The Tehran-Caracas Nuclear Axis

Ahmadinejad and Chávez: new evidence of a radioactive relationship.

Here’s one from the Department of We Are The World: Hugo Chávez and Mahmoud Ahmadinejad will address the U.N.’s climate summit in Copenhagen. Say what you will about these two gentlemen—the support for terrorists, the Holocaust denial, the suppression of civil liberties—at least nobody can accuse them of being global warming “deniers.”

On the contrary, the two leaders, who met in Caracas last month for at least the 11th time, have been nothing if not cooperative when it comes to environmentally friendly and carbon-neutral technologies. Bicycles, for instance: In 2005, Chávez directed his government to “follow seriously the project of manufacturing Iranian bicycles in Venezuela.” An Iranian dairy products plant (no doubt ecologically sensitive) also set up shop hard on the Colombian border, in territory controlled by Colombia’s terrorist FARC.

Ahmadinejad and Chávez: A new document sheds light on this radioactive relationship.

Then there was the tractor factory Iran built in Ciudad Bolivar. In January, the Associated Press reported that Turkish authorities had seized 22 containers labeled “tractor parts.” What they contained, according to one Turkish official, “was enough to set up an explosives lab.”

But perhaps the most interesting Iranian venture is a supposed gold mine not far from Angel Falls, in a remote area known as the Roraima Basin. The basin straddles Venezuela’s border with neighboring Guyana, where a Canadian company, U308, thinks it has found the “geological look-alike” to Canada’s Athabasca Basin. The Athabasca, the company’s Web site adds, “is the world’s largest resource of uranium.”

In 2006, Chávez publicly mocked suspicions of nuclear cooperation with Iran, saying it “shows they have no limit in their capacity to invent lies.” In September, however, Rodolfo Sanz, Venezuela’s minister of basic industries, acknowledged that “Iran is helping us with geophysical aerial probes and geochemical analyses” in its search for uranium.

The official basis for this cooperation seems to be a Nov. 14, 2008 memorandum of understanding signed by the two countries’ ministers of science and technology and given to me by a credible foreign intelligence source. “The two parties agreed to cooperate in the field of nuclear technology,” reads the Spanish version of the document, which also makes mention of the “peaceful use of alternative energies.” Days later, the Venezuelan government submitted a paper to the International Atomic Energy Agency on the “Introduction of a Nuclear Power Programme.” (Online readers can see the memorandum for themselves in their Farsi and Spanish versions. One mystery: The Farsi version makes no mention of nuclear cooperation.)

Iran would certainly require large and reliable supplies of uranium if it is going to enrich the nuclear fuel in 10 separate plants—an ambition Ahmadinejad spelled out last month. It would also require an extensive financial and logistical infrastructure network in Venezuela, not to mention unusually good political connections. All this it has in spades.

Consider financing. In January 2008, the Bank of International Development opened its doors for business in Caracas. At the top of its list of its directors, all of whom are Iranian, is one Tahmasb Mazaheri, former governor of the central bank of Iran. As it turns out, the bank is a subsidiary of the Export Development Bank of Iran, which in October 2008 was sanctioned by the U.S. Treasury Department for providing “financial services to Iran’s Ministry of Defense and Armed Forces Logistics.”

Or consider logistics. For nearly three years, Venezuelan airline ConViasa has been flying an Airbus 340 to Damascus and Tehran. Neither city is a typical Venezuelan tourist destination, to say the least. What goes into the cargo hold of that big plane is an interesting question. Also interesting is that in October 2008 the Islamic Republic of Iran Shipping Lines, also sanctioned by Treasury, announced it had established a direct shipping route to Venezuela.

Finally, there are the political connections. What do Fadi Kabboul, Aref Richany Jimenez, Radwan Sabbagh and Tarek Zaidan El Aissami Maddah have in common? The answer is that they are, respectively, executive director for planning of Venezuelan oil company PdVSA; the president of Venezuela’s military-industrial complex; the president of a major state-owned mining concern; and, finally, the minister of interior. Latin Americans of Middle Eastern descent have long played prominent roles in national politics and business. But these are all fingertip positions in what gives the Iranian-Venezuelan relationship its worrying grip.

Forty-seven years ago, Americans woke up to the fact that a distant power could threaten us much closer to home. Perhaps it’s time Camelot 2.0 take note that we are now on course for a replay.

Bret Stephens, Wall Street Journal

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Full article and photo: http://online.wsj.com/article/SB10001424052748704869304574595652815802722.html

A Courage of Failure

ObamaCare backer: Defying public, wrecking health care would be “a significant political achievement.”

There’s trouble in paradise, or rather there would be if the U.S. Senate’s Democratic Caucus were paradise. Last week we heard that Majority Leader Harry Reid had struck a compromise deal on ObamaCare. But, characteristically for the Senate, the leader is having trouble finding followers. “The supposed healthcare deal cut by Harry Reid is a ‘non-starter,’ Sen. Bill Nelson (D-Fla.) said,” the Hill reported Friday:

Apparently [Reid’s] “broad agreement” didn’t include Nelson.

“I think when we get the score back from CBO that it’s going to be too costly,” Nelson told Fox News Live today.

Nelson also said Americans who don’t currently have healthcare wouldn’t be able to afford their own Medicare policy. (That offer would only apply to those aged 55-64.)

“So, at the end of the day, I think it’s going to be a non-starter,” he said.

The other Nelson, Ben of Nebraska, has been among the Senate Democrats most prominent for their caution about ObamaCare, but we’ve been wondering where Bill Nelson was. He has a great many superannuated-Americans, who have got to be made nervous by all the talk of slashing Medicare.

Politico reports that “Sen. Clare McCaskill (D-Mo.) says she’d ‘absolutely’ vote against health care overhaul legislation if it raises costs and the deficit”:

“My statement all along is it has to slow down the increase in health care costs over time, and that is bending the cost curve and secondly that it has to be deficit neutral,” McCaskill said on “Fox News Sunday.” “We have to be saving more money for our government than we’re spending.”

Of course it’s possible that Nelson and McCaskill are just posturing–that they’ll eventually be “persuaded” the bill has been improved enough to make it acceptable, or that they’ll vote for cloture (which requires 60 votes) but against passage of the bill (which needs only a majority). Another development, however, makes ObamaCare’s passage look considerably less likely. As the New York Times reports:

In a surprise setback for Democratic leaders, Senator Joseph I. Lieberman, independent of Connecticut, said on Sunday that he would vote against the health care legislation in its current form.

The bill’s supporters had said earlier that they thought they had secured Mr. Lieberman’s agreement to go along with a compromise they worked out to overcome an impasse within the Democratic Party.

But on Sunday, Mr. Lieberman told the Senate majority leader, Harry Reid, to scrap the idea of expanding Medicare and abandon any new government insurance plan or lose his vote.

Lieberman apparently is referring to the cloture vote, so that his defection would require Reid to pick up at least one Republican. The Kos Kidz are livid: “Mcjoan” titles her post “Lieberman’s F-You to America,” and within the post she spells out a barnyard vulgarity. The title, though, uses the wrong preposition: It should be from America. After all, as we noted Friday, a CNN poll shows that 61% of Americans oppose the Senate version of ObamaCare. Lieberman’s stance isn’t just right, it’s popular.

Which brings us to one of the most hilarious analyses of the ObamaCare debate we’ve read. It comes from Nate Silver, a liberal blogger whose analyses often are astute, though not in this case:

Liberals have tended to underestimate what a significant political achievement it would be for Democrats to pass such a major bill that has become rather unpopular with the public. It would be going too far to characterize the Democrats as courageous for passing health care reform (if they do), because at the end of the day, the political case for passing health care reform is probably stronger than the case for failing to do so. Moreover, the handling of public option debate is not completely exogenous from the bill’s popularity or lack thereof. Nevertheless, Democrats have been negotiating into a stiff political headwind for months now, and have been rather resilient in the face of it.

In a very narrow sense, we suppose it would be “a significant political achievement.” It would be an impressive show of party discipline in a legislative chamber that is notoriously difficult to discipline, and under circumstances in which there is no margin for error.

But looking at it more broadly, Silver’s analysis is insane. If Congress passes this highly unpopular legislation, he argues, it will thereby show something resembling courage. But why is the legislation unpopular? We would say it’s because the public has correctly concluded it is a monstrosity–but we suspect Silver disagrees and actually thinks ObamaCare is a good idea on the merits.

Whose job was it to make ObamaCare popular? The politicians who backed ObamaCare, of course. If 61% of Americans oppose the Senate bill, it is because the senators who support it have failed to make their case. It’s hard to see how someone who thinks they had a good case to make can excuse this failure, much less present it as an achievement of near-courage.

James Taranto, Wall Street Journal

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Full article: http://online.wsj.com/article/SB10001424052748704869304574595960530632476.html

Obama’s War of Words

Eloquence without action is soon forgotten.

Whatever else he may be, Barack Obama is a gifted orator whose words will be remembered by generations. Or will they?

In the first two weeks of this month, President Obama has delivered two critical war speeches. At West Point he outlined a new policy for Afghanistan, committing 30,000 additional troops to deal with the threat that militant Islam continues to pose to the American people. In Oslo scarcely a week later, he used the occasion of his Nobel Prize to deliver a bracing reminder that the reality of evil requires nations willing to confront it.

Now comes the question put to all presidential speechwriters when a wartime president gives a major address. What did you think? Did he make his case? How will these speeches be treated by history?

The answer, surely, is that the measure of a speech goes beyond words. When it comes to the English language, the speechwriters around President Obama enjoy more than their share of talent. Still, ultimately a war speech will be judged as much on the success of the war as on the eloquence of the words.

Think of the great war speeches, starting with the Gettysburg Address. When Abraham Lincoln delivered those words at a cemetery for the Union fallen in 1863, he justified the terrible human toll on the promise “that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.”

Ask yourself this: Had Lincoln not committed himself so single-mindedly to that effort, had he given in and sued for peace, would schoolchildren still be memorizing his words today?

Or consider Franklin Delano Roosevelt. Historians are still debating his decisions. But there can be no debate that his exhortations resonate even today because they were backed by policies that defeated totalitarian threats across both the Atlantic and Pacific Oceans.

Ditto for John Kennedy. In his memoir “Counselor: A Life at the Edge of History,” Kennedy adviser and speechwriter Ted Sorensen did not dismiss the power of the spoken word, but neither did he confuse it with action. “[A]fter all is said and little is done, a speech—even an elevated, eloquent speech—is still just a speech,” he wrote. “Saying so doesn’t make it so.”

Kennedy is sometimes compared with Ronald Reagan, often thought to have been a great presidential speech-giver because of his gifts as an actor. No doubt the Gipper understood the stage. But the point about Reagan is that when he spoke, he wasn’t acting. When Reagan declared that the “last pages” of communism were being written or called for the Berlin Wall to come down, he believed it—and his policies reflected those beliefs.

“Nobody remembers “Tear Down this Wall” because I did an OK job of stringing the words together,” says my speechwriter friend, Peter Robinson. “We remember the speech because Reagan meant it, because it expressed the principles that he acted on, and because history proved him right. We remember Reagan at Berlin because the wall did come down—and he did his part to help bring it down.”

As the chief speechwriter who helped President George W. Bush draft his remarks on the surge in Iraq, I’ve been amused these past few days by hearing people compare that speech favorably to President Obama’s recent announcement of the surge in Afghanistan. It’s amusing because that’s not the tone many of these folks were taking back when President Bush delivered those remarks.

If that speech holds up well today, it’s because of more than words. It’s because President Bush burnished those words with actions—insisting that we could still win in Iraq, backing that up with more troops at a time when many Americans wanted them home, and, most of all, by refusing to countenance an end game that would see our men and women in uniform leaving Iraq from the ignominy of an embassy rooftop.

In wartime, people soon tire of lofty words that do not seem borne out by events. In September 2001, with the twin towers still smoldering and the Pentagon wounded, President Bush delivered a war address to a joint session of Congress (which I had no part in, so am free to praise) that ranks with the best of FDR. Whether that speech ever receives its full due depends in part on how this war ends.

The same goes for President Obama. At West Point and Oslo, he spoke to the challenge of defending our freedom against hard men with no moral limit on what they are willing to do to crush it. The irony is that whether these fine speeches are remembered by history depends on a word he didn’t use in either one: victory.

William McGurn, Wall Street Journal

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Full article: http://online.wsj.com/article/SB10001424052748704869304574596333548334314.html

Tough Times for Big Law

Grads turn down offers of $80,000 not to work for a year.

If things are tough at the law firm Cravath, Swaine & Moore, things are tough all over. Founded in 1819, Cravath is not really white shoe—too much rough-and-tumble—so much as it is black ink. Only the lean and mean machine that is Wachtell Lipton has higher per-partner profits than Cravath, which counts IBM and CBS among its loyal clientele.

When I witnessed the job-search drama as a student at Yale Law School, just about the most desirable placement was a spot at Cravath. It didn’t seem to matter that even summer associates at Cravath were expected to close Time Warner deals way past midnight. Nor did anyone seem to care that a new hire could regularly expect to have his viewing of Saturday Night Live disrupted by an emergency call from the office. Prestige whores will give it up for their choice currency, and Cravath carries that elite cachet.

Or at least it did. The class of associates that just joined Cravath was asked to defer their arrival for a year in exchange for a sweet deal: They would receive $80,000 to not work, plus they would get benefits and student-loan payments. This offer was optional.

Those who will be joining the firm next year are slightly, but only by a smidge, less lucky: They get $65,000 to put off employment for a year, with the same perquisites, and acceptance is mandatory. While other law firms are making similar overtures to their would-be and even current associates—top-notch names like Latham & Watkins and Skadden Arps among them—when trouble hits Cravath, economic swine flu has penetrated places that ought to be inoculated.

I’ll leave it to law bloggers and legal economists to ponder what it is about Cravath’s management that led it to this troubled place. But here’s something weirder: I’ve been told that none of the graduates of Yale Law School who were headed for Cravath accepted their offer of $80,000 to surf and sunbathe, or go forth and save the world. Since no one at either institution is willing to discuss this—and I don’t blame them, because I would be embarrassed too—I don’t know this for certain. But here’s what I’m sure of: Not everybody took Cravath up on this peachy keen opportunity to do anything for a year with pay and benefits. And that by itself is disturbing enough.

If even one person said no to $80,000 for bubkes, I’d question the sanity and intelligence of that sole holdout. Cravath recruits the best and the brightest kids from the most highly ranked law schools—and given $80,000 and a dream, all many of them could do was report to work on Monday.

This is cause for worry. I know it’s bad enough news when there is bad news in the Motor City and all of Michigan, and it breaks my heart that there’s never a good day if your livelihood is dependent on the fate of General Motors (coincidentally, another Cravath client). But New York City is not Detroit, Big Law is not the auto industry, and I dare say that even in this economy, life is still pretty swell at the top of Ivy shoots. The perception that institutions as venerable as Cravath might not be standing in a year’s time seems reasonable in an era when even Lehman Brothers, which survived the Civil War but not the Bush administration, came humpty-dumptying down not so long ago.

Or maybe Cravath’s fate isn’t the real issue. Recently, Supreme Court Justice Antonin Scalia said: “I worry that we are devoting too many of our very best minds to this enterprise.” Excuse me? These top-notch law grads, brilliant and bright as the Rockefeller Center Christmas tree when all the lights are turned on, may actually be idiots who lack imagination underneath it all. Maybe they just don’t have enough vision to know what to do with $80,000 worth of free time.

Not that sleeping and loafing around Park Slope for 12 months is so bad, by the way. It’s probably hard to plan a year off if your wits have been dulled by the Uniform Commercial Code and the Rule Against Perpetuities. Perhaps freedom so great is wasted on youth so stuck. These recent graduates were offered a generous gift in a time of great misfortune, and their response was to look at it askance.

That’s not what I would do now, in my 40s, but maybe I would have made the same mistake when I was 20-something. As a wise man once said: I was so much older then; I’m younger than that now.

Miss Wurtzel, a lawyer in New York, is the author of “Prozac Nation” (Houghton Mifflin, 1994).

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Full article: http://online.wsj.com/article/SB10001424052748704240504574586431109327544.html

Why Everyone Read Samuelson

The late Nobel laureate’s mathematical approach to economics has been a mixed blessing.

Three years after World War II drew to a close, a young professor at MIT published “Foundations of Economic Analysis.” Its mathematical approach to economics would revolutionize the profession. And its author, Paul Samuelson, would go on to earn many awards and honors, culminating in 1970, when he won the Nobel Prize in economics—the second year it was awarded. Samuelson died on Sunday at the age of 94.

His influence has been profound, but the mathematization of economics has been a mixed blessing. The downside is that the math hurdle in leading U.S. economics programs is now so high that people who grasp the power of economic concepts to explain human behavior are losing out in the competition to mathematicians.

The upside is that Samuelson sometimes used math to resolve issues that had not been resolved at a theoretical level for decades. As fellow Nobel laureate Robert Lucas of the University of Chicago said in a 1982 interview, “He’ll take these incomprehensible verbal debates that go on and on and just end them; formulate the issue in such a way that the question is answerable, and then get the answer.”

For instance, Swedish economist Bertil Ohlin had argued that international trade would tend to equalize the prices of factors of production. Trade between, say, India and the United States would narrow wage-rate differentials between the two countries. Samuelson, using mathematical tools, showed the conditions under which the differentials would be driven to zero: It’s called the Factor Price Equalization Theorem.

He contributed fundamental insights in consumer theory and welfare economics, international trade, finance theory, capital theory, general equilibrium and macroeconomics. In finance theory, which he took up at age 50, Samuelson did some of the initial work that showed that properly anticipated futures prices should fluctuate randomly.

Economists had long believed that there were goods that would be hard for the private sector to provide because of the difficulty of charging those who benefit from them. National defense is one of the best examples of such a good. In the 1954 Review of Economics and Statistics, Samuelson gave a rigorous definition of a public good that is still standard in the literature.

“Let those who will write the nation’s laws if I can write its textbooks,” Samuelson said during a speech at Trinity University in San Antonio, Texas. He revised his own widely read textbook, “Economics,” about every three years since 1948. One of the best and punchiest statements in the 1970 edition was his comment about a proposal to raise the minimum wage from its existing level of $1.45 an hour to $2.00 an hour: “What good does it do a black youth to know that an employer must pay him $2.00 an hour if the fact that he must be paid that amount is what keeps him from getting a job?”

This is the kind of comment that causes many on the left to grit their teeth; and yet Samuelson was a liberal Keynesian and the best-known rival of the late libertarian monetarist, Milton Friedman. The two men respected each other highly, but the intellectual influence was mainly one way. Over time, Samuelson came more to Friedman’s views, especially on monetary policy.

In the 1948 edition of his textbook, Samuelson wrote dismissively, “few economists regard Federal Reserve monetary policy as a panacea for controlling the business cycle.” But in the 1967 edition, he wrote that monetary policy had “an important influence” on total spending. In the 1985 edition, Samuelson and co-author William Nordaus (of Yale) would write, “Money is the most powerful and useful tool that macroeconomic policymakers have,” and the Fed “is the most important factor” in making policy.

Paul Samuelson began teaching at the Massachusetts Institute of Technology in 1940 at the age of 26 and remained there, publishing on average almost one technical paper a month for over 50 years. In addition to the Nobel Prize, he also earned the John Bates Clark Award in 1947, awarded for the most outstanding work by an economist under age 40. He was president of the American Economic Association in 1961.

Samuelson, like Milton Friedman, had a regular column in Newsweek (from 1966 to 1981). Unlike Friedman, he did not have a passionate belief in free markets—or, for that matter, in government intervention in markets. His pleasure seemed to come from providing new proofs, demonstrating technical finesse, turning a clever phrase, and understanding the world better.

But not always. Samuelson had an amazingly tin ear about communism. As early as the 1960s, economist G. Warren Nutter at the University of Virginia had done empirical work showing that the much-vaunted economic growth in the Soviet Union was a myth. Samuelson did not pay attention. In the 1989 edition of his textbook, Samuelson and William Nordhaus wrote, “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.”

Although I was never a fan of Samuelson’s textbook, an appendix on futures markets in a late 1960s edition laid out beautifully how the profit motive in futures markets causes reallocation from times of relative plenty to future times of relative scarcity. In 1990 I asked him to do an article on futures markets for “The Fortune (now “Concise”) Encyclopedia of Economics.” He replied quickly that he did not have time and ended graciously, “My loss.”

Mr. Henderson is a research fellow with Stanford University’s Hoover Institution and an economics professor at the Naval Postgraduate School in Monterey, Calif. He is editor of “The Concise Encyclopedia of Economics” (Liberty Fund, 2008.)

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Full article: http://online.wsj.com/article/SB10001424052748704869304574595823818190240.html

Banker Baiting 101

Obama’s latest populist turn won’t help the recovery.

The Obama Administration desperately wants a strong economic recovery, or so it says, but does it have any idea how to encourage one?

It says it wants job growth, but its policies keep raising the cost of creating new jobs. It says it wants small business to take risks, but it keeps reducing the rewards if those risks succeed. And it says it wants banks to lend more money, even as it keeps threatening to punish bankers if they make too many bad loans or make too much money.

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The last contradiction is again on display as President Obama rolls out his latest populist blame-the-bankers campaign. This is becoming a White House financial staple. Recall how the President joined the Congressional posse amid this year’s earlier AIG bonus uproar, until it threatened to run out of control. Later Mr. Obama targeted Chrysler’s bond holders who weren’t eager to accept the government’s meager dictated terms. The bond holders rolled over, but everyone in financial markets got a message about what this Administration thinks about the sanctity of contracts.

President Barack Obama meets with members of the financial industry in the Roosevelt Room of the White House in Washington, Monday, Dec. 14, 2009, to discuss the economic recovery.

Now, amid Democratic panic over 10% unemployment heading into an election year, the President is attempting a double populist play: Blame the bankers for causing the financial crisis and recession by lending too much, and blame them again for causing high joblessness now by lending too little.

“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street,” Mr. Obama said in an interview on CBS’s “60 Minutes” on Sunday. “They’re still puzzled why it is that people are mad at the banks. Well, let’s see,” he said. “You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it’s gone through in—in decades, and you guys caused the problem. And we’ve got 10% unemployment.”

He followed up that warm encouragement yesterday by hauling the bankers in to the White House to receive the command that “we expect an extraordinary commitment from them to help rebuild the economy.”

This blame-the-bankers rhetoric is worse than a distraction as the recovery tries to gain solid footing and become a durable expansion. It risks obscuring two critical and related problems: Federal policy is discouraging both lending and borrowing.

If there is a lack of lending by banks to small businesses, the President might consider cutting out the CEO middlemen and speaking directly to the regulators who work for him, as well as to the Federal Reserve Chairman he recently nominated for a second term.

Forcing banks to write down the value of small-business loans that are still performing has become the specialty of bank regulators who are now trying to make up for the bubble years. Whenever a commercial building serves as collateral, no matter the quality of the borrower, the loan becomes suspect.

The result is a reduction in bank capital, a disincentive to make the next loan and perhaps even a calling of the loan, forcing a sale of the property. Operating with perfect pro-cyclical precision, regulators who were asleep during the housing boom and its epidemic of liar loans now target current loans to companies with steady cash-flow. This does not encourage new lending.

Meanwhile, Fed Chairman Ben Bernanke’s near-zero-rate interest policy encourages banks to borrow cheaply and then invest in safe long-end Treasurys instead of riskier commercial loans. The Obama Treasury has explicitly supported this Fed policy as a way for banks to play the yield curve to rebuild their balance sheets.

But if Mr. Obama wants the banks to lend more, he should tell the Fed to start to rein in its excessively easy credit now that the financial crisis is over and the economic recovery gains steam. The longer the Fed keeps rates artificially low, the longer banks will get used to this implicit subsidy and the rougher their adjustment when it inevitably ends. Meanwhile, weren’t higher bank profits to raise capital a major goal of the bailout?

Regarding small business, not everyone agrees that lack of credit is the main economic problem. William Dennis of the National Federation of Independent Business says that for most small companies the problem is a lack of customers, not credit. “There aren’t a lot of folks who want to borrow. Our challenge is getting people in the front door,” he says.

A recent NFIB survey of small-business owners found only 10% reporting problems obtaining financing. The government’s own data tell a similar story. The Federal Reserve reports that business loan demand remains at depressed levels, while data from the Federal Deposit Insurance Corporation show $6 trillion of unused lending commitments at FDIC-insured institutions.

Mr. Dennis reports that small-business owners are much more concerned about other Washington issues, namely the uncertainty created by the Obama policy agenda: When will the taxes arrive to pay for Washington’s spending binge? How much will health-care reform cost? What will be the impact of cap-and-trade legislation to address climate change?

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Mr. Obama summed up his White House meeting with the bank CEOs by once again blaming them for the financial crisis and suggesting that they have an obligation to support new regulation being written by Barney Frank (D., Mass.) and Senator Chris Dodd (D., Conn.).

You have to smile at that irony. No two Members of Congress did more to encourage the financial crisis, by preventing reform of the government-sponsored housing behemoths Fannie Mae and Freddie Mac. By ignoring Washington’s role in creating the credit mania, Mr. Obama is hardly offering confidence that his financial reform efforts will prevent a repeat.

Yet none of this seems to count for much at a White House that is reading the polls and sees a political opening because bankers aren’t popular. Someone in that power palace ought to consider that you don’t encourage capitalism by beating up capitalists, and you aren’t likely to encourage more lending by whipsawing lenders.

Editorial, Wall Street Journal

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Full article and photo: http://online.wsj.com/article/SB10001424052748704869304574596092863514668.html

Saving the day

Abu Dhabi rescues Dubai after all

DUBAI, one of seven members of the United Arab Emirates (UAE), is now in the middle of its international film festival, which includes “City of Life”, a film set in Dubai and directed by a local. But the most gripping cliff-hanger is playing out in Dubai’s debt markets. On Monday December 14th Abu Dhabi, the wealthiest member of the UAE, arrived on the scene at the last moment to rescue its neighbour from the brink of default.

It provided $10 billion to Dubai’s government, more than enough to repay the $4.1 billion due on Monday to holders of a sukuk, or Islamic bond, issued by Nakheel, a prominent developer. Nakheel belongs to Dubai World, a holding company owned by the Dubai government, which less than three weeks ago requested a standstill on repayments of $26 billion of debt, perplexing investors and panicking global markets.

Just as every film-goer knows that the damsel in distress will be saved in the end, so Dubai’s creditors had long assumed that the emirate would be saved by its oil-rich neighbour. But the standstill announced on November 25th departed from this script, creating genuine suspense.

Investors knew Abu Dhabi could not let its neighbour fail without damaging its own economic interests. They assumed that Abu Dhabi knew this too. Therefore when it let Dubai walk to the edge, it was deeply unsettling. Either Abu Dhabi’s policymakers did not know the damage this would do, or they did not care. The announcement on Monday suggests that Abu Dhabi did care. It just did not anticipate quite how badly creditors would react.

Nakheel’s creditors can now be repaid, but Dubai’s credibility cannot be repaired so easily. Its solvency rests on a relationship with its neighbour that is impossible to fathom. At least this latest handout dropped the fig leaves that disguised Abu Dhabi’s previous gestures of support. It was given directly from one government to the other, unlike the $10 billion routed through the UAE’s central bank in February and the $5 billion lent in November through two commercial banks partly owned by the Abu Dhabi government.

Even now, Dubai’s creditors cannot expect every claim to be redeemed in full. The money left over after the Nakheel sukuk is repaid will go to Dubai World’s suppliers and contractors, who endured a standstill on payments long before the company asked the same of its creditors. The money will service Dubai World’s other debts only if the group is “successful in negotiating a standstill as previously announced,” the statement says.

If those negotiations falter, Dubai World’s fate will be governed by a brand new “reorganisation law”, unveiled on Monday. The UAE already has a bankruptcy law, but almost no one uses it. Any creditor foolhardy enough to test the regime can expect to recover just ten cents on the dollar, the World Bank calculates.

The new decree instead appoints three judges from the Dubai International Financial Centre (DIFC), a 110-acre “free zone” with its owns laws, written in English and based on common-law principles. The judges include one who formerly sat in the High Court of England and Wales and a Singaporean who previously served on his country’s Supreme Court. They will apply DIFC law, with some tweaks, including a provision to allow for an automatic stay on creditors’ claims.

Their expertise will not be needed if Dubai World’s creditors now come to terms. The chances are good that they will. The shock they have suffered over the past three weeks may have softened them up. And the underlying case for a restructuring of Dubai’s debts has some merit, even if the government has so far handled it abysmally. Dubai, one might say, has had one life. Now it must make a success of its second.

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Full article and photo: http://www.economist.com/businessfinance/displayStory.cfm?story_id=15106322&source=features_box_main

The regime’s ramparts are shaky

Iran’s resilient opposition

Seven months after a disputed election, opposition to the clerical regime and its controversially re-elected president refuses to die

EVER since President Mahmoud Ahmadinejad was returned to power in June’s dodgy election, protests have erupted in Iran at irregular intervals. The most recent was on December 7th, officially “Student Day”. Across the country, tens of thousands of demonstrators managed to evade the security forces, forcing a way out of the universities into the streets, where non-student protesters joined them. There were reports of hundreds of arrests and severe beatings by the feared baseej militia, which answers to the Revolutionary Guard, the Islamic regime’s armed bullies. In Tehran, the capital and hottest spot, on the day after the demonstration students in the university’s technical faculty were again attacked by plainclothes agents, and further arrests were made.

To the country’s supreme leader, Ayatollah Ali Khamenei, and senior members of Iran’s panoply of security organs, this is all part of a “soft war”—of disinformation, sabotage and provocation—being waged on the regime by the nation’s enemies. Earlier this month a troupe of pro-government actors performed a grotesque re-enactment of the last moments of Neda Agha Soltan, whose death by police bullet on June 20th was watched on television across the world, to perpetuate the fiction that she was somehow murdered by Western powers. Speculation swirls around the death by poisoning of a doctor who served in a prison where opposition detainees were killed and tortured this summer. Shirin Ebadi, a human-rights lawyer and Nobel Peace Prize-winner who has criticised the regime from abroad, has been threatened with prosecution on charges of tax evasion if she dares to return home.

Even on calm days, Tehran wears a scowling, joyless aspect. Phalanxes of police patrol the main streets and parks under the pretext of combating drug abuse, double parking and (in the case of Iran’s women) offensively thick amounts of eyeliner. The purpose of all the menace, most people think, is to intimidate the opposition.

Brutality and boastfulness have been the state’s favoured tactics to emasculate the “green movement”, as it is known after the campaign colours of its main figurehead, Mir Hosein Mousavi, who is widely thought to have won June’s election. During the summer there was a steady flow of reports describing deaths of dissidents on the streets and torture in jails. Scores of them were paraded in a show trial where they faced a range of capital charges.

But now such techniques seem to have given way to a subtler but equally determined type of tyranny. Having suffered grievously in jail, some prominent opponents of Mr Ahmadinejad have recently been let out pending appeal. The authorities seem to have silenced some of the freed detainees by demanding exorbitant bail or by threatening them and their families with further horrors. The judiciary has shied away from turning political personalities into martyrs. The five dissidents who are known to have been sentenced to death for their part in the summer’s disturbances were not well known.

At the same time, Iranians in many walks of life describe a slow but perceptible tightening of conditions. To the list of prominent activists, human-rights lawyers and filmmakers banned from leaving the country has now been added the name of Parastu Forouhar, the courageous daughter of dissidents murdered by government agents in 1998. On December 5th her passport was confiscated when she tried to leave for Germany, where she lives.

The number of banned anti-government newspapers and websites grows, while officials call for ever more strident measures to limit the pernicious influence of Western mores on an unsuspecting populace. The latest ideas include handing over control of some schools to clerics, segregating the sexes in universities and banning make-up for female television presenters. Some officials even promote the old Shia Muslim institution of temporary marriage as an alternative to illicit Western-style out-of-wedlock relationships. Conversation in middle-class households often revolves around visa and immigration applications.

Shades of green

In any event, despite this month’s efforts, the protests have lost some of their dynamism. Government propagandists depict the green movement as a busted flush. Fear and fatigue partly account for the dwindling number of demonstrators, but so does confusion over the protesters’ aims and capacity. In the words of a Tehran housewife, “The trouble is, the opposition is not agreed on what it wants.”

In the election’s aftermath, the movement had an attractively simple goal: to replace Mr Ahmadinejad with Mr Mousavi. The protests shrank when it became clear that the supreme leader, who has the last word on all state matters, would protect his president, and when he repeatedly turned overwhelming force against the protesters. Since then the authorities have refrained, despite loud exhortations by extreme hardliners, from arresting Mr Mousavi and a second defeated candidate-turned-opposition leader, Mehdi Karroubi.

Though they have conducted their pro-democracy campaign with tenacity and courage, Messrs Mousavi and Karroubi still proclaim their allegiance to the Islamic Republic, and notably to the “guardianship of the jurist”, the system of clerical rule that Mr Khamenei inherited in 1989 on the death of the regime’s founder, Ayatollah Ruhollah Khomeini. They also express broad support for Iran’s declared goal of self-sufficiency in nuclear fuel, and toe the official line, widely disbelieved in Europe and America, that Iran is interested solely in producing power for civilian use, not for nuclear weapons. But as the thwarted candidates’ backers become more radical, these views on nuclear issues are starting to sound rather quaint.

Enough of the jurist

For those tens of thousands of Iranians, in Tehran and other cities such as Mashhad and Isfahan, who are still willing to risk a truncheon charge or tear gas, not to mention the possibility of arrest and disappearance, the guardianship of the jurist (known in Persian as velayat-e faqih) has outlived its usefulness. When they are out demonstrating, many such people call not only for Mr Ahmadinejad’s head but also for Mr Khamenei’s. The old slogan, “Death to Israel!” has been replaced by “Death to Russia!” and “Death to China!”—allusions to the diplomatic and economic protection Iran enjoys from these two permanent members of the UN Security Council, and to Russia’s rumoured help in training Iran’s security forces in the dark arts of repression and crowd control.

Not long ago, a large majority of Iranians backed Iran’s nuclear programme. The efforts of Messrs Khamenei and Ahmadinejad to portray Western countries as vindictively hoarding technology for themselves and their Israeli clients found an appreciative audience. Some Iranians did not conceal their hope that the Islamic Republic, whatever its public words on the subject, would end up making a bomb.

Eyes wide shut

Though no reliable poll has recently been conducted, anecdotal evidence suggests attitudes on such issues are changing. Those who view Mr Ahmadinejad’s presidency as illegitimate tend to abjure all his policies. Though the supreme leader sets foreign policy, Mr Ahmadinejad has aggressively championed Iran’s pursuit of nuclear self-sufficiency, epitomised by his recent provocative statement that Iran would build ten more uranium-enrichment plants. Nowadays, some opposition people regard a nuclear-capable Iran with scarcely less alarm than Iran’s foreign foes.

A further change concerns the demonstrators’ attitude to violence. At the outset of the protests, many demonstrators saw non-violence as an article of faith. Since then, it has become an expedient but far from indispensable tactic. One middle-class Tehrani, a regular and non-violent marcher, frets for his teenage nephew, who has taken to demonstrating alongside a band of muscular toughs from south Tehran’s poor districts. “My nephew”, he says, “came back from a recent demo covered in blood, but it wasn’t his own. It was the blood of a baseej.” For the moment, younger male protesters arm themselves with bricks, rocks and screwdrivers, but few people would be surprised if more radical groups were stashing away firearms.

The main achievement of Iran’s democracy movement is to have survived. Mr Ahmadinejad, who has a winner’s chutzpah but little of the acumen, has helped. His still sizeable constituency of support, particularly among poorer Iranians, is more than offset by the passionate loathing he arouses in millions of his countrymen. One middle-class Tehran woman says that every time she attends a protest she vows it will be her last. She is unsure of the green movement’s aims and fears being beaten. “But then I see Ahmadinejad grinning on the television and I’m so appalled by him and what he’s done, I can’t bring myself to stop going.”

Moreover, the dictatorship that Mr Ahmadinejad shows every sign of wanting to set up is incompetent and fractured, its ability to make and implement policy increasingly weak. Iran’s prestige rose as America stumbled in Iraq. But talk of its becoming a regional superpower sounds overblown. Partly as a result of American pressure on international financial outfits, Iran is struggling to expand its oil industry. Separatist groups rattle the border provinces of Baluchistan and Kurdistan. Mr Ahmadinejad’s recent tour of South America and Africa showed Iran to be less isolated than the United States and Europe would like it to be. But its key friends, China and Russia, are not known for their constancy.

Indeed, the Islamic Republic may get lonelier now that its leaders have turned down the overtures of President Barack Obama and spurned a multinational proposal that Iran’s low-enriched uranium be turned into fuel rods abroad before being returned for monitored use in Iran—a deal which, its architects hoped, may have led to an accommodation on a range of matters. The president and his allies sounded most eager to cut a deal with Mr Obama but were undermined by internal rivalry and perhaps by the supreme leader himself, who does not hide his loathing of America. Mr Obama has high hopes of persuading China and Russia to harden UN sanctions.

The leaders’ last refuge

Messrs Khamenei and Ahmadinejad, whose denunciations of the West are as strident as ever, may well reckon that increased international pressure on Iran will—as in the past—galvanise Iranians in defence of their regime. But many in the opposition, taking their cue from Mrs Ebadi, now think Iranians will be pushed the other way. She has called for European governments to downgrade relations with Iran. Many of her followers dreaded the sight of Iran and the America achieving a detente that might bolster a regime they are now bent on undermining.

At home, Mr Ahmadinejad’s imperious and vindictive personality has alienated many conservatives, too. During his first term he annoyed parliamentarians, including those sharing his views, so that many proposed laws were blocked or watered down. Last week, they irritated the president by introducing a raft of amendments to a bill to phase out costly subsidies. For instance, Mr Ahmadinejad has tried in vain to seize control of Tehran’s underground railway from an ambitious and well-regarded mayor.

The president is also distrusted by some of Iran’s grandest ayatollahs. They are painfully aware of the damage months of repression have done to the Islamic Republic’s claims to moral rectitude.

Mr Ahmadinejad’s consuming vendetta has been against Akbar Hashemi Rafsanjani, a former president who remains rich and influential. The president and his allies regularly impugn Mr Rafsanjani’s integrity and that of his children, one of whom happens to run the Tehran metro.

True to his reputation for wilfulness, Mr Ahmadinejad seems to have turned a deaf ear to Mr Khamenei’s request that he lay off Mr Rafsanjani, who remains a firm if undeclared supporter of the opposition movement. Mr Rafsanjani’s daughter, a former parliamentarian, was cheered when she appeared among the demonstrators on December 7th.

He won’t drop his guard

For the moment, Mr Ahmadinejad seems secure. The supreme leader has linked his destiny to his president’s, perhaps judging that to accede to the opposition’s demands would encourage scrutiny of his own unaccountable powers. The pair share a power base among the Revolutionary Guard and its underlings, the baseej. The guard has benefited greatly. Under the complaisant eye of Mr Ahmadinejad, a former guardsman, it has won a big, even dominant, place in the economy.

The Revolutionary Guard signalled its aggressive interest in business back in 2004, during the presidency of Mr Ahmadinejad’s reformist predecessor, Muhammad Khatami, when its people seized Tehran’s new airport from the government. Mr Karroubi, then parliament’s speaker, caused a stir when he complained of the traffic of contraband through unregulated, guard-controlled jetties.

Since then, particularly since Mr Ahmadinejad came to power, the Revolutionary Guard has built an empire that encompasses oil and gas, construction, food production and clinics. In October a consortium controlled by the guard bought 51% of Iran’s telecoms monopoly. The central bank has allowed a guard-owned finance company to set up a bank.

So is Mr Ahmadinejad set fair for the next three-plus years in power? He may yet reckon that his plan to phase out subsidies, assuming it is implemented, will free him to direct more aid at his own, poorer supporters. But sceptics say inflation will gallop if the scheme goes awry.

For Messrs Khamenei and Ahmadinejad, their immediate task, made more urgent by the demonstrations of December 7th, is to end the protests and, with them, a perception of their own impotence. Now, on the eve of the mourning month of Muharram, when mass open-air parades may be a pretext for more demonstrations, Mr Khamenei’s advisers may well be urging him to shed more blood and also to arrest Mr Mousavi or Mr Karroubi or both.

But this might not work. A massive show of violence could suggest panic in the corridors of power, and could bring more people onto the streets. The movement does not need Mr Mousavi or Mr Karroubi to survive. In the words of Mohsen Armin, an influential reformist who backs Mr Mousavi, “No one is controlling the street protests.”

Having previously played their hand quite skilfully, the Islamic Republic’s leaders face an acute dilemma. Each act of brutality, though perhaps effective in the short run, erodes the credibility of a regime that prides itself on being close to God. Each time the security forces arrest more people or inflict cruelties behind the doors of Iran’s prisons, more and more people are confronted by the ugly face of the Islamic Republic fighting for its survival.

So the protests go on. In the taunting words of Mr Mousavi, “In the streets, you are fighting with shadows. And your ramparts are collapsing, one by one, in the hearts of the people.”

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Full article and photos: http://www.economist.com/world/middleeast-africa/displayStory.cfm?story_id=15065598&source=hptextfeature

A Hulu for print

Magazines take on Amazon

Magazines attempt to win back control of their digital editions

LET it never again be said that old-media firms are slow to deal with new technology. On December 8th Condé Nast, Hearst, Meredith, News Corporation and Time Inc invested in an as-yet-unnamed venture that will create and sell digital magazines and newspapers for the new generation of e-readers that is likely to succeed Amazon’s monochrome Kindle in the next year or so. It was as if a group of explorers had announced plans to settle a country that had not yet been discovered.

Consumers can already get hold of many publications on smart-phones and e-readers. But smart-phones have small screens, and e-readers render magazines as crudely illustrated black-and-white books. They cannot reproduce magazines’ distinctive fonts or elegant graphics. Worse, they are unsuited to advertising, on which most magazines depend. In the year to June, Meredith’s publishing arm, which produces Better Homes and Gardens among dozens of other titles, made almost twice as much from advertising as it did from newsstand sales and subscriptions.

Publishers are irked at the prospect of formatting content for multiple devices with slightly different requirements—a problem that will worsen. They are even more irked at the current market leader, Amazon, which returns as little as 30% of the sale price of a digital magazine to publishers and provides less detail about customers’ reading habits than they would like. Publishers who want to go digital currently have a choice between the open internet, which generally provides revenue from advertising (but not much) and no subscriptions, and e-readers, which provide revenue from subscriptions (but not much) and no advertising.

The consortium plans to develop software that can be used to create digital publications for a wide range of devices. It will also set up a storefront similar to iTunes, Apple’s online music outlet. This will not be restricted to the consortium’s publications, nor will it be the only way to get hold of them. Condé Nast is already working with Adobe to develop software of its own for advanced e-readers. Hearst, another member of the consortium, has a start-up called Skiff. How the new venture’s efforts will mesh with these other projects is not yet certain. Yet the destination is clear, says John Squires of Time Inc, who will manage the consortium at first. His company has produced a mock-up of an edition of Sports Illustrated, complete with video and interactive ads, which provides a compelling, if hypothetical, glimpse into the future of magazines.

In important ways the consortium resembles Hulu, an outfit Mr Squires praises as “artful”. Hulu’s website streams television programmes from three of America’s four big English-language broadcasters, as well as a few pay-television shows. It has no sneezing pandas, tedious home-made tirades or any of the other detritus with which YouTube is filled. Hulu is popular with both consumers and companies, which pay stiff rates to place advertisements in its programmes (it helps that Hulu does not yet run many ads). As with the magazine consortium, media companies own equity stakes in Hulu.

This model is spreading. On the very day the publishers agreed to set up their venture, record companies launched a Hulu of sorts for music videos in America. Vevo is partly owned by Universal and Sony and licenses other content from EMI. Although it is run in conjunction with YouTube, it is intended to be a separate, cleaner world. Such is the evolving wisdom for traditional media firms that want to engage with digital technology: put some distance between your content and the dross, and make sure you have a stake in any new outfit that appears.

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Full article: http://www.economist.com/businessfinance/displayStory.cfm?story_id=15065491&source=hptextfeature

Poem of the week

The Complaint of Chaucer to His Purse

This week, Chaucer confronts his medieval financial crisis with a light-hearted but earnest plea to his patron

Anglo-Saxon Pennies

Chaucer feels the pinch … Medieval pennies.

How’s your Middle English? Here’s an opportunity to brush it up as we dip into an empty purse belonging to Geoffrey Chaucer.

“Fortunately,” says Kathryn L Lynch, the editor of Dream Visions and Other Poems (Norton, 2007), my source for the text, “Middle English can be understood without comprehensive grammatical instruction.” Chaucer used the London dialect, she explains, which evolved into and became, after c1500, Modern English, so it’s really not too difficult, even without the glossary that our kindly editor adds, and which I have abridged below.

The Complaint of Chaucer to His Purse is probably the last poem Chaucer wrote. Framed initially as a love-poem to the purse in question, its purpose is to persuade King Henry IV (1367-1413) to renew the poet’s annuity. The highly unified rhyme-scheme lends an appropriately sing-song insistence to the beseeching voice.

Chaucer was in fact the first English poet known to have worked in Rime Royal, and he did so widely, in his longer poems as well as his lyrics. The form is probably Italian in origin. The interlocked version of the rhyme-scheme, as used here, is not easy to sustain in English, even with the flexibility poets of Chaucer’s time allowed themselves. Each stanza of the Complaint picks up the same rhyme-sounds, allowing for what are, one may guess, eye-rhymes:- companye and curtesye. The form also demands a refrain-line, woven in syntactically to create the last line of each stanza. Here, it’s the repeated plea, “Beth (be) hevy ageyn or elles mot (must) I dye.”

Chaucer’s touch is light and so, in part, is his tone. The witty word-play and enjoyment of paradox prefigure the Metaphysicals. Even the refrain-line asks to be read as hyperbole – after all, the addressee is merely a purse, who has no agency at all to become heavy by itself and save its owner from starvation.

It’s in the envoi (“Lenvoy de Chaucer”) that the poem acquires a more solid, earnest tone. Chaucer seems to want to display his learning, perhaps as a sound basis for his flattery. Directly addressing the King, he praises him as the descendent of Brutus (legendary founder of Britain), and rightful and true (“verray”) occupant of the throne. “Have minde upon (consider) my supplicacioun” is the humble final plea. It’s as if the poet had dropped to his knee and bowed his head. The joke’s over, he really needs the dosh. Most of us can sympathise with that at the present time, can’t we? Happily for Chaucer, his Complaint did the trick.

Of course, this is a minor, occasional poem, for all its dexterity and grace. We need to go to the long poems, The Canterbury Tales, in particular, to appreciate the full multi-coloured, poly-vocal glory of Chaucer’s genius. It’s many years since I read the whole Tales from cover to cover. The fact that it’s an A-level set text, I am sure, has something to do with this, though, let’s be honest, linguistic laziness might also be involved. So, if you’re in the same boat, limber up for the epic marathon by reading aloud the short poems like the Complaint. The Canterbury Tales, Troilus and Creseide and The Book of the Duchess, are great medieval works of fiction.

The Complaint of Chaucer to his Purse

To yow, my purse, and to noon other wight
Complaine I, for ye be my lady dere.
I am so sory now that ye be light,
For certes but if ye make me hevy chere,
Me were as leef be leyd upon my bere,
For which unto your mercy thus I crye
Beth hevy ageyn or elles mot I dye.

Now voucheth-sauf this day er it be night
That I of yow the blisful soun may here,
Or see your colour lyke the sonne bright
That of yelownesse hadde never pere.
Ye be my lyf, ye be myn hertes stere,
Quene of comfort and of good companye,
Beth hevy ageyn or elles mot I dye.

Now purse that been to me my lyves lyght
And saveour as doun in this worlde here
Out of this toune help me thurgh your might
Sin that ye wole nat been my tresorere
For I am shave as nye as any frere;
But yet I prey unto your curtesye,
Beth hevy ageyn or elles mot I dye.

Lenvoy de Chaucer

O conquerour of Brutes Albyoun
Which that by line and free eleccioun
Been verray king, this song to yow I sende,
And ye that mowen alle oure harmes amende
Have minde upon my supplicacioun.

Abridged glossary
“Me were as leef” = “I’d just as soon”
Pere = peer, equal
Stere = rudder
Toune = town, “probably Westminster, where Chaucer had taken refuge (perhaps from his creditors) in a house in the abbey grounds.” (KLL).
Tresorere = treasurer
Frere = friar (Chaucer is saying that he has as little money as a tonsured friar has hair).
Mowen = May

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Full article and photo: http://www.guardian.co.uk/books/booksblog/2009/feb/02/complaint-chaucer-purse-poetry