Monday, April 30, 2007

What if Warfare was Reinvented and Nobody Bothered to Tell the Pentagon?

The title of this post comes from a question posed in John Robb's new book, Brave New War. I received my copy a little over a week ago, but with all my travel, I just now finished it.

Summary Impression
For anyone involved in strategic planning, security, financial markets, energy infrastructure, scenario planning, transportation or communications networking, this book is a must-read. For those of us who follow his work at GlobalGuerrillas, much of the information is familiar, but presented here in book form, the many strands of thought that make up the concept come together effectively.

Go buy a copy of this book. Now. If you are low on cash, skip a few lunches and save up the cash. It is worth it.

In my view, one of the big concepts that Brave New War presents is found on page 20:
The threat posed by al-Qaeda and other emerging groups is different. It is not at war with us over the replacement of the state but over who controls the power a state exercises. Al-Qaeda doesn't want to govern Iraq or Saudi Arabia. It wants to collapse them and exercise power through feudal relationships in the vacuum created by their failure. This stance is exemplified by al-Qaeda's relationship with the Taliban in Afghanistan. In 1996, when Osama bin Laden returned to Afghanistan, he didn't maneuver to gain control or wield power over a newly emerging Islamic state. No, that would have been a uniquely twentieth-century goal. Instead, he was eager to build a new type of organization that operated in parallel and in concert with the Taliban within the same territory. {emphasis mine}

John Robb, Brave New War, page 20

The rest of the book works out how this new concept - powered by the technology of the microchip and enabled by a combination of a globalized market economy and vulnerable, complex infrastructure - will shape the future of conflict. I've touched on similar concepts (4GW, Socionomics and Chaos and Down This Winding Road for example) over the past few months and think Mr. Robb has come up with a model that explains a lot about the current problems with the wars in Iraq and Afghanistan.

Key point, if I read it correctly - the insurgents in Iraq and most of them in Afghanistan are NOT fighting to take over their governments. They are fighting hard enough to keep the state in a broken condition. They don't really care who gets appointed Minister of Games, Recreation and Mopery. They don't care what shiny little bureaucrat gets to attend an international conference, sit at a big table and act important. The global guerrillas just want the state to exist as a fiction - a straw man that gets beaten up by the international community when things go wrong, but which cannot police the criminal activities (smuggling, counterfeit product manufacture, oil bunkering, etc.) that make them and their associates/clan/gang rich.

They can keep a state in failure relatively easily because the modern nation-state is presented as the Ultimate Sugar Daddy. Even though it is ludicrous to believe that the U.S. federal government or the Federal Reserve can micromanage the multi-trillion dollar economy found in the U.S. - they are expected to. The propaganda associated with government leads citizens to expect that all good things flow from the State. When things go wrong, the government gets the blame.

For example, imagine that over the course of the last few hundred years, a large city grew up where a major river flows into the ocean. Due to subsidence, much of this city is actually now below sea level - protected by a system of levees. One day, as will happen in nature, an enormous storm blows in from the ocean and swamps the city, breaks the levees floods the homes of millions of people.

Now, anyone who ever looked at a map of New Orleans knew that something like Katrina was going to happen one day. As Mr. Robb points out in his book, much of the most effective response was executed by private individuals and corporations - entities with effective supply chains, good communications and a focus on results, not process. The government, especially the federales got a tremendous amount of blame for their response.

Now, multiply that by ten terrorist attacks a month on vital infrastructure and you can see Mr. Robb's point - a state can be dumped into failure relatively quickly these days. As an aside, it dovetails nicely with the socionomic model of behavior - this vulernability has been there for decades. Now we are reaching a critical mass of social mood and technology that allows that vulnerability to be exposed completely.

He ends on a positive note - that by building reslient "platforms" groups can use Global Guerrilla tactics for positive ends. I like the idea. The only problem I see is that getting to those platforms will require a change in mindset so vast that it will take two generations before the applications can spread outside of niche areas.

This Brave New War described by Mr. Robb is coming to a country near you. Buy a copy of this book and then begin thinking of just how vulnerable you are to systemic disruption. Then get off your butt and begin planning for a chaotic future. And always remember - chaos is not always bad, it is the seed of opportunity and success.

Wednesday, April 25, 2007

Some Socionomic Thoughts

A recent story out of Iraq is another socionomic marker on the road to collapse. It's just one of many data points, but a point well worth revisiting as the Western financial and social worlds teeter on the knife-edge of radical change.

U.S. wall seen worsening division of Baghdad
By Alistair Lyon, Special Correspondent - Analysis

BEIRUT (Reuters) - A U.S. military project to wall off a mainly Sunni Arab enclave in Baghdad evokes images of Israel's West Bank barrier for many Iraqis who believe the plan will widen sectarian rifts tearing their capital asunder.

Physically sealing Adhamiya and other troubled areas may have a fleeting impact on the level of bloodshed, analysts said. But it will further fray the social fabric of a city that has ripped very roughly into a Shi'ite east and Sunni west.

Now, the probable effects of building a wall around a large neighborhood will be catastrophic. We propose to create a mini-Gaza Strip on the east bank of the Tigris, a place where the limited pathways in and out will destroy the economy and create a further sense of helpless rage in the citizens there, creating an unbelievable opportunity for radicals and insurgents to exploit. All an Al Qaeda rep has to do now is say "Look - the Americans are doing to you what the Israelis did to the Palestinians. Join us and fight. We'll provide you with money and a chance to give your life meaning through struggle."

What will the Western forces be able to offer to counteract this? I have no idea.

Plus, an MSNBC story on the wall mentioned a chilling fact. The gates in and out will be guarded by Iraqi troops. Let's all pray that those troops are Sunni. If they are Shiite, it will only be a matter of time before another Shatila/Sabra or Damour happens behind those walls.

With this in mind, let's review a table of selected socionomic "poles" - emotional extremes that govern mass behavior during times of positive and negative social mood:

Selected Socionomic Poles
Positive Extreme
Negative Extreme








tendency to praise
tendency to criticize

Keep this table in mind as you follow stories on Congressional funding for the Iraq war, problems in the mortgage industry, the upcoming presidential race and community relations all across the U.S.

If my assumptions are correct, we are swinging towards the items in the right-hand column. Now, these different shades of emotion are always present in any debate, but the key point is that one pole or the other is always dominant - and that colors the decision-making process from individual decisions to national policy making.

Tuesday, April 24, 2007

Back in Town...

Well, I am back, but jetlagged and way behind on some work. Within the next few days I hope to get some stuff up on Iran/Iraq and a review of John Robb's new book, Brave New War.

Thursday, April 19, 2007

The Missouri of Europe

And I mean that as a compliment. I've been in Romania all week and must say I am impressed. The Romanians I've met are friendly, very competent, Bucharest is an enjoyable city and in general, life is good.

A dinner, hosted by IAEA, was held for us at a place called "The Golden Blitz" - a nice restaurant staffed by very attractive young ladies who started our night off with a dose of "Polenka" (I'm not sure of the spelling). Think of polenka as 1 part avgas, two parts distilled nails, with a hint of plum brandy to it. I was soon seeing two of pretty much everything. Then they a guy along with a band got up on a stage with a Zamfiresque pan flute and began playing 'Bridge Over Troubled Waters' - which beat the piped in music, such as "How Much is that Doggie in the Window" or a variety of Sinatra tunes.

As for their nuclear infrastructure - I am very impressed. They have a very professional set of folks in both the regulatory and testing parts of their shop. Once they finally get a good money-making project up and going (such as Mo-99 or n-doped silicon) I could see them building a fluorishing center here.

Thursday, April 12, 2007

Bucharest Bound

Downtown Bucharest

I'm off to Bucharest, Romania for an IAEA conference on LEU Mo-99 production. Should be a very interesting conference.

While I'm away, I suggest you check over at George Ure's UrbanSurvival for a fresh look at the news, economics and the big tidal wave of change rushing our way.

Peak Oil

Check out this trailer:

I plan to pick up a copy from Matt Savinar as soon as it becomes available.

4GW, Socionomics and Chaos

We read today that insurgents in Iraq somehow got into the heavily fortified Green Zone and set off a bomb, killing two Iraqi parliamentarians. In addition, another bomb was set off on a major bridge north of Baghdad, destroying the bridge and sending several cars plunging into the Tigris.

These are a couple of examples of how 4th Generation Warfare can be effective at destroying systems - both of governance and infrastructure. John Robb calls this type of emphasis the systempunkt (a play off the German Blitzkrieg concept of schwerpunkt).

To recap, modern complex communications, utility and transportation systems are vulnerable to attack, throwing a potentially thriving community into chaos. These attacks may be performed by small groups or individuals who have a grudge. These groups don't have to attack heavily armed troops or police to get their point across - they can do immense damage just by attacking the infrastructure that support those troops and the community at large.

Now, combine this ability, which has been shown time and time again in the laboratory of Iraq, with the coming wave of negative mood that will be sweeping the U.S. (Note - this assumption of mine will be delayed if you see the DJIA cross 12,900) which has been shown to lead to anger, violence and a tendency to want to break things apart rather than build them up.

If you see DJIA 6,000 - the bridge you read about being blown up may just be one over the Mississippi River instead of the Tigris.

Here's hoping this rally still has legs and that we can spend that time preparing for the coming storm.

Tuesday, April 10, 2007

Air Beverage

Quite possibly the coolest invention since the remote control.

Iran WarWatch (Part Eight)

I wrote the following as a posting in the Stratfor Iran Forum after the Iranians made their big claim about "industrial scale processing" for uranium enrichment.

Color me yawning. This kind of talk will be used by the West as part of the case to whack Ahmadinejad when the war that I expect finally comes, but as a real threat, it is way down on the list.

Iran Says Nuclear Enrichment Reaches Industrial Scale
by Marc Wolfensberger and Patrick Donahue

April 9 (Bloomberg) -- President Mahmoud Ahmadinejad said Iran has begun enriching uranium on an industrial scale, stepping up the country's defiance of the United Nations and risking an escalation of tensions over its nuclear program. ``I am proud to say that right from today our country has entered the group of countries that produce nuclear fuel industrially,'' Ahmadinejad said today at the Natanz uranium- enrichment site. While the president didn't specify the scale of enrichment, Iranian nuclear negotiator Ali Larijani confirmed to reporters that uranium gas was being fed into 3,000 centrifuges. The International Atomic Energy Agency said Feb. 22 that Iran planned to have 3,000 centrifuges at Natanz by May, though a UN official with direct knowledge of the IAEA's Iran inquiries at the time called that goal optimistic. About 1,500 centrifuges spinning non-stop for a year would be needed to produce the 28 kilograms (62 pounds) of 90 percent-enriched uranium needed for a bomb, said nuclear physicist David Albright of the Institute for Science and International Security in Washington.

The output of a centrifuge is based upon the rotational speed of the drum, along with the height and diameter (and a few other parameters, I suggest Cochran and Tsoulfanidis' The Nuclear Fuel Cycle: Analysis and Management, pg . 65-67 for a basic treatment).

It is estimated that the Iranian centrifuge design (based on a P1 type centrifuge) can churn out about 2 to 2.5 kg-SWU per year, centrifuge (where SWU is a Separative Work Unit - a term used in uranium enrichment). Numbers as high as 3 kg SWU/year have been touted for the type of centrifuge, but that is for one in optimum condition, run by experienced operators and with access to high-quality maintenance and parts.

So, if we are to believe President Ahmadinejad, then we have Iran cranking away with 3000 centrifuges. If he wants to go to 90% enriched for a bomb (instead of the civlian grade stuff he claims), then he needs around 30 kg of HEU. Note that that 30 kg figure is the low end - and does not take into account the HEU that might be lost in production, machining, etc.

How many kg-SWU will be required to get 30 kg of 90% enriched HEU? You can pencil it out, or you can use a Uranium SWU caculator provided by the FAS. I used a tails assay of 0.3% and got 5788 kg-SWU to get it. So... it does seem to pencil out to be around a year or so to get 30 kg.

Now, I will also grant you that the Iranians may have a reasonably modern weapons design with excellent neutron reflection capabilities and thus might be able to get by with just 30 kg at 90%, but I'll believe it when they test it successfully. Remember, Little Boy had 50 kg of 89% enriched material, along with a tamper of 14 kg of 50% enriched and the first weapon the Iranians will make will be similar to that (Trinity and Fat Man were both Pu weapons and Iran is not pursuing that route). Yes, I know they can boost it with various tritium producers to make it more powerful than Little Boy, but the uranium part will be very similar.

So we are looking at twelve to fourteen months at the earliest for Iran to have accumulated enough for a credible bomb design. They need all 3000 working, all the time. Now that boundary condition should be viewed as an extremely aggressive and unlikely when we consider other factors such as:

  1. What is the mean time between failures of these centrifuges? The Iranians, with all their skill, almost certainly do not have the industrial and metallurgical infrastructure to maintain their centrifuges in the manner you would see in Europe (the US will be building two centrifuge facilities, one at Piketon, OH and the other in Eunice, NM, but those will be years away). So even if we have two years or so MTBF the Iranians will have 5 or 10 fail per day.
  2. Can they maintain the ones that do fail? Bearings, rotors, etc. This is not trivial in a complex system such as a centrifuge cascade. The whole rationale for using centrifuges is based on its efficiency - which is reliant on speed of rotation. They can go easier on the system by easing rotation speed down to 300 m/s from 350 m/s, but that lowers the production rate. Good for the West.
  3. Steady supply of Hex. UF6 is a nasty substance. Think corrosion, think leaks, think potential for supply interruptions. No figures for you on this one, just another weak link in the chain.
  4. Then you have to do the metallurgy on the metal. Get it in the right phase, cast it, machine it, etc.
  5. Now, you have to test this beast you've built with all this time and effort - otherwise, no one will know for sure you are in the nuke club. So now you light it off, hope it explodes and...
  6. Iran now has to go through the whole process again. Of course, this all assumes the Israelis or the U.S. have not begun bombing by now.

My suggestion - don't stress too much for about two years, at least about an Iranian bomb. You get more time if they showcase stuff like pulling out low-enriched uranium to make fuel rods (they might do this if they decide to "prove" to the world they are in the business of the peaceful use of nuclear energy), giving them less material to continue the enrichment path.

Even two years is optimistic to the point of delusion for the Iranians. They have to "shake down" the centrifuges, apply "lessons learned" from the process, get their maintenance figured out, avoid sabotage by Western agents, provide enough UF6 to get maximum throughput, etc. I personally don't see them being able to do it in five years. Consider the two year mark a 'worst case' scenario.

Cleanest Air in the Industrialized World

If you have about 13 minutes to spare, click over to CBS News and watch this 60 Minutes segment on nuclear power in France. For those of you living in the U.S., then think about the decades we've wasted, held in thrall to insane eco-fascists...

Vive Les Nukes!

Monday, April 9, 2007

A Chronology

I find chronologies very useful in testing a theory. My current working hypothesis is that the mortgage sector in the U.S. is going to implode and that a credit crunch is nigh.

Assuming for a moment that Alt-A might be in more trouble than the Fed would have us believe, what policy steps will follow from it?
  1. A major Alt-A lender is leaned on by large banks as Alt-A mortgages they sold to be packaged into CDOs begin to default at higher rates than predicted in the computer models. The lender implodes as their cash flow can't handle the new costs.
  2. Foreclosure rates spike. Protesters, politicians and furious home "owners" work to oppose quick foreclosure. Property sits occupied, but no cash flow is generated for the banks or CDOs as the legal process drags on.
  3. Laws are passed to slow the foreclosure process even further. Some states emulate an Ohio effort to allow ARM holders to refi at 6.25%, but soon learn that they are now holding the bag on a lot of bad paper
  4. "Squatters Rights" movements gain strength in Colorado, Ohio and Michigan. Legally or otherwise, property rights are thrown into question. Imagine for a moment what that does to local and county property taxes - and the people who rely on a salary taken from that tax revenue...
  5. The supply of housing has grown so much that demand has no hope of clearing it out in any reasonable time frame. Layoffs hit the building trades, further hurting potential buyers. Laws are passed in several states to hire gangs of unemployed to tear down houses that have stood empty for more than 18 months, in an attempt to reduce supply.
  6. A new version of the Resolution Trust Corporation is formed. This one allows for groups of "buyers" to purchase blocks of properties with minimal equity input and on balloon notes, in an attempt to further clear out the backlog of unsold inventory. Home prices collapse as the oversupply of homes and new access to credit competes with an oversupply of apartments. If you have a job, rent is cheap.
  7. Just as real estate settles out, funding crises hit the federal government as the Medicare program approaches complete insolvency. This hurts the pocket books of citizens as taxes are hiked and further limits their ability to bid up home prices.
  8. Home prices stay low for a generation. David Lereah writes a book "The Eternal Slump - Why Housing Will Never Recover". The bottom is hit, prices rebound and the cycle begins again.

If we get a positive divergence from the above, then we will have weathered the storm and I can let my sphincter relax a little until the Welfare State Bankruptcy Crisis hits in about five years.

Remain Calm, for Real?

A spate of good news has me cautiously optimistic short term. Since the focus here is too often strictly negative, I'll avoid talking about Iran (chance to lessen tensions there with the release of those British sailors and Marines), Iraq (a bloodbath, but a stable bloodbath at the moment - as long as the Shia don't decide to choke off the Kuwait-to-Baghdad supply route) and mortgage lending for housing (still too early in my book to confirm that the lending crunch is mostly isolated to subprime and not spilling over into Alt-A).

Keep an eye on the Dow. We should see a big spike this morning. After that, if the rally leg stays strong, we may be able to relax some, until around September or so. Take this time to get liquid, stock an emergency kit of some sort, suited to your family's situation and enjoy life - read a good book, take a walk, paint a picture or just admire a sunrise.

Wednesday, April 4, 2007

Smoke, Fire, Etc.

Some quick news stringing and then a clever YouTube clip. Been busy as a one-armed paperhanger for the last few days - I do promise some original stuff soon. I've got Iran on the brain, not to mention some socionomic themes to play with as well.

Countrywide is a big-time capo of the subprime lending (under)world. But again, there is nothing to see fnord here. This is not smoke. There is no fire. There is no subprime meltdown. All fnord is well...

Two Countrywide Directors Leaving Board
From Reuters

NEW YORK, April 2 (Reuters) - A Countrywide Financial Corp. director has abruptly quit the board, and the largest U.S. mortgage lender isn't offering any explanation.

Last week's resignation of Kathleen Brown, whose board term wasn't due to expire until 2009, escaped the notice of much of the industry, which is in turmoil over a rising tide of delinquent loans. Countrywide announced Brown's resignation late Friday evening, but offered no explanation for her departure.

Brown, head of West Coast municipal finance for Goldman Sachs & Co., is the sister of California Attorney General Jerry Brown.

Brown joined Countrywide's board in 2005. She did not return telephone calls seeking comment.

Also leaving Countrywide's board is Michael E. Dougherty, who won't stand for reelection at the company's upcoming annual meeting. Dougherty, chairman of Dougherty Financial Group LLC, has served on Countrywide's board for nine years, including as lead director and chairman of the compensation committee.

Please file under Rats, cross-linked to Sinking ships.

And, for those of you who like visual representations of your charts and statistics, I give you this cool YouTube clip on inflation-adjusted home prices:

Tuesday, April 3, 2007

Remain Calm, All Is Well (Part Twelve)

This post by RodgerRafter in the Market Traders Forum steered me to the data behind the following chart for Impac Mortgage Holdings, an Alt-A lender:

Source data for the chart may be found here.

Okay, so we have it on "good authority" from the 600 pound Gorilla of the Alt-A tranche of the mortgage world, IndyMac, that Alt-A is not going to be tainted by the problems that have led to a blow-up in the subprime world:

"I think the facts, as we've outlined them, speak for themselves in terms of the credit quality of Alt-A production versus subprime -- and, in particular, how Indymac's credit quality shines in relation to the industry, validating our lending standards and practices," commented Michael W. Perry, Indymac's Chairman and CEO. "Alt-A is not 'slightly' less risky than subprime, it is a lot less risky. While Indymac does not have industry cumulative loss data for conforming loans for this time period, I find it inconceivable that conforming loan losses could be much lower than Indymac's Alt-A cumulative losses of less than 1/100th of one percent, or 0.81 basis points, at this time.

Then we have actual data, shown above. Now, IndyMac may be correct and their standards may be high enough to avoid the problems that seem to be creeping up on Impac, should that trendline hold.

That said, keep a few things in mind and keep a close eye on IndyMac - they will tell the tale of whether the current mortgage problems are isolated to subprime or whether the rot has spread deeper:

  1. A lot of Alt-A products were sold with teaser rates. They'll be resetting over the next couple of years. Many home "owners" won't be in a position to refinance, either, with stagnant home values.
  2. When housing crashed in the Southwest in the 1980's, a lot of prime borrowers lost everything - and we are supposed to believe that Alt-A is going to hold up fine in the teeth of the ugliest housing market in living memory.

Remain calm, all is well. Sit there, watch television fnord, consume, go into debt, buy a big house with a liar loan, max out your credit cards. fnord All is well. All is well.

Monday, April 2, 2007

That Thump You Hear...

... is the canary falling dead on the floor of the coal mine.

When the auditors tell a company to piss off, said company is likely in a world of hurt.

Grant Thornton Resigns as Auditor at Fremont, Accredited
from Housingwire

Grant Thornton LLP resigned Monday as the auditor for Fremont General Corp., an FDIC-insured lender ordered by federal regulators to stop subprime lending, and San Diego-based Accredited Home Lenders Holding Co.

The auditor cited “significant events” at Fremont as the reason behind a recent decision by Thornton to expand the scope of its financial audit of the lender’s internal documents, and said that Fremont had failed to provide the information needed to complete its review.

By the time May rolls around, we'll all be living in a different world - the long run that Keynes talked about...