Friday, August 29, 2008

The Story of the Three Bears

This is not the story of Papa Bear, Mama Bear and Baby Bear. It is the story of three growling bears. Russia, Gustav and Bush.

Russia is the bear making the most noise. Russia does not like the fact that its former protectorates are joining "The West". NATO is no longer just Western Europe and the USA. It no longer has the purpose of "keeping Russia out, Germany down and the US in". But, perception is reality for Russia.

To understand the view from Russia, we should pretend for a moment that several of the 31 states of Mexico have joined the Commonwealth of Independent States, dominated by Russia, and that Russia has sent troops and missile defense systems into a couple of Mexican states.

In the early days, NATO was a weak federation. Even as a teenager, NATO lost the military services of the French; France withdrew in 1966. During the cold war, NATO gathered strength. Reagan established missile defense systems in Western Europe. When the Soviet Union Socialist System of Government collapsed in 1989, the "West had won." The Warsaw Pact states were freed to do as they wished, maybe? The treaty that permitted the unification of East and West Germany allowed Germany to remain in NATO, provided no troops or missile systems could be stationed in the East. Later, Estonia, Latvia, Lithuania, Slovenia, Slovakia, Bulgaria and Romania joined NATO. In April of 2008, Georgia announced its intention to withdraw from the Commonwealth of Independent States and both Georgia and Ukraine were promised future membership in NATO. Ukraine has been attending meetings of the Commonwealth of Independent States but it has never ratified the treaty.

Russia is notable for ruling with an Iron Hand. The country builds its relationships through intimidation. Such a leadership style works in only a few situations. In the long run, man wants the freedom to do what is best for himself. Unfortunately, most of us are not willing to accept the truth as explained by Ayn Rand. In essence, we help others when we help ourselves.

This week, Russia has hinted that it may cut down on energy supplies sold to Europe. As we all know, embargoes and cartels are very difficult to maintain. If there is "significant leakage" or alternatives, the one attempting to force the issue is hurt the most. Russia has even hinted that it will cut its imports of beef, pork and chicken from the USA. Naturally, if Russia cuts back on oil sales to Europe, it will need to cut back somewhere and meat is a luxury good for millions of Russians.

Those who are free tend to recognize that trade helps both parties to every transaction. Novices at a board game like high bid will tend to attempt to corner a market. The more they try to drive the price of a certain good up, the less business they will do. The player who buys and sells a lot of goods at small profits on each sell will make more profit than the guy that tries to corner a market. In real life, we see silly games played all the time. Unions drive wages to artificially high levels in America only to see production go overseas. Lawyer-politicians, with little or no business experience, raise taxes the most on the most productive of assets. Russia owns a lot of resources and controls even more. Together, Russia and Kazakhstan own huge amounts of uranium but it can't sell it without cooperating with the rest of the world.

Russia has growled in other ways. It just held meetings with Syria. Syria has been isolated as a sponsor of terror for many years. It is close to gaining its "get out of jail card". The pending treaties with Lebanon and Israel and pending commercial treaties which include the building of an oil pipelines and gas pipelines through Syria and the building of a major refinery are all nice carrots that can be collected through cooperation with the West. Russia and Syria can talk about weapons systems but neither really want to walk away from pending treaties.

Russia has growled that it may withdraw its help in regard to nuclear bombs in Iran. Iran is cheering in hopes of a major confrontation between the West and Russia, but, the third round of sanctions, already approved by Russia and China, have not been fully applied.

Russia has growled about NATO presence in the Black Sea but a NATO member, Turkey, controls access to the Black Sea and many tons of goods flow down the Danube and into the Black Sea. Germany and many others access world markets cheaply and easily via the Black Sea. The Black Sea offers the West a look at the soft under-belly for Russia but the purpose of keeping the Black Sea open is to allow the flow of goods. Ukraine, with just as much sea frontage as Russia, is on the list to join NATO. Russia can hardly stand the thought, what can it do? Nations such as Ukraine benefit more from commercial connections to Western Europe and the rest of the world than from commercial connections to Russia. Membership in NATO supplies security. NATO has 70% of the worlds military power. Russia does not want to risk war with NATO.

The loudest growl so far, other than the military support of two tiny little break away states from Georgia, has been the threat of a new Cold War. We know how the first Cold War ended. Again, it is in Russia's economic interest to sell oil to Europe and to buy chicken from the USA, etc. Russia cannot expect to collect transit fees forever by forcing neighboring states to send oil and natural gas through Russian pipelines.

It is in Russia's interest to keep nuclear bombs out of the hands of the Islamic Fascist of Iran which are currently spending large sums to support the movement of Hezbollah to South America, among many other places. Islamic Fascist now control the southern half of Somalia. Iran fought Iraq to a standstill from 1980 to 1988. It knows it cannot win a conventional war against the West. Iran has only three routes to success: 1) to build satellite states through terrorist techniques in places like Venezuela, Columbia, Lebanon, Afghanistan, Pakistan, Iraq and Somalia, 2) to acquire nuclear weapons, 3) to divide Russia and the West. Russia has battled Islamic Fascist in Chechnya, Afghanistan and all the way into its homeland.

CONCLUSION: Russia is not happy about having so many neighbors in NATO but there is nothing it can do. At a critical time of multiple pending peace agreements, Russia is trying to impart just a little Russian shape to the deals.


Gustave is making noise as it enters the war waters of the Gulf of Mexico, but not as much as the media hype would indicate. Storms make the news, but they are not in the same historical league as the spread of Islamic Fascism or the "battle between Russia and the West". If Islamic Fascism is not checked, it could truly result in WW III. Katrina was one of the "once in 50-year storms". Gustave could be another, but not likely.


On the first day of the democratic convention, Bush sent the USS Iwo Jima, an aircraft carrier, on the way to Iran. On September 8, the day congress returns to Washington, Bush will send another aircraft carrier, the USS Theodore Roosevelt, to join the USS Ronald Reagan and other ships off the coast of Iran. On September 9, OPEC will start its fall meeting. High oil prices will be in the news when congress is back in session.

Democratic congressional leaders want a short session. The Reid -- Pelosi strategy is to not pass any budget bills until after the "big win in November". Talk about a do nothing congress! The law requires a budget by October 1, but both republican and democratic congresses have failed in the past. In the past, they at least tried. They have normally passed several bills well before the October deadline. This time, none of the 12 bills have passed.

The bill that funds the interior department is the one where the prohibition to drill is normally attached. Bush has said that he will veto the interior bill if it has the drilling moratorium attached. After going through the motions of introducing "Christmas Tree" drilling proposals, containing subsides for wind mills and windfall taxes for oil, the leaders will be stuck. Such a bill will not pass. To get out of town and onto the campaign trail, a congress with only a 14% approval rating will then attempt to pass a continuing resolution. The drilling ban will be attached. Again, Bush will threaten to veto. Such a bill will not pass the Senate.

In the absences of compromise, by October 1, fur will fly. The words will not be the nicest you have heard. If the democrats buckle, a clean CR will be passed and the price of oil will fall about $20 per barrel in two or three days. If the democrats do not buckle, all but emergency services of government will start shutting down and republican candidates around the country will hold massive rallies. The public is overwhelmingly on the side of drill, drill, drill to lower prices.

The price of energy is the number one economic and foreign policy issue. John McCain has picked a running mate from the oil rich state of Alaska.

Governor Palin, a working mom with 5 kids, is a powerful force. She has fought and won against the big oil companies. Her accomplishments include the passage of a bill to build a $40 billion gas pipeline across Alaska. If we develop enough of our gas reserves, natural gas can be used to fuel clean burning cars in the summer and heat homes in the winter, avoiding the cumbersome storage process we currently use.

Palin has other accomplishments, including a successful fight against corruption. However, her greatest asset to McCain is not her list of achievements. One TV anchor and former supporter of Hillary responded passionately to Palen criticism today. A male anchor questioned her abilities and the female anchor said that any women that can raise 5 children while holding a tough job has demonstrated the ability to work under stress. This female reminded me of a Mama Bear protecting her cubs. What is not to like? A smart woman who believes in low taxes and free markets, who cannot be pushed around by the powerful.


Last night, on the 45th anniversary of the powerful Martin Luther King speech, "I Have a Dream", Obama latched onto Al Gore's fantasy. Obama, like Gore, believes we should end US dependence on foreign oil within 10-years by spending billions to support poor solutions. If he could do it, his method would still be wrong. America should not spend billions to subsidize windmills or any other wasteful method. The great irony is the great harm to the environment being done by those who oppose all but their energy solutions.

PREDICTION: McCain will win by more than 2%. A virtual landslide. The first woman VP is going to be a republican.