Amira, an electrical engineer, had done some work for the Americans in the Green Zone when she started getting threats. She was living with her parents, and her family took the threats seriously because her sister, who was also working with the Americans, had already been shot in the chest three times by militants at a roadblock. Army doctors worked fifteen hours and saved her life.

“Friends in the FBI asked me to check up on Amira,” Omar says. “So I went to see her…”

He gave Amira his cell number — and told her to call anytime, day or night.

“I’m on night shift when she calls,” Omar says. “She’s terrified, whispering that men with guns are in her house looking for her.”

Amira had locked herself in the bathroom. The gunmen were ransacking the house and yelling, Which one works for the Americans?

Omar grabbed a vest and an AK-47 and raced to the house in his SUV, lights flashing. There were two cars parked at her front gate, and an armed lookout. Omar crashed straight into the first car.

Incredible story about a guy putting his life at risk to try to make his country a better place.

Not quite. It’s not the heavy weight of debt (as Krugman has posted about at length the past week, most notably in this column) that’s causing European nations to struggle. What’s causing those nations to struggle is their inability (until recently) to finance that debt at any sort of tenable rate (7% or under). The reason those governments couldn’t finance their debt is that investors don’t want to purchase debt that might not be paid back. The reason the debt might not be paid back is that, unlike the case of the United States, Great Britain, Finland, and various developing nations, European countries like Spain, Italy, and yes, Greece, can’t print their own money (their own money being Euros). Therefore, they’re at risk of not being able to pay back their Euro-denominated debt. The United States, on the other hand, will never be unable to print dollars, and will always be able to pay back its dollar-denominated debt.

Greece and Italy used substantial amounts of debt to sustain their welfare states, and while their economies are doing reasonably well, there’s no problem—they can roll over their debt before it comes due at similar interest rates and everything works out fine. The problem they now face is their economies are not doing well at all, tax revenue has decreased, and thus their deficits have shot up as they continue to fund their expensive government programs.

As their deficits have continued to grow, and their debt has continued to grow as a percentage of GDP, investors became afraid that they would not be able to pay their debt. Which is why, as Tim says, investors would not purchase their new debt at a sustainable rate: because their debt burden is too high.

Tim argues that this is only a problem because Greece and Italy are on the euro—rather than their own currency—they cannot “print” more money, that is, devalue their currency so the past debts are worth less now than they were then and are thus more affordable to pay.¹ Tim further argues that the U.S. will never have this problem, because since we do control our own currency, and our debt is denominated in our currency, we can inflate our currency to reduce the magnitude of our debts.

That’s perfectly accurate, but that does not happen in a vacuum. Everything else is not held equal. Investors will factor the risk of intentional inflation into their investments, and expect higher interest rates for future debts, too. Perhaps Greece and Italy (and the U.S., if we don’t right our ship in the interim) will leave the euro, re-denominate their debt, and pay their existing debt of a smaller magnitude. But what happens when Greece and Italy go back to those same investors, who just received substantially less than they were supposed to from their debt, and ask them to purchase their new debt? It’s going to be expensive, and unless Greece’s and Italy’s economies begin growing strongly, they’ll have the same problem all over again.

I never intended “…the heavy weight of their debt” to be a conclusive summation of Italy and Greece’s problems. Their problem is a confluence of a very poor economy, low tax revenues as a result, and debt used to finance an expensive welfare state. It’s but a piece. A very large, very heavy, piece.

1. Let’s set aside normative criticisms of this, which are substantial—”inflating” your currency for the purpose of making past debts more affordable is essentially stealing from creditors, because in real terms, they receive less than they were supposed to.

New recruits have stopped coming, Hanif says. “When new people came they brought new blood, enthusiasm, and money. All that has been lost.” The money may be a bigger problem than the manpower, he says. Al Qaeda used to receive millions of dollars a year from Arabian Gulf contributors, but Hanif’s uncle says his contacts tell him the donations have dried up. Instead, he believes, the money is going to the more productive and generally nonviolent Arab Spring movements in North Africa, Syria, and Yemen. “I think Arab people now think the fight should be political at home and not terrorism aimed at the West,” says the uncle. “The peaceful struggle on Arab streets has accomplished more than bin Laden and Zawahiri ever have.”

If so, that’s a huge shift in the Arab world. Before, after living under dictatorship for decades, Arabs were largely cynical and did not believe they could change their political system at home. That’s changed, and regardless of whether each country ends up a liberal democracy, channeling their frustration and energy into political discussion and reform is much, much more productive. Having a discussion about what kind of government they want, and what role religion plays in it, is an incredible step forward.

Of course, the Arab world is entering a period of instability. A better outcome is not guaranteed when regimes controlled societies for decades and weakened or destroyed political processes and culture in the process are suddenly gone. But peoples which suffered under dictatorship with no hope for a better future now do have that hope, and there’s no reason to have mixed feelings when that’s the case.

(Via Chris Martucci.)

Acknowledging that Walmart customers “need low prices,” he said he also believed that “more and more, they will be looking at the entire life cycle of a product: How is it made, how is it sold, how is it used, and how is it reused? To meet these customer expectations, we need to ask ourselves: Is a product made in a factory that is a responsible steward of the environment and our natural resources?”

Interesting report by Orville Schell for The Atlantic. His point that Walmart and the Chinese Communist Party are made of similar, if not the same, cloth is a bit vapid, but it’s worth reading for discussion about how Walmart is exerting pressure on its manufacturers in China to become more environmentally-friendly.

His death doesn’t mean, however, that North Korea’s condition will improve, or that their relations with the rest of the world will improve, either. There’s no reason to think their economy will suddenly be able to feed their people, or their government will dismantle their nuclear program and end hostilities with South Korea and stop threatening Japan.

In fact, there’s more risk now than there’s been since 1994, when Kim Jong-il’s father, Kim Il-sung, passed away. North Korea’s government is not only a totalitarian state, but it is a dictatorship with no defined process for transferring power from one leader to the next. Both Kim Il-sung and Kim Jong-il created a cult of personality for themselves to maintain their power, and so when they die, the country inherently becomes less stable. The government is very brittle in that way—one crack can demolish the entire structure.

This is compounded by North Korea’s constant feeling that South Korea, Japan, and the U.S. view them as inferior, and thus they have to prove how powerful they are both as a sense of pride and for their survival. This is dangerous enough when North Korea’s power structure is stable, and manifests itself as missile and nuclear tests and acts of aggression against South Korea, but it’s even more dangerous now. North Korea’s next leader, or the military, may find it necessary to show their strength by conducting more tests or threatening the South.

Worse, too, is Kim Jong-il’s son and apparent designated successor, Kim Jong-un, is a twenty-something year old four-star general with no military experience. Tension is almost guaranteed, between Kim Jong-un and the military, and possibly his family as well. In the worst case, a power struggle could ensue, and North Korea’s government could collapse.

There’s no telling what that would lead to, and that’s why this is so dangerous: there’s so many things that could go wrong. The world may be better off with Kim Jong-il gone, but in the short-term, it’s also a more dangerous world.

Certainly the countries of Southern Europe must rein in excess. In the long run, however, even the deepest of cuts won’t suffice. Southern Europe needs to grow or it will never control its debt levels. But with the euro zone keeping Southern Europe uncompetitive, the region’s growth prospects will remain dismal.

Northern Europe has fueled its growth through exports. It has run huge trade imbalances, the most extreme of which with these same Southern European countries now in peril. Productivity rose dramatically compared to the South, but the currency did not.

Europe’s problem isn’t just debt. The problem is Northern and Southern European nations are very different economically. Germany’s workers are highly productive and their economy relies on exports as a result, while Southern nations are not productive and thus cannot use exports to grow their economy. If they were not a part of the euro, they could devalue their currency to make their exports less expensive (and more competitive), but they aren’t, so they can’t. Their only way is to increase productivity.

It will be extremely difficult for any number of reasons for Israel to leave the West Bank, but it will be impossible for Israel to survive over the long-term if it remains an occupier of a group of people who don’t want to be occupied. I understand the security consequences of an Israeli departure from most of the West Bank, but I also understand that there is ultimately no choice. I don’t believe a one-state solution is any sort of solution at all; Israel/Palestine will devolve quickly into civil war. The only solution is a two-state solution.

The Indian economy which gained 6.9% in the second quarter, is expected to grow 7.5% this year, according to Indian finance minister Pranab Mukherjee, against previous estimates of 9% growth. And the Indian Rupee is off 13.14% year-to-date (YTD) against the U.S. dollar, and 13.72% against the euro. The currency has been declining as inflation remains consistently high, driven up by food costs.

Ouch. Moreover, China will be/is hurt by Europe’s struggles, too, because the EU is a huge export partner for them. Unless something significant changes, I think we’re heading toward a global recession.

(Via Tyler Cowen.)

Bottom Line: Don’t take US resilience for granted this time around – Europe is getting ugly, and it is far too late to prevent severe recession. The best policymakers can hope for at this point is too avoid a depression.

Click through and look at his chart showing the correlation between new orders from European manufactures and U.S. manufacturers, and then consider that European industrial orders dropped 6.4 percent in September. Europe is going to suffer a serious decline, and we will, too.

(Via Brad Plumer.)

In other words, the European segment of the shadow banking system was indirectly providing about $5 trillion in credit to U.S. borrowers. This was about as much as U.S. banks provided directly.

The Euro crisis is our crisis.