Washington - US secretary of defence Donald Rumsfeld on Sunday rejected allegations of widespread prisoner abuse at US-run overseas detention facilities.

"The idea that there's any policy of abuse or policy of torture is false - flat false," he told the Fox News Sunday television program.

"People have been instructed to treat people humanely," Rumsfeld said.

The defence secretary pointed out that in instances where they have been prisoner abuse has been substantiated "people have been punished and convicted in a court martial."

Rumsfeld rejected calls from some US lawmakers, civil libertarians and others that terror suspects be prosecuted in the general civilian criminal justice system.

"I'm not a lawyer, but the president and the attorney general decided after 9/11 that putting terrorists into the ... criminal justice system as though they were car thieves or bank robbers or something like that .... wasn't the way to do it," Rumsfeld said. [...]

President says U.S. committed to expanding democracy, freedom worldwide

In remarks commemorating United Nations International Day in Support of Victims of Torture June 26, President Bush says freedom from torture is "an inalienable human right."

In a statement released by the White House the same day, Bush said the United States "is committed to building a world where human rights are respected and protected by the rule of law." He added that the United States is working to expand democracy worldwide and "will help others find their own voice, attain their own freedom, and make their own way."

The president acknowledged that many people throughout the world are "stand[ing] up for their right to freedom," but said that too many are "paying a terrible price for their brave acts of dissent" by being "detained, arrested, thrown in prison, and subjected to torture by regimes that fail to understand that their habits of control will not serve them well in the long-term." [...]

Senior politicians are calling for a full inquiry into the activities of United States intelligence operatives in Italy, after a Milan judge issued arrest warrants for 13 CIA agents. The agents allegedly abducted a suspected Islamic militant and took him to Egypt for interrogation.

Paolo Cento, a Green party MP who is vice-chairman of the Justice Committee of the lower house of parliament, has demanded an explanation of the episode from both the Italian interior and defence ministers.

"What has emerged from the investigations requires a political clarification," he said. "We want to know if US secret agents are free to operate in Italy, and if that is the case, we want to know how the government will ensure national sovereignty."

In issuing the warrants, Judge Chiara Nobili took an unprecedented stand against the US policy of "extraordinary rendition", popularly known as "outsourcing torture".

The 13, three of them women and one of them allegedly a former US consul in Milan, are said to have seized the Islamic suspected from a street in Milan and flown him to Egypt. [...]

For many Italians, the behaviour of the CIA agents betrays a contempt for territorial boundaries that leaves them near-speechless. The investigators were able to build up a detailed picture of the Americans' movements because they took no precautions, staying at Milan's most expensive hotels for weeks on end and using Italian cellphones and insecure hotel landlines for long conversations.

Italian investigators are also fuming at the casual way the Americans sabotaged their own investigations. "We supplied them with information about Abu Omar, then they used the information against us, undermining our entire operation against his terrorist network," a senior Italian investigator told The New York Times. [...]

Guido Salvini, the judge in charge of preliminary investigations in the case, said the abduction "was illegal because it violated Italian sovereignty, but it also had a negative impact on the overall war on terror".

If the CIA had not intervened, he went on, "Abu Omar might be standing trial in Italy now".

Extraordinary rendition, the American practice of exporting foreigners suspected of involvement in terrorism to countries where torture is routine, has been practised since the mid-1990s, but became frequent after the 11 September attacks. Egypt is the most common destination, but suspects have also been sent to Syria, Morocco and Jordan.

The indignation of the Italian authorities has been further fuelled by emerging evidence of an attempted cover-up of the abduction by the CIA, which in 2003 informed Italian anti-terrorism officers that the Milan imam had fled to Bosnia to evade police investigations.

CAIRO - Some 200 demonstrators gathered outside state security headquarters in Cairo to protest torture in Egypt, a practice rights groups have long accused the regime of using in prison interrogations.

Surrounded by hundreds of riot police wearing helmets and carrying clubs, protestors chanted anti-regime slogans at the rally, organised by human rights advocates to coincide with World Day Against Torture.

The protest grew heated as demonstrators yelled "Down with (President Hosni) Mubarak" and "Gamal (Mubarak's son) tell your father all Egyptians hate him."

Demonstrators also called for Interior Minister Habib al-Adly, whom they deem responsible for the practice, to step down.

Some carried banners with pictures of the minister with the word "Resign," while others read: "Judge the pashas of torture," using the word to describe military authorities.

Egypt approved a key electoral reform in May to allow multi-candidate presidential elections for the first time, but the move was criticised by opposition as being too restrictive and voting day was marred by violence.

Prior to the referendum, in a move to clamp down on opposition, Egyptian police arrested hundreds of members of the banned but tolerated Islamist group the Muslim Brotherhood.

Some 1,300 members have since been released, but 300 remain behind bars, group leaders say.

The National Council for Human Rights led by former UN secretary general Boutros Boutros Ghali counted nine cases of torture in May and said "regrettable violations" of the right to life were committed, which led to "the death of some citizens apparently as a result of torture."

Faced with unremitting violence, the United States is building new detention areas at Iraqi prisons including the notorious Abu Ghraib.

President George Bush had declared that Abu Ghraib would be torn down in a symbolic gesture after shocking pictures emerged of Iraqi inmates being abused and tortured by American forces.

But the continuing insurgency and rising death toll has meant that not only can the US not hand over Abu Ghraib to the new Iraqi government, according to a planned timetable, but other prisons including Camp Bucca in the British-controlled south of the country are being expanded.

The numbers of prisoners being held by the US in Iraq has reached record levels this month, with 10,783 in custody, up from 7,837 in January and 5,435 in June last year. American Iraqi officials agree there is no sign of the resistance or the prisoners it produces abating soon. "It's been a challenge" said Col James Brown, commander of the 18th Military Police Brigade. "Many of the people we have captured have not given up the struggle."

President Bush will make a nationwide television address tomorrow after opinion polls showed increasing numbers of Americans are disenchanted with the war.

But the Defence Secretary, Donald Rumsfeld, was forced to admit yesterday that the fighting could go on for years, adding: "We are not going to win against the insurgency, the Iraqi people will win against the insurgency". Mr Rumsfeld tried to play down reports that the US and Iraqi officials had been meeting representatives of the Sunni insurgency to try to forge a peace deal. He insisted such contacts were "routine".

The decision by American commanders to add to the detention facilities instead of their planned decommissioning would be seen as an admission of just how much the situation is out of control more than two years after invasion. [...]

[...] In Malcolm Gladwell's book, The Tipping Point, he describes the conditions that are necessary to transform Hush Puppies from the old school to new cool. "The world of the tipping point is a place where the unexpected becomes expected, where radical change is more than a possibility," he argues. "It is - contrary to all our expectations - a certainty."

American public opinion appears to be approaching just such a point in relation to the war in Iraq. The last fortnight has revealed a growing impatience with the military misadventure in the Gulf and an irritation with the White House's persistent denials that anything is wrong. This has translated into more urgent and widespread calls to bring the troops home that has finally percolated up to the political class. This new phase has put George Bush on the back foot, forcing him to deliver a major address tomorrow night to rally public support, which is evidently draining away. He will tell them that America needs "resolve". For the White House Iraq has become the latest faith-based initiative.

A recent Gallup poll revealed that 56% said the war "wasn't worth it". Meanwhile, for the first time, a majority say they would be "upset" if Bush sent more troops, and a new low of 36% say troop levels should be maintained or increased. An earlier Washington Post poll showed that two-thirds of the public believe the US military is bogged down in Iraq while almost three- quarters think the level of casualties is unacceptable. The figures match or exceed the previous high-water mark of public disenchantment. More than half believe the war has not made them safer and 40% believe it has striking similarities to the experience in Vietnam.

Anti-war sentiment had always been part of mainstream national conversation here. But with the Democratic party and its presidential candidate having supported the war, such views remained marginal in the body politic. Now, as these statistics make themselves felt in the postbags and phone logs of congressmen, the notion that not only is the war not going to plan but that the plan might itself be flawed is finding expression in the most unlikely places. On June 16, the Republican congressman Walter Jones, the man largely responsible for introducing freedom fries to the congressional menu, co-sponsored a bipartisan resolution persuading the president to set a timetable for troop withdrawal.

When the secretary of defence, Donald Rumsfeld, testified before a Senate armed services committee last week, the Republican senator from South Carolina, Lindsey Graham, said: "I'm here to tell you sir, in the most patriotic state that I can imagine, people are beginning to question. And I don't think it's a blip on the radar screen. I think we have a chronic problem on our hands. We will lose this war if we leave too soon. And what is likely to make us do that? The public going south. And that is happening."

The critical factor driving this slump, explains Christopher Gelpi, associate professor of political science at Duke University who specialises in public attitudes to foreign policy, is not how many soldiers they lose but whether the mission for which they have fallen is likely to be successful. "The most important single fact is that the public perceive the mission as being destined for success. The American public is partly casualty-phobic but it is primarily defeat phobic. You can muster support for just about any military operation in the US so long as you can get enough of the defeat-phobic people on board." [...]

Until earlier this year, the White House had an easy-to-follow narrative for success on its own terms. When weapons of mass destruction were not found, it simply changed the story to fit the absence of facts. The final chapter then became the democratisation of the Arab world. First there would be a "handover" of power, then elections, all leading up to Iraqis regaining control of their own country. The carnage, in terms of human life, regional stability and international law, was dismissed as a price worth paying for the bigger picture. For a while, a majority of the American public bought it. But in recent months they have proved reluctant to wear it.

You can keep spinning just so long before you fall flat on your face. The administration's insistence that things are on track and all it must do is stay the course is beginning to grate. US efforts to reshape the world through a policy of pre-emption have been buttressed by an attempt to remould reality through the power of assertion. Since Vice-President Dick Cheney claimed that the insurgency was "in its last throes" 77 American soldiers and about 600 Iraqi civilians have died. His tortured explanation, late last week, that "if you look at what the dictionary says about throes, it can still be a violent period", adds insult to injury.

"We are all capable of believing things which we know to be untrue," wrote George Orwell in his essay In Front of Your Nose. "And then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield."

Stung by plummeting polls, the Bush administration is working on a new message about Iraq. Defense Secretary Donald H. Rumsfeld road-tested it on the Sunday talk shows, and President Bush will flesh it out during a speech Tuesday night. The basic message, as articulated by Rumsfeld, goes something like this:

1. "Progress is being made politically and economically" in Iraq.

2. But the casualties could get worse over the next six months, and fighting could go on for "five, six, eight, 12 years."

3. And we have never miscalculated, erred, or misled you.

Comment: See, we seem to recall statements about Saddam Hussein's WMD's and the fact that he was prepared to use them against the US. So, where are the WMD's?

It's an ambitious message - a mix of the upbeat, the downbeat and the defiant.

Comment: An ambitious message?! Let's think about this: A group of psychopathic liars hoodwinks an entire nation into going to war. The population of the country begins to wake up and see how the wool was pulled over their eyes. In response, the psychopaths simply lie again, stating, "No, REALLY - we're not liars, thieves, and scumbags. Honest!"

Whether a restive public buys the message may depend not on Bush's persuasive powers, but on the news from the battlefield. And this message arrives at a crucial juncture, with solid majorities of Americans now saying that invading Iraq was a mistake (a sharp reversal of the polls one year ago). At this point, 91.5 percent of all American military deaths have occurred since Bush declared on May 1, 2003, that "major combat" was over.

Worse yet, an administration known for its message discipline has been plagued lately by top officials sending contradictory signals. While Vice President Cheney is insisting that the insurgency is in its "last throes," military leaders are telling Congress that the insurgency is at least as strong as it was six months ago, buoyed by an ongoing influx of foreign fighters.

Bush, in his speech Tuesday night, will ask Americans to help him "stay the course" - in essence, to trust him anew as a war president. But for those who are increasingly skeptical about the war, trust may be the biggest hurdle. Only 32 percent of independent voters now support the war, according to Gallup, and the big drop in recent months has been fueled not just by the mounting casualties but by the perception that Bush and his war planners promised a short and relatively bloodless conflict.

As evidenced Sunday by Rumsfeld's televised remarks, however, it's clear that the administration, while seeking people's trust, does not want to entertain any suggestion that it made any mistakes in the past, whether intentional or not.

Rumsfeld told "Fox News Sunday," for example, that he had not made optimistic predictions during the prelude to war. Such a claim, he said, is "false. ... I have been balanced and measured."

Yet, on Feb. 7, 2003, more than a month before the war began, he predicted that "it could last six days, six weeks, I doubt six months." On Feb. 20, 2003, he told PBS that the Americans "would be welcomed," as happened in Afghanistan, where people in the streets were "playing music, cheering, flying kites." (Seven months later, when a broadcast journalist asked Rumsfeld about his PBS remarks, he replied: "Never said that. Never did. ... You're thinking of somebody else.")

Comment: Does anyone actually expect this man to suddenly start speaking the truth? Of course not. Bush's televised address to the nation will no doubt be laughable. The real problem is not the speech; the problem is what Bush and the Neocons will do when the speech doesn't work on the American people... What happens when you corner a wild animal?

Also Sunday, Rumsfeld told NBC's "Meet the Press" that any rosy prewar predictions (which he denies were made) would have been inappropriate. He said: "Anyone who tries to estimate the end, the time, the cost, or the casualties in a war is making a big mistake." Yet it was Cheney, on March 16, 2003, who said "I think it will go relatively quickly ... weeks rather than months." A month earlier, Bush budget official Mitchell E. Daniels Jr. publicly estimated that the war could cost roughly $60 billion. (The current cost is $208 billion.)

Clearly, the administration is seeking a clean slate on forecasts. Rosy talk is out. The new message is designed to prepare the public for a long slog, figuring that Americans will stay the course if they get the bad news up front. Talk of "progress" will be tempered by talk about the grim realities of war. In Rumsfeld's words Sunday, "it's violence, it's tough, it's terrible."

Comment: This is their brilliant plan?? Many Americans are opposing the Bush regime because they already know the bad news, and they are sick of the incessant lies. How will this message help matters any?

He recalled that, during the run-up to war, he had prepared for Bush a list of "15 things that could go terribly wrong," including oil fields set afire and mass refugees on the roads. NBC interviewer Tim Russert then asked whether he had put "a robust insurgency" on the list. Rumsfeld replied: "I don't remember if that was on there." [...]

Rumsfeld did seek, at several points, to defend Cheney's contention that the insurgency is in its last throes. He told "Fox News Sunday" that "last throes could be a violent last throes, or a placid and calm last throes," his way of saying that the insurgency could burn out quickly or persist for years. He did say, however, that "I will anticipate that you'll see an escalation of violence between now and the (next round of Iraqi) elections" next winter.

In essence, the message is that America will be fighting in Iraq through the end of Bush's tenure, and that people should not dwell on what Rumsfeld calls "the negative day after day, in the press and on television." (He didn't address the fact that some of the most negative reports lately have come from publications such as the Marine Corps Times, which has written about inadequate body armor, and recalls of armored vests.) [...]

THE American general who commanded allied air forces during the Iraq war appears to have admitted in a briefing to American and British officers that coalition aircraft waged a secret air war against Iraq from the middle of 2002, nine months before the invasion began.

Addressing a briefing on lessons learnt from the Iraq war Lieutenant-General Michael Moseley said that in 2002 and early 2003 allied aircraft flew 21,736 sorties, dropping more than 600 bombs on 391 “carefully selected targets” before the war officially started.

The nine months of allied raids “laid the foundations” for the allied victory, Moseley said. They ensured that allied forces did not have to start the war with a protracted bombardment of Iraqi positions.

If those raids exceeded the need to maintain security in the no-fly zones of southern and northern Iraq, they would leave President George W Bush and Tony Blair vulnerable to allegations that they had acted illegally.[...]

A leaked memo previously disclosed by The Sunday Times, detailing a meeting chaired by the prime minister and attended by Jack Straw, the foreign secretary, Geoff Hoon, the then defence secretary, and Admiral Sir Michael Boyce, chief of defence staff, indicated that the US was carrying out the bombing.

But Moseley’s remarks, and figures for the amount of bombs dropped in southern Iraq during 2002, indicate that the RAF was taking as large a part in the bombing as American aircraft.

Details of the Moseley briefing come amid rising concern in the US at the war. A new poll shows 60% of Americans now believe it was a mistake.

In his first statements since a landslide election victory on Friday, Iran's new hardline President, Mahmoud Ahmadinejad, defended his government's right to a nuclear programme and said that the country had "no significant need" for ties with the United States.

The former mayor of Tehran also sought to assuage domestic fears that he would crack down on social and political freedoms, saying in a press conference that "no extremism will be acceptable in popular government".

Mr Ahmadinejad's triumph has been greeted with dismay in Western capitals, which fear a newly confrontational approach from Tehran after months of tortuous negotiations over Iran's uranium-enrichment programme, which it claims is only intended to satisfy domestic energy needs. But although he was dismissive of American claims that the election was flawed and illegitimate, Mr Ahmadinejad was more conciliatory towards Europe, which has led the nuclear negotiations.

"Preserving national interests and emphasising the right of the Iranian nation for using peaceful nuclear technology," said the new President, "we will continue the talks," adding that they should be concluded "quickly".

With America however, it appears that Mr Ahmadinejad is prepared to let relations go into a deep freeze. His defeated opponent, Akbar Hashemi Rafsanjani, made improved dialogue with the US a pillar of his election campaign. But, asked yesterday about Washington's persistent criticism of poll arrangements, the president-elect angrily replied: "In the democratic elections in our country, the people have chosen their president. Those who defend dictatorships cannot pass judgement on us." [...]

The Israeli administration has warned the international community that the election of Ahmedinajad will increase the problems in the region and claimed that Tehran's diplomatic isolation will increase as well.

The Israeli deputy Prime Minister Shimon Peres released a declaration after the Iranian elections claiming that the elections cannot be determined as free and fair.

Furthermore, Amos Gilad from the Israel Foreign Ministry, speaking on Israeli radio, said that the Iranian elections had terminated the reforms and efforts for change in Iran.

First Unocal as a predicate...

The US has a little known entity that can reject the Chinese interest and intent regarding Unocal on national security/interest grounds. Remember that the beneficiary of the current Unocal deal is Chevron (NWO).

What you need to think about first is whether China wants the NWO to have this entity reject the overture.

If you think about it for a moment, China WANTS the US to reject it. Why? BY rejecting it the NWO affords China totally validity in doing what it wants to do: reject future NWO enmeshment via purchase of Chinese enterprise! China will broaden the doctrine and of course will not object to the US broadening it as well. What is the national security interest is within the pale of definition by the respective country. What is important to China is for the US to set up is the principle, which it will do openly now in rejecting China's interest in outbidding Chevron.

What if the deal is allowed to go through? China doesn't mind. Then it will resort to the contention that the US had the discretion to reject it or not. That it did not reject it does not limit China from applying it on a more stringent standard for its own interests.

Conclusion: China has everything to gain and nothing to lose in pursuing Unocal. It is again a brilliant Chinese maneuver. What it does is bring up the issue that the US can if it wants reject it. Thus, China cannot be faulted from applying the same standard as it deems best for the interests of its own country.

Now, look at the Iranian elections...

Did the NWO want the extremist candidate to win or lose?

It wanted Mahmoud Ahmadinejad to win to open the portal for Israel to attack Iran. [...]

The Unocal analysis shows you that every act of China is cast with the intent that regardless of the outcome China improves its position. The Iranian election analysis shows you that what the NWO wants is not always apparent from what it says it wants. The fact that Bush is going to speak live from a military base announced hours before the election results asking live television coverage when we all know he has little to say positive about Iraq means that he is setting the stage to probably defend an Israeli attack on Iranian nuclear sites, the probability being near 100% that Israel will justify a strike on such sites now based on the Ahmadinejad win and the record of his statements anti-West and anti-Israel.

So China pursues Unocal with its own agenda and Bush adds big bucks to the ante by pursuing Iran. Bush says his strategy will assure that China proves itself the paper tiger and Bush will have Iran and once having Iran he will explain that it abates most of all opposition in Iraq, thus proving important for US troops and US interests. Bush will further explain that Syria once Iran "loses it nuclear threat capability" will also prove of no consequence to US troops and interests in Iraq. Of course reinterpreted it means the NWO will move for control of oil in both Iraq and Iran and neutralize Syria which will mean Bush will complete his mission as per www.senderberl.com/BMI.pdf.

What are the chances of this unfolding on Tuesday: 50%, which is very high for such an extreme war scenario. It means Israel must attack, Israel must be somehow injured to allow US troops in Iraq to move in Iran to protect Israel. It also serves as an excuse for China not to intervene against US intervention for "injured" Israel.

A more important dynamic is what are the chances of the scenario (or something similar) unfolding in the foreseeable future? Answer: 80%. The NWO is arguing that the new Iranian leadership can only result in making the NWO position in Iraq totally untenable. Thus, the only conclusion per 9-11 is that it wanted Ahmadinejad to win because he was the sine qua non for the NWO to push through for the US and Israel the inevitable need to quash the nuclear sites and in doing so open the portal for US troops to enter Iran. This of course suggests some plan to effectuate a successful response/counterattack on Israel. [...]

Granted, the winds of corruption and shortsightedness still dominate. More so than at any time in recent memory, high-level officials are indistinguishable from right-wing lobbyists, gutting government's ability to regulate corporate power.

This may seem like a weird time for progressives to feel optimistic, but a confluence of recent events suggests the faintest breeze of hope in the air.

Granted, the winds of corruption and shortsightedness still dominate. More so than at any time in recent memory, high-level officials are indistinguishable from right-wing lobbyists, gutting government's ability to regulate corporate power. The Justice Department is throwing the fight against the tobacco companies; the White House is busy editing the science out of regulations that might restrain polluters.

Meanwhile, the administration and its congressional allies continue the fiscal recklessness that has been their hallmark since they got here. If they continue to have their way -- and they recently added a new slew of regressive tax cuts to their 2006 budget -- it will eventually be impossible for government to fulfill essential functions, from safety nets to investment in future technologies. (I know, that's the point: Starve the beast.)

Given this gale force of business as usual, where's this hopeful little breeze coming from? In fact, from a number of places:

* Infighting: There is clearly more dissension within conservative ranks. It might be that midterm elections are within sight, and members of Congress are paying a little more attention to polls showing their popularity ratings coming in just above that of Lyme disease. There's been uncharacteristic pushback from former White House allies on George W. Bush's domestic (stem-cell research, Social Security "reform") and foreign agendas (the war in Iraq).

* Speaking of Social Security, the more people learn about the president's plan, the less they like it. What's so notable here is that one of the most sophisticated and heretofore successful spin machines in the history of politics has been unable to sell the public on the benefits of privatization.

* A counter-theme is evolving. As these political phenomena are unfolding, leading newspapers have been providing a critically important "back story" regarding trends in economic inequality and mobility. A theme -- moving away from risk shifting and back to risk sharing -- is emerging.

The subject of this theme surfaced in 2004 in a prize-winning series by Los Angeles Times reporter Peter Gosselin. As stated in the introduction to the series, the piece questions "[w]hy so many families report being financially less secure even as the nation has grown more prosperous. The answer lies in a quarter-century-long shift of economic risks from the broad shoulders of business and government to the backs of working families. Safety nets that once protected Americans from economic turbulence -- safeguards like unemployment compensation and employer loyalty -- have eroded or vanished… The result is a daunting 'New Deal' for many working Americans -- one that compels them to cope, largely on their own, with financial forces far beyond their control."

And remember, Gosselin wrote this before Bush was offering future Social Security recipients the chance to play the stock market with what would otherwise be a guaranteed pension.

More recently, The New York Times and The Wall Street Journal both ran series on, among other things, the sharp increase in income inequality and the lack of income mobility (including the amazing factoid that there's more economic mobility in France, Canada, and Denmark than in the United States).

In other words, while markets are delivering less equitable outcomes, the rules and norms that formerly offset those outcomes have eroded.

It just may turn out that the failure to sell Social Security privatization is the tipping point where enough people say, "Enough, already" to the risk shifting that underlies the conservative agenda.

The final hint I have that help may be on the way comes from the words of someone who not only gets what the risk-shifters are up to but can talk about it in some of the most compelling ways I've heard in decades.

Here's the way it looks to Senator Barack Obama, from a graduation speech he gave a few weeks ago. There are those, he says, who believe:

" … That the best idea is to give everyone one big refund on their government -- divvy it up by individual portions, in the form of tax breaks, hand it out, and encourage everyone to use their share to go buy their own health care, their own retirement plan, their own child care, their own education, and so on.

"In Washington, they call this the 'ownership society.' But in our past there has been another term for it: social Darwinism -- every man or woman for him or herself. It's a tempting idea, because it doesn't require much thought or ingenuity..." …

"But there is a problem: It won't work. It ignores our history. It ignores the fact that it's been government research and investment that made the railways possible and the Internet possible. It's been the creation of a massive middle class, through decent wages and benefits and public schools that allowed us all to prosper. Our economic dependence depended on individual initiative. It depended on a belief in the free market; but it has also depended on our sense of mutual regard for each other, the idea that everybody has a stake in the country, that we're all in it together and everybody's got a shot at opportunity."

Did someone just open the window? Where's that breeze coming from?

In the U.S. stock market, the Dow closed at 10,297.84 on Friday, down 3.2% from the previous week’s close of 10,623.07. The NASDAQ closed at 2,053.27 on Friday, down 1.8% from 2,090.11 the week before. The yield on the ten-year U.S. Treasury bond closed at 3.92, down from 4.08 the previous Friday. The dollar closed at 0.8263 euros, up 1.5% from its close on the previous Friday of 0.8142 euros, or 1.2102 dollars to the euro compared to 1.2282 the week before. Oil closed at 59.84 dollars a barrel up 2.3% from $58.47 on the previous Friday. In terms of euros, a barrel of oil would cost 49.45 euros compared to 47.61 the week before, an increase of 3.9%. Gold closed at $441.60 an ounce, up a half percent from $439.50 on the Friday before. Gold in euros would be 364.90 an ounce on Friday, up 2% compared to 357.84 a week earlier. Comparing gold to oil, an ounce of gold on Friday would buy 7.38 barrels of oil, compared to 7.52 the week before, a rise of 1.9%.

Gold has been rising steadily of late. What has some observers puzzled is gold’s rise in the face of the dollar’s rise:

Gold on the cusp of 2005 peak, more gains seen

By Veronica Brown

LONDON, June 24 (Reuters) - Gold was poised to hit a new 2005 peak above $445 an ounce on Friday as fund and trade buyers ignored the traditional link between bullion and the dollar.

Gold has built steadily this month, with the market gaining just over seven percent to sit under $4 away from the March 11 high at $446.70 -- the highest level seen this year.

The move has been all the more remarkable given the dollar's strength against the euro, which would normally tend to make dollar-priced gold more expensive for non-U.S. investors.

"Can we get through $446.70 - I think we can. I think we will be testing $450, this will be a short-lived rally but will push higher still," Barclays Capital analyst Kamal Naqvi said.

Spot gold moved to $443.40/444.15 per troy ounce by 1020 GMT from $440.85/441.60 late in New York on Thursday. The market earlier hit $443.50 -- its highest since March 17.

"The market has found a great momentum, and this is providing great potential. An upside correction in the euro today could take gold even higher," MKS Finance analyst Frederic Panizzutti said.

EURO WOES

The euro fell briefly below $1.20 for the first time in 10 months against the dollar on Friday, buckling under the weight of expectations of lower interest rates in the euro zone. It was last at $2.2071.

Already at 2 percent, a cut in euro zone rates would further bolster the dollar's yield appeal as the Fed is expected to raise interest rates again next week to 3.25 percent.
Although a softer euro would normally scare-off foreign investors, analysts said bullion was merely reflecting a market feeding off its own momentum.

"I think it's not the start of a grand new era where gold moves up no matter what happens," Naqvi said.

"Should we see some sort of approach towards normality in the euro-zone then it's all over," he added.

Analysts also said gold's move higher was significant against a backdrop of falls in base metals, with copper futures seeing a five percent drop on Thursday.

"Despite the weakness in base metals, which has proved the old adage that seems to have been forgotten by many of the bulls that the value of an investment can go down as well as up, gold prices have remained firm of late, with dips very well bid," HSBC metals analyst Alan Williamson said in a daily report.

The rise of gold in the face of drops in other metals and strength in the dollar is not a good sign for the world economy. High gold prices don’t cause problems, but they are indicators of problems in the economy. What are those problems? Geopolitical instability, for one. With the Neoconservatives still in power in the United States, who can bet that the United States won’t invade Iran and Syria, even as they are losing the wars in Afghanistan and Iraq? They want to win back what they have just lost with one more reckless throw of the dice. Second, there is the economic instability with the twin deficits in the United States budget and balance of payments. Either new wars or a burst of the housing bubble can send everything crashing down, and I think people are sensing this.

Al Martin has this to say about the housing bubble:

The Federal Reserve pointed out in its study last Thursday, which Greenspan referred to in his testimony before the joint economic committee, although he didn’t refer to it in detail and I could understand why – that the current speculative bubble in real estate, even if it were to unwind in the same manner as all other speculative real estate bubbles have unwound in this nation, wherein there was experienced, over a 3-year period, an average 17% decline in median home prices, which is the average for the unwinding of a speculative bubble and is, indeed, the decline we saw from the 4th quarter of 1989 to the 2nd quarter of 1991 when the real estate bubble of the late 80's unwound–even this unwinding, would, according to the Federal Reserve, lead to 20 million mortgage defaults in the nation.

To put this into comparison: the speculative bubble of the late 80's, when that unwound from `89 to `91, there were 3.6 million mortgage defaults.

What the Federal Reserve is now saying is that there would likely be 20 million mortgage defaults. Because in the unwinding of the speculative bubble in property from `89 to `91, the debt-to-equity ratio was still 37% -- meaning the people had 37% of equity.

Now, the median debt-to-equity ratio of property in the United States is only 14%, a record low, due to the $3 trillion that has been taken out of property equities since 2001 in order to sustain consumer spending.

What the Fed pointed out is that even an unwinding of this speculative bubble to the extent of the historical average would wipe out $2 trillion of equity of the GSE’s: Ginnie Mae, Fannie Mae, Freddie Mac, more specifically.

How would that happen? Because of the enormous amount of mortgage defaults, which are going to occur in an unwinding of the speculative bubble because the debt-to-equity ratio is so low.

What the Fed is saying is that $2 trillion of capital would be taken out, would essentially evaporate within the GSE’s. Further, the nation’s commercial banks and mortgage lenders, which are indirectly guaranteed by the U.S. Treasury through various pools (FDIC, FSLIC, FSCL and so on), would potentially be exposed to a $2 trillion hit, if, and this is only assuming, if this current speculative bubble in real estate only unwinds to the extent of the national average of unwinding of speculative bubbles in property, a la 1989 to 1991.

This is the scenario as opposed to what others believe, including the Economic Policy Institute and AlMartinRaw.com. Remember Fed Governor Susan Beis remarks about a potential 40% loss in the national median home price average over 5 years when the bubble begins to unwind. A 40% loss, which is privately calculated by the General Accounting Office and the Office of the Comptroller of the Currency and the Federal Housing Administration. That is what those three institutions actually believe is going to happen. A 40% decline over 5 years of the median home price in the United States would collapse the economy of the United States, to use Walker’s words.

It would be an unprecedented debacle, and the only remedies are (and, unfortunately Alan Greenspan, I think, is the impediment) for the General Accounting Office, the OCC and the FHA to take action now to begin to pressure the speculative bubble in real estate by ending the availability of interest-only mortgages in what they call hot zones, where there is the greatest depreciation, in regions like California and Florida.

You know the reason why Alan Greenspan is against this? According to the Federal Reserve, real estate hot zones now include 68% of all of the transacted real estate in the nation. That’s how widespread the speculative bubble has become.

Thus the Fed is in yet another conundrum of its own creation. The Fed is literally frightened to go along with the OCC and other government agencies in imposing regulation that they know would lead to the collapse of the speculative bubble. Because they don’t want to be blamed for the economic consequences of it.

Think of what a conservative estimate of 20 million mortgage defaults means, in both human and economic terms. Then think of the fact that the Bush regime has taken steps to seal the entrances of the sweatshop before setting the fire, not only with the new personal bankruptcy law but also, quietly, they are making it harder for average people to take money out of the country:

The blogger at Cryptogon wrote about trying to get some money out of the United States:

Now, which of the following do you think would involve the most red-tape?

A. Getting a driver’s licence
B. Buying a gun
C. Setting up a corporation
D. Establishing a daytrading account to trade stocks and bonds on margin (that is, with money you don’t have)
E. Having the ability to send your money out of the U.S. at will

Hmmm?? Any guesses?

E is the correct answer.

Commenting on this is the Deconsumption blogger, who wrote:

As you may know, I work for a major financial firm, and the last three years have seen an unprecedented flurry of regulations being brought down on the industry. Various reasons are given for these regulations, all of them nominally being to "protect the public" or to "prevent crime/terrorism"--and certainly that is true. But at some point, like Kevin at Cryptogon.com, you perhaps begin to wonder whether the over-arching reason is nothing more than simply to establish greater and greater control over individuals. And if you actually come to realize that you want to draw the line somewhere for yourself, you discover you may be too late....

Everyone has probably heard the term "offshore hedge fund"--these are "investment accounts" established outside of U.S. tax and governmental jurisdiction, sort of like hyper-active versions of the legendary "Swiss bank account". The amount of money in them is unknown, but without doubt it is in the hundreds of billions, if not trillions. And this doesn't even address the actual 'corporate' money which has gone into overseas investment and holding companies, ne'er again to return....

This is the money of people who did pay attention to the direction things were headed, who did draw the line somewhere. This is the so-called "smart money". And so maybe this gives you a little bit of an insight into the future that they are betting on....

Usually the dominant power in the world is also the largest lender of money. Never has the dominant power been by far the world’s largest borrower, but this is in fact the case now. What this tells me is not that the rules have changed, but that the United States will not be the dominant power very soon. That is why the smart money has already bailed. Once the crash happens, they will be able to step in and buy everything at pennies on the dollar. This is why they are locking the exits and are still spreading cheap credit around: to make the crash harder, the pain worse for the average person in the United States.

The United States' super-elite and the corporations think that they can maintain their position even if the U.S. economy crashes. Remember that the inhabitants of the Italian peninsula became much poorer as the Roman Empire became richer during the imperial period. Rome had the more heavily urbanized East do what it did best (trade, make things and be more wealthy and urban) impoverishing the bulk of the people in Italy, where they fell under the domination of a very few, super-rich elite (the Senatorial class). The population in the West then was assigned to do what it did best: join the Roman legions, be poor, and be dominated by a soon-to-be feudal elite. Sound familiar?

Charley Reese has this:

Third World, Here We Come

Many Americans are living in a state of delusion, fed by the politicians who keep telling us we're the greatest, the strongest, the freest, the wealthiest, etc., etc., and so forth. Actually, we are heading toward becoming a Third World country.

The difference between a First World country and a Third World country is this: First World countries manufacture finished goods and import raw materials; Third World countries export raw materials and import manufactured goods.

Why does this account for a difference in standard of living? It's easy to explain. A skilled machinist adds more value to a product than someone who flips a burger with a spatula. Therefore, the machinist can demand a higher salary. Unfortunately, our manufacturing base is rapidly diminishing, and the villains are none other than our own corporate executives, who are moving production to cheap-labor countries.

The law of supply and demand works this way in regard to labor. Countries that have a surplus of people can bid the price of labor way down. India, China and Central America have a surplus of people. The alternative in those countries to taking a job with stingy wages and no benefits is to face no job and no income.

That was the old way of looking at economics, but there is a new factor that makes the old economic theory break down. That new factor is the multinational corporation. Much of what the U.S. government classifies as "exports" and "imports" are really nothing more than intracorporate transfers.

Under the old theory, if, say, all the bluejeans sold in America were manufactured in El Salvador, then El Salvador would prosper. After all, it would be exporting manufactured goods. Unfortunately for El Salvador, under the new theory all of the bluejean factories would be owned by American corporations. Thus, the multinational corporation screws both the people of El Salvador and the American consumer. The Salvadoran gets a low wage, and the American consumer pays an inflated price for a very cheaply produced garment. The capitalists pocket the profits.

But in the meantime, what happens to the Americans? Well, as their income is reduced by the loss of high-paying manufacturing jobs, they will at first take out second mortgages and max out their credit cards in a vain attempt to maintain their standards of living. This will eventually, however, result in bankruptcies and foreclosures. Interest will eat them alive. Then there will be a shrinking market for the high-priced goods no matter where they are manufactured.

Poverty will also affect the services sector. Poor people can't afford a doctor, a lawyer, an architect, an interior decorator, life or medical insurance, a nursing home or a funeral. The idea once touted by the wet-behind-the-ears gurus in Washington that we could easily replace manufacturing with services is false. A consumer economy only works if the consumers have money to spend, and they can only have money to spend if they can find jobs that pay a decent wage.

You can see the signs of the gradual impoverishment of America if you think about what is happening. First, supermarkets started accepting credit cards; then fast-food joints did. Many car dealers are now reduced to "sign and drive" promotions - nothing down, low monthly payments. What all of that tells you is that more and more Americans are squeezed for income.

All of this damage has been done under the guise of free trade. That is a false label. It's actually managed trade, and it's designed to facilitate the off-shoring of American jobs. The evidence of the failure of this policy is plain, but ignored. It has produced nothing but huge trade deficits and turned us into a debtor nation. The amount of U.S. dollars held by Asian countries is about $1 trillion. We will eventually be tenants in our own country if we don't change course.

President George Bush likes to talk about an "ownership society," but what he and his predecessors are creating is a "sharecropper's society." The only consolation Americans will have when everything goes south is that they will have done it to themselves.

It now is becoming clear that the successor power to the United States will not be Europe, it will be China. The U.S. Neocons and the Israeli Likud strategists think that there is a shot that Israel can be the successor power if it gets control of oil and more land, but their pursuit of this most likely will do no more than hasten the demise of U.S. power by entangling the U.S. in expensive, losing wars in southwest Asia. Certainly Israel is hedging their bets by selling advanced weapons systems to China over the objections of the United States.

Surfing the headlines, I came across this item which has not generated much commentary:

Chinese Oil Giant in Takeover Bid for US Corporation

By David Barboza and Andrew Ross Sorkin
The New York Times
Thursday 23 June 2005

Shanghai - One of China's largest state-controlled oil companies made a $18.5 billion unsolicited bid Thursday for Unocal, signaling the first big takeover battle by a Chinese company for an American corporation.

The bold bid, by the China National Offshore Oil Corporation (CNOOC), may be a watershed in Chinese corporate behavior, and it demonstrates the increasing influence on Asia of Wall Street's bare-knuckled takeover tactics.

The offer is also the latest symbol of China's growing economic power and of the soaring ambitions of its corporate giants, particularly when it comes to the energy resources it needs desperately to continue feeding its rapid growth.

CNOOC's bid, which comes two months after Unocal agreed to be sold to Chevron, the American energy giant, for $16.4 billion, is expected to incite a potentially costly bidding war over the California-based Unocal, a large independent oil company. CNOOC said its offer represents a premium of about $1.5 billion over the value of Unocal's deal with Chevron after a $500 million breakup fee.

Moreover, the effort is likely to provoke a fierce debate in Washington about the nation's trade policies with China and the role of the two governments in the growing trend of deal making between companies in the countries.

This week, a consortium of investors led by the Haier Group, one of China's biggest companies, moved to acquire the Maytag Corporation, the American appliance maker, for about $1.3 billion, surpassing a bid from a group of American investors.

Last month, Lenovo, China's largest computer maker, completed its $1.75 billion deal for I.B.M.'s personal computer business, creating the world's third-largest computer maker after Dell and Hewlett-Packard.

After years of attracting billions in foreign investment and virtually turning itself into the world's largest factory floor, China appears to be nurturing the growth of its own corporate giants into beacons of capitalism. China wants to be a player on the world stage, and it is eager to have its own energy resources, its own multinational corporations and its own dazzling corporate names.

And some of China's biggest companies are now on the hunt, trying to snap up global treasures.

The bubble hasn't burst, but the air may be leaking out.

Massachusetts may be finally entering a buyer's market for homes, experts said yesterday after new data showed the volume of single-family house sales plunged in May by the largest amount in nearly three years.

About 4,142 single-family homes sold last month, down 11.1 percent compared to the same period last year. It was the second straight month in which the number of year-over-year home sales declined in the Bay State, the Massachusetts Association of Realtors reported.

The decline was the sharpest since August 2002, when sales drooped 14.1 percent in year-to-year comparisons.

Prices of both homes and condominiums continued to rise last month - by 6.2 percent for single-family dwellings and 4.7 percent for condos. The average price for a home was $359,900 in Massachusetts, while condos were go