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The Sweetness of Illusion

from Leon Wieseltier at The Atlantic,  The Iran Deal and The Rut of History.


But what is the alternative? This is the question that is supposed to silence all objections. It is, for a start, a demagogic question. This agreement was designed to prevent Iran from acquiring nuclear weapons. If it does not prevent Iran from acquiring nuclear weapons—and it seems uncontroversial to suggest that it does not guarantee such an outcome—then it does not solve the problem that it was designed to solve. And if it does not solve the problem that it was designed to solve, then it is itself not an alternative, is it? The status is still quo. Or should we prefer the sweetness of illusion to the nastiness of reality? For as long as Iran does not agree to retire its infrastructure so that the manufacture of a nuclear weapon becomes not improbable but impossible, the United States will not have transformed the reality that worries it. We will only have mitigated it and prettified it. We will have found relief from the crisis, but not a resolution of it.

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Intervention and Abdication

mideast refugees

from the Wall Street Journal Editorial Board, The West’s Refugee Crisis

The lesson is that while intervention has risks, so does abdication. The difference is that at least intervention gives the West the opportunity to shape events, often for the better, rather than merely cope with the consequences of doing nothing. As difficult as the war in Iraq was, by 2008 the insurgency was defeated and Iraqis were returning to Baghdad. Only after Mr. Obama withdrew entirely from Iraq and ignored Syria did Iraq deteriorate again and Islamic State advance.

Europeans who dislike an America they think is overbearing should note what happens when the world’s policeman decides to take a vacation and let the neighbors fend for themselves. In the modern world of instant communications and easy transportation, the world’s problems will wash up on the wealthy West’s shores one way or another. If Europe isn’t prepared to handle nearby crises, militarily if necessary, be prepared to accept the refugees.

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The Real Cost of Virtue


from Bret Stephens at The Wall Street Journal, Farewell to the Era of No Fences:

How did this happen? We mistook a holiday from history for the end of it. We built a fenceless world on the wrong set of assumptions about the future. We wanted a new liberal order—one with a lot of liberalism and not a lot of order. We wanted to be a generous civilization without doing the things required to be a prosperous one.

There is no such thing as a lesson from the past that people won’t ignore for the sake of the convenience of the present.

Is there a way out? Suddenly, there’s talk in Europe about using military power to establish safe zones in Syria to contain the exodus of refugees. If U.S. administrations decide on adopting Kant, Europe, even Germany, may have no choice but to reacquaint itself with Hobbes by rebuilding its military and using hard power against unraveling neighbors.

Europeans will not easily embrace that option. The alternative is to hasten the return to the era of fences. Openness is a virtue purchased through strength.

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Currency Manipulation

US and Chinese currencies

from the editors of the Wall Street Journal, Emerging Market Rip Tide:

The destabilizing effect of QE threatens global growth at a moment when none of the major economies is firing on all cylinders. By encouraging overinvestment in developing countries, it may have created new deflationary pressures. China built massive steel-making capacity that will now drive down the global price and lead to protectionist pressure in the U.S. This dislocation and wasted investment should make policy makers reconsider their faith in the power of monetary policy to stimulate growth, and put the emphasis back on pro-market reforms.

There has often been a tension between the Fed’s roles as regulator of the U.S. domestic economy and custodian of the world’s reserve currency. The QE era shows what happens when it ignores the latter responsibility. Bond-buying allowed the U.S. to pump up asset values, even as it has failed to stimulate the real economy.

U.S. presidential candidates have been quick to jump on China’s recent small devaluation as proof of currency manipulation aimed at stealing American jobs. The irony is that the Federal Reserve has been guilty of the biggest currency whipsaw the world has ever seen. And it has beggared its neighbors in the process.

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Austerity and Reality in Greece

from The Wall Street Journal, Greece and the Flight From Reality by Bret Stephens


But maybe rules isn’t quite the right word. The larger issue is reality—and Greece’s flight from it. Greece’s debt-to-GDP ratio is 177%, which sounds like an abstraction but means that this year Greece will produce barely half as much as it owes. This is what the Greek government and its fellow travelers call austerity.

As of 2008, on the eve of the meltdown, Greece had no fewer than 133 public-pension funds, each administered by its own little bureaucracy. (Under pressure from creditors, the number was supposed to come down to 13.) Greeks retire earlier and live longer than most of their eurozone peers, which means they spend close to 18% of GDP on public pensions, compared with about 7% in Ireland and 5% in the U.S. Pension fraud is pervasive, but nobody can put an exact figure on it because record-keeping is notoriously, and probably deliberately, spotty.

Privatization of state-owned companies was supposed to bring in €50 billion. Five years into the crisis, successive governments have only sold off €2.5 billion of assets. Greece has more lawyers per capita than the United States. As of 2010, Greek labor costs were 25% higher than in Germany. A liter of milk in Greece costs 30% more than elsewhere in Europe, thanks to regulations that allow it to remain on the shelf for no more than a week. Pharmaceuticals are also more expensive, thanks to the cartelization of the economy.