NSA Scandal: The Bolivian Plane Incident

Welcome to Vienna Mr. President!

Photo: Heinz-Peter Bader/Reuters

The shenanigans surrounding the blocking and subsequent search of Bolivian President Evo Morales' plane last week will probably never be publicly explained.  That is the way of these things.  Fear not, I have an expansive conspiracy theory that reveals everything.  Like most good conspiracy theories, this one hasn't a shred of proof.  100% unadulterated speculation. 

For those not following the story breathlessly, here is a write up from The Guardian.  The brief version is that Morales was flying home to Bolivia after meetings in Moscow.  France, Italy, Spain and Portugal denied passage to the plane which ended up in Vienna.  There it was searched by the Austrians to determine if Edward Snowden was on board.  He was not.  These airspace closures were, as has been admitted, requested by the Americans who were apparently convinced Snowden was on the plane.  Just about everyone in South America is up in arms over the incident. The European governments in question are running for cover.  So what happened?

Here is my guess.  The Americans got information that Snowden was on the plane, and they panicked.  Remember that they are still extremely freaked out over Snowden's ongoing leaks.  They don't simply want to get him for what he has done, but for what he might do yet.  So they asked these five European governments to act (France, Italy, Spain, Portugal and Austria). But Snowden wasn't on the plane.  And all five governments, plus the Americans, are now humiliated. 

Why were the Americans so certain he was on the plane?  The information must have come, one way or another, from Moscow.  American agents could not have seen Snowden get on the plane.  He is at a different airport, and was nowhere near the Bolivian plane.  So the information must have come from from sources in Moscow, or from an intercept.  So that brings us to the crux of the conspiracy theory.  I think the Russians deliberately gave the information to the Americans as a nice "Fuck You", anticipating the panic and embarrassment that would ensue.  Further, to get the Americans to bite on the bait, it must have come from a source the Americans believed in.  Like an intercept.  An intercept like the ones Snowden is in trouble for revealing.  Wouldn't it be delightful if the Russians communicated the false story among themselves through a channel they knew the Americans were listening to?  One that the Americans thought the Russians did not know was compromised?  

If they did pass false information, the payoff was immense.  The incident might be forgotten soon among the general public and media, but institutions have a longer memory.  Trust has been broken.  Politicians are embarrassed.  Careers could be derailed.  And Snowden is still in Moscow.  So it was all for nothing.  Somehow I think the next urgent request from Washington will get a frosty reception in Europe.  Whether they are behind this or not, the Russians must be delighted. 

Dead Cat Bounce

 

    Dow, last 12 months

The markets are up and Obama is talking about glimmers of hope.  Had the situation turned?  Is the crisis abating?  Nope.  its a dead cat bounce. Even a dead cat bounces if dropped from sufficient high.

Although specific causes like the US sub-prime mortgage market were recognized before hand, almost nobody foresaw the tremendous complexity and global nature of the coming crisis.  Even they didn't see many significant consequences.  The crisis so-far has had several important themes.

1. The US housing bubble.  Asset bubbles always burst, leaving those who borrowed against bubble prices in a ruinous position.  
2. The tremendous over leveraging by countries like Iceland, Ireland and The Ukraine.  This one is significant because it shook up the currency markets.  
3. The uncontrolled growth of European banks.  Iceland, Ireland, Switzerland, The Netherlands, France and UK have banks who's combined liabilities greater than GDP.  Iceland would have to spend all its tax dollars for the next 19 years to pay off the commitments of its failed banks. 
4. The stunning over borrowing by consumers in many key economies, especially the US.  This over-borrowing, combined with housing deflation, means a consumer-led recovery is not on.
   
5. Blatantly illegal activities by US banks.  These people should be charged under organized crime laws rather than bailed out.  Its also worth mentioning the fraud by US ratings agencies like Moody's.  
6. The Bush administration's spectacular corruption.  This may have been the most corrupt US administration of all time.  They pissed away trillions enriching themselves and their friends.  Regulation first became a joke, then a memory.
7. The US' move away from traditional debt instruments that everyone understood, to derivatives that nobody understood.  Important because the traditional instruments have withered.  Reconstituting them will take years and imply an economy with far less available debt (i.e. less growth). 
   
8. The unexpectedly global reaction to the crisis.  Nobody expected such swift or far-reaching consequences in so many different places.
9. The complexity of the debt instruments at the core of the crisis.  Its almost impossible to take them apart to determine the status of the individual loans. Take a lemon, a lime and an orange.  Put them in a blender for 1 minute on high.  Now reconstitute the three original pieces of fruit.

You may notice the overarching theme of debt.  Debt is great, especially in business.  It allows you to rent money to buy an asset.  You pay back the money but still own the asset.   What nobody foresaw was the that providing debt would become so profitable that people would start manufacturing it outright.  US investment banks, became debt factories, manufacturing derivatives like toasters.  Too  much debt pouring into consumer markets creates bubbles.

So the fundamental problem is too much debt.  This is not just a US problem, because of globalization, everyone is involved.  The solution to the crisis is for asset prices to return to sustainable values, for all the bad debt created by the asset bubble to be wound down and for new mechanisms for financing debt. Asset prices have spectacularly re-adjusted over the last year, so that's already underway. What has not happened at all is the resolution of all the bad debt or the restructuring of the debt mechanisms. Hundreds of banks around the world are sitting on piles of worthless debt.  They are like a person on life-support.  The body functions, but they are not viable.  Thus the financial crisis persists.  Obama and the rest of the G20 are frantically engineering a soft landing.  No matter what, winding up all the bad debt will take years, with lots more pain on the way.  Likewise, the re-invention of debt mechanisms will take years.

The currency impact of so much government debt has yet to become apparent.  Europe's restructuring of its banking system to be less vulnerable has not yet begun.  The decision of China and India to re-orient resources on building their domestic markets has yet to be felt in global markets.  So I'm calling recent news a dead cat bounce rather than a recovery.

World Airline Map

IMPORTANT NOTE:  This image has a Wikipedia license.  That means you can use it or abuse it in any way you want.  You do not need my permission.  For corporate customers, that applies to you too.  However, some corporate customers have wanted specific licensing, and for a small fee I am happy to oblige.

Oct 31, 2012
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Here, at long last, is the world airline map. Click for big, for enormous, go here.
Things I learned from doing this map:

• Every country in the world, no matter how small or poor, has at least one airline
• Some of these airlines, particularly in Africa, seem to have only one or two planes, often 2nd or 3rd hand 737s.
• Any country with a plane big enough has a flight to New York and either their former colonial master or London.
• If they have a 2nd flight to the US, it is usually to Washington, sometimes LA.
• There are more airlines in Europe than anywhere else on earth.
• Each European country has a national flag carrier, sometimes a second large airline and two to five budget airlines.
• The big airlines fly to every 1st, 2nd and 3rd tier city in Europe, the budget airlines fly to the same, plus many smaller centers, also to holiday destinations.
• The most popular European holiday destinations are the Canaries, followed by Spain, Portugal and the Caribbean.
• North Americans holiday in Hawaii, Mexico and the Caribbean.
• Asians don’t seem to have a lot of specialized holiday destinations, probably because its either warm all the time, or people don’t have enough disposable income.
• The few obvious Asian holiday destinations seem to be The Philippines, Okinawa, Thailand, Guam and Bali.
• The density of air traffic in Europe far outstrips the US or Japan.
• Highest density of flight to population is probably Australia.
• Every Muslim country has a direct flight to Jeddah, and many to Riyadh.
• Arab airlines are huge. Not just from the Gulf, but North Africa, Jordan, Lebanon and Saudi Arabia.
• Some small countries stand out due to their long-haul business. The Netherlands, Dubai, Kuwait, Abu Dhabi, Belgium, Singapore and Korea, for example.
• Some other small countries have built a good long haul business based on being holiday destinations, Fiji, The Seychelles, Mauritius, Tahiti and The Maldives.
• Countries with a surprising volume of air traffic given economic or political problems: Ethiopia, Egypt, Sri Lanka, Central Asia, Russia, Mali, Togo, Senegal, Ghana, Ecuador, Angola, Bangladesh, Madagascar.
• The most underserved countries for their populations: Iraq, DR Congo, Zimbabwe, Burma, Nepal, Peru.
• Of these, Iraq is close to a black hole. You can only fly to Baghdad from Amman, Tehran, and Kuwait.
• You can fly to almost any city in Turkey from almost any city in Germany.
• By far the densest long-haul corridor is the North Atlantic, traffic there dwarfs Europe>>Far East or Far East>> North America.
• 80% of the International traffic to and from Central and South America is going to the US, primarily Miami, New York, Dallas, Houston and LA.
• South African Airlines dominates the African airspace, South Africa is also the only African country to have discount airlines.
• Surprisingly big hubs (at least to me): Santiago, Moscow, Kuwait, Houston, Bogotá, San Juan PR, Salt Lake City, Honolulu, Bali, Guangzhou, Cairo, Tashkent, Almay, Istanbul.

Edit Aug 29, 2012: the picture was broken, now fixed.

Black Power - Mexico City August, 1968

Tommy Smith, John Carlos, medal ceremony men's 200m August 16, 1968

I don't think its possible for anyone who doesn't remember this moment to understand how shocking it was. There was outrage around the world. I can remember, as a 9 year-old, thinking this was a violation. The Olympics were above politics. In a world being torn apart by war and chaos (as it was in 1968), the Olympics was one of the very few institutions that held any hope. 40 years later, I think the Olympics are a racket, and that these men were very brave. The image is no longer scandalous, but heroic.

I'm not surprised to learn now that the two men suffered for their gesture. Even Australian Peter Norman, the silver medalist, was punished for his support. Americans were incensed that these men, sent to represent the best of America, used the occasion to protest. Many felt betrayed. Besides, anger, there was fear. American society had agreed that blacks should have rights, but power was another matter. Carlos and Smith were saying "I do not accept definitions, I will define myself." To a lot of Americans, that sounded like a threat. But in a way, the gesture was aimed not at whites, but at blacks. Don't simply accept the rights you are given, take the freedom you deserve. Carlos and Smith were also announcing that the death of Martin Luther King was not the end of the civil rights movement. To quote Churchill, it was just the end of the beginning. And they were right. In the 1970's Black culture blew out of its niches to become mainstream American culture. Blacks entered swathes of American life on their own terms.

As for the Olympics, how naive we were. This was the first crack in the Olympic facade. We only found out later about the student massacre that proceeded the Olympics. 1972 brought the Munich hostage crisis, and politics was in the Olympics for good. 1976 was staggeringly corrupt. Then came the boycotts of 1980 and 1984. By the time the Bejing Games were announced, it was clear to everyone that the lily-white best-hope of humanity was a commercial racket, and the IOC racketeers. How could one explain such a deal with the devil? Money. The games, the sponsorships and the spectacle are designed to make money for the IOC, the broadcast networks, the games corporate sponsors and those few athletes who succeed in spinning their performances into business opportunities.

After 40 years, this image seems less to me a political statement, as an announcement. Things are going to change. And that change will come on our terms. They were right. Fortunately, they lived long enough to be widely recognized as heroes. There are statues, schools named after them, awards, speaking tours and best sellers. Who says there's no second acts in American life?