The Wall Street Journal - 02.08.2019

THE WALL STREET JOURNAL. Friday, August 2, 2019 |A

T

o make sense of President
Trump’s dust-up with Rep.
Elijah Cummings, Speaker
Nancy Pelosi and the rest
of the Democratic Party,
youhavetogobacktoBaltimorein
April 1968, when the city was over-
whelmed by a riot in the wake of
Martin Luther King Jr.’s assassina-
tion. The National Guard and city po-
lice proved unable to contain the situ-
ation. Mayor Tommy D’Alesandro III,
Mrs. Pelosi’s elder brother, pleaded
with President Lyndon B. Johnson to
send in federal troops.

In 1968 Maryland hadn’t yet been
absorbed by the wealth of Washing-
ton. It was still a semi-Southern
state, lying below the Mason-Dixon
Line. Republican Spiro Agnew—later
Richard Nixon’s vice president—had
been elected governor in 1966 over a
segregationist Democratic nominee.
In the black areas of West and East
Baltimore, the King assassination
triggered four days of rioting and
looting.
The conflict was so fierce that the
Baltimore police, 500 state troopers
and 6,000 National Guardsmen were
unable to quell it. Finally the “insur-
rection” was halted when Johnson
deployed nearly 5,000 Army troops
at Agnew’s request. By the time it

Ineffective and dishonest

politicians have used

racism as a shield from

criticism for half a century.

OPINION

Maybe We’re All Gold Bugs Now

Who knew ex-
change rates could
be so exciting? Af-
ter a spell out of
the public eye,
here they come
roaring back to
wreak political
havoc around the
world.
The exchange
rate between the
dollar and the euro is in danger of
triggering a trade war and under-
mining the independence of the Fed-
eral Reserve. President Trump
makes no secret of his frustration as
the European Central Bank pursues
what he perceives—rightly, as it hap-
pens—to be a competitive devalua-
tion of the euro.
One half of Mr. Trump’s “solu-
tion” is to threaten trade retaliation.
The other half is to demand that Fed
Chairman Jerome Powell competi-
tively devalue the dollar. Mr. Powell
this week may have been trying to
oblige with his quarter-point rate
cut, although if devaluation was his
intent, it backfired.
Exchange-rate management is be-
coming a flashpoint in Mr. Trump’s
nomination of Judy Shelton to join

the Fed’s board. Her preference for

stability—she’s a fan of the gold

standard—is at odds with Mr.

Trump’s own devaluationist streak,

but hey ho. No one elected him for

consistency, and meanwhile baffled

Americans will get to watch the aca-

demic monetary elite trip over itself

to argue, contra Ms. Shelton, that

the Fed’s ability to shed dollar pur-

chasing power at will is abenefitto

the U.S. economy.

Across the Atlantic, exchange

rates imperil Brexit. The value of

the pound plunged this week

against both the dollar and the euro

as investors took fright over the

prospect that Prime Minister Boris

Johnson might crash the U.K. out of

the European Union without a trade

deal. This sterling weakness—its

lowest point since January 2017—is

hitting at precisely the moment

large numbers of Britons are ex-

changing pounds as they jet off

abroad for summer vacations.

Brexiteers rode out a similar sum-

mertime pound plunge after the ref-

erendum in 2016, but this time is

different. No one now claims ster-

ling’s fall will boost British exporting

industries, because the previous epi-

sode certainly didn’t. Britons suf-

fered through a bout of consumer-

price inflation near 3% while

exporters got walloped with higher

costs for imported components.

What ties all these phenomena to-

gether is that we know less and less

about how exchange-rate changes in-

teract with modern economies.

The old conventional wisdom is

woefully inadequate for a world of

global financial flows. The assump-

tion was that as your currency lost

value relative to your trading part-

ners’ money, you’d cut prices on

your exports to increase market

share, or increase your earnings de-

nominated in your home currency on

the same amount of global sales.

This is known as the “competitive-

ness channel” linking exchange-rate

movements to Main Street activity.

That may still be true for some

economies or companies, but for

others the opposite happens just as

often. A new “financial channel” has

opened up, and it works at odds with

the old competitiveness channel. Be-

cause a renaissance in global finance

encourages banks and ordinary com-

panies alike to borrow outside their

home countries, their balance sheets

and ability to service their debts be-

come increasingly sensitive to ex-

change-rate movements.

A depreciation of the national

currency can strain those debtors

fast by forcing them to pay more of

their local money to service foreign-

denominated debts. When the for-

eign currency in question is the dol-

lar, a new risk emerges: With some

80% of global trade finance con-

ducted in dollars, competitive deval-

uation can gum up the short-term

credit that lubricates the journey of

components along a supply chain.

One consequence is that, espe-

cially in smaller and developing

economies, the trend is for monetary

authorities to surrender the policy

freedom floating rates were sup-

posed to bring. Central banks try to

calibrate policy toward achieving ex-

change stability rather than manipu-

lating domestic inflation, employ-

ment or output. The potential costs

of doing anything else are too high.

Such research tends to consider

everyone but the U.S. America’s

monetary situation is unique, and

uniquely complex, since the green-

back is a global reserve currency.

Rather than giving the Fed carte

blanche to manipulate the dollar’s

value at will, global capital flows and

their economic implications raise the

stakes of each Fed policy pronounce-

ment.

If, for instance, a strengthening

dollar strains trade finance along

global supply chains, it doesn’t fol-

low that a weak dollar is the answer.

That condition encourages the accu-

mulation of precisely the sort of dol-

lar-denominated debts that can be

so destabilizing for the global finan-

cial system—and for America’s trad-

ing partners—when investors inevi-

tably bid up the safe dollar in a

panic. Our sneeze becomes their

cold, which becomes our flu, which

becomes their pneumonia.

The overarching point is that

while monetary politics remains de-

cidedly local, monetary policy has

become unavoidably global. Gold

bugs have a policy proposal suited to

that environment. Shouldn’t the rest

of us?

Standard monetary

wisdom on exchange rates

doesn’t quite work in the

increasingly global system.

POLITICAL
ECONOMICS
By Joseph C.
Sternberg

You Can’t Blame Trump for Baltimore’s Failure

was over, six people were dead. Mr.

D’Alesandro, who had considered

running for governor, was so humili-

ated by the rioting in a city where

his father has been mayor before him

that he decided to withdraw from

elective politics.

Earlier that year, the Johnson ad-

ministration reluctantly released the

report of the National Advisory Com-

mission on Civil Disorders, com-

monly known as the Kerner Commis-

sion. The report wasn’t to LBJ’s

liking because it implied that his

Great Society was an insignificant

down payment on racial redress. The

presidential panel—assembled to ex-

plain the 1967 race riots in Chicago,

Detroit, Los Angeles and Newark,

N.J.—should have been called the

Lindsay Commission, after its vice

chairman, New York Mayor John

Lindsay. America’s racial problems,

the report claimed, could be singu-

larly attributed to white racism: “Our

nation is moving toward two societ-

ies, one black, one white—separate

and unequal.”

Over time, the Kerner Commis-

sion’s view of racism became gospel

in the media, academia and the Dem-

ocratic Party. An intellectual Iron

Curtain descended to protect black

politicians—including ineffective ones

like Mr. Cummings and even con men

like the Rev. Al Sharpton—by de-

nouncing their critics as racist.

President Trump’s boorish man-

ner tends to obscure a hard-to-swal-

low reality: He often has a point.

The failures of LBJ’s War on Poverty

are increasingly visible to anyone

who cares to look. To paraphrase

the philosopher Ernest Gellner,

some failed practices can’t be re-

considered, because they already

shape the way we think.

Mr. Trump follows the example of

New York Mayor Rudy Giuliani, who

provoked an avalanche of media hos-

tility in 1995 when he mocked Rep.

Charles Rangel for seeming indiffer-

ence to the decline of his Harlem dis-

trict. Like Mr. Trump, Mr. Giuliani

was disparaged as a racist. But he

wasn’t wrong, and his efforts helped

inspire the revival of Harlem’s main

shopping stretch on 125th Street.

Mr. Cummings has been in Con-

gress since 1983, to little local bene-

fit. Mr. Trump was condemned for a

tweet describing Mr. Cummings’s

district as “a disgusting, rat and ro-

dent infested mess.” Critics focused

especially on the word “infested.”

But in a 1999 congressional hearing,

Mr. Cummings said: “This morning,

I left my community of Baltimore, a

drug-infested area.”

Washington’s efforts to revive Bal-

timore have enriched local politicians

but left the city in far worse shape

than Mr. Rangel’s Harlem. The Amer-

ican Recovery and Reinvestment Act

of 2009—the Obama stimulus—

poured $1.8 billion into Baltimore

with no discernible effect. The 2015

antipolice riots made matters worse.

The author Ta-Nehesi Coates,

who is celebrated by the left, grew

up not far from West Baltimore’s

Mondawmin Mall, where the 2015 ri-

ots began. Although Mr. Coates has

written that he lived in fear of street

toughs as a teen, he has a largely

positive view of the “crews” that act

as if they own West Baltimore. His

aim, in part, is to free gang-ridden

areas from the malign grip of white

standards and the “brutal acts of the

city’s police department” that are

the necessary and logical expres-

sion, as Mr. Coates sees it, of those

values. In a “keep off our turf” ver-

sion of belligerent multiculturalism,

the police are assumed to be both

the source of black criminality and

an expression of white values. This

is so even when the police depart-

ment and city government are led by

African-Americans, as they are in

Baltimore.

Hostility to the police has “Charm

City” near collapse. Baltimore has

the highest murder rate of any big

city in America. It has gone through

four police commissioners and three

mayors since 2016.

Lindsay’s insistence that white rac-

ism is the source of America’s urban

problems has mutated in the half-cen-

tury since the Kerner Report. Among

its grotesque modern variations are

Sen. Kirsten Gillibrand’s relentless

apologies for her “white privilege,”

the media-enforced prohibition on

criticism of Mr. Cummings, and the li-

onization of Mr. Sharpton as “a cham-

pion in the fight for civil rights” (in

the words of Joe Biden) who “has

dedicated his life to the fight for jus-

tice for all” (Elizabeth Warren) and

“has spent his life fighting for what’s

right and working to improve our na-

tion” (Kamala Harris).

Meanwhile, West Baltimore con-

tinues to spiral downward. Neither

billions of federal dollars nor attacks

on Donald Trump will do anything to

stem its decline.

Mr. Siegel is a contributing editor

of the Manhattan Institute’s City

Journal.

By Fred Siegel

BETTMANN ARCHIVE

A hardware store burns in Baltimore, April 7, 1968.

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Israeli Jets Appear to Have Struck Iraq for the First Time Since 1981

T

wo airstrikes on Shiite militia
targets took place in Iraq last
month. No country or organi-
zation has taken responsibility, but
there are strong reasons to think
they were carried out by Israel. If so,
these would be the Jewish state’s
first air raids on Iraq since the de-
struction of Saddam Hussein’s Osirak
nuclear reactor in 1981.
The first of the raids, on July 19,
targeted a militia base near the town
of Amerli in Salah al-Din province,
north of Baghdad. The second, three
days later, struck Camp Ashraf, a
former U.S. military base in Iraq’s
Diyala Province. Both the Ashraf and
Amerli bases are now controlled by
the Badr Organization, a Shiite mili-
tia cum political party, in apparent
cooperation with Iran.
According to Arabic media reports,

the second raid was of considerably

larger dimensions than the first. Al-

Ain, the Emirati news website that

broke the news of the Camp Ashraf

action, reported about 40 dead Ira-

nian Revolutionary Guard personnel

and Iraqi Shiite militiamen.

The Saudi Sharq al Awsat news-

paper last week attributed the at-

tacks to Israel. Officials in Jerusalem

have remained silent, but their coun-

try is the only serious candidate. The

only other main enemies of the Shi-

ite militias in Iraq are Islamic State

and the U.S. and its coalition. The

former lacks the capacity to mount

air raids. The latter are engaged in

high-stakes diplomacy intended to

force an Iranian climbdown on the

nuclear issue while avoiding a fur-

ther deterioration in the relation-

ship; open conflict is the last thing

the U.S. and its allies want right

now. That leaves Israel.

This is almost certainly not Is-

rael’s first strike on Iraqi Shiite mili-

tias, which have been vital both to

the advance of Iranian power in Iraq

and to Tehran’s defense of the Assad

regime in Syria. According to U.S.

security sources quoted by the Jour-

nal, in June 2018 Israel bombed a fa-

cility that housed members of the

Kata’ib Hezbollah militia and Iran’s

Revolutionary Guards near Abu Ka-

mal, a town in southwest Syria, near

the Iraqi border. The raid was in-

tended to prevent the transfer of

Iranian weapons to Hezbollah in

Lebanon.

Yet hitting the Iranians in lawless

Syria is one thing, in line with the

general contours of Israeli activity

and defense strategy in recent years.

An Israeli attack in Iraq is another,

constituting a significant expansion

of the military theater.

The Israeli security establishment

has been acutely worried in recent

months by growing evidence that Iran

is using the Shiite militia infrastruc-

ture in Iraq as a pipeline for weapons

transfers to Hezbollah, which men-

aces Israel from the north in Leba-

non, and as a holding point for ballis-

tic missiles that can hit Israel all the

way from Western Iraq.

Armed to the teeth, the various

militias could be used as a tool to

pressure Israel, but also be presented

to the world as independent actors,

lending Iran plausible deniability. Is-

rael is familiar with this strategy—

employed by Iran with Hezbollah in

Lebanon—and it’s determined to pre-

vent a repeat in Iraq.

Some details of Israeli concerns

have already been made public. In

August 2018 Reuters reported the

transfer of Zelzal, Fateh-110 and Zol-

faqar Iranian missiles and launchers

from Iran’s Quds Force to Shiite

proxies in western Iraq. The Zolfaqar

has a claimed range of 750 kilome-

ters. The distance from Al-Qa’im, on

the Iraqi-Syrian border, to Tel Aviv is

only 632 kilometers.

An article published in May by Is-

rael Reserve Brig. Gen. Assaf Orion

and Iraq analyst Michael Knights

contended that several Iraqi bases

are wholly controlled by militias for

the purpose of storing, deploying

and transporting weapons. These in-

cluded Camp Ashraf, the second site

Israel bombed.

Publicly, Israeli spokesmen attri-

bute Iran’s increasing employment of

Iraqi Shiite militias for these tasks

as evidence of the success of Israel’s

(acknowledged) air war on Iran’s in-

frastructure in Syria. According to

this logic, the proven vulnerability of

Tehran’s facilities in Syria has led

the Revolutionary Guards to place

hardware further afield. But the

force and accuracy of the Israeli

raids in Syria notwithstanding, Iran’s

possession of a mobilized, Tehran-

dependent military infrastructure in

Iraq is equal evidence of an Iranian

success.

The largest and most powerful of

Iran’s proxy political-military organi-

zations in Iraq is the Badr Organiza-

tion. Thought to have around 50,

fighters, it held the Interior and

Transport ministries in the last Iraqi

government. It’s an integral part of

the Iraqi political and military estab-

lishments.

In the coming weeks the militias

are set to be incorporated officially

into the Iraqi armed forces, in line

with a recent decree by Prime Minis-

ter Adel Abdul-Mahdi. But these

fighters are unlikely to abandon

their Iranian patrons’ regional strat-

egy and settle for a future as Mr. Ab-

dul-Mahdi’s soldiers. Rather, the

Iraqi state looks set to offer them a

handy cover for their activities as

Tehran’s proxies. The implications of

continued Israeli action against the

militias will become graver as the

groups gain official status. The tem-

perature in the already overheated

cauldron of the Middle East has

risen by several degrees.

Mr. Spyer is director of the Middle

East Center for Reporting and Analy-

sis and a research fellow at the Jeru-

salem Institute for Strategy and Se-

curity and at the Middle East Forum.

He is author of “Days of the Fall: A

Reporter’s Journey in the Syria and

Iraq Wars.”

By Jonathan Spyer

No nation has yet claimed

the July air raids against

two bases of a Shiite

militia backed by Iran.

Caroline Klein and David Allan re-

porting for CNN.com, Aug. 1:

Have you ever noticed the popu-

larity of white robots?

You see them in films like Will

Smith’s “I, Robot” and Eve from

“Wall-E.” Real-life examples include

Honda’s Asimo, UBTECH’s Walker,

Boston Dynamics’ Atlas, and even

NASA’s Valkyrie robot. All made of

shiny white material....Thereason

for these shades of technological

white may be racism, according to

new research....“Thebiasagainst

black robots is a result of bias against

African-Americans,” lead researcher

Christoph Bartneck explained to The

Next Web. He told CNN, “It is amaz-

ing to see how people who had no

prior interaction with robots show

racial bias towards them.”

Notable&Quotable