- Signs of the Times for Mon, 20 Feb 2006 -

The other day SOTT received an email from a popular “Activist” website soliciting funds. The message said:

Dear member,

Yesterday 6,613 of us contributed $389,900 towards our $3.5 million field organizing plan for the election, smashing our goal of $250,000 for the week. Amazing. This generosity gives us a great deal of hope--and we've got to keep the momentum going. Can we make it to $600,000 by Friday?

A contribution of $100 from 2,100 more of us will get us there. Can you pitch in? You can contribute by credit card or check at the link below—it takes just a minute.

Wow! In one day they were able to raise $389,900.00 !!! And they are shooting for Three and a Half MILLION? What for?

Well, for their political ads and campaigns.

We wondered just what planet the people live on who gave this kind of money? Haven't they been paying attention? Don't they know that there is absolutely NO possibility that buying political ads or backing political candidates is going to make one bit of difference?

Think about it: Bush and the Neocons have been spying illegally for over a year now, and he has the gall to brag about it and shove it in our faces, and to declare that he's going to continue. In the midst of this uproar, he even gets his court pick accepted ensuring that no legal action will ever be taken against him. And while we are on the subject, just WHO have the Neocons been spying on that were such sensitive targets that they couldn't even be bothered with getting a rubber stamp approval?

The object of the illegal spying wasn't really to target innocent Americans as the Neocons would like us all to think.

Does anyone actually think that Bush and Gang would spend their time listening in on conversations between Junior and his granny in Pakistan? Does anyone seriously think that the arrogant Karl Rove is going to waste his time on “average Americans?” Do you think he - or ANY of them - really think that there are "terrorists" in America?

Of course not. They know that the whole "terrorist threat" is manufactured. They aren't going to waste their time looking for something that they created in their sick imaginations.

So, WHO are they REALLY spying on? And why did they out themselves as Bush did just before Christmas?

Sure, we read that it was done because the NY Times was going to publish a story that they had withheld for over a year. "President George W. Bush was so desperate to stop The New York Times' secret spy program story he summoned Publisher Arthur Sulzberger Jr. and Executive Editor Bill Keller to the Oval Office to try to talk them out of running it, Newsweek reported on its Web site on Monday."

That smacks of smokescreen. Does anyone really believe that if the President wanted the NY Times to keep quiet that there would be a problem? After Judy Miller? Not a chance.

The whole thing stinks of a smokescreen. So, what are they trying to hide? What are they trying to distract attention away from? As Paul Craig Roberts has written:

We have reached a point where the Bush administration is determined to totally eclipse the people. Bewitched by neoconservatives and lustful for power, the Bush administration and the Republican Party are aligning themselves firmly against the American people. Their first victims, of course, were the true conservatives. Having eliminated internal opposition, the Bush administration is now using blackmail obtained through illegal spying on American citizens to silence the media and the opposition party.

Before flinching at my assertion of blackmail, ask yourself why President Bush refuses to obey the Foreign Intelligence Surveillance Act. The purpose of the FISA court is to ensure that administrations do not spy for partisan political reasons. The warrant requirement is to ensure that a panel of independent federal judges hears a legitimate reason for the spying, thus protecting a president from the temptation to abuse the powers of government. The only reason for the Bush administration to evade the court is that the Bush administration had no legitimate reasons for its spying. This should be obvious even to a naif.[...]

The years of illegal spying have given the Bush administration power over the media and the opposition. Journalists and Democratic politicians don't want to have their adulterous affairs broadcast over television or to see their favorite online porn sites revealed in headlines in the local press with their names attached. Only people willing to risk such disclosures can stand up for the country.

So, what other journalists, congressmen, judges, various other government officials are they REALLY spying on? After all, considering the nature of these creatures that have taken over the U.S., you have to know that they are only going to expend their energy on things that will bring them the biggest rewards of money and power. The hoopla about spying on innocent Americans to ferret out terrorists is just a smokescreen; it was, purely and simply, to spy on political opponents, journalists, and to obtain material for blackmail so as to completely control the political process.

And that means that all those hundreds of thousands of dollars, millions of dollars even, that are flowing into the coffers of various “Political Action” groups are all going to waste. It's all for nothing. Nothing will change. They will spend your money, make a big show, make a good living off of it, and nothing, NOTHING, will change.

Yes indeed, the desire for change in the country is intense – 60% think America is on the wrong track.

Yes, President Bush is very unpopular. Only 39% approve of him in one poll – his polls are as bad as Nixon's were around Watergate.

No, the news isn't any better for Congress; 63% of Americans want Congress to move in a new direction. Based on very good information it seems that many members of Congress did NOT approve of the confirmation of Samuel Alito. But he was confirmed anyway with some notable Democratic switchovers! (A little domestic spying bearing fruit?)

Yes, it is true that the Republican-controlled Congress' approval ratings are at 29%, but don't think for a minute that the wheels are coming off the right-wing machine. Sure, Karl Rove is under scrutiny, Tom DeLay is under indictment and the Abramoff scandal keeps everyone titillated while the Neocon juggernaut just keeps on stomping across America.

Yes, it is true that everywhere, on all the issues, the people are rejecting the Bush/Neocon agenda from Iraq to Social Security to budget cuts, to funding the war machine, to drilling in the Arctic. But none of it makes one bit of difference to an administration that owns the media, the Intelligence agencies, the military, the Congress and now, the Supreme Court. While the pundits tell us Bush is in trouble, he continues to get his victories on the ground.

Nothing that the political activists have done or said or advertised about has made one whit of difference. Nothing. The same game is being played with Iran that was played with Iraq, and if something doesn't change in a very fundamental way very, very soon, America IS going to be embroiled in a global war that may, indeed, be the end of America.

With so many of our readers writing to us asking “What to do?”, we thought that we would make an experiment. We fought like hell against the Alito confirmation for weeks. We activated our group members, wrote letters, sent emails, made phone calls, sent FAXes, day after day after day. We blogged, we posted to internet forums, we listened to the agreement of hundreds of thousands of people who stood with us against the confirmation of Alito.

We KNOW we were having an effect because, toward the end, there WERE notable congressional reps responding to this pressure and calling for the filibuster. We don't think for a minute that they were serious, we think that rather they were giving lip-service to the idea to calm down all the activists.

The facts “on the ground” are that Alito was confirmed. He was confirmed because the Neocons OWN everything, including the Democrats. It's that simple.

As it now stands, the Republican juggernaut is unbreakable. The corruption scandals, the admitted lying, the low approval ratings, none of that makes any difference. This fall, there is absolutely NO chance of ending the Republican stranglehold on Congress. Anybody who does not see this is deluding themselves and taking you for your money. It's that simple.

As long as the Neocons own the media, the intelligence agencies, the military, the courts, congress AND the voting machines, NOTHING IS GOING TO CHANGE.

Would it make a difference if the Democrats returned to power?

MoveOn.org, the organisation who's email we cited above, is a front for the Democratic Party in the US. They serve to rally and deflect liberals who want to do something in the face of the Bush gang into doing exactly the kinds of activities that can change nothing. Their latest plan is to try and raise money to fight the Republicans in the next election. What? So that the spineless and equally corrupt Democrats, who have allowed Bush to capture the Supreme Court, illegally spy on Americans, get away with phoney commissions about 9/11, allowed the neo-cons and Israel to get away with 9/11, allowed Israel to continue its genocide of the Palestinians, who say that Bush needs to get serious about the war in Iraq and win it, who may not have received as much money from Abramoff as the Republicans, but who have their own lobbyists and slush funds, be put into power in order to improve things??? Is it really going to change anything? Is any dollar given to this cause going to be better spent than if it were thrown into a fire and burned?

You might as well imagine that Ariel Sharon going to rise from his sickbed and lead the Palestinians to a just and equitable one-state solution.

If there is no political opposition in the United States, if none of this anti-Bush busy work can have any beneficial affect, we come back to the question "What can I do?"

We receive many emails from people asking us this question. They can objectively see the situation in the United States, they understand that the Bush gang are imposing fascism, that the neo-cons and Israel were behind 9/11, that the administration lies, that the US Constitution has been torn into tiny pieces... they understand all that. So they ask us, "What can we do?"

As John Kaminski says with his usual eloquence in his article "Pain in the Brain":

Over and over I keep repeating: It doesn't matter who gets elected. All that stuff is a waste of time. America will continue to bomb and poison the world no matter who's in the White House.... The conversation on the radio show was about peace demonstrations. I commented that large peace events were nice for meeting people, but didn't accomplish anything, except reinforce the hollow illusion that we have free speech in the USA.

Indeed. Letters to the editor, peace marches, petitions, phone calls to your congressmen, these are only symbolic acts, moments when one can take a stand for the truth, doing so with no thought or anticipation to the outcome. They will change nothing... yet.

No amount of money that you give to any political organization is going to make any difference whatsoever.

That's the bad news. Activism based on the old model simply doesn't work against fascism.

Is there any good news? What does work? Can anything work? What can we DO?

We think there IS something that can be done, but it is going to require something that we talk about a lot on this website: Networking, colinearity and nonlinear dynamics. To just briefly explain, colinearity is when a lot of people are networked together, all going in the same direction. Nonlinear dynamics are the laws of physics that tell us that constantly applied pressure can keep building and building until it reaches a “popping” point when EVERYTHING shifts, and no one can know beforehand exactly when, where or how that critical mass will be reached.

We think that the solution to the problems facing America today can't yet be seen because there aren't enough people going in the same direction, all applying the pressure to the same goal/point.

That has got to change. And that can only change by a mass change of thinking. Americans needs to stop wasting energy on the wrong things and start spending it on the right things in the right way at the right time. We think that those who are sincerely working for change need to network together, to support each other not only in word and deed, but financially.

Yes, we have a plan. But like any plan, it requires funding. And unlike useless political plans, we can't reveal all the details because we want the plan to work. For those of you who have figured it out, yes, this is an information war, and we don't have the trillions of dollars that the Pentagon has to wage it. We have very limited funds, in fact.

In order to begin to implement our plan, we are going to need a lot of money. But we aren't asking you for that money, we aren't asking you for $3.25 million like certain political activist groups that don't accomplish anything. We are asking for something quite different. We are asking you to help us fund a real, significant Conscience Network. We already contribute financially to several 9-11 researchers and Activists who are struggling to stay afloat. We need to do more. Every day we see the sincere one, the ones that can't be bought off or co-opted, falling by the wayside, giving up in frustration and despair. Everyday we see the agents of COINTELPRO spreading their clever lies wrapped in truths over an ever widening sphere of influence, and those who can see, those who KNOW, are helpless. If they say a word, the small income they have will be cut off and they will have no further means of continuing to speak out.

That's how it works. First they try to buy off the sincere Truth seeker and speaker. If that doesn't work, then they try to destroy them financially. If that doesn't work, then they try to destroy your reputation. We've seen it and experienced it.

If you read these pages, it is likely to be because you get something from them. Readers of Signs of the Times and the Cassiopaea sites, as well as Laura's books, tell us how much our work means to them. You have come across this work, and it has touched you. It may even have changed you.

You know this to be true.

What if you could help us to support others of like mind, and then to help more and more people to have access to that work? And then, what if those others began to open their eyes and minds to what a true NETWORK is all about?

Up until now limited financial resources have meant that we have not been able to compete with the Pentagon COINTELPRO and Propaganda Budget. We've had to bootstrap every phase of our activity for the past eight years. You, the reader, can see the changes, the development of the site, the spreading influence and increasing readership. That has been due mostly to steady and consistent work, word of mouth advertising, and extremely positive feedback. But, it has now become clear that unless we can get make some serious moves, we will never reach those millions of people that are asking serious questions, thirsting for answers and receiving only lies and disinformation from their government and mainstream media. We won't reach them in time. And if we don't reach them in time, the rest of our plan cannot be put into effect. It all depends on a shift in mass consciousness.

Last year, we asked our readers to help to us raise the money to buy new computer and sound recording equipment in order to improve the services that we offer to our readers free. Thanks to your generosity, the Signs Team has been equipped with the necessary tools to increase our ability to give back, to reach more people, and it has caused a dramatic increase in our readership. More and more people are looking for exactly what Signs of the Times offers: a daily charting of the changing face of our world that keeps our readers abreast of essential information, the news behind the news, that may literally save their lives.

Now, more than ever, as galloping fascism stalks the world, there is a need for as many people as possible to be appraised of the reality of the world in which they live so that this knowledge can be utilised to protect themselves and those they love. It is clear that there is absolutely no chance that the mainstream media will ever provide this service to the people of the world.

It is also clear that there are plans afoot to shut down the Internet as a source of alternative news and points of view that point out the lies, that give people an accurate account of what is happening on our planet, and that demand that the will of the majority be respected. When that happens, sites like Signs of the Times will no longer be available, the information that you get today for free will not even be available if you were willing to pay. To prepare for this, we have been publishing as much of our material as possible as books. To date, we have books totalling over 4000 pages. We have plans for much more during the coming year.

But the books serve no purpose if they sit on shelves or boxed up in cartons. They need to move, they need to get out into bookstores, and from bookstores into homes. For that, we need to advertise. And that costs money. People thirsty for knowledge need the opportunity to learn about our work so that they, too, will understand the gravity of the situation we face and can see the possibility of a different way of living, of be ing.

We CAN make a difference; we just have to go about it in an altogether different way than has been tried up to this point. We need a bootstrap to the next level. That's what we are asking you for.

But we don't have much time. We need to work fast. The Darkness is falling and we need a lot of fuel to keep the lighthouse going. As Bob Dylan put, “It's not dark yet, but it's getting there”.

If every one of our daily readers could give $100.00 to help us counter the propaganda of the dark forces occupying America and open the eyes of others to the infinite possibilities of a colinear network pushing the envelope, we could create a network of Light and Truth that will shine from Sea to Shining Sea.

At this point, none of us have anything to lose anymore, except the last vestiges of our freedom. So, please, dig as deep as you can TODAY. If you can't possibly afford $100, then give what you can. It's time to Rock and Roll!

Click here to donate now!

Gold closed at 555.20 dollars an ounce on Friday, up 0.2% from 554.20 for the week. The dollar closed at 0.8375 euros Friday, down 0.3% from 0.8401 at the end of the previous week. That puts the euro at 1.1940 dollars, compared to 1.1904 the Friday before. Gold in euros would be 464.99 euros an ounce, down 0.1% from 465.56 the week before. Oil closed at 59.88 dollars a barrel, down 3.3% from $61.84 for the week. Oil in euros would be 50.15 euros a barrel, down 3.6% from 51.95 the week before. The gold/oil ratio closed at 9.27 up 3.5% from 8.96 at the end of the previous week. In the U.S. stock market, the Dow closed at 11,115.32, up 1.8% from 10,919.05 the Friday before. The NASDAQ closed at 2,282.36, up 0.9% from 2,261.88 the week before. The yield on the ten-year U.S. Treasury note closed at 4.54 down four basis points from 4.58 last Friday.

There was much optimism about the U.S. economy from mainstream analysts last week, buoyed by rising stocks and falling oil prices (down 3.3%) and, for a while, falling gold prices (gold actually ended up a bit). The hope is that fresh quarterly earnings reports from major retailers this week will keep the U.S. stock market rising:

Stocks could see 3rd week of gains

By Caroline Valetkevitch

Stock bulls will push for a third week of gains after last week's slide in oil to below $60 a barrel, but investors will be on the alert for signs of inflation and higher interest rates.

The Presidents' Day holiday-shortened week will include a rush of earnings from retailers, including Wal-Mart Stores Inc., which will grab investors' attention. After this coming Tuesday's closing bell, China's leading Web search company, Baidu.com, also will report quarterly results. The reports will put the finishing touches on the fourth-quarter corporate profit picture, which analysts said has improved since January when some high-profile companies disappointed Wall Street.

Minutes on Tuesday from the Federal Reserve's January policy-setting meeting and consumer price data on Wednesday will be picked apart for further clues about the interest-rate outlook. Investors are worried signs of rising inflation will force the Fed to keep extending its long campaign of raising interest rates. The Fed has been tightening credit since June 2004 in an attempt to rein in inflation.

New Fed Chairman Ben Bernanke, in congressional testimony last week, suggested that more rate increases may be needed to contain inflation. But analysts said his reassuring comments on the economy and the absence of any big surprises in his remarks helped push stocks higher.

"His testimony not only played well to Congress, but to Wall Street. So we should continue to get a little honeymoon spillover from that," said Fred Dickson, senior vice president and market strategist at D.A. Davidson & Co. in Montana.

In another positive sign for higher stock prices, crude oil last week fell below $60 for the first time this year. U.S. crude for March delivery was still below that level on Friday; it settled at $59.88 a barrel, up $1.42 on the New York Mercantile Exchange.

"Investors are going to go into the week feeling a little bit better about the shape of consumer spending and feeling much better about the emergence of Bernanke as he heads the Fed," Dickson said.

By Friday's closing bell, all three major U.S. stock indexes had finished the week with gains. The blue-chip Dow Jones industrial average rose 1.8 percent, while the broad S&P 500 advanced 1.6 percent, and the Nasdaq Composite Index gained 0.9 percent.

Oil's Drop Below $60

Forecasts of higher U.S. crude and gasoline inventories triggered the fall in oil to below $60 a barrel last Tuesday. On Wednesday, when a larger-than-expected rise in crude stockpiles was reported by the government, oil fell below $58 for the first time since late December.

Lower energy prices tend to boost stocks because they mean reduced costs for consumers and corporations.

But analysts said continued tensions between the Western powers and Iran over Iran's nuclear ambitions, as well as fighting in Nigeria, the eighth-largest crude exporter, between government forces and militants, could keep oil prices higher.

On Saturday, three American oil workers were abducted in Nigeria and the United States has called for their unconditional release. Militants stormed an offshore barge operated by U.S. oil services company Willbros Group Inc. in predawn attacks and abducted nine workers in all.

Crude hit an all-time high of $70.85 in late August after Hurricane Katrina struck the U.S. Gulf Coast.

"We don't think $60 is sustainable. We just had the warmest January in 100 years, but we're expecting colder temperatures in New York this weekend. Investors are being very short-sighted," said Philip Orlando, senior portfolio manager at Federated Investors.

"We're sitting on a geopolitical powder keg with Iran that could blow at any moment. It would not surprise us to see crude back in the $70-plus neighborhood by the end of the quarter."

Fed Minutes, Cpi And Durable Goods

The financial markets will be closed on Monday for the Presidents Day holiday.

But Wall Street will reopen on Tuesday anxiously awaiting the release of minutes from the Federal Open Market Committee meeting on January 31 -- Alan Greenspan's last.

In the week ahead, the FOMC news will be followed on Wednesday by the consumer price index and on Friday by durable goods orders. Both reports, for January's data, will shed more light on the U.S. economy's health.

"The market is hypersensitive to any clues that they can get as to what the Fed will do over the course of the tightening cycle," Orlando said.

On Friday, a report from the Labor Department showing the core Producer Price Index, excluding volatile food and energy prices, climbed 0.4 percent in January -- twice market expectations -- was a negative influence for stocks.

Economists polled by Reuters expect the overall CPI for January to rise 0.5 percent, after December's decline of 0.1 percent. They see core CPI, excluding volatile food and energy prices, up 0.2 percent in January, following December's gain of just 0.1 percent.

Orders for durable goods, which are manufactured goods like washing machines, computers and cars designed to last three years or more, are expected to drop 1.0 percent in January, according to the Reuters poll. In December, durable goods orders rose 1.8 percent. Excluding transportation, January durable goods orders are forecast to rise 0.5 percent, compared with December's gain of 1.7 percent.

From Wal-Mart To Nordstrom

Earnings will be on the watch list, too.

In the week ahead, investors will get more insight into consumer spending when earnings come in from retailers ranging from discounters to purveyors of luxury goods.

Quarterly earnings are due on Tuesday from Wal-Mart, the discount behemoth and the world's largest retailer, as well as from Federated Department Stores Inc., the parent of Macy's and Bloomingdale's, and Home Depot Inc., the world's largest home improvement retailer.

On Thursday, quarterly results are expected from Gap Inc., the largest specialty apparel chain; Nordstrom Inc., an upscale department store chain known for service and designer clothes; Kohl's Corp., a moderately priced department store chain, and Limited Brands Inc., owner of Victoria's Secret and Bath & Bodyworks stores.

They follow higher profits reported last week by J.C. Penney Co. Inc. and Target Corp., which were boosted by strong holiday season sales. The fourth quarter generates the biggest portion of retailers' annual profit.

"Good news on retailers should be a sigh of relief," Dickson said

Yet, this optimism is coming at a time of record triple deficits, the hollowing out of productive capacity and the end of the asset bubble. And by productive capacity, I don't mean only industrial production. The offshoring of jobs has spread to core white collar jobs as well.

The Pace of White-Collar Outsourcing

How rapidly will outsourcing of U.S. white collar jobs proceed? The consensus bet is 300,000 a year, but it all depends on how rapidly the English-literate populations of emerging markets expand:

India's Outsourcing Industry Is Facing a Labor Shortage - New York Times

By SARITHA RAI MUMBAI, India, Feb. 16 — India's leadership in global outsourcing may be in jeopardy unless it increases its supply of skilled workers.... Experts... said Thursday that an incipient skills shortage was the biggest threat to the industry's blazing growth.... Pramod Bhasin, chief executive of Genpact, a back-office outsourcing company once owned by General Electric, set the tone when he said, “If the talent in India is scarce, we will go wherever the labor pool is available.”

Lower-cost centers like Eastern Europe and China could become serious rivals for outsourcing business from Western multinational companies.

Until now, corporations mainly looked to India to do work from customer support to writing software code to designing chips. But the supply of India's famed “skilled, low-cost, English-speaking” work force may not quite match the sizzling demand.

India's $23.4 billion outsourcing industry accounts for most of the country's software and services industry, which makes up nearly 5 percent of gross domestic product. The industry employs 1.2 million workers, has sparked a consumer revolution in India, and is accelerating at more than 30 percent a year.

On the sidelines of the Nasscom meeting, B. Ramalinga Raju, chairman of India's fourth- largest outsourcing company, Satyam Computer Services, said that India produced three million college graduates every year, including nearly 400,000 engineers. “But most of these are uncut diamonds that have to go through polishing factories, as the trade requires only polished stones,” Mr. Raju said.

In a country of 1.1 billion people, raw talent is plentiful, he said, but not all of it is market-ready.... The supply shortfall is even more acute in mid-level jobs, like software engineers. Salaries in this segment are rising an average 20 percent a year, and in some segments even 50 percent annually, compared with 5 percent annual raises for software engineers in the United States.

“The irony is that while the outsourcing industry partially fueled an economic boom amongst the middle classes, the growth has now spilled onto other areas offering ambitious young college graduates an array of job options outside of the outsourcing industry,” said M. S. Krishnan , professor of business information technology at the Stephen M. Ross School of Business at the University of Michigan....

Outsourcing companies are taking matters into their own hands to meet mid-level skills shortages by setting up vast, dedicated training centers. Tata Consultancy Services... has a large training center in Trivandrum... its nearest rival, Infosys Technologies, has a training campus in Mysore.... “At any given point in time, there are 4,000 people in the pipeline at Infosys's training center,” Mr. Krishnan said.

Many companies believe the skills deficit will only grow. “We are in the people business, and the situation will become more challenging in five years,” said Amitabh Ray, director of global delivery, IBM Global Services India....

The situation is much the same in the back-office and call center jobs: of 100 college graduates applying, only 8 are immediately employable. Another 20 require considerable training to be hired, according to Nasscom data...

The fact that the demand for Indian engineers is so strong that even a country as populous as India cannot keep up with it says a lot for the rapid pace of the gutting of higher-paid western office and professional workers. The type of shift that used to take a generation, enough time to be trained, to work for a career then retire, now takes place in less than a decade. Even India is fearing that their boom will end and their new jobs will go to lower-paid workers in China.

One reason this is important is that standard economics says that if the dollar falls in value, the trade deficit can be turned around. Yet that presupposes productive capacity in the United States that can produce goods for export. But if that capacity has been completely gutted, then there can be no rebalancing. The following is from Stephen Roach, Chief Economist of Morgan Stanley:

Global: Trade Deficits and Asset Bubbles

Stephen Roach (New York)

Most believe that the dollar holds the key to global rebalancing. Academics are especially adamant on this point, with many maintaining that it will take at least a 20-30% drop in the greenback to “fix” the US external imbalance. Yet that remedy doesn't square with the raison d'être of America's trade deficit. The problem is concentrated on the import side of the equation, driven largely by the excesses of asset-dependent consumption. That means higher real interest rates are likely to be far more important than a weaker dollar in resolving America's external imbalances.

The latest US trade report says it all. In December 2005, imports of foreign goods and services ($177.2 billion) were fully 59% larger than exports ($111.5 billion). Moreover, it turns out that a -$70.6 billion deficit on goods was cushioned by a $4.9 billion surplus on services. Within the goods component of the December trade gap, the disparity between imports ($149.6 billion) and exports ($79.0 billion) was even larger. This underscores the daunting arithmetic of a turnaround to America's external imbalance. With goods imports fully 89% larger than goods exports, even if exports grow at twice the rate of imports, the deficit on goods will remain essentially unchanged. In other words, just from an arithmetic point of view, it will be exceedingly difficult for the United States to export its way out of its trade deficit.

The export solution also suffers from an even more glaring deficiency -- the hollowing of Smokestack America. With manufacturing capacity and jobs moving steadily offshore over the past 20-plus years, the US simply lacks the wherewithal to spark an export-led turnaround in foreign trade. In all too many cases, the loss of US manufacturing prowess has been a permanent, or structural, erosion. The list of “lost industries” -- from steel and autos to textiles and even computers -- speaks of a competitive dynamic that makes it all but impossible for the US to recapture its once leading market share as an industrial powerhouse. As I noted recently, that leaves the US on the outside looking in when one of its formerly large trading partners like Japan springs back to life (see my 10 February dispatch, “Rebalancing Made in Japan?”).

I am certain there is a level of the dollar that might reverse this process. But I think it is well in excess of the 20-30% decline that many believe is the answer to America's massive trade imbalance. Given the structural tilt to the global playing field, my guess is that in order to make a meaningful difference to America's trade dynamics on both the export and import sides of the equation, the US currency would have to be sustained at an exchange rate on the order of 30-50% below present levels on a broad trade-weighted basis. And the key word here is “sustained.” A trading blip will not give US exporters the confidence -- or the economics -- they need to go back into business. Needless to say, the odds are quite low that either the US or other global authorities would accept such a dollar-collapse scenario as a palliative for America's trade deficit . Largely for those reasons, I think it is safe to conclude that a weaker dollar is not the answer for the US external imbalance.

And that takes us to the essence of the problem -- America's massive import overhang. Import fluctuations in any economy are, of course, a derivative of the cyclical ups and downs of domestic demand. But there is also an important secular overlay that is traceable to the same structural pressures noted above. On both counts, the United States qualifies as “importer extraordinaire.” The shift in the global competitive playing field leaves an increasingly hollow US economy with little choice but to rely more and more on foreign production to source internal demand. And the extraordinary burst of domestic consumer demand in recent years -- with personal consumption expenditures holding at a record 71% of GDP since early 2002 -- pushes the internal-demand underpinnings of US imports into an entirely different realm. Little wonder the US continues to lead the global import sweepstakes, with some $1.7 trillion in imports in 2005 --well in excess of dollar-based import bills of the Euro zone (US$1.5 trillion), UK ($0.5 trillion), Japan ($0.5 trillion), and China ($0.7 trillion).

In terms of fixing America's external imbalance, for reasons also noted above, I am not optimistic that the answer can be found in the structural, or competitive, angle. Instead, my sense is that the answer lies mainly in the cyclical piece of the equation -- specifically, in the asset-driven excesses of US consumption. With consumption growth running well ahead of labor income growth over the entire four years of the current economic expansion, there can be no mistaking the importance of property-driven wealth effects in closing the gap. Estimates conducted by none other than former Fed Chairman Alan Greenspan put the equity extraction from residential property in excess of $600 billion in 2005 alone -- enough, by his reckoning, to have accounted for all of the decline in household saving since 1995 (see the September 2005 Federal Reserve working paper by Alan Greenspan and James Kennedy, “Estimates of Home Mortgage Originations, Repayments, and Debt on One-to-Four-Family Residences”). In short, look no further than the asset-dependent consumption binge as a major cyclical culprit behind America's import overhang.

This takes us to the most controversial piece of the debate -- the so-called real interest conundrum. In my view, led by the world's major central banks at the short end of the curve, and augmented by the conundrum at the longer end of the curve, the super-liquidity cycle has played the decisive role in taking asset markets to excess over the past decade. First with equities, then bonds, and now property, American consumers, in particular, have come to take excessive rates of asset appreciation as an entitlement. As I see it, the Federal Reserve played a critical role in fostering this outcome -- first by condoning the equity bubble in the late 1990s and then by setting up the now infamous serial-bubble syndrome by slashing its nominal policy rate to the rock-bottom 1% level once the equity bubble burst. The overall level of real interest rates was artificially depressed throughout this period -- sustaining the rise of asset-dependent consumption and a concomitant overhang of excess imports.

The Fed, of course, has attempted to normalize real interest rates over the past 18 months, but its 350 basis points of tightening at the short end of the curve has had next to no impact at the long end. Policy-related buying of dollar-denominated assets by Asian central banks has been an important, but by no means exclusive explanation of this conundrum. So has the globalization of disinflation. But for me, the bottom line is clear: If the US wants to come to grips with this imbalance, or if the world wants to address this increasingly worrisome source of instability, the answer can probably be found more in the real interest rate than in the dollar.

What Roach leaves out here is what the consequences of raising real interest rates to a sufficient level in an environment of consumer and government overindebtedness: another Great Depression.

Whatever the reason, there can be little doubt that the excesses of asset-dependent consumption lie at the heart of America's import problem -- and therefore at the heart of the world's biggest imbalance, the US trade deficit. And, of course, the saving problem is the mirror image of this statement. Lacking in domestic saving -- America's net national saving rate fell into negative territory for the first time in modern history in late 2005 -- the US has turned heavily to foreign saving in order to fill the void. And it has had to run massive current account and trade deficits to attract the foreign capital. Yet there is no free lunch. The imported saving comes at a real cost -- overly-indebted and asset-stretched American consumers, on the one hand, and a collection of US creditors that are under-consuming at home and massively overweight dollars in their rapidly growing stashes of official foreign exchange reserves. I don't buy the idea that these tensions are manifestations of a glorious new era for a dollar-centric world economy. I worry, instead, that as the liquidity cycle turns, asset-driven global imbalances are reaching the breaking point.

Yet the optimists have taken to questioning the math behind statistics that they don't want to acknowledge. Here's Brad Setser:

Is national income accounting biased against the US?

Feb 05 2006

In a fake news classic, Rob Corddry and Jon Stewart of the Daily Show once pondered how to report "the facts" when "the facts themselves were biased."

Michael Mandel seems to think the facts are biased against the US economy.

Not really the facts. National income accounting .

According to Mandel, national income accounting is biased against the US. It was designed for countries that invest heavily in factories that make things. The US in the 1920s and 1930s and above all the 1940s. Or China today.

National income accounting doesn't work for the current knowledge-driven American economy , driven by platform companies that have outsourced all the dirty work of manufacturing. Rather than obsess about all the weaknesses that US shows in the conventional national income accounts - low savings, not-so-wonderful investment, big current account deficits - we should embrace a set of new metrics designed for the Ipod (designed in California, assembled in Asia) economy.

Time and other worry warts have it all wrong, in part because it looked at the wrong measures. National income accounting understates both US investment in "knowledge" and brand equity and US "knowledge" exports.

To be fair to Michael Mandel, I am exaggerating his argument a bit for effect, and ignoring the caveats in his Business Week cover story. But he clearly thinks the "doom and gloom caucus, trade deficit division" doesn't get the new knowledge economy. Is he right?

Mandel's core argment is that the national accounts understate US investment in the knowledge economy and other intangible assets, understate savings by counting investment as consumption and fails to capture US knowledge exports.

I do not have an informed opinion on the question of whether the national accounts definition of investment is dated, and too narrow. Should some of McDonald's advertising budget be considered a long-term investment in McDonald's brand - an investment with a longer half-life than a new PC - rather than just an attempt to sell more burgers today. That would drive up US investment rates. And US savings rates, as both business investment and business savings would rise.

Maybe the US invests (and saves) more than the national income accounts show. I don't think, though, that mismeasured advertising investment changes the bottom line: the US now saves a lot less than it used to. The US savings rate may not be negative, but it still fall short of what the US needs to finance all the investment the US does.

But that's old thinking according to Mandel. The Gloom and Doom caucus - trade deficit division (I suspect most would consider me a member) misses all the fantastic profits that US firms are making exporting their know-how. It mismeasures the Ipod economy. A country that is the home of the company that owns Eurodisney, Tokyo Disney and Hong Kong Disney and profits from all the Brits lining up to get into Orlando's Disney World must be doing well ...

One caveat. Eurodisney is not my example. It belongs to the Harvard economists who conjured up dark matter . I suspect it isn't the best of all examples of US prowess abroad ...

According to Mandel, the doom and gloom caucus, trade deficit division, doesn't get the Ipod economy. It also ignores all the gains the US gets from importing human capital. Immigrants educated abroad generate large big windfall gains when they come to the US. India pays for the world class education at Indian Institutes of Technology (IITs), US firms (and therefore US economy) reap the benefits.

Mandel:

Perhaps the trickiest and most controversial aspect of the shadow economy is how it alters our assessment of international trade. The same intangible investments not counted in GDP, such as business know-how and brand equity, are for the most part left out of foreign trade stats, too. Also largely ignored is the mass influx of trained workers into the U.S. They represent an immense contribution of human capital to the economy that the U.S. gets free of charge, which can substantially balance out the trade deficit of goods and services. "I don't know that the trade deficit really tells you where you are in the global economy," says Gary L. Ellis, chief financial officer of Medtronic Inc., a world leader in medical devices such as implantable defibrillators. "We're exporting a lot of knowledge."

I want to touch (hopefully briefly) on both parts of Mandel's arguments.

Should a country that is importing human capital also be importing savings from abroad, as Mandel argues?

Perhaps. Consider Australia in the 1800s. It imported people and capital from the British Isles. But those resources were invested in the export sector, producing wool, wheat and iron to sell back to Britain.

Taking on external debt to build up an export sector (staffed with immigrant labor) is one thing. But that is not what the US seems to be doing. The debt seems to be financing the housing sector. And lots of immigrants seem to be employed in the US service sector. Visit a restaurant kitchen in New York. Or look for domestic help ...

Still, I can see why the US might be importing capital from other advanced economies whose labor forces are forecast to fall. Though it isn't immediately obvious why Japan is financing the US rater than say emerging Asia. Or why the emerging world and its rapidly expanding urban labor force is financing the US.

…But maybe my concern is misplaced - the US isn't importing savings to build houses and a domestic services sector, but successful, global platform companies that stride the world, sucking up profits from their activities abroad that "old" metrics like the current account don't capture. That too is part of Mandel's argument.

US knowledge exports that make Intel's plants in Israel, Costa Rica, Ireland, Singapore and no doubt many other places hum. Pepsi exports knowledge to Ireland, where it now produces Pepsi concentrate for sale back to the US . OK, not that one. It is too obviously tax arbitrage. Coke does it too.

I don't buy the broader argument, at least not in full.

Mandel didn't mention the Japanese knowledge Toyota exports to its US plants. Or the German knowledge that Mercedes and BMW export to their US (and Eastern European) plants. Or the French knowledge exported in the perfume, fashion and wine businesses ...

The flow of intangibles in the global economy is not one way.

Nor do US firms capture all of the benefits of their "intangible" knowledge exports. A US firm sets up a plant in China, and teaches its employees the secrets of building cars or computer chips. And then a Chinese firm poaches its US firms' employees. This is no doubt good for economic development, as it helps increase the productivity of Chinese firms. But it makes it harder for the US to continue to reap monopoly profits on its knowledge. Or its brands.

I also don't think the current account is quite as outdated a concept as Mandel suggests.

The current account deficit is not just the trade deficit. It also includes US overseas "income" - as well as the payments the US makes on its external debt.

There are obviously enormous issues about the correct measurement of the overseas profits of US firms. But the overseas income of US firms is a big part of the US current account. Indeed, it is the income that the US gets from its firms abroad that has keep the US from making (net) interest and dividend payments on the world. Dark matter and all.

Forcing the numbers to reflect your fantasy (creating your reality) is what Enron did. And Ken Lay is still unrepentant, blaming the crash of Enron on a ‘run on the bank'. The parallels are disturbing:

Greed, Debt, Incompetence

The United States of Enron

By ROBERT BRYCE

February 15, 2006

Jeff Skilling had a vision for Enron. In February of 2001, he told the company's employees that Enron, would, within five years, “be the leading company in the world.”

World dominance was the main message that Skilling and Enron's chairman, Ken Lay, imparted to their employees in the video of that 2001 meeting, which was re-played on Wednesday morning in courtroom 9B of the federal courthouse in Houston. Forget talk that Enron was short on cash, or that the mighty juggernaut was overextended and hobbled by competitors. Ignore the doubters, like the journalists at Fortune magazine, who had, a few days earlier, published a story saying that Enron's business model was based on a “black box.” “The company is doing great,” Skilling told the Enron employees. “We've got a vision for the next century.”

It was during the playing of that video that it became clear: the Bush Administration has become Enron. World dominance.

The old rules don't apply. Machiavellian vengeance toward naysayers. Corrupt accounting. And holding all of those ingredients together: a heaping helping of hubris, a hubris that leaves no room for doubt or uncertainty.

That George W. Bush has morphed into his old pal, “Kenny Boy” Lay shouldn't be surprising. Enron was, until the 2004 campaign, Bush's biggest career patron. The intrigue lies in the myriad parallels that can be drawn between the Bush regime and the Enron regime.

On a personality level, you have the similarities between Bush and Lay: both are the detached executives who couldn't know -- or didn't bother to pay attention to -- what was happening in their operations. Lay, his defense lawyers insist, had no idea that Enron's chief financial officer, Andy Fastow, was cooking the books. Lay was in charge of the big picture. He was the public face of Enron, Mr. Outside. Never mind that Lay was a PhD. in economics who couldn't read a cash flow statement. As for Bush, neither he nor his defense secretary, Donald Rumsfeld, can be held accountable for the torture of Iraqi prisoners that occurred at Abu Ghraib. That was done by rogue soldiers without approval from their commanders.

Both Lay and Bush have backed their subordinates, no matter how grievous their wrongdoing. In October of 2001, after Fastow's double-dealing was exposed, Lay insisted that he and the Enron board “have the highest faith and confidence in Andy and think he's doing an outstanding job as CFO.” In May of 2004, right after the Abu Ghraib scandal broke, Bush insisted that Rumsfeld was “doing a superb job” and that America owes him “a debt of gratitude.”

The old rules no longer apply. For Enron, it was the old rules of accounting. As Skilling once told Enron's chief accounting officer, Rick Causey, “Cash doesn't matter. All that matters is earnings.” Enron had blown up the old methods. It was operating in a new paradigm, and those who didn't understand that, well, as Skilling often put it, they just “didn't get it.”

For the Bush Administration the old rules include anachronisms like the Geneva Convention. Bush insist that he's fighting a new, stateless, enemy, and thus the “global war on terror” cannot be constrained by old treaties, old rules, or the countries that Rumsfeld calls “old Europe.” That means that “illegal enemy combatants” can be held at Guantanamo Bay, or in secret prisons in Syria, or elsewhere, for as long as Bush deems necessary.

Cheney, plays the role of Skilling. Like the monomaniacal Enron executive who never doubted that his vision for a business that would dominate global markets in everything from natural gas and electricity to paper and steel, Cheney is the true believer in America's global dominance, the one who constantly pushes against old notions that might constrain America's power. If that means torturing prisoners, no problem. As Cheney said shortly after the 9-11 attacks, the U.S. government must, “work through, sort of, the dark side.” And that means that it is “vital for us to use any means at our disposal, basically, to achieve our objective.”

Opponents of the regime must be dealt with quickly and harshly. For Enron, that meant that stock analysts like Merrill Lynch's John Olson, who never parroted the company's rosy predictions, had to be silenced. Merrill fired Olson after Enron made its displeasure known. For the Bush regime, it meant smearing former ambassador Joe Wilson and his wife, Valerie Plame. Wilson's offense: publicly questioning the story that Iraq was trying to buy radioactive materials from Niger.

Opponents who don't follow the script are “assholes.” That was made clear in September 2000, when Bush, unaware that his microphone was on, pointed to New York Times reporter Adam Clymer and told Cheney, who was standing nearby, that Clymer was a “major league asshole.” Cheney readily agreed.

Skilling used the same term a few months later during an April 2001 conference call with analysts. When Boston hedge fund manager Richard Grubman pressed Skilling on a financial question, Skilling cut him off, and let all of the analysts and his Enron pals know that Grubman, too, was an “asshole.”

Finally, the defense strategies adopted by Bush and his cronies at Enron are exactly the same. That is: everything we did was legal. From the beginning of their trial, the attorneys for Lay and Skilling, Mike Ramsey and Dan Petrocelli, have stuck to that theme. During his opening argument, Petrocelli declared that Enron was “no house of cards…It was a wonderful company, a shining star.” Ramsey told jurors that Enron didn't fail because of the billions of dollars in accounting shenanigans, it failed because of a “market panic.”

That same tactic has been used consistently by the Bush Administration to defend the CIA's rendition of terror and the indefinite imprisonment of terrorism suspects – without charges -- in places like Guantánamo Bay. Last week, about the same time that the first prosecution witness began testifying on the stand in Houston, Attorney General Alberto Gonzales was testifying before the Senate Judiciary Committee, telling the senators that the secret wiretaps that Bush has authorized are legal. And why are they legal? Well, because Gonzales and the president say it's legal.

Unlike the execrable Gonzales who has yet to utter a credible word in defense of torture or wiretaps, the Enron attorneys are at least partially correct in their diagnosis of the failure of Enron. It's true that the collapse of Enron was hastened by a “market panic.” That panic was a direct result of Lay's incompetence. Lay simply did not know how much money Enron had borrowed to fund its global ambitions. Nor did he grasp just how deeply distrusted Enron was by its peer companies.

Incompetence. Huge debts. Lack of trust. Just another set of parallels for Kenny Boy and his pal, W.

Robert Bryce is the author of Pipe Dreams: Greed, Ego, and the Death of Enron

No matter whom they want to blame it on, the fact is Enron collapsed. Will the U.S. empire and imperial economy collapse as well? Jared Diamond, best known as the author of Guns, Germs and Steel, published another book last year, called Collapse. Diamond defines ‘collapse' as “a drastic decrease in human population size and/or political/economic/social complexity, over a considerable area, for an extended time” (Jared Diamond, Collapse: How Societies Choose to Fail or Succeed, New York: Viking Press, 2005, p. 3).

In Collapse , he argues that societies collapse when bad decisions are made by societies in the face of threats to the basic resources on which the societies are dependent. These bad decisions result from: 1. Failure to Anticipate, 2. Failure to Perceive, 3. Rational Bad Behavior, and 4. Disastrous Values. Rational bad behavior is interesting because it has to do with the character of the society's leaders. After discussing conflicts of interest in societies, Diamond writes:

A further conflict of interest involving rational behavior arises when the interests of the decision-making elite in power clash with the interests of the rest of society. Especially if the elite can insulate themselves from the consequences of their actions, they are likely to do things that profit themselves, regardless of whether those actions hurt everybody else.

…Throughout recorded history, actions or inactions by self-absorbed kings, chiefs, and politicians have been a regular cause of societal collapses …(p.430-1)

Sound familiar?

According to Diamond, the challenges faced by today's self-absorbed leaders are these twelve environmental problems:

• At an accelerating rate, we are destroying natural habitats or else converting them to human-made habitats , such as cities and villages, farmlands and pastures, roads, and golf-courses. The natural habitats whose losses have provoked the most discussion are forests, wetlands, coral reefs, and the ocean bottom. (p. 487)

• Wild foods, especially fish and to a lesser extent shellfish, contribute a large fraction of the protein consumed by humans . In effect, this is protein that we obtain for free (other than the cost of catching and transporting the fish), and that reduces our needs for animal protein that we have to grow ourselves in the form of domestic livestock. About two billion people, most of them poor, depend on the oceans for protein. If wild fish stocks were managed appropriately, the stock levels could be maintained, and they could be harvested perpetually. Unfortunately, the problem known as the tragedy of the commons has regularly undone efforts to manage fisheries sustainably, and the great majority of valuable fisheries already either have collapsed or are in steep decline… (p. 488)

• A significant fraction of wild species, populations, and genetic diversity has already been lost, and at present rates a large fraction of what remains will be lost within the next half-century… (p. 488)

• Soils of farmlands used for growing crops are being carried away by water and wind erosion at rates between 10 and 40 times the rates of soil formation, and between 500 and 10,000 times soil erosion rates on forested land… (p. 489)

The next three problems involve ceilings—on energy, freshwater, and photosynthetic capacity. In each case the ceiling is not hard and fixed but soft: we can obtain more of the needed resource, but at increasing costs.

• The world's major energy sources, especially for industrial societies, are fossil fuels: oil, natural gas, and coal. While there has been much discussion about how many big oil and gas fields remain to be discovered, and while coal reserves are believed to be large, the prevalent view is that known and likely reserves of readily accesible oil and natural gas will last for a few more decades. This view should not be misinterpreted to mean that all of the oil and natural gas within the Earth will have been used up by then. Instead, further reserves will be deeper underground, dirtier, increasingly expensive to extract or process, or will involve higher environmental costs. (p. 490)

• Most of the world's freshwater in rivers and lakes is already being utilized for irrigation, domestic and industrial water, and in situ uses such as boat transportation corridors, fisheries, and recreation… Throughout the world, freshwater underground aquifers are being depleted at rates faster than they are being naturally replenished. (p. 490)

• It might at first seem that the supply of sunlight is infinite, so one might reason that the Earth's capacity to grow serious crops and wild plants is also infinite. Within the last 20 years, it has been appreciated that that is not the case, and that's not only because plants grow poorlyin the world's Artic regions and deserts unless one goes to the expense of supplying heat or water. More generally, the amount of solar energy fixed per acre by plant photosynthesis, hence plant growth per acre, depends on temperature and rainfall… The first calculation of this photosynthetic ceiling, carried out in 1986, estimated that humans then already used (e.g., for crops, tree plantations, and golf courses) or diverted or wasted (e.g., light falling on concrete roads and buildings) about half of the Earth's photosynthetic capacity. Given the rate of increase in human population, and especially of population impact…, since 1986, we are projected to be utilizing most of the world's terrestrial photosynthetic capacity by the middle of this century. That is, most energy fixed from sunlight will be used for human purposes, and little will be left over to support the growth of natural plant communities, such as natural forests. (pp. 490-1)

The next three problems involve harmful things that we generate or move around: toxic chemicals, alien species, and atmospheric gases.

• The chemical industry and many other industries manufacture or release into the air, soil, oceans, lakes and rivers many toxic chemicals, some of them “unnatural” and synthesized only by humans, others present naturally in tiny concentrations (e.g., mercury) or else synthesized by living things but synthesized and released by humans in quantities much larger than natural ones (e.g, hormones)… (p. 491)

• The term “alien species” refers to species that we transfer, intentionally or inadvertently, from a place where they are native to another place where they are not native…. (p. 492)

• Human activities produce gases that escape into the atmosphere, where they either damage the protective ozone layer… or else act as greenhouse gases that absorb sunlight and thereby lead to global warming. (p. 493)

The remaining two problems involve the increase in human population:

• The world's human population is growing. More people require more food, space, water, energy and other resources… (p. 494)

• What really counts is not the number of people alone, but their impact on the environment… Our numbers pose problems insofar as we consume resources and generate wastes. The per-capita impact… varies greatly around the world, being highest in the First World and lowest in the Third World. On the average, each citizen of the U.S., western Europe, and Japan consumes 32 times more resources such as fossil fuels, and puts out 32 times more wastes, than do inhabitants of the Third World. But low-impact people are becoming high-impact people for two reasons: rises in living standards in Third World countries whose inhabitants see and covet First World lifestyles; and immigration, both legal and illegal, of individual Third World inhabitants to the First World. (pp. 494-5)

Now, let's say you are a ruling psychopath, part of the pathocracy, which means you have no conscience whatsoever. But you are smart and you can see these facts. What to you would be the easiest solution? Reduce population! Do it purposefully so that you can direct the “reductions” to be in your best interests. Why would the pathocracy care to rationally steward resources to provide basics for the most amount of people when wars, genocides, and ethnic-specific weapons can not only solve the population problem but also put (or so they think) themselves on top of the world of survivors?

There can be little doubt that the very same Western powers that created the modern-day Middle East are now in the process of destroying it. Yet it is a constant source of amazement to us how a Middle East plan that began with then British Secretary for War Winston Churchill employing chemical weapons to 'placate' the indigenous Arab tribal population of then Mesopotamia, can have continued on so seamlessly for almost 100 years of the history of the political elite, until today, when Churchill's heir finds himself slavishly devoted to the same destructive impulse. What mechanism exists that can ensure the success of such a nefarious generation-spanning agenda?

As was the case in the 1920's, Middle Eastern leaders are well aware of the imperial and destructive nature of Western nations designs on their countries and populations. A few days ago Iranian foreign minister, Manouchehr Mottaki, demanded the pull-out of British forces around Basra in Iraq, saying their presence was causing turmoil both in Iraq and southern Iran. His comments came amid accusations by Iran that British forces were involved in a series of bombings in southern Iran. Tony Blair dismissed these claims as an attempt to divert attention from the international campaign to curb Teheran's nuclear programme. Yet history is on the side of the Iranians.

In dismissing the call for the removal of British troops from Iraq, Blair claimed that his grunts were in Iraq not only as part of a U.N. mandate but also at the request of the Iraqi government itself. Unsurprisingly, both claims are disingenuous in the extreme. The UN mandate for a multinational 'peace-keeping' force in Iraq is currently made up of troops from the very same countries that ignored the fact that there was no UN mandate to invade Iraq in the first place and went right ahead. The fact that Kofi Annan bestowed UN status on American and British troops after the non-existent handover of power in the summer of 2004 is simply a testimony to the spinelessness of the UN. The simple fact is that the presence of British and U.S. troops in Iraq is the result of the very same imperialist designs that lead Nazi troops to be in Poland in 1939.

As for Blair's claim that an ongoing invitation has been extended by the puppet Iraqi government; there is no Iraqi government that is free to make decisions that have not been sanctioned by the U.S. and British governments. Current Iraqi Prime Minister Ibrahim al-Jaafari has repeatedly called for a "coalition" troop withdrawal, yet at the same time has made it clear that neither he nor any member of the Iraqi government has any power to force the British or Americans to withdraw. So much for Iraqi sovereignty. Recently, CIA asset and Ayad Allawi who used his short term as Iraqi interim prime minister in 2004 to shoot prisoners in cold-blood and who provided bogus intelligence to justify the Iraqi invasion, has been spearheading a campaign to have al-Jaafari removed as Prime Minister with talk of the need for "liberal" and inclusive governments. He made no mention of arbitrary state-sanctioned murder however.

Like Allawi then, Blair is publicly upbeat about all that he, his predecessors and his American comrades can do for Iraq, but also like Allawi, Blair makes no mention of the real form of Western control that is being exerted on the Iraqi people. For example, two days ago, one of the wealthiest bankers in Iraq, Ghalib Abdul Hussein Kubba, was kidnapped during an audacious raid that left his five bodyguards dead, murdered by single gunshots to the head in the garden of a rented villa in western Baghdad.

The Times report tells us that up to a dozen men arrived in the wealthy Baghdad suburb, sporting Iraqi security force uniforms, weapons and even night-vision goggles on their helmets. "They moved and spoke like soldiers. Only their vehicles were non-military." Not exactly the attire of the average Iraqi insurgent that the British and American governments claim as the cause of all the problems in Iraq.

A little background on Mr Kubba tells us that:

he was originally a leading figure in the southern city of Basra, Mr Kubba rose to financial prominence through canny banking deals and big-business ventures, facilitated by his strong relationship with leading Baathist figures in the regime of Saddam Hussein. People in Basra allege that he was a close friend of Uday Hussein, Saddam’s gangster son. Yet in 2003, after the regime fell, Mr Kubba was appointed head of Basra’s interim council by the British. He became the president of Basra commerce, headed many local businesses and was a leading figure in the city’s al-Fadilah Islamic party.

Mr Kubba is not the only one with links to former Baathist figures in Saddam's regime:

West turns blind eye as police put Saddam's torturers back to work

IRAQI security forces, set up by American and British troops, torture detainees by pulling out their fingernails, burning them with hot irons or giving them electric shocks, Iraqi officials say. Cases have also been recorded of bound prisoners being beaten to death by police.

In their haste to put police on the streets to counter the brutal insurgency, Iraqi and US authorities have enlisted men trained under Saddam Hussein’s regime and versed in torture and abuse, the officials told The Times. They said that recruits were also being drawn from the ranks of outlawed Shia militias.

Iraqi forces blame U.S. for death squads

Challenging recent claims that Iraqi Shia militias were running death squads in the war torn country, the leader of the Badr Brigade, a powerful Shia militia that fought the toppled Iraqi leader Saddam Hussein from exile, blamed on Sunday the U.S. errors for the chaos that has plagued Iraq.

Iraq's Sunni Arab minority has repetitively accused the country’s Shia leaders of running death squads operating from inside the Interior Ministry, run for almost a year by the Supreme Council for the Islamic Revolution in Iraq (SCIRI).

The noticeable surge in daily bloodshed, including roadside and car bomb attacks by unknown elements dressed in officially-distributed Iraqi commando outfits has reached an alarming level.

Note that these death squads come from inside the U.S.-controlled Iraqi interior ministry. Of course, the use of covert death squads by the American and British governments to impose "democracy" is a tactic that is as old as their colonial designs on the Middle East (and many other parts of the world). Indeed, there are rumors that current US ambassador to Iraq and veteran El Salvador death squad organiser, John Negroponte is up to his old tricks.

See here for a blog dedicated to digging into the truth behind the thousands of kidnappings and assassinations going on in modern democratic, U.S.-controlled Iraq.

But employing terror tactics in modern Middle Eastern nations is best effected by those that have a long history of waging brutal wars of deception in the Arab world. Thankfully, there is one group that the Americans and British can turn to fulfill that specific need:

Israel trains US assassination squads in Iraq

Tuesday December 9, 2003
The Guardian

Israeli advisers are helping train US special forces in aggressive counter-insurgency operations in Iraq, including the use of assassination squads against guerrilla leaders, US intelligence and military sources said yesterday.

The Israeli Defence Force (IDF) has sent urban warfare specialists to Fort Bragg in North Carolina, the home of US special forces, and according to two sources, Israeli military "consultants" have also visited Iraq.

US forces in Iraq's Sunni triangle have already begun to use tactics that echo Israeli operations in the occupied territories, sealing off centres of resistance with razor wire and razing buildings from where attacks have been launched against US troops.

But to people like Blair, all of this is merely the outplaying of "democracy", and little things like the inhuman torture of hundreds of innocent men in guantanamo on the orders of Donald Rumsfeld as they 'lounge' around their holiday cells between sessions of genital electrocution are but "anomalies" that will one day have to be dealt with. Maybe.

In the meantime, there is the worldwide war of terror to be waged, and a country of 86 million people to be obliterated.

Occasionally I will take note of the lunatic wanderings of the Israeli settler Steven Plaut, a so-called economics professor in Israel (no doubt teaching his Jabotinsky-inspired brood how to steal land from Palestinians), if only to correct his lies and counter his slanderous remarks about your humble blogger. For instance, since the demise of David Horowitz’s Moonbat Central blog (probably retired because the reactionaries posting there often engaged in slander and outrageous if not transparent lies instead of making actual logical arguments, thus opening Horowitz and his CIA-connected meal ticket Richard Mellon Scaife to lawsuits), Plaut has since wandered about, “guest” posting on the blog of another dispossessed Horowitzite, Rocco DiPippo. In one such recent post, Plaut claims I was “fired” from Counterpunch.

I don’t know how much CIA money Plaut received from the Horowitz operation, but when I was writing for Counterpunch I didn’t receive a penny, even after one of my articles appeared in a Counterpunch book (The Politics of Anti-Semitism). In fact, the reason I stopped submitting articles to Counterpunch was, in part, due to a remark Alexander Cockburn made about the article published in the Politics of Anti-Semitism (Amiri Baraka’s Somebody Blew Up America: Poetry as Treason?)—Cockburn had received negative comments (this apparently irked him) about documentation I cited indicating government involvement in the terrorist attacks of nine eleven, thus revealing Counterpunch’s gatekeeping function, a common enough occurrence on the foundation-funded left (according to the research of Bob Feldman and tax forms, in 1999 CP and the Institute for the Advancement of Journalistic Clarity earned $178,000 from its “alternative journalism activity” and unlike “most of the other anti-conspiracist alternative media gatekeepers, IAJC/COUNTERPUNCH doesn’t appear to have received any big Establishment Foundation grants in recent years. But its vice-president, Ford Roosevelt, is a member of a Roosevelt Dynasty that possessed upper-class wealth and much political power during the 20th-century”).

I don’t know if Cockburn and crew made money on the publication of the Politics of Anti-Semitism, but if they did they sure the heck didn’t send me a check for the inclusion of my piece (in fact, I had to buy a copy of the book—the skinflints at AK Press obviously felt disobliged to the various authors, or at least this one).

Of course, since Plaut is a scurrilous liar and documented dirty trickster (stealing email lists from forums, effectuating various nasty personas in order to launch slanderous attacks on various IndyMedia open publishing venues, and other slimeball tricks) who engages in unethical behavior against his enemies—quite natural for a reactionary Jabotinsky neo-fascist to the right of the comatose Ariel Sharon—his invention of the story I was “fired” from CP is loathsome enough. The fact CP publishes dozens of writers and makes nearly $200,000 per year (according to tax forms) is almost as unethical.

However, at least Alexander Cockburn doesn’t live in Israel and advocate stealing land from Palestinians and then murdering them, as does Steven Plaut, who is actually considered an academic in this country, thus revealing that the University of California at Berkeley will hire anybody.

All of a sudden Saddam, or one of his groomed doubles, is talking on tape. Bush was right all along about Iraq’s weapons of mass destruction, or at least partially right, and there is a new shine of legitimacy on the invasion of Iraq and the murder of thousands of Iraqis who probably should have known better than to live in a country with such a perfidious dictator, a guy who messed around with weapons of mass destruction behind the back of the United Nations and the Greatest Darn Country on Earth.

“Hussein … can be heard speaking with high-ranking Iraqi officials about deceiving United Nations inspectors looking into Iraq’s weapons program, which his son-in-law, Lt. Gen. Hussein Kamel, oversaw,” reports CNN. “The tapes, which U.S. officials have confirmed are authentic, are part of a much larger cache of information on the nation’s weapons programs.” No doubt these are the same officials who confirmed the Osama tapes as authentic. On the side, they sell used cars in Poughkeepsie.

Since news is now considered entertainment, we are expected to check our disbelief and suspicion at the door. However, there is one small troublesome aspect to the Saddam tapes—they were released to the public by the International Intelligence Summit, described “as a nonpartisan, nonprofit forum that promotes an exchange of ideas among members of the international intelligence community…. The summit’s main sponsor is the Michael Cherney Fund, whose Web site describes the fund’s main objective as ‘helping realize the intellectual potential of the post-Soviet emigres to Israel.’”

For the casual observer, this bit about post-Soviet émigrés and Israel may seem confusing—that is until you realize, as Bush’s adviser Philip Zelikow revealed, the invasion of Iraq was launched to “protect” Israel, not that the enfeebled nation of Iraq, suffering from more than a decade of debilitating sanctions, posed a threat to Israel with its modern high-tech weaponry, including more than 400 nukes.

On the Michael Cherney Foundation web page, Cherney is described as an “Israeli philanthropist…. who has donated more than $20 million over the last decade to anti-terror activities and studies, and support for terror victims.” It appears Cherney made his money “buying low and selling high in the chaotic and unregulated post Soviet economies in several newly independent Eastern European states,” in other words he exploited the misery imposed on the people of Eastern Europe by a gang of globalist neoliberal bankers, loan sharks, and carpetbaggers after the props were pulled out from under the Soviet Union. Some of Cherney’s pals, described as the Russian-Jewish “Oligarchs,” have “fled Russia for the protection of Israel, where defrauding Gentiles is not considered a crime,” according to Focal Point. Cherney is not allowed to enter America due to his connections to the Russian Mafia, who are in turn connected to the Russian-Jewish Oligarchs.

So tainted is the “Israeli philanthropist” Cherney, even staunch Straussian neocons are backing away from him. “In the last week both John Deutch and James Woolsey abruptly left their positions at Intelligence Summit, according to its president, John Loftus, who said their departure is part of a campaign by the directorate of national intelligence to punish him for releasing the recordings,” reports the New York Sun. “The reason both men gave for their resignations was new information they received regarding one of the summit’s biggest donors, Michael Cherney, an Israeli citizen who has been denied a visa to enter America because of his alleged ties to the Russian mafia…. The Russian businessman immigrated to Israel in 1995 after allegations in his native country swirled that he was involved with assassinations and other criminal enterprises… In 1998, he was barred from Bulgaria for an alleged plot to assassinate the son of a Cabinet minister. The information originally was passed on by Israeli law enforcement authorities, who later rescinded the claim.”

In short, the alleged Saddam tapes, supposedly revealing how Hussein attempted to hide his desire to kick start a weapons of mass destruction program (and thus lending credence to the war crimes of the Straussian neocons), are tainted by the criminal background of “one of the summit’s biggest donors, Michael Cherney,” obviously an Israeli agent proffering dubious goods even hang tough Straussian neocons back away from, smelling a rat.

Of course, the corporate media will ignore all of this and go for the lathered gusto of the Saddam tapes story, even though we know the Straussian neocons are inveterate liars and flimflam artists, predicating the Iraq invasion on a passel of fabrications and outright and often absurd lies. None of this matters because it is all beyond the intellectual capacity of the average American, unable to break out of the Borg hive mentality of corporate media as it hucksters Straussian neocon and Jabotinsky Israeli propaganda.

Meanwhile, a new propaganda campaign directed against the next target is going famously. “The World Jewish Congress has launched a campaign against Iran following the nuclear crisis and the anti-Semitic statements of Iran’s president, Mahmoud Ahmadinejad,” Haaretz reported on February 10. “In its biannual gathering in Jerusalem on Thursday the WJC called on Jewish communities throughout the world to pressure their governments to act against the Iranian nuclear program and urge economic and political sanctions against Iran,” in other words attack Iran for nukes it does not have and will not have for a decade or more, according to experts not on the Israeli-Straussian neocon payroll. Rabbi Israel Singer, chairman of the WJC’s Policy Council, “said Jewish communities around the world must make it clear to their governments that the Iranian regime threatens not only the Jews with its utterances and nuclear activity, but all the countries in the world.”

Naturally, no mention here of the fact Israel has “200 and 500 thermonuclear weapons and a sophisticated delivery system,” as John Steinbach noted in 2003. “Since the Gulf War in 1991, while much attention has been lavished on the threat posed by Iraqi weapons of mass destruction, the major culprit in the region, Israel, has been largely ignored. Possessing chemical and biological weapons, an extremely sophisticated nuclear arsenal, and an aggressive strategy for their actual use, Israel provides the major regional impetus for the development of weapons of mass destruction and represents an acute threat to peace and stability in the Middle East.”

No mention as well of the established fact the Israelis encouraged the Pentagon to use “non-contaminating tactical nuclear weapons” against Iraq in 2003 (see The Third Temple’s Holy of Holies: Israel’s Nuclear Weapons, Warner D. Farr, USAF Counterproliferation Center).

“The Israeli government is preparing to use nuclear weapons in its next war with the Islamic world. Here where I live, people often talk of the Holocaust. But each and every nuclear bomb is a Holocaust in itself. It can kill, devastate cities, destroy entire peoples,” Mordechai Vanunu stated in a December, 2005, interview.

But instead of worrying about Israel and its bulging weapons of mass destruction arsenal—and its apparent desire to use nukes against its enemies, who are considered little more than cockroaches and beasts walking on two legs—we are distracted by a questionable Saddam videotape and a few comments, taken out of context and hysterically blown all out of proportion, by the anti-Zionist president of Iran.

Addendum

As a “Russian oligarch,” Cherney, also known as Mikhail Chernoy, “along with several other oligarchs, cornered the Russian aluminum industry under Yeltsin in the 1990’s through bribery and murder. As he is under indictment for these crimes in Russia, he has taken refuge in Israel. Recently Cherney was indicted in Israel for money-laundering and fraudulent receiving evidence for his part in the purchase of a 20% stake in state-run phone company Bezeq. Mr. Cherney has been associated with a number of international fraudsters, including Marc Rich of the New York Bank scandal. The Cherney Foundation is seen by Israeli investigators as a public relations ruse,” according to a Colorado Congressman Bob Beauprez Q&A. Is it possible the Saddam tapes are a “public relations ruse” as well? It is curious, however, to watch Straussian neocons, infested with the lice of war crimes, run away from the likes of a scumbag such as Mikhail Chernoy, obviously a bird of a feather.

In the past, Cherney bankrolled the Jerusalem Summit, a Straussian-Jabotinsky confab held “at the King David Hotel on the first days of Sukkot, Oct. 12-14,” 2003, according to Helen Freedman, Executive Director, Americans For a Safe Israel. It should be noted that the location is appropriate, since the King David Hotel was bombed on July 22, 1946, by the Irgun terrorist and future leader of Israel, Menachem Begin, killing 91 and injuring 45. As for the Straussian and Jabotinsky luminaries in attendance, see the photos on this page. As Habib Siddiqui noted at the time, the first Jerusalem Summit was held on the “10th anniversary of the Oslo Accord” and was tasked with establishing “an international think tank that would solidify Israel’s position vis-à-vis sanctifying its illegal annexation of Jerusalem and occupation of Palestinian territories.” As if to dispel and doubts the confab was anything but a radical Jabotinsky affair, “Rabbi Benny Elon, head of the Moledet Party and Tourism Minister, unveiled [a] plan calling for the dissolution of the Palestinian Authority and recognition of Jordan as the Palestinian state, with West Bank Arabs becoming citizens of the Palestinian state in Jordan. It also called for Israeli sovereignty over Judea, Samaria and Gaza.” In short, the attendees discussed ethnic cleansing and rampant violations of international law, common enough fare in conquered Palestine.

At a subsequent summit, neocon friendly Congress critter Bob Beauprez characterized Afghanistan and Iraq as “free Arab states,” even though Afghans are not Arabs (we cannot expect the good congressman to tell the difference), and “are now a candle of hope where a short while ago, only darkness lived,” even though Iraqis resoundingly declare things were better under Saddam, even with a million and half people killed under brutal medieval sanctions (500,000 of them children).