Economics: Deflation or inflation?

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I return sometimes to economic topics, just for fun. This is actually a bit more than just about economy.

There was a huge scare about a supposedly coming deflation in late 2008, and I see still some headlines about possible deflation. I had some quite strong discussions about this topic during last winter.

My take is simple, but it's not obvious enough for those who prefer to float with the current:

There were superficial early indicators for a USD and even EUR deflation, the seeds for the deflation fear. Indicators are mere indicators, though.

My thoughts included political behaviour, politicians/bureaucrats/technocrats and the fact that the U.S. invents new money at unprecedented rates. The early indicators and many economic theories and models are of questionable value in extraordinary, unprecedented situations like ours.

The ideal situation for a debt-reducing surprise inflation is a time of deflation scare.
That's a perfect, incredibly advantageous situation. Inflation doesn't reduce government (and other) debt much if it's expected inflation. The opposite - expected deflation - is like a godsend for a government intent on reducing its debt by inflation. This may be (or not) an actual federal U.S. strategy. The PR Chinese government isn't so uneasy about its dollar reserves because it expects them to rise in value, after all.


My scenario: The expansionist fiscal and central bank policies CAN cause an inflation, and it would surprise (extremely!) those who expect deflation.

I don't question that we could still see USD deflation (although the fiscal and central bank policies have fought against this tendency with great might) or that it was a possibility.

- - - - -

Yet, I was very irritated about how certain 'some people' were about a forthcoming deflation - completely ignoring the arguments pro inflation. I had the subjective impression of more inflation-related news and reports coming from Europe than from the U.S. anyway (both related to the USD).
'Some people' assumed that some early indicators were reliable and markets on autopilot; they ignored the capability of central banks and governments to steer against the trend and to even exploit it for their purposes.

- - - - -

Economists, even much-respected professors, opposed each other in debates about inflation vs. deflation expectations because it's really difficult (if not impossible) to KNOW in advance what would happen. It seemed really foolish (if not arrogant) to me how some laymen still claimed to be right beyond doubt, and everyone who disagreed didn't get it or is supposedly bad at economics.

It was especially ridiculous to hear about how this or that conclusion was supposedly "econ101" when it wasn't and when the same people had only a very superficial understanding of economics while discussing against actual economists who had learned much more than economics basics.
The inflation/deflation topic was a great case study about dirty rhetoric tricks, just like most rather emotionally-laden topics.

Some laymen were discussing this macro economic topic as if it was some kind of domino game, without entities in it that could influence events with their will.

Funnily, some of the same people were quick at criticizing professional economists for their supposed "homo economicus" theory. That's an outdated economic theory about perfectly rational human behaviour that gets nowadays more attention among economics laymen than among real economists. Economic students learn it in their first year - for about 20 minutes - because it's simplistic and a part of the whole.

- - - - -

We had so many short-sighted short-term policies in the past decades that few still consider our supposedly unstable democratic governments as capable of daring medium-term strategies. Yet, that's probably what we're experiencing. It may sound like a conspiracy theory to some, but the situation is simply perfect for a surprise inflation that would eradicate much of the U.S. government's debt. The enabler is the federal Reserve Bank, which invents new dollars at an astonishing rate.


The same can happen in the UK (much less likely). It's almost impossible in the Euro zone because of the design of the ECB.

- - - - -

Very active readers of the security-related blogosphere may already have understood this as what it is: Nothing less than an attack on a certain blogger who picks up topics, blogs for months or years strongly favouring one side of the topic and retreats silently once it is obvious that he picked the wrong team (as in case of "peak oil" as reason for the oil price troubles, for example).


S O

P.S.: I don't expect serious inflation in the Euro zone - the ECB lacks the organizational structure for such a scenario. It was designed for stability, not as a major political actor.

edit 2014:
Basically neither much inflation nor much deflation happened in the last five years in the U.S. or the Euro zone. The crisis doesn't seem so very much unprecedented any more; the great depression and the Japanese Lost Two Decades are useful parallels. The latter points at a lingering susceptibility to deflation. The very much inflated money quantity (M2, M3 et cetera) in the U.S. still holds the potential for much inflation if the anticipated "tapering" isn't done well. Overall, the last five years look a lot like a single long postponement of either deflation or inflation - with many more years of muddling through as third scenario.
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Conscription in Germany: Politics

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Germany has officially a conscription, but 88% of our soldiers are volunteers or professionals. Some of those volunteers are serving voluntarily a bit longer than a normal conscript does and wouldn't serve without the conscription.
We don't seem to send any real conscripts to missions outside of NATO territory.


The discussion about conscription in Germany hasn't been very fundamental, but usually focused on the "Wehrgerechtigkeit" - whether the method of conscripting is just. The shrinking of the Bundeswehr plus the enlarged population base (unification) reduced the per cent need of the Bundeswehr for conscripts. The need for more long-serving volunteers to master the casualty- and failure-sensitive missions in overseas further reduced the absolute need for conscripts. The ministers of defence have attempted to compensate and spin away the problem with two measures;
* much shortened basic service - that makes conscripts officially useless for demanding tasks
* increased fitness standards
They had a bit luck as well, because the baby boom children generation became eligible for military service til the 80's.

That wasn't enough spin, though. Only about a sixth of a generation is called to serve in the Bundeswehr and half of the young men are being declared to be unfit to serve (a ridiculously high percentage that tells more about the standards than about the men).

It's obvious: To serve or not to serve as conscript is a lottery nowadays. For men. An overwhelming majority of Germans acknowledges that our conscription discriminates men, but for unknown reasons this is not a mature though for discourse among high-level politicians.

This situation is a strange one, as few parties still back the system. We'll have federal elections this September and the political programs have been published. That's what they tell us about the parties' intents:

CDU/CSU (conservatives, most likely to join the next government, with chancellor)

(...)
Die Wehrpflicht ist auch angesichts der neuen Bedrohungen der Sicherheit unseres Landes zukünftig notwendig. Sie ist ein wichtiges Instrument der Sicherheitsvorsorge.
Die Wehrpflicht verbindet Bundeswehr und Gesellschaft. Wir wollen jedoch für mehr Wehrgerechtigkeit sorgen und die Wehrpflicht attraktiver gestalten. Den Zivildienst wollen wir als Ersatzdienst erhalten. Er hat große sozial- und jugendpolitische Bedeutung. (...)

In short: conscription is necessary due to the 'threats to national security'. They assert that the conscription is an important link between forces and society (that's based on assumed lessons of the Weimar Republic). The alternative civil service has great social importance.

F.D.P. (liberals, likely junior partner of the conservatives)

(...) Sie müssen als Instrument einer wirkungsvollen Friedenspolitik professionell, flexibel und schnell einsetzbar sein. Hierzu reicht eine einfache Fortschreibung überkommener Strukturen unter Beibehaltung der Allgemeinen Wehrpflicht nicht aus. Die Wehrpflicht ist nicht mehr zu begründen. Sie ist in ihrer Ausgestaltung zutiefst ungerecht und für die Einsatzbereitschaft der Bundeswehr mittlerweile sogar kontraproduktiv. Sie muss schnellstens ausgesetzt werden. Deutschland benötigt Streitkräfte, die gut ausgebildet, modern ausgerüstet, voll einsatzbereit und schnell verlegbar sind. Das kann nur eine Freiwilligenarmee gewährleisten. (...)

(...)Die von der FDP geforderte Aussetzung der Wehrpflicht bedeutet auch das Aus für den Zivildienst.(...)

In short: They call for a deactivation of the conscription. The forces would need to be for "effective peace policy" (= overseas deployments, apparently liberal newspeak) and the continuation of old structures like the conscription is counter-productive to this. They assert that only a volunteer army can meet their requirements. They also complain about the present conscription being unjust. The second quote also calls (in a chapter about social policy) for a deactivation of the alternative civil service as well.

SPD (social democrats, less likely party to lead a new coalition, incl. chancellor)

(...) Die Wehrpflicht weiterentwickeln. Wir setzen auf die Fortentwicklung der Wehrpflicht, die unter Beibehaltung der Musterung die Möglichkeit einer flexiblen Bedarfsdeckung des erforderlichen Bundeswehrpersonals mit einer Stärkung des freiwilligen Engagements in der Bundeswehr verbindet. Wir streben an, zum Dienst in den Streitkräften künftig nur noch diejenigen einzuberufen, die sich zuvor bereit erklärt haben, den Dienst in der Bundeswehr zu leisten.

In short: blablabla. They don't really tell anything. It may range from irrelevant changes to a deactivation of the conscription. They should be embarrassed.
Other sources than their program indicate that they probably think of a deactivation of the conscription.

Bündnis 90/Die Grünen (greens, former pacifists (pre-'99), possible junior partner)

(...) Die Bundeswehr muss europatauglicher und UN-fähiger werden. Wir wollen die Bundeswehr auf 200.000 Soldatinnen und Soldaten verkleinern, die Wehrpflicht abschaffen, den Zivildienst umwandeln und die Freiwilligendienste ausbauen.
In der Bundeswehr wollen wir einen freiwilligen militärischen Kurzdienst von zwölf bis 24 Monaten einführen, der Frauen und Männern offen steht. (...)

In short: The Bundeswehr shall be more optimized for (as peaceful as possible) overseas missions. Conscription shall be abolished. Alternative civil service shall be transformed. The Bundeswehr shall offer a short-term volunteer service of 12 to 24 months,. The size of the Bundeswehr shall be reduced to 200k (-20%).

I don't get why they want to emphasize short-term volunteers if they want to reduce the Bundeswehr by more personnel than it has conscripts.

Die Linke (socialists, turned pacifist in opposition, least likely to join the next government)

(...)
* radikal abrüsten: die Wehrpflicht abschaffen; die Bundeswehr zu einer Verteidigungsarmee umgestalten und deutlich verkleinern; (...)

In short: Disarmament, abolition of conscription, modify the Bundeswehr into a much smaller defensive force.

These socialists are hypocrites; they treat the Bundeswehr as if it was the anti-democratic military (NVA) of socialist Eastern Germany. They pretend to be peace-lovers now (as usual when socialists are an opposition party).

- - - - -

It's interesting that this lingering topic has made it into some newspapers as a topic for the elections. The party chairman of the liberals has attacked our conscription as unnecessary and a harassment of our young men. He's most likely to form a coalition with the pro-conscription conservatives (and his party is unlikely to ge the minister of defence seat).

The present minister of defence has a low standing and low competence, so he's likely to be replaced in a new coalition; either by a conservative or (less likely) by a social democrat. Everything else would be a premiere.

- - - - -

The present polls (2009-07-28) say

CDU/CSU 36%
SPD 23,5%
FDP 14%
Grüne 12%
DIE LINKE 10%

A classic black-yellow coalition of CDU/CSU and F.D.P. with Merkel as chancellor is most likely.
More about our parties here.

- - - - -

We could easily live without conscripts - their share of the Bundeswehr is small and they rarely get any tasks of importance any more. I have concerns about the issue of a sufficient reserve pool, but that's nothing that seems to worry our federal top politicians.
The greatest obstacle to a deactivation of this underpaid and sexually discriminating unfree labour is not national security policy: It's social policy.

Citizens can object to armed service and have to serve in an alternative social service. The income is similarly marginal as for conscripts (it's unfree labour, after all) and these social services are concentrated in social community services; caring for elderly in nursing homes, for example.
A deactivation or abolition of our conscription would deprive the private sector of tens of thousands of cheap unfree labourers. Efforts (so-called reforms) to reduce the costs of our social and health services are common in German federal politis, and an end of this unfree labour system would cause some new cost problems.

- - - - -

Oh, before I forget it: It's politically incorrect to call our conscription what it is:

An underpaid and sexually discriminating unfree labour with partial removal of human rights.

I challenged people to disprove this assertion for years, but so far all failed because it's true. We as a society have just become used to this instrument that was introduced by monarchs two centuries ago and reactivated by the Nazis and finally by the present state for the Cold War.

S O

edit 2015-12: I found a Swiss article which argued for a Swiss militia of volunteers. It's in German, and covers some of the same points as I did on this blog. By the way, conscription was deactivated in Germany a while ago, in one of the many political u-turns in which Merkel turned her party's decades-old policy upside down once the pressure became unbearable to her.

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Lessons from German military vehicle history

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I looked a lot into the history of historical German military vehicles and found that it's full of lessons.

The primary lesson of WWI were probably that internal combustion engines can indeed replace horse power for operational supply purposes. Horse-drawn carts were limited in their radius of action because horse fodder had to be transported as well - and was both quite voluminous and heavy in comparison to the performance. It was impossible to supply corps adequately far away from the closest railway station. This was a huge logistical problem of the Schlieffen plan.
Trucks also raised the transport capacity of roads (ton-kilometers/day), that proved invaluable for the French at Verdun. Finally, motorized tractors enabled road mobility (not just rail mobility) for heavy guns.

There was another lesson as well; the importance of raw material supply. Natural rubber supply was quickly cut off by the British naval blockade and trucks had to switch to spring-cushioned metal wheels halfway in the war.


The 20's were a period of much basic development (like 8x8 systems), but also of strange ideas.
One such strange idea was that off-road vehicles had to be very agile in terms of turning radius. All axles were steerable in some models, and the turning radius was reduced by several metres. The utility of this extra complexity, cost and weight was near zero.
Another idea was that relatively simple, jeep-like cars would need three axles (apparently to reduce nominal ground pressure).
Both requirements led to the idea that off-road vehicles would be complex, large and heavy.

The 30's were a time of greater realism, but most military vehicles were still way heavier than normal. The Czechs produced some complex, no-compromise off-road trucks (Tatra) - that failed spectacularly to match the off-road utility of even commercial models in WW2.

The German officials attempted to develop some "standard" ("Einheits-") models of cars and trucks and anticipated that at least field units would need dedicated military designs. The only successful result of their program was a 2.5 ton truck (6x6) "Einheits-Diesel". Its ability to drive on muddy Russian roads was excellent, but its production got cancelled in mid-war because its payload was considered to be inadequate (apparently "inadequate" only in relation to its costs).


Wartime soft vehicle production was falling very short of the forces' needs, barely matching the peacetime recapitalization needs. Much of the automotive sector was producing non-automotive equipment during the war.
Ten thousands of foreign trucks had to be captured and produced in foreign countries (especially France) - almost exclusively commercial designs.

The problem of a good jeep-like vehicle got eventually solved by accident: The original VW Beetle was modified with more ground clearance and a new shape and was introduced as a very light and cheap 4x2 vehicle, the famous "Kübelwagen" (which was in fact a more general term). Its soft surface performance was astonishing even without 4x4 (few 4x4 and a couple thousand amphibious 4x4 versions were produced as well).


It introduced the off-road concept that became later known as "buggy". It was able to negotiate soft soil by moderate ground pressure (low weight) instead of complex 4x4 drive for maximum traction.

The best light trucks were also available by accident; the 3 ton Opel "Blitz" was a commercial 4x2 vehicle, but proved to be superior to most other light trucks on the poor "roads" of Eastern Europe.


The heavy trucks were apparently all satisfactory, but not very important.

Finally motorcycles; the German army failed to appraise their limited durability in pre-war tests and extended the use of motorcycle into troop transport. The reason was apparently that the motorcycle was the natural successor of the horse. A single motorcycle was less efficient than a motorcycle with sidecar - and that was their choice. Sadly, a good motorcycle is still less efficient in troop transport than a car and a car is less efficient than a light truck.
They somehow failed to do proper operational research on this.

The choice of the motorcycle models was problematic as well. Military motorcycle competitions on difficult tracks were held until 1939, but relatively light (as 350ccm) motorcycles dominated these competitions. The reason was that the competitions were short and placed an emphasis on handling characteristics - the strength of light models.

The later actual war (WW2) placed a much greater emphasis on durability during many weeks of uninterrupted campaigning on unpaved roads without thorough maintenance and repair.


Almost all motorcycles lighter than 500ccm (cylinder volume) were failures.
Some heavy (500-750ccm) motorcycles proved to be great, but were more expensive than a car with four seats.

- - - - -

We could draw the lesson that dedicated military vehicles are probably not that good as they seem to be. Another possible conclusion is that requirements-driven development may be inferior to the diversity of the commercial vehicle portfolio.

It seems to be much more complex than that, though.

The Wehrmacht's experiences during WW2 were compressed in a period of just a few years The problem of muddy, unpaved roads and very difficult circumstances for maintenance were dominant factors. Their relevance is in question.

The Bundeswehr chose light motorcycles during the Cold War. It didn't expect to fight in Eastern Europe, and the light models were affordable and good enough on paved roads.

The great success of air-cooled vehicles as the Kübelwagen Typ 82 was in part based on extreme climates (Sahara, Russian winter) that played no role for the Bundeswehr till the 90's.


Several NATO armies bought more commercial off-the-shelf (COTS) trucks during the 70's and 80's for their low price (and to help the national automotive sector in times of crisis). These vehicles usually showed a central problem: Civilian cars and trucks are designed for high mileage in a period of 10-20 years. Modern military vehicles get a relatively modest mileage over a period of 20-40 years unless they're used in a major war.
This means that the higher initial cost of dedicated designs is in great part justified by their long life. Corrosion and other material failures (seals, rubber components, rust) are very different durability problems than the wear by movement. Firefighting trucks have the same challenge.

The idea of designs based on requirements, standardization and even vehicle families proved to be feasible with less politicized bureaucracies as well.



We could still expect the same for a major war as the 1930's planners: The most suitable military vehicles would likely need to be limited to field units, with commandeered vehicles being used in "rear" areas, in less demanding (on-road) tasks. Even the huge modern automotive sector would need several months to converse its production to military designs - and would probably need to make changes to those designs.

A certainly valid lesson is that vehicles need to be tested thoroughly, in all seasons and on different soils. Short competitions are inadequate compromises that weed out the greatest duds at best - long troop testing is simply necessary to unveil weaknesses.

Another (obvious) wisdom and conclusion is that simplicity is a strength in itself. We should remember this well. Today's automotive designers have a greater choice of gadgets and technical solutions than ever before - and they're enticing.


We should also check rationally whether our idea of off-road capability is a good one. The German planners of the 20's had a huge emphasis on the turning radius for no good reason. Modern Bundeswehr trucks can do impressive stunts with movable axles on uneven terrain.


Maybe we should place a stronger emphasis on soft soil performance (mean maximum pressure) and simplicity again?


There's one more thing that we should remember as lesson: The extreme importance of the ability to improvise, mobile repair shops and the standardization of spare parts.

S O
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The value of prestige and other intangible benefits

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They perceive their courage exploited, their lives risked, merely so that Britain can 'show willing' to the Americans.

Mail Online, July 9th 09

This made me think once again about all that "relations" and "prestige" stuff in politics.
How much blood and (real) treasure is it worth? What's an acceptable exchange rate between blood and prestige? Do the relevant decision makers think about this?

Germany attempted to get a permanent seat in the UNSC (and since gave up on the idea as far as I know). Our politicians told us that Germany must accept international "responsibilities" to show itself worthy of such a seat (and to 'buy' it).

Well, we sent thousands of troops to Bosnia, thousands to Kosovo, thousands to Afghanistan, hundreds into several other place ... the list is long, yet the supposed deal was no deal. The argument that playing on the international stage with military force would give us benefits seemed to be a false one.
We actually just had expenses, killed troops, injured troops, spent billions of € and got much of our red light districts taken over by refugees from nations where our soldiers were supposed to help.


I'm quite sure that the public would not have tolerated these missions if it had known the effects in advance, yet we continue to run these missions; that's the power of inertia and habituation.

- - - - -

The British, Australians and Canadians have a similar situation in my opinion. Their intent was no UNSC seat (Britain got one anyway) - it was rather a "good relationship" with the USA.
Blair repeated several times that Britain needs to fight along the Americans to have any influence on their actions.

Well, I'd say Blair was an extremely poor strategist if he had influence on GWB's foreign policy.
He was also an extremely poor strategist if he had none despite the disadvantages for Britain that he accepted. In short: His foreign policy looks like a huge failure to me.
The wisdom of sacrificing troops on the altar of American favour is increasingly being questioned in the UK as far as I know. Here's another example, one that focuses on whether this strategy can succeed at all because of the UK's limitations.

The Australians and Canadians most likely suffered more dead by their participation in American wars than they would have suffered otherwise. This makes me think that their national security policy was a failure as well.

- - - - -

Some German rulers of the 18th century sold their troops to England for fighting American insurgents. They got "subsidies" (gold) for it. This policy was very despised even at the time, but perhaps even smarter than the present German and British policy.
Well, at least they got something for it.


Let's look at the official German post Cold-War missions in foreign countries:
(excluding disaster relief and similar actions)

90/91 MCM ships to Med and Persian Gulf
1991 Alpha Jets to Turkey (gesture)
92-96 enforcement of naval arms embargo on Yugoslavia
93-94 army troops to Northern Somalia
95-today troops in Bosnia
1999 Kosovo Air War
99-today troops in Kosovo
01-03 troops in Macedonia
02-03 NBC troops in Kuweit
2006 troops guard elections in Kongo
01 -today ships in Med
02-today troops, aircraft and ships in/next to Eastern Africa (OEF)
02-today troops in Afghanistan (ISAF)
06-today naval arms embargo on Hezbollah
08-today anti-piracy force near Somalia

Present German out-of-area missions

The Bosnia mission was a mixed success and an end is in sight. Bosnia was certainly close enough to us to be of national interest.

The Macedonia mission was a success and still not far away.

The Kosovo missions were terrible in my opinion, but that's a topic in its own right.

I don't see noteworthy, tangible benefits of any other mission. Some missions were even running counter to official German foreign policy by freeing American resources for the war of aggression against Iraq in 2003. Several missions (like the naval embargoes and anti-piracy patrols) were inherently incapable of achieving the purpose of their mission.

All of these missions were at least in part justified by a supposed need to bear a share of the burden, to be recognized as an important nation in international affairs.

The relationship with the U.S. certainly didn't look like rewarding the OEF and ISAF missions. The GWB administration sabotaged our Eastern Europe policy and disregarded German interests whenever they had different interests.
GWB is gone, but the attitude seems to still go strong. It's a kind of "Give him an inch and he will take a mile" behaviour. We supplied thousands of auxiliary troops (contrary to German public opinion) and what did we get?

* No noteworthy rewards or advantages.
* Requests for ever more troops.
* Some German bashing from non-officials for not completely giving up our new sovereignty and accept a status as auxiliary troops pool for U.S. presidential adventures.

- - - - -

The insatiable thirst of U.S. presidents for auxiliary troops is actually not the topic,. It's just a highly visible, related symptom that serves as an example. This is about intangible rewards for military action, and their real value.

It seems to me as if government foreign politicians have a strange set of preferences and are under influence of group think. They seem to value things like "prestige", "symbolic actions" and "good relations" (meant to be bought by political bribing) much higher than many (most?) of their nation's citizens.
Or at least they seem to pretend to care that much about it.

I personally don't rate such supposedly good relations as very valuable. I prefer good relations based on actual friendliness and satisfactory win-win agreements, not on transfers.

There's also the question of durability. How long does any "prestige" or "good will" last? Does it last only till the next government? Does it decay once policy changes? It certainly seems so.


Prestige seems to be grossly over-valued in modern foreign politics, especially if it's based on loss of life, health and treasure.

Sven Ortmann

P.S.: I expect that most readers simply think "article 5" all the time. My answers:

* Article 5 is not applicable to Australia.
* Was sticking to NATO a good choice for effectively non-threatened Canada post-1990? They were and are free to leave, and alliances were always in history just temporary. There's no indebtedness because of having been allied in the past. And even if it was - wouldn't the other members owe more to Canada than Canada to them?
* And finally; Article 5 is about defence. The enemy was long chased from power, no alliance ever required or requires to defend by chasing the enemy to the last man. ISAF is not about article 5.
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Too big to fail (and I'm angry about it)

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The Airbus A400M project is a disaster in my opinion (I favoured the much more promising An-70 from the beginning).

Several air forces concluded a fixed price contract with Airbus to develop a medium military transport aircraft at a fixed price, date and performance (payload/range).

Airbus is over price by billions (€), behind schedule by at least four years and doesn't seem to be able to meet the payload/range requirement. Especially the schedule problems got only worse since they admitted to be in trouble months ago.


A) They promised too much.

B) They kept their best engineers out of the project and withdrew more good ones to fix their troublesome civilian A380 and A350 projects.

C) They don't get an appropriate sanction.

Airbus already missed milestones weeks ago, but got a delay till end of July. Now it's official; our secretaries of defence stick with the project, it will be four years late, be likely be more expensive and no-one seems to expect that the original performance expectations will be met.

By the way; the whole project rests on demands for airlift for political overseas adventures - it's incredibly cost-inefficient for real defence.

- - - - -

This begs the question; did the consolidation of the Western (and indeed-world-wide) arms industry on the systems integrator level hurt us? Are these companies like EADS (Airbus), MBDA, General Dynamics, BAe Systems, Eurocopter too big to fail?

They certainly looks too big to fail to me. Their projects either don't get canceled even if they suck or they get alternative contracts real quick.

- - - - -

The A400M case shows another problem as well: Lack of spine.

It was a great opportunity to punish Airbus badly enough to prohibit such failure (overly optimistic promises, low resource priority) in the future.
The tool of fixed cost and performance contracts would have been fearsome to suppliers, but would most likely have been very effective.

It's ruined now. They blinked to save Airbus from multi-billion losses (inflicting the same losses on the taxpayer instead!) in order to save the competitiveness of Airbus with airliners.

In worst case Airbus would have had to attract additional equity capital. The politicians saved the riches of Airbus' current shareholders, not Airbus itself! They did so with taxpayer money!

The damage to the taxpayer is huge; it's in the billions of € for the German taxpayers alone.

About Airbus current shareholders: It's 100% EADS, which again has shareholders, of course. The stock price for EADS shares rose by 1.4% at the day of the news about the A400M renegotiation. Many traders apparently already expected that the politicians would care more about the shareholders than the taxpayers.

As of 3 July 2007 41.63% of EADS stock is publicly traded on six European stock exchanges, while the remaining 58.37% is owned by a "Contractural Partnership". The latter is owned by SOGEADE (27.38%), Daimler AG (22.41%), SEPI (5.46%) and Dubai Holding (3.12%). SOGEADE is owned by the French State and Lagardère, while SEPI is a Spanish state holding company. France also owns 0.06% of publicly traded stock.

Wikipedia

I want to see all responsible politicians (and all bureaucrats who advised to do this) sacked. "Lack of spine" is a VERY friendly interpretation of their actions.
 

S O
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Pat Lang on the wars in Iraq (and Afghanistan)

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The US generals do not seem to understand yet that their presence and the presence of our forces are not desired in Iraq. And this from the Shia dominated government that we "purple fingered" into existence and defended against the Sunni Arab insurgents that we later brought over to our side and are now gradually abandoning.

Let's see---

They don't want our forces in the country. They don't want to be "allied" to us an any meaningful way.

They still loathe the Israelis and would never, NEVER accept the idea of the US cooperating with Israel against Iran in any way that invloves their territory or facilities.

They pursue their age old pursuit of private gain at public expense. Reform? Sure, "why not?" they would say.

The OIL? We can buy it at market prices like everyone else.

What did we gain in Iraq? Tell me. I am reminded of all the clever, self-serving people who told me six months or a year into this fiasco that whatever had been the narrative leading to the Iraq War, we were "in it now." All you geniuses who said that, how do you feel about the narrative in Afghanistan?

Source: Sic Semper Tyrannis

It sounds like an old theme of mine: Most wars are simply a failure; their gains are often not worth their costs.

That doesn't keep everyone from promoting them nevertheless. And frequent readers of this blog know how I think about those who do that.

Sven Ortmann
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A permanent challenge for societies

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I had some conversations about extremists and idiots in this or that society and time.
An unpleasant Neonazi page (in English language) among my recent Google image search results reminded me of this problem.

Here's my take on the problem of extremists:

Every society has its share of hardcore idiots.

Some are dangerous, others aren't. They occupy themselves with things like far-right ideology, far-left ideology, jihad, holocaust denial, conspiracy theories, warmongering, scaremongering, investment banking, serious bullying or they simply end up in jail for being idiotic enough to commit a serious crime and get caught.
I estimate the share of these hardcore idiots at about 5% of the adult population, and admit that males make up most of this share. The basis for this share is personal experience, not the least by observation of conscripts. The share may be too high or too low, but my guess is quite close to scientific estimates about the prevalence of antisocial personality disorder.

There's nothing that we seem to be able to do against this problem; they're just among us, and it seems to be natural. It's human, sadly.

Maybe a state or society will sometime find a cure for this problem, but in that case I'd most likely be scared more by the cure than the problem.

- - - - -

It's been historically proved that a greater share of the society can cause extreme trouble, of course. Let's call that part-time idiocy.
Many people - in fact way TOO MANY people - can turn really ugly under the wrong circumstances.
The Stanford prison experiment was a scary evidence for this.

All nations are the same or very similar about hardcore idiocy, but they are different about part-time idiocy. Every society has the permanent challenge of establishing and maintaining an order that prevents the conditions that turn people ugly.

Democracy is such an order; it prevents the abuse of power as it is prevalent in authoritarian regimes.

Another permanent challenge is to keep the hardcore idiots from attaining power, of course. It helps to limit the power handed to individuals in the first place. A poor choice is bound to happen sooner or later, so we need to at least limit the damage done.

- - - - -

I'm sure that many people would disagree (especially with terminology and share), but this is how I see people and societies; the huge differences are usually a result of conditions, and we're in an eternal struggle to get these conditions right.

The conditions that a society creates are much more relevant than its history, reputation, successes and failures. Culture and legal situation are the cornerstones for human behaviour and the behaviour of groups (like states and political parties).

Every manipulation of these conditions needs to be careful and wise (that's a point for conservatism IF things were already satisfying AND if no external shocks are relevant).

This "hardcore idiots - part-time idiots - all else" framework looks much more useful to me than to simply attribute groups of people or nations with distinctive characteristics.

S O

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Summer time

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It's summer time (actually open-air sauna time here). We shouldn't worry all the time about what's going wrong in military affairs and national long-term strategy-making.

Let's relax for a while!



edit: 2nd embed, for the first one doesn't function in all countries:


Maybe you ask what this has got to do with "Defence and Freedom".
Well, ask someone from Eastern Germany age 38 yrs or higher for a thorough explanation.

We're actually in lucky times.
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Pakistan's priorities

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I found an article that kind of confirms my recent post about the Afghan-Pakistan border.

It confirms another problem as well; the Pakistani army is half-hearted in its effort against the Taliban in part because it keeps most of its power at the border with India, its supposed and historic arch-enemy. Well, it's either like that or they simply have this as an excuse.

I know from first-hand experience that many Pakistanis (in the army and in national security-related jobs) take the prospect of a war with India really seriously. It's not a faked focus.


Nevertheless, I assume that they are also serving their own partial interests by keeping the fear of a war with India alive; peaceful, relaxed relations would sooner or later cause a crash of the Pakistani army budget.

The prospect of war at the border isn't entirely fiction, though. That's where diplomacy could intervene.

A mediator could motivate India to move its military - or at least its offensive parts of its military (like armoured vehicles and helicopters) away from the border.
Pakistan could in exchange do the same, and thus free enough forces to swamp the troublesome regions with its army troops.

- - - - -

It's an open secret that Pakistan is in part still considering the Taliban as their present or future proxy. Such a shifting of army units would therefore not defeat the Taliban in Pakistan, but it would re-assert Pakistani authority to some degree and force the Taliban into the underground or non-violent politics.

The problem of Pakistani motivation is tricky, but at least their army availability problem could be solved with good diplomacy.

Sven Ortmann
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Airspace deconfliction

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I recall an interesting recount about an early night air raid against Germany (by the UK and maybe Canada). The anti-air artillery (AAA) that protected German cities were exacting their toll, and the British understood that the duration of an air raid over the target was a major variable for the AAA's effect. A longer bomber presence allowed to guns to fire longer = more, and with equal hit chance, therefore achieving more hits.

The RAF Bomber Command decided to reduce that duration to about 20 minutes, but at the same time the air raids were approaching 1,000 bomber strength. The air crews were sceptical and feared many collisions because of this.
The RAF's answer was based on the new field of operational research: They told their crews that - according to maths - there would be on average just one collision, but more than a dozen bombers would be saved from AAA.
The new tactic was tested one night and it played out exactly as expected (one collision) . It was (with modifications) used many times afterwards.


It's remarkable that some (even lethal) accidents were accepted to achieve another, more important and/or more likely advantage.

- - - - -

Let's contrast this with modern army and air force deconfliction requirements:
These requirements shall ensure that no manned object in the air collides with another object.
Three methods are dominant (and known to me):

(1) restricting assets in altitude (like "aircraft need to fly higher than x,000 ft" or "mortars must not fire higher than y,000 ft")


(2) restricting assets in time (like aircraft being limited to a time window of artillery silence)

(3) asking for permission and coordinating flexibly (but slowly)

Today's battlefields don't have a thousand manned bomber-sized objects over an area like 10 x 10 km. Collisions are much less likely - nevertheless, deconfliction is much more rigorous.

The only viable justification for this could be low opportunity costs; the advantages that are lost due to the deconfliction requirements may be even less important and/or less likely than the tiny collision chances.

- - - - -

So what are those costs? Here are some examples:

* Mortars are restricted in their firing arcs and less effective especially against high and far targets.

* Artillery is very restricted in its fire support role.

* Helicopter operations are impeded (helicopter need to go low to do their job)

* Use of radio bandwidth.

* Busy signallers and controllers (even the use of E-3 AWACS for airspace control)

* Company and battalion leaders don't use available small UAVs as much as otherwise desirable because airspace deconfliction is too limiting.


Probably most important:
* Support fires are delayed down (impacting after five to ten instead of two to three minutes, for example). This puts troops in combat at risk, makes fire missions obsolete and fire missions against moving or only briefly observed targets impossible

- - - - -

Does the tiny (like one in a million) chance of a collision justify strict deconfliction requirements at such opportunity costs?

Maybe. Maybe in present conflicts due to the low lethality enemies.
Maybe not.

It's certainly advisable to treat airspace deconfliction as a temporary requirement, though. Its rationality needs to be re-assessed for every new conflict (at the beginning and during the conflict till its end). It must not become gospel, or else we could someday do the equivalent of what the British pilots were about to do; avoid accidents and die in the process due to another problem.

S O

P.S.: This was - like many other points raised by me - in part about how small war experiences and optimization may be a terribly preparation for major warfare in the future.

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Desertec

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edit 2021:  I leave this blog post online and don't hide it, but if you want to know the current state of affairs on the subject I recommend to you this: https://www.youtube.com/watch?v=7OpM_zKGE4o

 

Desertec - it's been in German news for weeks, apparently in other European news as well. It's been almost completely ignored by U.S., Australian and New Zealand's news as far as I can tell. It's a huge and credible project of European companies to establish a renewable energy supply in North Africa with continuous current power line links to Europe. Desertec is a big enough effort to provoke comparisons with Manhattan and Apollo projects and could prove to be the most important grand strategic factor for Europe in the 21st century. I wrote about such ideas (which were circulating for about three decades in Europe) in 2007, and it's obvious that the European powers will need to be involved although the project itself will by driven and financed by private companies. State-funded R&D has apparently already ensured the feasibility, but that was only a small step in comparison to what lies ahead. Such a huge project would link Europe with Northern Africa and require a close and reliable relationship. Just a short collection of thoughts: * We would care a lot about political stability and reliability of the Northern African countries * Northern African economic and social problems would become an issue for us because they could destabilize governments. Economic aid policy and trade policy could reflect that. * Lesser objectives like establishing democracy and human rights would most likely be subordinated to energy political stability and reliability. This could similar to the Cold War's competition in the Third World when support for dictators depended almost entirely on whether they declared to be "socialist" or "anti-socialist". * A formal alliance (that prevents other alliances for the Arab countries in the fine print) may develop. This could be an extension to NATO or it could replace NATO. * Any unification movement would likely be in opposition to Europe because a unified Northern African/Arab Region would be less easily influenced (see previous blog posts here and here). * We would most certainly not accept being cut off of our energy supply and go to war to secure it just as Japan did in 1941 when cut off from its oil supply. * European nations would re-orient their military to the south; a huge increase in amphibious capability and dedicated defences for the power lines would be likely. * We would want to make the Northern African countries more dependent on us to increase the safety of the project. * We could even take the modern equivalent of hostages (investments of influential Arab elites in Europe, attracting the Arab elites' youth into European universities and companies). * Northern Africa would possibly become an interest sphere for European foreign policy (and I think that such a common European policy would indeed be feasible in this context). We wouldn't allow third much country influence in this area. That could create conflicts with the PR China and the USA. * Several European powers would likely not agree that a high degree of dependence on Northern Africa is a good idea. Some or all European countries would limit the project to a small or no share of their energy supply (Norway, for example). * The company Desertec would be allowed its profits, but most likely become as politicized as Gazprom in Russia. I expect a very tight political control of the company and senior politicians in its boards.

Desertec - if realized only a quarter as big as planned - could become the most important factor in European grand strategy of the 21st century (unless the nuclear fusion power would really become practical in the 2nd half). Its effects would be as important as the Cold War for Europe - and might replace the oil riches for Arab countries. 

 

S O

Afghanistan and Pakistan

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For Britons and Americans watching the hard-fought progress of our Coalition troops in Helmand, the harsh reality is that Nato could do everything right in Afghanistan and still lose the broader regional campaign against terrorism if Pakistan fails to contain its internal militants. This makes the fight in Pakistan, and finding means to help Pakistanis help themselves, the most important battle in the world.

(Kilcullen)

Kilcullen argues that Pakistan is much bigger and more problematic than Afghanistan. He's certainly right; the Afghanistan problem has been inflated for years.
This needs to be reflected in priorities and therefore in strategy.

I've argued about this at the example of border control years ago (I think it wasn't in the blog).


An intuitive answer to the problems in Afghanistan is what many people in fact demand: To seal off the border, to interdict the smuggling of drugs and fighters. That would be fine for the campaign in Afghanistan; it would reduce the pressure there.
The problem: The pressure would still exist. It would stay in Pakistan and cause much greater trouble. A campaign against smuggling would also add the smugglers (traders) to our list of enemies for no good reason.

This could be considered one of the many seeming paradoxes in war. The intuitive, quick answer is 180° wrong (and not being refuted often enough).


The sad part in this is that there's really little hope of getting us out of the mess except by simply disengaging or by leaving effective counter-Taliban forces in power.

Sven Ortmann
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Kwang Hwa VI

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I learned more than ten years ago about a Republic of China (Taiwan) naval project for a 'stealth' missile boat Kwang Hwa VI (~fast attack craft).
It kept me puzzled about its purpose all the time.


Taiwan has two obviously dominant naval requirements:
1) Deter/Defend against an invasion by the PRC
2) Protection of its overseas trade (deter/break a blockade)

Other requirements certainly exist as well, but are of lesser importance
3) cooperate with air power by providing surface-to-air missile coverage over sea
4) land attack
5) protection of naval link with Pratas Islands and Taiping Island (near PRC coast)

I don't see how missile boats would be useful in such a setup. Such boats are much less cost-efficient in an anti-invasion role than coastal missile batteries (on trucks) and also quite useless for convoying.

The only utility seems to be their land attack ability - if their Hsiung Feng II (or III) missiles are prepared for it. Yet, even then it's questionable whether they're worth their cost. It would be much cheaper to launch the missiles from an auxiliary ship (with strategic surprise) or to simply use longer-ranged, heavier missiles. Finally, they've got their islands as forward bases for such land attack missions.

The Taiwanese Hsiung Feng missile family is actually quite interesting, but that doesn't explain the missile boats.

Well, maybe the Taiwanese defence establishment knows a good explanation for the class.

Sven Ortmann
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Plebiscites and a Federal German myth

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Germany has several myths about its history that are, well, historically incorrect.

One such example was the overestimation of the Marshall Plan.

Today is a good day to rip into one more.
I wrote yesterday about petitions "It's the closest thing to a federal plebiscite we got."

We don't have federal/nation-wide plebiscites in part because of a German Federal Republican myth:

The myth that plebiscites are evil because they (allegedly) helped to crash the Weimar Republic and helped Hitler.

I could be lazy and just point at an old newspaper article that already ripped this myth apart.
I'm not THAT lazy, so I'll provide a summary for those readers who cannot read German.

There were only seven nation-wide plebiscite attempts between 1919 and 1933.
(The so-called plebiscites during Hitler's reign were irrelevant propaganda tools, not plebiscites).


Of these seven attempted plebiscites were three ineligible because they were about finance policy, and only the president was authorized to launch a plebiscite on that topic. There was no vote on these three.

Another attempt was accepted, but not executed any more.

Three other plebiscites were executed, but all failed because they didn't reach 50% participation as required for becoming effective. The political strategy of the time exploited this rule by boycotting the plebiscites of political opponents.

There was not a single national plebiscite in the Weimar Republic that had any consequence.
The myth is simply nonsense.

- - - - -

There are in my opinion two reasons for why we don't get federal plebiscites:

1) The politicians don't want to lose their legislative monopoly.

2) Too many people are not really democratic-minded because they don't really trust the voter to vote responsibly in plebiscites. They prefer to have professional politicians and bureaucrats as a filter.

Sven Ortmann
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Too funny to ignore

Obama Axes Pentagon Plan To Build Billion Dollar Tank In Shape Of Dragon

Our democracy evolves...

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The German population is aging in average and median - it's not a disaster, but an important change.


Some have predicted a clash of generations as the elders get a larger and larger share of the vote. Things like high pensions and deficit spending (effectively moving the burden of state expenses on the young) have been used as examples.
The results about this are mixed so far.

Instead, we've got a completely different trend; the elders don't understand the youth and their lifestyle and concerns.
This is no news, ABSOLUTELY NO NEWS. The ancient Greeks already wrote extant texts about this phenomenon.
It's also quite ridiculous because exactly the generation that got in trouble with conservative parents for their rock and Beatles music (born in the 40's and 50's) is now opposing the internet pop culture of the young German generation.

The 'young' Germans (I draw the line at about 35-40 years age for this purpose) seem to have found a tool to resist intolerant (and at times technology-incompetent) elder's politics.
The politicians who try to grab elder votes by representing their views seem to face more and more opposition.


The online petition against internet censorship addressed one concern of the young Germans that most elders didn't even understand. This petition got a record-breaking participation without being significantly supported by mainstream offline media.

Now there's another one. That's also against a pet project of intolerant conservative politicians (conservative, but not just CDU/CSU): Their campaign against violence in video games.
Their argumentation gets refuted by scientific experiments all the time, but they persist because the elder generation has its firm prejudices.
The new petition is only one week old and already reached the critical 50,000 signatures mark that forces the parliament committee to listen to the petition initiator.

American politicians are scared of nipples - German politicians are scared of guns. Even on screens.


The political parties attempt to wage their campaigns for the federal elections in the internet as well. The most conservative parties are apparently failing the worst in this terrain.
A new party - Piratenpartei - that focuses on fighting exactly against these conservative policies gets surprisingly much support (and a similar party won actually a seat in the European parliament in the Swedish elections).

I doubt that the new party will have a lasting impact. The new ability of grass-roots ad hoc mobilization of voters and future voters is much more impressive.

The German political world was similarly challenged by the environmental-friendly movement of the late 70's that eventually led to the establishment of a substantial green party.
The reaction of the established parties was to counter by adapting most of their messages, just a little bit weaker. The green party was kept small (typically five to little more than ten per cent of the vote) and German policies became more environmentally friendly.

That's a well-proven approach, probably introduced by Bismarck (a somewhat ruthless, but most likely the greatest German politician of all time) to German politics when he invented obligatory social insurances in response to the rise of socialists in the 19th century. The worker's life quality was raised, and the left was stopped in its advance.

Something like this may happen again - especially if some key politicians are much smarter than I usually assume.
The Piratenpartei may eventually be absorbed by the liberals, but the e-petition campaigns, the Piratenpartei and all the other resistance may have a lasting impact and may defeat the conservative populism/ignorance.

The new ability of near-spontaneous mobilization for e-petitions will most certainly last as well. The youth has (almost) no representatives in the parliament, in the top leadership of parties, in the boards of the public television stations, in church leadership and it lacks a lobby.
Nevertheless, its voice can now be heard.

It's the closest thing to a federal plebiscite we got.

Sven Ortmann
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