What if Roubini's Right: A Thought Experiment

Nouriel Roubini, known as Dr. Doom, is a renowned economist. He made a name for himself by predicting the mortgage, financial, and oil crisis currently going on.

"In 2005 Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage."[1] In September 2006, he warned to a skeptical IMF that: "The United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining
consumer confidence, and, ultimately, a deep recession."[2]

He also foresaw "homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt". The New York Times labeled him "Dr. Doom", whereas, in hindsight, IMF economist Prakash Loungani has called him "a prophet".[2]

Now, the same Roubini is predicting a dollar carry trade bubble.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.

Let us sum up: traders are borrowing at negative 20 per cent rates to invest on a highly leveraged basis on a mass of risky global assets that are rising in price due to excess liquidity and a massive carry trade. Every investor who plays this risky game looks like a genius – even if they are just riding a huge bubble financed by a large negative cost of borrowing – as the total returns have been in the 50-70 per cent range since March.

Roubini believes that the weak dollar has been fueling a rush to risky assets as investors try and take advantage of a weak dollar. Roubini specifically identifies "risky global assets". Risky global assets are especially plentiful in the third world and the developing world.

In other words, domestic investors are borrowing at cheap domestic rates, moving out of dollars, and going into the third world with the potential of massive returns. One important characteristic of any bubble is the presence of a stimulant outside of fundamentals. In this case, the stimulant is the weak dollar itself. So, investors aren't making massive bets in the third world necessarily because of the fundamentals, but rather, because they're taking advantage of the weak dollar. So, once the dollar strengthens, they'll move out and back into dollar assets.

So, what we'll see is the rapid investment into the developing world and then that investment will move out, and the bubble will burst. Now, the U.S. has had its fair share of bubbles. They're difficult even at their mildest. Looking back, 2001-2003 was a relatively mild recession following the internet bubble. Yet, while it occurred, there was plenty of pain. In the third world, bubbles are much rarer since they don't experience as many booms.

Roubini isn't merely calling for a dollar carry back asset bubble but the MOTHER OF ALL dollar carry back asset bubbles. That means that third world economies will see economic pain on scales we've never seen before. After experiencing growth that will give their populations hope, they'll experience pain on scales they thought they'd never see again.

We often look at economics strictly economically. There is however a cultural, societal, and geopolitical aspect that is often overlooked. A massive bubble that hits the third and developing world all at once would lead to a sort of geopolitical instability that's frightening. In those nations, economic pain leads to coups, governments falling, and dictators rising.

Since this bubble's nexus will be tracked to a weak dollar, tracked to U.S. policy, you can bet that despots and opportunists will use the crisis to blame America. So, what we will have is a dictatorial takeover all over South America, some parts of Asia, and parts of Africa. Anti American depots and opportunists will look to use the crisis to support leftists to fill the vacuum for falling governments all over the world.

There will of course be plenty of civil wars. That's what happens in conjunction with falling government, often, in the third world. We'll see death, looting, and mass chaos all over the place. This will also give opportunities for terrorists and other American enemies like Hugo Chavez, Russia, and Iran to install governments sympathetic to their beliefs.

Chavez will almost certainly be the big winner in South America in such a scenario. He, more than anyone else, would ride the Anti American card as developing countries have their governments fall. Africa would see multiple civil wars all at once. Parts of Asia will have their governments fall. In the geopolitical climate that will likely be in place before all this, this sort of scenario is a recipe for disaster.

Navigating Foreign Policy in a World of Bad Actors

When I first heard about the coup in Honduras, I immediately thought of something that Bill O'Reilly once said. He covered the war in El Salvador. He said that when he speak to common folk in El Salvador, they told him both sides, the military lead government and the leftists militias, were rotten to the core. The outbreak in Honduras has immediately turned partisan. Supporters of the president also now support deposed leader Manuel Zelaya. Here's an example of that support from the Huffington Post.

Viewed from a distance, the streets of Honduras look, smell and sound like those of Iran: expressions of popular anger - burning vehicles, large marches and calls for justice in a non-English language - aimed at a constitutional violation of the people's will (the coup took place on the eve of a poll of voters asking if the President's term should be extended); protests repressed by a small, but powerful elite backed by military force; those holding power trying to cut off communications in and out of the country.

These and other similarities between the political situation in Iran and the situation in Honduras, where military and economic and political elites ousted democratically-elected President Manuel Zelaya in a military coup condemned around the world, are obvious.

Meanwhile, conservatives have called the coup totally legal and necessary. They have taken defending most of the actions of the new government. The fact is this. Military stormed the quarters of the leader of the nation and arrested him at gun point in the early morning. To not see that this is wrong is to be willfully blind. Furthermore, these same folks are now cutting off television signals, detaining journalists, and imposing martial law. These are not necessarily nice folks.

Of course, Maneul Zelaya is far from a good guy himself. This all started when attempted to move forward with an election the Supreme Court had ruled illegal. He has alligned himself with Hugo Chavez and he was clearly on the road to a leftist dictatorship.

So, what does President Obama do? He had three options. The first was to declare this an internal issue and distance himself. This was a long term untennable stance. At some point, he would either have to recognize the new government, and inherently support the coup, or to cut diplomatic ties, and inherently make it illegal. The other two options were to support the coup or Zelaya.

Obama, of course, chose the third option. The first problem with Obama's decision is that he made an absolute moral stance. This situation has no absolute morals. In Obama's view, coups are inherently evil and thus, we must oppose this coup. What about the rise of leftist dictators? Aren't those equally as evil?Why wouldn't we oppose the rise of another leftist dictator?

Furthermore, he has condemned the coup without condemning the actions of Zelaya that lead to the coup. If the coup is "illegal", how does President Obama view a leader that ignores the ruling of the highest judiciary?

The second problem is that he has alligned himself with someone that gives America no strategic value. In fact, all this does is strengthen the hand of our enemy, Hugo Chavez. In El Salvador, the U.S. wound up supporting the military government not because they were beacons of goodness, but because they were the enemy of our enemies, the leftists. We have the same situation here. The new government is not a beacon of goodness, but they are opposing a leftist alligned with Hugo Chavez. There are no good options, but ultimately, the enemy of my enemy is my friend. President Obama chose the wrong side.

What Now of Our Policy in South America

President Obama just laid down the marker today regarding Honduras. (h/t Hot Air)

The president called the coup "illegal" and said the U.S. continues to recognize deposed President Manuel Zelaya the leader of Honduras. Now, if we are to follow this to its logical conclusion, then this means that we won't recognize the new government. That means we would have to remove our ambassador from the nation. We'd cut off aid and all diplomatic ties. As such, we would wind up with more diplomatic ties with Venezuela than with Honduras.

More importantly, the United Nations, the Organization of American States, and the United States have all not only condemned the coup but also continue to recognize Zelaya. How long can the new government survive with all of these groups refusing to recognize it? What will happen once the government falls? Most likely, Zelaya will regain power. Then, he will impose another term and eventually lifetime rule.

Then, you create a leftist axis in Venezuela, Cuba, Honduras, Nicaragua, and Bolivia. Our ally in the region, Colombia, has far more leftist dictators to deal with. So, where does that leave our policy in South America? Are we still going to engage with Venezuela? A coup is something you don't necessarily want to make a habit of support, but in this case, a leftist leader trying to be a dictator is even worse. By taking sides with Zelaya, we help to secure yet another dictatorship in an area in which democracies are in an ideological battle with Socialist dictators. Which side are we on exactly?

Obama, Iran, and Honduras

I am trying not apply cynical and disturbing motivations to Obama's disjointed foreign policy but it's really hard when you look at the situations in Iran and Honduras. So, rather than getting inside his head, I will simply lay out the facts.

In Iran, there was a sham election. Despite record turnout, the results were announced about four hours after polls closed. Iran has no machine ballots nor exit polling. As such, these results would have had to have been hand counted. Even though everyone expected a very close election, Mahmoud Ahmadinejad was announced to have won overwhelmingly.

Then, supporters of the opponent, Al Mousavi, took to the streets in mass protests. The protests were eventually put down, often violently. The opposition candidate doesn't appear to be free to move. Many protestors have been beaten, jailed, and even murdered. Meanwhile, the ruling elites have declared the election valid and call this the final word.

Here, President Obama has been very careful with his words. He has insisted that he doesn't want to meddle. His language has been very even handed. He once pronounced that there was little difference between Ahmadinejad and Mousavi. He has repeatedly referred to the election and its aftermath and "internal Iranian matter".

Meanwhile, in Honduras, the President, Manuel Zelaya, was attempting to run for office one more time despite being at the end of his final term. He called for a national referendum to put it to the voters. Yet, according to the Supreme Court of Honduras, this move is unConstitutional. They declared as such. Despite the ruling of the Supreme Court, Zelaya went ahead with the referendum. When the military refused to set up balloting stations, he fired most of the heads of the military.

When Zelaya insisted on moving ahead with the referendum despite the ruling of the Supreme Court, the Supreme Court issued an arrest warrant. The military followed through on their order. Then, the Congress declared that Zelaya was no longer the President and installed a new one, Roberto Micheletti.

Now, some in the conservative media have already taken to siding with the Congress and the Supreme Court. I'm more skeptical. Often in cases like this, there are no good guys. There are only different sorts of bad guys all vying for power.

That said. If President Obama felt that he shouldn't meddle in Iran, he certainly shouldn't be meddling here. The last thing anyone needs is for the world to think that this is being orchestrated by the U.S. Yet, not only was he meddling, but they've been meddling for weeks.

The Obama administration and members of the Organization of American States had worked for weeks to try to avert any moves to overthrow President Zelaya, said senior U.S. officials. Washington's ambassador to Honduras, Hugo Llorens, sought to facilitate a dialogue between the president's office, the Honduran parliament and the military.

The efforts accelerated over the weekend, as Washington grew increasingly alarmed. "The players decided, in the end, not to listen to our message," said one U.S. official involved in the diplomacy. On Sunday, the U.S. embassy here tried repeatedly to contact the Honduran military directly, but was rebuffed. Washington called the removal of President Zelaya a coup and said it wouldn't recognize any other leader.

Furthermore, the statements coming out of the White House regarding Honduras are significantly less equivocating.

We call on all parties in Honduras to respect the constitutional order and the rule of law, to reaffirm their democratic vocation, and to commit themselves to resolve political disputes peacefully and through dialogue.

I am having an awful lot of trouble squaring these two situations without becoming cynical and frankly frightened by our foreign policy. In Iran, there was a popular and peaceful uprising that demanded fair and honest elections and an end to tyranny. In Honduras, the President ignored the Supreme Court and moved forward with a referendum that very Supreme Court deemed un Constitutional. As such, both the Supreme Court and the Congress acted in conjunction with each other. The president saw the situation in Iran as one he needed to maintain a passive and even handed approach to. Meanwhile, in Honduras, he sided with the President, and he meddled both in words and deeds. It's even more disturbing when you add that Zelaya is a leftist alligned with Hugo Chavez. Exactly, which side is our president on?

Coup in Honduras

This morning, in a daring pre dawn raid, the President of Honduras, Manuel Zelaya, was arrested by military force and forced into exile in Costa Rico. The Congress then elected its leader, Roberto Micheletti, to replace Zelaya. The military acted on the order of the Honduran Supreme Court.

The whole dispute started when Zelaya attempted to serve another term in office. He was about to finish his constititutionally mandated final term next year. He wanted to serve another term. As such, he planned on having a referendum allowing him to serve another term. His opponents said that a referendum was not the Constitutionally prescribed way to allow him to serve another term.

As such, the military not only began opposing Zelaya, but the referendum. As such, his Defense Minister, Edmundo Orellana, was removed and so was General Romeo Vasquez, the head of the armed forces. Meanwhile, the heads of the army and marines resigned in protest.

Then, two days ago, the Honduran Supreme Court ruled the referendum unconstitutional. The President, Manuel Zelaya, went ahead with the referendum even though the military, the judiciary and the legislature were now all against him. Then, this morning, the Supreme Court ordered an arrest warrant for the President.

Zelaya is a leftist and an ally of Hugo Chavez. He was, at least in the opinion of his opponents, attempting to turn the country into a dictatorship much like Chavez has in Venezuela.

Meanwhile, the U.S. worked behind the scenes for the last couple days to stop the coup. (H/T to Hotair

The Obama administration worked in recent days to prevent President Zelaya's ouster, a senior U.S. official said. The State Department, in particular, communicated to Honduran officials on the ground that President Obama wouldn't support any non-democratic transfer of power in the Central American country.

"We had some indication" that a move against Mr. Zelaya was a foot, said a U.S. official briefed on the diplomacy. "We made it clear it was something we didn't support."

Secretary of State Hillary Clinton joined Mr. Obama Sunday in criticizing the Honduran coup and calling for the restoration of the democratic process.

The President is calling on all sides to "respect Constitutional order". Television stations aren't working today and power is out in many parts of Honduras. It goes without saying that the situation remains "fluid".

The Hubris of Humility

In last night's talking points memo, O'Reilly did a fine job of describing President Obama's strategy so far in foreign policy.

In Europe, Mr. Obama went out of his way to tell the world how he is going to correct what he believes were the mistakes of the Bush administration

...

The Obama strategy is to clear the decks of any anti-Bush hostility and present a new day dawning. He wants to make the nations of the world our partners in problem solving, and if he has to eat a little crow to do that, he'll butter up the bird.

Of course, while former President Bush is the biggest recipient of his ire, the current president is in fact criticizing our modern day foreign policy in general. After all, as he once said

too often we dictate the terms of the debate

and

we speak when we should listen

He will turn the page not only the wrongs of President Bush, but on all the wrongs of America. He will listen. Listen he did. He listened for nearly an hour while Marxist Daniel Ortegan went into an anti American diatrobe and said nothing. Later on, he only mused that he was glad that Ortega didn't blame him (President Obama) for things that happened when he was very young. That was rather revealing. The president wasn't terribly concerned if Ortega blamed his country, just not him personally.

President Obama will have a new sort of a foreign policy philosophy. This starts with a whirlwind tour in which he apologizes for every previous American wrong, real and imagined, all over the globe. It started in Europe, move to Mexico, and hat its latest stop in Trinidad and Tobago. What is the effect? Well, his advisor, David Axelrod, summed it up.

What’s happened is anti-Americanism isn’t cool anymore,” Mr. Axelrod said, speaking to an audience of a few hundred at a conference in Washington sponsored by the Religious Action Center of Reform Judaism.

“This president has not only engaged the leaders of the world, he’s engaged the people of the world,” Mr. Axelrod said, arguing that Mr. Obama’s approach to foreign policy has restored “a sense of humility” that “was missing” in the past.

He's right. It isn't cool to bash America anymore. After all, why bash America, when its leader beats you to it. It is an old trick. Beat your critics to the punch. Before they have a chance to bash you, you bash yourself. It's the best part of self deprecating humor.

There's a bit of irony in all of this. President Obama is convinced that America has been doing it wrong all this time. America has been far too arrogant. It's time for more humility and he's just the one to do it. In fact, the only real arrogance is his own. He isn't merely bashing President Bush's foreign policy but America's in general in our recent history, all the way back to JFK. This nation, which brought freedom and democracy to millions in multiple continents, is the one that has been getting it wrong all this time. It's his job to fix it all. Job one is telling the rest of the world about each and every mistake. Job two is taking seriously the views of each and every tyrant and despot that has a beef with us.

Of course, so far at least, all of this "humility" has given us absolutely nothing tangible. We got no troops in Afghanistan. We got nothing of substance on North Korea. Iran put an American in prison for years on trumped up charges. His supporters continue to say that these things take time. That's true. His presidency has a lot more days left than days past. Maybe, we, critics, are wrong. Maybe after some more buttering up soon everyone will come to work with him constructively. They just haven't yet. I'd just like to know how much time he needs. At what point will he see that maybe, just maybe, his approach is wrong.

For me, it's rather simple. What sort of arrogance can be behind a belief that hundreds of years of history is wrong while your own view point is right. If America is so wrong, why are we more often than not on the right side of history? if we are on the right side of history more often than not, maybe that's what you tell the rest of the world rather than focusing on each and every mistake. That's what I would have told Ortega, but then again, my view of foreign policy isn't nearly is humble as the president's.

The Handshake II: the Propaganda Boon and Nightmare

Following their embrace last night, Hugo Chavez saw another opportunity for a propaganda boon this morning.






Jake Tapper is reporting that the book that Chavez gave President Obama the book, Open Veins of Latin America: Five Centuries of Pillage by Eduardo Galeano. It's a book that essentially blames U.S. imperialism for every problem in Latin America, and to add insult to injury, the book is in Spanish, a language the president doesn't speak.



The video has become an instant sensation, but the propaganda value is only the latest in a string of propaganda coup for Chavez at this conference. The photo of the leaders taken last night was instantly posted in the web by the Chavez administration. The photo of the two men shaking hands enjoyed the top billing, page 1 above the fold, in the New York Times today. Now, the speculation is that relationships between the two nations are "thawing".



The White House has been busy downplaying the two handshakes, but the propaganda value has been maximized by Chavez. Chavez is already claiming that Obama initiated the handshake. The images have been broadcast the world over, and as such, Chavez gains not only much needed attention but credibility.



Hopefully, this will teach the president a valuable lesson of caution when deciding to meet with thugs and tryants. He has given the enemy much unnecessary leverage. This was a chance meeting at a conference. What kind of propaganda value would Obama give our enemies if the meeting was scheduled?

This Photo Op Will Reverberate Everywhere

I have said over and over that President Bush's biggest foreign policy error was ever trusting Vladimir Putin. He allowed that tyrant his trust. He gave him several powerful photo ops. Putin repaid Bush's trust by turning a budding democracy into a near totalitarian state. When this phot op was created for Bashar Assad.

Within weeks, Assad turned up the heat and he began to crack down on his critics throwing significant numbers of political opponents in jail in a way that he hadn't before this photo was taken. The legitimacy that this photo and the meeting created gave him the leverage he needed to crack down on his opponents in a way he wasn't before the meeting.

Now, we have another photo op that will strengthen our enemies, weaken our friends, and it will likely lead to a crackdown on dissidents of an oppressive regime.

This embrace will give Hugo Chavez a legitimacy that he desperately needs. That legitimacy gives him more leverage in the region. There is a power struggle in South America between the faction lead by Chavez and other socialists in coutries like Bolivia and budding democracies lead by our allies in Colombia.

Such an embrace also sends the signal that you need not reform or end tyranny to be legitimized by America. Totalitarians all over the world are rejoicing because America just said with this handshake that they don't need to change and they will be recognized as equals by America just the same. Stay tuned, we will likely give the same kind of treatment to Mr. Castro. After the bow to the King of Saud, this continues a symbolism of respect to despots and tyrants all over the world. You can bet that this photo will be used by anti America media all over the world to legitimize this tyrant.

In geopolitics, symbolism is awfully important and this sends the worst kind of symbol.

The Clinton Convention

Dick Morris will endear himself to all conservatives with his latest column.

Hillary and Bill have hijacked the Denver convention, making it into a carbon copy of what it would have looked like had she won until the last possible moment. By the time Obama gets up to speak and put his stamp on the convention, Hillary will have had one prime time night all to herself. Bill will have pre-empted a second night. Hillary will have had all the nominating and seconding speeches she wants. And the roll call of the states would record, in graphic detail, how the voters of state after state rejected Obama’s candidacy in the primaries. Only then, after three and a half days of all Clinton all the time will the convention then, finally, turn to its nominee and allow him to have an hour in the sun!

Now, Morris goes onto point out that Hillary will speak one day, Bill will speak another, and Obama even allowed Hillary's delegates to count. Worse than that, in the view of Morris, is that Hillary did this with ABSOLUTELY NO LEVERAGE. It's what Morris says next that will likely be quoted by conservatives like myself ad nauseum...

This Clintonian tour de force raises a key question about Barack Obama: Is he strong enough to be president or can he be pushed around? His failure to stand up to the Clintons makes one wonder how effective he will be against bin Laden, Iran, Chavez, or Putin.

...

His weakness, if the face of the Clinton demands coupled with his refusal to debate McCain in the town forum meetings raise the question of whether he is tough when the teleprompter is turned off. Why is he afraid or unwilling to do tough interviews? It is not enough for him to say that he is the front runner and ask why he should risk such confrontations. In case he hasn’t noticed, he’s not the front runner. The tracking polls all suggest a tied race where taking certain risks would be reasonable, unless his handlers worry about his vulnerability in difficult or extemporaneous situations.

Is an unscripted Obama a pushover? Will foreign leaders conclude that he is not up to the job, just as Khrushchev did with JFK at his 1961 Vienna summit that presaged the Cuban Missile crisis? If he does so poorly in negotiating with the Clintons, how will he do with the Russians?

Now, it is rather provocative to say that Barack Obama would fold like a lawn chair to the likes of Vladimir Putin and Hugo Chavez because, in the name of party unity, he caved to Clinton. Of course, Morris raises an interesting concern. Foreign policy negotiations are extremely sophisticated. Barack Obama has absolutely zero experience in it. If he can't negotiated the best deal for himself during his own nominating convention, how will he negotiate with Putin and Chavez.

Fortunately, in my opinion, if Morris is right, we will never have to worry. If, in fact, Morris is right, and Obama has turned this into the Clinton convention, then that will deflated Obama when he should get a bounce. If the Democratic Convention really does become Clinton centric, then it will be an utter disaster for Barack Obama. If it is, he will lose momentum, votes, and ultimately the election.

Of course, if Morris is being overly provocative, then we won't see such a disaster. I guess the last week in August will tell the tale.

Bush Responsible for Chavez Coming to Power?

According to these comments Barack Obama, President Bush is responsible for the vacuum that lead to Hugo Chavez coming to power. Here is the relevant portion...

No wonder, then, that demagogues like Hugo Chavez have stepped into this vacuum. His predictable yet perilous mix of anti-American rhetoric, authoritarian government, and checkbook diplomacy offers the same false promise as the tried and failed ideologies of the past. But the United States is so alienated from the rest of the Americas that this stale vision has gone unchallenged, and has even made inroads from Bolivia to Nicaragua. And Chavez and his allies are not the only ones filling the vacuum. While the United States fails to address the changing realities in the Americas, others from Europe and Asia – notably China – have stepped up their own engagement. Iran has drawn closer to Venezuela, and just the other day Tehran and Caracas launched a joint bank with their windfall oil profits.

Of course, Chavez came to power in an election in 1998. I am reminded of the line by Tom Cruise' character in A Few Good Men

maybe if we work really hard, we can get Dawson (or in this case Bush) charged with the Kennedy assassination

I think if the Democrats work really hard soon they can get their followers at least to believe the Kennedy assassination is Bush's fault as well. I suppose that face to face meetings with Chavez and rejecting free trade deals with friends in the region like Colombia is the way to make sure that tyrants like Chavez don't come to power.

Dick Morris in Bolivia: Struggling for Independence

Last night, Dick Morris joined H&C from Bolivia. Morris is down there trying to help eastern provinces, Beni, Pando, Santa Cruz and Tarija gain their independence from the leftist government.

Bolivia's leader, Evo Morales, is a well known ally of Hugo Chavez in the region. (in fact, Venezuela gives Bolivia 100 million dollars yearly in aid) While Bolivia's economy has gone through a period of privatization over the last twenty years, it continues to be largely influenced by socialism. Now, it seems that a confrontation between four Eastern provinces and the Morales government is coming to a head.

differences with the four provinces, where officials approved statutes last week that would give them control over petroleum royalties and other functions, such as creating their own police forces.

After these provinces took steps to create more autonomy in their own regions, the Morales government responded by amending the Constitution...

acknowledged that the dispute had intensified after his supporters approved a controversial draft constitution.

Still, Mr. Morales said he believed that the constitution, which would bolster indigenous rights and dismantle large landholdings in eastern Bolivia, was legitimately approved despite a boycott of the vote by the political opposition and the abrupt transfer of the constitutional assembly to Oruro, a Morales bastion in the western highlands.

While this referendum must still pass through the national referendum, tensions are quite high. The context of this dispute is quite complicated. First, Morales is of Aymara descent,

a native ethnic group in the Andes and Altiplano regions of South America; about 2.3
million live in Bolivia, Peru, Northern Chile, and Northwestern Argentina (in particular in Salta Province). They lived in the region for many centuries before becoming a subject people of the Inca, and later of the Spanish in the 16th century

This makes Morales the first indigenous leader of Bolivia. His sharp anti American rhetoric make him a lightning rod. For instance, here is how he described the American economy...

The worst enemy of humanity is U.S. capitalism. That is what provokes uprisings like our own, a rebellion against a system, against a neoliberal model, which is the representation of a savage capitalism. If the entire world doesn't acknowledge this reality, that the national states are not providing even minimally for health, education and nourishment, then each day the most fundamental human rights are being violated.

As such, he has moved aggressively to nationalize many vital industries most notably natural gas.

As of May 1, 2006, President Morales signed a decree stating that all natural gas reserves were to be nationalized: "the state recovers ownership, possession and total and absolute control" of hydrocarbons (Bolivia has the second largest resources of natural gas in South America — 1.38 trillion cubic meters — after Venezuela). He thus put to some effect his electoral promises made during the various Gas Wars, declaring that "We are not a government of mere promises: We follow through on what we propose and what the people demand."

The area which the four "rogue" provinces are located on is rich in natural gas. Morales' drive to nationalize the industry also creates a situation in which their fruitful natural resource is rendered to a central government that the provinces don't believe is looking out for them. Morris has allied himself with these provinces and no doubt this story is constantly evolving.

There is more at stake than whatever internal domestic issues this addresses in Bolivia. In Venezuela, there was also nearly a grass roots uprising when Chavez closed down a television station. If this particular uprising is successful it may signal that Chavez' brand of leftism is dying in the region and that the folks in the region are rejecting their demagoguery. Here enters Dick Morris who has allied himself with the four provinces seeking their independence. This story is sure to evolve over the next several months and I will track it.