Chavez meets Ahmadinejad in Tehran – 1 Jul 2007
Hugo Chavez, the Venezulan president, has told Iranian leader Mahmoud Ahmadinejad that their two countries should “join to defeat imperialism”.
Day: July 1, 2007
The Daily Show: Back in Black – Conservative Media (video; Lewis Black)
By Manila Ryce
Published Friday, June 29th, 2007, 6:11 am
As we’ve been told, “reality has a well-know liberal bias”. Unfortunately, Stewart’s characterization of a blissfully ignorant Republican mindset is right on the money. To conservatives, anything which contradicts their neatly wrapped concept of the world is part of a vast left-wing conspiracy. As Lewis Black points out, the right creates their own biased media to counter such inconvenient truths.
Black’s money quote: “You know what a fake news show on Fox News should give you? Real news!”
Olbermann: THE HORROR THAT IS RUPERT MURDOCH (videos)
THE HORROR THAT IS RUPERT MURDOCH
JUNE 28, 2007
JUNE 29, 2007
MIKE GRAVEL IN BJORK MUSIC VIDEO
US intelligence czar wants power to snoop on all non-Americans
US intelligence czar wants power to snoop on all non-Americans
Submitted by Canada IFP on Fri, 2007-06-29 16:42
US intelligence czar wants congress to pass a bill that would allow American spies to snoop electronically on non-Americans anywhere in the world by forcing telecommunication carriers to comply in exchange for immunity from prosecution by affected individuals.
“The law needs to be updated so that we can target foreigners, regardless of where [communications are] intercepted in the world, and at the same time, if a U.S. person is ever a subject of surveillance for any reason, it would require a warrant,” Admiral Michael McConnell, the US director of national intelligence said in an interview with Council of Foreign Relation’s Eben Kaplan. “The threat has increased, the intent is stated, and the way the wording in the current law is captured inhibits or prevents us from being successful.”
He also wants Congress to grant immunity against legal action to telephone companies and ISPs who collaborate and cooperate with the United States.
The Intelligence Authorization Act for Fiscal Year 2008 would update the definition of electronic surveillance to cover all forms of telecommunications.
It authority both to force providers to cooperate with authorized intelligence activities, and protect those carriers when they do comply with requests under FISA.
The new bill also redefines the term “agent of a foreign power” to include any non-U.S. persons whom the US Government believes possess significant intelligence information, even if there’s no evidence to substantiate that belief.
If the bill becomes law, the US spies would be able to eavesdrop on foreigners who use US servers for communications, including those who use popular email services such as Google’s Gmail and Yahoo! mail, Internet chatrooms and VOIP services.
Civil rights groups have the FISA “modernisation” bill an attempt by Bush administration to retroactively legitamise President’s illegal wiretapping.
“Congress enacted FISA with the intention of protecting Americans from the very sort of domestic wiretapping the administration has engaged in,” said Caroline Fredrickson, Director of the ACLU Washington Legislative Office. “Amending FISA after the fact would only serve to legitimize and reward the president’s illegal actions. There is no legitimate need to expand FISA and the argument that this law cannot keep up with technology is flatly false. “
The US house of representatives last month passed the Intelligence Authorization Act for Fiscal Year 2008 bill and the bill has been referred to the Senate Intelligence Committee.
But the Committee is unable to proceed as the White House has repeatedly refused to hand over documents related to Administration’s illegal wiretapping.
h/t: ICH
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
US intelligence czar wants power to snoop on all non-Americans
US intelligence czar wants power to snoop on all non-Americans
Submitted by Canada IFP on Fri, 2007-06-29 16:42
US intelligence czar wants congress to pass a bill that would allow American spies to snoop electronically on non-Americans anywhere in the world by forcing telecommunication carriers to comply in exchange for immunity from prosecution by affected individuals.
“The law needs to be updated so that we can target foreigners, regardless of where [communications are] intercepted in the world, and at the same time, if a U.S. person is ever a subject of surveillance for any reason, it would require a warrant,” Admiral Michael McConnell, the US director of national intelligence said in an interview with Council of Foreign Relation’s Eben Kaplan. “The threat has increased, the intent is stated, and the way the wording in the current law is captured inhibits or prevents us from being successful.”
He also wants Congress to grant immunity against legal action to telephone companies and ISPs who collaborate and cooperate with the United States.
The Intelligence Authorization Act for Fiscal Year 2008 would update the definition of electronic surveillance to cover all forms of telecommunications.
It authority both to force providers to cooperate with authorized intelligence activities, and protect those carriers when they do comply with requests under FISA.
The new bill also redefines the term “agent of a foreign power” to include any non-U.S. persons whom the US Government believes possess significant intelligence information, even if there’s no evidence to substantiate that belief.
If the bill becomes law, the US spies would be able to eavesdrop on foreigners who use US servers for communications, including those who use popular email services such as Google’s Gmail and Yahoo! mail, Internet chatrooms and VOIP services.
Civil rights groups have the FISA “modernisation” bill an attempt by Bush administration to retroactively legitamise President’s illegal wiretapping.
“Congress enacted FISA with the intention of protecting Americans from the very sort of domestic wiretapping the administration has engaged in,” said Caroline Fredrickson, Director of the ACLU Washington Legislative Office. “Amending FISA after the fact would only serve to legitimize and reward the president’s illegal actions. There is no legitimate need to expand FISA and the argument that this law cannot keep up with technology is flatly false. “
The US house of representatives last month passed the Intelligence Authorization Act for Fiscal Year 2008 bill and the bill has been referred to the Senate Intelligence Committee.
But the Committee is unable to proceed as the White House has repeatedly refused to hand over documents related to Administration’s illegal wiretapping.
h/t: ICH
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
End the Occupation-An Open Letter to Gordon Brown By PATRICK COCKBURN
June 29, 2007
An Open Letter to Gordon Brown
End the Occupation
Dear Mr Brown:
Peace can only be returned to Iraq by a negotiated end to the occupation and an acceptance by Washington and London that the Shia religious parties, in alliance with the Kurds and influenced by Iran, are going to run the country.
You should take on board simple facts about Iraq that Tony Blair never seemed to grasp. The occupation is disliked by most Shia and Sunni Iraqis and is supported only by the Kurds. When the US and Britain overthrew Saddam Hussein and his Sunni-dominated regime in 2003 they made it inevitable that the majority Shia community would rule and Iranian influence would increase. The contortions of US policy over the past four years are largely a vain attempt to avoid this outcome.
US officials and their Iraqi allies stuck in the Green Zone often take comfort in the fact that many Iraqis want a US pull-out over a period of a year or after Iraqi security forces are ready to take their place. They imagine that this means the Iraqis do not want them to go. The reality is that they do and the continuing presence of foreign forces means the government never learns to stand on its own feet and lives in a dependency culture. Sending in more troops to support a government is like giving a drunk more whisky, as one former senior US intelligence officer said.
The presence of foreign troops and a government dependent on them may delay a final explosion but it makes that final explosion all the more certain. All the talk of creating mixed Sunni-Shia government means stopping any winner emerging in the civil war that has been raging across Iraq since 2004.
The British record in Basra, for instance, has proved more dismal than the US’s in Baghdad. The much-bruited British Operation Sinbad in Basra from September last year until March was talked up by British ministers at the time as an example of how to bring militias under control and strengthen local security forces. A year later it is the Shia militias who rule Basra and the battles between them are about taking over government institutions and resources – notably petrol – out of which they can make money. Racketeers rule the city. British troops are increasingly confined to their compounds and are relentlessly attacked when they leave.
Iraqi politics increasingly resembles Chicago during Prohibition in the 1920s in which criminal mafiosi and politicians are linked together and disputes are settled violently. Turf wars are endemic.
British soldiers now have no role in southern Iraq other than to provide targets. The only reason for them to stay is that the White House does not want to be wholly bereft of allies on the ground, and it would be embarrassing to admit the futility of the British presence over the past four years.
Patrick Cockburn is the author of ‘The Occupation: War, resistance and daily life in Iraq‘, a finalist for the National Book Critics’ Circle Award for best non-fiction book of 2006.
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
The Newest Artificial Intelligence Computing Tool: People
Source: University of Southern California
Date: June 29, 2007
The Newest Artificial Intelligence Computing Tool: People
Science Daily — A USC Information Sciences Institute researcher thinks she has found a new source of artificial intelligence computing power to solve difficult IT problems of information classification, reliability, and meaning.
That tool, according to ISI computer scientist Kristina Lerman, is people, human intelligence at work on the social web, the network of blogs, bookmark, photo and video- sharing sites, and other meeting places now involving hundreds of thousands of individuals daily, recording observations and sharing opinions and information.
[…]
via Science Daily
Time Is Right for New Pentagon Papers By Amy Goodman
By Amy Goodman
truthdig.com
Jun 26, 2007
Of the Democratic presidential candidates, Sen. Mike Gravel is probably the least well recognized. His dark-horse candidacy may be the butt of jokes on the late-night comedy shows, but that doesn’t faze former Pentagon analyst Daniel Ellsberg: “Here is a senator who was not afraid to look foolish. That is the fear that keeps people in line all their lives.”
The famed whistle-blower joined Gravel this past weekend on a panel commemorating the 35th anniversary of the publication of the Pentagon Papers by the Beacon Press, a small, nonprofit publisher affiliated with the Unitarian Universalist Association. It was this publisher that Gravel turned to in 1971, after dozens of others had turned him down, to publish the 7,000 pages that Ellsberg had delivered to Gravel to put into the public record.
[…]
via truthdig.com
Glasgow Airport Incident by Juan Cole
Saturday, June 30, 2007
Glasgow Airport Incident
by Juan Cole
Apparent car bombing attack at Glasgow Airport. The two drivers appear to have been arrested.
The eyewitness description suggests rank amateurs with no training. They didn’t actually get close enough to do much damage, and their behavior suggests that something went very wrong– what with one of them on fire and trying to get into the trunk.
Larry Johnson points out that Friday’s similar incident in London was similarly a SNAFU.
Long may terrorists be clueless screw-ups who can’t start fires in cars because they leave the windows rolled up and starve the flames of oxygen, and who scramble around to manually detonate things while on fire themselves.
Just remember what screw-ups these guys are when Alberto Gonzales comes to you with a plea to repeal the Bill of Rights in order to deal with them.
FAIR USE NOTICE: This blog may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
see:
London Bomb – What a Crock of Crap!! by Larry C Johnson
The Fed’s Role in the Bear Stearns Meltdown, by Mike Whitney
by Mike Whitney
“ICH”
June 30, 2007
The Bank for International Settlements issued a warning this week that the Federal Reserve’s monetary policies have created an enormous equity bubble which could lead to another “Great Depression”. The UK Telegraph says that, “The BIS–the ultimate bank of central bankers–pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.
The IMF and the UN have issued similar warnings, but they’ve all been shrugged off by the Bush administration. Neither Bush nor the Federal Reserve is interested in “course correction”. They plan to stick with the same harebrained policies until the end.
The “easy credit” which created the subprime crisis in mortgage lending has now spread to the hedge fund industry. The troubles at Bear Stearns prove that Secretary of the Treasury Henry Paulson’s assurance that the problem is “contained” is pure baloney. The contagion is swiftly moving through the entire system taking down home owners, mortgage lenders, banks, rating agencies, and hedge funds. We are just at the beginning of a system-wide breakdown.
The problem originated at the Federal Reserve when Fed-chief Alan Greenspan lowered the Feds Fund Rate to 1% in June 2003 and kept rates perilously low for more than 2 years. Trillions of dollars flowed into the economy through low interest loans creating a massive equity bubble in real estate which drove up housing prices and triggered a speculative frenzy.
The Feds’ “easy money” policy has disrupted the “debt-to-GDP” balance which maintains the integrity of the currency. By expanding circulation debt via low interest rates; Greenspan put the country on the path to hyperinflation and, very likely, the collapse of the monetary system.
The problems at Bear Stearns are the logical upshot of Greenspan’s policies. The over-leveraged hedge funds are a good example of what happens during a “credit boom”. Liquidity flows into the markets and raises the nominal value of all asset classes but, at the same time, GDP continues to shrink. That’s because the wages of working class people have stagnated and not kept pace with productivity. When workers have less discretionary income, consumer spending—which accounts for 70% of GDP—begins to decline. That’s why this quarters earnings reports have fallen short of expectations. The American consumer is “tapped out”.
The current rise in stock prices does not indicate a healthy economy. It simply proves that the market is awash in cheap credit resulting from the Fed’s increases in the money supply. Consumer spending is a better indicator of the real state of the economy than stocks. When consumer spending drops off; it is a sign of overcapacity, which is deflationary. That means that growth will continue to shrivel because maxed-out workers can no longer purchase the things they are making.
The underlying problem is not simply the Fed’s reckless increases to the money supply, but the growing “wealth gap” which is undermining solid economic growth. If wages don’t keep pace with productivity; the middle class loses its ability to buy consumer items and the economy slows.
The reason that hasn’t happened yet in the US is because of the extraordinary opportunities to expand personal debt. The Fed’s low interest rates have created a culture of borrowing which has convinced many people that debt equals wealth. It’s not; and the collapse in the housing market will prove how lethal that theory really is.
To large extent, the housing bubble has concealed the systematic destruction of America’s industrial and manufacturing base. Low interest rates have lulled the public to sleep while millions of high-paying jobs have been outsourced. The rise in housing prices has created the illusion of prosperity but, in truth, we are only selling houses to each other and are not making anything that the rest of the world wants. The $11 trillion dollars that was pumped into the real estate market is probably the greatest waste of capital investment in the nations’ history. It hasn’t produced a single asset that will add to our collective wealth or industrial competitiveness. It’s been a total bust.
The Federal Reserve produces all the facts and figures related to the housing industry. They knew that trillions of dollars were being diverted into a speculative bubble, but they did nothing to stop it. Instead, they kept interest rates low and endorsed the lax lending standards which paved the way for millions of defaults. Now the effects of their “cheap money” policies have spread to the hedge fund industry where hundreds of billions of dollars in pensions and savings are in jeopardy.
Alan Greenspan played a major role in the housing boondoggle. On February 26, 2004, he said, “American consumers might benefit if lenders provide greater mortgage product alternatives to the traditional fixed rate mortgage. To the degree that households are driven by fears of payment shocks but willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”
Greenspan tacitly approved the whacky financing which produced all manner of untested loans—including ARMs, piggyback loans, “no doc” loans, “interest only” loans etc. These loans are a break from traditional financing and have contributed to the increase in bankruptcies.
Millions of people who were hoodwinked into buying homes with “interest-only”, “no down” loans will now either lose their homes or be shackled to an asset of decreasing value for the next 30 years. They’ve been tricked into a life of indentured servitude.
A recent article in the Wall Street Journal revealed the extent of Greenspan’s involvement in the housing fiasco. Here’s an excerpt from the article:
“Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.
“I would have liked the Fed to be a leader” in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.
“He was opposed to it, so I didn’t really pursue it,” says Mr. Still, Mr. Greenspan’s views did color the regulatory environment, facilitating growing concentration in banking and a hands-off approach to derivatives and hedge funds. That approach, broadly shared by both the Clinton and Bush administrations, is coming under increased scrutiny”. (Wall Street Journal)
So, Greenspan had the chance to “crack down on predatory lending” and he refused. Now millions of low income people are saddled with payments they have no reasonable prospect of paying off. How much of the present carnage could have been avoided if he had Greenspan done the right thing?
The “Not So Great” Depression
An article appeared this week in the UK Telegraph by Ambrose Evans-Pritchard which supports the theory that Greenspan’s “loose monetary policy” fueled a huge credit bubble, which is pushing the global economy towards a “1930s-style slump.”
The article quotes from a statement made by The Bank for International Settlements:
“Virtually nobody foresaw the Great Depression of the 1930s, or the crises which affected Japan and Southeast Asia in the early and late 1990s. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a ‘new era’ had arrived”.
But today we face “worrying signs” of another economic meltdown.
The BIS said that they were “starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be ‘cleaned up’ afterwards”. (Greenspan’s method) and that, “while cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and sowing the seeds for more serious problems further ahead.’”
“The bank said it was far from clear whether the US would be able to ignore the consequences of its latest imbalances, ($800 billion per year) citing a current account deficit running at 6.5% of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unprecedented drop in the savings rate. ‘The dollar clearly remains vulnerable to a sudden loss of private sector confidence.”’
The BIS referred to the toxic effect of the “$470 billion in collateralized debt obligations (CDO), and a further $524 billion in “synthetic” CDOs which have spread through hedge funds industry. These CDOs are the loans (many sub primes) which were bundled off to Wall Street and turned into securities which are highly leveraged in hedge funds for maximum profitability. As Bear Stearns is discovering, these CDOs are like roadside bombs; exploding without notice whenever the stock market suddenly dips.
The BIS also cautioned about the excess of “leveraged buy-outs (mergers) which touched $753bn, with an average debt/cash flow ratio hitting a record 5.4…. ‘Sooner or later the credit cycle will turn and default rates will begin to rise.’”
The central banks around the world are increasingly worried that the Bush administration’s profligate spending and irrational monetary policies will trigger a global depression. The recent volatility in the stock market suggests that the credit boom is just about over. Once the liquidity dries up—stocks will fall sharply.
The Housing Slump
Yesterday’s housing data, shows that sales are still weak while inventory continues to grow. Existing home sales dropped 3% while prices dropped another 2.1%. Falling prices mean that cash-strapped home owners will not be able to tap into their home’s equity for other expenses. Last year, mortgage equity withdrawals (MEWs) accounted for $600 billion of consumer spending. This year, the amount will be negligible at best.
The media and the Fed continue to mislead the public about the magnitude of the housing bubble. Fed chief Bernanke assures us that the sub prime calamity hasn’t “spread to other parts of the economy” (tell that to Bear Stearns) and the media keeps cheerily reiterating that a “turnaround” or “soft landing” is just ahead.
These claims are ridiculous. Apart from the 80 or more sub-prime lenders that have gone “belly-up” in the last few months, the rickety collateralized debt obligations (CDOs) and mortgage backed securities (MBSs) are steamrolling their way through the stock market bowling down everything their path. Bear Stearns is just the first on the casualties list. There’ll be many more before the storm is over.
Fed-chairman Bernanke knows what’s going on. He was given a full rundown by “John Burns Real Estate Consulting that the national sales information for both new and existing homes, is “misleading and covering up a deep plunge of the housing sector.” The housing market is freefalling. Existing-home sales are down 22% in May and mortgage applications have fallen a whopping 18%….In Florida home sales are down 34%, not 28% as NAR reported; Arizona sales are down 38%, not 28%; and California’s down 37%, not 24% as NAR reports.”
Down 37% in California!?!
Gadzooks! It’s a landslide.
As the defaults continue to pile up; the hedge funds will take a bigger and bigger pounding. It can’t be avoided. That’s what happens when bankers abandon traditional lending standards and lend trillions of thousands of dollars to people who have bad credit and lie on their loan applications.
Thousands of these same shaky sub primes loans have been wrapped up like the Crown Jewels and sold off to Wall Street as CDOs. Now they are ripping through the hedge fund industry like a tornado in a trailer park. The media has tried to downplay the damage, but its not hard to see what is really going on. According to Reuters:
“Banks doubled the amount of CDOs outstanding in the past two years to $2.6 trillion, including a record $769 billion sold last year, according to J.P. Morgan. These figures include funded and unfunded issuance. Pimco’s Bill Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS — all of which he considers “toxic waste.”’
“$2.6 trillion”! That’s enough to bring down the whole economy. And, as Bear Stearns proves, the whole mess is beginning to unwind pretty quickly.
“Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. ‘If investors start dumping them, oh boy, watch out for some massive credit widening,” said Dan Fuss, Vice Chairman at Loomis Sayles. (Reuters)
If the hedge fund industry follows the downward slide of the housing bubble, foreign investors will run for the exits. In fact, this may already being happening.
China sold $5.8 billion in US Treasuries in May; the first time they have dumped USTs on the market. This may be the first sign of “capital flight”—foreign investment fleeing the US for more promising markets in Asia and Europe. The greenback’s survival now depends on the generosity of foreign bankers. If they refuse to recycle our $800 billion current account deficit by purchasing US bonds and securities, then the dollar will sink like a stone and lose its place as the world’s reserve currency.
More Housing Blowdown
Last Friday, the stock market took a 185-point nosedive on the news that Bear Stearns was trying to raise $3.2 billion to rescue its battered hedge fund. According to the New York Times, however, Bear was only able to came up with “$1.6 billion in secured loans to bail out one of the 2 hedge funds”.
The funds are the latest victim of the sub-prime meltdown which Bernanke and Paulson assured us was “largely contained”. In fact, Paulson even said, “We have had a major housing correction in this country,” and “I do believe we are at or near the bottom.”
Anyone who believes Paulson should take a look the chart linked below: http://www.belowthecrowd.com/photos/ackman.jpg?ref=patrick.net It illustrates that how loan “resets” will continue to pound the housing market for at least another year and a half getting steadily worse as inventory grows.
The disaster is so bad that even the realtors are beginning to tell the truth. As one agent noted, “It’s a bloodbath.”
But the debacle in housing is only the first part of a much larger problem—a global liquidity crisis. Banks and mortgage lenders have already begun to tighten up their lending practices and many have abandoned sub prime loans altogether. (20% of the housing market in 2006 was sub prime) Now the focus has shifted to the stock market, where banks are beginning to see that “risk” has not been properly calculated. That means that if more hedge funds collapse, the banks may not be able to cover the losses.
The Bear Stearns fiasco has had a chilling affect on lending. In fact, the New York Times reported on 6-26-07 that “After years of supersize private equity deals…the buyout boom may be about to hit a bump…Rising interest rates and tougher terms from investors may signal that private equity players will soon be struggling to continue reaping the outsize returns that have made the buyout business so lucrative.” (Private Equity Investors Hint at Cool Down” NY Times)
Liquidity is drying up in the private equity business. The troubles at Bear Stearns has changed the credit-landscape overnight. Bankers are nervous, money is getting tighter, and liquidity is vanishing.
“We know that these holdings are not unique to Bear Stearns,” said Professor Joseph R. Mason, co-author of a recent study warning of dangers in securities backed by home loans to high-risk borrowers. “It would be hard to find a Wall Street firm that hasn’t created similar funds.”
That’s right; the industry is waist-deep in these sub-prime time-bombs. Shaky loans and rising foreclosures threaten to knock the foundation blocks out from under the stock market and set off a wave of panic selling.
Could it have been avoided?
Perhaps, if there were better regulations on rating bonds and restricting leverage.
Consider this: one of Bear Stearns hedge funds took a $600 million investment and leveraged it 10 times its value to $7 billion. Their portfolio was chock-full of dicey CDOs and “illiquid assets” such as timber holdings in foreign countries and toll roads. These assets are difficult to price and nearly impossible to quickly auction off if the market suddenly takes a downturn.
It looked like Merrill Lynch & Co., was going to auction off $850 million of Bear Stearns CDOs this week, but backed off at the last minute. (They were reportedly only offered 30 cents on the dollar!) Once the hedge funds start selling these CDOs, then everyone will know how little they’re worth. That could trigger a wave of selling that could bring down the stock market. Even if that scenario doesn’t play out, the Bear Stearns incident ensures that CDOs in other hedge funds will be face a substantial downgrading that could take a big chunk out of their bottom line.
And, there’s a bigger fear on Wall Street than the fact that 2 hedge funds are headed into bankruptcy, that is, that a sudden tightening of credit will send the over-leveraged stock market into a downward spiral.
The market is particularly sensitive to any rise in interest rates or tougher lending standards. It’s become addicted to cheap credit and any break in the chain will cause equities to plummet.
Economist Henry C K Liu sums it up like this:
“The liquidity boom has been delivering strong growth through asset inflation without adding commensurate substantive expansion of the real economy. …. Unlike real physical assets, virtual financial mirages that arise out of thin air can evaporate again into thin air without warning. As inflation picks up, the liquidity boom and asset inflation will draw to a close, leaving a hollowed economy devoid of substance. …A global financial crisis is inevitable”. (Henry C K Liu “Liquidity boom and looming crisis” Asia Times)
In other words, the “virtual” wealth of Wall Street is a chimera which was created by the Fed’s inexorable expansion of debt. It can vanish in a flash if the sources of liquidity are cut off.
Puru Saxena draws the same conclusion in his article “A Gradual Transition”:
“Thanks to the Federal Reserve’s expansionary monetary policies over the past 5 years, US asset-prices have risen considerably; also known as the “wealth effect”. At the end of last year, the market capitalization of the US stock market rose to a record-high of US$20.6 trillion, matching the value of household real-estate, which also rose to a record-high at the same time. On the surface, this may seem like brilliant news, however you must realize that this “wealth illusion” achieved by an ocean of money and record-high indebtedness is only a consequence of inflation.”
Code Red: Subprime Chernobyl
We expect that the mounting losses in CDOs and the continuing defaults in the housing industry will precipitate a “severe credit crunch” which will end in a stock market crash. A report which appeared yesterday in the UK Telegraph appears to agree with this analysis. Lombard Street Research predicted that:
“Excess liquidity in the global system will be slashed. Banks Capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US ‘hard landing”’ (“Banks set to call in swathe of loans” UK Telegraph 6-26-07)
Three of the main hoses which provide liquidity for the market, have either been cut off or severely damaged. These are “securatized” subprime CDOs, corporate mega-mergers and hedge fund leveraging. Without these instruments for expanding debt; liquidity will dry up and stocks will fall. The period of “easy credit” will end in disaster.
We should now be able to see the straight line that connects the Fed’s low interest rates to the impending stock market meltdown. The problems began at the central bank.
Presidential candidate Rep. Ron Paul (R-Texas) summed it up best when he said:
“From the Great Depression, to the stagflation of the seventies, to the burst of the dot.com bubble; every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and artificial “boom” followed by recession or depression when the Fed-created bubble bursts”.
Imminent Crises: Threats and Opportunities By Noam Chomsky
Imminent Crises: Threats and Opportunities
By Noam Chomsky
06/29/07 “ZNet”
Regrettably, there are all too many candidates that qualify as imminent and very serious crises. Several should be high on everyone’s agenda of concern, because they pose literal threats to human survival: the increasing likelihood of a terminal nuclear war, and environmental disaster, which may not be too far removed. However, I would like to focus on narrower issues, those that are of greatest concern in the West right now. I will be speaking primarily of the United States, which I know best, and it is the most important case because of its enormous power. But as far as I can ascertain, Europe is not very different.
The area of greatest concern is the Middle East. There is nothing novel about that. I often have to arrange talks years in advance. If I am asked for a title, I suggest “The Current Crisis in the Middle East.” It has yet to fail. There’s a good reason: the huge energy resources of the region were recognized by Washington sixty years ago as a “stupendous source of strategic power,” the “strategically most important area of the world,” and “one of the greatest material prizes in world history.”1 Control over this stupendous prize has been a primary goal of U.S. policy ever since, and threats to it have naturally aroused enormous concern.
For years it was pretended that the threat was from the Russians, the routine pretext for violence and subversion all over the world. In the case of the Middle East, we do not have to consider this pretext, since it was officially abandoned. When the Berlin Wall fell, the first Bush administration released a new National Security Strategy, explaining that everything would go as before but within a new rhetorical framework. The massive military system is still necessary, but now because of the “technological sophistication of third world powers”—which at least comes closer to the truth—the primary threat, worldwide, has been indigenous nationalism. The official document explained further that the United States would maintain its intervention forces aimed at the Middle East, where “the threat to our interests” that required intervention “could not be laid at the Kremlin’s door,” contrary to decades of fabrication.2 As is normal, all of this passed without comment.
The most serious current problem in the minds of the population, by far, is Iraq. And the easy winner in the competition for the country that is the most feared is Iran, not because Iran really poses a severe threat, but because of a drumbeat of government-media propaganda. That is a familiar pattern. The most recent example is Iraq. The invasion of Iraq was virtually announced in September 2002. As we now know, the U.S.-British invasion was already underway in secret. In that month, Washington initiated a huge propaganda campaign, with lurid warnings by Condoleezza Rice and others that the next message from Saddam Hussein would be a mushroom cloud in New York City. Within a few weeks, the government-media propaganda barrage had driven Americans completely off the international spectrum. Saddam may have been despised almost everywhere, but it was only in the United States that a majority of the population were terrified of what he might do to them, tomorrow. Not surprisingly, support for the war correlated very closely with such fears. That has been achieved before, in amazing ways during the Reagan years, and there is a long and illuminating earlier history. But I will keep to the current monster being crafted by the doctrinal system, after a few words about Iraq.
There is a flood of commentary about Iraq, but very little reporting. Journalists are mostly confined to fortified areas in Baghdad, or embedded within the occupying army. That is not because they are cowards or lazy, but because it is simply too dangerous to be anywhere else. That has not been true in earlier wars. It is an astonishing fact that the United States and Britain have had more trouble running Iraq than the Nazis had in occupied Europe, or the Russians in their East European satellites, where the countries were run by local civilians and security forces, with the iron fist poised if anything went wrong but usually in the background. In contrast, the United States has been unable to establish an obedient client regime in Iraq, under far easier conditions.
Putting aside doctrinal blinders, what should be done in Iraq? Before answering, we should be clear about some basic principles. The major principle is that an invader has no rights, only responsibilities. The first responsibility is to pay reparations. The second responsibility is to follow the will of the victims. There is actually a third responsibility: to bring criminals to trial, but that obligation is so remote from the imperial mentality of Western culture that I will put it aside.
The responsibility to pay reparations to Iraqis goes far beyond the crime of aggression and its terrible aftermath. The United States and Britain have been torturing the population of Iraq for a long time. In recent history, both governments strongly supported Saddam Hussein’s terrorist regime through the period of his worst crimes, and long after the end of the war with Iran. Iran finally capitulated, recognizing that it could not fight the United States, which was, by then, openly participating in Saddam’s aggression—something that Iranians have surely not forgotten, even if Westerners have. Dismissing history is always a convenient stance for those who hold the clubs, but their victims usually prefer to pay attention to the real world. After the Iran-Iraq war, Washington and London continued to provide military equipment to their friend Saddam, including means to develop weapons of mass destruction and delivery systems. Iraqi nuclear engineers were even being brought to the United States for instruction in developing nuclear weapons in 1989, long after Saddam’s worst atrocities and Iran’s capitulation.
Immediately after the 1991 Gulf War, the United States and the United Kingdom returned to their support for Saddam when they effectively authorized him to use heavy military equipment to suppress a Shi’ite uprising that might well have overthrown the tyrant. The reasons were publicly explained. The New York Times reported that there was a “strikingly unanimous view” among the United States and its allies, Britain and Saudi Arabia, that “whatever the sins of the Iraqi leader, he offered the West and the region a better hope for his country’s stability than did those who have suffered his repression”; the term “stability” is a code word for “following orders.”3 New York Times chief diplomatic correspondent Thomas Friedman explained that “the best of all worlds” for Washington would be an “iron-fisted military junta” ruling Iraq just the way Saddam did. But lacking that option, Washington had to settle for second-best: Saddam himself. An unthinkable option—then and now—is that Iraqis should rule Iraq independently of the United States.
Then followed the murderous sanctions regime imposed by the United States and Britain, which killed hundreds of thousands of people, devastated Iraqi civilian society, strengthened the tyrant, and forced the population to rely on him for survival. The sanctions probably saved Saddam from the fate of other vicious tyrants, some quite comparable to him, who were overthrown from within despite strong support from the United States and United Kingdom to the end of their bloody rule: Ceausescu, Suharto, and quite a rogues gallery of others, to which new names are being added regularly. Again, all of this is boring ancient history for those who hold the clubs, but not for their victims, or for people who prefer to understand the world. All of those actions, and much more, call for reparations, on a massive scale, and the responsibility extends to others as well. But the deep moral-intellectual crisis of imperial culture prevents any thought of such topics as these.
The second responsibility is to obey the will of the population. British and U.S. polls provide sufficient evidence about that. The most recent polls find that 87 percent of Iraqis want a “concrete timeline for US withdrawal,” up from 76 percent in 2005.4 If the reports really mean Iraqis, as they say, that would imply that virtually the entire population of Arab Iraq, where the U.S. and British armies are deployed, wants a firm timetable for withdrawal. I doubt that one would have found comparable figures in occupied Europe under the Nazis, or Eastern Europe under Russian rule.
Bush-Blair and associates declare, however, that there can be no timetable for withdrawal. That stand in part reflects the natural hatred for democracy among the powerful, often accompanied by eloquent calls for democracy. The calls for democracy moved to center stage after the failure to find weapons of mass destruction in Iraq, so a new motive had to be invented for the invasion. The president announced the doctrine to great acclaim in November 2003, at the National Endowment for Democracy in Washington. He proclaimed that the real reason for the invasion was not Saddam’s weapons programs, as Washington and London had insistently claimed, but rather Bush’s messianic mission to promote democracy in Iraq, the Middle East, and elsewhere. The media and prominent scholars were deeply impressed, relieved to discover that the “liberation of Iraq” is perhaps the “most noble” war in history, as leading liberal commentators announced—a sentiment echoed even by critics, who objected that the “noble goal” may be beyond our means, and those to whom we are offering this wonderful gift may be too backward to accept it. That conclusion was confirmed a few days later by U.S. polls in Baghdad. Asked why the United States invaded Iraq, some agreed with the new doctrine hailed by Western intellectuals: 1 percent agreed that the goal was to promote democracy. Another 5 percent said that the goal was to help Iraqis.5 Most of the rest took for granted that the goals were the obvious ones that are unmentionable in polite society—the strategic-economic goals we readily attribute to enemies, as when Russia invaded Afghanistan or Saddam invaded Kuwait, but are unmentionable when we turn to ourselves.
But rejection of the popular will in Iraq goes far beyond the natural fear of democracy on the part of the powerful. Simply consider the policies that are likely to be pursued by an independent and more or less democratic Iraq. Iraqis may have no love for Iran, but they would doubtlessly prefer friendly relations with their powerful neighbor. The Shi’ite majority already has ties to Iran and has been moving to strengthen them. Furthermore, even limited sovereignty in Iraq has encouraged efforts by the harshly repressed Shi’ite population across the border in Saudi Arabia to gain basic rights and perhaps autonomy. That is where most of Saudi Arabia’s oil happens to be.
Such developments might lead to a loose Shi’ite alliance controlling the world’s major energy resources and independent of Washington, the ultimate nightmare in Washington—except that it might get worse: the alliance might strengthen its economic and possibly even military ties with China. The United States can intimidate Europe: when Washington shakes its fist, leading European business enterprises pull out of Iran. But China has a three-thousand-year history of contempt for the barbarians: they refuse to be intimidated.
That is the basic reason for Washington’s strategic concerns with regard to China: not that it is a military threat, but that it poses the threat of independence. If that threat is unacceptable for small countries like Cuba or Vietnam, it is certainly so for the heartland of the most dynamic economic region in the world, the country that has just surpassed Japan in possession of the world’s major financial reserves and is the world’s fastest growing major economy. China’s economy is already about two-thirds the size of that of the United States, by the correct measures, and if current growth rates persist, it is likely to close that gap in about a decade—in absolute terms, not per capita of course.
China is also the center of the Asian Energy Security Grid and the Shanghai Cooperation Organization, which includes the Central Asian countries, and just a few weeks ago, was joined by India, Iran, and Pakistan as observers, soon probably members. India is undertaking significant joint energy projects with China, and it might join the Energy Security Grid. Iran may as well, if it comes to the conclusion that Europe is so intimidated by the United States that it cannot act independently. If Iran turns to the East, it will find willing partners. A major conference on energy last September in Teheran brought together government officials and scholars from Iran, China, Pakistan, India, Russia, Egypt, Indonesia, Georgia, Venezuela, and Germany, planning an extensive pipeline system for the entire region and also more intensive development of energy resources. Bush’s recent trip to India, and his authorization of India’s nuclear weapons program, is part of the jockeying over how these major global forces will crystallize. A sovereign and partially democratic Iraq could be another contribution to developments that seriously threaten U.S. global hegemony, so it is not at all surprising that Washington has sought in every way to prevent such an outcome, joined by “the spear carrier for the pax americana,” as Blair’s Britain is described by Michael MccGwire in Britain’s leading journal of international affairs.6
If the United States were compelled to grant some degree of sovereignty to Iraq, and any of these consequences would ensue, Washington planners would be facing the collapse of one of their highest foreign policy objectives since the Second World War, when the United States replaced Britain as the world-dominant power: the need to control “the strategically most important area of the world.” What has been central to planning is control, not access, an important distinction. The United States followed the same policies long before it relied on a drop of Middle East oil, and would continue to do so if it relied on solar energy. Such control gives the United States “veto power” over its industrial rivals, as explained in the early postwar period by influential planners, and reiterated recently with regard to Iraq: a successful conquest of Iraq would give the United States “critical leverage” over its industrial rivals, Europe and Asia, as pointed out by Zbigniew Brzezinski, an important figure in the planning community. Vice President Dick Cheney made the same point, describing control over petroleum supplies as “tools of intimidation and blackmail”—when used by others.7 He went on to urge the dictatorships of Central Asia, Washington’s models of democracy, to agree to pipeline construction that ensures that the tools remain in Washington’s hands.
The thought is by no means original. At the dawn of the oil age almost ninety years ago, Britain’s first lord of the admiralty Walter Hume Long explained that “if we secure the supplies of oil now available in the world we can do what we like.”8 Woodrow Wilson also understood this crucial point. Wilson expelled the British from Venezuela, which by 1928 had become the world’s leading oil exporter, with U.S. companies then placed in charge. To achieve this goal, Wilson and his successors supported the vicious and corrupt dictator of Venezuela and ensured that he would bar British concessions. Meanwhile the United States continued to demand—and secure—U.S. oil rights in the Middle East, where the British and French were in the lead.
We might note that these events illustrate the actual meaning of the “Wilsonian idealism” admired by Western intellectual culture, and also provide the real meaning of “free trade” and the “open door.” Sometimes that is even officially acknowledged. When the post-Second World War global order was being shaped in Washington, a State Department memorandum on U.S. petroleum policy called for preserving absolute U.S. control of Western hemisphere resources “coupled with insistence upon the Open Door principle of equal opportunity for United States companies in new areas.”9 That is a useful illustration of “really existing free market doctrine”: What we have, we keep, closing the door to others; what we do not yet have, we take, under the principle of the Open Door. All of this illustrates the one really significant theory of international relations, the maxim of Thucydides: the strong do as they can, and the weak suffer as they must.
With regard to Iraq today, talk about exit strategies means very little unless these realities are confronted. How Washington planners will deal with these problems is far from clear. And they face similar problems elsewhere. Intelligence projections for the new millennium were that the United States would control Middle East oil as a matter of course, but would itself rely on more stable Atlantic Basin reserves: West African dictatorships’ and the Western hemisphere’s. But Washington’s postwar control of South America, from Venezuela to Argentina, is seriously eroding. The two major instruments of control have been violence and economic strangulation, but each weapon is losing its efficacy. The latest attempt to sponsor a military coup was in 2002, in Venezuela, but the United States had to back down when the government it helped install was quickly overthrown by popular resistance, and there was turmoil in Latin America, where democracy is taken much more seriously than in the West and overthrow of a democratically elected government is no longer accepted quietly. Economic controls are also eroding. South American countries are paying off their debts to the IMF—basically an offshoot of the U.S. Treasury department. More frightening yet to Washington, these countries are being aided by Venezuela. The president of Argentina announced that the country would “rid itself of the IMF.” Rigorous adherence to IMF rules had led to economic disaster, from which the country recovered by radically violating the rules. Brazil too had rid itself of the IMF, and Bolivia probably will as well, again aided by Venezuela. U.S. economic controls are seriously weakening.
Washington’s main concern is Venezuela, the leading oil producer in the Western hemisphere. The U.S. Department of Energy estimates that its reserves might be greater than Saudi Arabia’s if the price of oil stays high enough for exploitation of its expensive extra-heavy oil to become profitable. Extreme U.S. hostility and subversion has accelerated Venezuela’s interest in diversifying exports and investment, and China is more than willing to accept the opportunity, as it is with other resource-rich Latin American exporters. The largest gas reserves in South America are in Bolivia, which is now following much the same path as Venezuela. Both countries pose a problem for Washington in other respects. They have popularly elected governments. Venezuela leads Latin America in support for the elected government, increasing sharply in the past few years under Chávez. He is bitterly hated in the United States because of his independence and enormous popular support. Bolivia just had a democratic election of a kind next to inconceivable in the West. There were serious issues that the population understood very well, and there was active participation of the general population, who elected someone from their own ranks, from the indigenous majority. Democracy is always frightening to power centers, particularly when it goes too far beyond mere form and involves actual substance.
Commentary on what is happening reveals the nature of the fears. London’s Financial Times warned that President Evo Morales of Bolivia is becoming increasingly “authoritarian” and “undemocratic.” This is a serious concern to Western powers, who are dedicated to freedom and democracy everywhere. The proof of his authoritarian stance and departure from democratic principles is that he followed the will of 95 percent of the population and nationalized Bolivia’s gas resources, and is also gaining popularity by cutting public salaries and eliminating corruption. Morales’s policies have come to resemble the frightening leader of Venezuela. As if the popularity of Chávez’s elected government was not proof enough that he is an anti-democratic dictator, he is attempting to extend to Bolivia the same programs he is instituting in Venezuela: helping “Bolivia’s drive to stamp out illiteracy and pay[ing] the wages of hundreds of Cuban doctors who have been sent to work there” among the poor, to quote the Financial Times’ lament.10
The latest Bush administration’s National Security Strategy, released March 2006, describes China as the greatest long-term threat to U.S. global dominance. The threat is not military, but economic. The document warns that Chinese leaders are not only “expanding trade, but acting as if they can somehow ‘lock up’ energy supplies around the world or seek to direct markets rather than opening them up.”11 In the U.S.-China meetings in Washington a few weeks ago, President Bush warned President Hu Jintao against trying to “lock up” global supplies. Bush condemned China’s reliance on oil from Sudan, Burma, and Iran, accusing China of opposition to free trade and human rights—unlike Washington, which imports only from pure democracies that worship human rights, like Equatorial Guinea, one of the most vicious African dictatorships; Colombia, which has by far the worst human rights record in Latin America; Central Asian states; and other paragons of virtue. No respectable person would accuse Washington of “locking up” global supplies when it pursues its traditional “open door policy” and outright aggression to ensure that it dominates global energy supplies, firmly holding “the tools of intimidation and blackmail.” It is interesting, perhaps, that none of this elicits ridicule in the West, or even notice.
The lead story in the New York Times on the Bush-Hu meeting reported that “China’s appetite for oil also affects its stance on Iran….The issue [of China’s effort to ‘lock up’ global supplies] is likely to come to a particular head over Iran,” where China’s state-owned oil giant signed a $70 billion deal to develop Iran’s huge Yadavaran oil field.12 That’s a serious matter, compounded by Chinese interference even in Saudi Arabia, a U.S. client state since the British were expelled during the Second World War. This relationship now threatened by growing economic and even military ties between China and the Kingdom of Saudi Arabia, now China’s largest trading partner in West Asia and North Africa—perhaps further proof of China’s lack of concern for democracy and human rights. When President Hu visited Washington, he was denied a state dinner, in a calculated insult. He cheerfully reciprocated by going directly to Saudi Arabia, a serious slap in the face to Washington that was surely not misunderstood.
This is the barest sketch of the relevant global context over what to do in Iraq. But these critical matters are scarcely mentioned in the ongoing debate about the problem of greatest concern to Americans. They are barred by a rigid doctrine. It is unacceptable to attribute rational strategic-economic thinking to one’s own state, which must be guided by benign ideals of freedom, justice, peace, and other wonderful things. That leads back again to a very severe crisis in Western intellectual culture, not of course unique in history, but with dangerous portent.
We can be confident that these matters, though excluded from public discussion, engage the attention of planners. Governments typically regard their populations as a major enemy, and keep them in ignorance of what is happening to them and planned for them. Nevertheless, we can speculate. One reasonable speculation is that Washington planners may be seeking to inspire secessionist movements that the United States can then “defend” against the home country. In Iran, the main oil resources are in the Arab areas adjacent to the Gulf, Iran’s Khuzestan—and sure enough, there is now an Ahwazi liberation movement of unknown origin, claiming unspecified rights of autonomy. Nearby, Iraq and the gulf states provide a base for U.S. military intervention.
The U.S. military presence in Latin America is increasing substantially. In Venezuela, oil resources are concentrated in Zulia province near Colombia, the one reliable U.S. land base in the region, a province that is anti-Chávez and already has an autonomy movement, again of unknown origins. In Bolivia, the gas resources are in richer eastern areas dominated by elites of European descent that bitterly oppose the government elected by the indigenous majority, and have threatened to secede. Nearby Paraguay is another one of the few remaining reliable land bases for the U.S. military. Total military and police assistance now exceeds economic and social aid, a dramatic reversal of the pattern during Cold War years. The U.S. military now has more personnel in Latin America than most key civilian federal agencies combined, again a sharp change from earlier years. The new mission is to combat “radical populism”—the term that is regularly used for independent nationalism that does not obey orders. Military training is being shifted from the State Department to the Pentagon, freeing it from human rights and democracy conditionality under congressional supervision—which was always weak, but had some effects that constrained executive violence.
The United States is a global power, and its policies should not be viewed in isolation, any more than those of the British Empire. Going back half a century, the Eisenhower administration identified three major global problems: Indonesia, North Africa, and the Middle East—all oil producers, all Islamic. In all cases, the concern was independent nationalism. The end of French rule in Algeria resolved the North African problem. In Indonesia, the 1965 Suharto coup removed the threat of independence with a huge massacre, which the CIA compared to the crimes of Hitler, Stalin, and Mao. The “staggering mass slaughter,” as the New York Times described it, was greeted in the West with unconcealed euphoria and relief.13 The military coup destroyed the only mass-based political party, a party of the poor, slaughtered huge numbers of landless peasants, and threw the country open to Western exploitation of its rich resources, while the large majority tries to survive in misery. Two years later, the major problem in the Middle East was resolved with Israel’s destruction of the Nasser regime, hated by the United States and Britain, which feared that secular nationalist forces might seek to direct the vast energy resources of the region to internal development. A few years earlier, U.S. intelligence had warned of popular feelings that oil is a “national patrimony” exploited by the West by unjust arrangements imposed by force. Israel’s service to the United States, its Saudi ally, and the energy corporations confirmed the judgment of U.S. intelligence in 1958 that a “logical corollary” of opposition to Arab nationalism is reliance on Israel as “the only strong pro-Western power in the Middle East,” apart from Turkey, which established a close military alliance with Israel in 1958, within the U.S. strategic framework.14
The U.S.-Israeli alliance, unique in world affairs, dates from Israel’s 1967 military conquests, reinforced in 1970 when Israel barred possible Syrian intervention in Jordan to protect Palestinians who were being slaughtered during Black September. Such intervention by Syria was regarded in Washington as a threat to its ally Jordan and, more important, to the oil-producers that were Washington’s clients. U.S. aid to Israel roughly quadrupled. The pattern is fairly consistent since, extending to secondary Israeli services to U.S. power outside the Middle East, particularly in Latin America and southern Africa. The system of domination has worked quite well for the people who matter. Energy corporation profits are breaking all records. High-tech (including military) industry has lucrative ties with Israel, as do the major financial institutions, and Israel serves virtually as an offshore military base and provider of equipment and training. One may argue that other policies would have been more beneficial to the concentrations of domestic power that largely determine policy, but they seem to find these arrangements quite tolerable. If they did not, they could easily move to terminate them. And in fact, when there are conflicts between U.S. and Israeli state power, Israel naturally backs down; exports of military technology to China are a recent example, when the Bush administration went out of its way to humiliate Israel after it was initially reluctant to follow the orders of what Israeli commentator Aluf Benn calls “the boss-man called ‘partner.’”
Let us turn next to Iran and its nuclear programs. Until 1979, Washington strongly supported these programs. During those years, of course, a brutal tyrant installed by the U.S.-U.K. military coup that overthrew the Iranian parliamentary government ruled Iran. Today, the standard claim is that Iran has no need for nuclear power, and therefore must be pursuing a secret weapons program. Henry Kissinger explained that “For a major oil producer such as Iran, nuclear energy is a wasteful use of resources.” As secretary of state thirty years ago, Kissinger held that “introduction of nuclear power will both provide for the growing needs of Iran’s economy and free remaining oil reserves for export or conversion to petrochemicals,” and the United States acted to assist the Shah’s efforts. Dick Cheney, Donald Rumsfeld, and Paul Wolfowitz, the leading planners of the second Bush administration, worked hard to provide the Shah with a “complete ‘nuclear fuel cycle’—reactors powered by and regenerating fissile materials on a self-sustaining basis. That is precisely the ability the current administration is trying to prevent Iran from acquiring today.” U.S. universities were arranging to train Iranian nuclear engineers, doubtless with Washington’s approval, if not initiative; including my own university, the Massachusetts Institute of Technology, for example, despite overwhelming student opposition. Kissinger was asked about his reversal, and he responded with his usual engaging frankness: “They were an allied country.”15 So therefore they had a genuine need for nuclear energy, pre-1979, but have no such need today.
The Iranian nuclear programs, as far as is known, fall within its rights under Article IV of the Non-Proliferation Treaty (NPT), which grants non-nuclear states the right to produce fuel for nuclear energy. The Bush administration argues, however, that Article IV should be strengthened, and I think that makes sense. When the NPT came into force in 1970, there was a considerable gap between producing fuel for energy and for nuclear weapons. But with contemporary technology, the gap has been narrowed. However, any such revision of Article IV would have to ensure unimpeded access for nonmilitary use, in accord with the initial bargain. A reasonable proposal was put forth by Mohamed ElBaradei, head of the International Atomic Energy Agency: that all production and processing of weapon-usable material be under international control, with “assurance that legitimate would-be users could get their supplies.”16 That should be the first step, he proposed, towards fully implementing the 1993 UN resolution calling for a Fissile Material Cutoff Treaty (called FISSBAN, for short), which bans production of fissile materials by individual states. ElBaradei’s proposal was dead in the water. The U.S. political leadership, surely in its current stance, would never agree to this delegation of sovereignty. To date, ElBaradei’s proposal has been accepted by only one state, to my knowledge: Iran, last February. That suggests one way to resolve the current crisis—in fact, a far more serious crisis: continued production of fissile materials by individual states is likely to doom humanity to destruction.
Washington also strenuously opposes a verifiable FISSBAN treaty, regarded by specialists as the “most fundamental nuclear arms control proposal,” according to Princeton arms control specialist Frank von Hippel.17 Despite U.S. opposition, in November 2004, the UN Disarmament Committee voted in favor of a verifiable FISSBAN. The vote was 147 to 1, with 2 abstentions: Israel, which is reflexive, and Britain, which is more interesting. British ambassador John Freeman explained that Britain supported the treaty, but could not vote for this version, because he said it “divides the international community”—divided it 147 to 1.18 A later vote in the full General Assembly was 179 to 2, Israel and Britain again abstaining. The United States was joined by Palau.
We gain some insight into the ranking of survival of the species among the priorities of the leadership of the hegemonic power and its spear carrier.
In 2004, the European Union (EU) and Iran reached an agreement on nuclear issues: Iran agreed to temporarily suspend its legal activities of uranium enrichment, and the EU agreed to provide Iran with “firm commitments on security issues.” As everyone understands, the phrase “security issues” refers to the very credible U.S.-Israeli threats and preparations to attack Iran. These threats, a serious violation of the UN Charter, are no small matter for a country that has been tortured for fifty years without a break by the global superpower, which now occupies the countries on Iran’s borders, not to speak of the client state that is the regional superpower.
Iran lived up to its side of the bargain, but the EU, under U.S. pressure, rejected its commitments. Iran finally abandoned the bargain as well. The preferred version in the West is that Iran broke the agreement, proving that it is a serious threat to world order.
In May 2003, Iran had offered to discuss the full range of security matters with the United States, which refused, preferring to follow the same course it did with North Korea. On taking office in January 2001, the Bush administration withdrew the “no hostile intent” condition of earlier agreements and proceeded to issue serious threats, while also abandoning promises to provide fuel oil and a nuclear reactor. In response, North Korea returned to developing nuclear weapons, the roots of another current crisis. All predictable, and predicted.
There are ways to mitigate and probably end these crises. The first is to call off the threats that are virtually urging Iran (and North Korea) to develop nuclear weapons. One of Israel’s leading military historians, Martin van Creveld, wrote that if Iran is not developing nuclear weapons, then they are “crazy,” immediately after Washington demonstrated that it will attack anyone it likes as long as they are known to be defenseless.19 So the first step towards ending the crisis would be to call off the threats that are likely to lead potential targets to develop a deterrent—where nuclear weapons or terror are the only viable options.
A second step would be to join with other efforts to reintegrate Iran into the global economy. A third step would be to join the rest of the world in accepting a verifiable FISSBAN treaty, and to join Iran in accepting ElBaradei’s proposal, or something similar—and I repeat that the issue here extends far beyond Iran, and reaches the level of human survival. A fourth step would be to live up to Article VI of the NPT, which obligates the nuclear states to take “good faith” efforts to eliminate nuclear weapons, a binding legal obligation, as the World Court determined. None of the nuclear states have lived up to that obligation, but the United States is far in the lead in violating it—again, a very serious threat to human survival. Even steps in these directions would mitigate the upcoming crisis with Iran. Above all, it is important to heed the words of Mohamed ElBaradei: “There is no military solution to this situation. It is inconceivable. The only durable solution is a negotiated solution.”20 And it is within reach. Similar to the Iraq war: a war against Iran appears to be opposed by the military and U.S. intelligence, but might well be undertaken by the civilian planners of the Bush administration: Cheney, Rumsfeld, Rice, and a few others, an unusually dangerous collection.
There is wide agreement among prominent strategic analysts that the threat of nuclear war is severe and increasing, and that the threat can be eliminated by measures that are known and in fact legally obligatory. If such measures are not taken, they warn that “a nuclear exchange is ultimately inevitable,” that we may be facing “an appreciable risk of ultimate doom,” an “Armageddon of our own making.”21 The threats are well understood, and they are being consciously enhanced. The Iraq invasion is only the most blatant example.
Clinton’s military and intelligence planners had called for “dominating the space dimension of military operations to protect U.S. interests and investment,” much in the way armies and navies did in earlier years, but now with a sole hegemon, which must develop “space-based strike weapons [enabling] the application of precision force from, to, and through space.” Such measures will be needed, they said, because “globalization of the world economy” will lead to a “widening economic divide” along with “deepening economic stagnation, political instability, and cultural alienation,” hence unrest and violence among the “have-nots,” much of it directed against the United States. The United States must therefore be ready to plan for a “precision strike from space [as a] counter to the worldwide proliferation of WMD” by unruly elements.22 That is a likely consequence of the recommended military programs, just as a “widening divide” is the anticipated consequence of the specific version of international integration that is misleadingly called “globalization” and “free trade” in the doctrinal system.
A word should be added about these notions. Both are terms of propaganda, not description. The term “globalization” is used for a specific form of international economic integration, designed—not surprisingly—in the interests of the designers: multinational corporations and the few powerful states to which they are closely linked. An opposing form of globalization is being pursued by groups that are far more representative of the world’s population, the mass global justice movements, which originated in the South but now have been joined by northern popular organizations and meet annually in the World Social Forum, which has spawned many regional and local social forums, concentrating on their own issues though within the same overarching framework. The global justice movements are an entirely new phenomenon, perhaps the seeds of the kind of international that has been the hope of the workers movements and the left since their modern origins. They are called “antiglobalization” in the reigning doctrinal systems, because they seek a form of globalization oriented towards the interests of people, not concentrated economic power—and unfortunately, they have often adopted this ridiculous terminology.
Official globalization is committed to so-called neoliberalism, also a highly misleading term: the regime is not new, and it is not liberal. Neoliberalism is essentially the policy imposed by force on the colonies since the eighteenth century, while the currently wealthy countries radically violated these rules, with extensive reliance on state intervention in the economy and resort to measures that are now banned in the international economic order. That was true of England and the countries that followed its path of protectionism and state intervention, including Japan, the one country of the South that escaped colonization and the one country that industrialized. These facts are widely recognized by economic historians.
A comparison of the United States and Egypt in the early nineteenth century is one of many enlightening illustrations of the decisive role of sovereignty and massive state intervention in economic development. Having freed itself from British rule, the United States was able to adopt British-style measures of state intervention, and developed. Meanwhile British power was able to bar anything of the sort in Egypt, joining with France to impose Lord Palmerston’s doctrine that “No ideas therefore of fairness towards Mehemet [Ali] ought to stand in the way of such great and paramount interests” as barring competition in the eastern Mediterranean.23 Palmerston expressed his “hate” for the “ignorant barbarian” who dared to undertake economic development. Historical memories resonate when, today, Britain and France, fronting for the United States, demand that Iran suspend all activities related to nuclear and missile programs, including research and development, so that nuclear energy is barred and the country that is probably under the greatest threat of any in the world has no deterrent to attack—attack by the righteous, that is. We might also recall that France and Britain played the crucial role in development of Israel’s nuclear arsenal. Imperial sensibilities are delicate indeed.
Had it enjoyed sovereignty, Egypt might have undergone an industrial revolution in the nineteenth century. It shared many of the advantages of the United States, except independence, which allowed the United States to impose very high tariffs to bar superior British goods (textiles, steel, and others). The United States in fact became the world’s leader in protectionism until the Second World War, when its economy so overwhelmed anyone else’s that “free competition” was tolerable. After the war, massive reliance on the dynamic state sector became a central component of the U.S. economy, even more than it had been before, continuing right to the present. And the United States remains committed to protectionism, when useful. The most extreme protectionism was during the Reagan years—accompanied, as usual, by eloquent odes to liberalism, for others. Reagan virtually doubled protective barriers, and also turned to the usual device, the Pentagon, to overcome management failures and “reindustrialize America,” the slogan of the business press. Furthermore, high levels of protectionism are built into the so-called “free trade agreements,” designed to protect the powerful and privileged, in the traditional manner.
The same was true of Britain’s flirtation with “free trade” a century earlier, when 150 years of protectionism and state intervention had made Britain by far the world’s most powerful economy, free trade seemed an option, given that the playing field was “tilted” in the right direction, to adapt the familiar metaphor. But the British still hedged their bets. They continued to rely on protected markets, state intervention, and also devices not considered by economic historians. One such market was the world’s most spectacular narcotrafficking enterprise, designed to break into the China market, and also producing profits that financed the Royal Navy, the administration of conquered India, and the purchase of U.S. cotton—the fuel of the industrial revolution. U.S. cotton production was also based on radical state intervention: slavery, virtual extermination of the native population, and military conquest—almost half of Mexico, to mention one case relevant to current news. When Britain could no longer compete with Japan, it closed off the empire in 1932, followed by other imperial powers, a crucial part of the background for the Second World War. The truth about free trade and economic development has only a limited resemblance to the doctrines professed.
Throughout modern history, democracy and development have had a common enemy: the loss of sovereignty. In a world of states, it is true that decline of sovereignty entails decline of hope for democracy, and decline in ability to conduct social and economic policy. That in turn harms development, a conclusion well confirmed by centuries of economic history. The work of economic historian M. Shahid Alam is particularly enlightening in this respect. In current terminology, the imposed regimes are called neoliberal, so it is fair to say that the common enemy of democracy and development is neoliberalism. With regard to development, one can debate causality, because the factors in economic growth are so poorly understood. But correlations are reasonably clear. The countries that have most rigorously observed neoliberal principles, as in Latin America and elsewhere, have experienced a sharp deterioration of macroeconomic indicators as compared with earlier years. Those that have ignored the principles, as in East Asia, have enjoyed rapid growth. That neoliberalism harms democracy is understandable. Virtually every feature of the neoliberal package, from privatization to freeing financial flows, undermines democracy for clear and well-known reasons.
The crises we face are real and imminent, and in each case means are available to overcome them. The first step is understanding, then organization and appropriate action. This is the path that has often been followed in the past, bringing about a much better world and leaving a legacy of comparative freedom and privilege, for some at least, which can be the basis for moving on. Failure to do so is almost certain to lead to grim consequences, even the end of biology’s only experiment with higher intelligence.
Notes
1. See Aaron David Miller, Search for Security (Chapel Hill, NC: University of North Carolina Press, 1980); Irvine Anderson, Aramco, the United States and Saudi Arabia (Princeton, NJ: Princeton University Press, 1981); Michael Stoff, Oil, War and American Security (New Haven: Yale University Press, 1980); Steven Spiegel, The Other Arab-Israeli Conflict (Chicago: University of Chicago Press, 1985), 51.
2. National Security Strategy of the United States (Washington DC: The White House, March 1990).
3. Alan Cowell, “Kurds Assert Few Outside Iraq Wanted Them to Win,” New York Times, April 11, 1991.
4. Nina Kamp and Michael E. O’Hanlon, “The State of Iraq,” New York Times, March 19, 2006.
5. Walter Pincus, “Skepticism About U.S. Deep, Iraq Poll Shows; Motive for Invasion Is Focus of Doubts,” Washington Post, November 12, 2003; Richard Burkholder, “Gallup Poll of Baghdad,” Government & Public Affairs, October 28, 2003.
6. Michael MccGwire, “The Rise and Fall of the NPT,” International Affairs 81 (January 2005): 134.
7. Zbigniew Brzezinski, “Hegemonic Quicksand,” National Interest 74 (Winter 2003/2004): 5-16; Stefan Wagstyl, “Cheney Rebukes Putin on Energy ‘Blackmail,’” Financial Times, May 4, 2006.
8. See Ian Rutledge, Addicted to Oil (London: I. B. Tauris, 2005).
9. See Multinational Oil Corporation and U.S. Foreign Policy, Report to the Committee on Foreign Relations, U.S. Senate, January 2, 1975 (Washington DC: Government Printing Office, 1975).
10. Hal Weitzman, “Nationalism Fuels Fears over Morales’ Power,” Financial Times, May 2, 2006.
11. National Security Strategy of the United States (Washington DC: The White House, March 2006), 41.
12. David E. Sanger, “China’s Rising Need for Oil Is High on U.S. Agenda,” New York Times, April 18, 2006.
13. Editorial, New York Times, August 25, 1966
14. Mark Curtis, The Great Deception (London: Pluto Press, 1998), 133.
15. Darna Linzer, “Past Arguments Don’t Square with Current Iran Policy,” Washington Post, March 27, 2005.
16. Mohamed ElBaradei, “Towards a Safer World,” The Economist, October 16, 2003.
17. Frank von Hippel, “Coupling a Moratorium To Reductions as a First Step toward the Fissile-Material Cutoff Treaty,” in Rakesh Sood, Frank von Hippel, and Morton Halperin, “The Road to Nuclear Zero,” Center for Advanced Study of India, 1998, 17.
18. See Rebecca Johnson, “2004 UN First Committee,” Disarmament Diplomacy 79 (April/May 2005), and Jean du Preez, “The Fissban,” Disarmament Diplomacy 79 (April/May 2005), http://www.acronym.org.
19. Martin van Creveld, “Sharon on the Warpath” International Herald Tribune, August 21, 2004.
20. Jeffrey Fleishman and Alissa Rubin, “ElBaradei Asks for Restraint on Iran Sanctions,” Los Angeles Times, March 31, 2006.
21. Michael MccGwire, “The Rise and Fall of the NPT,” International Affairs 81 (January 2005), 127; John Steinbruner and Nancy Gallagher, “Constructive Transformation,” Daedalus 133, no. 3 (Summer 2004): 99; Sam Nunn, “The Cold War’s Nuclear Legacy Has Lasted too Long,” Financial Times, December 6, 2004.
22. National Intelligence Council, Global Trends 2015 (Washington DC, December 2000); U.S. Space Command, Vision for 2020 (February 1997), 7; Pentagon, Quadrennial Defense Review, May 1997.
23. See Afaf Lutfi al-Sayyid Marsot, Egypt in the Reign of Muhammad Ali (New York: Cambridge University Press, 1984), 240; Harold Temperley, England and the Near East (London: Longmans, Green and Co., 1936).
Noam Chomsky is Institute Professor and Professor of Linguistics Emeritus at the Massachusetts Institute of Technology. This article is based on a talk delivered May 12, 2006, in Beirut, two months before Israel began its military campaign against Lebanon on July 13, 2006. It appears in Inside Lebanon: Journey to a Shattered Land with Noam and Carol Chomsky (just published by Monthly Review Press, order online at http://www.monthlyreview.org or call 1-800-670-9499).
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The Doors: Unknown Soldier (music video)
The Daily Show – Illegal Immigration is a Health Issue (link)
The Daily Show – Illegal Immigration is a Health Issue
By Manila Ryce
Published Friday, June 29th, 2007, 6:48 am
Lou Dobbs has warned us that Americans are not just losing jobs because of immigrants, but also body parts. We need to put our foot down while we still have one left. As confirmed by John Hodgman, Faux News correspondents are not racist. They’re simply aware of the undeniable fact that Mexicans are dirty disease-carrying rapists. Conservatives merely want them to stay on their side of the fence so that our white power structure doesn’t fall apart – literally. Okay, enough bad jokes. Enjoy the clip.
The Daily Show – You Don’t Know Dick (link)
The Daily Show – You Don’t Know Dick
By Manila Ryce
Published Saturday, June 30th, 2007, 5:42 am
With all the secrecy surrounding Vice-President Cheney, Jon Stewart introduced a new segment this week called “You Don’t Know Dick”. I’ve collected this week’s clips and placed them here. Stewart exposes the fact that Cheney can’t be exposed to bright light, you can’t get him wet, and he can’t be fed after midnight. There may also be a river of pink mood slime originating from underneath Cheney’s house which feeds off the misery of Washington DC’s residents, but a pixilated mist keeps us from verifying much more.
Dandelion Salad 
