Obama's decision making process and Syria's use of chemical weapons.

President Obama has had difficulty in developing and sustaining a consistent course of action in response to Syria’s use of chemical weapons. As the New York Times reported last month, “Over the last three weeks, the nation has witnessed a highly unusual series of pivots as a president changed course virtually in real time and on live television. Mr. Obama’s handling of his confrontation with Syria over a chemical weapons attack on civilians has been the rare instance of a commander in chief seemingly thinking out loud and changing his mind on the fly. Instead of displaying decisive leadership, Mr. Obama, to these critics, has appeared reactive, defensive and profoundly challenged in standing up to a dangerous world.” 

Three moments support this perspective. Alarmed by intelligence reports in August  of 2012, suggesting that the “besieged Syrian government might be preparing to use chemical weapons,” Obama announced at a news conference that month that should Syria move or use large quantities of chemical weapons, they would be crossing a “red line” that would “change my calculus.” Yet as journalists reported, cabinet and staff members who participated in the discussion of these new and alarming reports, could not recall any discussion whatsoever about announcing a red line. It seemed that on so important a matter, Obama was speaking extemporaneously, and as a result boxed himself into a course of action he had not fully vetted or even clarified.  Moreover, as a writer for the London Review of Books notes, “a clearer invitation could scarcely be imagined by anyone who had an interest in drawing the US into the war.”

Second, when in late August of 2013, the Syrian government in fact killed over a thousand people by launching chemically tipped rockets into the Damascus suburbs, the Obama administration appeared divided. His Secretary of State, John Kerry, said that, “The indiscriminate slaughter of civilians, the killing of women and children and innocent bystanders by chemical weapons is a moral obscenity. By any standard, it is inexcusable.” This seeming call to arms was reinforced when Chuck Hegel, the Secretary of Defense, said a few days later, “We are ready to go,” as the Navy “beefed up its presence in the Persian Gulf region, increasing the number of aircraft carriers from one to two.” Indeed, after lengthy deliberations Obama had in fact decided to launch a missile strike. Yet, despite his penchant for following a deliberate decision-making process, Obama, walking for an hour on the grounds of the White House with his chief of staff, changed his mind about striking Syria with missiles. He decided instead to submit the decision to launch missiles to Congress, without consulting with Hegel or Kerry. As one journalist writes, “When President Obama strode into the Rose Garden after a week of increasing tension over Syria’s use of chemical weapons, many assumed it was to announce that the attack that had been broadly hinted at by his own aides had begun. Instead, he turned the decision over to Congress.”

Third, with congressional opposition to a missile strike growing, Obama used a September 10 speech, planned as a venue for making the case for a missile strike, to announce that he would give the Russians and Syrians time to come up with a plan for the UN to take control of Syria’s chemical weapons stocks. Russia, it appears, was emboldened to propose such a plan, after John Kerry in a news conference, made the offhand comment that Assad could avoid war, if he turned over “every single bit of his chemical weapons to the international community in the next week, adding quickly, that Assad "isn't about to do it, and it can't be done."  In others words, Obama supported a plan that his Secretary of State had said was unworkable.

One way of interpreting these decision-making slips is to argue that they represent Obama’s customary fecklessness and unreliability. Certainly some of his long-standing critics believe this to be true. Another way is to emphasize Obama’s open mindedness, his ability to tolerate uncertainty and to respond to changing events with agility. Certainly, some of his long-standing supporters believe this.

I propose a different tack. I'll assume that Obama is customarily a disciplined decision maker, in the specific sense that he relies on an extended process of consultation with his staff and cabinet members, as well as on debates among them, before making a decision. However, this mode of decision-making creates delays, and may result in many false starts and premature conclusions. Yet, as long as these twists and turns take place in private, they actually help Obama grow comfortable with a particular decision. As one analyst writes, “President Obama is almost defiantly deliberative, methodical and measured, even when critics accuse him of dithering. When describing his executive style, he goes into Spock mode, saying, 'You've got to make decisions based on information and not emotions.'

His decision in 2009 to increase troop levels in Afghanistan had this character. As the New York Times reports, “The three-month review that led to the escalate-then-exit strategy is a case study in decision making in the Obama White House — intense, methodical, rigorous, earnest and at times deeply frustrating for nearly all involved. It was a virtual seminar on Afghanistan and Pakistan, led by a president described by one participant as something “between a college professor and a gentle cross-examiner.”

In other words, I will assume that Obama is most satisfied when he avoids impulsive decisions even when this process creates delays, false starts and frustration. This assumption has the merit of suggesting that his opponents and supporters are both expressing partial truths. To his opponents, he meanders through his decision making process giving the appearance of undisciplined thinking, to his supporters his path to a decision, however indirect, depends on a rational consideration of all alternatives. If this is true, how do we account for what appears to be his impulsive decision making in the Syria case? In this case he appears to have made decisions too quickly and to have acted out, rather than thought through, his different options.

I am drawn here to the distinction between ambiguity and uncertainty. Uncertainty describes our lack of knowledge about the facts, or our inability to predict the future accurately. Ambiguity describes our inability to ascribe meaning to facts we may already know with certainty. Thus for example when Obama made the decision to kill Osama Bin Laden in his compound in Abbottabad, Pakistan he faced some imponderables. Was Bin laden actually there? Would the Pakistanis detect a Navy Seal intrusion and send troops to confront them? Would the Seals kill someone that they mistook for Bin Laden? But while these uncertainties were fodder for the decision making process, Obama had no doubt as to the meaning of this undertaking namely; to weaken Al-Qaida and to revenge the death of the thousands killed in 9/11. This is why he made finding Bin Laden such a priority.

Meaning in this sense is linked to the story we tell ourselves about our experience, to a narrative that links different facts together into a comprehensible composite.  One hypothesis is that Obama stumbled in responding to Syria’s use of chemical weapons, because he lacked a story he believed in. Was the Syrian crisis the story of an enemy threatening us or our allies, a story of an evil government acting immorally, a story of a proxy war between powerful states, a story of the Arab spring in which democratic forces confronted authoritarian ones, or finally a story of a religious war between two Muslim sects. Each potential story reinforced the viability of different strategies, for example to act as a proxy in a proxy war, to stay out of a religious war, or to support democratic movements. Obama in a candid moment acknowledged that he wished he did not have puzzle his way through this dilemma. “I would much rather spend my time talking about how to make sure every 3- and 4-year-old gets a good education than I would spending time thinking about how can I prevent 3- and 4-year-olds from being subjected to chemical weapons and nerve gas.” The New York Times, notes that " current and former officials said his body language was telling: he often appeared impatient or disengaged while listening to the debate, sometimes scrolling through messages on his Blackberry or slouching and chewing gum." In other words, Obama stumbled on the ambiguity of the situation he faced and had an impulse to withdraw from the difficulty. 

This hypothesis, while admittedly speculative, has the merit of shedding some light on Obama’s decision to impose a “red line” in the first instance. Psychologists describe a thinking process called, “reaction formation.” This happens when for example, a person who feels hostility toward a friend, masks it from himself through a stance of being overly solicitous. We say that the person finds his hostile feelings to be unacceptable to himself, and so conceals them, without consciously intending to do so, by showing exaggerated feelings of kindness. This leads to situations in which, as the saying goes, a person “kills with kindness.” (It is also the meaning of Shakespeare’s famous phrase in Hamlet, “the lady doth protest too much.”)

One hypothesis is that facing the pressure that ambiguity created, Obama tried to reject that pressure by projecting outward a stance of certitude, by in fact drawing a red line. It was as if he were saying, “I will respond to ambiguity in the domain I can’t control, by eliminating ambiguity in the domain I can.” This, despite the fact that from a strategic point of view a nation state often gains leverage by projecting ambiguity. This is why the Israelis for the longest time did not acknowledge that they had built an atomic bomb, why the United States has no clear red line for triggering the defense of Taiwan from attacks by China, and why Saddam Hussein suggested, without ever explicitly saying so, that he had weapons of mass destruction. (This bluff of course was his undoing, as bluffs sometimes are, but that does not mean bluffing is never a path to victory. After all, it helped him project power in the Arab world.)

To say that Obama rejected the psychological pressure that ambiguity imposed on him personally, by projecting it outward, is to say that he allowed his psychological vulnerability, in the moment, to shape his fate making decision. This is the opposite of disciplined decision making. Is this too harsh a claim? Perhaps, but one hypothesis is that his process of personalizing a decision is one occupational hazard of the way he makes decision in the first instance.

Return to the description of his decision-making about Afghanistan. “It was a virtual seminar on Afghanistan and Pakistan, led by a president described by one participant as something “between a college professor and a gentle cross-examination.” Obama does not rely on what one scholar calls “brokers” to assemble knowledge and then present it to Obama. “The most striking characteristic of Obama’s decision-making style was his personal involvement in the details of policy. Rejecting the use of an honest broker, either in principle or because of the personalities of the staffers he chose, Obama himself delved deeply into the major policies of his administration.”

In this way of deciding, the people close to him, particularly White House staff members who have no independent power bases, can become extensions of his own thinking process. If this is true he is vulnerable to thinking through them rather than with them. The danger here is that his thinking may become solipsistic, particularly when facing ambiguity. This danger is compounded by the fact that his staff members, in contrast to his cabinet officials have as their primary task the defense of his political interests. Chuck Hegel or John Kerry can represent the independent perspectives of the groups and interests they lead and manage, namely the military and the State Department. In this way they bring in the wider world into the decision making process. But the White House staff must represent in the end, their best understanding of the president’s own interests.  This hypothesis may explain why in fact he did not consult with Kerry or Hegel before deciding to turn the decision to bomb Syria over to Congress. This may also explain how Obama could change his mind after conferring with his chief of staff alone.  It also gives an account of why some journalists characterized Obama as making policy by “thinking out loud.” Failing to engage the military and State Department as links to the world outside the White House, he remained in the seminar room, where thinking out loud is quite acceptable.

Obama supporters may argue of course that these twists and turns, these false starts may all prove irrelevant if in the end the Russian plan for collecting and turning over Syria’s stockpiles to the UN, succeeds. Syria cannot use chemical weapons and the US has not bombed Syria, avoiding in this way collateral damage and the death of more innocent people. But this argument presumes that the pressing issue facing Obama is chemical weapons, rather than the Syrian crisis writ large. After all conventional weapons have already killed more than 100,000 people, millions of Syrian citizens have been displaced, creating certain trauma for a generation to come, and the war is destabilizing Iraq by reviving the conflict between Shiites and Sunnis. The question remains what stance should the U.S. take toward this conflict? How can Obama bring meaning to the ambiguities that underlie these events? 

One hypothesis about decision making in the face of ambiguity is that a decision maker can find a compelling narrative in such a situation by drawing on his feelings, his gut, as well as his thoughts. Feelings are synthesizers, they enable us to value facts and give them color, according to our dispositions, interests and hopes. George W. Bush relied perhaps too much on his feelings, for example, knowing his gut that the War against Saddam Hussein was a war for democracy in the Middle East. In retrospect, this proposition was simplistic, and revealed Bush’s own failures as the gutsy “decider,” (as he once described himself). Obama may face the opposite dilemma. He stays too much in his head plumbing for facts, that however accurate and numerous, can never on their own confer meaning.  This can reinforce his natural cautiousness. But as we saw in the case of the Syrian chemical weapons crisis, it can also lead him to act impulsively.

The Folk Psychology of Money.

I recently read a blog post about the coming catastrophic collapse of the U.S. economy and the destruction of all our wealth. This genre of writing is familiar, but it author’s errors are nonetheless instructive. While the author may be what Keynes called a “monetary crank,” his errors highlight some of challenges we face in understanding what money actually is. In this post I hypothesize that a folk psychology underlies our theory of money; a psychology based on anxieties about our interdependence, and the conditions of contingency that shape our experience.

The post’s author writes, “You see that 300 percent increase in the money supply we've experienced . . Much of it is sitting in excess reserves at the Fed and with the big banks. These funds haven't made it into the markets and the economy yet. But it's a mathematical certainty that once this dam breaks, and this money passes through the reserves and hits the markets, inflation will surge.” (http://www.moneynews.com/MKTNews/billionaires-dump-economist-stock/2012/08/29/id/450265?PROMO_CODE=110D8-1)

The metaphor of the dam breaking suggests that money is a physical force, not unlike a raging river, which operates under its own mathematical laws, much as a gravitational field exerts an inexorable pull on objects in its field.  But nothing could be farther from the truth. It is useful to ask if this misconception is simply a question of ignorance, or is it motivated? Does it serve any purpose?

It is useful to look at the numbers behind the metaphor. Banks are required to hold a minimum amount of reserves in their own checking deposits with the Federal Reserve Bank (“the Fed”). The following chart traces the amount of excess reserves that banks held in these checking deposits with the Fed since 2009. It has grown by the astounding amount of $1.8 trillion. 

 

 

As the post we quoted suggests, the bank system has been flooded with money. But how did the money get there and what does it consist of?  The Fed buys treasury bonds, bills and mortgage-backed securities from mutual, hedge and pension funds and deposits the money in sellers’ bank accounts. This means that this money is now available to a seller’s bank as the basis for lending to borrowers, and thus counts as its reserves. (Recall that banks can lend out far more than their reserves because it is unlikely that all the depositors will demand their money at the same time. When this happens, we say that there is a “run on the bank.”)

But where did this money and the subsequent reserves come from? The answer is from nowhere. The Fed created it with keystrokes. Reserves are like points in a football game. The Fed bought the bills and bonds and credited the seller by adding points to both the seller’s account and to the bank’s “score,” or the amount of its recorded reserves. When game officials add points on the scoreboard in a baseball stadium, we never wonder where the points came from. We should not in this case either. Moreover, in the first instance this does not change the money available to the public. Bonds and Treasury bills are ways in which institutions, non-profits, households and mutual funds can earn interest on the money they own, much as individuals do with a savings account. When a pension fund sells bonds to the Fed for money, it is in effect moving its money from a savings account to a checking account. The amount of an individual and institution’s financial assets, at least initially, remains unchanged.

There is a common misconception, held even by some economists, that banks are intermediaries, linking people with money to lend, to people needing money to borrow. This is called the “loanable funds doctrine.” This is not right. Instead, banks create money whenever they make a loan. This is why the process is called credit creation. In this of way of thinking, as modern monetary theory emphasizes, loans create deposits, deposits don’t create loans. (See Modern Money Theory, by Randall Wray, Palgrave, 2012). If a bank gives me a loan it does not give me a barrel full of cash. It simply creates an account on its spreadsheet and marks down the requisite “points” in dollars. Keystrokes again. This also means that when the Fed increases a member bank’s score – the measure of its reserves—the banks do not automatically give out more loans. The money is not sitting there creating pressure. It is denominated in keystrokes. Instead, banks lend only when they can identify credit worthy borrowers. One reason that banks had so much excess reserves in the years after the Great Recession is that they were wary of extending credit. This is also why the Fed’s program of “quantitative easing’ – buying bonds and bills and crediting member banks with reserves, has not caused inflation.

The seeming mystery of how money can come from nothing is resolved by recognizing that economic life is lived forwardly. Businesses have to spend money, before they earn it, and credit, or what is sometimes called “working capital,” makes this possible. This is why sometimes a fast growing company goes out of business. It cannot get enough credit to finance its growing expenses in advance of its hoped for revenues. Credit in this sense is a measure of a bank’s and business owner’s shared conception of the future, which by definition does not yet exist. It is a signal from the future, as the bank and borrowers imagine it together. Money instantiates this signal.

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In this sense credit represents a victory of abstraction. Human culture has found a way of representing numerically something that does not exist materially. It is not unlike, the way in which Newton’s theory of gravity accounted for the observed motion of objects, by abstracting from its physical manifestations and positing a force that could only be described mathematically. We can’t “touch” gravity. Instead, it is instantiated only in the numerical relationship between objects. 

So one question is why do people persist in thinking about money as a “thing,” as a force that can break through a dam, or as an object that is passed like a tennis ball from a lender to a borrower. I can think of two hypotheses that draw on psychoanalytic thinking. Both presume that human culture creates “social defenses” against anxiety, which if experienced directly would be distressing and discomfiting.

Consider the extreme case of “gold bugs.” These are people who believe that the only basis for a national currency is gold, and that the Central Banks of all countries should promise to redeem their national currency into gold upon demand. This was in fact the basis for the historic but now defunct international gold standard. The conviction underlying this idea is that states and their representatives cannot be trusted, that left to their own devices they will “print money” in order to confiscate our real resources; our houses, cars, televisions, coal and gas. If political and economic elites are foresworn to redeem paper into gold they will be constrained by the amount of extant gold and the amount that can be mined. Never mind that the amount of gold available as backing is in some degree arbitrary. Never mind as well that if there is insufficient gold, countries will experience deflation because there is too little paper currency to support the desired volume of exchange. Gold bugs discount the salience of these likely problems partly because their larger vision is tinged with paranoia. They worry that a cabal of unseen forces, call them Jewish bankers or Freemasons, controls us, and that only gold will free us.

I suggest that we can generalize from this extreme case. The gold bug has a fantasy of a social relationship, albeit a paranoiac one. Once we understand that money is nothing but the expression of our relatedness, we must recognize the ways in which we are interdependent in world wide circuit of exchange. So one hypothesis is that we want to see money as thing, as a defense against the anxiety we feel when we see how interdependent we really are.  Karl Marx’s conception of “commodity fetishism” is helpful here. He argued that we tend to see an economic exchange as the relationship between money and goods, rather than what it ultimately is, a relationship between people. We treat money as magical, as if it can conjure up objects without considering the underlying social organization that money sets into motion. Thus for example, we buy cheap clothing from Bangladesh imagining that we are exchanging money for clothing.  But in fact we are setting in motion a social process through which poor people work under unsafe and sometime life threatening conditions.  It could very well be anxiety provoking to acknowledge our personal connection to this social fact. That is why of course activists insist that trade be fair as well as free.

Marx’s use of the term, “fetishism” is also suggestive to the psychoanalytic listener, and may provide some additional insight. For example, many men are comfortable in a sexual situation, at least initially, only if they can focus on a body part, for example, a woman’s breast, leg, buttocks or foot. This is very common, as is evident in most commercial pornography.  In the extreme, a male fetishist may need a prop, for example a shoe, in order to become sexually excited. He endows the fetish or shoe with magical properties. One hypothesis is that the this focus on a part, rather than the whole, and on a material object, rather than on the relationship with the woman,  enables the man to exercise control over the conditions that excite him. Absent the fetish his excitement would turn into anxiety. The conception that money is a physical object, that is separate from the complicated relationships it sets into motion, and from the relationships it exposes, shares some of these features. (Note to my skeptical reader. Invoking sexuality does not mean that people's relationship to money is sexualized  Rather, by drawing on sexual experience in its vividness and specificity we gain insight into motivation and its constituents more generally. This is one way to interpret psychoanalysis' privileging of sex as a key to motivation.) 
 

The term “magical” points to another and perhaps more speculative hypothesis. I came across the following video, which gives a coherent presentation of credit creation, emphasizing for example the creation of credit out of nothing and the system of account settlement and clearing. (http://www.youtube.com/watch?v=KyDU4X8GSmE) Yet the tone and import of the video suggests conspiracy. It is introduced with dark sounding music, and images of a grim reaper type of figure chained to a rock of “debt” and swinging a mallet to break the chain. The video scrolls through a quote by Woodrow Wilson, the 28^th president of the United States, “Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they had better not speak above their breath when they speak in condemnation of it.” The video’s central message is that there is something nefarious about the fact that credit is created “ex-nihilo,” or to translate the Latin, “out of nothing.”    

The phrase “ex-nihilo” is in fact linked to the idea of credit creation (http://en.wikipedia.org/wiki/Ex_nihilo),  but was originally a theological description of God’s powers.  In Judeo-Christian theology only God can create ex-nihilo. This is why the Old Testament counsels the Israelites to avoid magic and magicians, “No witch shall you let live,” (Exodus, 22: 17).  Moreover, the economist Fredrick Hayek argues that in the early stages of capitalism, “Activities that appear to add to available wealth ‘out of nothing,’ without physical re-creation and by merely rearranging what already exists, stink of sorcery.” As David Hawkes notes this was one basis for the revulsion against usury in Renaissance England; not that it was simply unjust but that it was supernatural. Money “procreated” so to speak, in the form of interest payments added to capital. Yet it was lifeless. As he writes, “Usury was magic perfected by other means.” (The Culture of Usury in Renaissance England, Palgrave, 2010)

Today most of us do not believe in magic. Instead we enjoy magic shows in which stage magicians makes objects appear out of nothing -- ex-nihilo -- but only in fun, though we are often astonished. I want to suggest nonetheless that there is an experiential basis for our anxieties about "ex-nihilo," particularly in a secular age. If we think seriously about our own existence, it must seem that we came into the world, ex-nihilo. Of course we understand how babies are born, but our own existence is so arbitrary. After all, none of us have existed since the beginning of the universe and yet here we are now, suddenly! How can that be?  

The arbitrary can be frightening. It is a portal to chaos. But we should also remember that the other side of arbitrary is “contingency.” Our world is not determined, and this becomes the basis for creative work of all kinds. That is why credit creation can support entrepreneurship, which is, after all, the creative arrangement of resources in new ways.

One speculative hypothesis is that that we project these existential anxieties onto a “folk-theory” about money. At the extreme, some people develop a theory of money in which “hidden forces,” who create credit out of nothing, use this power to enslave us, in other words to eliminate contingency and the capacity for creative work. This fantasy paradoxically provides relief because it suggests that someone, some shadowy network, is actually in control. All is not chaos, and if we are smart enough, we can control the controllers. A larger number of people, less likely to be drawn to conspiratorial thinking, persists in thinking of money as a physical object that operates mechanically, as a way of avoiding the uncomfortable idea that the course of our lives, like our birth, is entirely contingent and unpredictable. The laws of money like the laws of physics provide scaffolding, an “invisible hand.” This may be one reason why economists did not anticipate the financial crisis that led to the Great Recession. This sense of contingency is also the basis for  the criticism that George Soros, the famous investor, has of modern economic theory. His name for it is "reflexivity." The challenge then, is to accept the arbitrary, and then see the creative opportunities in contingency, both in our individual lives and in the social world we create together. We can use credit and money creatively.