The Week in Review
Middle East
Israeli Foreign Minister Avigdor Lieberman proposed a plan on July 16 whereby Israel would fully disengage from the Gaza Strip and hand over responsibility for its development to the European Union. Under the plan, Gaza would no longer be considered an occupied territory by the international community, the EU would rebuild the area, and Israel would relinquish all responsibility for it, including lifting the naval blockade. Should the plan be implemented, reports Haaretz, “Israel would allow the European Union to take responsibility for infrastructure development in Gaza and supervision of the cargo entering the region, in coordination with Israeli security officials” (July 19). Stratfor analysts say this proposed solution is an attempt by Lieberman to alleviate international pressure over the Gaza blockade. While the plan may not come to fruition, it demonstrates the increasing willingness of the Jews to look to Europe to solve their problems, a remarkable trend that biblical prophecy says will grow.
Israel this week carried out final operational tests on a new anti-missile system, the Iron Dome, which is designed to protect Israeli communities from Hamas and Hezbollah rockets. Within a few months it will be deployed in vulnerable towns close to Gaza. Israeli Deputy Defense Minister Matan Vilna’i has said he is confident it will protect against 80 percent of attacks. It seems, however, that the system has been talked up to be more effective than it may prove to be. Haaretz says “there is concern that the defense establishment is feeding the public with illusions.” For one, the Iron Dome cannot be deployed everywhere, whereas Hamas’s Kassams and their launchers are highly maneuverable. Additionally, for the communities closest to the border with Gaza, there would not be sufficient warning time for the system to be of use. The system also does not protect against mortars. Then there is the cost it will impose on Israel: A single Iron Dome anti-rocket missile costs $100,000—as opposed to just a few dollars for a Kassam. If Hezbollah, which has some 50,000 rockets, were to start firing them over the border, the economic infeasibility of Iron Dome would quickly become clear. While the technology may be impressive, the Jews’ reliance upon it to protect them will prove to be yet another false hope.
Iraqi Prime Minister Nouri al-Maliki on Wednesday called on Iranian companies to invest in Iraq and contribute in its reconstruction operations, during a meeting with Iran’s ambassador to Iraq. “The premier underlined Iraq’s keenness to develop relations with all neighboring countries, including Iran,” a statement received by the Aswat al-Iraq news agency read. Relations between Iraq and Iran are of course already close—and will only get closer as the U.S. presence in Iraq diminishes.
Europe
German Chancellor Angela Merkel suffered another blow this week as the mayor of Hamburg, Ole von Beust, resigned on July 18. Von Breust is the sixth state governor to resign in just one year. Also this week, Merkel’s coalition partners, the Freedom and Democracy Party (fdp), challenged her deficit-cutting policies. The policies appeared to be a done deal, but on July 20, the fdp called for the plans to be reviewed. German Finance Minister Wolfgang Schäuble is said to have been furious. The next day, an opinion poll found that Merkel’s coalition parties had the lowest approval ratings since the polling agency Forsa began conducting polls in 1986. The three parties had a combined approval rating of 34 percent. The pressure is building on Merkel to go.
Europe’s economy took a couple of hits this week. Credit agency Moody’s downgraded Ireland’s rating to AA, blaming risky banks, slow growth and high national debt. Dietmar Hornung, Moody’s lead analyst for Ireland, said this was a “gradual, significant deterioration, but not a sudden, dramatic shift” and that he believed Ireland had “turned the corner.” There was worse news for Hungary as European Union and International Monetary Fund negotiators abandoned budget talks with the nation saying that Prime Minister Victor Orban’s strategies were inadequate. If the review is not concluded, Hungary cannot receive any more funds from the imf. Hungary’s currency, the florint, now looks set to fall even further, as investors lose confidence in the country.
Asia
Recently released data shows that China became the world’s largest energy consumer last year—usurping a title held by America for the past 100 years. China’s predominance marks “a new age in the history of energy,” said International Energy Agency chief economist Fatih Birol. According to the Wall Street Journal, global energy markets have been transformed, and there are long-term implications for America and the world. Historically, being the largest consumer of fossil fuels was correlated with being the dominant economy. Prior to America’s ascension, this was the position held by Great Britain for most of the time beginning with the Industrial Revolution. Although America’s economy, as measured by gross domestic product, is still twice as large as China’s, the Chinese economy is growing approximately three times as fast. On a per capita basis, Americans still burn approximately five times what the Chinese do. But with China’s billion-plus people becoming wealthier, that nation’s energy consumption is set to soar. If all the proposed power-generation plants are completed, approximately 1,000 gigawatts of new electricity-generating capacity will come online over the next decade and a half. To put that number into perspective, it is about equal to the current total electricity-generation capacity of the U.S.—an amount that took America several decades to build. In the years ahead, expect the competition for resources to heat up—resulting in trade war.
A prominent Chinese economist in remarks published on Monday urged policy makers to sell down China’s holdings of U.S. treasuries while market demand is still strong, Reuters reports. Yu Yongding, a former adviser to the Chinese central bank, said authorities should invest in other currencies as well as hard assets, including commodities. Yu’s recommendation was diversification. “When demand for U.S. treasury securities is strong, it is a rare opportunity for us to gradually pull back. That way, it will not have a big impact on prices,” Yu wrote. In May, China cut its holdings by $32.5 billion yet still remained the single largest lender to the U.S. government. Although the dollar remains the world’s reserve currency, there is a growing international effort to replace it with an alternative.
Japan’s government is again stalling over allowing Washington to build a new military base in Okinawa. In May, the Obama administration touted the significance of getting the new Japanese government to support the plan. The new delay centers on convincing the governor of Okinawa to support the plan. The current governor is stridently opposed to the base relocation, as is the local populace. However, local elections are underway and it is unclear who may emerge as the new governor.
On July 18, a 7.2 magnitude quake hit Papua New Guinea, triggering a tsunami warning. The epicenter was 73 miles east of Kandrian, New Britain. No casualties were reported.
Latin America
Four people were killed by the Juárez cartel in the Mexican border city of Ciudad Juárez on July 15. They appeared to have been murdered by a car bomb. If this was the case, it would be the first car bombing in the Mexican drug war. However, rather than being a full-blown vehicle-born improvised explosive device, the explosion seemed to be caused by a small explosive or homemade grenade placed inside the car. Mexican cartels appear to be innovating new weapons—a dangerous escalation in the already brutal drug war besieging Mexico.
Spanish Foreign Minister Miguel Angel Moratinos said on July 21 that Cuba’s release of political prisoners could lead to improved relations with the EU, and even a lifting of the United States’ embargo against the island. Cuba agreed to release 52 dissidents after negotiations with the Roman Catholic Church. Expect Europe and the Vatican to use Latin America’s Catholic roots to draw the region closer to the Continent.
Anglo-America
Race continued to make headlines this week with a controversy over a Department of Agriculture employee. The employee had been criticized and forced to resign when a video of her speaking at a naacp event appeared to show that she did not want to help a farmer because he was white, when in fact she was speaking about how she overcame her personal prejudice. Watch for “post-racial” America to become increasingly fractured over accusations of racism.
Americans will begin to feel the future of taxation in 2011, according to Investor’s Business Daily. Investors.com reported on Wednesday that January 1 will bring a 55 percent death tax on estates worth more than $1 million, plus a 50 percent increase in the lowest bracket for personal income tax, which rises to 15 percent. The next lowest bracket rises to 28 percent, and the higher-end bracket of 35 percent increases to almost 40 percent. The government will also re-institute the “marriage penalty” tax and raise capital gains and dividends taxes, which should lead to a $115 billion bill for taxpayers as a struggling economy attempts to pay for itself and a raft of new government spending.
Meanwhile, sales of existing homes fell more than 5 percent in June to a three-month low. Last week, the number of U.S. workers filing new claims for unemployment benefits rose more than expected.
Meteorologists at the National Hurricane Center are watching a tropical depression in the Gulf of Mexico that has a 20 to 30 percent chance of producing tropical storm-force winds. The pattern is forcing BP workers in the area to temporarily halt operations at the leaking well site.
The previous Australian administration ran a loose ship when it came to national security, Australia’s abc News 24 reported on Thursday. Former Prime Minister Kevin Rudd showed an alleged “casual disregard” for the national security committee, delaying meetings for hours, missing them altogether, or sending his 31-year-old chief of staff to sit in for him.