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What is becoming increasingly clear is that the net result of the current conflict known as the "war on terrorism" is not the eradication of terrorism around the world but rather it's promotion and the restriction of civil rights of ordinary citizens. This much is beyond doubt because we can all verify that this is indeed what has occurred. Terrorist attacks have increased dramatically since the "war" began, and the steady abolition of civil freedoms continues unabated.

The matter of real importance then, is to understand to which warring party in this 21st century conflict such goals belong. Who really wants to embroil the world in a terror attack nightmare and sweep away our basic social rights? If it is the terrorists' goal to exterminate "freedom and civilisation" and if it is the goal of Bush and Blair to protect our freedoms and our lives, then clearly the terrorists are winning the war and Bush and Blair are losing.

The argument that the draconian measures undertaken by the British and American governments have prevented worse attacks from occurring is disingenuous as there is no way to verify this claim and, in any case, progress in "making the world a safer place" should be gauged in terms of a comparison between the level of global security before and since Bush and Blair decided to lie to the world about the reasons for their collaborative, illegal invasion of Iraq.

Bush and Blair have repeatedly claimed that the goal of the terrorists is to turn back the clock on civilisation and install a fundamentalist Islamic regime across the globe. Whatever else we say about the terrorists, we cannot accuse them of setting their sights too low.

In a recent press conference Blair stated:

That is why I don’t even agree actually … that in the end they just want us out of Arab countries, they don’t, it is far more fundamental than that, they want a war between Islam and other religions, that is what they want, that is why they keep referring to this as the crusader Zionist alliance and all this sort of rubbish. That is what they want, they want a situation in which we end up being divided.

This statement however, is simply Blair's opinion, and flies in the face of past statements made by terrorists to the effect that their attacks are revenge for decades-old Western meddling in Arab nations, particularly the more recent invasion and appropriation of the countries of Afghanistan and Iraq.

The problem for Bush and Blair now is that, since they have been exposed as having lied about their reasons for the invasion of Iraq, and that the real reasons had much more to do with occupying a foreign country and pillaging it's oil wealth than fighting terrorism, they can reasonably be accused of actually promoting terrorism by inspiring ordinary Iraqis and Afghanis to fight back using the age old guerilla warfare tactics, aka "terrorism", that have been used by dozens of groups that faced the overwhelming superior military power of a nation state aggressor. It is for this reason that the Bush and Blair governments are now talking about a "global struggle against violent extremism" rather than a "war on terror". It is a subtle maneuver which vectors attention away from the lies of the war on terror and onto the idea that the "civilised" world is under threat from an extremist form of Islam that is as old as the religion itself.

For the people of the world however, this is an ominous turn of events which serves nicely as justification for the Bush and Blair government's continued repression of basic civil rights and the fomenting of a potentially violent division along ethnic and religious lines in their respective countries.

But what then is the answer to the central question of who is really winning the "war on terror" or the "global struggle against violent extremism"? How do we explain that, despite their best efforts, the actions of the Bush and Blair governments appear to directly playing into the hands of the "terrorists" and fulfilling their alleged goals?

For the answer, we need look no further than the increasing volume of evidence to suggest that both the 9/11 attacks and the recent London bombings were, at the very least, carried out with the consent of the Bush and Blair governments themselves. Indeed, that the Islamic terrorists are actually agents of the very governments that claim to be fighting the war on Islamic terrorism.

From this we can draw the conclusion that, when Blair says that is "not about Western government presence in Arab countries", that it is "far more fundamental than that, that "they" want a war between Islam and other religions, that "they" want a situation in which we end up being divided," he is actually revealing his own agenda and that of his war on terror allies.

As if to confirm his duplicitous strategy in the same recent Press conference Blair clarified the situation:

Israel shouldn't’t exist, yes American foreign policy is evil, yes what happened in Iraq or Afghanistan was designed to suppress Islam, [if people accept those as ideas it is far less of a step into the extremism of terrorism.]

As has so often been the case throughout the history of modern civilisation, - the truth is usually to be found approximately 180 degrees from the official government version of events.

Just in case there remains any doubt as to the true goals of Bush and Blair's war on terror, consider the net results:

• Worldwide terrorism has increased dramatically since the war on terror started; in societies where there was little or no evidence of social and ethnic strife, wedges are being driven between Christians and Muslims, Whites or Westerners and "people of Middle Eastern origin" or "Asians" in European and American society;
• an innocent Brazilian electrician was recently gunned down in cold blood for no obvious reason by London anti-terrorist police;
• hundreds of innocent men are currently confined, and routinely tortured in Guantanamo Bay with no recourse to legal representation and in flagrant violation of the Geneva Convention on human rights;
• 100,000 (and counting) innocent Iraqi men, women and children have been slaughtered by US forces; women's rights in "free" Afghanistan are as neglected, if not more so, as under the Taliban;
• opium (heroin) production in that country has skyrocketed;
• invasive 'biometric' ID cards will soon be introduced for the British population;
• British police will be granted sweeping new powers to counter the "terrorist threat", including the right to detain a suspect for up to three months without charge instead of the current 14 days. They will also be granted powers to attack and close down web sites and to "suppress inappropriate internet usage", with the simple act of exposing government lies potentially falling into the "inappropriate internet usage" category;

and all of it in the name of fighting a war on terror - and yet the terror attacks continue, ensuring that there is no end in sight to these drastic and, dare we say, "fascist" measures. Plainly, either the "Islamic terrorists" and the Bush and Blair governments share the same goals, or they are in fact one and the same.

The age-old maxim, "by their fruits ye shall know them" is certainly as true today as it ever was, and it may be the only clear-cut method at our disposal to understand the truth behind the dark future that is beckoning us all.

Over the past fortnight Israeli intelligence agents have noticed something distinctly odd happening on the internet. One by one, Al-Qaeda's affiliated websites have vanished until only a handful remain, write Uzi Mahnaimi and Alex Pell.

Someone has cut the line of communication between the spiritual leaders of international terrorism and their supporters. Since 9/11 the websites have been the main links to disseminate propaganda and information.

The Israelis detect the hand of British intelligence, determined to torpedo the websites after the London attacks of July 7.

The web has become the new battleground of terrorism, permitting a freedom of communication denied to such organisations as the IRA a couple of decades ago.

One global jihad site terminated recently was an inflammatory Pakistani site, www.mojihedun.com, in which a section entitled How to Strike a European City gave full technical instructions. Tens of similar sites, some offering detailed information on how to build and use biological weapons, have also been shut down. However, Islamic sites believed to be "moderate", remain.

One belongs to the London-based Syrian cleric Abu Basir al-Tartusi, whose www.abubaseer.bizland.com remained operative after he condemned the London bombings.

However, the scales remain weighted in favour of global jihad, the first virtual terror organisation. For all the vaunted spying advances such as tracking mobile phones and isolating key phrases in telephone conversations, experts believe current technologies actually play into the hands of those who would harm us.

"Modern technology puts most of the advantages in the hands of the terrorists. That is the bottom line," says Professor Michael Clarke, of King's College London, who is director of the International Policy Institute.

Government-sponsored monitoring systems, such as Echelon, can track vast amounts of data but have so far proved of minimal benefit in preventing, or even warning, of attacks. And such systems are vulnerable to manipulation: low-ranking volunteers in terrorist organisations can create background chatter that ties up resources and maintains a threshold of anxiety. There are many tricks of the trade that give terrorists secure digital communication and leave no trace on the host computer.

Ironically, the most readily available sources of accurate online information on bomb-making are the websites of the radical American militia. "I have not seen any Al-Qaeda manuals that look like genuine terrorist training," claims Clarke.

However, the sobering message of many security experts is that the terrorists are unlikely ever to lose a war waged with technology.

THOUSANDS of police marksmen will be on London's streets and rooftops again today after warnings that another team of suicide bombers is plotting a third attack on the capital.

The new group is believed to be made up of British Muslims who were understood to be close to staging an attack on the Underground network last week. According to security sources the men are thought to be of Pakistani origin but born and brought up in this country. They have links with the Leeds-based terrorist cell that staged the July 7 attacks, in which 52 innocent people died.

Even with the transport system so heavily guarded, police and intelligence sources believe that the bombers are intent on once more attacking London's bus and Underground network. Another multiple suicide strike is also intended to demonstrate how the network can call on more recruits. The men are said to have access to explosives.

US security sources said yesterday that this third group of would-be bombers met at Finsbury Park mosque in North London, where some of the July 7 terrorists are also known to have stayed. There are reports that this team originally planned to strike last Thursday, which is why more than 6,000 police, half of them armed, were present at Underground stations. Scotland Yard said at the time that this exercise, the biggest since the Second World War, was to test their resources and reassure a nervous public.

As commuters return to work today police chiefs say that the arrest of five suspected bombers in house raids in Birmingham, London and Rome has not ended this threat. Deputy Assistant Commissioner Peter Clarke, head of the anti-terrorist branch, said: "The threat remains and is very real."

There is concern among ministers and police at how long officers can continue such an intensive operation to "lock down" London while a threat remains. Although reinforcements have been brought in and leave has been cancelled, resources are stretched to keep up the guard on the capital, which is costing £500,000 a day. Sir Ian Blair, the Metropolitan Police Commissioner, admitted that his officers were "very, very tired".

Comment: Well, gee, it looks like there are only two solutions:

1. Deport anyone who has dark skin or anyone that questions the government's actions in the war on terror to purge the country of "terrorists"
2. Institute a police state

While the priority is to thwart another strike, police are still investigating links between the attacks on July 7 and the botched operation a fortnight later. They are also hunting for what officers describe as "key logistical players" behind the attacks.

Seven more people - six men and a woman - were arrested in raids in Brighton yesterday, bringing the number of people under arrest in Britain to 18. A Scotland Yard spokesman said: "This is a further indication of the fact this is a fast-moving investigation and we continue to progress. We are searching for other people in connection with this ongoing inquiry.

"There were quite a few other people involved in the incidents of the 7th and the 21st. It's extremely likely there will be other people involved in harbouring, financing and making the devices."

The major link between the two sets of bombers is that the alleged leaders of both groups attended Finsbury Park mosque. Experts are studying similarities between the bombs used on July 7 and 21. [...]

Ethiopian-born Hussain, 27, who has a British passport, claimed that the plot was orchestrated by another of those arrested on Friday, Muktar Said-Ibrahim. Hussain said that he had been recruited in an underground gym in Notting Hill.

Immigration officials are trying to find out how he managed to slip out of Waterloo station on a Eurostar train to Paris and make way to Italy where he met his brother, who lives in Rome. Officials want to know why Hussain, who says his real name is Hamdi Isaac and who has Italian citizenship, came to Britain posing as a Somali asylum-seeker in 1996. [...]

Italian police say they are using Hussain's phone records to unpick the international network that has been helping him. Alfredo Mantovano, an Interior Ministry official, said that the network "confirms the presence in our country of autonomous Islamic cells . . . which could represent a concrete threat." Italy is worried that it is the next target for Islamic terrorists.

Tony Blair will leave London for a family holiday this week despite concern that he will be out of the country at the same time as Charles Clarke, the Home Secretary, and Jack Straw, the Foreign Secretary.

Mr Blair and senior ministers have decided to continue with planned summer breaks even though the country is in the midst of its biggest security alert after the bombings. [...]

KABUL, Afghanistan - Uzbekistan's decision to end an agreement that let U.S. military aircraft use a base - an important hub for American operations in Afghanistan - will not hinder the battle against militants here, a U.S. military spokesman said Monday.

The Karshi-Khanabad air base, commonly referred to as K2, has been a critical staging point for U.S. military operations in Afghanistan since the earliest days of the war, which began in October 2001.

More recently, the base has been used to move supplies, including humanitarian aid, into northern Afghanistan. It also is a refueling point for transport planes.

"Our presence there is an integral part of Operation Enduring Freedom here in Afghanistan and to support the Afghanistan people," U.S. military spokesman Col. James Yonts said. However, he said, "our ability to execute combat operations ... will not be hindered by this decision." He said operations would be reorganized to use air bases at Bagram, just north of the Afghan capital, Kabul; at Kandahar, in southern Afghanistan; and at Manas, in neighboring Kyrgyzstan.

His comments echoed those of Defense Secretary Donald H. Rumsfeld, who said last week that he did not believe American operations in Afghanistan would be hurt by the decision that prevents U.S. aircraft from using the Uzbek base.

The Uzbek government offered no reason for evicting U.S. forces.

Moscow - The withdrawal of a base from Uzbekistan by a six-month deadline set by Tashkent is not a big problem militarily.

But politically, the loss of an ally is quite serious for the United States. On the one hand, the West will exert much more pressure on the Islam Karimov regime. But on the other, China and Russia are not likely to abandon their partner in the Shanghai Cooperation Organization.

U.S. Undersecretary of State for Political Affairs Nikolai Burns has conspicuously cancelled his visit to Tashkent. He told The New York Times that it was considered inexpedient to pay a visit to Tashkent after they got notification about the withdrawal of the U.S. military base. He added that Uzbekistan was isolated because its government had failed to carry out reforms.

But this is very far from the truth. Tashkent has not become an international outcast just because the West is displeased with lack of democracy there, or because it makes every effort to prevent the extradition of Uzbek refugees from Kyrgyzstan. To the contrary, both China and Russia approve to a different extent Tashkent's tough action against Muslim radicals.

Moreover, the West's desire to encourage Central Asian nations to make a fast leap to democracy finds no support in Moscow. Director of the Russian Institute for Strategic Studies Yevgeny Kozhokin: " Imperfect schemes of democratization may produce a social and political explosion, as a result of which secular regimes will be replaced with Muslim, or even Muslim fundamentalist forces. This threat exists in Central Asia, especially in Uzbekistan and Tajikistan." [...]

The 46-year stand-off between Cuba and America has taken a turn for the worse after Washington appointed a "transition co-ordinator" to hasten the downfall of President Fidel Castro.

Condoleezza Rice, the US secretary of state, chose Caleb McCarry to "accelerate the demise of Castro's tyranny" on the Caribbean island that the Communist dictator has run since a coup in 1959.

The appointment is part of President George W Bush's plan to tighten the 40-year programme of sanctions against Cuba.

In addition, the American government has been beaming in extra aircraft-transmitted radio and television broadcasts to Cuba to avoid Castro's jamming of Miami-based ones.

Over the weekend, both Cuba's government and the dissidents it has repressed criticised the appointment, which was made last week. President Castro called the move "especially aggressive".

"Surely he will receive a juicy salary in his new job, but Caleb McCarry - I assure you - will retire without setting foot in Cuba," Felipe Perez Roque, the Cuban foreign minister, said.

Cuban dissidents have been subject to a government crackdown in recent weeks, with dozens of arrests. President Castro called them "mercenaries", "traitors", "bums" and "delinquents" in a speech last week. But they do not approve of the latest American move.

"Any transition in Cuba is for Cubans to define, lead, organise and co-ordinate," said Oswaldo Paya, leader of the Christian Liberation Movement and promoter of a petition seeking democracy in Cuba. [...]

The U.S. dollar closed at 0.8208 euros on Friday, down one percent from the previous week's close of 0.8293. That put a euro at 1.2184 dollars, compared to 1.2058 on the previous Friday. Gold closed at 435.80 dollars an ounce, up sharply (2.4%) from $425.40 a week earlier. In euro terms, an ounce of gold closed at 357.68 euros up 1.4% from last week's close of 352.79. Oil closed at $60.83 a barrel, up 3.7% from 58.65 dollars a barrel the previous week. In terms of euros, a barrel of oil cost 49.93 euros, up 2.6% compared to 48.64 a week earlier. The gold/oil ratio closed at 7.16 compared to 7.25 a week earlier for a drop in gold terms of 1.3%. In the U.S. stock market the Dow Jones Industrial Average closed at 10,640.91, down a tenth of a percent from last week's close of 10,651.18. The NASDAQ closed at 2184.83 on Friday, up 0.2% from 2,179.74 the week before. The yield on the ten-year U.S. Treasury bond closed at 4.29 percent, up seven basis points from 4.22 the previous Friday.

The U.S. economic situation is being spun positively by the Mainstream Media in the United States as can be seen by this wire service article:

Economy kept growing solidly in Q2

By Glenn Somerville
Sat July 30,12:03 AM ET

The U.S. economy grew at a solid 3.4 percent annual rate in the second quarter, setting the stage for steady second-half expansion as inventories fell and Midwest manufacturing picked up, government and industry reports on Friday showed.

The quarterly report on gross domestic product, or GDP, showed core inflation well contained but analysts said there was enough price pressure after nine quarters of growth exceeding 3 percent to keep U.S. interest rates on the rise.

A price index based personal consumption expenditures rose at a 3.3 percent rate that topped the first quarter's 2.3 percent. However, when food and energy were stripped out -- a formulation that Federal Reserve Chairman Alan Greenspan favors -- the rate of price rises slowed to 1.8 percent in the second quarter from 2.4 percent.

But with oil topping $60 a barrel on Friday, investors bet the Fed's policy of pushing interest rates steadily higher -- as it has done nine times since June last year -- will remain in place for some time.

Stock prices dropped, with the Dow Jones industrial average down 64.64 points, or 0.6 percent, to end at 10,640.91. The tech-laden Nasdaq Composite Index lost 13.61 points, or 0.62 percent, to end at 2,184.83.

Similarly, bond prices sagged on the expectation that interest rates will keep rising. Prices for 30-year U.S. Treasury bonds plunged 1-9/32s points and their yield rose to 4.48 percent from 4.40 percent. Ten-year Treasury notes dropped 21/32 of a point while their yield gained to 4.28 percent from 4.20 percent on Thursday.

Other reports showed U.S. Midwest manufacturing gathered momentum in July while consumer sentiment brightened slightly. Wages and salaries -- regarded as a potential strong influence on inflation -- increased at a modest pace.

The strong second-quarter GDP performance followed a 3.8 percent growth rate in the first quarter and reflected well-balanced strength in consumer spending, business investment and exports.

"Strong, broad-based growth is just the ticket the Fed needs to support its interest-rate hike program," economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania, wrote. "And the members can point to this report and say the economy is in good shape and does not need much stimulus, if any."

GDP measures the value of all goods and services produced within U.S. borders.

Separately, the Labor Department reported that employment costs continued to gain moderately in the second quarter, by 0.7 percent, matching the first quarter's pace.

The Employment Cost Index is a broad measure of what employers pay in wages and benefits. The second-quarter data showed pay increased 0.6 percent in the April-June period, matching the gain recorded in the January-March quarter.

Most measures of GDP activity remained healthy in the second quarter, with consumer spending increasing at a 3.3 percent rate after growing at a 3.5 percent rate in the first quarter. Business investment advanced at a 9 percent rate after growing 5.7 percent in the first three months of the year.

Companies drew down inventories at a $6.4 billion annual rate during the second quarter -- the first time they reduced stocks since the second quarter of 2003. Carmakers restrained production while dealers used sales incentives to clear their lots of unsold goods, clearing the way for stronger production in coming months.

Another gauge of economic activity in the industrial Midwest -- the Chicago Purchasing Management Index -- posted a sharp jump in July to 63.5 from 53.6 in June. Every one of its separate measures, from new orders to current production levels, strengthened in July.

A University of Michigan consumer confidence index rose modestly to a 2005 high of 96.5, implying consumers are likely to keep adding their purchasing punch to the economy.

Analysts said the employment costs data was encouraging, since it did not point to hefty wage demands that can foster inflation. Over a 12-month period ending June 30, wages and salaries have grown just 2.4 percent.

Again we see a bifurcation between the conclusions reached looking at snapshot-data for the U.S. economy and those reached by looking at the big picture and at historical trends. People interested in the latter would have spent the week thinking about the unpegging of the yuan, the passage of CAFTA and the new U.S. energy bill as well as the continuing disaster of the war in Southwest Asia.

The implications of the Chinese move are clear: rising U.S. interest rates, which could be disastrous when combined with an out-of-control housing bubble. Here's Al Martin:

China acted to revalue its currency, the yuan, on July 20 -- by removing the dollar peg and substituting it for a basket of foreign currencies on a trade-weighted basis. Essentially, the Bank of China duplicated its own DL dollar contract that trades on the NYBOT. This means that China will substitute the U.S. dollar for other currencies belonging to countries they do business with on a weighted basis – that is, based on the amount of trade they conduct with these countries. The U.S. dollar will still be included in this peg, but will only be 1/5th of the weight ascribed to it before. What does this mean for the US economy?

The effect of this will be that the Bank of China will now need to maintain in its reserves far fewer U.S. dollars -- perhaps only 1/5th as many U.S. dollars as it did before. It also means that the Bank of China will be purchasing fewer U.S. Treasury securities in the future.

It should be noted that the Bank of China has been the largest purchaser of U.S. Treasury securities in the last 5 years and is now, indeed, the largest holder of U.S. Treasury securities. It was the Bank of China's buying of U.S. Treasury securities which led, in part, to the conundrum which Fed Chairman Alan Greenspan talks about -- as the Fed has pushed short-term interest rates, through the Fed funds, higher, long-term rates actually declined. That's because of the demand for U.S. Treasury instruments in dollars coming from China.

This demand is now removed. Therefore, what will happen is that longer-term U.S. Treasury bond rates must rise, as they did on Thursday and Friday after China announced this new action. Why? Treasury rates will have to rise in order to attract foreign capital from other sources–now that the Bank of China is not a ready, and virtually compelled, buyer – in order to re-circulate U.S. dollars that China accrues through its enormous trade surpluses with the United States.

Furthermore, Chinese absorption of U.S. dollars, through these trade surpluses, has effectively been a supporting factor of the U.S. dollar in the past. This will no longer happen.

Therefore, what is also likely to happen is that the U.S. dollar will decline in value without this support, no matter the counter-trend rally that the dollar has had over the last 3 months; thus making the dollar, for investors, an attractive short-selling opportunity at current levels.

This will be inflationary for the U.S. economy, in that it will force longer-term rates up, and it will exert downward pressure on the U.S. dollar, as well as increasing the cost of Chinese goods being imported into the United States. This acts, more so than the monetary action of any other country, as a triple inflationary whammy on the United States.

This action by China then will A) force up long-term U.S. interest rates; B) force down the value of the U.S. dollar and C) force up the cost of consumer goods and services imported from China, which are substantial. (WalMart, the nation's largest retailer imports 83% of everything it sells from China.)

See also this by Peter Schiff:

China's decision to change the nature of its currency peg means that it will no longer be in the dollar buying business, or by extension, the U.S. Treasury buying business. That means that America will be losing its biggest benefactor. China will no longer act as the principal enabler of America's irresponsible extravagance, ending its subsidies to American consumers and borrowers.

Changing the nature of the yuan peg is a first step in the ultimate direction of either allowing the Yuan to float freely or possibly pegging it to gold. In the meantime the Yuan will remain undervalued, as it will likely be pegged to a basket of other currencies using current exchange rates that clearly undervalue the Yuan. Chinese imbalances will continue to grow, along with all the domestic inflationary implications that result.

However, the pressure on China to prop up the dollar will be greatly diminished. To maintain the peg against its new basket, Chinese monetary authorities will most likely now be buyers of those other currencies likely to be included in its basket, such as the Euro or Yen. Since its reserves are already disproportionately held in dollars, it will likely rebalance those reserves to more accurately mirror the basket to which the Yuan will be pegged. Such a rebalancing will only exacerbate the dollar's decline. However, a declining dollar will not automatically require offsetting dollar buying by the Chinese as it has during the period of the yuan-dollar peg. As long as dollar weakness is offset by strength in other currencies in its basket, the peg can be maintained.

The implications for America are enormous. Far from being the panacea that American politicians proclaim, China's decision to alter its peg could be the pin that finally pricks America's bubble economy.

Does that mean that U.S. politicians have been actively pursuing a policy (encouraging China to remove the dollar peg) that would pop the U.S. economic bubble? It would seem so.

For America, the direct result of this action will be the following:

1. Higher consumer prices.
2. Higher interest rates.
3. Reduced profits for American companies, particularly those dependent on domestic consumption and consumer debt.
4. Lower stock prices, as earnings decline and multiples contract.
5. The busting of the housing bubble, as tighter credit standards and higher interest rates squeeze current home prices.
6. Rising unemployment, as higher interest rates and vanishing home equity slow consumer spending and reduce jobs dependant on that spending.
7. A severe recession as a result of all of the above.
8. Rising federal budget deficits, as recession reduces tax revenue, while higher interest rates and escalating outlays increase expenditures.

Schiff ends the article with this somewhat bizarre paragraph:

In conclusion, July 21, 2005 will be another date likely to live in infamy. This time the aggressor is China not Japan, and the bombs are purely economic. Though there will be no immediate loss of life, and no American retaliation, the financial damages will be devastating. History will remember this date as the beginning of Chinese independence, and the beginning of the end of America's ability to depend on China.

How can he use the war metaphor when all prominent U.S. politicians have been urging China to adopt this policy? That would be like the United States urging Japan to attack Pearl Harbor in 1941 (hmm…). Or like the United States urging Japan and Germany to send troops overseas in wars (wait, hasn't the United States been urging them to do that?). Should he then invoke the "treason" metaphor? Maybe war is not the right analogy for what is happening. Or maybe it is, but not for the reason most people would think. War may be a good metaphor if we note the staged aspects of many wars and the fact that many corporations flourish during wartime and that many powerful fortunes are established on war-profiteering.

Doug Wakefield, on the other hand, uses a natural disaster metaphor: the Tsunami.

In December 2004 we watched the devastating impact of a Tsunami. For those living away from the area, what we saw, horrifying as it was, was impossible to grasp. How could so much destruction occur? How could over 240,000 people die from a natural disaster that started from shifting plates on the earth's floor? How can water top speeds of 500 mph? We heard stories of individuals looking at the ocean as it pulled back hundreds of yards from the beach only to then be totally surprised by the high wall of water that returned. It left the observer no time to prepare.

Today, as we look at our financial markets, most of the talk is of comfortable retirements, funded pension plans, and safe Social Security and Medicare Benefits. And yet, as the event of last December has shown, things are not always what they seem and they can change quickly. Now is the time for every investor to ask, "What evidence is there that a major decline could occur in the financial markets and what actions can I take to address any systemic risks?"

As we look out across the exchanges, everything appears calm. The bond market continues the bull that started in the early 1980's. The Dow Jones Industrial, after dipping below 7200 in 2002, looks to be safely resting on a 10,000 floor. Nationally, real estate has appreciated moderately for years, and substantially in the last few.

However, as we look below the happy talk about "how the Dow has held strong above the 10,000 level since late 2003" or "how resilient the American markets are", we begin to notice that long term investing records are still tarnished by the "downturn" of 2000 - 2002. When we consider that the S&P500 is still down 10.64% over the 6-year period ending June 30, 2005, or that the Dow is down 3.17% during the same timeframe, then the first signs of concern start to creep into our thinking.

…In June of 1999, total mortgages in the USA stood at $6,021 billion. At the end of March 2005, the number is $10,774. This is a 79% increase. Keep in mind our incomes have only risen 34% while our credit card bill has grown by 58%. So, what have we, as a nation, done? The answer is painful, if not obvious. We have borrowed the money with our homes as collateral for the loan. As our credit has gotten increasingly splotchy and our cash flow needs have increased, institutions have lowered their lending standards and moved toward riskier finance products. In a May 5th 2005 report issued by Fannie Mae, we see that the share of interest only Adjustable Rate Mortgages (ARMs) "A" paper selling in the Mortgage Backed Securities (MBS) market has grown from 3% in 2001 to 50.9% in 2004, while ARMs for the same class and timeframe have grown from 18% to 72.1%. The Jumbo MBS market has grown from 5.4% to 52.5% during the same period. In addition to this we learn that the sub-prime MBS finished 2004 with 66% of their loans as 2 year ARMs. In other words 66% of these notes face a likely upward adjustment in payments as early as 2006. 5 These are astonishing numbers.

Ok, before we go any further, let's look at this huge and growing risk that will affect our financial markets. The question is not if, but when. In a society where everything is focused on how we can make payments, versus what can we afford to purchase, the lending environment must become more lax when the consumer starts tapping out. If we cannot afford the house payment with a fixed mortgage, we can buy the house with a lower payment with the understanding that the payments will adjust upward in the future. If we still cannot afford the payment, the lender cuts the loan terms to interest only for a period of time, so that even less may be required of our consumer today. Tomorrow, well, why worry about that today? Besides, house prices have been increasing and players in the real estate game, like condoflip.com, give us the impression that our property will only be valued higher in 2 - 4 years when we look to either refinance or sell. So again, we ask, what's the problem?

On the surface, nothing. But let's look at this a little closer. If this only affected the consumer doing this, then this would only be an issue for the lending institution reckless enough to allow it. However, since each of these mortgages are packaged in groups and sold in the bond markets as mortgage backed securities to investors, it becomes a concern. When those investors are mutual funds, large endowments, or pension funds, the problem now becomes an issue for thousands of investors who never intended to flip condos. Pretty pie graphs and the last quarterly statement are nice, but they do not go far enough in disclosing the true risk each investor is taking.

While it would be easy to blame one politician, investment institution, or Federal Reserve official and demand changes, the size of the markets make it extremely improbable that one individual could "fix" these problems. History reveals that the pressures we now face have been building for decades.

According to Marshall Auerback, there is increasing evidence that the housing bubble is popping as could be predicted to happen with rising long-term interest rates.

Americans have been using their homes as ATM machines, refinancing their mortgages in order to fund their spending. But even in the sluggish economy of 2000-2002, housing prices have soared.

Because of these rising prices, American consumers have long been seduced into believing that despite all the ups and downs in stocks and salaries, their overall situation was okay. Homes are the biggest asset most families own, and their value has been rising nicely. For that reason, Americans have felt more comfortable buying big-ticket items, from SUVs to new computers to Disney World vacations. Much of that spending has gone right onto the VISA card. But that debt has been kept somewhat manageable by another factor in housing prices: mortgage refinancing, where China's importance cannot be overstated. Coming at a time of increasing vulnerabilities in the US housing market, a higher risk premium on forward US interest rates needs to rise to cover this uncertainty, which is clearly not going to help the mortgage market. (As an example, the Washington Post recently reported that Philadelphia, its suburbs and indeed much of Pennsylvania had experienced a foreclosure epidemic as low-income homeowners took on mortgage debt they could not afford. In 2000, the Philadelphia sheriff auctioned 300 to 400 foreclosed properties a month; now he handles more than 1,000 a month. Allegheny County, which includes Pittsburgh, had record auctions of foreclosed homes, and officials speak of a "Depression-era" problem). Could this be repeated across the country?

The passage last week of CAFTA, the Central American Free Trade Agreement, also did not go unnoticed as an ominous portent:

How the West Was Lost
CAFTA and the Disassembling of America

By NIRANJAN RAMAKRISHNAN

I am working on my computer when I discover that the House has passed CAFTA. I turn on the TV for the eleven-o-clock news. The local channels are full of reports...about an uptown homicide. On cable, both Fox and MSNBC each have a specialist standing near a pond in Aruba talking with great earnestness (I have the sound turned off). On CNN, Paula Zahn is interviewing an expert on the size of the debris from the space shuttle.

The House has just passed CAFTA, and the discussion on television is all about Natalee Holloway and flakes of foam.

CAFTA comes twelve years after NAFTA, about which every dire prediction -- job losses, erosion of the manufacturing base, mounting trade imbalances -- has been borne out in spades. Against this background the Senate voted 54-45 for the bill a few days back, and the House has followed with 217-215.

Watching CSPAN the following day when the Senate re-voted on the revised version of the CAFTA bill after just 20 minutes of debate, I saw a couple of senators extoll the bill, saying how it would remove tariffs on American exports to Central America. I was reminded of an old remark by my cousin, "If we had ham, we could have ham and eggs ---- if we had eggs!" When all the manufacturing has fled, Senator, I felt like shouting, what do you plan to export? Like the morning-after pill, Democrats complained the next day about the House vote (took place at midnight, was kept open for forty-five minutes until a majority was....assembled), complaining how the rules were bent after the original tally actually rejected CAFTA by five votes. Why did they then not stage a sit-in or register a vociferous protest? One Democratic senator referred to this ploy, but when the vote came, I counted many Democrats -- Dianne Feinstein, both the Washington Senators, and the Old Reliable, Joe Lieberman himself, all voting for CAFTA.

Any other country would have made a huge stink about a re-enactment of such a fire-sale of its wealth. But not America of the New American Century. If Socrates died cheerfully sipping hemlock from a chalice, we will likely reach our end propped up on a couch, watching the latest 'breaking news' of a high-speed car chase or a disappeared bride, maybe even to the background music of 'Suicide is Painless'.

Unlike many others, I have somehow admired President Bush for his knack, like Mr. Dick (he of David Copperfield, not he of the undisclosed location), of revealing profound truths even when appearing to speak in toungues. Remember his interview last year where he said he didn't think something like the 'War on Terror' could be won? Or during the 2000 campaign when he thundered, "They think Social Security is some kind of a Federal Program"?

But his purest vision of clarity came some weeks back, when he introduced 'disassembling' back into the popular lexicon. Everyone laughed at his not knowing that the word he wanted was 'dissembling'.

But they were misunderestimating him once more. He was right. Disassembling is mot juste. My only regret is that he didn't save the word till January -- he could have uttered just that one word and delivered the shortest and most accurate State of the Union speech in history.

Disassembling covers everything that's happening around us. The government's sole purpose seems to be to dismantle every protection the country has, leaving the borders unguarded, splurging on an empire project that sputters even before getting under way, and financing foreign reveries and domestic revelries with borrowed money hiding the bottom of a Hubbardian treasure chest. The loyal opposition -- loyal not to the nation's interests but to focus groups -- silent or spouting cant while freedoms are freely curtailed, jobs vanish abroad, and economic security disappears. The press is rotted (I have reported only the facts in the opening paragraph), and a once proud people, now riven by anxiety at one level and addled by a half-century of don't-worry-be-happy television at another, have no idea what to do after two generations of systematic alienation from politics. The notion of a nationalist bourgeoisie seems to have vanished too, and big industry is no longer American in any meaningful sense, being indifferent to American plight in more ways than a Bermudan or Caymanian registered address alone might suggest.

And, finally, the U.S. Energy Bill passed the House of Representatives last week. I don't know about you but I have been stressed out lately, wondering how we, as a society, were going to funnel many more billions of dollars to (already highly profitable) oil companies. Well, I needn't have worried, the United States Congress was hard at work tackling this problem the whole time.

US energy bill funnels billions to oil, utility corporations

By Patrick Martin
29 July 2005

Congressional Republican and Democratic negotiators reached agreement Monday night on major elements of a new energy bill promoted by the Bush administration to reward its corporate backers in the oil, coal and utility industries.

The resulting legislation is set to provide as much as $14.5 billion in tax breaks over the next 10 years to corporations that are already immensely profitable. At the same time, the bill will relax environmental regulations, thereby permitting greater industrial pollution with all of the harmful consequences for public health.

… It is impossible to overstate the importance of sheer greed in determining both the policies of the Bush administration and the actions of Congress. A case in point is oil drilling in the ANWR: if not a solution to the impending energy crisis, it is nonetheless a source of enormous potential profits. At the current price of nearly $60 a barrel, it would provide $600 billion in revenue for Big Oil.

All the environmental and regulatory decisions of both the White House and Congress have corporate dollar signs plastered all over them. A recent emergency military spending bill, for instance, had four paragraphs that allowed energy exploration in the Gulf Islands National Seashore, a national park that comprises ecologically sensitive barrier islands on the Gulf coast of Mississippi. The first step will be seismic testing, which involves detonating explosions in an area that is home to sea turtles, dolphins and a wide range of fish and birds, and using the resulting sound waves to locate pockets of oil and gas.

During 2004, the federal Bureau of Land Management issued 6,052 permits to drill oil and gas wells on federal land, triple the number issues 10 years before. Some 40 million acres of public land in the continental US have been leased out to oil and gas development.

In the meantime, oil industry profits have reached stratospheric levels. In May, Exxon Mobil Corp. announced first-quarter revenues of $82 billion and first-quarter profits of $7.86 billion, up 44 percent over the same period last year. This works out to an annual profit of more than $30 billion for the biggest US oil company.

PARIS - Wim Duisenberg, the former European Central Bank chief who helped create the euro currency, was found dead Sunday in his swimming pool in southeastern France, officials said. He was 70.

An autopsy showed Duisenberg had drowned after an unspecified cardiac problem, a regional prosecutor said. He was found unconscious in the swimming pool at his home in the town of Faucon and could not be resuscitated, police said.

Duisenberg "died a natural death, due to drowning, after a cardiac problem," said Jean-Francois Sanpieri, a state prosecutor in the nearby town of Carpentras. He did not give further details about the autopsy.

Duisenberg was the first head of the ECB, serving from 1998 to 2003. Having shepherded the euro through its introduction in 1999, he became known as the father of the 12-nation European common currency.

"With his calm manner, he established people's basic trust in the euro," German Finance Minister Hans Eichel told The Associated Press in Berlin. "We will remember his personality and what he achieved."

Tall and stoop-shouldered, with a large mane of white hair, Duisenberg sometimes appeared more of a professor than a heavyweight policy-maker. A chain-smoking golf lover, he kept a decidedly low profile as the ECB chief but was a major figurehead bearing overall responsibility for price stability in the euro zone of more than 300 million people.

During his tenure at the bank, Duisenberg was known for his cautious monetary policy and was eager to defend the euro through its early years.

He sometimes frustrated financial markets and politicians by sticking to the bank's inflation-fighting stance, keeping rates higher than some investors and officials would have liked.

"I hear, but I don't listen" to such pleas, was one of his typically blunt responses. Duisenberg repeatedly said it was up to European governments to pursue structural reforms - such as loosening rigid rules on hiring and firing - if they wanted more growth.

Higher rates are the bank's main tool to fight inflation, but they can crimp economic growth. The bank's tight policy helped keep the euro a strong, stable currency even as it is criticized as a drag on growth.

One of Duisenberg's biggest achievements was the smooth introduction of euro notes and coins in early 2002. Twelve national currencies were removed from circulation by banks and shops and replaced with the new money in a huge logistical effort that defied predictions of long lines and consumer confusion.

Duisenberg, who unabashedly sought to model the ECB on the U.S. Federal Reserve Bank, was at times referred to as "Europe's Greenspan" - a reference to Fed chief Alan Greenspan.

His selection as ECB chief was championed by Germany - Europe's biggest economy - but faced controversy when France proposed its central banker, Jean-Claude Trichet, as a rival candidate. Trichet took over in 2003.

Trichet, in a statement, called Duisenberg's death a "terrible loss," and credited him with a decisive role in setting up EU monetary institutions, overseeing the euro launch and building confidence in the currency.

Willem Frederik Duisenberg was born July 9, 1935, in the Dutch city of Heerenven. He became a member of the Dutch Labor party, and received a doctorate in economics from Groningen University, writing his dissertation on the economic consequences of disarmament.

Duisenberg also served as finance minister and central bank chief in the Netherlands, and once ran the European Monetary Institute - an ECB predecessor - in Frankfurt, Germany.

He is survived by his wife, Gretta Duisenberg-Bedier de Prairie, and two adult sons.