Iraq

The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.

"They keep saying things like Mohammed is the prophet. Similar to Bin Laden. They are paving the way for him in North Africa."

"In retrospect, Obama’s intervention in Libya was an abject failure, judged even by its own standards. Libya has not only failed to evolve into a democracy; it has devolved into a failed state...As bad as Libya’s human rights situation was under Qaddafi, it has gotten worse since NATO ousted him."

In a move that could very well lead Iran to take the "proxy" out of Yemen's proxy war, Saudi Arabia has reportedly bombed the Iranian embassy in Sana'a, injuring staff in what Tehran says was a "deliberate" attack. "My classmate and I were at recess when a huge explosion hit the neighborhood. We ran to the side and she fell to the ground in fear."

For more than four decades Washington’s middle eastern policy has been dead wrong and increasingly counter-productive and destructive. Washington’s Mideast policy is predicated on the assumption that the answer to high oil prices and energy security is deployment of the Fifth Fleet to the Persian Gulf. And that an associated alliance with one of the most corrupt, despotic, avaricious and benighted tyrannies in the modern world is the lynch pin to regional stability and US national security. Nothing could be further from the truth. The House of Saud is a scourge on mankind that would have been eliminated decades ago, save for Imperial Washington’s deplorable coddling and massive transfer of arms and political support.

We don’t have a dog in this fight.  San Bernardino doesn’t change the calculation.  ISIS will eventually collapse under its own homicidal and parasitical weight, probably with the help of one or more of its neighbors, whose inactivity and divisiveness we currently underwrite. Then ISIS will be replaced by something better... or worse... it is impossible to know in this region.  In the interim, we and our European friends should focus our efforts on isolating ourselves from the madness.  And we certainly should not go out of our way to draw further fire.

Energy investors got clobbered in 2015, and are hoping for things to turn positive as we head into the New Year. What can we expect in 2016? Here is a rundown of some key trends to watch for...

See For Yourself ...

Turkey’s shoot-down of a Russian jet and the Saudi execution of a revered Shiite cleric, who threatened no one in prison, should cause the United States to undertake a cost-benefit analysis of the alliances and war guarantees we have outstanding, many of them dating back half a century. Do all, do any, still serve U.S. vital national interests?

"The United States should do everything possible to avoid choosing sides in an intensifying proxy war between the dominant Shiite and Sunni powers in the Middle East. Though history tells us we should tilt toward Saudi Arabia, our old ally, if we look toward the future, Iran is the more logical partner. The reasons are simple: Iran’s security interests are closer to ours than Saudi Arabia’s are."

It doesn’t matter what the issue is - whether it’s a rancher standing his ground over grazing rights, a minister jailed for holding a Bible study in his own home, or a community outraged over police shootings of unarmed citizens - these are the building blocks of a political powder keg. Much like the heated protests that arose after the police shootings in Ferguson and Baltimore, there’s a subtext to the Oregon incident that must not be ignored, and it is simply this: America is a pressure cooker with no steam valve, and things are about to blow. Now all that remains is a spark, and it need not be a very big one, to set the whole powder keg aflame.

Because the sectarian divide is set to become the key geopolitical issue in the weeks and months ahead, we thought it an opportune time to present the following map from Goldman which does a nice job of delineating the Sunni-Shiite split in the Mid-East.

When a pair of Sunni mosques were bombed in Iraq on Sunday, the assumption was that the attacks were carried out by angry Shiites protesting the execution of Sheikh Nimr al-Nimr. Iraqi officials on the other hand, blame ISIS. If Islamic State is behind the attacks, the question becomes this: were they instructed to carry out the bombings by a handler or a benefactor with a hidden agenda?

There’s really one supreme element of this story that you must keep in view at all times: a society (i.e. an economy + a polity = a political economy) based on debt that will never be paid back is certain to crack up. Its institutions will stop functioning. Its business activities will seize up. Its leaders will be demoralized. Its denizens will act up and act out. Its wealth will evaporate. Given where we are in human history - the moment of techno-industrial over-reach - this crackup will not be easy to recover from. Things have gone too far in too many ways. The coming crackup will re-set the terms of civilized life to levels largely pre-techno-industrial. How far backward remains to be seen.