Right Pulse

Argentina has for the first time directly threatened Australian interests:

Argentina’s ambassador to Australia says mining group BHP Billiton will face business sanctions if it pushes ahead with oil exploration in Falklands waters.

BHP has a licence to explore off the Falkland Islands and is scheduled to start doing so in the next four months.

But Ambassador Pedro Villagra says if the company proceeds, their business in Argentina will suffer.

“If they conduct activities they will not be allowed to carry out some activities in the Argentine territory in the mainland,” he said….

BHP does not currently have any operations in Argentina but has in the past held stakes in gold and copper mining projects.

BHP will probably just thumb its nose at Argentina and start drilling. It is fairly suspect that the USA is refusing to recognise Britain’s sovereign right over the Falklands. Are they hoping to gain a commercial advantage in the region? It looks like it. Clinton will probably do a deal when she meets the Argentine President.

I’ve been following the new Falkland Islands crisis, mostly because of the implications it has for Australia and no one else in the media has picked up on the issue. BHP’s exploration and drilling rights near the Falklands are being coveted by the Argentine President – who typically is whipping up hysteria over the issue to distract attention away from her appalling approval rating. Argentine claims to the Falklands are pretty weak. They still regard the Falklands as a British colony, even though residents of the Falklands are British citizens and have been living on the Islands for nearly 180 years. What happened in the late 1700s – who killed who – is hardly relevant today.

Despite this, Argentina has managed to get the backing of the Latin American community to do…well what I am not really certain what. Let the UN sort it out and predictably tell the UK to bugger off? Something like that I gather, oh and lend support to Argentina’s defacto blockade of the Falkland Islands through a system of shipping permits between the two territories. Certainly there is next to nothing that Argentine military can do, other than harass. Their Air Force is still flying around in A4 Skyhawks and Mirage III jets, basically the same fighters Australia was flying in the 1970s; and the Argentine Navy is not much to write home about. No AAW capability, though they do have a couple of submarines – likely in dry dock. A squadran of RAF Eurofightersand pilots - preferably Block 5 and backed by Tornados for maritime strike- should be able to deal with the Argentine threat fairly easily.

Even more absurd than Argentina’s claim to the Islands is the response by – you guessed it – Hugo Chavez to the situation. As a sign of Latin American solidarity he had these choice words to say:

“Look, England, how long are you going to be in Las Malvinas? Queen of England, I’m talking to you,” said Mr Chavez.

Charming. Hugo also made vague promises of giving Argentina military support – a long held pet issue of his – along with putting together some type of pan-Latin American air and naval armada that apparently will be thrown at the UK if the UN does not sort the issue out. That would make for interesting TV. Hugo does have some SU-30s and a couple of submarines that could cause grief. Their readiness and availability is another matter. I can’t imagine they are ready for war tomorrow, and how they would get down to the Falklands is also a question Hugo probably hasn’t thought through. Trivial details for the great people’s leader no doubt. I don’t see Chile throwing its F-16 Block 50s into the sway – secretly they really hate Argentina.  While Brazil could cause some grief, I don’t see anyone risking it. Well… anyone rational, just to please plastic face Argentina President Cristina Fernandez, as a 6th generation Falkland Islander called her in the Daily Mail.

I think it would be prudent for Australia to send 1 FFG and 2 FFHsaroundthe Falkland Islands  for training purposes and to link up with the Type 42 destroyer in the area. Also, making a good will visit to Chile to send the message that any irrational poorly thought through Latin American gusto would not be such a good idea. I think Chile is beyond that though. Argentina less so. While when it comes to stupidity Hugo is beyond redemption.

Hugo Looking For RN Ships

Not quite as absurd, but miserably predictable, the USA has essentially refused to acknowledge the UK’s sovereignty over the Falkland Islands. So if the Argies manage to stirrup military trouble, what is meant to happen to Australia’s commercial interest on and near the islands along withtheBritish citizens that live on them. What ever happened to you are either with us or against us? Words uttered by GwB after 9/11. Seems that when it comes to supporting allies when it is not convinent, the US is pretty good at fence sitting. As noted by Tony Young of UK Telegraph fame:

Tony Blair sacrificed his political career and jeopardised Britain’s international standing by making common cause with America in the War on Terror. No matter how often he claims it was because he believed it was “the right thing to do”, we all know what was really going on in his head. He simply didn’t want to break ranks with the United States….

So it is truly shocking that Barack Obama has decided to disregard our shared history and insist that we have to fight this battle on our own. Does Britain’s friendship really mean so little to him? Do the sacrifices Britain has madeindefence of the Atlantic alliance count for nought? Who does he think will replace us as America’s steadfast ally when she finds herself embroiled in a territorial dispute of her own — possibly with the very same motley crew of Latin American rabble rousers? Spain? Italy? France? Good luck with that, Mr President.

Ah, so naive. I mean both Tony Blair and Barack Obama. Possibly Obama, being part of the USA is always wrong crowd, sees that the USA has a weaker future so there is no point $#@! off the neighbours. From economic historian Niall Ferguson writing about US Federal fiscal matters:

Already, the federal government’s interest payments are forecast by the CBO to rise from 8 percent of revenues in 2009 to 17 percent by 2019, even if rates stay low and growth resumes. If rates rise even slightly and the economy flatlines, we’ll get to 20 percent much sooner. And history suggests that once you are spending as much as a fifth of your revenues on debt service, you have a problem. It’s all too easy to find yourself in a vicious circle of diminishing credibility. The investors don’t believe you can afford your debts, so they charge higher interest, which makes your position even worse….

As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon’s present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028….

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force….

The precedents are certainly there. Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and also succumbed to inflation due to a surfeit of New World silver. Prerevolutionary France was spending 62 percent of royal revenue on debt service by 1788. The Ottoman Empire went the same way: interest payments and amortization rose from 15 percent of the budget in 1860 to 50 percent in 1875. And don’t forget the last great English-speaking empire. By the interwar years, interest payments were consuming 44 percent of the British budget, making it intensely difficult to rearm in the face of a new German threat.

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.

Gee, can’t wait. So what does the Falklands say about Australia’s reliance on the US military? Noticeably, their nuclear deterrent and the Pacific Fleet. Those days are numbered, so we may as well get our act together and increase military spending or otherwise we may find ourselves like the Royal Navy, not enough ships, limited force projection capability and helpless. And more than a decade of a mediocre Labour government philosopy of  ‘help the poor by destroying the middle class and wealth creators’ has not helped. The Falklands has a good deal to teach Australia.

UPDATE I

If Bill Clinton’s response to the East Timor crisis in 1999 is anything to go by, then his wife as Secretary of State couldn’t care less about ‘allies’ either. She is about to meet plastic face herself, Cristina Ferndandez de Kirchner, in a big snub to the UK. Presumably they will day dream together all things socialist.

Now the USA on the face of it may have some cause for feeling pretty angry at the UK at the moment, because of the release of Lockerbie bomber Abdelbaset Al Megrahi and the release of CIA interrogation details by a UK Court on Binyam Mohammed.  However the fact of the matter is that Brown and Obama are both kindred spirits. They both love government debt and giving terrorists the benefit of the doubt. Releasing Abdelbaset Al Megrahi was disgraceful, but so has been Obama’s attempts at freeing Guantanamo Bay POWs, and his intent to give them access to the civilian legal system in NYC.  Feel the empathy Obama has for NYC residents? So the USA has no grounds for being angry at the irrational ‘protect the criminal’ mentality of the British Labour Party, because it is a mentality that Obama seemingly embraces as well.

Oh, and there is the small note of counting up the number of Argentine troops that have fought with the USA in Iraq and Afghanistan. 1,2,3…..0.

Kevin Rudd should pull in the US ambassador with a ‘please explain’ as to why the US won’t acknowledge the sovereignty of the Falkland Islands and by extension the BHP oil exploration and drilling rights that follow?

Looks like the Argentine government in an attempt to bully its way into potential oil revenues from the Falklands, is going to punish any company with Argentine operations involved with Falklands oil exploration:

The Argentine government is looking into the British oil companies involved in the Falkland Islands exploratory drilling operation checking on their possible links to interests in Argentina (and if so the infringement of legislation of Argentine legislation), according to reports in the Buenos Aires press….

Falkland Oil & Gas Ltd’s associate Anglo-Australian BHP Billiton is one of the world’s leading mining companies and is also involved in copper exploratory mining in the north of Argentina….

However it is not clear yet how the Argentine government could “intimidate” major corporations or financial institutions without further deteriorating its international image in business affairs when it is trying a comeback to world money markets.

The Argentine President, Cristina Fernández de Kirchner, doesn’t give a damn about money markets, financial obligations or private property rights and so would probably just nationalise BHP assets. This latest move would come on top of an effective blockade of the Falklands, with Argentina basically banning shipping between the two territories, hampering the re-supply of oil exploration operations.

Kevin Rudd should pull in the Argentine ambassador with a ‘please explain’. Failing that, working up plans to send an expeditionary air and naval task force would be a prudent response to the current situation. How the task force would get to the Falklands would be another matter. It would need Chile’s co-operation and we probably wouldn’t be ready until early 2011.

I’m thinking 12 x F/A-18F with JSOW, 12 x F/A-18 HUG with JASSM, 3 x AP-3C, 2 x KC-30a, 2 x Wedgetail, 1 x C-17, 2 x C-130J, 1 x FFG UP, 2 x FFH ASMD, 1 x SSK, 1 x MHC, 1 x LPA with a detachment of S-70s, RBS-70, CDT, SAS, etc….and any ancillary nuclear bombs that may be laying around in Kevin’s basement. I know, dream on….

Well not really, but there are comparisons. Interesting dispute brewing over the Falkland Islands and Argentina’s spurious claims to the island and their newly found oil reserves – potentially second only to the Ghawar field in Saudi Arabia. Argentina is effectively ending shipping between it and the Falklands, oil exploration, fishing and potentially tourist ships. In effect a de facto blockade.

The Henry Jackson Society, a cross-partisan think tank, said recent Argentine actions, including curbs on Falklands-bound shipping and threats to drag Britain into an international tribunal, had resulted from perceived weakness of the British defense capability in the South Atlantic.

The Argentine actions underline “the vital importance of resisting defense budget cuts,” HJS Executive Director Alan Mendoza said in a statement.

He said Argentina’s decision to punish shippers who trade with the Falklands in effect gave the Latin American country “the power to blockade the disputed islands.”

I doubt Argentina could mount any type of credible military attack on the islands. They never reconstituted their air force or Naval aviation after the Falklands War, though they have some Naval assets that could be more annoying than a threat.

Noticed that BHP is the biggest corporate party to the Falklands oil fields.

Hilarious….

Just substitute France for Christmas Island.

Where’s Rudd’s anti-market, pro-government, pro-debt neo-liberal conspiracy theories now?

Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU’s refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece’s drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

Barclays Capital says the net external liabilities of Greece are 87pc of GDP, or €208bn (£182bn). Spain is worse at 91pc (€950bn), and Portugal worse yet at 108pc (€177bn); Ireland is 68pc (€123bn), Italy is 23pc, (€347bn). Add East Europe’s bubble and foreign debts top €2 trillion.

And its immediate relevance:

Britain, France, Japan, and the US are all vulnerable. All must retrench. The great “reflation trade” of 2009 is over.

Bail-outs, socialist and debt fueled ’stimulus’ spending are coming back to bite much sooner than I thought possible. Good luck trying to re-finance all that government debt,  especially with tighter banking rules covering lending and investment. That means higher taxes to punish the independent and make them government dependent.

I’ve being covering the risk to the US’s sovereign credit rating for a while now, at least since November 2008. Well a little while ago Barnaby Joyce was hounded down by Wayne Swan and his financial commentariat in the press for suggesting that a US downgrade was a growing distinct possibility. Well guess what?

Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.

This is not the first time such a warning has been fired off. Moody’s previously issued a veiled warning last year. It seems now they are manning up to the reality of the US’s dire fiscal position.

“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.

And why wouldn’t it? The US is lucky to have the rating it does now. Printing money to devalue your country and monetise your debt is not exactly likely to impute investors with confidence. Given the way the US Federal Budget is put together by both President, Congress and Congressional Committees – all responsibility but no accountability – there seems no prospect of bringing spending under control.

The cavalier way in which the government dismissedJoyce’s previous warnings makes it clear that Rudd is more concerned with attacking his opponents and savings his own skin than preparing the nation’s budget for the economic mess that would be created from a US downgrade. Certainly it would make the cost of borrowing in Australia more expensive, but I don’t see that stopping Rudd’s spend-a-thon.

Oh well, looks like the IPCC is about to fall over.

India has threatened to pull out of the United Nations’ Intergovernmental Panel on Climate Change and set up its on climate change body because it “cannot rely” on the group headed by its own Nobel Prize-winning scientist Dr R K Pachauri.

Gee, shucks. If India pulls out I doubt the IPCC would be able to continue in its current form. What little credibility it has left would simply vanish, with 17 per cent of the world’s population automatically checking out of the body. I wonder how the ABC would try to spin such an event? Imagine the clamour of scientists in Australia worried about their funding stream for continued doom mongering if they don’t get more funding to study their own doom mongering predictions. Talk about positive feed back loops.

The reason for this threat is that India is none too pleased about the IPCC’s deliberate misrepresentation of the effects of global warming on Himalayan glaciers, claims that benefited funding for the IPCC’s head Dr R K Pachauri, and his research institute.  Add to that the IPCC’s sloppy research covering the Amazon, relationship with the Climagegate scientists, misrepresentation of sea level rises, using non-peer revised material to make shocking headline graping claims for publicity sake and seemingly exaggerating virtually every other climate related issue of note. Seems the manufactured scientific consensus has reached its used by date. Even the Guardian’s prophet of doom George Monbiot is getting worried:

These scandals have done tremendous damage. This is not because they threaten the canon of climate science– that would require similar exposés of tens of thousands of scientific papers – but because they create an atmosphere of opacity and evasion.

The canon of climate science?!? There are not ‘tens of thousands of scientific papers’ supporting the IPCC’s claims about the heating effect of human carbon emissions on global temperatures. Monbiot’s statement is complete bonkers. In order to disprove the IPCC’s claims one only has to show that carbon dioxide will not heat the climate to the extent the IPCC proposes it will. Every other scientific paper written in the name of climate change will fall if the IPCC’s claim about climate sensitivity can be shown to have been exaggerated. Some claim that it already has, in the context of Rudd’s ETS:

…the IPCC’s central estimate of CO2’s warming effect, according to an increasing number of serious papers in the peer-reviewed literature, is a five-fold exaggeration. If those papers are right, after a further decade of incomplete compliance and billions squandered, warming forestalled may prove to be just a thousandth of a degree.

From the Financial Post in Canada and the impending doom facing the IPCC:

He joins a growing list of dissenters.

The continuing attacks on Indians in Australia is symbolic of the ineptitude of the Rudd government. The latest comes from Brisbane:

The Indian community in Brisbane says it fears two bashings last night were copycat crimes triggered by a spate of attacks on students in Melbourne and Sydney.

Rudd and his left-wing allies believe that there is very little they can do to combat these crimes. According to their dogma, crime is a function of circumstance, be it social or economic, and as a consequence police merely respond but can’t stop or prevent crime. The issue of individual responsibility is completely lost on Rudd and his state labor allies. So the bashings will continue and our relations with India will also continue to get worse.

A recent article in the WSJ exposes this great lie:

The recession of 2008-09 has undercut one of the most destructive social theories that came out of the 1960s: the idea that the root cause of crime lies in income inequality and social injustice. As the economy started shedding jobs in 2008, criminologists and pundits predicted that crime would shoot up, since poverty, as the “root causes” theory holds, begets criminals. Instead, the opposite happened. Over seven million lost jobs later, crime has plummeted to its lowest level since the early 1960s. The consequences of this drop for how we think about social order are significant.

It should also cause Rudd and his ‘progressive’ friends in the state Police departments across the country to also have a re-think.  That won’t happen though because it would destroy one of their main political tenants:

If crime was a rational response to income inequality, the thinking went, government can best fight it through social services and wealth redistribution, not through arrests and incarceration….

Instead:

The recession crime free fall continues a trend of declining national crime rates that began in the 1990s, during a very different economy. The causes of that long-term drop are hotly disputed, but an increase in the number of people incarcerated had a large effect on crime in the last decade and continues to affect crime rates today, however much anti-incarceration activists deny it. The number of state and federal prisoners grew fivefold between 1977 and 2008, from 300,000 to 1.6 million.

So these attacks on Indians can be set squarely at the foot of Rudd and his ‘progressives’ that promote social theories on crime that seek to deflect blame for crime away from the individual.