I don’t know much about inter­na­tional finance, I’ll admit. So I’ll let [Stratfor](http://www.stratfor.com/) do the talk­ing for me, below:

The finance min­is­ters of the G-7 coun­tries are meet­ing in Wash­ing­ton. The first announce­ments on the meet­ings will come this week­end. It is not too extreme to say that the out­come of these meet­ings could rede­fine how the finan­cial mar­kets work, cer­tainly for months and per­haps for a gen­er­a­tion. The Amer­i­cans are argu­ing that the regime of inter­ven­tion and bailouts be allowed to con­tinue. Oth­ers, like the British, are argu­ing for what in effect would be the nation­al­iza­tion of finan­cial mar­kets on a global scale. It is not clear what will be decided, but it is clear that this meet­ing matters.

The meet­ings will extend through the week­end to include mem­bers of the G-20 coun­tries, which together account for about 90 per­cent of the global econ­omy. This meet­ing was called because pre­vi­ous steps have not freed up lend­ing between finan­cial insti­tu­tions, and the finan­cial prob­lem has increas­ingly become an eco­nomic one, affect­ing pro­duc­tion and con­sump­tion in the global econ­omy. The polit­i­cal lead­er­ship of these coun­tries is under extreme pres­sure from the pub­lic to do some­thing to solve — or at least alle­vi­ate — the problem.

Under­ly­ing this polit­i­cal pres­sure is a sense that the finan­cial class, peo­ple who run global finan­cial insti­tu­tions, have failed to behave respon­si­bly and effec­tively, and have there­fore lost their legit­i­macy. The expec­ta­tion, rea­son­able or not, is that the polit­i­cal sys­tem will now sup­plant these man­agers and impose at least a tem­po­rary solu­tion. The finance min­is­ters there­fore have a polit­i­cal man­date, almost global in scope, to act deci­sively. The ques­tion is what they will do?

That ques­tion then divides fur­ther into two parts. The first is whether they will try to craft a sin­gle, global, inte­grated solu­tion. The sec­ond is the degree to which they will take con­trol of the finan­cial sys­tem — and inter-financial insti­tu­tion lend­ing in par­tic­u­lar. (A pri­mary rea­son for the credit crunch is that banks are cur­rently afraid to lend — even to each other.) Thus far, attempts at solu­tions on the whole have been national rather than inter­na­tional. In addi­tion, they have been built around incen­tiviz­ing cer­tain action and increas­ing the avail­able money in the system.

So far, this hasn’t worked. The first prob­lem is that finan­cial insti­tu­tions have not increased inter­bank lend­ing sig­nif­i­cantly because they are con­cerned about the unknowns in the borrower’s bal­ance sheet, and about the bor­row­ers’ abil­ity to repay the loans. With even large insti­tu­tions fail­ing, the fear is that other insti­tu­tions will fail, but since the iden­tity of the ones that will fail is unknown, lend­ing on any terms — with or with­out gov­ern­ment money — is impru­dent. There is more lend­ing to non-financial cor­po­ra­tions than to finan­cial ones because fewer unknowns are involved. There­fore, in the United States, infu­sions and promises of infu­sion of funds have not solved the basic prob­lem: the uncer­tain sol­vency of the borrower.

The sec­ond prob­lem is the inter­na­tional char­ac­ter of the cri­sis. An exam­ple from the Ice­landic melt­down is rel­e­vant. The gov­ern­ment of Ice­land promised to repay Ice­landic depos­i­tors in the island country’s failed banks. They did not extend the guar­an­tee to non-Icelandic depos­i­tors. Partly they sim­ply didn’t have the cash, but partly the view has been that tak­ing care of one’s own takes pri­or­ity. Coun­tries do not want to bail out for­eign­ers, and dif­fer­ent gov­ern­ments do not want to assume the lia­bil­i­ties of other nations. The nature of polit­i­cal solu­tions is always that politi­cians respond to their own con­stituen­cies, not to peo­ple who can’t vote for them.

This week­end some basic deci­sions have to be made. The first is whether to give the bailouts time to work, to increase the pack­ages or to accept that they have failed and move to the next step. The next step is for gov­ern­ments and cen­tral banks to take over deci­sion mak­ing from finan­cial insti­tu­tions, and cause them to lend. This can be done in one of two ways. The first is to guar­an­tee the loans made between finan­cial insti­tu­tions so that sol­vency is not an issue and risk is elim­i­nated. The sec­ond is to directly take over the lend­ing process, with the state dic­tat­ing how much is lent to whom. In a real sense, the dis­tinc­tion between the two is not as sig­nif­i­cant as it appears. The mar­ket is abol­ished and wealth is dis­trib­uted through mech­a­nisms cre­ated by the state, with risk elim­i­nated from the sys­tem, or more pre­cisely, trans­ferred from the lender to the tax­ing author­ity of the state.

The more com­plex issue is how to man­age this on an inter­na­tional scale. For exam­ple, Amer­i­can banks lend to Euro­pean banks. If the United States comes up with a plan which guar­an­tees loans to U.S. banks but not Euro­pean banks, and Euro­peans lend to Europe and not the United States, the inte­gra­tion of the global econ­omy will very quickly shat­ter, lead­ing to sig­nif­i­cant lim­i­ta­tions on inter­na­tional trade, cur­rency con­vert­ibil­ity and so on. You will nation­al­ize economies that can’t stand being purely national.

At the same time, there is no global mech­a­nism for man­ag­ing rad­i­cal solu­tions. In tak­ing over lend­ing or guar­an­tees, the admin­is­tra­tive struc­ture is every­thing. Man­ag­ing the interbank-lending of the global econ­omy is some­thing for which there is no insti­tu­tion. And even with coor­di­na­tion, finance min­istries and cen­tral banks would find it dif­fi­cult to bear the bur­den — not to men­tion man­ag­ing the system’s Her­culean size and labyrinthine com­plex­ity. But if the G-7 in effect nation­al­ize global finan­cial sys­tems and do it with­out inter­na­tional under­stand­ings and coor­di­na­tion, the con­se­quences will be imme­di­ate and serious.

The G-7 is look­ing hard for a solu­tion that will not require this level of intru­sion, both because they don’t want to abol­ish mar­kets even tem­porar­ily, and more impor­tant, because they have no idea how to man­age this on a global scale. They very much want to have the prob­lem solved with liq­uid­ity injec­tions and bailouts. Their incli­na­tion is to give the cur­rent regime some more time. The prob­lem is that the global equity mar­kets are destroy­ing value at extremely high rates and declines are approach­ing his­toric levels.

In other words, a cri­sis in the finan­cial sys­tem is becom­ing an eco­nomic prob­lem — and that means pub­lic pres­sure will surge, not decline. There­fore, it is plau­si­ble that they might choose to ask for what FDR did in 1933, a bank hol­i­day, which in this case would be the sus­pen­sion of trad­ing on equity mar­kets glob­ally for sev­eral days while admin­is­tra­tive solu­tions are reached. We have no infor­ma­tion what­so­ever that they are think­ing of this, but in start­ing to grap­ple with a prob­lem of this mag­ni­tude — and search­ing for solu­tions on this scale — it is totally under­stand­able that they might like to buy some time.

It is not clear what they will decide. Fun­da­men­tal issues to watch for are whether they move from manip­u­lat­ing mar­kets through gov­ern­ment intru­sions that leave the mar­kets fun­da­men­tally free, or do they aban­don free mar­kets at least temporarily.

Another such issue is whether they can find a way to do this glob­ally or whether it will be done nation­ally. If they do go inter­na­tional and sus­pend­ing mar­kets, the ques­tion is how they will unwind this sit­u­a­tion. It will be eas­ier to start this than to end it and state-controlled mar­kets are usu­ally not very attrac­tive in the long run. But then again, nei­ther is where we are now.

*Reprinted with the per­mis­sion of [Stratfor](http://www.stratfor.com/).*

As of 0855 GMT Tues­day, Russ­ian Pres­i­dent Dmitry Medvedev has ordered a halt to Russ­ian oper­a­tions in Geor­gia, South Osse­tia and Abk­hazia. This is accord­ing to the Russ­ian press agency Inter­fax. [Hur­riyet reports that French Pres­i­dent Nico­las Sarkozy will attempt to cement a cease-fire.](http://www.hurriyet.com.tr/english/home/9640090.asp?scr=1)

“On the basis of your report, I have taken the deci­sion to bring to an end the oper­a­tion to force the Geor­gian author­i­ties to peace,” Medvedev told Russ­ian Defence Min­is­ter Ana­toly Serdyukov, accord­ing to a Krem­lin spokesman.

The cease­fire pro­posal is appar­ently the one drawn up by the Organ­i­sa­tion for Secu­rity and Coop­er­a­tion in Europe, which was signed yes­ter­day by Geor­gian pres­i­dent Mikhail Saakashvili.

Not that this will return the region to nor­mal. NATO’s east­ward expan­sion has now fin­ished, and Amer­i­can promises of friend­ship are not worth the paper they’re writ­ten on. As the Geor­gians have com­plained, why did the help the U.S. in Iraq if Wash­ing­ton turns its back on them when they come under attack? (That it appears that Saakashvili walked into a trap set by Rus­sia is almost beside the point.) And could Pres­i­dent Bush have appeared less con­cerned as he yukked it up with vol­ley­ball play­ers in Beijing?

The world has entered a both a new period, but one that looks very famil­iar to those of us who remem­ber the Cold War.

Greet­ings all… Sorry for the site prob­lems. I upgraded Mov­able­Type and the site went all side­ways. I’m think­ing of switch­ing over to Word­Press, but I’m wor­ried that the old con­tent would then be unavail­able (as hap­pened with a WP exper­i­ment I’m run­ning right now.)
Does any­one have any suggestions?

A Jour­nal edi­to­r­ial picks up on Gina Chon’s non-scoop front-page story yes­ter­day to crow that “Moq­tada packs it in.” Well, as I pointed out yes­ter­day, there was lit­tle in that story that was new, as Moq­tada al-Sadr seemed to be more clar­i­fy­ing ear­lier instruc­tions to his peo­ple than issu­ing new ones. He will still main­tain secret cells to attack U.S. troops, for instance.

And does the Jour­nal really want a kinder, gen­tler al-Sadr? Para­dox­i­cally, keep­ing him an angry, vio­lent out­sider will go a lot fur­ther toward advanc­ing the Jour­nal’s goals in Iraq than hav­ing him as a peace­ful polit­i­cal player. Because if he’s on the out­side, his unruly Mahdi Army will con­tinue to act like thugs, caus­ing Iraqis to resent them and cling to the Maliki gov­ern­ment (which the neo-cons at the Jour­nal like.)

Hav­ing him inside the process, while decreas­ing the vio­lence, gives him a chance to win at Maliki’s own game of pol­i­tics, how­ever. And if al-Sadr wins, does the Jour­nal think an Iraq dom­i­nated by Shi’ite nation­al­ists will be very friendly to U.S. inter­ests? Per­haps it does, but I cer­tainly don’t.

Like most Jour­nal edi­to­ri­als, this is a grunt from the rep­til­ian cor­tex, in line with the tri­umphal­ist bul­ly­ing so com­mon to that page.

This is great, and a wel­come respite from pol­i­tics. [Researchers have found the world’s old­est joke.](http://afp.google.com/article/ALeqM5h_OczNQMGiWXoiyi7apguhKSQXWw)
“Some­thing which has never occurred since time immemo­r­ial; a young woman did not fart in her husband’s lap,” goes the joke, which dates from 1900 B.C. and which orig­i­nated in what is now south­ern Iraq.

Now, I like a good fart joke as much as the next guy, but WTF? Does any­one actu­ally get that?

No mat­ter. Iraqi humor even today doesn’t quite trans­late into Eng­lish, a fact that often left me feel­ing damn con­fused over grue­some tales that my Iraqi friends found hilarious.

Many of mod­ern day Iraqi jokes deal with the Dulaimi tribe from Anbar and tend to focus on their per­ceived back­ward­ness and sheer yokelry. One I remem­bered went some­thing like, “A Dulaimi drove his cousin to Bagh­dad. His cousin sat behind the dri­ver so he could take over the wheel after he killed the first guy.” Much laugh­ter would then ensue, and no, I still don’t get it.

But the real genius of Iraqi humor was pok­ing fun at Sad­dam and mak­ing word plays. (Too bad puns don’t trans­late well.) ‘Izzat Ibrahim al-Douri, the sickly vice chair­man of the Rev­o­lu­tion­ary Com­mand Coun­cil who today may or may not be part of the neo-Ba’athist insur­gency (what’s left of it) often came in for humil­i­at­ing jokes. The craven yes-man was often pic­tured imper­son­at­ing a woman, for some reason.

Ancient humor was no dif­fer­ent, and mega­lo­ma­ni­a­cal rulers have always been good for a laugh. Some of the ancient jokes the researchers found poked fun at Egypt­ian pharaohs.

“How do you enter­tain a bored pharaoh?” goes one. “Sail a boat­load of young women dressed only in fish­ing nets down the Nile — and urge the pharaoh to go fish­ing.“
Put your favorite Iraqi joke — not jokes *about* Iraqis, mind you — in the comments.