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NightWatch 20111208

NightWatch

For the night of 8 December 2011

Afghanistan: Feedback from a Brilliant and exceptionally knowledgeable Reader reminded NightWatch that any attack against Shiite believers inevitably is an attack against the Hazaras, the third largest Afghan ethnic group and the only one most of whose members speak Farsi and are Shiite.

The Hazaras historically are one of the most disdained ethnic groups in Afghan history because they are not Sunnis or Pashtuns. Under the US inter-regnum, the Hazaras on a family basis, with the assistance of New Zealand, have prospered. Three provinces of Hazarajat, centered on Bamyan, have been neglected by the Karzai government, but the Hazaras found a way to turn adversity into advantage. Families encouraged education of their children and application to government service. They have become essential to the functioning of the Kabul bureaucracy.

Afghan women taking air force pilot lessons include Hazara women. The US intervention saved this ethnic group from genocide.

The attacks on the Shiite holy day of Ashura this week, which the Lashkar-e-Janghvi from Pakistan claimed, were both sectarian and ethnic. Their intent apparently was to continue to polarize Afghanistan so that the Hazaras again unite with the Tajiks and Uzbeks against the Pashtun Taliban.

In Pakistan, the Lashkar e Janghvi (LeJ) is the primary group that attacks and harasses the 500,000 Hazaras who live in Quetta, Baluchistan Province, Pakistan.

The LeJ seeks to eradicate the Shiites in Pakistan, which means exterminate the Hazaras in Quetta. They almost certainly are not responsible for the Afghanistan attacks this week. Groups backed by Pakistani intelligence are a surer bet, to retaliate for the deaths of two dozen Pakistani paramilitary soldiers.

The symmetry is that the US can reach deep into Pakistan using technology, but Pakistani-based and backed groups can reach even deeper into Afghanistan.

Egypt: Special Report. In the past two days, the Egyptian Army leadership showed a belated appreciation that elections are incredibly dangerous. Democracy is not an absolute good. Within less than a half year, the Armed Forces leadership has migrated from savior of the Egyptian Arab uprising to enemy of Egyptian democracy.

In the aftermath of the elections in which the Islamists won a majority, the Army leadership has reneged on its promise that an elected parliament would draft a new constitution. A two-day chronology of the Army leadership struggle against the Muslim Brotherhood follows.

The military government announced on 7 December that it would appoint a council to check the influence of religious groups on the drafting of a constitution. General Mukhtar Mulla said Egypt is in the early stages of democracy and the new parliament does not represent all sectors of society. The new council will coordinate with parliament and the Cabinet to make sure a constitutional assembly represents the population properly, Mulla said. He confirmed the new council seeks to limit the influence of Salafis (Islamic fundamentalists.)

The Muslim Brotherhood's (MB's) Freedom and Justice Party announced it would oppose the Supreme Council of the Armed Forces' attempts to control the process of drafting a constitution. MB Secretary General Saad el-Katanti asked why the council wants to interfere with the will of the people.

General Mulla said the Egyptian government is not the U.S. Congress, adding that Egypt is still unstable, with economic and security problems. Mulla said for now, all sectors of society must contribute to the new constitution

The MB's Freedom and Justice Party deputy chief Isam al-Uryan said on 8 December that Egypt will review its relations with all countries and will improve its ties to Iran. Al-Uryan said the Arab Republic of Egypt has returned to the region and will not remain under the influence of the United States and the West.

The Muslim Brotherhood's Freedom and Justice Party will boycott the civilian advisory council overseeing the drafting of Egypt's new constitution, an MB spokesman said on 8 December. The 50-member council appointed by the Supreme Council of the Armed Forces will deprive Egypt's parliament of its authority, the spokesman said.

Comment: Egypt is on the brink of another episode of violent internal instability. The armed forces council appears to have reneged on a deal with the Muslim Brotherhood, over the elections. Apparently the military leadership completely failed to anticipate the strong Salafist vote. They expected the secular parties to make a stronger showing. As a result, ten months after the ouster of Mubarak, the military itself has become the target of protests and boycotts by elected parties.

Somalia-Ethiopia: Update. Hundreds of Ethiopian troops reportedly accompanied Somalia's Transitional Federal Government (TFG) forces as they moved from Kala Bayrka junction near the Ethiopian-Somali border to the Hiiraan Region in central Somalia to establish bases about 7 kilometers (4.3 miles) from Beled-Weyne District.

Eyewitnesses said more than ten armored vehicles were present at the Ethiopian-Somali bases as of late 8 December, TFG official Mohammad Afey Hirsi confirmed the troop movements, saying TFG troops joined with Ethiopian forces to liberate Beled-Weyne District from militants with pre-dawn attacks planned in Beled-Weyne and several other districts in the region.

Comment: Al Shabaab retains the capability to stage harassing attacks in the outskirts of Mogadishu sufficient to expose the presence of Ethiopian soldiers.

For the record: Earlier this week al-Shabab announced that it was changing its name to Imaarah Islamiya.

Europe: The European Central Bank (ECB) Governing Council will adopt non-standard measures to ensure enhanced banking sector liquidity access and to facilitate the euro area money market, ECB chief Mario Draghi said in a 8 December news conference.

It will increase collateral availability by reducing the rating threshold for some asset-backed securities and allow national central banks to temporarily accept additional performing credit claims such as bank loans as collateral, he said. It will reduce the reserve ratio from 2 percent to 1 percent, he said. And it will temporarily discontinue fine-tuning operations carried out on the last day of the maintenance period beginning 14 December.

Comment: The ECB is trying to save the banking community by increasing liquidity. This is a short term measure. It might be necessary but it is not sufficient because it has limited stimulative effect but it is what central banks do. In a financial crisis, banks raise capital or decrease leverage, neither of which directly increases output, creates jobs or pays down debt in the near term when the need is greatest. The European banks cannot be saved according to some experts because they owe too much.

The euro cannot be saved by the action of the banks. The debt crisis cannot be saved by structural changes in the European Union. The basic rule is that political maneuvers kick the can down the road for a while, and buys time.

Poland announced a two year low in manufacturing output this week.

Comment: According to Larry Summers, the characteristics of a financial crisis, vice a disinflation crisis, are declining demand drives decreases in output which drive declining interest rates which drive an investor stampede to sell stock whose value is dropping which drives further declines in output and repeat. This is one of Summers' "vicious cycles" that signify a financial crisis.

Poland's announcement is today's indicator of a financial crisis.

End of NightWatch for 8 December.

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