Massenbach-Letter: NEWS 26/07/13

Massenbach-Letter

Udo von Massenbach

Guten Morgen.

Massenbach* Is Germany Repeating American Errors at Bretton Woods?

Bretton Woods Conference
John Maynard Keynes (center) with M.S. Stepanov of the U.S.S.R. and Vladimir Rybar of Yugoslavia at the Bretton Woods conference in July 1944. Photograph: AP Photo

At the founding of the Bretton Woods international monetary system in 1944, the world’s dominant creditor nation, the U.S., set out to revive a fixed exchange-rate system by offering a war-torn, debt-ridden world a new deal in monetary relations, one to be supported by concessionary dollar loans from a new International Monetary Fund.

Today, Germany is trying to resuscitate the periphery of the crisis-stricken euro area in much the same way, and it is worth looking back at the formation of Bretton Woods for clues as to how this will play out.

Before entering negotiations with the 43 other national delegations at Bretton Woods, the architect of the conference, Harry Dexter White of the U.S. Treasury Department, gave the American delegates a warning: Other nations believed the U.S. would soon put “pressure on the monetary systems of the rest of the world” by “cornering a larger proportion of the world markets and will be in a position to develop what we call an export surplus.” In response, the other countries would want the IMF to prod the U.S. “to adopt a policy which will put less pressure on their exchange and enable them to sell more goods here.”

The U.S. wouldn’t tolerate such interference. “We have been perfectly adamant on that point,” White said. “We have taken the position of absolutely no on that.”

John Maynard Keynes, the head of the British delegation, and other representatives of debtor nations wanted “to charge us interest, as a lender,” White continued. But the U.S. position was “the opposite of that,” he said, “we want to charge them.”

Stopping Devaluation

The reason, White explained, was that the IMF was “designed for a special purpose, and that purpose is to prevent competitive depreciation of currencies.” Fixed exchange rates should therefore be at the center of the postwar monetary architecture, to stop countries devaluing their way out of trade deficits. The IMF should only lend money for short periods to countries that had difficulty financing deficits.

Why was the U.S. in a position to impose such a system? Because it controlled almost 80 percent of the world’s monetary gold stock at the time. Gold in Fort Knox, White explained, was “why we dominate practically the financial world, because we have the where-with-all to buy any currency we want. If only England was in that position, or any of the other countries, it would be a very different story.”

But the very strength of the U.S. position led American opponents of the conference to question its purpose. “The average American doesn’t need to be told that most of the world’s monetary gold is buried safely away in Kentucky,” wrote the Christian Science Monitor. “When experts from other lands come to talk about money and loans and trade and repayments it gives the uninitiated the uncomfortable feeling that there may be thieves in the pantry.”

Such views failed to recognize that the rest of the world had a viable, if unpalatable, fallback option. Keynes “pointed out that Great Britain might be forced to resort to some very unacceptable means of pushing her foreign trade, should the monetary plan be rejected,” the Washington Post reported. “A return to the barter system was, he said, the only alternative in sight, and it might have to be tried as a ‘last expedient.’ That is a possibility that the United States certainly does not wish to see realized.” The British “may be ‘broke’ (since they lack the wherewithal to meet their external obligations), but they are not without facilities for pushing their goods into foreign markets.”

Poor Alternative

Germany had been operating this way for years, compelling foreign holders of marks to redeem them for German goods. The U.K. could do the same, making the pound convertible into whatever wares Britain chose to make available. As the political columnist Walter Lippmann wrote, if other countries were dissatisfied with the terms the U.S. offered “they have an alternative to the system of general international trading which this country desires. The alternative is government controlled trading on a bilateral or barter basis. It is not a good alternative, and the world will be a poorer and more troubled place if it is adopted.” But the U.S. had to be conscious that such an alternative existed.

Lippmann was prescient. Although the U.S. succeeded in pushing through its creditor-friendly monetary and financial policies at Bretton Woods, it couldn’t actually get them off the ground after the war. It was only the 1948 Marshall Plan, which substituted American grants-in-aid for IMF loans, that managed to revive the war-ravaged debtor nations of Europe and create the foundation for a new international trading system.

Today, Germany is persisting with the same creditor-centric plan for reviving the euro area — new loans to finance old loans while the debtors cut spending and wages to accommodate fixed exchange rates. Lippmann, if he were alive, would no doubt warn that the seemingly endless austerity being imposed on southern Europe will ultimately lead to a political backlash that will make it unsustainable. Germany will soon have to choose: a Marshall Plan for the south, or an economic and political breakdown of the euro zone.

(Benn Steil is director of international economics at the Council on Foreign Relations and author of “The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order.”)

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Policy = res publica

Bärbel Freudenberg-PilsterFreudenberg-Pilster* Wie Perspektiven für Europa im Alltag entstehen können
Von Jochen Thies | 16.07.2013 11:57Deutsch Türkisches Journal-online

In der deutschen innenpolitischen Debatte, in Zeitungen, in den Think-Tanks wird immer öfter die Forderung erhoben, Deutschland solle sich endlich als Führungsmacht positionieren und auch sichtbar und damit offen die politische Gestaltung des Kontinents übernehmen. Begründet wird dies u.a. damit, dass die Zeit gegen Europa laufe und die Alte Welt nur noch wenige Jahre Zeit habe, um ihren Platz in der Weltpolitik zu finden.

Was in diesen Debatten in der Bundesrepublik unterschlagen bzw. verdrängt wird, ist, dass die letzten Fragen einer Nation Krieg und Frieden betreffen. Ist das politische Bewusstsein in Deutschland, in Europa so weit, um sich auch als Solidargemeinschaft im Extremfall verstehen zu können? Zweifel sind da angebracht, man blicke bloß auf den Balkan der 90er-Jahre, der noch immer in Teilen zertrümmert am Boden liegt und wo sich Kroaten und Serben einer Zusammenarbeit verweigern.

Und es gibt noch eine Wahrheit: Die NS-Zeit ist in Europa noch nicht vergessen, sie sitzt tief in den Köpfen und kann jederzeit wieder in die politische Debatte eingeführt werden. Das politische Eis in den Ländern, die die Wehrmacht vor 70 Jahren besetzte, ist noch immer dünn. Eine deutsche Führung in Europa kann Großbritannien, das in der Auseinandersetzung mit Hitler das eigene Weltreich verlor, nicht akzeptieren. Ähnlich steht es um Frankreich, das bereits Mühe hat, die ökonomische Vormachtrolle Deutschlands hinzunehmen. Und wo es wie bei Airbus erfolgreiche Zusammenarbeit gibt, ist es am Ende noch immer eine französische Unternehmung.

Aus der Krise das Bestmögliche machen

Unter solchen Umständen ist der Weg, den Deutschland unter wechselnden Regierungen seit den Tagen von Helmut Schmidt eingeschlagen hat, ein kluger: Führungsstärke im europäischen Alltag zu zeigen. Frankreich will seine Landwirtschaft schützen: Gut, dann muss der deutsche Agrarbetrieb noch industrieller gestaltet werden. Spanien und Portugal können ihre Fischfangflotten nicht reduzieren: Gut, dann muss Deutschland diesen Bereich weitestgehend stilllegen. Es kann sich stattdessen auf andere Weise neu erfinden, z.B. als wiedervereinigtes Land mit neuen Küsten und neuen Urlaubsregionen, wie nach 1990 geschehen.

Die deutsche Wirtschaft ahmt die Vorgehensweise des Staates nach. Selbst mittelständische Unternehmen warten nicht darauf, dass die Politik ihnen den Weg weist, sondern handeln auf eigene Faust. Selbst die großen deutschen Automobilmarken kommen ohne die Vorproduktion und Zulieferung der europäischen Partnerländer nicht aus. Da es immer schwieriger wird, im Inland qualifiziertes Personal zu finden, schwärmen sie in die Nachbarländer aus.

Die Wäsche von großen Berliner Hotels wird in Polen gewaschen. Jungen Menschen, die in den Krisenländern Osteuropas und neuerdings der iberischen Halbinsel keine berufliche Perspektive finden, bekommen einen Job in Deutschland. Die sprachliche und berufliche Qualifizierung der jungen Deutsch-Türken erfolgt mit mehr Verve als noch vor wenigen Jahren, nicht zuletzt auch deswegen, weil auf der anderen Seite eine artikulationsfähige zweite und dritte Generation ihre Wünsche und Vorstellungen formuliert. Quasi über Nacht hat die Bundesrepublik ihren restriktiven Kurs bei der Anerkennung von ausländischen Schulabschlüssen und akademischen Qualifikationen aufgegeben und gilt hier nun als liberalstes Land weltweit.

„Duales System“ und ähnliche Errungenschaften

Selbst in den deutschen Kommunen hat das Denken in europäischen Dimensionen seinen Einzug gehalten. Es gibt Engpässe bei Lehrern, Erziehern und Altenpflegern. Nun werden sie in den Nachbarländern angeworben. Ohne solches Handeln sähe die Arbeitslosenstatistik in manchen Staaten noch finsterer aus, von den Überweisungen der nach Deutschland Gegangenen in die Heimat gar nicht zu reden. Und da die Deutschen, anders als die Franzosen, nicht so gerne Urlaub im eigenen Land machen, profitieren viele Länder, allen voran Spanien und die Türkei, von der Sehnsucht der Deutschen nach Sonne. Die enormen Ausgaben sind auch ein Beitrag zur Ausbalancierung ökonomischer Ungleichgewichte.

Binnen kürzester Zeit ist in Europa akzeptiert worden, dass die deutsche Zivilgesellschaft auf vielen Gebieten Vorbildcharakter für andere Länder hat. Es gibt Anzeichen, dass das „duale System“, auf dem ein Gutteil des deutschen wirtschaftlichen Erfolges basiert, von anderen Ländern übernommen wird. Vielleicht ist dies ein Weg, der Europa in der Konsequenz näher zusammenbringt als noch so gut gemeinte Verabredungen bei EU-Gipfeln. Vielleicht ist es auch der Pfad, von den Schatten und Dämonen der Vergangenheit loszukommen und Europa auch politisch zukunftsfähig zu machen.

http://dtj-online.de/news/detail/2657/fuhrungsmacht_deutschland.html
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Politics: From Vision to Action
Barandat* Special Report: Military Logistics
US Pacific Shift Has Heavy Logistics Price Tag

New Strategy: New M2A2 and M3A3 Bradleys are loaded onto railcars at Pier 8 in Busan, South Korea. Equipment and troops will be redistributed through a complex logistics chain as the US ‚pivots‘ to the Asia-Pacific. (US Army)

837th Transportation Battalion pushes new Bradleys

WASHINGTON — A year and a half after the Obama administration released its latest National Security Strategy calling for a “rebalancing” of US strategic focus from the Middle East to the Pacific, the broad outlines of what that shift may look like are coming into view.

What the military is discovering is that the shifting of troops and materiel across the globe, and then finding them homes, shelter and storage space, is complex and won’t come cheap.

To take one example for which some preliminary figures are available, it’s estimated that moving approximately 9,000 Marines from Okinawa and spreading them out to several other locations in the region, as plans call for, would cost about $12 billion, according to Defense Department figures.

The plan is to shift roughly 4,800 Marines to Guam, 2,700 to Hawaii and 2,500 to Australia, with others coming back to the US mainland.

But a Government Accountability Office report published June 11 warns that the Pentagon “has not developed an integrated master plan for its current realignment plan, and it has not developed a strategy to support the development and oversight of the Japanese construction projects associated with other realignment initiatives.”

While the Marines continue to address that logistics dilemma, the Navy is well into the planning phase of positioning 60 percent of its ships to the Asia-Pacific region by 2020. This includes not only adding a fourth forward-deployed submarine to Guam in 2015 and four littoral combat ships staged in Singapore, but also more maritime patrol aircraft and transferring Fire Scout UAVs and other electronic surveillance aircraft from Afghanistan.

The Navy also is shifting assets from Europe. It will base four destroyers in Rota, Spain, which will provide a ballistic-missile defense capability for Europe. That mission had been performed by a complement of 10 destroyers that rotated from the US to the Mediterranean, but six of those ships will be shifted to the Pacific.

The Air Force also will shift capacity from Afghanistan to the Asia-Pacific, including B-1 bombers, MQ-9 Reapers, U-2 spy planes and Global Hawk UAVs.

For its part, the Army already has about 91,000 soldiers and civilians assigned to the Asia-Pacific, which man and support eight brigade combat teams, 12 batteries of Patriot missiles and other enablers.

An Army report released in early July that spells out its equipping priorities from 2013 to 2016 admits that due to the wars in Iraq and Afghanistan, “there is a significant portion of our gear that is in the wrong place for the future, given the adjustments to regionally aligned forces and redesigned units.”

The logistical challenges in getting that gear from the Middle East to the Pacific — or back to the United States — “will be one of the essential elements in our equipping guidance,” the paper said.

One large-scale money-saving project that the Army and Marines are working on is the divestiture of thousands of hulking mine-resistant, ambush-protected (MRAP) vehicles taking up parking spots in government depots.

The Army has said it will divest 13,000 MRAPs from its 21,000-vehicle fleet, putting about 4,000 of the blast-resistant vehicles in long-term storage and pre-positioned stocks, while keeping 4,000 in regular Army formations.

Likewise, the Marines have said they plan to retain about 1,200 MRAPs while they scrap or sell off about 2,680 others in the coming years.

The DoD has spent about $50 billion on buying and maintaining MRAPs since 2007.

This massive political and military rebalance effort comes as requirements from the Middle East are slowing down, but remain a key area of operations for US forces.

At an April 25 event focused on the Army’s role in the Pacific, the chief of staff for strategic plans and policy on the Pentagon’s Joint Staff offered an honest — if somewhat uncomfortable — assessment of the strategic landscape.

“We’ve been consumed by that arc of instability from Morocco to Pakistan for the last 10 years,” Rear Adm. Robert Thomas said. And while the senior staffs at the Pentagon are dutifully discussing how they are rebalancing to the Pacific, “I suspect, though, for the next five years, just as the last 10 years, we will have this constant pull into the” Middle East.

Over the next several years, he continued, “I think that you’re going to continue to talk about a rebalance to Asia, and you’re going to do some preparatory work in the environment, but the lion’s share of the emphasis will still be in that arc of instability.”

The needs of Central Command (CENTCOM) and Pacific Command (PACOM) are obviously different: While CENTCOM continues to deal with the political and social unrest caused by the Arab Spring, a bloodletting in Syria that is drawing in all manner of regional actors and an Iranian regime that continues to defy the international community with its nuclear program, PACOM is focusing on reviving atrophied military-to-military contacts while offering a host of advisory and humanitarian assistance to Asian allies.

Thomas offered a warning on this count as well. Competition for resources will stir in the halls of the Pentagon between the Pacific and Central commands, he said.

“If we think that this is going to be at all a clean break and not a competitive environment for forces between two very capable and influential COCOMs, we’re mistaken.”

Speaking at the same event, Lt. Gen. Robert Brown, commanding general of the US Army’s I Corps, which has been aligned to the Asia-Pacific, said PACOM has already been assigned three Stryker brigades, two of which are based at Joint Base Lewis-McChord in Washington state.

Highlighting the shift, Brown said that just three months after returning home from Afghanistan, the 3rd Stryker Brigade Combat Team, 2nd Infantry Division had already traveled to the Philippines for a training mission with Filipino forces for Joint Exercise Balikatan in April.

While Brown said the Army is working with allies in the region on counter-roadside bombs and intelligence-sharing capabilities, the most likely mission he envisions for US forces “is humanitarian assistance and disaster response — that’s the most likely thing we’ll respond to.”

While humanitarian missions in the Pacific area have traditionally been a Navy mission, Brown boasted of I Corps’ capability to assume some of the burden.

“I can have as few as a dozen folks on a plane within hours, or I can have five C-17s worth,” he said. “One of our huge advantages as I Corps is we’re extremely well located strategically, we have three deepwater ports” 12 miles away from Fort Lewis, as well as 52 C-17s.

Brown’s staff has been working on setting up joint task forces with military staffs in the region, which he said are focused on “enabling partner capacity,” as well as intelligence support “that we’re already providing.”

This jibes with what the Australian Army’s Maj. Gen. Rick Burr — who, in an unusual move, was named deputy commander of US Army Pacific in 2012 — told Defense News when he assumed command in February.

Burr also brought up the primacy of the logistics-heavy humanitarian mission, and the Army’s desire to play more of a role in assisting in disaster relief in the Pacific.

While “the potential for anything to happen at any time is very real, particularly with natural disasters … being prepared to respond to any crisis that could happen at short notice is clearly the most pressing issue at the moment.”

Now planners just have to figure out how to move all of these assets across the globe while automatic budget cuts outlined under the sequestration plan are beginning to take large bites out of DoD budgets.

http://www.defensenews.com/article/20130717/DEFREG02/307170022
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Suter* Food Prices and Body Fatness among Youths

by Michael Grossman, Erdal Tekin, Roy Wada
(June 2013)

Abstract:

In this paper, we examine the effect of food prices on clinical measures of obesity, including body mass index (BMI) and percentage body fat (PBF) measures derived from bioelectrical impedance analysis (BIA) and dual energy x-ray absorptiometry (DXA), among youths ages 12 through 18. The empirical analyses employ data from various waves of the National Health and Nutrition Examination Survey (NHANES) merged with several food prices measured by county and year. This is the first study to consider clinically measured levels of body composition rather than BMI to investigate the effects of food prices on obesity among youths. We also examine whether the effects of food prices on body composition differ by gender and race/ethnicity. Our findings suggest that increases in the real price of one calorie in food for home consumption and the real price of fast-food restaurant food lead to improvements in obesity outcomes among youths. We also find that an increase in the real price of fruits and vegetables has negative consequences for these outcomes. Finally, our results indicate that measures of PBF derived from BIA and DXA are no less sensitive and in some cases more sensitive to the prices just mentioned than BMI.

Text: See Discussion Paper No. 7465

http://www.iza.org/en/webcontent/publications/papers/viewAbstract?dp_id=7465

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Middle East

Over 100 House members sign letter supporting U.S. diplomacy with Iran

Posted on July 18, 2013

Some 118 House members have signed onto a bipartisan letter calling on President Obama to try to advance opportunities for a diplomatic resolution with Iran in the wake of the election of Hassan Rouhani last month.

The letter, being circulated by Representatives David Price (D-North Carolina) and Charles Dent (R-Pennsylvania), is the biggest ever pro-Iran diplomacy letter from the Hill, those supporting the initiative said.

A spokesperson for Rep. Price’s office said the letter would close for signatures Thursday night and he expected it to be sent to the White House on Friday. It had 118 signatures as of Thursday afternoon, he said, 14 of them Republican.

“This is not the first time that Iran has elected a president on a platform of moderation and reform, and history advises us to be cautious about the prospects for meaningful change,” the ‘Dear Colleague’ letter signed by Reps. Price and Dent states.

“Even so, given the stakes involved for the United States, Israel, and the international community, it would be a mistake not to test whether Dr. Rouhani’s election represents a genuine opportunity for progress toward a verifiable, enforceable agreement that prevents Iran from acquiring a nuclear weapon,” Price and Dent wrote.

Though the letter doesn’t take a position on sanctions or the possible use of military force by the United States or its allies, it cautions that “we must also be careful not to foreclose the possibility of such progress by taking provocative actions that could weaken the newly elected president’s standing relative to Iran’s hardliners.” It also says that while members may have different views about those issues, “we should all be able to agree on the need for a renewed diplomatic push as part of our broader strategy toward Iran.”

The United States expects nuclear talks between Iran and the P5+1 to resume in the fall, following Rouhani’s inauguration next month and the appointment of a new Iranian nuclear negotiating team, a senior US official said last week.

Meantime, former US diplomats William Luers and Thomas Pickering this week urged Obama to consider sending Rouhani a note of congratulations upon his inauguration, in a piece advocating ways the U.S. could try to reinvigorate diplomacy with Iran.

“Pressure has helped get Iran to negotiate; but diplomatic negotiation cannot succeed unless each side gets some of what it needs and unless each side comes to believe that the other wants an agreement and is willing to comply with it,” Luers, Pickering and MIT’s Jim Walsh wrote, at the New York Review of Books. “With innovative and assertive diplomacy, the Obama administration can, in our view, still help change the direction of US–Iran relations, reach an interim nuclear agreement, and possibly open the door to discussions on other regional and bilateral issues.”

Update: The letter has 124 signatures as of Friday midmorning, “with a couple more expected,” Shawn Millan, a spokesman for Rep. Dent, told the Back Channel Friday he understood from Rep. Price’s office.

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*Massenbach’sRecommendation*

The South China Sea in Focus
Clarifying the Limits of Maritime Dispute
Jul 17, 2013

Satellite imagery and geospatial analysis tools offer an unprecedented opportunity to harness new technologies in order to help resolve boundary disputes. The South China Sea in Focus: Clarifying the Limits of Maritime Dispute uses these tools to provide a first and necessary step toward tackling the overlapping maritime disputes in the South China Sea: determining which waters are and are not in dispute under international law. The report opens with a set of geographic information system (GIS)–based maps that provide an easily understandable benchmark against which policymakers and academics can judge the claims and actions of the South China Sea claimants. More detailed color maps and methodological information follow for those who want to dig deeper into the claims and the report’s conclusions.

„The best and likely only real hope of tamping down tensions in the absence of an actual settlement of claims in the South China Sea is joint development of the disputed resources. […] Rivalry over these [fisheries and oil and gas] resources has been the immediate cause of most of the policing incidents, military clashes, and arrests of fishermen in the sea in recent years. Any successful effort to jointly develop resources must include China, the heavy hitter in the area and the provocateur of most episodes of violence in recent years.“

http://csis.org/files/publication/130717_Poling_SouthChinaSea_Web.pdf

http://csis.org/publication/south-china-sea-focus
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Social Capital, Policing and the Rule of Law: Keys to Stabilization

Authored by: various Army War College Students

Added Date: 16-Jul-2013

Type: PKSOI Paper

Download it now

Brief Synopsis

Social Capital, Policing and the Rule-of-Law: Keys to Stabilization reflects a breadth of U.S. Army War College Strategy Research papers in which students tackled tough issues. The danger in compiling student papers is that an anthology can become a set of isolated, disconnected, anecdotal experiences. We have tried to select those that best describe the essentials of stability tasks and activities and the role they play in our success, failure, or combination thereof, in current and future operations.

Stabilization is a process in which personnel identify and mitigate underlying sources of instability to establish the conditions for long-term stability. While long-term development requires stability, stability does not require long-term development. Therefore, stability tasks focus on identifying and targeting the root causes of instability and by building the capacity of local institutions.

http://pksoi.army.mil/PKM/publications/papers/paperreview.cfm?paperID=35

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see our letter on:

Wir wünschen Ihnen ein angenehmes Wochenende. Ihr Team.

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Udo von Massenbach – Bärbel Freudenberg-Pilster – Jörg Barandat

UdovonMassenbach Mail
Edith.Suter JoergBarandat

130717_Poling_SouthChinaSea_Web.pdf

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