Sections on today's Signs Page:
Signs Editorials
Editorial: Signs Economic Commentary for September 25, 2006
Donald Hunt
Signs of the Times
September 25, 2006
Gold closed at 594.90 dollars an ounce on Friday, up 1.5% from $586.00 at the close of the previous Friday. The dollar closed at 0.7817 euros Friday, down 1.0% from 0.7895 for the week. The euro closed at 1.2792, compared to 1.2666 at the end of the previous week. Gold in euros would be 465.06 euros an ounce, up 0.5% from 462.66 for the week. Oil closed at 60.28 dollars a barrel Friday, down 5.1% from $63.33 at the close of the previous Friday. Oil in euros would be 47.12 euros a barrel, down 6.1% from 50.00 euros for the week. The gold/oil ratio closed at 9.87, up 6.7% from 9.25 at the end of the week before. In U.S. stocks, the Dow closed at 11,508.10 Friday, down 0.5% from 11,560.77 at the close of the previous Friday. The NASDAQ closed at 2,218.93, down 0.8% from 2,235.59 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.59% Friday, down 20 basis points from 4.79% at the close of the Friday before.
The manipulated nature of the economy is becoming more obvious lately, with the U.S. election-related sharp drop in oil prices - a drop taking place amid swirling rumors of an imminent U.S. bombing attack on Iran, an attack that will surely interrupt Persian Gulf oil shipping. Interestingly, if letters to the editor and water cooler conversations are any guide, many people in the U.S. see the oil price drop as an election-season ploy by the Bush regime and its allies in Big Oil. And, since an illusionary improvement in the economy will not be enough to counteract the foreign policy disasters of the neocons in the public mind, rumors are swirling as well about an October Surprise. As the saying goes, that can't be good.
But the drop has had its intended effect:
Economy Fades as Election Issue on Falling Fuel Costs
By Matthew Benjamin
Sept. 22 (Bloomberg) -- Plummeting gasoline prices and a buoyant stock market may be weakening the power of the economy as an issue for Democrats less than seven weeks before U.S. congressional elections.
A majority of Americans -- 54 percent -- say the U.S. economy is doing well, according to a new Bloomberg/Los Angeles Times poll. That's up 4 percentage points from the beginning of August, when the price of a gallon of gasoline was an average of 54 cents higher and the Standard & Poor's 500 stock index was 4 percent lower. President George W. Bush's approval ratings on handling the economy also rose.
Almost 1 in 3 poll respondents said lower gasoline prices have enabled them to spend more on other household items.
"If there's any way that voters link economic uncertainty with what they experience on a daily basis, it's through what they feel at the gas pump," said Amy Walter, an election analyst for the nonpartisan Cook Political Report in Washington.
According to Gary Dorsch, oil traders' feeling that war with Iran is not going to happen has helped to bring about weak oil prices. These traders have been looking at Europe for indications of an attack on Iran
Unwinding the $15 per barrel Iranian 'War premium'
The most influential driver behind the CRB's plunge since August 8th however, was the unwinding of the Iranian "war premium" which had inflated the price of crude oil by as much as $15 per barrel this year. Iranian negotiators have skillfully split the British, French and the German coalition away from the Bush administration's hard-line stance for economic sanctions against Iran.
Iran's rulers have always relied on the Russian and Chinese veto to any economic sanctions, but now there are signs the Europeans are also seeking a way out, once the moment of truth had finally arrived. On Sept 13th, British Foreign office minister Kim Howells waved the white flag, "I can't see a military way through this, and I'm not sure that even there's an easy way for the UN to impose sanctions," he told parliament's Foreign Affairs Committee.
Economic sanctions against Iran would jeopardize more than 10,000 jobs, the German Chamber of Commerce said on Sept 1st. "Economic sanctions against Iran would solve none of the political problems. But the German economy would be hard hit in an important growing market." France's oil giant Total is interested in a 10-15% stake in Iran's Azadegan, seen as one of the largest unexploited oilfields in the world, said head of exploration Christophe de Margerie on Sept 12th.
On Sept 18th, Norwegian energy and aluminum giant Norsk Hydro, signed an oil exploration deal with the National Iranian Oil Company for the Khorramabad block in southwestern Iran. "If exploration proves to be successful, the period of the agreement will be 25 years," Hydro said.
Iran's chief nuclear negotiator Ali Larijani reportedly offered a 2-month suspension of Tehran's nuclear enrichment program in talks with EU foreign policy chief Javier Solana, which sent crude oil plunging below $66 per barrel. Still, there are questions of whether or not Iran's internal debate is over, and if the concession by Larijani is fully backed by the Ayatollah Khameinei and president Amadinejad in Tehran.
Without the imposition of UN sanctions or the threat of military action against Iran, crude oil succumbed to the laws of supply and demand. US stockpiles of crude oil were 327.7 million barrels last week, or 18% higher from two years ago, when crude oil was trading at $45 per barrel. Unleaded gasoline prices tumbled 65 cents a gallon since August 1st, and boosted US President George Bush's approval ratings by 3% to 41% last week, with seven weeks left before mid-term US elections in Congress.
OPEC, which supplies 40% of the world's oil, has been pumping 28 million barrels per day (bpd), since November 2004, when crude oil first touched a record $50 per barrel, but was unable to stop the surge in crude oil to a record $78.40 /bl in July 2006. But with a bearish market mood and unwinding of the Iranian "war premium", crude oil traders seized upon OPEC's Sept 11th pledge to leave its output unchanged at 28 mil bpd, and dumped oil to as low as $62 per barrel on Sept 15th.
Crude oil traders are beginning to view the Bush team as a paper tiger in dealing with Iran. Other traders think the gloves will come off after the US Congressional elections on November 7th, when whispers of a US military adventure could grow louder. In any case, China's crude oil imports rebounded 15% to 11.8 million tons in August, which could put a floor under the market at $60 /barrel.
Of course, oil traders may have made the mistake of ascribing rational calculations to those who would be ordering the bombing of Iran. Colonel Sam Gardiner, in a recent paper for the Century Foundation reminds us that the Bush/Neocon decision-making process does not use the usual standards of self-interested diplomacy:
Unfortunately, the military option does not make sense. When I discuss the possibility of an American military strike on Iran with my European friends, they invariably point out that an armed confrontation does not make sense - that it would be unlikely to yield any of the results that American policymakers do want, and that it would be highly likely to yield results that they do not. I tell them they cannot understand U.S. policy if they insist on passing options through that filter. The "making sense" filter was not applied over the past four years for Iraq, and it is unlikely to be applied in evaluating whether to attack Iran.
We have written about the puzzling nature of gold in financial markets. Gold is both a commodity and a currency. Lately, since the U.S. dollar has been holding its value, gold has acted more like a commodity, dropping along with other major commodities. But the drop seems to have found its bottom lately with downward pressures from general commodity markets counterbalanced by upward demand pressures. Here's Gary Dorsch in "What's behind the Meltdown in the Commodity Markets:"
Gold Tumbles Under $600 /oz
Gold tumbled under $600 per ounce last week, in line with a weaker crude oil and CRB index, telegraphing lower headline inflation in G-7 oil importing countries in the months ahead. Gold has also been pressured by fears of by European central bank sales ahead of a Sept 26th fiscal year-end that limits sales to 500 tons per year. So far, European central banks have only sold an estimated 340 to 360 tons this year.
With central bankers coordinating their tightening moves, there has been little volatility in the foreign exchange markets to influence the price of gold. Instead, gold traders are focusing on crude oil and other key industrial commodities for clues about the future direction of inflation. Supporting the gold market however, is speculation of eventual Chinese central bank diversification into gold. Only 1% of China's $954 billion of foreign currency reserves are held in the yellow metal.
The US current account, the broadest measure of trade with the rest of the world, includes both trade in goods and investment flows, widened in the second quarter to $218.4 billion, and remains a major risk for the global economy. The US deficit totaled 6.6% of gross domestic output, the same as in the first quarter. That compares with China's current account surplus of 7% of GDP.
With pressure mounting on Beijing to revalue it yuan upwards, China could quietly build a gold position in a declining market. Fan Gang, a member of China's central bank monetary policy committee said on August 29th, "The US dollar is no longer a stable anchor in the global financial system, nor is it likely to become one, therefore it is time to look for alternatives."
We can probably expect weak gold and oil prices until the October Surprise, whatever it turns out to be and whoever is directing it. Be that as it may, if commodities are dropping in anticipation of reduced industrial demand, then why are stocks doing so well? According to Michael Nystrom stocks are reacting to one thing only: interest rates. Nystrom makes a useful distinction between the real economy (the economy of those who make things) and the financial economy. The real economy is doing very poorly in the United States, while the financial economy has been fine.
Imminent Decline Dead Ahead
A number of factors are converging this week that I think will lead to a substantial reversal. While I normally don't like to go out on such a limb, there are enough factors lined up this time that I think it is warranted, and if I am wrong, it should be immediately obvious. This week is do or die time for the market.
Ford's Example Let's start off by looking at the chart of the Ford Motor Company. Last Friday, Ford announced big news and the stock got killed - down almost 12% in one day! The price action in Ford, I think, is a preview of what we're going to see going forward in the general stock market.
Since mid July, Ford's stock rallied over 50%. It was an impressive gain, but the price action was purely technical: It was a standard short-covering rally with prices advancing steeply over a short period of time on very little volatility. There was a jittery drop in mid-August but a quick recovery and resumption of the steady upward progress, culminating in a two-day price explosion just before Friday's big bomb.
Why did Ford rally? For the past several years, and certainly through the entire recent rally, the situation at Ford was grim and getting worse: The company was/is/has been losing market share, losing money, has high costs, the wrong products, etc, and everyone knew it and had known it for years. There had been no change in Ford's fundamentals. The fuel for the brief, sharp rally was therefore provided by bears who were short and got caught in a typical short squeeze. In this case, the squeeze culminated in a mini buying panic that sent the stock up nearly 9% in just two days before the big drop on Friday.
The funny thing in this case is that Friday's sharp drop was precipitated by news that Wall Street usually likes: Ford is laying people off, slashing jobs, slashing salaries, cutting costs and closing plants. Under Wall Street's standard logic, what is bad a company's employees is usually good for its stock price. (In this instance, however, Ford is also suspending its dividend, which is very bad for shareholders and a sign that things are very grim indeed.)
Parallels to the General Market
Now I'd like to look at the lessons that Ford holds for the overall market, represented by the S&P 500 cash index. Like Ford, the SPX has had a decent rally from mid July to present - close to 8% - while the news for the real economy has been getting progressively worse. The housing market is really slowing down, the trade deficit just hit a record high, and corporate layoffs are surging. We've had no fundamental change in this story, and in fact things appear to be getting worse.
But while the real US economy - the economy that is involved in making things - seems to be on the ropes, the financial economy - the one that is involved in using money to make more money - seems to be doing just fine, as measured by a single indicator: Interest rates. They're coming down. And the most recent data indicates that the Fed is done raising them. This single factor is the primary impetus behind the current rally. It is what has gotten the ball rolling, and short covering is taking care of the rest. But to see how this one is going to end, just refer back to the Ford chart above.
Look at the shape of the most recent rally, from the July lows. From a classical technical analysis perspective, this is called a rising wedge. From p. 189 of Edwards & Magee's technical analysis classic, we learn that:
Once prices break out of the Wedge downside, they usually waste little time before declining in earnest. The ensuing drop ordinarily retraces all of the ground gained within the Wedge itself, and sometimes more (p.189)
From an Elliott Wave perspective, this is called a rising diagonal or an ending diagonal:
An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast," as Elliott put it...In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement." (EWP , page 36) Furthermore, "A rising diagonal is bearish and is usually followed by a sharp decline retracing at least back to the level where it began." (EWP, p.39)
To make matters even worse for the bullish case, the index is right at resistance provided by both the upper end of the diagonal, but also by the recent May highs. Sustaining an advance beyond this resistance will not be easy. And Friday's price action was weak: The market hit its high in the first hour of trading, then spent the rest of the day giving back its gains. Based on the indicators I look at, this market is overbought at multiple levels of trend: monthly, weekly, and daily. Like with Ford, all it needs now is a trigger to set it off.
Talk about a "trigger" brings us right back to the October Surprise.
... But what about the price of oil, you ask? Since it's falling, isn't that fundamentally bullish for the market? And since interest rates are falling, won't the housing bubble be able to reflate? The short answer is, no. Falling oil prices reflect falling demand, which signals a recession. And yes, the housing market may see a second wind due to falling interest rates, but it is likely to be no more than a dead-cat bounce. The top is already in.
CEO's, in their capacity as managers of the real economy, that is, and not as participants in the financial economy, see recession ahead:
CEOs grow pessimistic about outlook
Business Roundtable index falls to lowest mark in three years
By Greg Robb, MarketWatch
Sep 18, 2006
WASHINGTON (MarketWatch) -- Chief executives at major U.S. corporations are more downbeat about prospects for the economy than at anytime in the past three years.
The Business Roundtable CEO economic outlook index fell to 82.4 in the third quarter from a reading of 98.6 in the second quarter. This is the lowest level since July-September 2003 for the survey, which had averaged 97.6 over the past year. Read full survey.
Seventeen straight interest-rate hikes engineered by the Federal Reserve as well as higher energy costs are beginning to slow growth, said Harold McGraw, chairman of the Business Roundtable and chairman and CEO of McGraw-Hill Cos.
Of those CEOs surveyed, 39% said they anticipate increasing their capital spending in the next six months, while half see no change in their spending plans and about 11% expect to cut their capital spending,
CEOs see "a much-slower second half that will logically continue into next year," said McGraw during a teleconference with reporters.
The nation's softening housing market has also been a burden, he said.
"The overall picture for the economy in the months ahead remains a bit unclear," in light of mixed variables, McGraw said.
Energy prices "remain the wild card." There has been some improvement in energy prices, but prices seem to be event-driven, he noted.
The biggest concern for big companies is the impact of energy costs and other inflationary pressures on profits.
There was a mixed response to a special survey question asking CEOs to assess if their companies are able to pass along higher energy costs.
Only about 21% of the companies said they have been able to pass increased energy prices to along their customers, while another 33% of CEOs said they were only partially able to pass along these increases.
The Mainstream Media also see problems ahead for stocks due to the clear bursting of the housing bubble:
Can Wall Street withstand weak housing?
Some experts say real estate slump may spell trouble for equities
Peter Coy
BusinessWeek Online
Sept 19, 2006
If your nest egg is made of 2-by-4s and you're watching the real estate slowdown with a mixture of fear and nausea, then this article is for you.
The question: If real estate tanks, will stocks follow? Or will the market ignore housing? Or maybe - just maybe - will a decline in housing trigger a rise in stocks? It's something you really ought to think about if you're trying to figure out where to put your money.
Conventional wisdom, and some historical evidence, suggests that a decline in housing is associated with a fall in stocks. Evidence of a slump continues to mount: On Sept. 18, the National Association of Home Builders said its monthly sentiment index fell to a 15-year low. And on Sept. 19, the Commerce Dept. said that housing construction fell 6 percent in August to its lowest level in three years - an annual rate of 1.67 million starts.
"If that's not meltdown, it's pretty close," Ian Shepherdson, chief U.S. economist of High-Frequency Economics, said in a research note. The prospect of stocks plummeting at the same time housing falls into a slump is bad for homeowners, because it means no port in the storm. But the case isn't completely closed: There's some tantalizing counter-evidence that stocks might do just fine in a housing downturn, or even benefit from it.
Time lag
Let's start with the main, bearish case. Making the rounds of investment advisers is a chart prepared by Merrill Lynch showing the Standard & Poor's 500 stock index overlaid on an index of homebuilding activity from the National Assn. of Home Builders. The chart shows that the S&P 500 goes up one year after the homebuilding index goes up, and goes down one year after the homebuilding index goes down. (The correlation is 0.8, which means it's pretty strong.)
The scary part: The homebuilding index has plunged over the past year. If you believe that history repeats itself, the S&P 500 is about ready for a nosedive.
Another chart - this one from InvesTech Research - correlates changes in private residential construction with recessions. Going back to 1968, it shows that with just one exception, every time there has been a downturn in residential construction, a recession has occurred at the same time or shortly after. (The exception: 1995.) That indicator, too, is flashing red, because residential construction has shrunk over the past year.
"Being a student of history, I would think I would want to play it very cautiously from a stock standpoint," says Standard & Poor's Chief Investment Strategist Sam Stovall.
Wealth effect
It makes some sense that a housing slump would be bad for stocks. First, there's the direct effect on jobs in construction, real estate brokering, mortgage lending, and so on. Goldman Sachs estimates that housing and related industries account for nearly 10 million jobs (payroll and nonpayroll combined).
Second, consumer spending has been buoyed by the housing boom. People spent more freely because they felt wealthier and because they turned their homes into piggy banks through home equity loans, cash-out refinancing, and other means. Take away jobs and consumer spending, and it's no wonder that many experts expect a housing slump to hurt stocks.
By this view, stocks aren't a good choice right now. What, then? Barry Hyman, equity market strategist for EKN Financial Services, says that the same rising rates that have squeezed housing have given investors a nice alternative: money market accounts, which are yielding better than 4 percent, and bank certificates of deposit, some of which yield 5 percent or more.
'Down But Not Out'
Super-bears on housing have different advice. John Talbott, author of the none-too-subtly titled "Sell Now! The End of the Housing Bubble," recommends avoiding not only the stock market, but banks, too, since lots of banks could be hurt by lax mortgage lending standards.
But not everyone is convinced that housing will crush stocks. Why? Some figure that the housing slump won't be severe or prolonged. Robert DiClemente of Citigroup argues that the adjustment to a slower rate of sales is well under way. He says that the issuance of building permits is actually 10 percent below the rate of new-home sales. This process "will clear the overhang of houses within the next six to nine months," DiClemente predicts in a recent research note. The headline on his report: "Down But Not Out."
Others say it's too soon to declare the stock market dead because of housing. "Summing it up, I'm in the camp that says I don't know and the jury is still out," says Jeffrey Saut, equity strategist for Raymond James Financial.
Back to the future
Then there are the outright optimists. Bob Carey, chief investment officer for First Trust Advisors in Lisle, Ill., says that the stock market is 20 percent to 25 percent undervalued at current levels and should reach full valuation by sometime next year, which means: Get ready for a heck of a bull market. Carey says the demand for housing is driven by incomes and jobs, and since corporate profits are extremely strong, the outlook for income and job growth is good. Says Carey: "It's hard to imagine Corporate America doing well and somehow people not doing well on the employment side."
Carey has seen Merrill Lynch's chart showing a tight correlation between homebuilding and the S&P, but he says the pattern dates back only a decade or so. Before then, there was very little correlation, and he says the economy might return to that older pattern.
It's also possible that the housing slowdown could prod the Federal Reserve into cutting interest rates, which could boost stocks. Maybe, too, speculative investors will go back to dabbling in stocks instead of real estate, the way they did before the dot-com bubble burst and the real estate boom began.
Clearly the bulls have been vastly underestimating the consequences of a housing bust. Here's Michael Shedlock:
No Hard Landing
Monday, September 18, 2006
I have it on great authority that there will not be a hard landing in real estate.
Who told me that? It was none other than Mike Morgan at MorganFlorida. Please listen in to what Morgan has to say.
Mike Morgan:
Will there be a hard landing? No!
Will there be a crash landing? Absolutely!
Despite September's short covering of home builders and value buyers trying to cash in on low P/Es and stocks selling at or below book value, a hard landing is now out of the question. We're in for a market crash. Read between the lines, or read actual comments for content.
Here's what Robert Toll, CEO of Toll Brothers said at the Credit Suisse conference. "The market got ahead of itself in recent years, citing "greed on the part of buyers and sellers, and that the current level of speculative inventory is probably the largest ever."
And how about Don Tomnitz, CEO of D.R. Horton. "We have never seen housing prices and demand slow as quickly as they have during this down cycle."
Take it a step further and look at the statistics. Never before have we seen inventories at these levels. Recently NAR finally admitted home price are coming down. Never before have we seen home prices fall. And RealtyTrac just announced that foreclosures are up 53% from a year ago.
For those "value investors" buying the home builders because the P/Es are so low, I ask, "What happens when there are no earnings?" And for those "value investors" buying for the book value, I ask, "What happens when the builders take massive write downs to land, and burn up cash with carrying costs of unsold inventory?"
But that's not even the heart of the current problems. For the last two weeks I've been receiving daily calls from desperate mortgage brokers, real estate attorneys, insurance brokers, title companies and subcontractors looking for deals and work. This week I spoke with a real estate attorney closing his office and returning to the corporate world. And several of the smaller builders have called me offering triple commissions to entice sales of their inventory. It doesn't end there.
Who will the housing crash effect? Everyone. Real estate agents will be first. As a group, they've made a ton of money during the housing boom, and they've spent millions on new cars, vacations, restaurants, clothes, and everything else that comes with excessive discretionary income. That's over now. Agents are not buying the luxury items that helped feed the economic boom, and they are cutting back on business spending like advertising and marketing. That hits the vendors and newspapers revenues.
Take it a step further. With sales off 50% and more, all of the industries that have benefited from the boom, will suffer loss of revenue and jobs at accelerated rates and massive proportions. Home builders and condo developers have been announcing cancellations of projects and cut backs in spec building. The flippers fed the housing boom, and they're washed up right now. In fact, they are making the crash much worse than it should have been.
Many flippers bought multiple properties. When in the history of the world have we ever seen the housing industry conduct business like a stock exchange. We had bidding wars. We had lotteries on new developments, just like we had allocations for new tech offerings during the late 90's. And just like the tech boom, the buyers were not making decisions based on fundamentals. Take a look at the recent Vonage offering, where buyers don't want to pay for their stock, because the price dropped after the public offering. The same thing is happening in the housing market, with thousands of buyers walking away from deposits, refusing to close on homes. That adds to the woes of the builders.
And just like we saw a tech crash with everyone rushing to sell, we're now just starting to see flippers dump properties for 200-400% losses on their deposits. Add to the woes, the fact that interest rates are up and most flippers bought using creative financing and low rate ARMs.
But this is all old news for us. The other shoe is dropping now. Loss of hundreds of thousands of jobs created from housing will act like a virus and spread throughout our economy. As real estate agents, attorneys and mortgage brokers reign in their spending, it will effect restaurants, car dealers, advertising companies, jewelers, remodeling contractors, furniture manufacturers, bank profits, electronic retailers, clothing and the list goes on and on and on.
As the primary players are effected, and they cut back on spending, so will the secondary players in this market. These companies will be forced to lay off employees, and the cycle will grow like a virus. Is that it? Not a chance.
The housing market benefits most when rates are low and jobs are being created. With rates rising and job loss skyrocketing, the affordability index for homes drops in step. The buyers that are still in the market can not afford the same home they could a year ago. On average, with the rise in interest rates, the buyer that could afford a $500,000 home a year ago, can now only afford a $425,000 home. But with the loss of jobs growing, there are fewer buyers that can afford the $425,000 home and many existing homeowners that can no longer afford to make their monthly mortgage payments.
So now we have a third group of sellers scrambling for the ever dwindling buyers'
market. You've got the flippers desperate to sell. You've got the builders stuck with inventory of unsold homes, and now you have the group of sellers that are being foreclosed or simply decide to sell because they can no longer swing the monthly mortgage payments after losing their jobs.
Nonsense? Hardly. I spoke with a real estate agent the other day that has not sold a home in three months. His wife works for a title company and was just laid off. He's now sending out applications for a job in his former field of banking. Lots of luck. He's been out of the field for five years, and he's 54 years old. They have two kids in college and a hefty mortgage. Oh, by the way, did I mention they own three flip properties that they can't sell.
How about the attorney that is closing his office and returning to the corporate world. He's laying off six people in his office. And how about the builder that called me this week. He employs about a dozen people, as well as a small army of subcontractors. He's closing up, and he has unsold inventory that he cannot sell at a profit. That means the dozen employees are out of work, and his army of subcontractors are out of work for the first time in four years.
And how about my office. I've decided to lay off one of my team members. She's a single Mom, but as much as it hurts to break the news to her, I have no choice. If things don't pick up within the next 30 days, I will be forced to lay off a second team member. When you do the math, the choice is survival. It doesn't end there. Realistically, if things do not pick up within 90 days, I will close my office and concentrate on my other businesses. This is reality, and you're hearing it from the horse's mouth.
Multiply these four scenarios by thousands and you have a crash. A hard landing is out of the question at this point. The economists should be talking about how devastating the crash will be.
...When we last talked we were both laughing about the Senate Hearings on the Housing Industry. All of the negative comments were sugar coated. Both of us think this is the tip of the iceberg. This mess is going to spread to subprime lenders, mortgage companies offloading mortgages to pension plans, and all sorts of other fiascos that neither of us can clearly see at the moment. Senate hearings have just begun.
The USA Today is reporting More fall behind on mortgages.
Calls to the Homeownership Preservation Foundation, which provides free credit counseling, hit a record 2,464 in August, a 25% jump over July. More than half of the distressed callers had ARM loans.
"It's alarming. It really is," says Pam Canada, executive director of the NeighborWorks Homeownership Center in Sacramento. Her non-profit counseling center used to receive two or three calls a week from homeowners in financial quicksand; now, it's 20 a week.
More homeowners with shaky credit are falling behind on their mortgage payments, especially in such states as Ohio, Alabama, Tennessee, Michigan and West Virginia, where job losses have struck the local economies, the Mortgage Bankers Association said Wednesday.
The problem is the worst for those with subprime credit who pay higher-than-usual interest rates and who have adjustable loans that have been resetting to higher rates. About 12.2% of such borrowers were late paying their loans in April through June, the highest level since the end of 2003.
In Ohio, which has lost thousands of manufacturing jobs, the foreclosure process was already underway for 11% of homeowners with subprime ARMs - the nation's highest rate. In California, which had the nation's highest number of risky ARM loans, delinquency rates are still near historic lows. "There's no place to go but up," says Doug Duncan, the MBA's chief economist.
Foreclosures and delinquencies have "no place to go but up". That is the key message that Morgan, Duncan, and I have been saying for quite some time. No, there will not be a hard landing. We will crash.
Another major economic storm on the horizon is the future of the China boom.
Is China on the Brink? - and Why It Matters for the United States
September 18, 2006
Thomas Au
China is now feeling the strain of almost a decade of torrid growth. Although there are plenty of worrisome signs, the conventional wisdom is that things will be fine through the 2008 Olympics. I have a slightly different view of the timing of a pullback in that country's economy, which could be especially bad, given likely upcoming developments in the United States (and elsewhere in the world).
One example of prevailing opinion is that of James Jubak, a street.com guest columnist, who thinks that the Chinese economy is headed for "a train wreck," having just passed "the point of no return." Cheap U.S. money, operating through China's mammoth trade surpluses and dollar reserves, has fueled a steroidal double-digit GDP growth that has even the local authorities worried. The result is that key industries such as cement and steel are seeing profit plunges because of price pressures caused by overcapacity. This is spreading to a number of areas, mainly the commodity producers dominated by state-owned-enterprises (SOEs), many of which are bankrupt in all but name, and are propped up by outstanding bad loans from state banks.
I disagree with Jubak about one important thing though, in my belief that the crisis in the Chinese economy will not take place in 2009, after the Olympics as Jubak opines; it will take place before, in late 2007 or early 2008. What has been driving the Chinese economy is not the 2008 Olympics per se, but rather the anticipation of the Olympics, which will mostly end in 2007. The infrastructure buildup in advance of the hosting of the games has been giving a one-time artificial, and foreign-based, stimulus to the economy, creating a gap that domestic demand cannot fill. By early 2008 on the other hand, investment for the Olympics will be winding down, as attention turns to last-minute fine-tuning of the event itself, likely causing a sharp drop in aggregate demand at that time. And markets often move on anticipation of major events, not necessarily on the events themselves. ("Buy on rumor, sell on news.")
Jonathan Laing raised some related concerns in a recent Barron's article. Runaway development is creating massive environmental problems, including calling into question the safety of air and water in much of the country. China needs five to six times as much energy to produce a dollar of GDP as the United States, so its energy use is now starting to approach ours, despite the vastly larger GDP stateside. And more of China's energy is from pollution-creating coal. And there have already been spot shortages of essential commodities such as water and electricity. Given the country's overloaded infrastructure, it wouldn't take all that much to bring about a general shortage. Either this, or environmental problems, could quickly halt, rather than merely slow, growth.
In fact, one important question is how large is the size of the black hole of bad loans to SOEs, meaning how costly is it to keep the country more or less fully employed, thereby dampening social unrest. The official estimate of such bad loans is about $200 billion, an unpleasant, but manageable amount. But Ernst and Young did a study that initially pegged the true figure as closer to $900 billion, roughly the size of China's foreign exchange reserves (the world's largest), before the firm withdrew its findings under heavy pressure from the Chinese government. And as we learned from a painful experience with a company called Enron, America's accounting firms tend not to overestimate the magnitude of problems. My guess is that China's bad loans are north, rather than south of $1 trillion.
Moreover, there is widespread corruption at the banks that lend to the SOEs; officials at China's second and fourth largest state banks were recently arrested for embezzlement and fraud. Less dishonest, but only slightly less troubling problems include the lack of underwriting standards and regulatory oversight, because of the banks' social mission to prop up the SOEs, which provide the largest proportion of China's jobs (because the private sector is more efficient, and hence less labor intensive).
Moral hazard is clearly at work, as rapid growth encourages a "get rich quick" mentality, causing people to cut corners and bend the rules, creating widespread discontent among the hundreds of millions of people who are not participating in, and are fact harmed by, the recent "economic miracle." This is causing protests, riots, and other events that threaten social stability. In order prevent the details from getting out, China is passing laws forbidding the divulging of "government secrets," particularly those about natural or other disasters, especially when reports about bureaucratic incompetence are involved. Even printing a critical article like this one, while legal in the United States, might soon be illegal under evolving Chinese law. When a government goes out of its way to suppress the truth (as it did in the former Soviet Union), it is a sign that the truth is probably too bad to tell.
All this wouldn't seem so critical if it weren't for the fact that I believe that the United States will have a recession in 2007. This would be a result of our own, somewhat milder version of China's problems, which would start with the impending bursting of the consumer bubble (particularly in housing) caused by the Fed's earlier easing and more recent tightening. Under ordinary circumstances, the U.S. economy should begin a comeback in 2008, after a cleansing period, although whether that would be enough to elect a Republican President would be very much open to question. (The muted 1992 recovery from the 1990-91 decline was not enough to re-elect George Bush Sr.)
But the timing and degree of a prospective Chinese crash raises the stakes. In 1931, the United States was in a recession that then-President Herbert Hoover reasonably thought would soon end. The impending recovery was derailed by the collapse of the German economy, then the second most important in the world, not only because of its sheer size, but because of its connections to other countries in Europe. China's economy plays a similar "second most important" role today because of her ties in Asia and elsewhere, and because its swings are larger than those of other, nominally larger, economies such as those of Germany and Japan. If a collapse of the Chinese economy comes hard on the heels of a deep U.S. recession in 2007-2008, the result could be a prolonged slowdown of global growth such as we saw in the 1930s.
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Editorial: A Courageous Man Speaks Out - Hugo Chavez Was In Rare Form at the UN
by Stephen Lendman
Hugo Chavez chooses his authors, political and social thinkers well, and there's no one better than Noam Chomsky. In his dramatic and courageous speech yesterday to the 61st UN General Assembly, Chavez held up a copy of Chomsky's 2003 book Hegemony or Survival (which I've read and quoted from before). In the book, Chomsky cites the work of Ernst Mayr whom he describes as "one of the great figures of contemporary biology." Mayr noted that beetles and bacteria have been far more successful surviving than the human species is likely to be. He also observed that "the average life expectancy of a species is about 100,000 years" which is about how long ours has been around, and he went on to wonder if we might use our "alloted time" to destroy ourselves and much more with us. Chomsky then noted we certainly have the means to do it, and should it happen, which he says is very possible, we likely will become the only species ever to have made itself extinct.
Hugo Chavez also could have explained what Chomsky had to say about this possibility in his most recent book, Failed States, in which he addresses the three issues he feels are most important - "the threat of nuclear war, environmental disaster, and the fact that the government of the world's only superpower is acting in ways that increase the likelihood of (causing) these catastrophes." Chomsky goes even further raising a fourth issue that the "American system" is in danger of losing its "historic values (of) equality, liberty and meaningful democracy (because of the course it's on)."
Reflecting the thinking and spirit of Noam Chomsky, Hugo Chavez delivered an impassioned speech yesterday to the assembled delegates who came to hear him. It's one likely to be favorably remembered many years from now. At its end, the delegates showed their appreciation and support by giving him a standing ovation (the longest one of all the leaders addressing the Assembly) in contrast to the cool and polite reception given George Bush the previous day who chose not to attend to hear the Venezuelan leader. Too bad he didn't as he might have learned from it if he stayed alert and paid attention. Citing the language in Chomsky's book in his hand, Chavez said: "The hegemonistic pretentions of the American empire are placing at risk the very existence of the human species (and) We appeal to the people of the United States and the world to halt this threat, which is like a sword hanging over our head." He went on to explain that earlier the President of the US attended an Organization of American States meeting and proposed a NAFTA-type trade agreement in both regions that is the "fundamental cause of the great evils and the great tragedies currently suffered by our people. Neoliberal capitalism, the Washington Consensus....has generated....a high degree of misery, inequality and infinite tragedy for all the peoples on (this) continent."
Hugo Chavez called George Bush "the devil" several times and said he came here yesterday and "from this rostrum (talked) as if he owned the world." He denounced the President's talk, said he's responsible for all conflict in the Middle East, and that those opposed to these policies are resisting his imperial model of domination. Chavez predicted the US empire will fall, said "What we need now more than ever....is a new international order," and that he wants to see a reinvented UN be part of what can help achieve it. He said the UN under its current rules "does not work" and must be changed to bring more democracy to the organization. He called for the "foundation of a new United Nations" and proposed four fundamental changes including the "need to....suppress....the veto in the decisions taken by the Security Council (because) that elitist trace is incompatible with democracy, incompatible with the principles of equality and democracy." He also called for expanding the Security Council to include developing nations as permanent members and wants to strengthen the role of the Secretary General. He stressed that today the UN body is "worthless" and needs to be "refounded."
Hugo Chavez is dedicated to the principles and spirit of the Bolivarian Revolution he gave the people of Venezuela and wants to spread it to the developing world as a counter-force to the US model of global dominance of the developed North over the less-developed South with the US as hegemon-in-chief. He called on leaders from the developing world to unite and resist to build a new world model based on social equity and justice. Judging by the reception Chavez got yesterday, it looks like he made some progress toward that goal, especially in Latin America that's become an incubator of resistance against the unipolar world the US is beginning to lose its grip on and in support of the multi-polar one Hugo Chavez wants to help create.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com.
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Editorial: President Ahmadinejad's News Conference
CQ Transcripts Wire
September 21, 2006
Speaker: Mahmoud Ahmadinejad, President Of Iran
AHMADINEJAD (THROUGH TRANSLATOR): I thank God, the almighty God, for giving me an opportunity to meet with my friends once again, and to speak about the important world affairs we face today.
At the outset, I'd like to seize the opportunity to thank the people of New York, the New York police and the security forces here for all their efforts.
I know it is not easy when world leaders arrive in New York. The regular life of New York City is disrupted. The movement with cars around the streets, and with the convoys, these people to stand behind traffic, and at times they even have to wait before being able to cross the green light on the street. So on my part, I'd like to apologize to the people of New York and thank them for accepting us.
I was hoping that on this trip I would have an opportunity to meet with people here in New York, to talk with them face to face, to speak with them and meet with them on the streets closely, to see them all and for them to see me and hear what we have to say.
But regretfully, though, pressure of our work program, and the current conditions that we face when we travel here, has not allowed me to do that. But I do hope in the future there will be an opportunity.
People in the United States, like all people around the world, are highly respected by us. They are good-willing people who seek justice. They care and understand the fate of humanity is important. And there are many people here who care. Many people in the United States believe in God and believe in justice.
At the U.N. General Assembly, I raised a new point. After covering problems facing mankind today, and just, sort of, reviewing them, talking about some conflicts and wars and the problems we face and the atmosphere of threats we face, I tried to touch of some of the root causes of our problems.
AHMADINEJAD (THROUGH TRANSLATOR): Some root causes of today's problems facing humanity has to do with the international system, a system that has remained with us since World War II, emanating from the concept of a group of victors emerging from a world war and ruling the world.
That is an old system, because it leads some to believe that they have more rights to rule the affairs of the world than others, to run world affairs. And as a result, justice is hurt as long as this system prevails in the world.
It is not possible for all humanity to taste freedom in the full sense of the word, as well as justice in the full sense of the word.
When we look at the Security Council, we see that some members of the council are, in fact, one party to many conflicts of the world. They are involved, in fact, in many conflicts around the world. They are a direct party to many conflicts and have created them. Nonetheless, they sit in judgment of world affairs at the Security Council when they're a party to the conflict themselves.
We think and feel that this system must change. We believe that all nations should enjoy equal rights for all human beings should be respected, all nations must be respected. All have the right to a dignified life and to enjoy justice and, more importantly perhaps, enjoy peace and tranquility.
International organizations must, therefore, pave the way and lead the way so that all nations can, without any pressure or imposition of political or economic nature, defend their rights and feel that they're able to do so.
AHMADINEJAD (THROUGH TRANSLATOR): The world system must be able to absorb the confidence and the trust of all nations around the globe in order to implement and enforce justice in the best manner.
Regretfully, there is a great mistrust among nations and people today because they feel they are unable to find and achieve their rights through international fora. We must find a solution for 60 years of past failed experience.
It's perhaps enough the world conditions have changed. Many governments and groups that had no role in World War II, regretfully, are impacted by the consequences of World War II. To this day they were dominated by other groups, their rights were ignored and repressed.
We, therefore, must strive to achieve a world filled with peace and freedom and brotherhood and humanity and justice. And for that, again, I emphasize that we do need justice, for justice creates love, and justice guarantees viable security, and justice paves the way for permanent stability.
This is what I like to say to you. And I hope that all those involved will be able to respect justice, to submit to justice, and to make every effort to help realize justice, because it will benefit all. Those who seek justice have more followers, are loved more and, therefore, can guarantee their long-term interests more.
Therefore, it's clear that all humanity seeks justice throughout the world, from the most southern corners of the world, whether in South America, to the eastern corners of the world, in the Pacific, to the west and north. Everyone wants justice. In Africa, over 52 countries are in search of justice, as well as in Asia and in Europe, in northern America too.
It is, therefore, incumbent upon world leaders to move hand in hand to help lead nations toward justice -- a true and complete justice.
And I believe the media have a very important role to play in this respect, for media upholds the rights of the people, for media supports peace and security, as well as stability.
AHMADINEJAD (THROUGH TRANSLATOR): And therefore media must call for peace and justice. For justice will benefit everyone.
Nobody, except people who are selfish, will benefit from injustice. The vast number of human beings in the world by nature seek justice.
I hope that in the very near future we will bear witness to the establishment of a true sense of justice in the international system, along with what will be followed by peace, love and permanent peace in the world.
Thank you.
MODERATOR: Thank you very much, Mr. President.
As is common practice in this house, the first question goes to the president of the U.N. Correspondents Association.
QUESTION: Mr. President, allow me to welcome you on behalf of the United Nations Correspondents Association.
And my question to you will be in the form that you are one of the highest-profile leaders over here in the United States now, at this point in time. And there are concerns, as you know, about Iran's nuclear power program. And Western powers believe that you are at the threshold of creating a bomb, which you have denied time and again.
And in the fact that you are talking about justice and fairness to everybody, what is it that you can do, at one point in time, to assure the international community, completely and totally, that this will not be the case, that you will not make a nuclear bomb, and that you will reach (ph) Iran, the country which is -- where justice and everything --will not seek to destroy any country, including Israel?
That is what is the perception, which has to be corrected. And I think it's very important that you tell the world community that this is what it is.
AHMADINEJAD (THROUGH TRANSLATOR): Thank you very much.
In addition to speaking on behalf of the press here in the United Nations, I'm sure that you've raised the question on the minds of many here.
AHMADINEJAD (THROUGH TRANSLATOR): The authorities in the United States, I believe, are aware that Iran's nuclear issue is a political one with no legal background.
For 27 years, United States government officials have been hostile with the Iranian government and, by default, against the development of our country.
For 27 years, spare parts or even airplane -- passenger airplanes -- have been denied to us. These will have no military usage but, nonetheless, we've been denied even such technology.
So it seems to us that the question is political.
Let us remember that for eight years, the United States supported an aggressor to attack Iran. We had just freed ourselves from a dictator who depended on the United States, who was violent toward his own people, who put down regular demonstrations and used guns to silence people.
We did not have any elections in his time. Our officials and authorities were chosen in other corners beside popular corners. And people rose to establish a republic to introduce freedom and democracy.
We expected that the United States government would support the initiative taken by the Iranian people, but from day one, hostilities arose.
There were, of course, acts of terror. There were confrontations in our country. And we had been under siege, including economic sanctions, from the first day of our revolution almost.
Almost from 1979, even before our government institutions were able to shape, we were in the initial stages of drafting a constitution, having parliamentary elections, we were placed under sanctions.
AHMADINEJAD (THROUGH TRANSLATOR): And not only that, this has continued for 27 years under various pretexts. Today the pretext happens to be the nuclear issue.
We have been, for many years, a member of the IAEA. We have been a signatory. We are a signatory to the NPT. And we've demonstrated the largest volume of cooperation with the IAEA. Iran has provided the IAEA the largest number of documents that any country has ever given.
Even in the past several years, all the works that we have done we have also seen that the IAEA has published many reports, numerous reports saying that they do not see any violation of the treaty requirements of NPT by the Iranian government.
So when we talk about concerns about Iran's nuclear issue, I want to say that it's not the nuclear bomb that the American government is afraid of, for there are countries in our region who are armed with a nuclear bomb and are supported by chance by the United States government. Now, how is this?
In Iran, we sees there are two skies over one ceiling, or two kinds of wind running over the same ceiling. It doesn't seem plausible.
They're not concerned about the bomb, but it seems to us they like to prevent the development of our country, as they have in the past.
We were ready for a dialogue. However, some countries believe that they can speak for the entire world community.
Let us recall that in a declaration that was very transparent, 180 member states of the non-coalition movement recognized Iran's right to nuclear technology.
I am at a loss in understanding what else we need to do to provide guarantees.
I have said to the dear gentleman here that there is no provision in the NPT that says that we do not have the right -- that perhaps it says that we need the vote or the confidence of the U.S. government to have peaceful nuclear technology.
AHMADINEJAD (THROUGH TRANSLATOR): There's no such provision, especially coming from a country that not only has an immense nuclear arsenal, but is developing new nuclear bombs -- the second, third generation -- that are even more frightening than previous nuclear bombs, and that is even today supporting countries that produce nuclear bombs. Now, this, it seems to us, seems that it should be of more concern.
I*f we consider and accept that there is a logic behind what we are saying too, then we have to also ask the right questions. Should Iran shut down every technological development in the biological field and the medical field and the chemical field? Because in any of these fields, there's a possibility of dual usage, possibly a chemical bomb.
So when we speak of justice, we mean that everyone is equal when we act within the framework of international law and we follow the provisions of NPT.
Now, if the U.S. government submits a report, as a member of an NPT, I'd like to ask, what have they done to destroy their nuclear weapons? To what extent? Where are these weapons? And who inspects their weapons program? They, too, need to submit a report.
And it's also important for the IAEA to also publicize the extent of what they've done in Iran, for example, versus what they've done elsewhere, let's say the United States.
We've acted in a very transparent manner. I've even invited journalists and members of the press to visit our nuclear facilities with me. I opened the doors and let them see what we do.
So it's very important to make these nuclear facilities program a transparent one, for it is a technology for development and growth that should be used for agricultural growth, as well as growth in other industries.
There's no need to hide such development. Those who seek to violate the provisions of the Non-Proliferation Treaty or nonproliferation international program are those who hide it.
But we've actually given information to the IAEA. We've invited international world community to visit our facilities.
Now, we are told by some that you have to gain our trust and confidence, but we don't have any criteria developed for confidence- building as such. It may take a hundred years or more for you to gain confidence in what we do.
What are we supposed to do, given the context that in the past 27 years you've demonstrated so much hostility towards our nation? And let us not forget, you're just a few countries talking like that with us.
Our logic is quite clear and simple. I think everybody understands what we're saying.
We say that nuclear fuel cycle for peaceful purposes, granted if it's a good thing, should be good for everyone. And if it's a bad act, it should be bad for everyone. It should be banned for everyone.
AHMADINEJAD (THROUGH TRANSLATOR): Throughout our history, our country has not taken away the rights of any other country, has not initiated war against any other country, has not been an aggressor, has had no territorial claims over other countries. We love all nations and countries.
Last year, let us recall, when Katrina happened, my administration announced readiness to dispatch relief aid to the victims of Katrina. We suffered from the pain that the victims of Katrina suffered. When we saw bodies floating on waters, when we saw homeless people, we felt that we needed to help.
This comes, might I say, from our religion but also from our culture, from our beliefs. We believe in peace everywhere.
And so when we speak of Palestine, it's because we don't want to see war there. We don't want the continuation of displacement and death and destruction, the destruction of homes, the death of young people on their way to school, from school to home. We want people to feel safe and secure, not fear imprisonment.
So our proposals on Palestine are quite clear. We have proposed a referendum. We've had enough of an experience, over 60 years, all failed, tens and tens of solutions, simply because they did not give justice to all sides.
Justice means allowing, as well, the Palestinian people to decide over its own fate. It is a right they must enjoy. It is the right of all human beings. Why should some people not recognize such rights for the Palestinian people directly?
It seems to me that it's the Palestinian nation that it would be convenient if it is wiped off the map of the world. Why should a nation be destroyed as such?
They are human beings. They have children, women, daughters, men. They care for each other. They're human beings who have been living in that homeland for many years. They have been displaced, though.
On the other hand, there has been an effort to bring others from all over the world to place in that territory. Now, this is unprecedented in world history.
Where in the U.N. Charter is this allowable and permissible? Is there a law that endorses -- not so much permissible, but it might endorse the displacement of a whole nation and its replacement by another group and the establishment of a state by the second group to rule the fate of the first group?
Now, even if Ahmadinejad, even if I as a person would keep my silence, do you think that such injustice will go unnoticed, such aggression will go unnoticed?
This is a wrong assumption to make because nations are awake and they move forward. Nations will reawaken. And they have already, might I say.
So it's wrong to think that this is a problem with me, with Ahmadinejad as a humble person. No, it is a question for humanity.
You're facing public voices in Venezuela, in Argentina, in Brazil, in Sudan, in South Africa, in China, Indonesia, Japan and China. All across the world, people are upset by the aggression committed there.
Let us recall what happened recently in Lebanon. No matter what religion or belief people belong to, they condemned what happened in Lebanon because people are more aware.
Even yesterday, in New York, we saw that after a few days of heavy propaganda in the media there were even ads as long as a whole page -- 100 people, maybe, more or less, gathered (inaudible) support perhaps with the Zionist agenda. And the buses were all the same. It seems they had rented buses to all come here together, or maybe these buses were -- I mean, I don't even know, you know -- were these people paid?
But what I do want to say is that there are hundreds of millions of other people around the world who spend their own money to gather, demonstrate, publish and raise awareness about the aggression that happens in Palestine and condemn those acts.
Now, some people think, if they accuse me as being a terrorist, as a murderer, as being anti-Jew, that they can solve the problem that is in Palestine.
AHMADINEJAD (THROUGH TRANSLATOR): No, I'm not anti-Jew. Jews are respected by everyone like all human beings. And I respect them very much.
Let us remember that in Palestine there are Muslims, Christians and Jews who live together. We speak of the Palestinian nation, of a people all in all embracing everyone. I never have said the Muslims in Palestine alone should decide about their fate.
They used to live freely together. But ever since the arrival of the British, with the imperialistic goals they had, and then the arrival of the Zionist system of thinking into that land, the problems were created.
So why not let the people there decide for themselves, and then let's see what happens? Let's give that a chance.
QUESTION: For 18 years, your country hid its nuclear program until it was revealed by a dissident. The IAEA says there are still many questions left with your nuclear program.
Mr. President, why should anyone trust what you say?
AHMADINEJAD (THROUGH TRANSLATOR): Well, I believe we need to put this in context.
For over 27 years, we feel under attack. And the U.S. government calls us a terrorist.
Now, let us recall that a large number of our government officials were assassinated by a group who are recognized as a terrorist here but nonetheless get to walk in the U.S. Congress and lobby against the Iranian government.
AHMADINEJAD (THROUGH TRANSLATOR): Many of my own friends lost their lives walking on the streets in Tehran with their wives and children. They were assassinated by these same terrorists that you're referring to. And they, let us recall, were then later supported by the U.S. government.
We have not hidden anything. We are working transparently. We are working within the framework of the NPT. And according to NPT provisions, every country has the right to enjoy the fuel cycle.
Six months before giving UF6 to centrifuge machines, we have to inform the agency. We've even taken that step, to inform them when uranium enrichment occurs, when the activities happen, six months in advance, according to provisions.
It's interesting that American officials should say that we're hiding things. Now, let us see. Will the American government allow the press to come and visit their nuclear facilities, their nuclear weapons arsenals? We've opened everything for everyone to see.
If you come to Iran, you can go and see for yourself. It's actually an open area. Students go and visit it. Teachers do. University professors go and see it. Even people who work in the farms (ph) or even people who graze their sheep there, I'm talking about villagers, people go and visit there. They know where everything is.
The bottom line is, we do not need a bomb, unlike what others think.
Regretfully, some believe that the nuclear bomb can be effective in international relations. They're wrong, because the time for nuclear bombs has ended. We know that. These nuclear arsenals will not benefit anyone.
They have to spend so much money destroying them. If the nuclear bomb could have saved anyone, it would have prevented the collapse of the Soviet Union. If the nuclear bomb could have created security, it would have prevented, perhaps, September 11th. If the nuclear bomb could have done anything, it could have, perhaps, stopped the Palestinian intifada.
AHMADINEJAD (THROUGH TRANSLATOR): Today is a time of thought and ideas. We know that and we felt that across the world.
And let me say that at the same time, we are Muslims. And based on a decree given by the leader of the Islamic republic, moving toward having a nuclear bomb is banned and forbidden. Therefore, no one has the right to move in this direction. In our country, it is not permissible.
Now, let me say again, I believe this all is a political issue. At least the politicians know it is. And, of course, they have an outlet to speak their views.
QUESTION: Mr. President, we all know how important your role is in Lebanon, in Syria and in the Middle East. Will you be ready to press the Hezbollah to disarm in order to get peace in Lebanon?
AHMADINEJAD (THROUGH TRANSLATOR): Iran is a large and powerful country. Its spiritual influence in the world is very effective. Naturally, given the long civilization of the country, we have an impact on the region.
I like to stress that Lebanon's internal affairs is its own affairs. We don't interfere in its affairs. We don't want to, because we believe that people in Lebanon, various groups in Lebanon are strong enough to discuss issues among themselves and resolve problems with each other.
We speak at an international level. We like to fix problems that are on an international level and do not involve ourselves, and would not like to, in internal affairs.
QUESTION: On Lebanon, I'm not sure I understood precisely your answer. Are you going to respect the resolution and not ship any weapons to Hezbollah, which you support?
And on Iran, could you give us any details on your meeting with Italian leader Prodi and whether you've come to any kind of agreement with the E.U.-3 on timing?
AHMADINEJAD (THROUGH TRANSLATOR): I responded to the first part of your question.
We give spiritual support to all those who want to uphold their rights, because even according to the U.N. Charter we believe that all countries have the right to legitimately defend themselves. When we support nations, it's a spiritual and cultural support. That is our position, and it is a clear position.
As far as the meeting with the Italian leader is concerned, it was a very good meeting. We both spoke about our viewpoints. Our relations with Italy are a very long and historical one that are also expanding and growing.
We are interested, I'd like to say, to have relations with all countries based on the framework of international law, including mutual respect, friendship ties. And Italy is a country that we are interested in having such relations with.
We know that in one session alone you cannot arrive at all forms of agreement, but the Italian and Iranian authorities are meeting on all levels, and we are interested in expanding relations on regional issues, as well as on international issues.
QUESTION: Mr. President, I understand the importance of the spiritual support that you have just spoken about toward Hezbollah and others, but there is a resolution called 1701, and there is a demand of countries to respect an arms embargo to anyone in Lebanon other than the legitimate government.
You have twice evaded saying clearly whether you plan to respect that resolution and implement it, so can you kindly be forward and say will you stop giving Hezbollah arms and will you implement that resolution?
And do you support, by the way, like you did last year, the tribunal of an international character for the assassinations in Lebanon, including the assassination of Prime Minister Hariri, which the president of France called crimes against humanity?
AHMADINEJAD (THROUGH TRANSLATOR): Thank you very much.
Are you a representative of the U.N., it seems? I mean, you are definitely very powerful in making sure that the resolutions here are enforced.
QUESTION: Yes, I am a journalist at the U.N.
AHMADINEJAD (THROUGH TRANSLATOR): Or are you against Hezbollah?
QUESTION: No, sir, I am asking whether you plan to respect a resolution that clearly demands of all countries to stop armament to any party in Lebanon other than the legitimate government.
AHMADINEJAD (THROUGH TRANSLATOR): Thank you very much.
Yes, we support, actually, peace and permanent stability in Lebanon, and we will fall short of no measure in promoting this goal. Whether it's in the cultural or spiritual support that we can render or whether it is the role that we can play in the international arena, we will do our best. And this is the fundamental principle of our foreign policy, and it does not preclude Lebanon.
QUESTION: The French president, Jacques Chirac, when he was here, offered for the E.U.-3 to resume negotiations with Iran, provided there are two good-will gestures from each side, would stop for the E.U.-3 requesting sanctions and for Iran, which would be a suspension of uranium enrichment.
What's your answer to that proposal?
AHMADINEJAD (THROUGH TRANSLATOR): As far as the nuclear issue is concerned, we have carefully examined the package given to us by the E.U.-3, by the European group. Some expected us to actually turn it down right away, but given the recommendation by the U.N. Security Council, we were determined to read it carefully, to give an appropriate answer.
AHMADINEJAD (THROUGH TRANSLATOR): And throughout the period that we were examining it, regretfully, a resolution was passed.
We didn't understand and couldn't understand why a resolution was passed in the midst of an examination of a package. We think it was probably under pressure by some powers who constantly want to place pressure on countries.
The secretary general told me to disregard what has happened for the time being, resort to diplomacy. And he's right to respond to the package.
In our response, we delineated a clear framework for the continuation of the negotiations, based on a legal framework as well as on the principle of justice. We maintain that that is a very good foundation for working together.
Mr. Chirac also proposed that we will talk until we arrive at a negotiation (inaudible) level.
Yes, we are talking. And we accept that. And negotiations, let us remember, needs a framework. And we need to know who the parties to the negotiation are and what the prerogatives and the responsibilities of each are and what guarantees there are on enforcement measures.
You see, we have some bitter experience from the past. We've talked on numerous occasions. We've been given promises on numerous occasions, but those promises fell short of happening.
We even had and have had nuclear agreements with the United States that were unilaterally abrogated and (inaudible). We have had similar agreements with Canada, with Europe, other places, that were unilaterally abrogated.
And so therefore we've decided to propose a framework within our legal responsibilities under international law so we know what that framework for negotiations is, so that it is clear who will support the decisions taken as a result.
You are quite aware that over 30 years ago we did have agreements to build the Bushehr reactor facility. However, the party to the agreement, which were the Europeans, unilaterally decided to disregard the agreement. And so the Bushehr reactor remains suspended. Its operations for completion have not gone through.
We have the right to criticize governments for falling short of rendering their side of their agreement. We want guarantees.
So we have, therefore, offered a framework and we are negotiating within that framework. And we believe that those negotiations are moving on the right track, unless, hopefully, others will not disrupt the work in small ways, perhaps. We think that it is a constructive path to take.
QUESTION (THROUGH TRANSLATOR): Mr. President, since the president of the United States has not responded to your letter, what is your message to the American people?
AHMADINEJAD (THROUGH TRANSLATOR): Our response is clear. We believe that all nations have the right to live in a dignified manner. And we believe that the American nation is a great nation. We've never had problems with the American people.
The problem comes from the American government directed toward the people of Iran, really. Our people don't have any problems with the American people because our people too seek justice and peace, just as people in the United States do.
AHMADINEJAD (THROUGH TRANSLATOR): We ask for peace around the world.
But we also stand up when there is tyranny against us, when there is repression, when people like to force their will on us, or to say we won't submit to that, never. And we like people here to understand that.
QUESTION: Yesterday, I approached you and asked you a question. And after you found out that I'm an Israeli reporter, you ignored me.
I want you to know I'm an authentic Palestinian Jew. My family arrived to this area in 1882, when the Turks ruled this area. So I think I deserve an answer from you, even according to your definitions.
One thing: Can you clarify once and for all, do you seek the destruction of Israel, or don't you seek the destruction of Israel?
AHMADINEJAD (THROUGH TRANSLATOR): We love everyone around the world: Jews, Christians, Muslims, non-Muslims, non-Jews, non- Christians. We have no problem with people.
What we object to are acts that are inappropriate against us, or acts of occupation, of aggression, of violence, of displacement of nations. We have no problem with regular people.
We have no problem -- everyone we respect. Everyone should enjoy their legitimate rights.
But, again, I repeat that we oppose aggression and violence and murder. And we say that loudly.
QUESTION: You're talking about negotiations. First of all, at what point during the negotiations do you foresee suspending enrichment of uranium?
And you had talked about guarantees just before that. What kind of security guarantees are you looking for in the negotiations?
AHMADINEJAD (THROUGH TRANSLATOR): We are not talking of getting security measures. We are able to protect ourselves and our security. The experience of the eight-year war should have shown that to everyone in the world.
You know, the world powers were behind Saddam. Our country was fighting with empty -- with no real arms, but it was the power of our young people that upheld the territorial integrity of Iran.
What we speak of are guarantees of enforcement of the provisions agreed upon. Well, we, for example, as I gave the example, had agreements in the past to -- nuclear agreements for peaceful purposes, building reactors, et cetera. Not only were those neglected, but they also neglected agreements to provide, say, helicopters to us; to provide spare parts for civilian aircraft. So we want to make sure that whatever we agree on has a guarantee of enforcement.
But speaking about suspension, our position on suspension is very clear. In the package given to the Europeans, we've discussed that. We have said that under fair conditions and just conditions, we will negotiate about it -- under fair and just conditions, I repeat. Thank you.
QUESTION: Mr. President, you and President Chavez did not really address the concerns of your own citizens in the speeches you gave at the General Assembly. Both of you primarily expressed your anger at the United States and American hegemony.
Since you just visited Venezuela, and both of your countries are large oil producers and members of OPEC, is this a new close relationship, an alliance between Iran and Venezuela?
As well, are the speeches you gave a type of alarm for the energy industry and a threat to the United States?
AHMADINEJAD (THROUGH TRANSLATOR): No. Not at all. We do not seek to represent a threat to any country. We have relations with all countries, you must note, and we like to have friendly relations with all, as you must note.
I'd like to point out here that, despite the support of the American government of a former dictatorial regime in our country, after the victory of the revolution, the late Ayatollah Khomeini said that (inaudible) two countries that we consider are illegitimate are the apartheid system of South Africa first, and the occupying regime of Jerusalem.
AHMADINEJAD (THROUGH TRANSLATOR): We like to have friendly relations with all countries. Our imam and our people were saddened, but yet forget the support of the United States gratefully of the former regime in Iran, because we have practically sought good relations with everyone, and we still do.
Venezuela, let us not forget, is a large country with sincere people, with great people, with an independent government, let us not forget. And we must have relations, just as have relations with India, with Pakistan, with Algeria, with 195 countries in the world. We have relations that are sincere and friendly and close.
While the United States, let us not forget, cut its ties with us unilaterally. They look at us with hostility in a very unilateral way. If they change toward us, there, too, we can solve our problems.
The expansion of our ties with the rest of the world is based on the interest of nations and people, and toward the promotion of peace and justice worldwide.
QUESTION (THROUGH TRANSLATOR): The question I have, you speak of (inaudible) you suspended the enrichment as a precondition. Is it really possible for Iran to consider spending enrichment once negotiations begin (inaudible)? And if you give a positive answer to this, will the leader support that or not?
AHMADINEJAD (THROUGH TRANSLATOR): You actually managed to get two questions in the form of one here.
You see, our position is very clear: We work within the framework of NPT. We seek to define our rights within that framework and nothing more.
I don't quite see why so many people are so sensitive about the "enrichment" word. It seems that this "enrichment" word has become the sort of lingua franca of our time and day.
But let's see, it looks to me that the problem is something else. It seems to me again that the United States government and some European countries should make some changes and alterations in the way they treat the Iranian government and speak with us.
AHMADINEJAD (THROUGH TRANSLATOR): You see, they can't look at our nation as they have in the past 27 years (inaudible) trying to impose their views on us because that's not possible.
But if they recognize that we too, as a nation, have rights that they too recognize international law, well then many things are possible, and the concerns too will be removed.
Again, we have given another suggestion, too. Since they have bombs themselves, they know what bombs are. They're actually more afraid of it, I think.
(LAUGHTER)
They should destroy their arsenal, and I think they'll be less fearful about it. And they'll be less suspicious of others.
(LAUGHTER)
QUESTION: India has always maintained it has a civilizational relationship with Iran. But at the same time, it does not want to see another country in the region develop a nuclear weapon and it's urging Iran not to produce a nuclear weapon.
What do you think of this position, also given India's blossoming nuclear relationship with the United States, your archrival right now?
AHMADINEJAD (THROUGH TRANSLATOR): Well, their suggestion is a good one, because we are not seeking the nuclear bomb. I mean, that's quite clear.
QUESTION: Your Excellency, I'm not a speaker of Farsi, but there is a debate going on as to what exactly you said at the conference on the World Without Zionism.
Did you say that Israel as a state should be wiped off the map or did you say something else? Could you just please specify this, because there is this debate going on?
And if you said Israel should be wiped off the map, that's very scary. If you said something else perhaps less alarming; perhaps you could tell us.
AHMADINEJAD (THROUGH TRANSLATOR): It's quite interesting. I mean, it seems to me that there's a strong Zionist lobby. And it seems to me that I face this question wherever I go. And I have always been ready to answer.
I am not saying that you are a Zionist lobbyist, sir. I'm just saying that wherever I go I face questions like this.
But I'd like to say that we are opposed to aggression. We are opposed to occupation. We are opposed to murder and violence, whoever commits them -- does not matter -- whoever is an aggressor, whoever who is the source for disgracement or is a murderer.
I mean, I'm talking about aggression and occupation as an abhorrent act wherever it occurs, whether in Palestine that is occupied, whether in Lebanon, in Vietnam, in Iraq.
AHMADINEJAD (THROUGH TRANSLATOR): We oppose killing on such scale. And, you know, we have tried to offer some proposals on Palestine: the referendum that I discussed earlier, with the participation of everyone.
Now, when you speak of referendum, you're thinking of a process, naturally. You're not speaking of anything else. It's within the framework of the United Nations Charter.
We do believe that the Zionist role in creating conflict around the world should be thoroughly examined by the media. It is a responsibility. Let us not forget that they represent a complex group, a complex organizational system, that has been the source of many problems.
Now, we cannot force our will on the vast part of the world because there is a small group that has a certain interest related to wealth and power.
Let's not forget that Zionism is a party that, in fact, it has no religious affiliations. They might say that, "Well, we're Jews," but that's really not true and that's not the fundamental foundation of Zionism.
And let's not forget that after all, the prophet Moses, was a supporter of peace, was a supporter of justice. He opposed aggression and occupation, and he opposed war and the displacement of people. He saved the children of Israel, banning Israel from pharaohs of the time, from occupiers from aggressors of the time.
So how can the followers of Moses possibly destroy the homes of people over their heads in their homeland to take, and to kill, actually, an infant that is feeding in the arms of a mother?
These Zionists, I want to tell you, are not Jews. That's the biggest deception we've ever faced.
Zionists are Zionists, period. They are not Jews, they are not Christians, and they are not Muslims. They are a power group, a power party. And we oppose oppression and the aggression that any party that seeks pure power, raw power goes after.
AHMADINEJAD: And we announce and (inaudible) loudly that if you support that, you'll be condemned by the rest of the world.
If you usurp the rights of others, you'll be condemned by the rest of the world. If you displace people from their homeland, the rest of the world will condemn you.
And you too must condemn these acts. Everyone should. As a conscienced voice, we must.
Would you like to be displaced from your homeland and replaced by others and, when you raise objections, to be named a terrorist? I really doubt that anyone in the world would like that.
So this is an imposition on humanity.
QUESTION (THROUGH TRANSLATOR): In your remarks, you have mentioned that the leaders and presidents of the world should turn to justice and enforce justice.
You are the president of Iran and you have the opportunity to enforce justice. Reports coming from Iran seem to indicate that student movements are being repressed, that justice is not being served, as far as the followers of the Baha'i faith, as well as for women, who object to the Islamic laws that discriminate against them.
And this justice that you speak of in the political realm does not exist. So why are against justice?
AHMADINEJAD (THROUGH TRANSLATOR): In the meeting we had with the Foreign Press Council last night, it seemed to me that this was the main question on the mind of many people.
I want to give you two figures.
There are about 219 million people in the United States and in Iran we have about 68 million people.
Now, there are about 3 million prisoners in the U.S. There are about 130,000 -- there are exactly 130,000 prisoners in Iran, 90 percent of whom are illicit drug traffickers who have been arrested in direct armed conflict with our security forces, who were trying to prevent the transit of drugs from Iran into Europe and the United States.
Now, let's find out, and I think you should, what the composition of the backgrounds of prisoners in the United States is.
AHMADINEJAD (THROUGH TRANSLATOR): I asked this question yesterday, but nobody had an answer.
Now, let's see, a high percent of American people are in prison, whereas only 0.2 percent of the Iranian population is in prison. Let's just put these figures in proportion now.
You know, I like to speak of law as a framework. If you violate a traffic regulation, you will be governed (ph) by law. If not, there will be no rule of law.
Now, we do have law in our country. We have a judiciary system. And, in fact, our courts are quite independent because the president does not have the right by law to interfere in the judgments of the judiciary. It therefore represents an independent power, an independent branch of government. We have a judiciary, we have lawyers, we have judges, we have trials. There are violations under law.
Now, let me just clarify what the political situation in Iran is and for you to understand better.
There is a newspaper in Iran that is affiliated with the government and it's a voice, a podium for government position. Three months ago they had a violation under law and they were shut down. The president could not do anything.
Now, I mean, what happened there is really a concept of freedom, a dimension of freedom that we must examine, because if we are to allow insults to happen, if we allow violations of law to happen, then we are acting against justice, we're allowing those with power to tell others what to do.
The courts are set up to defend the rights of the people. A citizen might raise a complaint against me. The judge must consider and examine that and they might give a sentence against me and force me to leave office. This, to me, is a power given to our courts and is a dimension of freedom, it is a dimension of democracy that we've been attained.
Now, let us not forget that there is a possibility of failing to carry out law completely (ph) everywhere. It's in our country as well. Sometimes an enforcement official may not carry out his duties in the right way. But we are all involved, we are all responsible, we have to tell people not to do that, we have to make our efforts.
And everywhere in the world, when you look, such things do happen, and in Iran, too. But we believe that the freedom that we enjoy in Iran and the kind of justice we enjoy in Iran today is, sort of, self-grown, home-grown, and we made every effort to get to where we are, and we hope you respect that.
I thank you all. I know many of you had many questions. I am sorry that my time is limited. Our time is really tight. But if you coordinate with my friend Mr. Zaid (ph), inshallah, meet you in Tehran in the near future in a press conference.
Thank you for your time.
END
.ETX
Sep 21, 2006 13:21 ET .EOF
Source: CQ Transcriptions © 2006, Congressional Quarterly Inc., All Rights Reserved
Comment on this Editorial
Editorial: The Five Pillars of the U.S. Military-Industrial Complex
by Rodrigue Tremblay
September 25, 2006
"Over-grown military establishments are under any form of government inauspicious to liberty, and are to be regarded as particularly hostile to republican liberty." George Washington (1732-1799), 1st US President
"[The] conjunction of an immense military establishment and a large arms industry is new in the American experience. ...In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist." Dwight D. Eisenhower (1890-1969), 34th US President, Farewell Address, Jan. 17, 1961
"It is part of the general pattern of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear." General Douglas MacArthur, Speech, May 15, 1951
In the 1920's, President Calvin Coolidge said, "the business of America is business." Nowadays, it can be said that the Arms industry and permanent war have become a big part of American business, as the offshoot of a well-entrenched military-industrial complex. This is a development that previous American men of vision, men like President George Washington and President Dwight Eisenhower have warned against as being intrinsically inimical to democracy and liberty. However, the current Bush-Cheney administration is not afraid of such a development; its principal members are part of it and are instead very busy promoting it.
Wars, especially modern electronic wars, are very murderous, but they are also synonymous with big cost-plus contracts, big profits and big employment for those who produce the required military gear. Wars are the paradise of profiteers. -Wars are also a way for mediocre politicians to monopolize both the news and the media in their partisan favor by whipping up patriotic fervor and by pushing for narrow-minded nationalism. Indeed, to inflame patriotism and nationalism is an old demagogic trick used to dominate a nation. When that happens, there is a clear danger that democracy and freedom will be eroded, and even disappear, if that development leads to an exacerbated concentration of power and political corruption.
The terrorist attacks of Sept. 11, 2001, were a bonanza for the American military-industrial complex. This was an event, a "New Pearl Harbor", that some had openly been hoping for. The reason? These attacks gave the perfect pretext to keep military expenses, which had been expected to fall after the demise of the old Soviet Empire, at a high level. Instead, they provided the rationale for dramatically increasing them, by substituting a "War on Terror" and a "War against Islamists" as a replacement for the "War against Communism," and the "Cold War against the Soviet Union". In this new perspective, the gates of military spending could be open and flowing again. The development of ever more sophisticated armaments could go forward and thousands of corporations and hundreds of political districts could continue to reap the benefits. The costs would be born by the taxpayers, by young men and women who die in combat and by remote populations who happen to lie under the rain of bombs about to fall upon them and their homes.
Indeed, in September 2000, when the Pentagon issued its famous strategy document entitled "Rebuilding America's Defenses", the belief was expressed that the kind of military transformation the planners were considering required "some catastrophic and catalyzing event - like a new Pearl Harbor", to make it possible to sell the plan to the American public. They were either prescient or lucky, because one year later, they had the "New Pearl Harbor" they had been hoping for.
The military-industrial complex needs wars, many and successive wars, to prosper. Old military equipment has to be repaired and replaced each time there is a hot war. But to justify the enormous costs of developing ever more deadly weapons, there needs to be a constant climate of fear and vulnerability. For example, there are many reports, originating from medical and international observers, that the Israeli attacks against Lebanon and Gaza during the summer of 2006, allowed for the use of 'new American-made weapons'. Such weapons are reported to include depleted uranium (DU) bombs, 'direct energy' weapons and new chemical and biological weapons. These weapons not only make the act of homicide easier but they also contaminate the environment with radioactive DU particles for decades to come.
But, to build a compact strong enough to steer a democratic country on the path of a permanent war economy takes an alliance of interests between militarists, industrialists, politicians, sycophants and propagandists. These are the five pillars of the military-industrial complex, as can be found in the United States.
1. The U. S. military establishment
In 1991, at the end of the Cold War, the U.S. defense budget was $298.9 billion. In 2006, that budget had increased to $447.4 billion, and this does not include the $100 billion-plus spent in the Iraq and Afghanistan wars. It is estimated that American military expenditures represent, at a very minimum, close to half of total world military outlays (48 per cent of the world total in 2005, according to official figures), while the U.S. accounts for less than 5 per cent of world population and about 25 per cent of world total output. -As a percentage, the U.S. military expenses gobble up a minimum of 21 per cent of the total American federal budget (2006=$ 2,144.3 billion). Such a military budget is larger than the gross domestic product (GDP) of some countries, such as Belgium or Sweden. -It is sort of a government within a government.
In 2006, the U.S. Department of Defense employed 2,143,000 people, while it estimates that private defense contractors employ 3,600,000 workers, for a grand total of 5,743,000 defense-related American jobs, or 3.8% of the total labor force. In addition, there are close to 25 million veterans in the United States. Therefore, it is safe to say that more than 30 million Americans receive checks which originate directly or indirectly from the U. S. military budget. Assuming conservatively only two voting-age people per household, this translates into a block of some 60 million American voters who have a financial stake in the American military establishment. Thus the clear danger of a militarized society perpetuating itself politically.
2. The private defense contractors
The five largest American Defense contractors are Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. They are followed by Honeywell, Halliburton, BAE Systems and thousands of smaller defense companies and subcontractors. Some, like Lockheed Martin in Bethesda (Maryland) and Raytheon in Waltham (Massachusetts) draw close to 100 per cent of their business from defense contracts. Some others, like Honeywell in Morristown (New Jersey), have important consumer goods divisions. All, however, stand to profit when expenditures on weapons procurements increase. In fact, U.S. defense contractors have been enjoying big Pentagon budgets since March 2003, i.e. since the onset of the Iraq war. -As a result, they have posted sizable increases in total shareholder returns, ranging from 68 % (Northrop Grumman) to 164 % (General Dynamics), from March '03 to September '06.
It also has to be pointed out that private defense contractors play another social role: they are big employers of former generals and former admirals from the U.S. military establishment.
3. The political establishment
In the U.S., president George W. Bush, a former oil-man, and Vice President Dick Cheney, as former chairman and C.E.O of the large oil service company Halliburton in Houston (Texas), epitomize the image of politicians devoted to the growth and development of the military-industrial complex. Their administration has expanded the military establishment and they have adopted a militarist foreign policy on a scale not seen since the end of the Cold War and even since the end of World War II. Indeed, under the Bush-Cheney administration, the arms industry has become very profitable. Multi billion-dollar contracts to sell planes and tanks to various countries in an increasingly lawless world are going full swing. Close to two-thirds of all arms exports in the world originate from North America.
Congress, for its part, is indebted to defense corporations that operate military plants in each congressman's district or senator's state, besides owing some gratitude to the lobbies that provide funds and media support in election times.
4. The "think tanks" establishment
The brain-trust and the sycophants behind the war-oriented economy form an interlocking network of Washington-based so-called 'think tanks' that are financed by the rich tax-exempt foundations which have billions of dollars of assets, such as, for example, the John M. Olin Foundation, the Scaife Foundation or the Coors Foundation, etc. -Among the most influential and representative think tanks, whose mission is to orient American foreign policy, one finds the American Enterprise Institute
(AEI), the Heritage Foundation, the Middle East Media Research Institute, the neoconservative Washington Institute for Near Eastern Policy, the Center for Security Policy,
the Jewish Institute for National Security Affairs, the Project for the New American Century (PNAC) and the Hudson Institute. -Such think tanks serve a double purpose: they provide government officials with policy papers on various topics, usually on the very conservative side; and, they serve as incubators for government departments, supplying them with already trained personnel and providing employment for public officials who are out of office.
The same revolving door that exists between the military establishment and defense contractors is also observed to exist between the Washington-based think tanks and U.S. government departments.
5. The "propaganda" establishment
The pro-war economy propagandists are to be found in the fundamentally right-wing American media industry. This is because the selling of war-oriented policies requires the expertise that only a well-oiled propaganda machine can provide. The most potent propaganda tool is television. And there, Rupert Murdock's Fox News Network
is unbeatable. There is no American media outlet more openly devoted to the neocon ideology and more committed to supporting new American wars than Fox News. CNN or MSNBC may sometimes try to emulate it, but their professionalism prevents them from even coming close to Fox News in being biased toward war and in unabashedly promoting U.S. global domination. Fox's propaganda efforts are closely coordinated with other Murdoch-owned print media, such as the Weekly Standard and the New York Post. The Washington Times, which is controlled by the Rev. Sun Myung Moon's Unification Church, the neoconservative New York Sun, and other neocon publications such as the National Review, the New Republic, The American Spectator, the Wall Street Journal, complete the main pro-war propaganda infrastructure.
In conclusion, it is the conjunction of these five pro-war machines, i.e. the bloated military establishment, the large American arms industry, the Neocon pro-war administration with Congress being strongly under the influence of militarist lobbies, the pro-war think tanks network and the pro-war media propagandists that constitutes the framework of the military-industrial complex, of which President Dwight Eisenhower wisely feared the corrosive influence on American society, forty-five years ago, in 1961.
Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@ yahoo.com.
He is the author of the book 'The New American Empire'.
Visit his blog site here.
Author's Website:www.thenewamericanempire.com
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Bush's America
For Bush, War Anguish Expressed Privately
By Peter Baker
Washington Post Staff Writer
Monday, September 25, 2006
FALMOUTH, Maine -- They sat on two frayed chairs in a teacher's lounge, the president and the widow, just the two of them so close that their knees were almost touching.
She was talking about her husband, the soldier who died in a far-off war zone. Tears rolled down her face as she mentioned two children left fatherless. His eyes welled up, too. He hugged her, held her face, kissed her cheek. "I am so sorry for your loss," he kept repeating.
She told him she considers him responsible for her husband's death and begged him to bring home the troops. "It's time to put our pride behind us and stop the bleeding, for all of us," she recalled saying. The president demurred, unwilling to debate a mourning woman. "We see things differently," he said.
But Hildi Halley, a self-described liberal antiwar activist who met with President Bush in Maine last month, said she believes he felt her grief. "It wasn't just a crocodile tear," she said in an interview at her home. "I felt like I moved him. I don't think he's going to wake up tomorrow and say, 'Oh my gosh, I've been wrong this whole time and I'm going to change all my policies because of my meeting with this woman.' I just hope that with each soldier, he remembers my pain."
He has a lot of pain to remember. Now more than five years after the attacks of Sept. 11, 2001, Bush has served as a wartime president longer than any occupant of the White House since Lyndon B. Johnson. He has presided over more U.S. military casualties than any since Richard M. Nixon. While he travels the country defending his policy and arguing to stay the course in Iraq, he also confronts the human burdens of wartime leadership.
The two sides of Bush as commander in chief can be hard to reconcile. His public persona gives little sense that he dwells on the costs of war. He does not seem to agonize as Johnson did, or even as his father, George H.W. Bush, did before the Persian Gulf War. While he pays tribute to those who have fallen, the president strives to show resolve and avoid displays that might be seen as weak or doubting. His refusal to attend military funerals, while taking long Texas vacations and extended bicycle rides, strikes some critics as callous indifference.
Yet the private Bush comes across differently in the accounts of aides, friends, relatives and military family members who have met with him, including some who do not support him, such as Halley. The first question Bush usually asks national security briefers in the Oval Office each morning is about overnight casualties, aides say, and those who show up for the next round of meetings often find him still stewing about bad news from Iraq.
Bush seems to separate these aspects of war in his mind, advisers say. He expresses no regret even in private for his decision to invade Iraq, they say, while taking seriously the continuing consequences of doing so. "Removing Saddam, he never revisits that in his mind or his heart," said one adviser, who like others spoke on the condition of anonymity because Bush does not want them to discuss his feelings. "Sending troops into harm's way, that's something that weighs on him."
If he does not show that publicly, it's in keeping with a White House practice of not drawing attention to the mounting costs of the wars in Afghanistan and Iraq, which have killed more than 3,000 U.S. troops and tens of thousands of civilians. Advisers worry that sending the wrong signal would further sap public will and embolden the enemy and Bush's critics. Aides say that Bush does not attend military funerals because the presidential entourage would disrupt solemn events and that, out of respect, the media have been banned from photographing coffins arriving at Dover Air Force Base. But they also know it would focus a spotlight on the price of the president's policies.
Bush is less reticent about public displays of grief for victims of Sept. 11. During the recent events marking the fifth anniversary of the attacks, he teared up several times and at one point had to concentrate just to finish a speech. "Your heart breaks for somebody who suffered," he later told Charles Gibson of ABC News. "Tears can get contagious as far as I'm concerned."
For those who have suffered losses in the wars he initiated, Bush prefers to offer comfort in private. He writes letters to families of those killed, visits soldiers at military hospitals and meets with relatives of the dead. Altogether, according to the White House, Bush has met with 1,149 relatives of 336 dead service members. These sessions generate little attention because the White House bars journalists, but some relatives have described them.
"It's absolutely painful for him," said Beth Karlson, 63, a retired school food-service manager whose son died in Iraq and who met with Bush in Wisconsin last month. The president hugged her and held her hand. "He's a genuine person. He wants to reach out to the families and let them know how he feels."
Not everyone agrees. Cindy Sheehan, who would later launch antiwar protests near Bush's Texas ranch, met with him in 2004 and left alienated. She said he came across as overly casual and immune to her pain, referring to her as "Mom," yet uninterested in stories about her dead son, Casey, and calling him "your loved one" instead of by name. When she later sought another meeting, Bush refused.
Said Missy Beattie, a fellow member of Gold Star Families for Peace whose nephew died in Iraq: "He only meets with people who support him. I don't know what I'd say to him. I almost feel like he's not worthy of time and thought because I don't think he cares. I don't think he has any human qualities. I don't think he would listen to me or anyone who's lost someone and feel any empathy."
Many presidents confront the burden of ordering troops into danger. Johnson was tormented by the Vietnam War, padding down to his war room in slippers and robe at night to check on casualty numbers. Taped telephone calls, published by historian Michael Beschloss, reveal the depth of anguish. "I want to be called every time somebody dies," Johnson declared. He took to bed, depressed. Aides consulted psychiatrists. "He suffered," biographer Robert Dallek said. "It certainly took a toll on him. You could see it in his face at the end of his term. He was so old and careworn."
George H.W. Bush wrote an angst-ridden letter to his children before the Gulf War: "I guess what I want you to know as a father is this: Every Human life is precious. When the question is asked 'How many lives are you willing to sacrifice' -- it tears at my heart. The answer, of course, is none -- none at all." He did not sleep well before the bombing began and prayed that an Iraqi child shown on television would not be hit. "There's no way to describe the pressure," he said in a diary entry, later published in a volume of personal correspondence. "I've been plagued with the image of body bags."
Warren Finch, director of the George Bush Presidential Library and Museum, said the former president's service as a pilot shot down over the Pacific shaped his outlook. "The fact that he had served in World War II and lost two crewmen meant he experienced it firsthand. That weighed heavily on him."
His son never served in combat and gives no public indication that he anguishes like his father. White House spokesman Tony Snow said the president, like his predecessors, "lies awake nights asking himself the question: How can I get this done and get our people home?" But Bush controls his feelings around associates. "He keeps a lot of that very, very locked up inside himself," said a longtime friend. "I don't raise it with him. I just don't feel comfortable doing that."
Bush is more open with confidants about his aggravation over events in Iraq. "He's unbelievably candid in person," said another person close to the president. "Of course it frustrates him. You can't not be frustrated by four car bombs a day and that sort of thing. But I think he's confident it's going to work out. I think he also thinks there's not much of an alternative." Does the president confide much in his father? "Nobody knows," the person said. "It's a steel wall."
Bush deals with stress through vigorous exercise, working out six days a week. When he goes for long bicycle rides, he often invites others to join him, but he asks them not to ride in front of him so he can have the illusion of solitude. "Riding helps clear my head, helps me deal with the stresses of the job," he told reporters last month after an 80-minute ride.
To those angry over the war, that can seem cavalier. "It's important for me to be thoughtful and sensitive to those who have got something to say," Bush said last year when Sheehan began her protest. "But it's also important for me to go on with my life, to keep a balanced life. . . . I'm mindful of what goes on around me. On the other hand, I'm also mindful that I've got a life to live and will do so."
Aides see the impact on Bush after meetings with "families of the fallen," as the White House calls them. Bush typically meets each family separately, joined by one aide, often Deputy Chief of Staff Joseph W. Hagin. He offers commemorative coins, poses for photos or signs autographs. "I do the best I can to cry with them or, you know, laugh with them if they wanna laugh, and hug them," Bush recently told Katie Couric of CBS News.
Karlson, whose son, Staff Sgt. Warren Hansen, died in a helicopter crash in Iraq in 2003, asked Bush for help in obtaining an investigative report. "I just felt I was being stonewalled, I wasn't getting anyplace," she recalled. "He said it will be taken care of. And it was. The next Wednesday, the report was hand-delivered." In the end, the report confirmed what she had been told about her son's death. "It has brought some peace," she said.
After such meetings, aides said, Bush often seems drained. During a trip to Fort Bragg, N.C., last year, he spent three hours with dozens of relatives of troops who were killed. One of them, Crystal Owen, asked him to wear a metal bracelet in honor of her dead husband. He put it on, then went to deliver a nationally televised address. With the widows still on his mind, Bush seemed flat as he began to speak, aides said, and at one point his eyes became watery.
Halley, 41, lost her husband, National Guard Capt. Patrick Damon, also 41, in June in Afghanistan to what officially was ruled a heart attack. When Sen. Olympia J. Snowe (R-Maine) called to offer condolences and asked if she could do anything, Halley requested a telephone call from the president. Instead, when he came to Maine to visit his parents in Kennebunkport, the White House invited her to meet him at a school.
When Bush walked in, Halley told him about Patrick, how they had met at American University, moved to Maine and had a family. "After I spoke about my husband for quite some time, I said, 'And now he's dead. For what? Why? I've lost my soul mate.' " She asked her children, Mikayla, 14, and Jan-Christian, 12, to leave the room, then wept as she told Bush how hard life had become for them. "He started crying. I said, 'These two children do not like you and they have good reason for that. And I hold you responsible for the death of my husband.' "
Bush seemed surprised that she opposes even the war in Afghanistan, and he cited the Taliban. "And I said, 'Who put them in power?' And he got a little defensive and said, 'I'm really not here to discuss public policy with you.' And I said, 'That's probably wise, and I'm not here to talk about public policy, either.' "
Bush said he hoped their meeting helped her healing. "You know what would help my healing?" she recalled responding. "If you change your policies in the Mideast." Bush smiled, she said, but did not reply.
Halley said the meeting did not change either of their minds. She would still vote against him. But she said she appreciated that he opened himself up to her. "I don't think he's a heartless man," she said. "I think he's pulled in a lot of different directions by very intelligent people. . . . I don't think it's going to change his policies, but I hope it does make him think about it. I hope I'm in his dreams."
Comment: Gosh, is there an election coming up or something?? In any case, you see, Bush sees things differently than this widow and the thousands of other widows and soon-to-be-widows in America. For Bush, there is no problem with the fact that their husbands died, or will die, for no good reason. For sure, he understands their stance, but the point they are missing is that he simply doesn't care.
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Will The Next Election Be Hacked?
ROBERT F. KENNEDY JR.
Rolling Stone
October 5, 2006
Fresh disasters at the polls -- and new evidence from an industry insider -- prove that electronic voting machines can't be trusted
The debacle of the 2000 presidential election made it all too apparent to most Americans that our electoral system is broken. And private-sector entrepreneurs were quick to offer a fix: Touch-screen voting machines, promised the industry and its lobbyists, would make voting as easy and reliable as withdrawing cash from an ATM. Congress, always ready with funds for needy industries, swiftly authorized $3.9 billion to upgrade the nation's election systems - with much of the money devoted to installing electronic voting machines in each of America's 180,000 precincts. But as midterm elections approach this November, electronic voting machines are making things worse instead of better. Studies have demonstrated that hackers can easily rig the technology to fix an election - and across the country this year, faulty equipment and lax security have repeatedly undermined election primaries. In Tarrant County, Texas, electronic machines counted some ballots as many as six times, recording 100,000 more votes than were actually cast. In San Diego, poll workers took machines home for unsupervised "sleepovers" before the vote, leaving the equipment vulnerable to tampering. And in Ohio - where, as I recently reported in "Was the 2004 Election Stolen?" [RS 1002], dirty tricks may have cost John Kerry the presidency - a government report uncovered large and unexplained discrepancies in vote totals recorded by machines in Cuyahoga County.
Even worse, many electronic machines don't produce a paper record that can be recounted when equipment malfunctions - an omission that practically invites malicious tampering. "Ev