The mindgame of fighting terror

Earlier this week posters appeared in Pattan in Jammu & Kashmir’s Baramulla district, threatening to kill 13 persons for assisting security forces. Here is the poster by a group with a grand sounding title of “Al Mashterqa Lashkar-e-Taiba Hizbul Mujahideen”.

Al Mashterqa Lashkar-e-Taiba Hizbul Mujahideen's Poster

Here’s the Indian Army’s counter-poster.

In the first panel it says “Hey terrorists, why are you fighting these innocent people. Fight with the Army, your fight is with the Army.” In the second it tells the people “Don’t fear these terrorists because the army is with you. Call us for help.”

Now let’s see if the message gets through.

Pakistan wants an additional $5000 for each truck that passes through its its territory carrying non-lethal supplies for NATO troops fighting in Afghanistan. US is hoping to clinch the deal at $1500-1800 a truck of supplies. Pakistan also wants an indemnity waiver in case American cargo is damaged. US might end up discontinuing the Coalition Support Fund money it pays to Pakistan to balance out the new levy on supply trucks. And the haggling continues.

This reminds us of the story (often attributed to George Bernard Shaw) of a conversation between a very sophisticated gentleman and a very respectable lady at a party.

“Well,” says the gentleman, “just for the sake of our argument, suppose I offered you $100,000—would you spend the night with me?”

The lady, smiling coquettishly: “Who knows—I might very well!”

The gentleman: “Now suppose I offer you $10 for the night?”

The lady: “But what do you think I am?”

The gentleman: “We’ve already established what you are. Now we’re just haggling over the price.”

One wonders if that is the line someone from the US actually uses during the negotiations when the Pakistan rhetoric over sovereignty gets too much to bear: “We’ve already established what you are. Now we’re just haggling over the price.”

The military establishment seeks more rent

Pakistan, the United States and NATO are currently engaged in negotiations over a transit fee for the route from Karachi to the Afghan border. Pakistan has demanded $5000 per container (in either direction) although other reports suggest that it would seek a ‘nominal fee’ of around $1800. It is important to note that these are over and above what Pakistan has already been making from the container traffic.

Here’s a conservative estimate of how much the Pakistan makes from permitting US and NATO troops transit routes from Karachi to the Afghanistan border. Between 2005 and June 2010, Pakistani military and civilian government entities made $290 million, or a little over $1000 per container, from allowing US and NATO transit to Afghanistan. The military establishment’s share of this is just over half, all of it in terms of pure rent or, as we like to call it “Al Faida”. The civilian government’s share came from taxes and through port charges.

Click to enlarge

An earlier post, from February 2009, has another estimate of the takings. Those figures are higher than these because they involve a different period and perhaps a different count of the number of containers. In the present analysis, the number of containers is taken from a report on the ISAF container scam by the Pakistani government’s Federal Tax Ombudsman, from January 2011. That report provides some interesting details about the political economy of the transit business—how a lot of people make lot of shady money.

Related Links: Pragmatic Euphony on the truth about the NATO supply routes.

In recent weeks, the price of gold in US dollar terms has dropped from around 1660 to around 1560 now. That is a 6% drop. Risk appetite has dropped. Investors have flocked to the dollar and yen. The scent of debt-deleveraging induced deflation is in the air. Hence, investors feel the need to abandon gold. It is strange. Investors have proven, time and again, to be myopic. The US dollar is no panacea. The Federal Reserve has expanded its balance-sheet more than the European Central Bank and the Bank of Japan have done since September 2008.

There is no threat of deflation. If anything, there is the threat of stagflation: low economic growth or recession combined with persistently above-target inflation in the US and in Europe. There are still persistent calls for the Federal Reserve to further expand its balance-sheet. In fact, many want the Federal Reserve to abandon any caution and buy risky assets aggressively. The latest to make this call is the Chief Economist for Citigroup. Willem Buiter was once a member of the Monetary Policy Committee of the Bank of England and then taught at the London School of Economics. He used to be critical of the bailout of financial institutions. Then, he joined one. Now, he is calling for helicopter dropping of money by the US and UK central banks.

FT subscribers can download the report written by Buiter here. The blog post in FT Alphaville on the Buiter note is here. I have written a lengthy comment on this brazenly irresponsible suggestion by Buiter in my latest MINT column.

There are rumours that Germany might loosen its stance on inflation and austerity and let the European Central Bank drop rates and expand the size of its long-term repo operations. All of these point to rising risks of stagflation because these measures will not lead to more economic activity but to more fear among the public that something is drastically wrong for countries to adopt such reckless policies. People will fear inflation tax and the government slapping higher taxes in future to make up for such aggressive policy measures. Therefore, they are unlikely to spend more. They are going to hold on to their cash more tightly than before. More likely that they would keep it under the carpet than even put it in banks.

At the same time, aggressive liquidity measures would boost speculation in commodities, cheapen the value of paper currencies relative to real assets and reverse the recent decline in commodity prices. In other words, aggressive monetary easing is more likely to result in higher inflation than in a growth pick-up. That is where the policy paths are leading to.

Perhaps, this is the ‘darkest before dawn’ for gold. Alternatively, the global financial order that was born in the 1980s and the paper money standard are on their last legs. Willem Buiter’s article reinforces the belief that fiat money backers are propelled by a death wish.

Tailpiece: Thanks to Zerohedge, stumbled upon this FT News item that a Japanese pension fund is switching into gold.

Shards of pottery with traces of mare’s milk, mass gravesites for horses, and drawings of horses with plows and chariots: These are some of the signs left by ancient people hinting at the importance of horses to their lives. But putting a place and date on the domestication of horses has been a challenge for archaeologists. Now, a team of geneticists studying modern breeds of the animal has assembled an evolutionary picture of its storied past. Horses, the scientists conclude, were first domesticated 6000 years ago in the western part of the Eurasian Steppe, modern-day Ukraine and West Kazakhstan. And as the animals were domesticated, they were regularly interbred with wild horses, the researchers say. [Whence the Domestic Horse?]

If you are interested in the history of horses in India, this would be a good starting point.

Both at the institutional level and at the individual level, it is important to remember this dictum that Lomborg proposes: we need to focus on what works more than what makes us feel good. Projects that tug at our heart might not be often the most effective ones that our monies can address.

If our goal in doing social good is to remove miseries of the maximum number of humans so that they can then develop the capabilities or be enabled to find their own solutions, then for example, de-worming is a great idea. Many children in India do not come to school because of diarrhea, stomach pains, etc. If only their stomachs are de-wormed twice a year, their digestion capabilities improve. They attend school regularly. A host of other good things follows.

I am proud to say that I know of both the individuals who have set up InkludeLabs in India. Check out the website here. It is in the making. But, you can get an idea. Their first big nation-wide project in India is de-worming.

Another idea with a similar potential is the provision of safe and clean toilets for girls in schools. That is an important factor in girls dropping out of school. The late Tamil Nadu Chief Minister M.G. Ramachandran’s mid-day meal scheme was another inadvertent, serendipitous smart welfare idea.

The idea to provide simple, safe and smoother cotton napkins for women to go through their menstrual cycle has immense benefits. Anshu Gupta of Goonj is a pioneer in that field. Many have entered that area, even commercially. All for the good.

Rainwater harvesting is another. Many organisations are involved in it. Tarun Bharat Sangh, Jal Bhagirathi Foundation, Dhan Foundation and the Centre for Society and Environment, etc. Provision of clean water goes a long way in boosting rural productivity, cohesion in families, allows women in the households to spend time on their children, on their food, nutrition, etc., instead of trekking miles to find water.

Teaching life skills to children from the primary years to higher secondary years is a great idea. Many of us find it difficult to cope with problems thrown up by others and that life throws up. We grope in the dark, unable to cope. We inflict pain on others in the family, consequently. The negativity spreads. Being aware of ourselves and our minds and knowing some simple rules of the game leading to that awareness can create millions of more stable humans in their adolescence and in their prime years. That is what Aparajitha Foundation tries to do (I am a Trustee of that Foundation). I am proud to say that I am a good friend of the founder and the man behind the idea.

I am sure there are many examples outside India too. I wonder if there is an organised way for these ideas to be shared, cross-fertilized, etc.  Perhaps, there is. If so, I would be grateful for pointers from readers of this blog.

To reiterate, the motto in giving and doing is: what works than what feels good

As per Washington Post, it costs the US $100 billion annually to keep 100,000 American troops on Afghan soil.

As per Dawn, using the Central Asian route for NATO supplies is costing the US an additional $38 million a month.

As per the Express Tribune, Pakistan has budgeted $1.1 billion in the next year’s budget as reimbursements from the United States on account of the Coalition Support Fund (CSF). The figure for the current fiscal year is $1.34 billion. And outstanding CSF dues at present amount to $2.5 billion.

Now do the maths. At $38 million a month, the losses sustained by not using supply routes in Pakistan over a year are $456 million. This is not even half a percent of the total amount being spent by the Pentagon in Afghanistan. Moreover, it is barely one-fifth of the CSF amount Pakistan wants from the US in the current and the next fiscal year. Do you still think the US is deeply hurt by the financial losses it is incurring by stoppage of NATO supply routes via Pakistan? In fact, Pakistan has done the US a favour by closing the supply lines. It is actually saving the US some money.

Perhaps this also explains John Kerry’s statement yesterday where he asked Pakistan to act against jehadi groups being provided sanctuary in that country. And he is the same John Kerry people expected would come and deliver a formal public apology to Pakistan.

[Hat Tip: @majorlyprofound for the idea]

At a time when the Hindu community in the country is crying over ‘conversion and forced-marriages’, they have been inflicted by another misery: the sacred pond at Katas Raj here is drying up because its water is being supplied to the nearby towns, Dawn has learnt. A cement factory near Katas Temples has installed tubewells in the area which have reduced the water level in the pond. The water from the pond is being supplied to Choa Syedan Shah and Waula village as the Punjab government could not provide any alternative facility to the residents of the area. [Holy pond at Katas Raj drying up]

Salman Rashid who visited the region recently writes

Last Sunday I was at Katas Raj, the ancient religious site (Buddhist and Hindu) in the Salt Range. It is useless to lament the destruction of the pristine site with marble flooring and steel pipe banisters to the stairways where none had ever existed in history. Culprit: the department of archaeology.[What is the matter with us?]