Taepodong-2 is the name of the ballistic missile that North Korea reportedly has fueled and ready on the launch pad. If North Korea really has the 5 or 6 nuclear warheads routinely reported in the press and suddenly demonstrates the ability to throw one of those warheads a great distance what should the reaction be of the United States and her Asian allies?
This development has resulted in some rather strange pronouncements from unlikely sources. Former Clinton administration Secretary of defense William Perry and assistant Secretary of Defense Ashton Carter wrote in the Washington Post " the United States should immediately make clear its intention to strike and destroy the North Korean Taepodong missile before it can be launched." This morning former Vice President Walter Mondale called for similar action. Mondale said that "the United States should tell North Korea to dismantle the missile - and if it doesn't we are going to take it out." http://kstp.com/article/stories/S17144.html?cat=1
There is no explanation from these people as to why when they were in power, they proposed appeasement as a preferred solution to the North Koreans desire to acquire both nuclear and ballistic missile capability instead of a decisive military solution. The disclosure of the existence of the missile is not a new development. The North Koreans have previously test fired an earlier version of the missile and if we follow the development of our own missile program it is only natural to expect that the next generation of any test sequence is going to be bigger and better with more payload and range capability. The original test occurred around September 1st of 1998 and was conducted over Japan.
What was interesting about the timing of the test was that it took place while the North Koreans were involved in discussions with the U.S., Japan and others about incentives to entice them to stop their nuclear program. Some members of the administration who advocated appeasement at that time were apparently unimpressed by a two stage ballistic missile being fired over the sovereign territory of one of our most important allies.http://news.bbc.co.uk/1/hi/world/asia-pacific/161513.stm
As we know those negotiations were concluded and the North received assurances of tons of fuel and food aid as well as the construction of two light water nuclear reactors. Some still tout this as a major negotiating victory for the United States and an example of how we should manage the behavior of rogue states. The outcome of that agreement was that several years later the North Koreans announced the possession of nuclear weapons.
The North Koreans have a long history of brinkmanship and have found it to be quite profitable for them to be on the minds of both their Asian neighbors and the United States. The Bush administration has not been as responsive to the North Korean bluster. Bush has refused direct talks with the North, instead preferring to include the nations whose security interests are most threatened by a nuclear armed and wholly unpredictable neighbor. This strategy seems to be most upsetting to the North Koreans and seems to be forcing "Dear Leader Kim Jong Il" into higher and higher stakes bluffing and posturing.
How long will it be before he makes a fatal mistake? Could the test firing of this missile be the straw that breaks the camel's back? The real power in the region and the historic supporter of the North has been the People's Republic of China. It was long in the Chinese interests to have an unpredictable North creating instability on the Korean Peninsula. It made the Japanese nervous and having a large troop presence in South Korea continually sapped the military strength of the United States.
Much has changed in the region over the last decade. The Chinese have discovered that doing business with the capitalists has a great deal of reward. Namely, a huge balance of payments surplus and a resulting lifting of the standard of living of the entire country. Can the Chinese afford to have that new prosperity and the relationship with their biggest trading partners threatened by a rather insignificant client state?
A successful test firing of a multi stage ballistic missile by the North Koreans will most certainly result in the Japanese arming themselves with a missile defense system as well as significantly upgrading their offensive capability. The security burden in the region will dramatically shift from the United States defense budget to that of the Japanese. A similar reaction will occur in Taiwan and perhaps even the South Koreans might wake up to the threat.
It might just be worth it to see what the implications are and the strategic result is of a successful testing of this missile.
Saturday, June 24, 2006
Saturday, June 17, 2006
Let Shawsheen do it
Burlington acquired the Marion Tavern as part of the three way land swap between the Guiterrez company and developer Gary Ruping. Part of the rationale for the deal was to renovate the old farm house/tavern on the site for historical reasons. Other reasons for the enthusiam for the deal was the affluent neighborhood adjacent to the site just was interested in reducing the number of units and the affordability component of the original much larger develoment proposed by Ruping. Up until that point no ever suggested the town spend a dime in acquiring this property.
At the time of the deal a few voices in town suggested that we were going to be stuck with a termite infested albatross that would be an enormous expense to the town to renovate and an ongoing facilities nightmare to operate and maintain.
The political forces behind the acquisition said not to worry because no tax payer money would be used in the renovation. So far that has been almost true with the exception of the tax payer money that has been acquired for the project by virtue of the sale of one of the lots that was part of the package. The deal was supposed to be three lots however after closing on the deal, the town found out that because of wetlands on the site the town had only gained two lots. That resulted in the value of the towns end of the deal being reduced by about three hundred and fifty thousand dollars. There has never been an explanation from the selectman as to how the town, which is the actual enforcement authority for such things as wetlands could have acquired land that by its own rules could not be developed.
All of that is in the past however and now we are faced with how to move forward with the project. The first of the three proposed phases of reconstruction faced a setback this week when it was reported that the two bids received for the far exceeded the available funds (approximately 800k).
This should come as no surpise to anyone familar with municipal construction projects in Massachusetts. A rule of thumb might be what ever is reported should be at least doubled and that is a good starting point for what will likely be an even more expensive project.
There is a reasonable and creative solution to this particular problem however. The Shawsheen Technical High School has long been in the building business by virtue of its carpentry instruction program. A renovation of a structure of this type would be a perfect learning experience for its students. Instead of a bloated bid and cost over run process, the town could simply engage Shawsheen to use the site as a school project and provide materials only to the school. There is no pressing time table for completion of the project since once completed there is no real use for the tavern anyway.
The superintendent of Shawsheen was approached at the May town meeting and asked about the possibility of the school taking on the project, Mr. Lyons replied that "that is something we do". So far there has been no effort by the board of selectmen to publicly inquire about the possibility of saving as much as two or three million dollars by taking this avenue. I wonder why not?
At the time of the deal a few voices in town suggested that we were going to be stuck with a termite infested albatross that would be an enormous expense to the town to renovate and an ongoing facilities nightmare to operate and maintain.
The political forces behind the acquisition said not to worry because no tax payer money would be used in the renovation. So far that has been almost true with the exception of the tax payer money that has been acquired for the project by virtue of the sale of one of the lots that was part of the package. The deal was supposed to be three lots however after closing on the deal, the town found out that because of wetlands on the site the town had only gained two lots. That resulted in the value of the towns end of the deal being reduced by about three hundred and fifty thousand dollars. There has never been an explanation from the selectman as to how the town, which is the actual enforcement authority for such things as wetlands could have acquired land that by its own rules could not be developed.
All of that is in the past however and now we are faced with how to move forward with the project. The first of the three proposed phases of reconstruction faced a setback this week when it was reported that the two bids received for the far exceeded the available funds (approximately 800k).
This should come as no surpise to anyone familar with municipal construction projects in Massachusetts. A rule of thumb might be what ever is reported should be at least doubled and that is a good starting point for what will likely be an even more expensive project.
There is a reasonable and creative solution to this particular problem however. The Shawsheen Technical High School has long been in the building business by virtue of its carpentry instruction program. A renovation of a structure of this type would be a perfect learning experience for its students. Instead of a bloated bid and cost over run process, the town could simply engage Shawsheen to use the site as a school project and provide materials only to the school. There is no pressing time table for completion of the project since once completed there is no real use for the tavern anyway.
The superintendent of Shawsheen was approached at the May town meeting and asked about the possibility of the school taking on the project, Mr. Lyons replied that "that is something we do". So far there has been no effort by the board of selectmen to publicly inquire about the possibility of saving as much as two or three million dollars by taking this avenue. I wonder why not?
Saturday, June 10, 2006
Yield curve inverts again
It has not been a very good couple of weeks for new Fed Chairman Ben Bernanke, he has not yet learned the skills that Alan Greenspan was most famous for. Greenspan speak was so convoluted and ambiguous that very rarely could anyone make out what he really meant. Over the last month Bernanke has made several gaffes that have resulted in the markets being roiled.
The equity markets had jumped in early May when Bernanke testified before congress. At that congressional appearance April 27th, Bernanke gave the impression that the Fed would pause in its 22 month campaign of raising interest rates. The result was that the Dow hit a 6 year high within two days of his testimony. Shortly thereafter CNBC reported this quote from Bernanke about the markets reaction to his congressional comments,'It's worrisome that people would look at me as dovish and not necessarily an aggressive inflation-fighter," the news wire quoted.
With the specter of continued rate hikes now back in focus the equity markets reacted sharply and negatively. With the possibility of a Fed induced recession in the future and the potential of declining corporate profits as a result, investors fled the major indices. The Dow had been at 11,700 and now 4 weeks later is 10,891. Friday's close marked the end of the worst performing week for the Dow in over a year. Nice going Ben!
Interestingly enough during this same period gold prices have dropped from year to date highs of $727 to a close of $612 dollars yesterday. More importantly than gold is the reaction of the bond market. While Bernanke seems to be wringing his hands over inflation and whether or not he is perceived as an inflation hawk, the bond market is screaming at him to wake up.
For the second time this week, the treasury yield curve closed with the short term yield inverted against longer term yields. The 2 year closed yesterday at 5% while the five year was 4.93% and the ten year was 4.97%. Buyers of the thirty year bond hardly seemed phased by the specter of inflation as it also rallied and closed at 5.02%.
A clear statement from Bernanke and the Fed is appropriate here regarding their intention to pause in rate hikes. There has been no clear and compelling economic data that would suggest that inflation is a real and impending threat to the U.S. and world economies. There is however clear indications that the Federal Reserve is a threat. Artificially high Fed induced rates and a corresponding inversion of the treasury yield curve has been a precursor to the last 5 major U.S. recessions.
There is some disagreement over the importance of this bell weather since the curve has inverted several times over the past 8 or 9 months, however given the fact that the Fed has hiked rates 16 consecutive times what exactly is the hurry? Will the economy be ravaged by inflation if the Fed takes a wait and see attitude over the next several months?
The winners in such a cautious policy are likely to be the average American who is already feeling the weight of higher energy prices. Average Joe and Joanne don't need added pressure from more increases in variable rate debt as well as the fear of government induced recession added to their burden.
The equity markets had jumped in early May when Bernanke testified before congress. At that congressional appearance April 27th, Bernanke gave the impression that the Fed would pause in its 22 month campaign of raising interest rates. The result was that the Dow hit a 6 year high within two days of his testimony. Shortly thereafter CNBC reported this quote from Bernanke about the markets reaction to his congressional comments,'It's worrisome that people would look at me as dovish and not necessarily an aggressive inflation-fighter," the news wire quoted.
With the specter of continued rate hikes now back in focus the equity markets reacted sharply and negatively. With the possibility of a Fed induced recession in the future and the potential of declining corporate profits as a result, investors fled the major indices. The Dow had been at 11,700 and now 4 weeks later is 10,891. Friday's close marked the end of the worst performing week for the Dow in over a year. Nice going Ben!
Interestingly enough during this same period gold prices have dropped from year to date highs of $727 to a close of $612 dollars yesterday. More importantly than gold is the reaction of the bond market. While Bernanke seems to be wringing his hands over inflation and whether or not he is perceived as an inflation hawk, the bond market is screaming at him to wake up.
For the second time this week, the treasury yield curve closed with the short term yield inverted against longer term yields. The 2 year closed yesterday at 5% while the five year was 4.93% and the ten year was 4.97%. Buyers of the thirty year bond hardly seemed phased by the specter of inflation as it also rallied and closed at 5.02%.
A clear statement from Bernanke and the Fed is appropriate here regarding their intention to pause in rate hikes. There has been no clear and compelling economic data that would suggest that inflation is a real and impending threat to the U.S. and world economies. There is however clear indications that the Federal Reserve is a threat. Artificially high Fed induced rates and a corresponding inversion of the treasury yield curve has been a precursor to the last 5 major U.S. recessions.
There is some disagreement over the importance of this bell weather since the curve has inverted several times over the past 8 or 9 months, however given the fact that the Fed has hiked rates 16 consecutive times what exactly is the hurry? Will the economy be ravaged by inflation if the Fed takes a wait and see attitude over the next several months?
The winners in such a cautious policy are likely to be the average American who is already feeling the weight of higher energy prices. Average Joe and Joanne don't need added pressure from more increases in variable rate debt as well as the fear of government induced recession added to their burden.
Saturday, June 03, 2006
Massachusetts Democratic Party convention
Three of us jumped in the car at 6:30 this morning to get out to Worcester in time to participate as delegates to the Massachusetts democratic Party Convention. It was a mostly an uneventful day as the convention lacked any real drama. Just about everything that was expected to come to pass did so.
There had been speculation that the 15% rule might affect Chris Gabrieli or Thomas Reilly in terms of keeping them off the September primary ballot however that did not come to pass as Reilly got the 15 % easily and although it was a close call for Gabrieli he to managed to cross the threshold by a mere 38 votes.
The results were the same for the other two contested races as the three candidates for Lieutenant Governor, Deb Goldberg, Andrea Silbert and Tim Murray all qualified as did William Galvin and John Boniface in the Secretary of State race.
I had been elected as part of a Deval Patrick slate in the caucuses, however as the day grew nearer I had planned to switch allegiances and vote for Gabrieli to help insure that he would get on the ballot. I completely changed my mind after hearing the convention speeches of all three candidates. It wasn't so much that Reilly or Gabrieli was bad on the podium as much as it was that Deval Patrick was head and shoulders above all the speechmakers in his content as well as how he was received by the delegates. Patrick can move people with words.
My thinking up to this point was that Deval Patrick was mostly a convention aberration. This meaning that he would be popular amongst the largely far left leaning convention delegates but in the party primary would not have enough go power with the moderates to defeat the odds on favorite, Thomas Reilly nor could he defeat Kerry Healey in the general election.
Nothing could be further from the truth. Deval Patrick is the real thing. He has genuine charisma, an unshakable optimism, and a record of achievement that he can present to the Massachusetts voter.
The convention had already been won by Patrick by virtue of the caucus results so that the sign holding and cheering was preprogrammed. Having already agreed in advance to sell him out I was not one of the starry eyed delegates there for the purpose of cheering him on. Never the less I found myself caught up in his enthusiasm as well as his message and was thoroughly impressed with what he had achieved at the grass roots level with his organization. So when ballot time came around I felt as though I owed Patrick my allegiance and did in fact cast my vote for him.
By virtue of the presentations in the Lieutenant Governors race I would say it is going to be a tight one between Tim Murray and Andrea Silbert. I voted for Murray on the basis of his experience as the mayor of Worcester however Silbert has very impressive credentials out side of government.
The big question mark of course is money. Can Patrick off set the huge difference in resources between himself and both Reilly and Gabrieli?
If I were a betting man (which I used to be) I would say that the primary may result in a Democratic ticket of Patrick and Murray. The demographics would be very good with the Worcester based Murray and the energy and enthusiasm generated by each campaigns workers might be enough to put a Democrat back in the corner office after a 16 year hiatus.
There had been speculation that the 15% rule might affect Chris Gabrieli or Thomas Reilly in terms of keeping them off the September primary ballot however that did not come to pass as Reilly got the 15 % easily and although it was a close call for Gabrieli he to managed to cross the threshold by a mere 38 votes.
The results were the same for the other two contested races as the three candidates for Lieutenant Governor, Deb Goldberg, Andrea Silbert and Tim Murray all qualified as did William Galvin and John Boniface in the Secretary of State race.
I had been elected as part of a Deval Patrick slate in the caucuses, however as the day grew nearer I had planned to switch allegiances and vote for Gabrieli to help insure that he would get on the ballot. I completely changed my mind after hearing the convention speeches of all three candidates. It wasn't so much that Reilly or Gabrieli was bad on the podium as much as it was that Deval Patrick was head and shoulders above all the speechmakers in his content as well as how he was received by the delegates. Patrick can move people with words.
My thinking up to this point was that Deval Patrick was mostly a convention aberration. This meaning that he would be popular amongst the largely far left leaning convention delegates but in the party primary would not have enough go power with the moderates to defeat the odds on favorite, Thomas Reilly nor could he defeat Kerry Healey in the general election.
Nothing could be further from the truth. Deval Patrick is the real thing. He has genuine charisma, an unshakable optimism, and a record of achievement that he can present to the Massachusetts voter.
The convention had already been won by Patrick by virtue of the caucus results so that the sign holding and cheering was preprogrammed. Having already agreed in advance to sell him out I was not one of the starry eyed delegates there for the purpose of cheering him on. Never the less I found myself caught up in his enthusiasm as well as his message and was thoroughly impressed with what he had achieved at the grass roots level with his organization. So when ballot time came around I felt as though I owed Patrick my allegiance and did in fact cast my vote for him.
By virtue of the presentations in the Lieutenant Governors race I would say it is going to be a tight one between Tim Murray and Andrea Silbert. I voted for Murray on the basis of his experience as the mayor of Worcester however Silbert has very impressive credentials out side of government.
The big question mark of course is money. Can Patrick off set the huge difference in resources between himself and both Reilly and Gabrieli?
If I were a betting man (which I used to be) I would say that the primary may result in a Democratic ticket of Patrick and Murray. The demographics would be very good with the Worcester based Murray and the energy and enthusiasm generated by each campaigns workers might be enough to put a Democrat back in the corner office after a 16 year hiatus.
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