning ones. How long has the US been chasing the Assad chimera? Remember Warren Christopher panting after Assad père during the Clinton administration? Nancy Pelosi meeting with and gushing over the Chinless Ophthalmologist in 2007? John Kerry chasing after Assad for years, finally dining with him and his wife in Damascus, then saying this?:

“I have been a believer for some period of time that we could make progress in that relationship,” he said. “And I’m going to continue to work for it and push it.”

In the same year, when he once again wanted to go to Syria, his visit was blocked by the Obama administration.

“President Assad has been very generous with me in terms of the discussions we have had,” he said after his March speech. “And when I last went to – the last several trips to Syria – I asked President Assad to do certain things to build the relationship with the United States and sort of show the good faith that would help us to move the process forward.”

He mentioned some of the requests, including the purchase of land for the US Embassy in Damascus, the opening of an American cultural centre, non-interference in Lebanon’s election and the improvement of ties with Iraq and Bahrain, and said Mr Assad had met each one.

“So my judgment is that Syria will move; Syria will change, as it embraces a legitimate relationship with the United States and the West and economic opportunity that comes with it and the participation that comes with it.”

A few years later, of course, Kerry was comparing Assad to Hitler and pressing for air strikes- a call that Obama spurned. A perfect demonstration of Kerry’s lack of judgment, discernment, and just plain seriousness.

No. Fred Hof is not the problem. Fred Hof is a symptom of a bigger problem: the intellectual failings of American foreign policy.

If there’s been a bigger debacle for the US military since St. Clair’s Defeat in 1791 than the fiasco of arming the “moderate” Syrian resistance, I would be hard pressed to name it.

First, there was the fact that the pitifully small number of recruits that we managed to scrape together were either killed or captures no sooner than they had set foot into Syrian territory. Then, other groups turned over arms and equipment to al Nusra to secure safe passage. Then the Russians bombed the snot out of our (CIA-trained) forces while Kerry mewled in protest.

So it was announced that the Pentagon-run train and equip program was being terminated. But check that! The mission has not been ended. Train no: equip yes. We will just give arms to “leaders” we’ve vetted and let them hand them out to . . . whomever.

Meanwhile, in a 60 Minutes interview Obama said that he had been skeptical of arming the opposition from the get-go. (This is no doubt true: remember his dismissive remarks from last year about the futility of arming pharmacists and farmers and expecting them to beat an organized army?)

This immediately raises the questions: (a) then why did you, as commander of chief, permit the program to proceed? (b) if you were going to let it proceed, why didn’t you demand changes to give it a reasonable chance of achieving some success?

What’s more, despite Obama’s alleged skepticism, he is permitting yet another effort. This one would make Rube Goldberg proud. This is so bizarre that you might think I’m playing some sort of joke on you, but I swear, I’m just passing along what’s been reported.

Lo and behold, last night, almost at the exact same time Obama was heaping scorn on the idea of supporting armed opposition groups, a new Syrian resistance group magically appeared: The Democratic Forces of Syria.

It’s sort of the Rainbow Coalition of Syria. Kurds. Arabs. Assyrian Christians. So you should feel all warm and fuzzy about the inclusiveness of the new group.

If you believe the formation this group, and its allegedly ecumenical nature, was spontaneous and indigenous, I have some oceanfront property in Wyoming to sell you.

Bolstered by American arms, the mission of the new group is to advance on Raqqa, and drive ISIS from its Syrian capital. The Kurdish YPG has gained some success against ISIS, and would obviously be the core of any new force.

But we aren’t arming the Kurds! Because that would infuriate Erdogan and Turkey, and he could very well back out of his agreement to allow the US access to Incirlik, and do other nefarious things to kneecap the American efforts (such as they are) against ISIS. So we’re doing this instead:

Officials emphasized that U.S. military aid will go directly to the Arabs, not the Kurds, but the Kurdish fighters stand to benefit from the decision. To date, Washington has hesitated to hand equipment directly to the Kurds. Instead, they send materiel through the central government of Iraq. The new aid will be transported directly to Syria, where Arab groups are expected to launch a new offensive in and around Raqqa, the de facto Islamic State capital, while the Kurds continue to hold border areas where together they have succeeded in routing the militants.

The Kurds are the most effective military force in the region, and the Arabs have been completely unheard from in this sector, so we arm the latter and let the former cool their heels.

From the ridiculous to the absurd is but a single step.

To quote Casey Stengel: Can’t anybody here play this game?

The hysteria over Russian actions in Syria continues. The Russians are making token strikes-at most-against ISIS, and are focusing their firepower on other anti-regime forces in the west of the country.

Well, of course they are. Putin’s objective is to save Assad’s regime. Its core area in the west. The greatest threat is in the west. So that’s where the bulk of the blows will fall.

Today’s cruise missile attack, launched from the Caspian is partly showing off (especially showing off the fact that Iran and Iraq had to concur), but it also makes military sense as part of a preparatory bombardment supporting a counterattack by regime forces, which is apparently in progress. This demonstrates that the Russian air campaign is part of a coherent military operation which integrates air and ground elements. This presents a stark contrast to the air-only US campaign against ISIS, which cannot achieve any decisive result whatsoever. (It remains to be seen whether Russian air support is sufficient to overcome the extreme shakiness of the Syrian army, which wasn’t much to start with and which has been relentlessly ground down by four years of brutal war.) (In contrast to the coherent Russian effort, the US attacks in Syria yesterday involved destroying two “crude oil collection facilities.” Really. No excavators were available?)

There is also hysteria about Russian lying about what they are doing.  This is like attacking a cobra for striking. It’s what they do.

Most of the frenzy focuses on the Russians’ targeting of “our” rebels in the Free Syrian Army. Yes, this is quite deliberate, and a strike at the US for having the temerity of supporting the anti-Assad effort. Putin views this as a part of a broader struggle against the US.

So should the US respond to the challenge frontally, in Syria?  No. And it’s not even a close call.

First, what is the strategic objective to be gained? I find it hard to see an important security interest in Syria. And overthrowing Assad because he’s a monster could be justified, except that monsters-and arguably worse monsters than Assad-will take over. An Assad rout would likely result in a bacchanal of sectarian violence which would result in the extirpation of non-Sunni communities in Syria. There has not been one Middle East war that has ended in anything closely resembling peace, and the circumstances in Syria are even less favorable to such an outcome than in Iraq and Libya.

Second, the idea that the there is a serious “moderate” opposition in Syria is not true today, and arguably never was true. The FSA’s day passed years ago, and our track record of identifying moderate, secular forces in this region is appallingly bad.

Those that are pushing this fantasy include John McCain, who is detached from reality on this issue. Others include journalists Michael Weiss and Hassan Hassan, who have been flogging this narrative for four years, and are frantically doing so now: the more implausible the narrative becomes, the more frenzied they become. One should note that Hassan is tightly connected with UAE, which has been the main supporter of the anti-Assad opposition from the beginning, and Weiss’s connections are murky, and his pom-pomming for a Syrian opposition that is lousy with Islamists raises questions.

(And by the way: I thought the CIA program to arm the opposition was supposed to be covert. Why are we blabbing about it?)

Third, what can be done? The idée du jour supported by left (Hillary Clinton) and right (several GOP candidates, including Rubio, Fiorina, and Christie), is a no fly zone. This is superficially appealing because it relies purely on American airpower, and thus does not require a ground commitment. This virtue is in fact a measure of the non-seriousness of the idea.  It would not have been militarily decisive before the Russians arrived because Assad’s air force played only a marginal role in the conflict. Now it would require a confrontation with the Russians, because it is the Russians that are flying. Why engage in a confrontation that could lead to unpredictable developments elsewhere, and which (per the above) would not result in any material strategic gainer the US?

Rubio goes further, plumping for a “safe zone” that somehow will magically be radical Islamist-free. How this would work outside of some Harry Potter-esque fantasy is beyond me. Further, note the “safe zone” idea is a favorite of Erdogan. Who has been a major supporter of the Islamist groups in Syria. It appears for all the world that Rubio has bought a bill of goods from the GCC and the Turks about the Syrian opposition.

If you look at the correlation of forces (as the Soviets put it), and the strategic stakes, deeper US involvement in Syria makes no sense. The odds of prevailing are low, and the gains from winning are trivial, and likely non-existent.

Russia’s aggressiveness is indeed a concern, and someone with Putin’s mindset will be emboldened if he believes that he will meet no resistance. But an asymmetric response, an indirect approach, is more advisable. Russia’s vulnerabilities are economic and financial, and its greatest sensitivities are on in the Baltics, Poland, and Ukraine.

One last thing. The sputtering denunciations of Putin, notably again by McCain and others, are profoundly counterproductive. They only contribute to Putin’s image as some sort of colossus, which only encourages more aggressiveness and more admiration for him. At the other extreme, the administration’s mewling protests that the Syrian intervention is a testament to Putin’s weakness is just plain pathetic, especially since it is not accompanied by any countermoves anywhere.

Unfortunately, this administration is has neither the intestinal fortitude nor the strategic dexterity to respond effectively, or even coherently. We will have to wait another 15 months at least for a reach change. Unfortunately, there’s not much to look forward to on that front, as none of the Republican candidates have impressed in the least. Rubio particularly disappointed not just because of the safe zone inanity, but because of his clueless remark that Syria is a battle for the future of Sunni Islam: (a) this is not our battle, and (b) it it mimics Saudi and Qatar Sunni chauvinism, and their interests are not ours, in the slightest. (How often has our anger at Iran blinded us to the fact that the Saudis are a deeply malign force too? I actually have a grudging respect for the Iranians. At least they are quite open about their hatred for us.)

We need to pick our battles, and Syria isn’t it. The obsession with it is distracting from the true objective, which should be to construct a coherent strategic response to Putin that exploits our comparative advantages, rather than confronting him where he can exploit his.

There is a lot of hysterical chatter out there about Glencore being the next Lehman, and its failure being the next Lehman Moment that plunges the financial system into chaos. Please. Get. A. Grip.

Comparing the firms shows there’s no comparison.

Let’s first talk size, since this is often framed as an issue of “too big to fail.” In November, 2007, Lehman’s total assets were $691 billion. As of August, Glencore’s were $148 billion. Lehman was about 4.5 times bigger. Moreover, Glencore’s assets include a lot of short term assets (inventories and the like) that are relatively liquid. Looking at Glencore as a $100 billion firm is more realistic. Lehman was much bigger.

Then let’s talk leverage. Lehman had 3 percent equity, 97 percent debt. Glencore about one third-two thirds. Stripping out the short term debt and short term assets, it’s about 50-50.

Then let’s talk off-balance sheet. Lehman was a derivatives dealer with huge OTC derivatives exposures both long and short. Glencore’s derivatives book is much smaller, more directional, and much in listed derivatives.

Lehman had derivatives liabilities of about $30 billion after netting and collateral were taken into account, and $66 billion if not (which matters if netting is not honored in bankruptcy). Glencore has $2 billion and $20 billion, respectively.

Lets talk about funding. Lehman was funding long term assets with short term debt (e.g., overnight repos, corporate paper). It had a fragile capital structure. Glencore’s short term debt is funding short term assets, and its longer term assets are funded by longer term debt. A much less fragile capital structure.  Lower leverage and less fragile capital means that Glencore is much less susceptible to a run that can ruin a company that is actually solvent. That also means less likelihood that creditors are going to take a big loss due to a run (as was the case with Lehman).

As a major dealer, Lehman was also more interconnected with every major systemically important financial institution. That made contagion more likely.

But I don’t think these firm-specific characteristics are the most important factors. Market conditions today are significantly different, and that makes a huge difference.

It wasn’t the case that Lehman failed out of a clear blue sky and this brought down the entire financial system through a counterparty or informational channel. Lehman was one of a series of casualties of a financial crisis that had been underway for more than a year. The crisis began in earnest in August, 2007. Every market indicator was flashing red for the next 12 months. The OIS-Libor spread blew out. The TED spread blew out. Financial institution CDS spreads widened dramatically. Asset backed security prices were plummeting. Auction rate securities were failing. SPVs holding structured products were having difficulty issuing corporate paper to fund them. Bear Sterns failed. Fannie and Freddie were put into receivership. Everyone knew AIG was coughing up blood.

Lehman’s failure was the culmination of this process: it was more a symptom of the failure of the financial system, than a major cause. It is still an open question why its failure catalyzed an intensified panic and near collapse of the world system. One explanation is that people inferred that the failure of the Fed to bail it out meant that it wouldn’t be bailing out anyone else, and this set off the panic as people ran on firms that they had thought were working with a net, the existence of which they now doubted. Another explanation is that there was information contagion: people inferred that other institutions with similar portfolios to Lehman’s might be in worse shape than previously believed and hence ran on them (e.g., Goldman, Morgan Stanley, Citi) when Lehman went down. The counterparty contagion channel has not received widespread support.

In contrast, Glencore’s problems are occurring at a time of relative quiescence in the financial markets. Yes commodity markets are down hard, and equities have had spasms of volatility lately, but the warning signs of liquidity problems or massive credit problems in the banking sector are notably absent. TED and OIS-Libor spreads have ticked up mildly in recent months, but are still at low levels. A lot of energy debt is distressed, but that does not appear to have impaired financial institutions’ balance sheets the same way that the distress in the mortgage market did in 2007-2008.

Furthermore, there is not even a remote possibility of an implicit bailout put for Glencore, whereas it was plausible for Lehman (and hence the failure of the put to materialize plausibly caused such havoc). There are few signs of information contagion. Other mining firms stocks have fallen, but that reflects fundamentals: Glencore has fallen more because it is more leveraged.

Put differently, the financial system was more fragile then, and Lehman was clearly more systemically important, because of its interconnections and the information it conveyed about the health of other financial institutions and government/central bank policy towards them. The system is more able to handle a big failure now, and a smaller Glencore is not nearly as salient as Lehman was.

In sum, Glencore vs. Lehman: Smaller. Less leveraged. Less fragile balance sheet. Less interconnected. And crucially, running into difficulties largely by itself, due to its own idiosyncratic issues, in a time of relative health in the financial system, as opposed to being representative of an entire financial system that was acutely distressed.

With so many profound differences, it’s hard to imagine Glencore’s failure would lead to the same consequences as Lehman. It wouldn’t be fun for its creditors, but they would survive, and the damage would largely be contained to them.

So if you need something to keep you up at night, unless you are a Glencore creditor or shareholder, you’ll need to find something else. It ain’t gonna be Lehman, Part Deux. But I guess financial journos need something to write about.

I had an acid flashback moment when I read this:

Biotechnology stocks took a sharp dive Monday after Hillary Clinton said she would propose a plan to counteract “price gouging” by drug makers.

Ms. Clinton, who is seeking the Democratic nomination for president, was responding to New York Times article published Sunday that told of a price increase for a drug used to treat a life-threatening parasitic infection. The cost of the drug was recently increase from $13.50 a tablet to $750, the story said.

Why? Because Hillary wreaked havoc on pharmaceutical stock prices 23 years ago, when Bill was running for President. Indeed, this is more than a matter of academic interest to me, because I played a role in the fallout from that. In 1993, I wrote a study, titled “Political Rhetoric and Stock Price Volatility,” that contributed to one of the early Clinton scandals. For you see, while blasting pharma companies, Hillary was also invested in a hedge fund that shorted health care stocks, and I documented using standard event study methodology that her speeches led to economically and statistically significant declines in pharmaceutical company stock prices.

In large part as a result of the study, Hillary was subjected to an official ethics inquiry. Her friend-and arguably more-Vince Foster was working on this and other nascent Hillary scandals when he put a bullet in his brain on the ramparts of Fort Marcy. On a more personal note, the study was the direct cause of the end of my employment at the University of Michigan Business School.

For details about the official fallout of this long-ago and long-forgotten study, see footnote 3 and the associated text in the Senate Whitewater Report. For how this played out for me, see this old SWP post. (As an aside, Sara Ellison and Wally Mullin expanded on my study in an article that was published in the JLE.)

As for Hillary, I think an inquiry into her investment holdings is warranted. Given the sleaze of the Clinton Foundation, and her disdain for the rules that little people follow as illustrated by the Home Brew Server, I would not be in the least surprised if the (once, and hopefully not future) Wicked Witch of the West Wing has been less than punctilious in the separation of her financial and political interests.

In my humble opinion, too many people are way overthinking what Putin is doing in Syria. It seems pretty straightforward. A long-time Soviet and Russian client was on the verge of collapse: the loss of Idlib earlier this month, after a long battle which ground inexorably against Assad, represented a major blow. Syria is Russia’s only outpost in the Middle East, and is also important to Iran, with which Russia cooperates because they share a common enemy: the US. Absent Russian intervention, Assad’s destruction appeared imminent.

Meaning that this is more of a rearguard action, defending the rump of the Syrian state, than an offensive thrust. And it is a reaction to events, not a part of some grand geopolitical strategy.

Some get this.

Donbas is a precedent. Direct Russian military intervention only occurred last August when it seemed that the Ukrainian army was on the verge of crushing the rebels. Once the situation stabilized, Putin seemed-and still seems-to be willing to accept a stalemate.

As for the military effect, the major resources committed appear to be aircraft, and ground units to protect them and their bases. The US campaign against ISIS shows that air power alone is unlikely to be decisive. The Russians have Assad’s army to work with, but it is battered and demoralized after four years of war, and even with air support is unlikely to be capable of sustained offensive action. It is probably on a par with the Iraqi army in terms of combat effectiveness (and may be worse), and past months have shown that even with US (and some Iraqi) air support, the Iraqi army can’t wage offensive warfare. I seriously doubt the Syrian army can either, even with additional Russian air support. Thus, the most likely outcome of the Russian intervention is to stave off Assad’s defeat and perpetuate the stalemate.

There is much gnashing of teeth and rending of garments in Washington and Europe, but since they haven’t done anything in the past four years and had no plans of doing anything serious going forward, this reaction is decidedly overwrought.

The administration persists in its pathetic insistence that Assad must go. Today Kerry repeated this demand, but said Assad’s departure doesn’t have to happen on day one or month one. What about century one? That seems feasible.

The US wants to negotiate Assad’s departure, and somehow thinks it can enlist Russia in this effort. That is utterly delusional, especially now that Russia has upped its commitment to Assad. It is also delusional because by making it clear that the US will not do anything serious to combat Assad (especially since that would anger its new BFF, Iran). Our negotiation leverage is therefore bupkis. Therefore, it is better for Kerry and Obama to keep quiet, and let the world think that they are neutered losers, rather than speak up and remove all doubt.

The biggest loser in this is Israel. Iran cares about Syria primarily because it is its bridge to Hezbollah. Israel has periodically launched air attacks in Syria to prevent the movement of advanced weapons (especially anti-aircraft missiles) to Hezbollah in Lebanon. The Russian presence complicates Israel’s problem greatly. But of course, this is probably a feature not a bug from Obama’s perspective.

The puzzle is Turkey. Turkey wants to see Assad’s destruction, and is perfectly fine with replacing him with Islamist radicals. Russian intervention reduces the odds of Assad’s defeat, and this is a defeat for Turkey. I have no idea how someone as erratic  as Erdogan will respond. One response will likely be greater covert support for the jihadists fighting Assad.

In sum, Putin’s actions in Syria will perpetuate a grim status quo, rather than cause a dramatic change in the strategic situation in the Middle East.  What happens going forward depends in large part on developments on the ground. If the current level of intervention is insufficient to slow the crumbling of the Assad regime, how much further will Putin be willing to go? His resources are constrained. As I wrote earlier, he faces daunting logistic difficulties in mounting a bigger intervention.

Regardless, we (in the US) are cast in the role of spectators: as Anthony Cordesman notes (perhaps stating the obvious), at present the US has no realistic military options in Syria. Obama made that choice four years ago, and reiterated his choice in 2013. Putin is now making his choice, and will have to live with the consequences: his options are no more palatable that the US’s (though he does have a coherent objective, which the US does not have and never had). We should leave him to it.

Cast your eyes around the world, and they are likely to land on a scene of conflict and chaos. In the Middle East, obviously, from pillar (Libya) to post (the Persian Gulf). In the center of Eurasia (Ukraine). In the South China Sea and the DMZ. The world situation has not been this fraught since the 1930s.

If you are like me, you crave an explanation. You could do far worse than start with Samuel Huntington’s Clash of Civilizations. Huntington’s article and subsequent book of the same title unleashed a storm of furious criticism when it came out in 1993. But standing 22 years later, Huntington looks prescient, and many of his critics look like utter fools.

The best evidence of this is to look at the antagonists in the most important cockpits of conflicts.

Start with Ukraine. Putin has explicitly invoked the idea of “a Russian world” and has justified his actions in Ukraine and elsewhere as a legitimate defense of Russian people, language, and culture from the assaults of his enemies, especially in the West. Putin and other Russians tirelessly invoke contrasts between Russian civilization and European civilization in particular.

Putin and Russians generally think they are in a Clash of Civilizations.

Next consider China. China’s leadership too views China as a great civilization that was oppressed by others (Westerners, Japanese), and which is now assuming its proper place in the world. They express a clear cultural-civilizational-chauvinism. If anything, the Chinese people are even more aggressively chauvinistic than their leaders.

The Chinese leadership and people think they are in a Clash of Civilizations.

And of course, there is Islam. That Islam believes that it is in a civilizational war with just about everybody, but in particular the West, needs no explication. Yes, there is an intramural civil war within Islam, between Sunnis and Shia, but (a) this is complicated by a civilizational clash between Arab and Persian, and (b) this conflict is in no small part a battle over who will lead the clash of Islam with the infidels.

The jihadis and the mullahs and vast numbers of Muslims generally believe they are in a Clash of Civilizations.

Who doesn’t believe it? The skeptics and doubters reside mainly in one civilization: the Western.

Indeed, Huntington’s harshest critics resided (and reside) in the West. They are, in the main, progressives, which, like top quarks, come in left-handed (mainly those who self-identify as progressives) and right-handed (e.g., neocons as epitomized by Francis Fukuyama) varieties. Despite their differences in specific policies, they share a dialectical view that history progresses in one direction, and that it is relentlessly moving to a final state, and that in the end, humanity as a whole will converge to this state. The left progs’ final state is socialist/statist: the right progs’ final state is liberal and democratic.

Obama is clearly a progressive, so understood. His most consistent trope in responding to conflict, with Putin or the Islamists, is to say that history will leave them behind; that they are swimming against the tide of history. Obama said this to Putin about Ukraine: he just said it about Syria: he has said it about Isis. His policy towards Iran is predicated on the belief that once Iran is readmitted in into the community of nations, it will become a Normal Country, and discard its Islamist civilizational mission.

So part of the failure of many of those in the West to believe in the Clash of Civilizations is rooted in a worldview that such conflicts are an atavism that will disappear as the world converges to-progresses to-some homogenous end state in which all existing differences are dissolved.

But that’s not the only part. Another part is a paradox of Western civilization. The West’s distinguishing characteristics include skepticism, criticism and doubt. That very skepticism, criticism and doubt have led many (especially on the left, but also many on the right) to conclude that Western civilization is flawed, corrupt, defective, and certainly not superior to any other civilization, and hence not worth fighting for. Thus, the self-criticism that defines Western civilization prevents many in it from fighting for it. In this respect too, Obama is an exemplar.

A big part of the reason the past few years have seen a waxing of the Clash is precisely that the leader of the leader of Western civilization has declined to fight for it, due to a rather strange combination of fatalism (history will progress and nations will converge due to fundamental historical forces) and a belief that its civilization has no right to assert itself, because of its inherent flaws. This is in contrast to the American role post-1945, which self-confidently (on the whole, with exceptions like post-Vietnam) believed in the superiority of Western (and specifically American) civilization, and exerted its power (economic, social, cultural, and often military) to create and maintain a rough order even at the fault lines of civilizational conflict (notably the Middle East, but also between Europe and Russia, and between China and the rest of Asia).

So one way to understand the mess that the world is in now is to take Huntington’s idea of enduring antagonisms and frictions between competing and incompatible civilizations, and add the retreat of the one power that largely kept those antagonisms and frictions under control.

We are arguably in the midst of a new world war, though one that is fortunately, for now anyways, not as cataclysmic as the two that preceded it. But it is a different type of world war not only because of its lower intensity, but because it is not a war between two dominant blocs. Instead, it is a multipolar war with at least four major civilizations jostling at various points around the globe. This multipolarity makes the struggle less predictable, and far more confusing. It will only become more so unless the West, and in particular the US, realizes the nature of the ongoing conflict, and reengages accordingly.

A phrase often attributed to Trotsky (probably wrongly) seems apt here: “You may not be interested in war, but war is interested in you.” Rephrased: you may not be interested in a Clash of Civilizations, but a Clash of Civilizations is interested in you. If we don’t awaken to that reality, we are destined to be the losers in that clash.