Randy's Corner Deli Library

31 July 2008

Open Letter to Syrian President Assad: Shake Hands with Olmert and Greet Him with "Shalom"

Let us hope that President Al-Assad is reading the newspapers these days, or at least that his advisors are. A peace with Syria is an essential ingredient to a comprehensive Middle East peace, and if Assad can see that it's worth his country's while to get back with the Turkeys and USs of the world and get away from the hardline Iranians, the better off the world at large will be.

Randy Shiner

In an open letter posted July 8, 2008 on the liberal Arab e-journal Elaph, the prominent liberal Arab intellectual Lafif Lakhdar urges Syrian President Bashar Al-Assad to cut his ties with Iran, embrace domestic reforms, and follow in the footsteps of Egyptian president Anwar Al-Sadat in making peace with Israel. Following are excerpts:( 1)

Turkey and France Have Opened the Door to Peace with Israel For You

"To the Honorable President of the Syrian Republic: "The prime minister of Turkey's Islamic government, Mr. Tayyip Recep Erdogan, has opened the door to peace with Israel for you. And the French president, Nicholas Sarkozy, has tried ever since his election, and is continuing to try, with difficulty, to open another door to extract Syria from the regional and international isolation into which [your] poor diplomatic decision-making has brought it.

"[This poor decision-making has ranged] from encouraging the infiltration of terrorists into Iraq to prevent its rebuilding to drowning Lebanon in problems and blood, and en route obstructing [the creation of] Palestinian national unity among Hamas, Fatah and all the Palestinian factions, under one authority and one military command - which is a prerequisite for increasing the possibility of resolving the Palestinian-Israeli conflict through the emergence of a Palestinian state - this state that everyone has heard about but no one has seen. It is a known fact that no national liberation movement that is divided against itself has ever achieved its objective. "

Obstructing the resolution of the Palestinian-Israeli conflict is not merely a tactic to get the Golan back, but has a strategic component as well. [Syrian] president Hafiz Al-Assad's 1973 speech still rings like a slap to my ears: 'There is no Palestine,' he said; 'Palestine is southern Syria.' "I once said to Mr. Nabil Sha'ath, at the Center for Palestine Studies... 'Palestine is trapped between the mandibles of Greater Israel and Greater Syria... may Allah come to your aid.' "In order not to slam shut the two doors of hope that have opened before you, you must sincerely and responsibly manage to confront four great challenges: 1) correcting the error of [your] strategic alliance with Iran; 2) [arriving at] a final abandonment of [your] attempt to regain control of Lebanon; 3) regaining the Golan; and 4) [achieving] domestic reconciliation."

Your "Greatest Error... Was the Strategic Alliance with Iran's Inflammatory Extreme Right-Wing Religious Government"

Mr. President: The crux of politics today is for the politician to understand exactly in what world we live. We live in a world that changes at the speed of light, and in which the dangers are increasing. The true politician is one who tries to adapt to this world as it is, not as he would like it to be.

"Therefore, perhaps the greatest error in [your] diplomatic decision-making was the strategic alliance with Iran's inflammatory extreme right-wing religious government.

"The contemporary international diplomatic lexicon recognizes only the government of the center: center-right and center-left, alternating peacefully in government. Other governments are shunned and have no future. "...This alliance was accomplished with the Islamic Republic of Iran's most delirious and isolated government, domestically and abroad, to the point that one does not know whether to laugh or cry at [Iranian] President Ahmadinejad's hallucinations of the imminent return of the Hidden Imam, who from this time forth, according to the Iranian president, formulates 'Iran's domestic and foreign policies.'

"The funny thing is that the Majlis ([Iran's] parliament) debates in all seriousness on hallucinations like these. One ayatollah said: 'Far be it from the Hidden Imam that a policy leading to 20% inflation be set!'

"Former French foreign minister Doust-Blasy records in his memoirs that he and the German foreign minister could not believe their ears when President Ahmadinejad told them, at a private meeting in New York, that 'the world is in need of chaos.' He did not add, of course, that the chaos is a sign of the return of the Hidden Imam, who will achieve a 'divine victory' over the enemies of the Islamic Republic of Iran!

"The alliance of Syria - militarily weak and in a state of economic collapse - and Iran is like one drowning man calling on another drowning man for help. Unless the moderate Iranian elite get rid of Ahmadinejad and the Islamic Revolutionary Guards Corps (IRGC) and Al-Quds Brigades government, and their policies of aggression, Iran may one day find itself standing alone in a fateful confrontation with the world. And Syria may thus find itself in the same dark tunnel as its ally Iran.

"The Syria-Iran alliance is not a matter of predestination. Syria can find a preferred alternative in the Gulf petrodollars and in the investments of international companies that were, and continue to be, capable of development in Southeast Asia, India and China.

"It seems that Syria intends to emulate Iran in the matter of nuclear weaponry, which your father, president Hafiz Al-Assad, with his far-reaching vision, rejected - aware that [this weaponry] is not usable in the closely adjacent countries of the Middle East, except in the event of collective suicide... This is an extreme case - the case of existential threat - in which Syria is very unlikely one day to find itself.

"Mr. President: The Syrian-Iranian alliance entails [a Syrian] alliance with Hizbullah, the most extreme and delirious of Iranian parties in Lebanon in matters of military decision-making and achieving 'divine victory' - with the blessings of the Hidden Imam.

"You can now transform this disadvantage into an advantage. Particularly if a government formed from the alliance of Mohammad Khatami's reformists and 'Ali Akbar Hashimi Rafsanjani's moderate conservatives replaces Ahmadinejad's government in Iran, [this alliance] can help disarm Hizbullah, whose weapons hinder the Lebanese government from [exercising a] monopoly on the legitimate use of force. This would transform [Hizbullah] into a political party with no claim to controlling Lebanon by force of arms.

"Such a wise decision would require you to convince some in Damascus to put out of their minds the idea of Lebanon as a 'milk cow' - and, beyond that, to encourage them to get used to full recognition of the state of Lebanon, and to draw international Syrian-Lebanese boundaries, and to [establish] mutual diplomatic relations.

And, finally, to put to an end, once and for all, to the chain of assassinations of Lebanese presidents, leaders, intellectuals, and journalists that has been going on since the 1970s. "Such courageous decisions as these are sufficient for Syria to escape its regional and international isolation, and perhaps to find a Lockerbie-type solution to the international tribunal [for the Al-Hariri assassination] that is such a nightmare for your regime."

"You Will... Not Regain the Golan by Waging a Proxy War Via Hizbullah or Hamas" or Via a Syria-Israel War

"Mr. President: You will in all probability not regain the Golan by waging a proxy war via Hizbullah or Hamas, and you are even less likely to do so via a Syria-Israel war, whose only certain outcome would be the overthrow of your regime.

"A realistic regional and international policy may - rather, will - regain it. The means of salvation are before you - mediation between you and [Israeli Prime Minister Ehud] Olmert, by the Islamic leader of Turkey, Erdogan. Try to transform him from mediator to arbitrator in direct negotiations between the two of you. His friendship with both Syria and Israel qualify him for this task.

"Erdogan, who strives for stability and peace in the Middle East, is a better option for you than Ahmadinejad, who advocates jihad and martyrdom and threatens the region with nuclear convulsions.

"The policy of [the late Egyptian president Anwar Al-]Sadat, of 'breaking down the psychological barrier' between Egypt and Israel, could be a good example for you on the same path leading to Syrian-Israeli reconciliation. The landing of the Egyptian president at Ben Gurion Airport had global media reverberations [as great] as if he had landed on the surface of Mars. [Moshe] Dayan confessed to him during the Camp David negotiations, 'You, sir, are more popular than all of us in Israel.'

"In this way he regained the Sinai, and lightened the burden of arms buildup that had bled the Egyptian economy - as is the case with the Syrian economy today. Try to be the Sadat of Syria - attaching no importance to the taboos that forbid communication with and greeting the enemy, inherited from the customs and religions of primitive tribes and totemism, which were haunted by obsessionive neurosis. Also, initiating peace with the Jews and Christians is proscribed and criminalized by the Islamic jurisprudence of al-wala' wa'l-bara' [the doctrine that Muslims may only associate with and have allegiance and loyalty toward other Muslims].

"Your refusal to shake hands with Olmert, even though both of you were sitting at the same table, is a primitive vestige of this obsessive neurosis. Modernity has established, upon the ruins of these ossified taboos, the principles, laws, and customs of civilized, flexible, and humane behavior that regulate protocol relations among officials - and they do not proscribe an offer on your part to shake hands with Ehud Olmert.

"But the recovery of the Golan will require even more than a handshake. It requires you to say 'Shalom' to him with enthusiasm, and it may be that he will answer... with the same greeting or better, saying 'Salaam.'

"Such an affecting, human scene would be broadcast by the media to every home in the world, and would give you symbolic capital, of which you are in direst need, and perhaps will motivate some of the Israelis who would have voted 'No' on returning the Golan to change their minds.

"There is no place for sticking to insignificant formalities when the signing of a lasting peace is at stake - with all that it symbolizes and all that it promises of peaceful coexistence and cooperation in all fields...

"It is inappropriate that strategic thinking exhaust itself with obsessive formalities. Rather, it must address the basic issues directly, for the day after peace is signed: cooperation on economic, water resource, technological, scientific, petroleum and gas, cultural, and especially educational issues.

"Israel's curricula and teaching methods, and the competence of its teachers, are among the best in the world, whereas education in most of the Arab countries, including Syria, is poor and sterile. Throughout 5,000 years of history, the Middle East has known only wars, interrupted by brief periods of peace that coincided with brief periods of economic prosperity.

"New applied technologies can make economic prosperity permanent, and they can make peace permanent as well - as in the case of the European Union, among its modern, secular, and democratic countries...

Domestic Reform: "Begin by Freeing the Prisoners of Opinion"

"Mr. President: Let us imagine that all of the relevant sides play out their roles in this optimistic scenario perfectly. No doubt you will ask yourself: What good will it do me to gain the world and lose my people?

"One who formulates a realistic foreign policy would do well to complement it with a domestic policy that is no less realistic, with which you can remind your people, who fear raids by the security agencies, of the salad days of the Damascus Spring.

"Begin by freeing the prisoners of opinion, and even the Islamists whose hands are not stained with blood - and don't forget the members of the Damascus Declaration, who have committed no crime except calling for 'the normalization of Syrian-Lebanese relations' - something something that the writer of these lines also demands.

"Let the Kurds exercise their cultural rights freely, and speak, sing, and write in their language. Recognize their full citizenship and nationality under the International Convention for the Protection of Minority Rights.

"Extend compensation to the families of the 17,000 Islamists who have 'disappeared' since the 1970s. Likewise, compensate the families of the Lebanese and Palestinians who met the same fate.

"And this is really astonishing: How does Syrian law pardon or allow for mitigating circumstances to the perpetrators of 'honor crimes' - [a practice] which the Prophet of Islam outlawed and nullified in the third year of the hijra, in surah 24 of the Koran - while at the same time ratcheting up the punishment for democratic intellectuals and defenders of human rights?"
Endnote:(1) www.elaph.com, July 8, 2008.

The Freedom To Be Religious: Wins and Losses

The Freedom To Be Religious: Wins and Losses
July 31st, 2008by Gershom Gorenberg · 1 Comment · Judaism and Religion
Gershom Gorenberg

Religious freedom is often confused in our parts with freedom from religion, and atheism is mistakenly equated with liberalism. For the state to be secular - so goes the thinking - everyone who lives in it should secular too. As political scientist Yaron Ezrahi once said to me, “The Israeli secular community lacks the understanding that you don’t have to secularize individual identity to evolve a secular state.”

Ezrahi made the comment to me when I was writing a story on Gil Kopatch, a stand-up comedian who for several months in the late 90s appeared on a Friday night TV show and presented a pointed, often-ribald commentary on the weekly Torah portion. Kopatch was attacked by the ultra-Orthodox for his supposed blasphemy. But he confused his secular supporters when he insisted “I’m a believing Jew” and expressed “love of Torah.” Secular MKs presumed that in defending Kopatch’s freedom of expression, they were also attacking religion as such. The idea that freedom of expression includes religious expression was beyond them.

Ezrahi’s comment fit the American model: secular state, religious society. But “liberal” Israelis aren’t alone in assuming that for the state should impose secularism. Here are several recent stories, starting with the most important:

Turkey’s top court voted narrowly yesterday against banning the country’s ruling party. The alleged offense of the Justice and Development Party was that it engaged in “anti-secular” activity, as proven by its attempt to allow women attending state universities to wear headscarves. Six out of 11 judges voted to shut down the party, but a majority of seven was needed. But the court did cut half of the party’s state funding. The court and the prosecutor represent Turkey’s old nationalist establishment, based in the military, viligantly loyal to Kemal Ataturk’s program of forced secularism.In its defense, the Justice and Development Party cited European Union principles of democracy. That fit its basic European orientation. (So much for the clash of civilizations: The pro-Islam party is also pro-Western and pro-democracy.)

A British court ruled yesterday that a school could not suspend a Sikh girl for wearing the bracelet required by her religion. Fourteen-year-old Sarika Singh of South Wales said the bracelet should be exempt from a school ban on jewelry; her school disagreed. In this case, at least on the surface, the school wasn’t trying to crush religion as such, but it didn’t understand that there was a difference between fashion and faith. But were it not for the assumption that people should give up their irritatingly non-conformist attachments to their religion in favor of fitting in, the school authorities would have seen this. Fortunately, the judge righted the wrong.

A French court turned down an immigrant’s application for citizenship because she wears the veil, in accordance with her understanding of Islam. According to the New York Times, “France’s highest administrative court upheld a decision to deny citizenship to Ms. Silmi, 32, on the ground that her ‘radical’ practice of Islam was incompatible with French values like equality of the sexes.” Now Faiza Silmi’s “radicalism” did not express itself by seeking to overthrow the state by force and violence, and there’s no report that she discriminated in any way against other women. Rather, the state decided in a somewhat patriarchal manner that by failing to dress as other women do, she was violating the principle of equality. Put differently, one can’t be too religious and also be French.

As my friend and mentor Marc Howard Ross wrote in his book, Cultural Contestation in Ethnic Conflict, the battles over scarves and veils in France aren’t only about Islam (The word “Republican” in the following quote refers to French belief in the republic; it’s got nothing to do with the American party.):

In the hard-core Republican narrative, the French emphasize the individual citizen’s relationship to the unitary state that has historically rejected the relevance of intermediate group identities. It is the product of a centuries-long struggle to limit the power of the Catholic Church in the public domain. For its adherents, the secular state [is]… not all that is at risk - so is French culture.

In other words, a Frenchman is supposed to identify with the state, and the state is secular. Identifying with a religion as well is virtually an act of civic adultery. The Turkish generals feel just the same.

So do a good many Israelis, who see Zionism as having replaced religion as the way to express being Jewish. Their ultra-Orthodox opponents agree that one can be religious or Zionist, but not both. The classic religious Zionist position sought to solve the problem by making the state religious, at least in some ways. That way you could identify with both the state and religion without a conflict.

What all three positions miss is that the state can be the neutral protector of one’s right to have multiple, overlapping identities. It can be secular, and protect the right of a citizen to be religious.

30 July 2008

McCain's Tax Blunder

View from a booth: When the Wall Street Journal's editorial board, bastion of business, conservatism and Rupert Murdoch uses the word "rout" in connection with John McCain's chances to be elected, that should tell everyone, regardless of party affiliation, that this man is incompetent to be President of the Unted States. This was brought home by word from the McCain campaign that "McCain does not speak for the McCain campaign". Hmmm. I wonder who exactly will speak for a President McCain if G-d forbid, he is elected. Got me. I am sick of this guy's bullshit. This campaign is only worthy of pity if not schadenfreude, thought this doesn't produce the same joy that your average case of schadenfreude would.

Randy Shiner

McCain's Tax Blunder
July 30, 2008; Page A14

One of the miracles of this Presidential election campaign is that John McCain still has a chance to win, notwithstanding his best attempts to kick it away. In his latest random policy improvisation, the Arizona Senator tried to give up the tax issue.

On ABC's "This Week" Sunday, Mr. McCain was asked to draw distinctions between his and the current Administration's economic policy. Given an easy opening, the Senator came back with his usual hodgepodge of new child-tax credits, promises to "veto every single pork barrel bill" and close wasteful government agencies, cut dependence on foreign oil and introduce a gas-tax holiday.

Then host George Stephanopoulos raised Social Security. "You're a longtime supporter of the private accounts, as President Bush called for them." Wishing to further distance himself from President Bush, when he could have drawn an equally useful contrast with Barack Obama, Mr. McCain didn't even own up to his support for private retirement accounts, simply saying, "I am a supporter of sitting down together and putting everything on the table and coming up with an answer."

Mr. Stephanopoulos pressed, "So that means payroll tax increases are on the table, as well?" Here came the words that have caused the McCain campaign well deserved grief: "There is nothing that's off the table. I have my positions, and I'll articulate them. But nothing's off the table."

So given a chance to reiterate his opposition to tax increases -- and underscore a main contrast with his opponent -- Mr. McCain punted. Democrats were quick to pounce, with the Democratic National Committee issuing a press release headlined, "McCain Tax Pledge? Not so much." It provided citations of the presumptive GOP nominee asserting that "Senator Obama will raise your taxes. I won't." Expect the "nothing's off the table" line to show up in Democratic TV spots this fall.

The wandering candidate also put his chief economic adviser, Douglas Holtz-Eakin, in an uncomfortable spot. Back in June, the McCain campaign went after Mr. Obama's proposal for a Social Security payroll tax increase on income above $250,000. A President McCain, his adviser then said, wouldn't consider a payroll tax increase "under any imaginable circumstances." So much for that.

Economics has never been Mr. McCain's strong suit, but with Iraq receding as a crisis the economy is the ground where the Senator will have to fight and win. And the tax issue provides him with a potent opening, given Mr. Obama's pledge to raise taxes on incomes, dividends and capital gains. In proposing to raise the payroll tax cap, the Democrat is to the left even of Hillary Clinton. Mr. McCain's Sunday blunder will make that issue that much harder to exploit.

Such mistakes also help explain the continued lack of enthusiasm for Mr. McCain among many conservatives. Meeting with us last December, before the primaries, he declared that "I will not agree to any tax increase," repeating the phrase for emphasis. He did not say any tax increase with the exception of Social Security. If Mr. McCain can't convince voters that he's better on taxes than is a Democrat who says matter-of-factly that he wants to raise taxes, the Republican is going to lose in a rout.

29 July 2008

The Media's Love Affair With John McCain

This is a snarky little advert sponsored by Media Matters giving lie to the bitching and whining coming out of the John McCain's so-called "campaign" after the world's attention was focused on Barack Obama when he went to Iraq, Afghanistan, Germany, France and London last week. McCain goaded Mr. Obama into making the trip and I am sure that he certainly regrets what he asked for. Perhaps Mr. McCain can make some additional suggestions for Mr. Obama; he should just be careful what he wishes for: Obama is likely to take him up on the dare.

28 July 2008

Today's Rant

Rant: John McCain is running the absolute worst campaign for President that I have ever been witness to. I thought Bob Dole (he of WWII, the Senate and Viagra commercials)ran something close to a Keystone Kops flick in '96, but McCain's inept campaign is obviously completely flummoxed by the Obama's uncanny ability to say the right things at the right times in the right places with the right people. The ad that was released today that questioned Mr. Obama's patriotism was just foul. Like month-old catbox foul. Beneath him. And the MSM lets this pass? What are people afraid of? Criticizing a former POW? Where is the examination of Mr. McCain's qualifications to lead this country in 2008?

For a candidate that supposedly stands up for veterans, it is interesting that the Disabled Veterans of America gave McCain a 20% favorable rating and Obama an 80% favorable rating. McCain has not supported the troops his record belies his protestations to the contrary and it's just pathetic that the MSM is not all over the McCain campaign for the outright lies and just plain stupidity that emanates like week-old fish fromt that campaign. For someone who claims expertise in Foriegn Affairs, the fact that he placed Pakistan on Iraq's borders is just inexcusable. Then again, he didn't have his lapdog Lieberman by his side to correct him, as he did when he mixed up Sunni and Shi'ia.

The reason the MSM isn't reporting all this about McCain is simple: they want to see a race. Races mean ratings. Ratings mean revenue. Revenue means bigger paychecks. The MSM, in this environment, cannot afford to have the thumping that McCain deserves. That the daily tracking polls are so close is either a reflection of a very poorly informed electorate or a general consensus that the people answering the polls are lying. If Obama loses to McCain, it will be worse than the 2000 election. The country will be doomed.

Randy Shiner

Our Dwindling Spirit

View from the booth by the window, view of the ocean:

That Israel's spirit is dwindling is no surprise. This is a refrain which I have heard personally from people just returned from Jerusalem. There is a pall cast over the country, beset as it is with problems that a peaceful and stable democracy in a stable part of the world could deal with. But Israel does not have the luxury of existence and life in a part of the world that welcomes their drive and determination to make something out of nothing, which is what they have done.

With in excess of 60% of Israelis not practicing Judaism or who no longer identify with Judaism at all, is it any wonder that there is a paucity of budding Bubers in philosophy departments in Israeli universities? There are plenty of Israelis who have no use for Judaism, as they view themselves as being redeemed by the very fact of their living in Israel. The truth, it seems to me, is that for the vast majority of Israelis, Judaism is not viewed as an important part of their lives; for too many, Judaism is represented by the Haredim and settlers who have made Jewishness seem, well, quaint, and at the same time out of touch with reality, the cause of more problems than it resolves. Dangerous, even, to the continued existence of the State. In a world which is changing far too rapidly and in uncertain ways, the only thing that Israelis can offer the world that will pay the bills to live in it is of course the ability to create and to discover.

Today, Shai Agassi is making a bid to make Israel the first westernized country to run its automobiles completely on electricity. Is the focus on current problems that people of Buber's generation did not have to face necessarily counter to Jewish principles? It would seem to me that those Israelis who claim to have no affiliation with Judaism can never escape who they are - or what the perceptions of the world are of them - as Jews, living in a place that is constantly in bitter bloody fights with its intractible and growing enemies at its borders and, as we have seen over the past few days, even within them. They have a responsibility to themselves, their families and their country to make advances where they are needed. Does Israel need philosophers? Probably. But that is a requirement for a country that can afford to have its best minds studying Plato and Sartre. Or Talmud for that matter. Can Israel's best and brightest afford, in any sense of the word, to take their eyes off of immediate concerns to ponder the meaning of Judaism in 2008, with Hezbollah on the North and Hamas in Gaza and Iran ever present everywhere? With Syria's allegiances in play between Iran and reality? Science and engineering are existential for Israel. Undertaken to preserve Israel, does it matter that the people doing the preservation do not outwardly identify as Jews? I think not. As long as the job gets done - that Israel is preserved for future generations, what people call themselves is immaterial. Living is proof of success.

It seems to me that what Israel really needs right now are not philosophers necessarily but a new class of Jewish politicians who can lead the country into the future. It is shocking to me that there can be serious discussion about philosophy and philosophers in Israel when it seems that the entirety of the government is either indicted or under suspicion of bribery or sexual peccadilloes or abuse. Who will take the place of the old guard? Shimon Peres, for all his 85 years, and all his smarts and reason, is 85 years old. This does not represent the future. People like Ehud Olmert, Binyamin Netanyahu and Ehud Barak are known quantities and have had their time to make life better for Israelis, though certainly their failures are not entirely their fault. The only new name of which I am aware is Tzipi Livni, but she is in the process of being marginalized by Mr. Olmert, prepared as he is to move the Minister for Transportation, Shaul Mofaz, into the P.M. spot after the forthcoming elections. Who else is there? Adding to the difficulty is the fact that Israel does not have a qualified partner for peace as no P.A. leader can guarantee that they can control their own people. There have to be new ideas in place. The ideas coming out of Israel today, in my view, are shopworn and tired, understandably so. The problems coming from the other side are the same as they have been for quite some time. Perhaps it is time to change the perception of the problem, to force responsible Arabs to take some of the load off of Israel. Dubai, Abu Dhabi and Qatar are wealthy sheikdoms who have only one thing in mind: to maintain control of their wealth. An uncontrolled Arab mob has the potential to destabilize all of those countries and more. It behooves the wealth in the region to take affirmative steps to bring the neanderthals among them into the 20th century, if not the 21st.

At some point, philosophy becomes useless - an academic discussion - if it is not put into action. After 5000 years of Hebrew and Judaism, we probably have enough philosophical discourse to last another 5000 years. I only hope that Israel can make it another 60. With a reserve of strength, nerve and will, I hope that Israel can raise its collective heads high enough to see and feel a horizon instead of the constant heavy and loud breathing of enemies at and within the gates. It is a heavy load. Pray that the bearers are strong enough to resist the temptation to give up.

Randy Shiner

Our Dwindling Spirit
By Aaron Ciechanover
Tags: Israel, Judaism
In her opinion piece "Shakespeare is not a moneymaker" (Haaretz,July 25), Na'ama Shefi lamented the demise of the Israeli spirit in academia. Making income the number-one goal of academia has sidelined Shakespeare and Plato. I can only agree with every word she wrote and add that in Israel, the Jewish state, the study of Judaism, archaeology, literature and Israeli and Jewish history are fading in a process that endangers our very existence.

For over 2,000 years in exile, carrying the torch of hope and yearning for political and religious freedom has kept Judaism rooted. Erosion of these principles may now unhinge our ideological, religious and historical claim to being here. Indeed, we are witnessing the dwindling down of our academic leadership and the failure to produce heirs. There are few successors to academics such as philosophers Martin Buber and Gerhard Scholem, historians Joseph Klausner and Jacob Talmon, archaeologists Benjamin Mazar and Yigael Yadin, and poet Leah Goldberg, just to name a few of the groundbreaking thinkers who taught at the Hebrew University. The university's humanities departments have shrunk and no longer attract many students.

Their very existence is in danger. Universities are becoming trade schools bereft of any Israeli or Jewish spirit. It is of particular concern that the disappearance of fields that are not profitable does not stem from budget cuts. Rather, they result from a deep shift in principles and culture felt both at home and on the streets and which have caused the younger generation to abandon them. So we can't put all the blame on the universities. They cannot fight against the sweeping cultural changes; perhaps not even the country's leadership, if such a thing exists, could do so.

It is unfortunate, however, that Shefi quoted me saying things that I never did in order to support her argument. As for the comparison between the brain drain from Israel and the flight of Jewish scientists from Nazi Germany, that comparison was never made and my words were taken out of context. What I meant to say was that cultural and scientific creativity is very sensitive to pressures and reacts to them by escaping elsewhere. I mentioned Germany's Jewish scientists as an extreme example and said unequivocally that I was not comparing them to the situation in Israel. But even though I felt I was taken out of context I apologized in the media to anyone who may have been hurt by what I did not say. On the subject of a broad education, I have made myself clear time and again. I quote from an interview I gave with my colleague and fellow Nobel Prize laureate Robert Aumann to Sever Plocker, only one example in many: "An educational deterioration exists on all levels. Those with academic titles are inarticulate, lack cultural depth and are ignorant in general and Jewish history. Where are the great thinkers of the past? I see a direct link between the demise of the Israeli spirit and that of the nation.

Without advanced humanities and Jewish studies, quality scientific research will not be carried out in Israel, not in physics, chemistry, mathematics or medicine." Only recently, in a speech I gave at the Open University, I spoke about the road that connects Jewish prayer and winning the Nobel Prize; the road between a broad education and succeeding in the tumultuous world of science.

Aaron Ciechanover is a Nobel Prize winner and faculty member at the Technion - Israel Institute of Technology.

27 July 2008

Al-Jazeera Interviews Palestinian Officials on Gaza Blasts

Al-Jazeera Interviews Palestinian Officials on Gaza Blasts
By: iStockAnalyst Sunday, July 27, 2008 6:54 AM
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Text of report by Qatari government-funded, pan-Arab news channel Al-Jazeera satellite TV on 26 July
["Midday" news programme, featuring an interview with Azzam al- Ahmad, head of the Fatah bloc in the Palestinian Legislative Council, via satellite from Ramallah, by Layla al-Shayib in the studio; and an interview with Mahmud al-Zahhar, a leading member of the Hamas movement, via satellite from Gaza, by Al-Habib al- Ghuraybi in the studio - live]

[Al-Shayib] Azzam al-Ahmad, head of the Fatah bloc in the Palestinian Legislative Council, is with us from Ramallah. Mr Al- Ahmad, we have heard your reply to Hamas's accusations against you. Who do you think is behind what happened in Gaza yesterday?

[Al-Ahmad] I can definitely say that conflicts within Hamas - and I do not want to mention names - were the reason for the deterioration of the security situation in Gaza. Fatah has absolutely nothing to do with these explosions because we in Fatah have a clear strategy we will never abandon. It says differences and divisions in the Palestinian arena can be solved only through dialogue. Therefore, it is not possible for us to carry out such operations. Hamas reacted by detaining more than 170 persons since morning today. By the way, some of them belong to Hamas and others to the Army of Islam and other factions. Hamas also raided the headquarters of Deputy Ziyad Abu-Amr although he was one of the candidates who were named and supported by Hamas in the elections. Why did they raid his office? Did Dr Zakariya al-Agha carry out bombings in order to raid his office? The houses of journalists and the headquarters of the Bar Association and the Fatah parliamentary bloc were also raided. All this proves that Hamas is trying to aggravate the crisis instead of heeding President Abu-Mazin's [Mahmud Abbas] call for dialogue.

[Al-Shayib] Some in Hamas say that following the recent calm agreement some Palestinian parties are trying to depict security in Gaza as fragile. What is your opinion?

[Al-Ahmad] No, this is not accurate. With regard to calm, President Abu-Mazin was the first to call for it. By the way, we tried to reach a calm agreement even before the Gaza coup. I represented Fatah in the dialogue held in Gaza with Hamas, Islamic Jihad, and the Popular Front [for the Liberation of Palestine]. They were convinced of the need for calm only after we had paid a heavy price. They always become convinced at the wrong time. We could have avoided the human and material losses inflicted on the Palestinian people. Hundreds of people were martyred. President Abu-Mazin also played a key role in urging the Egyptian leaders, Israel, and the United States to reach the calm agreement. Therefore, we are for calm and for commitment to it. We are also for expanding the calm agreement to include the West Bank in the hope that we can deny the Israeli side of its pretexts as it is trying to avoid the implementation of its commitments.

[Al-Shayib] How can this problem be solved quickly to avoid further exacerbation of the situation? Some in Hamas say justice should take its course on this issue. Do you agree with this opinion?

[Al-Ahmad] Yes, but not only on this issue. All issues, all crimes, all killings that took place in Gaza, and all violations of the law in Gaza should be subject to law when reconciliation is sought. Even if the leaders of factions are the ones who issued the decision to commit these crimes, they must be exposed regardless of their affiliation with Hamas, Fatah, the Popular Front, or the Democratic Front. Law and the supremacy of the law are the basis. Therefore, we call for the implementation of the Arab League resolution by restoring Palestinian unity, ending the state of division, and committing to law. This is the crux of the Yemeni initiative, which was adopted by the Damascus summit and on whose basis President Abu-Mazin called for a comprehensive national dialogue. Dialogue is the only way to solve internal Palestinian differences.

[Al-Shayib] Azzam al-Ahmad, head of the Fatah bloc in the Palestinian Legislative Council, in Ramallah, thank you very much.

[Al-Ghuraybi] Dr Mahmud al-Zahhar, a leading member of the Hamas movement, is with us from Gaza. Dr Al-Zahhar, you might have heard Mr Al-Ahmad. He said and even emphasized that what happened was the result of internal conflicts and an attempt by Hamas to cover these conflicts.

[Al-Zahhar] In the name of God, the Merciful, the Compassionate. He said what happened was definitely the result of internal conflicts. In turn, I say Azzam al-Ahmad is definitely not telling the truth. If he has any information about internal conflicts within Hamas, let him tell us between who and who these conflicts are. This is a game indicating that they committed the crime and are trying to blame Hamas for it. Abu-Rudaynah [Palestinian president's adviser] today said these operations will continue because differences within Hamas continue. These are their claims as if they have information and as if one does not know what is going on in his house. The second point is that the so-called Brigades of Return, which belong to Fatah, have claimed responsibility. Third, he called for justice. We will apply justice this time. We were overwhelmed with mercy for them in the past. We were sorry for them because they were deceived with the money paid to them, but now we will announce facts to the public as they become available. He spoke about justice and law. What is going on in the West Bank? Did they not cooperate with the Israeli entity every minute to destroy Hamas? They arrested Husayn Abu-Kuwayk but we threatened them that if he was not released, another person would be arrested here. Therefore, they released him on the same day but Israel arrested him the next day. They have a programme which they called the programme of security cooperation with Israel. All martyrs today except the little girl were targeted more than once by the Israeli side. They are one of the tools of occupation in the West Bank.

[Al-Ghuraybi, interrupting] If we adopt this factional logic, we might as well ask about Fatah's interest in sowing chaos in Gaza.

[Al-Zahhar] This is clear. The Palestinian television is now chanting for the Fatah revolutionaries and airing pictures of martyrs. What does this mean? Fatah's interest is clear. Azzam al- Ahmad denied this and said he wanted calm. Where is the calm he wants? All those arrested belong to Fatah. In this case, we will say only what the Brigades of Return said to him. We will pursue them. Some of them were arrested and the others will be pursued. We will place facts before all people. If Fatah is responsible, it will have to bear the consequences on the level of leaders and personnel.

[Al-Ghuraybi] Azzam al-Ahmad said the same thing. He said we appeal to law but on condition that justice is fair and neutral.

[Al-Zahhar] Our experience with them on the issue of fair and neutral justice is clear. They asked all personnel of the judiciary not to work. They disrupted work at courts and left the Gaza Strip without judiciary. What sort of neutral justice does he want? Besides, why do they not activate the judiciary in the West Bank? Why are people are arrested, shops closed, and houses knocked down? Some collaborated with Israel and were arrested but none of them received a court verdict? It is well known that Fatah has ruined all civil and military courts in the Gaza Strip and West Bank, so what sort of justice does he want? The judiciary he respects is only the Israeli judiciary.

[Al-Ghuraybi] How much will this incident influence the Palestinian reconciliation efforts?

[Al-Zahhar] Azzam, who spoke a minute ago, was the one who signed the Sanaa agreement. You could have asked him what happened in the media between him and the group around Abu-Ammar [Yasir Arafat] which had continuous contacts with Israel. They exposed themselves in the media. One told the president he had no knowledge while the second told him he had knowledge. What dialogue are they talking about? How can one imagine Abu-Mazin hugging and kissing one from Hamas after having hugged and kissed Olmert? How can these two things be reconciled? How can a person's programme that supports the United States and Israel be in harmony with the programme of resistance, confrontation of Israel, and opposition to the US project in the region? Such reconciliation cannot take place. This is what we warned of and what we called national truce. If Fatah manages to collect funds from Dayton and some other parties to destroy Hamas for its so-called coup - they are the ones who tried to turn against Palestinian legitimacy - what dialogue will then make sense?

[Al-Ghuraybi, interrupting] Your point is very clear. Dr Mahmud al-Zahhar, a leading member of the Hamas movement, thank you very much.

Originally published by Al-Jazeera TV, Doha, in Arabic 1304 26 Jul 08.
(c) 2008 BBC Monitoring Middle East. Provided by ProQuest Information and Learning. All rights Reserved.Story Source: BBC Monitoring Middle East

"Network": Deja Vu All Over Again

I am watching the film "Network" which was broadcast the other day on HDNet, Mark Cuban's TV station. I am convinced that he must have a hand in the programming, as "Network" is like watching (thanks to Yogi Berra) deja vu all over again.

It was prescient in that most everything that was thought to be satire in 1976 has come to reality. The bastardization, commercialization and propagandization of the news in this country is apparently complete, according to 1976 absurdists who were responsible for "Network", primarily Paddy Chayefsky, who wrote the screenplay.

When Howard Beale - a fictional character whose contemporaries were Walter Cronkite, Harry Reasoner and Eric Sevareid -- is thought to have a mental illness when he announces that he is going to commit suicide on the air in a week, Faye Dunaway's character, ("Diana Christensen") sees a chance to bring UBS' evening news out of the ratings cellar, and turns Beale into a visionary prophet - a messiah - whose mission is the condemnation of the bullshit that he admits he has been spewing for the past 11 years as anchor for the UBS evening news. He does not deliver the news; he is on a mission. Robert Duvall goes along, until Beale starts inveighing against the Saudi Arabian purchase of the ginormous corporation that owns UBS. Alas, Saudi Arabia is owed $2 billion so they are not terribly keen on having their financial deals sullied by the likes of Howard Beale.

The funniest part is the Angela Davis - like character that is introduced to the mix as "an angry Communist n****r" who is given a show called "The Mao-Tse Tung Hour". Cut to a meeting of the local Communist party central committee going through a distribution agreement so that UBS can film the criminal activities of the "Ecumenical Liberation Army" who supplies UBS with live footage of bank heists that they commit and which is used by UBS to boost its ratings, damn the federal criminal conspiracy charges. Journalism first! Protect those sources!

"The world is a business and has been since man crawled out of the slime." So says Ned Beatty ("Arthur Jensen") to Beale to tell him that Business is an ecumenical holding company for everything and that nations and states do not exist. (Makes me wonder whether this film was the uncredited parent of "The Matrix". It could be argued that big corporations exist in a parallel universe to that of people like me who think that they actually have freedom of choice or that votes really matter.)

By the end, Beale is howling about the end of democracy, saying that "the individual is finished". Beale starts the beginning of the end by starting to preach the death and decay of society and the conversion of people into humanoids, devoid of feeling and sensitivity to real pleasure and pain.

At the end of the film , Network bigwigs are dissecting the 18-34 demographic and syndication potential in figuring out whether to keep or fire Howard Beale. All discussion is just about money. In the end, they plot to have the Maoists kill Beale because of the ratings drag he'll end up being. And kill him they do, right on the air, for having lousy ratings.

The film won three best acting awards and was nominated for Best Picture in 1976.

Fatah and Hamas may be getting ready for another bloodbath

This is what happens when you deal with clans, not democratic institutions, cloaked though some may be with that mantle. So much for peace with the Palestinians. If they are not careful, they will find themselves Jordanian subjects and not "Palestinians". In 2000, had Yasir Arafat had the word "yes" in his vocabulary, they would have a state right now. Alas, Arafat had what seems to be a congenital defect among Palestinians: sadly, they never miss an opportunity to miss an opportunity.

Randy Shiner

Fatah and Hamas may be getting ready for another bloodbath

By The Daily Star Monday, July 28, 2008

After three deadly bombings and a string of tit-for-tat arrests, tensions between Fatah and Hamas are once again running dangerously high. The last time that the rivalry between the two groups degenerated into street violence nearly a year ago, hundreds of innocent people were killed as a result. If the leaders of both Palestinian factions fail to come to their senses and rein in their respective supporters, the streets of Gaza and/or the Occupied West Bank could soon see yet another needless bloodbath.

Hamas leaders acted rashly when they almost immediately accused Fatah of carrying out an attack in Gaza late Friday night - and then responded by rounding up almost 200 Fatah members and shutting down cultural and sports offices. Fatah upped the ante of irresponsible behavior when it retaliated to Hamas' move by arresting 20 the Islamist group's members in the Occupied West Bank. Both groups know what can happen when these kinds of retaliatory actions get out of hand and both groups now have an urgent responsibility to prevent that from happening again.

Over the past few years, the rivalry between Hamas and Fatah has rapidly made its way up the list of threats to the Palestinians' existence. In some circles, it is still fashionable to blame Israel for all of the Palestinians' troubles, but in this instance, the leaders of Hamas and Fatah have committed crimes of equal magnitude against their own constituents. Not only have scores of people died at the hands of their armed forces, the fighting has also served to greatly undermine the Palestinian cause. It has become increasingly difficult for the international community to feel sympathy for the Palestinian people when their own leaders provide so much media ammunition to distract the world from their plight. The image of lawlessness and internecine warfare conveys the image of a people who are simply not ready for self-governance or an independent state.

The lessons from the Occupied Territories ought to also weigh heavily on Lebanese leaders, who have also shown a propensity to allow their power struggles to degenerate into violence that claims the lives of innocent victims. International mediators will soon grow tired of helping those who show no interest whatsoever in helping themselves.

When Markets Collide: Investment Strategies for the Age of Global Economic Change

June 2008
When Markets Collide: Investment Strategies for the Age of Global Economic Change
By Mohamed El-Erian
Introduction: Finding Signals Within the Noise
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By the standards of the financial markets, I entered the investment world late. I was 39 years old when I left the relative predictability and stability of a career at the International Monetary Fund (IMF) at the end of 1997 for the rough and tumble world of Salomon Smith Barney in London. A fascinating journey followed during which I had the privilege of witnessing at close hand the slow but steady transformation of the global economic and financial landscape.

At first, the changes impacted relatively small areas of the investment and policy world—essentially, the specialized segment of emerging market investing and the even more specialized and arcane world of derivative instruments and risk transference. But the phenomena—and the related good, bad, and ugly that came with them—gathered momentum, and they are now critically relevant to a broad spectrum of investors, policy makers, and international institutions.

By discussing these phenomena in some depth, When Markets Collide seeks to shed light on how the ongoing economic and technical shifts, what I refer to throughout the book as “transformations,” are impacting the world we live in—present and future. The book offers analytical anchors for identifying the key elements of what, for some, have become drivers in an unusually fluid environment. In so doing, I will uncover many of the understandable reasons that otherwise rational and well informed investors can be late in recognizing important turning points and, subsequently, be prone to mistakes. In some cases, such mistakes have resulted in market turmoil, liquidity sudden stops,1 institutional failures, and emergency policy responses—and they will continue to do so.

The information in this book has important practical implications for investment strategies, business approaches, and policy making. It provides readers with insights on how best to exploit new opportunities and minimize exposure to changing patterns of risks. Or in market jargon, the aim is to minimize the left (that is, unfavorable) tail of the distribution of outcomes while simultaneously exploiting the right (that is, favorable) tail. In this new economic and financial age, both tails are fatter.

Transformations: Inherently Tricky

Transformations are not easy to recognize or navigate, especially when they are initially unanticipated and evolve rapidly. By challenging conventional wisdom and historic entitlements, transformations feed a dynamic that is inevitably uneven and, at times, unpredictable. Indeed, the phenomena accentuate in an important manner the difficulties that people face in the run-up to the more familiar long-term (i.e., secular) turns. Here, the issues tend to revolve essentially around the timing and the orderliness of the turn as opposed to the secondary considerations that pertain to time and system consistency.

As transformations in individual markets are gathering momentum, it becomes evident that the market and policy infrastructures cannot yet adequately support the emerging realities—at either the national or international levels. Activities that have been newly enabled by the transformations tend to outrun the ability of the system to accommodate and sustain them. The result is a series of blockages and other “plumbing problems” whose prevalence gives rise to an initial bewilderment, turmoil, a blame game, and a subsequent realization that some type of change is needed.

Then when the needed refinements are being undertaken, market participants—investors and national and multilateral policy makers—face uncertainty and worry about the prospect of further turbulence. The market turmoil that started in the summer of 2007 illustrates the type of overshoots and dislocations that are likely to continue to occur. I would go so far as to say that the turmoil will shake the foundation of our global financial system. What started as a problem peculiar to the subprime segment of the U.S. mortgage market has morphed into a series of collapses whose impacts are being felt on both Wall Street and Main Street.

The responses of both the private and public sector market participants were initially undermined by their lack of understanding of the causes and consequences of the turmoil. Too many observers were quick to dismiss it as transitory and of limited impact. Investors, particularly in the equity markets, regarded it as an isolated event that would not prove contagious. Policy makers initially remained on the sidelines, also influenced by the understandable desire to allow greedy borrowers and unscrupulous lenders to suffer the consequences of their actions.

However, it did not take long for all this to change as elements of the financial industry and the economy as a whole fell with a loud thud. Wider recognition triggered a catch-up process involving massive injections of emergency liquidity by central banks around the world. When such injections failed to halt the collapse, the U.S. government was forced to adopt a large fiscal stimulus package and directly support the housing sector. Meanwhile, senior executives of major western investment banks headed to Asia and the Middle East in a massive capital raising campaign—one that was described on the front pages of the financial media as involving “lifelines” (Wall Street Journal),2 “bailouts” (Financial Times),3 and the “invasion of the sovereign wealth funds” (The Economist).4

To some of us, the financial market turmoil that started in the summer of 2007 reflects the secular transformation of the global economy. There are now economic and financial forces in play whose impacts are of great consequence but that cannot as yet be adequately sustained by the world’s current policy and market infrastructures. As such, the efficiency gains that they bring are associated with higher risks of short term disruptions.

Indeed, one of the important messages of this book is that the present turmoil is neither the beginning nor the end of the transformation phase.

A series of inconsistencies and anomalies, which will be detailed throughout the book, acted as early signals of the growing tension between what participants or actors on the global finance stage were pressing for and what could be reasonably and safely accommodated by the existing systems in order to minimize the risk of turmoil. The signals also indicated the extent to which cross-border wealth hand-offs were empowering a new set of actors and products when it came to global influence

As you read this book, it is important to realize that the forces behind the recent financial crises have not gone away. Instead, underlying global transformations will play a major role in defining and influencing the investment and policy landscape for years to come.

When Noise Matters

This bumpy process is nothing less than a collision of markets, in which the markets of yesterday collide with those of tomorrow. The underlying dynamic is one of hand-offs being made between actors, instruments, products, and institutions. In this environment, the basic challenge is to understand the inevitable bumpiness of such hand-offs and to manage them appropriately without losing sight of the nature and implications of the new destinations.

Market participants first become aware of transformations through what is commonly known as “noise.” This noise comes initially from the sudden emergence of anomalies to long-standing relationships that participants take for granted. The typical human inclination is to treat the anomalies as both temporary and reversible. People tend to dismiss the noise as containing no meaningful information. Consequently, they believe there is little point in thinking about the longer-term implications for investment strategies, business models, or national and multilateral policies. But a careful reading of history and theory suggests otherwise. Noise can matter in so far as it contains signals of fundamental changes that, as yet, are not captured by conventional monitoring tools.

During my first year as an analyst on the Salomon Smith Barney trade floor in London in the late 1990s, I learned through observations a simple but powerful lesson about how to approach market noise. Rather than automatically dismissing it, one should ask whether there are signals within the noise. This lesson came from observing a smart colleague—a trader in his early twenties—who was working on the emerging markets bond desk. His name was Edward Cowen. I remember Edward as a talented trader and a diehard supporter of Arsenal in the English football league.

Edward was particularly well versed in one of the three qualities that Bill Gross, PIMCO’s founder and widely respected “Bond King,” argues are essential for an ideal portfolio manager or, more realistically, an ideal portfolio management team: street smarts. And to the outsider, Edward seemed to know it and be proud of it—so much so, I am told, that at one stage early in his career, he preferred to be seen walking to his desk in the morning with a tabloid under his arm as opposed to the Financial Times or the Wall Street Journal.

Edward’s market instincts were so sharp that they more than complemented the other two qualities that Bill Gross had identified: a rigorous training in economics and a command of finance mathematics. These qualities made Edward a moneymaker for the firm at a young age. Indeed, he illustrated back then what work, particularly in behavioral finance and neuro-science, has confirmed: The importance of instincts, especially during periods of market stress. This was most visible in the manner he would treat analysts like me. On some occasions, he would step back from the markets to listen to our views—in fact, he aggressively sought them. In the process, he would push us hard on whether the turmoil reflected a potential realignment of fundamentals. On other occasions, he would ask us (mostly politely, but not always) to stay away from his desk lest we confuse him with some fundamental analysis that bore no relationship whatsoever to the realities of that day’s market action.

This lesson—and specifically the discipline to think about potentially different interpretations of market noise—stayed with me as I moved from analyzing markets at Salomon to directly investing in them at PIMCO and at the Harvard Management Company (HMC). And over the years, I have found validation for this approach from thoughtful academic work on imperfect and asymmetrical information, market failures, and behavioral finance.

Most of the time, I have applied the lesson to specific strategies and trades. Early in my investing career, I was lucky to be involved in an asset class (emerging market bonds) inherently prone to noise and investor overreaction. After all, it was still in its early maturation phases. The challenge was to identify the causes of the noise and derive their implications. And the outcome was often good—not only through the calls that PIMCO made on Argentina’s bond price collapse in 2000 to 2001 and on Brazil’s sharp bond price recovery after the summer of 2002 but also in the contrarian positions taken vis-à-vis smaller market events (for example, the manner in which the markets was extrapolating in early 2002 the impact of Argentina’s default on Mexico and the impact of Zimbabwe’s unstable political situation on South Africa).5

The methodology was a simple one: Observe and analyze the underlying causes of the noise; see how those causes relate to a separate and distinct analysis of valuations based on economics and financial fundamentals and market technicals; test the initial findings against the views of experts in the markets; and derive short- and long-term implications for the impacted financial asset valuations and those that are connected through common ownership or other drivers of correlation.

In many instances, the right answer was to “fade” the noise—that is, treat it as a temporary and reversible deviation. But in some important cases, the correct response was to interpret the noise as containing signals—that is, pointing to meaningful changes in parameters governing both absolute and relative prices in certain market segments. Always, the right approach was to resist the initial temptation to simply dismiss, and therefore ignore, the noise.

With time, I inadvertently documented the process through a regular publication that I wrote for PIMCO and in op-ed pieces for the Financial Times and Newsweek.6 The articles had a simple objective: to explain recent market developments and trends, including how they impacted investment strategies and policies going forward. In the process, I ended up compiling a body of evidence suggesting that the noise was signaling the emergence of deep and, as yet, little-understood changes impacting the global economic and financial landscape.

A shift in the nature of the noise coming out of the markets supported this evidence. Starting in 2004 and 2005, we moved from a world where noise was generally associated with sequential inconsistencies in markets to a world where simultaneous inconsistencies were notable. In other words, rather than just being inconsistent over time, the progressively louder signals coming from various market segments also became increasingly inconsistent at the same time.

Some Recent Inconsistencies

There are many examples of recent anomalies, several of which are discussed in detail in Chapter 1. Perhaps the most vivid public illustration of this change came in early 2005 when Alan Greenspan, the former chairman of the U.S. Federal Reserve, described as a “conundrum” the fact that successive and meaningful upward moves in short-term interest rates (the federal funds rate) had been accompanied by downward moves in long-term interest rates in the United States.7 Indeed, for what seemed an eternity for investors (many of whom feel that a week is a long time), the U.S. bond market provided signals about the economy that conflicted with those coming out of the other most liquid market in the world, the U.S. equity market.

This inconsistency was accompanied by a rather peculiar situation among Fed watchers, that group of economists and analysts on Wall Street who make their living from predicting the course of the most influential interest rate in the world—the fed funds rate. In the middle of 2006, with the rate at 51⁄4 percent, the vast majority of Fed watchers fell into two distinct and opposite camps. One confidently predicted rate hikes—to 6 percent; the other equally confidently predicted cuts—to 4 percent. I remember noting several times that I could not recall such divergence in sign and size among such credible market observers.

Yet, despite such divergent views and inconsistent signals from the two most liquid financial markets in the world, the traditional indicators of market volatility and uncertainty (or market fear) continued to reach new lows. Too many market participants started to confuse the decline in market volatility with a decline in overall risk. This led them to make ever riskier trades. Questionable loans were made, and, with financial alchemy working over time, a host of balance sheets were excessively leveraged (including those of U.S. homeowners) using overly complex investment vehicles, products, and instruments.8

The work that I carried out with colleagues at PIMCO and HMC to explain the economic and financial inconsistencies pointed to three structural forces. As these factors played out, they emitted unusual signals on both a standalone basis and through their interactions. In the process, they confused existing models and the accepted rules of thumb. And while they were not the only factors in play, they were influential enough to explain much of what puzzled investors and policy makers.

Missing the Signals

The increasing prevalence of unusual signals was not accompanied by an adjustment meaningful enough on the part of market participants. Rather than seek out new analytical and operational anchors to better understand developments, too many investors went full steam ahead, taking on more risk and heavily engaging in new activities with backward-looking approaches. Policy makers expressed some discomfort, but they seemed either unwilling or unable to take much action. Indeed, along with the majority of market observers, policy makers shifted to becoming “data dependent” as their long-standing and seemingly robust models failed to explain modern-day realities. This data dependency was adopted notwithstanding the recognition that high-frequency economic and financial information is inevitably volatile and subject to important ex post revisions.

Such a situation begs for a disorderly unwind. Indeed, one problem of navigating markets without robust analytical anchors is the potential severity of the consequences when there is a sudden turn in the high-frequency data and/or prices. This phenomenon was, of course, vividly illustrated starting in the summer of 2007. In the intense period that followed, the financial system suffered a tremendous amount of damage. As the smoke initially started to clear, the media’s first estimate of $18 billion in losses for the “big banks”9 was subsequently revised up to $400 billion by analysts at Deutsche Bank.

An $8 billion write-off by Merrill Lynch was followed by the resignation of its CEO, Stan O’Neil. The CEO of Citigroup, Chuck Prince, followed after an additional $8 to $11 billion in losses. More was to come. A few weeks later, both institutions announced another round of losses that stunned Wall Street; yet another round followed a few weeks after that.
They were not the only ones.

An initial upbeat assessment by UBS gave way to a multibillion-dollar, subprime write-down that would lead to an overall loss for the year. A similar series of events happened at Morgan Stanley and elsewhere on Wall Street and in Europe. Indeed, Goldman Sachs seemed to be the only large investment bank that managed to navigate well through the turmoil.10 And it also stood out as one of the few large institutions not forced to embark on an urgent capital raising campaign to safeguard its balance sheet.

The turmoil in the banking system was only part of the story in the financial markets. Several mortgage companies went bankrupt. AAA companies that insure bonds issued by municipalities and others faced large losses and the prospect of downgrades, forcing them to also look for emergency injections of capital.

The damage in the financial markets pushed governments and central banks into crisis management mode. This was vividly illustrated in the dramatic interest rate cuts in the United States and the U.S. government’s emergency fiscal stimulus package. Yet the credibility of the official sector (i.e., governments, central banks, and regulatory agencies) suffered, including the Bank of England, which was forced into a very public U-turn on policy. Indeed, virtually every regulatory and oversight body in the major industrial countries came in for some criticism, as did the rating agencies.

Let us not forget Main Street. The turmoil in the financial markets raised legitimate concerns about collateral damage in the economy. References to a “credit crunch” multiplied, which drew the attention of politicians and acted as a catalyst for multiple legislative hearings, particularly in the U.S. Congress. Questioning went well beyond the nearest trigger (namely, the debacle in the subprime mortgage market) and the potential consequences (higher actual and expected foreclosures). It also encompassed the breakdown in consumer protection and financial regulation, the role of fraud, the near paralysis of money markets, the fragility of interbank activities, and the activities of credit rating agencies. And, in looking at the potentially stabilizing role of the fresh and patient capital waiting on the sidelines, some politicians questioned its motives rather than welcoming its involvement.11

No wonder observers have started to question the long term impact of this episode. Instead of a cyclical hiccup, some have expressed concern that it will pull the legs out from under the globalization process and, more precisely, derail the integration of markets across geographical boundaries and financial instruments.

The New Secular Reality

The reaction of some observers in the recent past—in particular, the once-eager supporters of financial globalization who are now willing to ditch it—reminds me of the way five- to seven-year-olds play soccer: Players on both teams tend to chase the ball in the manner of a noisy herd. They are, in effect, totally data dependent. Their approach stands in sharp contrast to the behavior of older kids. Anchored by a better understanding of the game and more of a strategic mindset, the older players seek to maintain positions on the field and rely more on letting the ball do the work.

So, you ask, what are the structural factors that help explain the noise, and why has it been so difficult for market participants to develop appropriate analytical tools and approaches? I am sure you have come across these three factors under various labels:

The first is a fundamental realignment of global economic power and influence, including a gradual hand-off to a set of countries that previously had little if any systemic influence.

The second is the pronounced accumulation of financial wealth by a set of countries that includes some that were previously more used to being debtors and borrowers than creditors and investors. This has fueled the systemic influence of sovereign wealth funds (SWFs),12 reinforced the natural desire to diversify the allocation of their capital, and attracted the attention of politicians in industrial countries.

The third is the proliferation of new financial instruments that have deeply altered the barriers of entry to many markets. For some, such as Greenspan, they are an important source of risk transfer and risk diversification; for others, such as Warren Buffett, the well-known value investor, they constitute “time bombs” akin to weapons of financial mass destruction.13
The interaction of these three factors has resulted and will continue to result in deep changes to the drivers of key global economic and financial relationships. Markets collide as new actors, instruments, products, and institutions assume greater systemic importance and do so in a manner that is different from that exercised by the previous sets. No wonder it has been difficult for market participants to adapt quickly and effectively.

These phenomena are being seen in the appearance of new, and in some cases previously unimaginable, drivers for such basic variables as global economic growth, trade, price formation, and capital flows—variables that investors should take seriously because they carry enormous weight in selecting appropriate investment strategies, business models, and policies. They are also seen in the stress faced by previously dominant players in the financial industry, some of whom are adjusting more quickly than others. Witness as well the way in which the interlinkages among markets are changing. As a result, diversification no longer delivers for investors the same amount of comfort as it once did. And all this inevitably leads to excessively large swings in the production and consumption of new, complex “structured products” and related investment vehicles, with the resulting need for costly “clean-up” operations.

Plumbing Problems Arise Out of the New Reality

There is another reason history tells us that such fundamental structural changes are not easy to navigate. It is not just because the recognition of risks is delayed and the risks are configured differently. It is also because the changes are yet to be accompanied by a retooling of enabling functions, including the “pipes” and infrastructure of the financial markets. Yet many investors feel compelled to jump in, either willingly or otherwise.

This combination results in a typical plumbing problem: The pipes are simply unable to handle the flow of new and old transactions. This is true at the level of the individual firm, where the willingness of the portfolio managers to use new strategies is yet to be accompanied by the ability of the middle and back offices to adequately process and maintain them. It is true at the level of the financial system as a whole where basic parameters—such as valuations, price discoveries, transparency and adequate supervision—risk being overwhelmed. It is also true at the level of policy where traditional instruments are less potent.

Like plumbing problems that you may experience at home, the result is a cleaning process that is often unpleasant. The costs can also be significant since they relate not only to the problem itself but also to the collateral damage. Indeed, investors face more than just the difficult challenge of understanding the new destination (or “steady state”), including what it implies for institutional and organizational set-ups. They also have to understand and navigate a journey that is inevitably turbulent and nonlinear. And with that comes the probability of market accidents and policy mistakes.

Due to the difficulties in being able to rapidly identify and adapt to multiple structural changes, it is inevitable that some investors (including previously successful investors) will trip, some firms will fail, some admired policy makers will be slow in reacting, and some international institutions will lose relevance. As long as the numbers remain contained, they will constitute only “flesh wounds” for a generally robust secular transformation. But if few become many, the world faces the prospect of a disorderly adjustment characterized by disappointing economic growth, higher unemployment, greater poverty, trade wars, capital controls, and financial market instability.

A Framework for Understanding the New Reality

Against this background, the purpose of this book is to document and detail the fundamental structural changes that are now in play—both their individual impacts and the manner in which they come together in defining a new secular destination. In doing so, the book also sheds light on the journey. This combination offers the readers analytical anchors—mental models, if you will—that can help in the formulation and implementation of strategies for an age of economic and financial change.

I would view this book as meeting its objective if it helps readers better understand the nature and implications of the emerging global secular realities. To this end, it details the challenges that face market participants and suggests ways to address them. The focus is on the ability to address both the most likely secular results (that is, the results that anchor the belly of the distribution of outcomes) and potential major disruptions (that is, the fat left tail of the distribution).

In attempting to meet this objective, I also provide a framework for explaining developments in the financial industry and the policy world, including the recent market turmoil and liquidity disruptions that started in the summer of 2007. I demonstrate that these developments share a common root: the tendency of structural transformations to enable activities that initially outrun the ability of the system to accommodate and sustain them. This mismatch will continue to play out in the period ahead pending what is likely to be a protracted phase of reconciliation at the level of individual firms and nations and the multilateral system as a whole.

The analysis thus sheds light on such factors as the recent large-scale migration of financial activities beyond the purview of traditional regulatory and supervisory jurisdictions; the virtual 180-degree turnaround in the sources and victims of systemic disruptions; the difficulties that exist in valuing certain instruments; the proliferation of structured investment vehicles (SIVs) and other off-balance-sheet conduits; and the new influence of SWFs.

Finally, the analysis also speaks to the unusual spectacle of seeing the most sophisticated banking system in the world come under significant pressure. It sheds light on what was previously thought to be a highly unlikely and, for some, unimaginable shutdown of the vibrant market for commercial paper lending. It explains why investors have suddenly had to worry about the stability of their money market funds and long-standing financial institutions. And it details why authorities in countries with highly developed market mechanisms have been forced into crisis management and emergency policy actions.

1. As noted in a paper by Columbia University Professor Guillermo Calvo published by the IMF (Guillermo Calvo, "Explaining Sudden Stop, Growth Collapse, and BOP Crisis: The Case of Distortionary Output Taxes," IMF Staff Papers, vol. 50, 2003), the term "sudden stop" was coined by the MIT economist Rudi Dornmusch in 1995 (Rudiger Dornbusch, Ilan Golfajn, and Rodrigo O. Valdes, "Currency Crises and Collapses," Brookings Papers on Economic Activity, 1995). It was popularized by Calvo in the context of the emerging market crises of the 1990s.
2. David Enrich, Robin Sidel, and Susanne Craig, "World Rides to Wall Street's Rescue: Citigroup, Merrill Tap Foreign Aid Lifelines; Damage Tops $90 Billion," Wall Street Journal, January 16, 2008, p.A-1.
3. Financial Times, "US Banks Get $21 Billion Foreign Bail-Out," January 16, 2008, p.1.
4. The Economist, "Invasion of the Sovereign Wealth Funds," January 19-25, 2008, front cover.
5. The rationale for this was detailed in Mohamed A. El-Erian, "Development and Globalization: Friends or Foes," Emerging Markets Watch, PIMCO, March 2002.
6. The Emerging Markets Watch publication, which I had the privilege of authoring from December 1999 until I left PIMCO for HMC in early 2006, was taken over by my two PIMCO colleagues Michael Gomez and Curtis Mewbourne. The articles are available on http://www.pimco.com/. The columns that appeared in the Financial Times and Newsweek are available on http://www.ft.com/ and http://www.newsweek.com/.
7. See the related discussion in Chapter 1 that refers to the February 16, 2005 testimony of Chairmen Alan Greenspan before the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate. Available onwww.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm.
8. Stephen Barrow, the CIO of Ironbridge Capital Management in London, put it in the following way in an interview that appeared in the August 20 edition of Barron's: "Wealth is not created by financial engineering. Financial engineering tends to be a transfer of wealth."
9. Ben White and David Wighton, "Credit Squeeze Costs Banks $18 Billion," Financial Times, October 6, 2007, p. 1.
10. Christine Harper, "Goldman Doesn't Plan Significant Mortgage Write-downs, CEO Blanefein Says," Bloomberg News, November 13, 2007.
11. Mohamed A. El-Erian, "Foreign Capital Must Not Be Blocked," Financial Times, October 2, 2007.
12. For an early discussion of SWFs, refer to the papers contained in Jennifer Johnson-Calari and Malan Rietveld, Sovereign Wealth Management, Central Banking Publications, London, 2007.
13. See, for example, Berkshire Hathaway Annual Report 2002.

25 July 2008


Leon de Winter, 54, is a Dutch writer and best- selling author living in Bloemendaal, near Amsterdam, and in Los Angeles. He latest novel, "The Right of Return," is a current best- seller in the Netherlands. A German translation is set for publication in autumn 2009 by Diogenes Verlag.

AP Israelis in Jerusalem following a suicide attack that involved a bulldozer on July 2.


'The Europeans Are Chasing Illusions'

Dutch author Leon de Winter talks with SPIEGEL about his new novel, which is set in 2024, the threats mounting against Israel and the assimilation of Muslims in Europe.

SPIEGEL: Mr. de Winter, your new book -- "The Right of Return" -- is a novel, but it actually describes a political vision. In the book, it is the year 2024, and Israel has shrunk to just a few square kilometers around Tel Aviv, which is surrounded by enemies. Are you simply playing with some ideas here or is this a serious prediction?

Leon de Winter: Both. Israel is menaced by two threats. On the one hand, by the hatred of its enemies, which today is primarily stirred up by Iran, and on the other hand, by the erosion spreading throughout Israeli society. There are three groups that have little in common: the Orthodox Jews, the Israeli Arabs and the secular Jews, who currently make up the majority of the population. But this majority is dwindling. The conflict between these three lifestyles is every bit as much of a threat -- if not even more dangerous -- to the existence of Israel as its outside menaces.

SPIEGEL: Does this mean you're afraid that Israel, as a predominately secular Jewish state, could soon be history?

De Winter: I am not a prophet. When I was young, I really wanted to be a prophet, sometimes even the Messiah. But that is what all Jewish boys at a certain age want to be. They all wake up one morning and are absolutely positive: I am the Messiah! Who else would they be? And then they have to attend school, and reality catches up with them. I don't disseminate messages; I tell stories about individuals. On the other hand, you cannot tell stories about Israel in the year 2024 without writing about politics. That just doesn't work.

SPIEGEL: This is not the first time that you have made skeptical remarks about Israel's future. This story sounds like the proclamation of a catastrophe.

De Winter: And that's what it is. The book is a thriller with a sad, almost desperate undertone. But concern about Israel's future was not my starting point here. I focused on a father whose 4-year-old son has suddenly disappeared without a trace. What happens then? His wife leaves him, he can't work anymore, and he quits his job as a professor at Princeton and starts looking for his son. He feels guilty because, for a brief moment, he failed to watch over him. Later on, he realizes that his son's disappearance has to do with global politics.

SPIEGEL: But he doesn't care about politics; he's only interested in his own misfortune.

De Winter: That's right. My story starts in the past and ends in the future. That was my personal framework for articulating all my fears -- in a fictional context. At the same time, I hate science fiction because the present provides enough excitement. I don't need the future to write myself into a rage.

SPIEGEL: Do you think the conflict in the Middle East can be resolved through negotiations, or will the strongest win out in the end?

De Winter: It will depend on who gives up first -- who won't be able to take it any longer because it costs too much: too much energy, too much time, too much blood. And that will be the secular Jews, who have no ideology, who merely want to live their lives.

SPIEGEL: In your vision, many Jews leave Israel and emigrate to Europe or America, where life is easier. In the real Israel, an increasing number of Jews are acquiring a second passport, but it doesn't look like they really want to leave. It's more a modern form of life insurance, just in case things go wrong.

De Winter: It's more than that. Immigration compensates for emigration because Russian Jews are still coming into the country. Nevertheless, take a look at Los Angeles or New York, where there are now large communities of ex-Israelis. And you even have them here in Holland. I wonder what will happen if it comes to a new conflict with Hezbollah. Very soon, the majority of Israelis will live within range of the rockets launched by Hezbollah and Hamas. Contrary to Islam, Judaism has a very weak tradition of martyrdom. In the end, we are powerless against a people who are prepared to sacrifice everything.

SPIEGEL: That said, the number of suicide attacks has declined sharply.

De Winter: Just because there is a wall that stands in the way of the terrorists doesn't mean that their frustrations have disappeared! Look, the age-old yearning of the Jews to return to their historical homeland has engendered the same desire on the Palestinian side: the return to the homeland. It's already a reality for the Jews, yet it remains a dream for the Palestinians. And, as far as the lower number of attacks is concerned, it's an illusion. It will only be a matter of time before they rise again. While we are sitting here talking, the smuggling of arms continues, from Iran to Lebanon via Syria and from Egypt to the Gaza Strip. Nobody can do anything about it. It's the calm before the storm.

SPIEGEL: The Europeans are trying to mediate in the conflict between Iran and the West. They keep returning to the negotiating table to prevent a possible nuclear threat against Israel…

De Winter: ... but what good does it do? Remember the so-called troika, the foreign ministers of Germany, France and the UK: Joschka Fischer, Dominique de Villepin and Jack Straw. They flew to Tehran and back, drank tea and coffee with Iranian politicians and negotiated over the Iranian nuclear program. Imagine that: three respectable European intellectuals negotiating with guys who grew up in the Tehran bazaar and would sell them their own watches! That's the kind of results that it produced. They told us that they had pursued a constructive dialogue but had not yet attained their objectives, and so they said that negotiations had to continue … And these three educated, sensible, and critical European intellectuals went along with this! And then, in the fall of 2003 -- in other words five years ago -- they held a press conference: We've reached our goal! Actually, nothing has happened, no agreement, absolutely nothing.

SPIEGEL: What do you think the Europeans are doing wrong?

De Winter: They are chasing illusions. At the time, I met Fischer during a reception at the headquarters of Springer Verlag (publishing house) in Berlin, and he came to me and asked: "What do you have against me? Why do you write such negative things about me?" I said: "I have placed so much hope in you, but you have disappointed me." And he was really taken aback. I tried to explain the situation to him. He had to be told that the Iranians weren't taking him seriously; they were making a fool of him. Fischer's response to this was that we had to pursue a dialogue and return to the negotiating table again and again.

SPIEGEL: But Fischer was right. What would have been the alternative?

De Winter: We could have told them: If you don't stop, we'll wipe you out!

SPIEGEL: You can't really mean that.

De Winter: Yes, I really do. I would have told the Iranians that if they don't halt their nuclear program today, we'll put the fear of God into them tomorrow. And they would have stopped because that's a language they understand. You can't go to these people and say: "Listen, if you renounce generating nuclear power, we'll help you produce something else. And if you don't do that, well, we'll be very, very sad." "Okay," is definitely what the guys in Tehran would say "That's a threat that we take seriously, and we'll meet your demands." What a ludicrous idea.

SPIEGEL: That is, with all due respect, the slightly simplified worldview of a novelist who lives in nice, little Holland and doesn't have to make such decisions. A foreign minister has responsibilities and has to be more cautious in his judgments.

'We Know Who We Are Dealing with Here'

De Winter: But we know who we are dealing with here. These people pursue their objectives with all possible means. If we wait to see what happens, then we have already accepted their ground rules. We are placing our fate in the hands of fanatics and fundamentalists. When you deal with diplomats from Iran or politicians from the Middle East, you cannot act as if you were dealing with the state governor of Hesse or Bavaria! It's another world. You cannot negotiate without threatening to use force, especially if you want to prevent the development of nuclear arms by people who are practically longing for the apocalypse.

SPIEGEL: You have misread at least one situation in the past with your hawkish positions. Shortly before the war in Iraq, you published an essay in SPIEGEL, which could have been interpreted as a call to arms. You wrote that we have to cut off the monster's head -- meaning Saddam Hussein's -- and that if that didn't happen, the monster would send our heads rolling. But now we've learned that Saddam's secret military arsenal was a myth.

De Winter: At the time, Saddam Hussein acted as if he had weapons of mass destruction. He threw the United Nations inspectors out of the country; he ordered thousands of Kurds to be killed with chemical weapons.

SPIEGEL: That was long before that.

De Winter: What do you mean by "long"? He did it, and we had to assume that he would do it again at any time. And, besides, getting rid of a tyrant is never a wrong move, even if later on you have to accept the chaos that we are all familiar with for a period of time.

SPIEGEL: In the 1990s, Philip Roth wrote a novel called "Operation Shylock," in which the Jews abandon Israel because it has become too dangerous. Did you have this book in mind when you wrote yours?

De Winter: No. I had the idea for "The Right to Return" when I wrote my last book, "Malibu." I read something about the Mameluks, who were not originally Muslims, but were abducted as children or taken from their parents as "taxes" to be raised as warriors. I was captivated by this story. What happens to children who are basically forced to switch sides? What would a Mameluk story be like today? I've transferred the whole thing to the future, the future of Israel. Roth's "Shylock" is a great novel, but it has no connection with reality. That's not my field. I write realistic thrillers.

(AFP) Palestinian Islamic Jihad fighters in Gaza

SPIEGEL: In "The Right of Return," Jewish children are transformed into Muslim terrorists to spread fear and desperation throughout Israel. That's not especially realistic, either. Actually, it's more like introducing a new level of anxiety…

De Winter: Exactly, the ultimate horror.

SPIEGEL: Do these Jewish suicide bombers serve as a metaphor for those Jews throughout the world who oppose Israel or at least sharply criticize the country?

De Winter: Yes, definitely. On the one hand, I unconditionally support the right to freedom of speech. Everyone should be able to say whatever they want to say -- even if it's absolute nonsense. It wouldn't be fair to say that those Jews who back the anti-Semites are just a bunch of sick or crazy people because there are some intelligent people among them. But there is an absurd or pathological element to it: the fear of being identified as a Jew or, actually, as a bad Jew. They would like to be good Jews and well liked because of it.

SPIEGEL: In your home country, the Netherlands, there is a widespread fear of Islamization. You have written a great deal on this topic yourself, and some of this sounds rather apocalyptic. Does this still reflect your view of the world?

De Winter: Not during the day. Only when I wake up at 3 o'clock in the morning and can't fall asleep again. That's when I really start to worry about everything -- about my taxes, my children, my dog and my cats. And, of course, about the state of our society and what will happen to it. We are living in exciting times. And you know the Chinese curse: "May you live in exciting times!" Not since the end of World War II have things been as exciting as they are today. We are experiencing a new phenomenon: the mass immigration of Muslims to countries where the "infidels" live.

SPIEGEL: What do you expect the consequences of this will be?

De Winter: There are signs that a modern Islam is emerging. An increasing number of young, liberal Muslims are trying to practice their own form of religion because they have been inspired by the idea of freedom. But, of course, radical Islam remains a problem. It has a very strong appeal for frustrated young men with violent tendencies who at some point in time discover that the world is full of injustice and want to do something about it. It's a bit like an adventure: the dramatic farewell videos, the last message to the world and then -- the explosion. On top of that, there is the promise of sex after death, something many of them can only dream of. I can understand how young men become fanatics. But I also see something entirely different: how it is primarily young Muslim women here in Holland who become integrated into society; how they get an education and move forward because they have their freedom. And they seize this opportunity.

SPIEGEL: So it's only a matter of time before the problem solves itself?

De Winter: We don't know how long it will take and how many victims it will claim. It could take 40 or 50 years before integration has really occurred. Everything is in a state of flux, and nobody can say where the journey will take us.

SPIEGEL: And, in these exciting times, you are now moving to the US with your family?

De Winter: Yes, we're going to Los Angeles for a year, to the most multicultural city in the US. I want to experience first-hand the election campaign and the period immediately following the elections. I feel comfortable in the US, and especially in LA, where there are no real locals and everyone is an immigrant.

SPIEGEL: Does your love for the States have something to do with your Jewish origins?

De Winter: That's certainly possible. But if that were the case, then I would feel most at home in Israel. I travel a lot to Israel, but I wouldn't want to live there.

SPIEGEL: Why not?

De Winter: Because of all the things that we have talked about. If I had lived during the 1920s, I would probably have also emigrated to Palestine. But today? I don't see it as the duty of every Jew to live in Israel. As far as I'm concerned, America is the Promised Land because everyone can live there as they please, no matter where they come from and no matter which god they worship -- as long as they work and respect the laws.

SPIEGEL: A fairly idealistic view of the United States.

De Winter: Please leave me with at least one illusion!

SPIEGEL: Your last novel, "Malibu," was published six years ago. Usually it takes you two to three years to write a new book. Why did it take so long this time?

De Winter: I tried to save the world. That's also a terrible Jewish habit. Above all, I tried to save Europe. I really thought that I could make a difference by writing political commentaries, columns, lead articles, essays for SPIEGEL. It became an obsession. I couldn't do anything else. I spent the whole day on the Internet and got upset about everything. That's not healthy for a writer.

SPIEGEL: Are you feeling better now?

De Winter: You can't imagine how wonderful, how liberating it is to write a novel, even one with such a sad story. It's such a relief to be able to control reality instead of being swallowed up by it. In my novels, I'm God. Everything obeys my command.

SPIEGEL: Thank you for this interview, Mr. de Winter

Interview conducted by Martin Doerry and Henryk M. Broder at de Winter's home in Bloemendaal