What Really Happened in Iran?

It's unfortunate how limited our knowledge of history is. In part, it's because the amount of work involved to be informed. It's impossible to have any depth of understanding by only following media sound bytes. Hence, the importance of reading, but even here you have obfuscation and disinformation taking place so as to mislead. Here's an example.

How many Americans were aware that the Shah of Iran, Mohammad Reza Pahlavi, was put in power by U.S. covert action in the early 50s? How many knew any history at all about the roots of the hostage crisis that took place during the Carter administration? I myself knew nothing about the reasons the Shah had to flee his country. Perhaps the media heads themselves were ignorant, except for those who played the mouthpiece for an American spin on these events.

It wasn't until I read David Haberstam's The Fifties that I learned how the Shah came to power, an early "victory" for the CIA, overthrowing a democratically elected leader whom we (the U.S.) didn't like. 

And why didn't we like him? Because he wanted to keep his country neutral during the Cold War. The U.S. wanted a leader who was pro-U.S.

Here's what Halberstam wrote about the overthrow:

[The coup had] gone so smoothly... because local conditions were favorable.  The Shah's historical legitimacy had proved far more compelling than Mossadegh's popularity, which was shaky at best. But Roosevelt [EdNote: not FDR] sensed that Dulles was not terribly interested in that part of his report.

In fact, even as Roosevelt was briefing the top national security people about Iran, planning was going ahead on the next coup--one that they hoped would topple the leftist government of Jacobo Arbenz in Guatemala. In fact, soon after Roosevelt's return, he was offered the job of running the new covert operation, which confirmed his earlier suspicions about Foster Dulles's eagerness to proceed in this sphere. The success of the coup in Iran, Roosevelt sensed, had provided an irresistible inducement for the Eisenhower administration: It had been quick, painless, and inexpensive. A potential adversary had been taken out with almost ridiculous ease. American newspapers had all carried the cover story, although the press elsewhere and the Iranian people talked openly about the CIA role.

Administration officials had few moral qualms either about their role or about deceiving the American press and people. They saw themselves in an apocalyptic struggle with Communism in which normal rules of fair play did not apply. 
--David Halberstam, The Fifties

* * * 

Earlier this spring I picked up Stephen Kinzer's book All the Shah's Men: An American Coup and the Roots of Middle East Terror. The frontispiece sets the tone with this quote by Harry Truman: "There is nothing new in the world except the history you didn't know."

That pretty much sums it up. 

Kinzer begins his preface with this attention-getting anecdote:

PREFACE
One day I attended a book party for an older Iranian woman who had written her memoirs. She spoke for an hour about her eventful life. Although she never touched on politics, she mentioned in passing that her family was related to the family of Mohammad Mossadegh, who served as prime minister of Iran for twenty-six months in the early 1950s and was overthrown in a coup d'etat staged by the Central Intelligence Agency.

After she finished speaking, I couldn't resist the temptation to ask a question. "You mentioned Mossadegh," I said. "What do you remember, or what can you tell us, about the coup against him?" She immediately became agitated and animated.

"Why did you Americans do that terrible thing?" she cried out. "We always loved America. To us, America was the great country, the perfect country, the country that helped us while other countries were exploiting us. But after that moment, no one in Iran ever trusted the United States again. I can tell you for sure that if you had not done that thing, you would never have had that problem of hostages being taken in your embassy in Tehran. All your trouble started in 1953. Why, why did you do it?"

This outburst reflected a great gap in knowledge and understanding...
--Stephen Kinzer

* * * 

Sadly, we have seemingly countless gaps in our knowledge and understanding, but this doesn't seem to stop us from expressing strong opinions on almost everything. Becoming aware of our limitations ought to make us exercise a little more humility before we speak, shouldn't it?

Trillion Dollar Meltdown

Yesterday I finished listening to the audio verson of a powerful book by Charles R. Morris explaining the recent collapse of the financial markets called Trillion Dollar Meltdown. Published in late 2007, the book predicted all of the disastrous events of the past eighteen months and how they came to be. The scope and clarity of its many insights and anecdotes are worth pondering more deeply. I will get to those shortly.

Morris begins by giving an overview of the past six decades from the perspective of wealth creation, business expanse and retraction, the market drivers during this period and the political context of it all. You really cannot understand particulars without an overall context and often Americans forget this simple fact. What is happening today is an outcome of decisions made over a period of decades, not days, weeks or months.

According to one review on Amazon the book is written toward university level students, and it may be heady for some but even if you have a marginal understanding of economics and markets, you will glean plenty in my opinion.

I remember in high school my father invited a representative from the Dreyfus Fund come to our Bridgewater home to help teach me how to invest my savings. The fellow had stock market charts with all kinds of data, along with prospectuses and documents designed to show me the power of investing my money in the market. Well, I took $500 out of the bank and opened an account. I never saw that money again.

This is not an argument against investing. It is simply a statement that there's no such thing as a sure thing. This period in which I salted a few hundred dollars away was, according to Morris, the tail end of the Liberal/Keynsian era in economics. The resulting collapse of the markets in the 70's, with a simultaneous inflation so that your real holdings in dollars was about 75% less than they had previously been worth, culminated in Carter's disastrous presidency. (This is not to say Carter was not or is not a good man.)

It could be argued that half the debacle of the Carter era (double digit inflation, double digit interest) was due to the circumstances he inherited. In the end, it is during desperate times that a sea change can be set in motion. Thus was Reaganomics born, a new period of deregulation as Chicago-school economics gave the boot to Keynes.

Milton Friedman's ideas carried the day and the market climbed higher (with a few hiccups along the way) than anyone could have even dreamed. But, and it is an important part of the equation, part of the reason markets climbed so far is that the enormous size of the Baby Boom generation was becoming older now and, staring at retirement with a little more earnestness, they began to save more. This resulted in increased stock valuations. It also gave unscrupulous money managers increasing quantities of cash to play with, which was leveraged in extremis.

Morris shared how computers helped companies create financial instruments (bonds, etc.) that were so complicated even the people who sold them did not understand them. It was an amazing run. And when variables shifted, some companies had no idea how to determine their own true valuations. Some of these disappeared completely.

Add to this the increased debt loads and the absurdly high real estate valuations and you have a witch's brew of disaster in the making.

Though Morris published the book before Obama was elected, he accurately predicted that the pendulum is about the swing the other way. It certainly wasn't good to see 401K retirement plans shrink in value by 40% while the men who managed them made quarter million dollar a year salaries on average.

There are ideologies at war in the economic realm of which the average person usually has the most simplistic understanding. And this particular author lays some heavy blame on the Alan Greenspan camp. Morris gives the impression that he is in love with Paul Volcker.

Funny thing how every time things are good, the reigning president takes credit, and when things are bad the reigning president says he inherited it. And how politicians are ever trying to re-assure us that things are not as bad as they seem.

Not everyone who reviewed this book on Amazon liked it. Some found it biased against free market economics. One called it "A Coherent Rant." But I still found it raising good questions. He compared the complexity of the markets to Yertle the Turtle, in which everything is so interdependent that when you modify one variable it can have a serious impact on the stability of the whole.

My great-grandfather was scammed late in life by a fellow who was going to invest great-grandpa's life savings. The man lost everything and had his heart torn out. It's a scary thing to work hard and save and do all the right things only to have it plucked away with no legal recourse. This tragic family event led to my mother being more careful with her retirement assets. I myself took a measure of comfort in knowing (or believing) that the U.S. investment markets were the most regulated and reliable in the world, unlike many nations where there are no disclosure requirements or where banks can close and without warning take all your money saved (Russia) or where the government can devalue their currency by 50% overnight (Mexico 1981).

So how is it that a man like Bernie Madoff, former head of the NASDAQ stock exchange can make off with 50 billion dollars of other peoples' money right there under the big spotlights of our regulators? How about all the funds that invested in Enron because of the high returns and the approving nods of auditor Arthur Anderson?

Morris predicted a financial mess and he predicted right. What many of us wish to know is what happens next? Yesterday's paper carries a feature story with newly elected Senator Al Franken claiming the economy will "come back strong." I want to know how that will happen and why? Unemployment keeps rising. Our investment in bailouts and overseas military enterprises continues unabated.

I am especially curious what book being published today will be the one that most accurately portrayed the next two years? Maybe we'll find out in five. If sooner, you can be sure I'll write about it here.