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The Quantum Future Group 2006 Agenda is now available. Our critics say we have an agenda. Now you can have our agenda, too! This leatherbound pocket agenda includes a handy notepad as well as a double-page weekly view of all of the important events you need to remember. Moreover, it's in French, a subtle way to show your disapproval of the Bush Reich. Planning a trip to Europe next summer to scout out a safe haven for the future? An easy-to-use chart includes distances between major European cities. The Quantum Future Group 2006 Agenda will be available for a limited time for any donation of 20.06 euros (US$24.00 approximately). Get in on the agenda! Click here now to support the Quantum Future Group! Merry Christmas and Happy New Year! The Quantum Future Group Signs Economic Commentary Donald Hunt January 2, 2006 Gold closed at 519.70 dollars an ounce on Friday, up 2.7% from $505.90 the Friday before. The dollar closed at 0.8440 euros on Friday, up 0.2% from 0.8425 at the end of the previous week. The euro closed at 1.1849 dollars, down from 1.1869 the week before. Gold in euros would be 438.60 an ounce at Friday's close, up 2.9% for the week. Oil closed at 61.04 dollars a barrel, up 4.5% from $58.43 the week before. Oil in euros would be 51.43 euros a barrel, up 4.5% from 49.23 euros at the end of the previous week. The gold/oil ratio closed at 8.51, down 1.8% from 8.66 the week before. In U.S. stocks, the Dow Jones Industrial Average closed at 10,717.50 for the week, down 1.5% from 10,883.27 at the previous week's close. The NASDAQ closed at 2,205.32, down 2.0% from 2,249.42 the week before. The yield on the ten-year U.S. Treasury note closed at 4.39%, up one basis point from 4.38 the week before. Since Friday was the last market day of the year, let's look at how the numbers we have been following came out for the year. The price of gold rose 18.9% from $437.10 to $519.70 in 2005 in dollar terms and 36.1% in euros, having begun the year at 322.32 and closing at 438.60 euros an ounce. Oil rose 40.5% from $43.45 dollars a barrel at the beginning of 2005 to $61.04 at year's end. In euros, oil rose 60.2% from 32.09 euros a barrel at the beginning of the year to 51.43 on December 30th. The price of oil outpaced the price of gold for the year, with the gold/oil ratio going from 10.06 at the beginning of the year to 8.51 last week, a fall of 18.2% for the year. The U.S. dollar began the year at 0.7390 euros and closed the year at 0.8440, a gain of 14.2%. The euro fell from 1.3532 to 1.1849 dollars for the year. The U.S. stock market treaded water in 2005, with the Dow ending slightly down for the year and the NASDAQ slightly up. The Dow started the year at 10,783 and closed at 10,717.50 for a drop of 0.6% for the year. The NASDAQ went from 2175 to 2205 for the year, rising 1.4%. In U.S. interest rates, the yield on the ten-year U.S. Treasury note went from 4.22% to 4.39% for the year, a rise of 17 basis points. Here are the charts for the year: In some ways the situation is similar to what we saw at the beginning of 2005: A world economy still functioning, yet in danger of collapse due to serious structural imbalances. The world economy has not yet collapsed, but the imbalances are worse than they were a year ago. The housing bubble in the United States, the sole reason U.S. consumers have felt wealthy enough to spend, is popping. The trade imbalances are worsening, and the prospects for the U.S. empire do not look good. Even the normally optimistic U.S. public now senses that something is seriously wrong. Clear, unmistakable evidence of climate change, media-stoked fears of deadly epidemics, and a loss of confidence in the conduct of the Iraq War, and the belated realization that the United States is ruled by a criminal gang, all these things will undoubtedly weigh on the confidence of the U.S. consumer in 2006. And the U.S. consumer has been, after all, keeping the world economy afloat. If you read the mainstream media's year-end economic wrap-ups, you might think that those of us who warned of economic collapse a year ago have cried wolf and that there is therefore no longer a reason to worry about the economy. Leaving aside the probability of an HEE, a Huge Exogemous Event, to use George Ure's term, all the reasons we had to fear collapse are still here and may even be stronger. Here's Morgan Stanley's chief analyst, Stephen Roach: Global: The Symbiosis Trap Stephen Roach (New York) A year ago, the macro debate was dominated by concerns over mounting global imbalances. Our 2005 outlook piece, modestly entitled "How to Fix the World," probed in great detail the coming rebalancing of a lopsided world economy. The passage of time has not treated this outcome kindly. Global imbalances have continued to mount, but few seem to care these days. I suspect that 2006 will be a year when that ambivalence is shattered. The broad consensus of financial market participants has come to the conclusion that there is a new symbiosis between America's record-setting external deficit and those willing to fund it. China is typically singled out as the most willing participant in the "symbiosis trade" - the arrangement whereby the US buys goods made in China in exchange for China's willingness to buy bonds printed in Washington. On the surface, this seems like a terrific deal for both - providing American consumers with the interest rate subsidy needed to sustain wealth- and debt-dependent spending and helping China limit an appreciation in its currency that might otherwise hamper its export prowess. Because this implicit contract has enabled China to keep its currency tightly aligned with the US dollar, many have also referred to the new symbiosis as a "Bretton Woods II" regime - the modern-day sequel to the dollar-based international financial architecture that was adopted in the aftermath of World War II. Advocates of this view conclude that since it is in both parties' best interests to perpetuate the symbiosis, there is no reason why it should change. With net foreign purchases of long-term US securities averaging $114 billion in September and October 2005, the latest facts are certainly not getting in the way of that logic. I worry, however, that the sustainability of the symbiosis trade is predicated on a very dangerous ex post rationalization of global imbalances. As was the case in the midst of recent bubbles in equities, bonds, credit, and property, there are important kernels of truth to the notion of a new international symbiosis. The increased trade and capital flows that stem from the cross-border connectivity of globalization create a growing sense of co-dependence in the global economy. The US dollar's role as a reserve currency adds confidence to the notion of an expanded dollar bloc. But at the end of the day, I do not believe that this arrangement is either desirable or sustainable from the perspective of either of the two main protagonists in the new symbiosis - China or the United States. China's problems stem in large part from excess foreign exchange reserve accumulation. With its official reserves now around $770 billion - up 50% from a year ago and rapidly closing in on Japan's $840 billion - China is forced into massive buying of dollar-denominated assets in order to prevent the renminbi from rising too rapidly and jeopardizing its export competitiveness. Yet, lacking a well-developed domestic debt market, China can only sterilize a portion of these purchases; the rest leaks back into its domestic financial system - leading to excess liquidity and concomitant asset bubbles. The property bubble in coastal China is a worrisome manifestation of these risks. Moreover, with China holding an estimated 70% of its reserves in the form of dollar-denominated assets, the mark-to-market costs of a significant further depreciation of the dollar would represent a major fiscal blow to the Chinese economy. Finally, another outgrowth of this perceived symbiosis is an ever-widening bilateral trade imbalance between the US and China that only heightens the risks of trade frictions between the two nations. The risks are equally disturbing from America's point of view. To the extent that foreign purchases of dollar-denominated assets represent the functional equivalent of a subsidy to US interest rates, asset markets enjoy artificial valuation support. The result is a surge in housing values that many Americans now perceive to be a new and permanent source of saving. This, in turn, has had a profound impact in reshaping saving and spending strategies of US consumers. In essence, the income-based consumption models of yesteryear have been replaced by asset-driven frameworks. The repercussions of this transformation are profound: The income-based personal saving rate has plunged deeper into negative territory than at any point since 1933. At the same time, US consumers can only create newfound purchasing power by extracting equity from an ever-expanding housing stock. This is where debt enters the equation - in effect, the cost of equity extraction. The overall household sector debt ratio has been pushed up by 20 percentage points of GDP over the past five years - equal to the gain in the preceding 20 years; moreover, reflecting this overhang in the outstanding stock of indebtedness, US household sector debt-service burdens have risen to record highs - even in the context of an unusually low interest rate climate. The result is unprecedented consumer vulnerability on both the saving and debt fronts. "So what!" retorts the symbiosis crowd. After all, these are precisely the excesses - both for China and the US - that we in the rebalancing crowd have been bemoaning for years. Fair point. Moreover, a year ago, when there were widespread concerns over global imbalances, the dollar rose instead of fell - and those concerns lost credibility. As long as the world is willing to finance America's saving shortfall, goes the argument, there is no reason to worry about sustainability. This, in my view, is the essence of the "symbiosis trap." The consensus has been lulled into a false sense of security - believing that imbalances will remain a non-issue for the global economy and world financial markets. That view could well be tested in 2006. For starters, global imbalances are likely to go from bad to worse over the next 12-18 months, pushing tensions in both the US and China ever closer to the breaking point. In the case of the US, pressures are likely to intensify on two fronts - the first being the housing market. There are those, of course, who still doubt that the US property market has ascended to bubble stature. I am not in that camp. Through 3Q05, fully 40 major metropolitan areas were still experiencing year-over-year house price inflation of at least 20%; at the state level - a broader geographic unit - residential home prices for 25 states plus the District of Columbia were still rising in excess of 10%. Of course, not every home in America has gone to bubble-like extremes. But to the extent that a sizable portion of the national property market has, the broader asset class is probably in the danger zone - along with the asset- and debt-dependent American consumer. A second area of pressures in the US is likely to come from the saving front. In a high-energy-price climate, US households are likely to defend their lifestyles by pushing the personal saving rate deeper into negative territory. Moreover, as Dick Berner and Ted Wieseman note below, the outlook for the Federal budget deficit is deteriorating once again. The net result is likely to be further erosion in America's net national saving rate, which has been hovering at a record low of around 1.5% of GDP since early 2002. As the domestic saving rate moves inexorably toward the "zero" threshold, the US can be expected to import more and more surplus saving from abroad by running ever-widening current account and trade deficits to attract the foreign capital. In fact, our latest estimates suggest that the US current account deficit, which stood at a record 6.4% of GDP in the first half of 2005, could well increase toward 7.5% over the next year. In short, America will be upping the ante in terms of what it expects from China and the rest of the world in order to sustain the symbiosis trade. Such an outcome could put increasingly acute pressure on an already unbalanced Chinese economy. The more dramatic the shortfall in domestic US saving, the greater the need to fill the void with foreign saving. That will put pressure on the biggest piece of America's already gaping trade deficit - namely, the US-China bilateral trade imbalance. That, in turn, would tend to support Chinese export growth, as well as export-led fixed investment -- thereby further extending the same two sectors that have already gone to excess. At the same time, there is good reason to believe that most of America's foreign creditors are rational - likely to exercise increasing caution in managing reserve portfolios by gradually pruning their overweight in dollar-denominated assets. That would then put added pressure on China to compensate for any shifts out of dollars - especially if it remains steadfast in resisting a sharp appreciation of the renminbi. In short, if China wants to preserve the symbiosis trade in the context of a further deterioration of the US current account deficit, it may well have to up the ante on its own imbalances. The case for global rebalancing was dealt a tough blow in 2005. The dollar's surprising appreciation led many to believe that financial markets are perfectly capable of coping with massive external imbalances. In my view, that coping mechanism has led to a false sense of complacency that could well be tested in 2006. In particular, a further deterioration of global imbalances - more likely than not over the next year - could well have adverse consequences for already-extended US and Chinese economies. The result could be a sharp decline in the dollar and related upward pressures on US real interest rates - developments that would take generally complacent investors by surprise. I have long been wary of new theories that spring up to explain away old problems. That was the problem with the so-called new paradigm thinking of the late 1990s. And it could well be the ultimate peril of the symbiosis trap. Mainstream analysts are also predicting a "soft landing" for the housing market. Home Sales Down; Labor Market Stable By JEANNINE AVERSA AP Economics Writer A cooling housing market may put buyers in the driver's seat while an improving job market could give workers and jobseekers more leverage, economists say. Either way, analysts read a pair of economic reports Thursday as indicating a soft landing for the high-flying housing sector and a smoother ride for the labor market. Sales of previously owned homes fell for the second month in a row, declining a moderate 1.7 percent in November to an annual rate of 6.97 million units, the lowest since March, the National Association of Realtors reported. "As more listings of homes come on the market during this period of modestly declining sales, more home buyers will find themselves in a better position to negotiate," said the association's president Thomas Stevens. Meanwhile, a Labor Department report showed that new applications filed for unemployment insurance last week edged up to 322,000 - a level that is still consistent with a labor market revival, economists said. That report provided further evidence the jobs market is back on its feet after being knocked around by Gulf Coast hurricanes. Those are the kinds of delusions that result from analyzing complex, non-linear systems in simple, linear terms. Most likely, though, the elite themselves do not believe the optimistic line they are peddling to the public. What seems clear is that the negative effects of a bursting of the housing bubble will outweigh any positive effects: The Fall of the House of Cards Pop Goes the Bubble! By MIKE WHITNEY Four months ago I wrote an article, "Doomsday; the Final Months of the Housing Bubble" that predicted a dramatic fall in housing prices that would have a catastrophic effect on the American economy. In truth, I'm a lousy forecaster and simply collected the relevant data from a number of sources that convinced me that the end was quickly approaching. Now, it seems that dismal day is upon us and the Grim Reaper has begun churning out the disappointing statistics that we've dreaded from the very beginning. In November the sales of new homes plunged by the largest amount in 12 years. The 11.5% decline from October was 4 points higher than expected by Wall Street analysts, fueling the belief that the red-hot housing market is headed for the dumpster. This sudden downturn is expected to slow the wave of speculation that has kept the market booming for the last few years. According to an Associated Press report, sales dropped by "22% in the West, the biggest decline in the region since February 1995." Many readers will wonder why trimming the spec-market threatens the overall economy. The reason is, as The Economist points out is that "23% of all American houses bought in 2004 were for investment, not owner-occupation. Another 13% were bought as second homes. Investors are prepared to buy houses they will rent out at a loss; just because they think prices will keep rising -- the very definition of a financial bubble." If we consider the effects of 36% of buyers moving out of the market we can grasp the magnitude of the problem. The crisis is compounded by the enormous effect of the housing market on both growth and jobs. "Over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP. And over two-fifths of all private sector jobs created since 2001 have been in housing-related sectors, such as construction, real estate and mortgage broking." (The Economist) "2 out of every 5" private sector jobs!?! "90% of the total growth in GDP"!?! These are figures that simply boggle the mind. What it tells us is that the market has been artificially inflated by the Federal Reserve's shortsighted low-interest rates policy and the shabby lending practices of the major mortgage companies. The banks have lowered the standards for home loans to such an extent that the traditional loan of 20% down and a fixed interest rate is virtually a thing of the past. Instead, those conservative practices have been replaced with "creative financing" schemes that put the entire housing market at risk. In 2004 "one-fourth of all home-buyers -- including 42% of first-time buyers -- made no down payment." (New York Times, July 7, 2005) Equally troubling is the fact that "nearly one third of all new mortgages this year call for interest-only payments (NY Times) This tells us that a large number of new buyers can barely make their payments, but are gambling that their property value will go up enough to justify their investment. This is "equity roulette," a shell game that anticipates that salaries will go up while interest rates stay low. We can anticipate that many overstretched homeowners will begin to fall from the economic precipice in short order. In fact, many markets are already showing a 40% increase in foreclosures even though the air has just begun hissssssing out of the bubble. The ridiculously low interest rates coupled with the irresponsible lending practices has precipitated a feeding frenzy for cheap money. Greenspan is expected to raise rates another one-half percent before he leaves in January which should be just enough to collapse the market and put the economy in a permanent coma. ...Jittery Americans don't need a crystal ball to spot the shipwreck looming just on the horizon. The last remaining droplets of prosperity are trickling from the ailing economy and Greenspan's 18 year quest to flatten the American middle class will soon be realized. 'the Economist" summarized it best when they said, 'the worldwide rise in housing prices is the biggest bubble in history. Prepare for the economic pain when it pops". 2 Taxes on Wealthy Expiring: 5-Year Phaseout Starts Jan. 1; Move to Cost Treasury $27 Billion By William Neikirk 2005-12-31 Chicago Tribune WASHINGTON -- They call them the PEP and Pease provisions of tax law, and they are on their way out. If you are wealthy, this should make you smile. You could be a little richer. PEP and Pease refer to two tax increases adopted in 1990 when President George H.W. Bush broke his "read my lips" promise against boosting taxes in order to cut the deficit, angering many in the Republican Party. But on Sunday, thanks to a law quietly passed in 2001 when his son, George W. Bush, was in the White House, the PEP and Pease provisions--essentially limitations on tax exemptions--will begin a five-year phaseout at a cost of $27 billion. According to the Center on Budget and Policy Priorities, a liberal think tank here, about 53.5 percent of that money will go to households earning more than $1 million. Another 43.2 percent will go to those with incomes of $200,000 to $1 million. The rest will go those earning $100,000 to $200,000. "It is particularly ironic that these two new tax cuts repeal provisions of the tax code that President Bush's father signed in 1990 to reduce deficits," said Robert Greenstein, executive director of the center. By contrast, conservative groups said the PEP and Pease tax increases are bad tax law. PEP stands for "personal exemption phaseout." Basically, Congress decided in 1990 to slash the personal income exemption (now $3,200) for high-income Americans. Pease refers to former Rep. Don Pease (D-Ohio), who sponsored a provision limiting the value of itemized deductions for the wealthy. By 2010 those provisions will be gone unless Congress reinstates them, and that does not appear likely. Millionaires will receive an average tax cut of $19,000 a year when the two provisions are wiped out, the Center on Budget and Policy Priorities said. The center added that this comes on top of an average tax cut of $103,000 that millionaires received in 2005 because of other tax cuts adopted since 2001. Comment: We’re not a democracy. It’s a terrible misunderstanding and a slander to the idea of democracy to call us that. In reality, we’re a plutocracy: a government by the wealthy.” Ramsey Clark, former U.S. Attorney General Bosses predict year of economic pain Robert Worcester and Heather Stewart Sunday January 1, 2006 The Observer BRITAIN'S business leaders are bracing themselves for a tough 2006, with two thirds expecting the economy to deteriorate over the next 12 months, according to a recent MORI survey. Chancellor Gordon Brown has promised a recovery in Britain's fortunes after the weakest year since the recession of the early Nineties - but few business leaders have confidence in his optimistic projections. In the survey of more than 100 FTSE top executives, MORI found that two thirds, 66 per cent, expect the economy to worsen in 2006, while only one in 25, 4 per cent, believe it will improve. With analysts expecting rampant US growth to stutter in 2006, little sign of a recovery in the eurozone, and consumer spending at home still under pressure from rising taxes, businesses have plenty of reasons to be nervous about the year ahead. Despite their pessimism about the general outlook, most senior executives expect their own company to be able to ride the storm in 2006. More than half - 57 per cent - thought business would improve over the next year, while only 11 per cent expected things to get worse. Larger firms were particularly negative about the future, as were those based outside the capital. Perhaps surprisingly, bankers and financial services executives were generally as depressed about their fortunes as others, despite a bumper 2005, with a rash of deals that have put City staff in line for the most lavish bonus season since the boom years of the late Nineties. The poll also suggested few of Britain's corporate giants have much confidence left in the Labour government's recipe for economic success. Two in three respondents rejected the notion that 'in the long term, this government's policies will improve the state of Britain's economy'. Just two in 10 said they still had faith in the Chancellor's economic policy. Those in the retail sector, hit hard by the slowdown in 2005, were the most divided, with half (47 per cent) saying they still had hope for the government's policies, while the other half (47 per cent) rejected the notion. After a so-so Christmas, retailers are pinning their hopes on a second quarter-point cut in interest rates in the new year. Bosses from multinational firms, which tend to be more exposed to fast-growing global markets in the US and Far East, are far more upbeat about their prospects than their domestic counterparts. Seven in 10 multinationals expect their company's fortunes to improve over the next 12 months, against fewer than half of domestic companies. In his pre-Budget statement last month, when he admitted that his forecasts for 2005 were badly awry, the Chancellor blamed record oil prices for the consumer spending squeeze, which dragged growth to its weakest rate since the early Nineties recession. But when business leaders were asked about the biggest problem for their businesses, it was red tape that came top of most of the lists. Three in 10 executives cited legislation, regulation or bureaucracy as a problem - almost twice as many as mentioned the next most bothersome issue, the general economic climate. The Treasury has promised a bonfire of regulation, but business leaders do not seem to be feeling the benefits. The chairman of one major international bank complained of 'regulation, political interference and lack of qualified people'. The chairman of a major property developer singled out the much-criticised planning regime, saying 'securing planning permissions is becoming more tortuous', and adding 'there is more interference and it is taking longer and even when we are assessing a site it is very difficult to be able to establish what the conditions, and therefore the costs, of the planning would be.' Smaller firms were the most likely to complain about regulation. The economic climate worried 17 per cent of executives, with the chairman of a leading mining and natural resources company citing 'uncertainty in the pattern of economic development in China', as a concern. Another troubling issue, reported by 16 per cent, was the skills shortage: 'Lack of workforce, labour costs,' was mentioned by the CEO of one retail property company, while the head of a chemical firm blamed 'energy prices, economics, pensions and the continuing malaise in the manufacturing industry'. Manufacturing suffered in 2005 as demand from the eurozone economies remained weak, and high-energy prices took their toll. By the end of October, manufacturing output was no higher than it was in 2002. When asked how they judged the calibre of a major company, business leaders picked out 'financial performance' as most important (58 per cent), but said they would also think about the quality of management (44 per cent), and a company's image (34 per cent). Of the 132 executives interviewed by MORI, 102 hold the title of chairman, CEO and/or MD, and another 12 are chief financial officers, all of FTSE top 500 industrial firms by turnover and top 100 financial companies by capital employed. The survey was carried out between 5 September and 28 November 2005. Time to pay the bill Frank Kane Sunday January 1, 2006 The Observer First, the good news. If you are a multi-million pound lottery winner, or a member of that small band of City executives and senior business people who get to write their own salary and bonus cheques, 2006 will be a very good year indeed. Another small group of professionals - the insolvency accountants - can also look forward to the New Year with a rosy glow, but that is all part of the problem. The bad news is that the rest of us - say 99.99 per cent of the population - can only look forward to a year of financial belt-tightening and uncertainty. The economic omens for 2006 are more depressing than at the start of any year so far this century. This is especially the case in Britain, though in the age of globalisation, no country is an island in the great economic ocean, and our prospects have to be seen against the background of world economic forces. Here, too, the auguries are not favourable. The biggest economy in the world - the United States - is still marching relentlessly on, using the all-conquering dollar to buy what it wants from the rest of the world. But there is a growing fear that Uncle Sam has been living beyond his means for too long and the reckoning cannot be postponed for much longer. The problem is that America's global spending spree has been financed largely by borrowing. Under George W Bush, the national debt has grown enormously, with the USA owing foreign governments and banks around $8 trillion - that's eight followed by 12 zeros, making it rather a large amount of cash. The American consumer, characterised in the transatlantic psyche as Johnny Sixpack, has done his patriotic duty to keep the economy turning over nicely, but he has done it on tick. The national motto, 'In God we trust; all others pay cash', has been meaningless throughout the 21st century. The people who have lent that money are, mainly, Asian governments and financial institutions. For the time being, that is good news for America and the rest of the world. With Japan coming out of a long period of recession, and the Chinese economy growing at a vertiginous rate, they are not likely to want their money back any time soon. But one day, the chickens will come home to roost - maybe not in 2006, but the fear is always there. What has this got to do with us, as we contemplate the post-festive season reckoning? Well, our personal finances are increasingly a microcosm of the American and the global situation. We have kept the recessionary wolf away from the door for five years now, but we have largely borrowed to do it. The dynamics of Britain's consumer-driven economy are similar to Johnny Sixpack's. As we manufacture less at home but still want the glitter and glamour of consumerism, we have taken to debt as the natural way to finance our spending addiction. Total borrowing in Britain topped £1 trillion last year, just a bit under £5,000 for every man, woman and child in the country. Now, five grand may not seem a big sum, and most of us would be able to handle that amount of indebtedness, but look at it a different way. Personal debt per household has soared over the past 20 years, from around 80 per cent of household income to the present level of 150 per cent. It has been rising throughout the 21st century as banks have been aggressively pushing their financial products, mainly credit cards and loans. We have been only too ready to take up their generous offers. Increasingly, some people have been unable to handle it. In the coming year, there will be something like 20,000 personal insolvencies, the highest number since records began in the 1960s. It used to be that insolvency followed on from the failure of a family business venture, but these days, it is increasingly high levels of personal indebtedness that triggers the plug-pulling. This government has rightly, I would say, taken much of the shame out of bankruptcy, on the grounds that risk-taking entrepreneurs would be deterred from starting up wealth-creating businesses if they were faced with the life-long shame of Carey Street. But the intention of that was certainly not to allow people to build up huge levels of personal debts, on which they could then renege in a relatively painless bankruptcy. There is much muttering among the big banks which provide all this credit that guidelines will have to be tightened to prevent this spiral getting out of control, but in many cases it is too late. Consumer organisations regularly see individuals with £100,000 of personal debt through loans and credit cards, with one case involving a couple who had built up £350,000 in plastic debt. The future is certainly not all doom and gloom, though. There is a great comfort factor at work in the form of bricks and mortar. The reason so many people feel sanguine about running up huge bills on their flexible friends is because so many of have substantial capital, acting as security, in the form of their homes. Property prices have enjoyed years of steady growth, and if they are now on some kind of plateau for the foreseeable future, as most experts agree, it is nowhere near the negative-equity days of the last serious recession in the early Nineties. So should we be worried? The problem is the sheer interdependency of the modern consumer economy. Growth is dependent as never before on our willingness to go to the shops and spend, which, in turn, is reliant on the feelgood factor of historically high property prices. High levels of disposable income - or credit - keep the economic wheels turning, but what happens when one of them falls off? This is the background against which to see the full import of November's solemn pre-budget review. Chancellor Gordon Brown was forced to admit that he had got the sums wrong on growth, and that the economy would have to make do with less than 2 per cent annual growth, rather than the 3 per cent plus that he had hitherto been expecting. It was a chilling admission, but we will only see how chilling in 2006. Lower growth will mean employment levels in the doldrums, falling consumer confidence and declining real wages. And, crucially, it will mean a lower tax take for the Treasury. The Chancellor has been able to avoid increases in headline income tax, but 2006 may be the year he has to bite that bullet, especially with his ambitious plans for public-sector spending. Higher taxes lead to lower disposable income, falling consumer confidence, and declining growth; the virtuous cycle of consumerism could easily turn into a vicious spiral of economic decline. There is one instrument the government has at its disposal that might head off this gloomy scenario - interest rates. Ever since Brown (in his first act as Chancellor) set free the Bank of England, it has been more worried about inflation than consumer confidence, largely because of rising energy prices. But this may change. A cut in rates would reduce debt worries and give the property market a boost. The Chancellor, and the British consumer, may both be relying on the Bank of England to generate a happy New Year. Justice Dept. official resisted spy program By Eric Lichtblau and James Risen The New York Times SUNDAY, JANUARY 1, 2006 WASHINGTON A top Justice Department official objected in 2004 to aspects of the National Security Agency's domestic surveillance program and refused to sign on to its continued use amid concerns about its legality and oversight, according to officials with knowledge of the tense internal debate. The concerns appear to have played a part in the temporary suspension of the secret program. The concerns prompted two of President George W. Bush's most senior aides to make an emergency visit to a Washington hospital in March 2004 to discuss the program's future and try to win the needed approval from Attorney General John Ashcroft. The senior officials were Andrew Card Jr., Bush's chief of staff, and Alberto Gonzales, then White House counsel and now attorney general. Ashcroft, suffering from pancreatitis, was hospitalized for gallbladder surgery, the officials said. The unusual meeting was prompted because Ashcroft's top deputy, James Comey, who was acting as attorney general in his absence, had indicated he was unwilling to give his approval to certifying central aspects of the program, as required under the White House procedures set up to oversee it. With Comey unwilling to sign off on the program, the White House went to Ashcroft because "they needed him for certification," according to an official briefed on the episode. The official, like others who discussed the issue, spoke on the condition of anonymity because of the classified nature of the program. Accounts differed as to exactly what was said at the hospital meeting. But some officials said that Ashcroft, like his deputy, appeared reluctant to give Card and Gonzales his authorization to continue with aspects of the program in light of concerns among some senior government officials. It is unclear whether the White House ultimately persuaded Ashcroft to give his approval to the program after the meeting or moved ahead without it. The White House and Ashcroft, through a spokeswoman, declined to comment Saturday on the hospital meeting. Comey declined to comment, and Gonzales could not be reached. The domestic eavesdropping program was publicly disclosed in mid-December by The New York Times. Bush, in acknowledging the existence of the program, said that tight controls had been imposed over the surveillance operation and that the program was reviewed every 45 days by top government officials, including at the Justice Department. "The review includes approval by our nation's top legal officials, including the attorney general and the counsel to the president," Bush said. WASHINGTON A top Justice Department official objected in 2004 to aspects of the National Security Agency's domestic surveillance program and refused to sign on to its continued use amid concerns about its legality and oversight, according to officials with knowledge of the tense internal debate. The concerns appear to have played a part in the temporary suspension of the secret program. The concerns prompted two of President George W. Bush's most senior aides to make an emergency visit to a Washington hospital in March 2004 to discuss the program's future and try to win the needed approval from Attorney General John Ashcroft. The senior officials were Andrew Card Jr., Bush's chief of staff, and Alberto Gonzales, then White House counsel and now attorney general. Ashcroft, suffering from pancreatitis, was hospitalized for gallbladder surgery, the officials said. The unusual meeting was prompted because Ashcroft's top deputy, James Comey, who was acting as attorney general in his absence, had indicated he was unwilling to give his approval to certifying central aspects of the program, as required under the White House procedures set up to oversee it. With Comey unwilling to sign off on the program, the White House went to Ashcroft because "they needed him for certification," according to an official briefed on the episode. The official, like others who discussed the issue, spoke on the condition of anonymity because of the classified nature of the program. Accounts differed as to exactly what was said at the hospital meeting. But some officials said that Ashcroft, like his deputy, appeared reluctant to give Card and Gonzales his authorization to continue with aspects of the program in light of concerns among some senior government officials. It is unclear whether the White House ultimately persuaded Ashcroft to give his approval to the program after the meeting or moved ahead without it. The White House and Ashcroft, through a spokeswoman, declined to comment Saturday on the hospital meeting. Comey declined to comment, and Gonzales could not be reached. The domestic eavesdropping program was publicly disclosed in mid-December by The New York Times. Bush, in acknowledging the existence of the program, said that tight controls had been imposed over the surveillance operation and that the program was reviewed every 45 days by top government officials, including at the Justice Department. "The review includes approval by our nation's top legal officials, including the attorney general and the counsel to the president," Bush said. WASHINGTON A top Justice Department official objected in 2004 to aspects of the National Security Agency's domestic surveillance program and refused to sign on to its continued use amid concerns about its legality and oversight, according to officials with knowledge of the tense internal debate. The concerns appear to have played a part in the temporary suspension of the secret program. The concerns prompted two of President George W. Bush's most senior aides to make an emergency visit to a Washington hospital in March 2004 to discuss the program's future and try to win the needed approval from Attorney General John Ashcroft. The senior officials were Andrew Card Jr., Bush's chief of staff, and Alberto Gonzales, then White House counsel and now attorney general. Ashcroft, suffering from pancreatitis, was hospitalized for gallbladder surgery, the officials said. The unusual meeting was prompted because Ashcroft's top deputy, James Comey, who was acting as attorney general in his absence, had indicated he was unwilling to give his approval to certifying central aspects of the program, as required under the White House procedures set up to oversee it. With Comey unwilling to sign off on the program, the White House went to Ashcroft because "they needed him for certification," according to an official briefed on the episode. The official, like others who discussed the issue, spoke on the condition of anonymity because of the classified nature of the program. Accounts differed as to exactly what was said at the hospital meeting. But some officials said that Ashcroft, like his deputy, appeared reluctant to give Card and Gonzales his authorization to continue with aspects of the program in light of concerns among some senior government officials. It is unclear whether the White House ultimately persuaded Ashcroft to give his approval to the program after the meeting or moved ahead without it. The White House and Ashcroft, through a spokeswoman, declined to comment Saturday on the hospital meeting. Comey declined to comment, and Gonzales could not be reached. The domestic eavesdropping program was publicly disclosed in mid-December by The New York Times. Bush, in acknowledging the existence of the program, said that tight controls had been imposed over the surveillance operation and that the program was reviewed every 45 days by top government officials, including at the Justice Department. "The review includes approval by our nation's top legal officials, including the attorney general and the counsel to the president," Bush said. WASHINGTON A top Justice Department official objected in 2004 to aspects of the National Security Agency's domestic surveillance program and refused to sign on to its continued use amid concerns about its legality and oversight, according to officials with knowledge of the tense internal debate. The concerns appear to have played a part in the temporary suspension of the secret program. The concerns prompted two of President George W. Bush's most senior aides to make an emergency visit to a Washington hospital in March 2004 to discuss the program's future and try to win the needed approval from Attorney General John Ashcroft. The senior officials were Andrew Card Jr., Bush's chief of staff, and Alberto Gonzales, then White House counsel and now attorney general. Ashcroft, suffering from pancreatitis, was hospitalized for gallbladder surgery, the officials said. The unusual meeting was prompted because Ashcroft's top deputy, James Comey, who was acting as attorney general in his absence, had indicated he was unwilling to give his approval to certifying central aspects of the program, as required under the White House procedures set up to oversee it. With Comey unwilling to sign off on the program, the White House went to Ashcroft because "they needed him for certification," according to an official briefed on the episode. The official, like others who discussed the issue, spoke on the condition of anonymity because of the classified nature of the program. Accounts differed as to exactly what was said at the hospital meeting. But some officials said that Ashcroft, like his deputy, appeared reluctant to give Card and Gonzales his authorization to continue with aspects of the program in light of concerns among some senior government officials. It is unclear whether the White House ultimately persuaded Ashcroft to give his approval to the program after the meeting or moved ahead without it. The White House and Ashcroft, through a spokeswoman, declined to comment Saturday on the hospital meeting. Comey declined to comment, and Gonzales could not be reached. The domestic eavesdropping program was publicly disclosed in mid-December by The New York Times. Bush, in acknowledging the existence of the program, said that tight controls had been imposed over the surveillance operation and that the program was reviewed every 45 days by top government officials, including at the Justice Department. "The review includes approval by our nation's top legal officials, including the attorney general and the counsel to the president," Bush said. WASHINGTON A top Justice Department official objected in 2004 to aspects of the National Security Agency's domestic surveillance program and refused to sign on to its continued use amid concerns about its legality and oversight, according to officials with knowledge of the tense internal debate. The concerns appear to have played a part in the temporary suspension of the secret program. The concerns prompted two of President George W. Bush's most senior aides to make an emergency visit to a Washington hospital in March 2004 to discuss the program's future and try to win the needed approval from Attorney General John Ashcroft. The senior officials were Andrew Card Jr., Bush's chief of staff, and Alberto Gonzales, then White House counsel and now attorney general. Ashcroft, suffering from pancreatitis, was hospitalized for gallbladder surgery, the officials said. The unusual meeting was prompted because Ashcroft's top deputy, James Comey, who was acting as attorney general in his absence, had indicated he was unwilling to give his approval to certifying central aspects of the program, as required under the White House procedures set up to oversee it. With Comey unwilling to sign off on the program, the White House went to Ashcroft because "they needed him for certification," according to an official briefed on the episode. The official, like others who discussed the issue, spoke on the condition of anonymity because of the classified nature of the program. Accounts differed as to exactly what was said at the hospital meeting. But some officials said that Ashcroft, like his deputy, appeared reluctant to give Card and Gonzales his authorization to continue with aspects of the program in light of concerns among some senior government officials. It is unclear whether the White House ultimately persuaded Ashcroft to give his approval to the program after the meeting or moved ahead without it. The White House and Ashcroft, through a spokeswoman, declined to comment Saturday on the hospital meeting. Comey declined to comment, and Gonzales could not be reached. The domestic eavesdropping program was publicly disclosed in mid-December by The New York Times. Bush, in acknowledging the existence of the program, said that tight controls had been imposed over the surveillance operation and that the program was reviewed every 45 days by top government officials, including at the Justice Department. "The review includes approval by our nation's top legal officials, including the attorney general and the counsel to the president," Bush said. 9/11 -- The Gift That Keeps on Giving The Bulldog Manifesto (I feel a rant coming on......) So what if the Bush administration wants to conduct illegal wiretaps, they are fighting the terrorists! So what if the Bush administration wants to attack a country that has never attacked us and was not a threat to us, they are fighting the terrorists! So what if the Bush administration wants to take away all my liberties, they are fighting the terrorists! So what if the Bush administration outs a CIA operative in order to smear a political opponent, they are fighting the terrorists! So what if the Bush administration has encumbered more foreign debt in the past five years then all of the preceding administrations did combined, they are fighting the terrorists! So what if the Bush administration paid American journalists to write deceptive and administration-friendly news stories, they are fighting the terrorists! So what if the Bush administration hasn't enacted an exit plan in Iraq, they are fighting the terrorists! So what if the Bush administration has destroyed the United States' reputation overseas, they are fighting the terrorists! Wanna break the law? Invoke 9/11! Wanna start a war? Invoke 9/11! Wanna piss on the Constitution? Invoke 9/11! Wanna make sure your family business profits off the war? Invoke 9/11! Wanna f&%k with people you just don't like? Invoke 9/11! Wanna make your political adversary look like a treasonous bastard? Invoke 9/11! I'm so sick and tired of 9/11. The Bush regime uses 9/11 like a heroin addict uses a spoon. It's the ultimate political weapon. Meanwhile, ignorant bastards keep driving around town in their cars with their "9/11- Never Forget" bumper stickers. That's akin to a southern slave in the 1800's wearing a shirt that says "I Need to Be Whipped Some Mo' Masseh" For f&%k's sake, who has gained the most from 9/11? Who? Isn't it obvious? Terrorists? Who the f&%k are these terrorists? The only terrorists I see are the ones sitting in Washington D.C. fucking over my country. Who is fighing against those bastards, that's what I wanna know. The only terrorists I see are the ones handing out tax breaks to the rich while the poor fight over the scraps. Why isn't the Army fighing those dangerous thugs? The only terrorists I see are the CEOs making $27 million dollars while the grunts make $17,000 (Walmart). Shouldn't we call in the Navy SEALS? My government is one big organized crime family. That's the way I see it. Like any strong crime family, you gotta have muscle. And we certainly have the muscle. We make up 5% of the world's population, and yet we are responsible for 50% of all money spent on defense worldwide. "Luca Brasi swims with the fishes!" Speaking of which, when can we begin calling "military defense" by it's rightful name? It should be called "military offense." For pete's sake, we've been on the offense for about 60 f&%king years now. I think the days of "defense" are long gone, aren't they? Yes indeed, 9/11 is the ultimate lotto prize for the neocon pigs. Full Spectrum Dominance? Try Full Spectrum Fascism. Oh they danced and danced, drank lots of wine, and listened to lots of Wagner and Beethoven. Meanwhile their "brave leader" was out there fighing against the scourge of communism, the scourge of the Jews, and the scourge of everything else that wasn't Nazi. Yup, the Germans in the early 1940's were asleep too. Their leader had saved them from the communists who, after all, were accused of burning down the Reichstag building. (Oh wait, Hitler actually set the building on fire himself. Sounds so familiar?) Ah yes, because Germany was "under attack", they let Hitler enact the Enabling Act, thereby giving him dictatorial authority over Germany. Dictatorial power. Where have I heard that before? Yup, it all goes back to that eleventh day in September, 2001. The day when our country did a swan dive off the top of the World Trade Center, straight f&%king down! 9/11-- the gift that keeps giving. Bush rings in 2006 with less ambitious political agenda 1 Jan 2006 AFP US President George W. Bush is ringing in the New Year with a less ambitious political agenda planned for 2006 ahead of key congressional elections in which his Republican Party hopes to retain its grip over Congress. Sobered by a bruising 2005 that included ongoing unrest in Iraq, the devastation caused by Hurricane Katrina, a probe into whether his White House outed a CIA agent and sliding poll ratings, Bush is expected to play it safe in the year ahead, according to political analyst Larry J. Sabato. "Although he does not like backing down, Bush has realised that he was too ambitious," said Sabato, a professor at the University of Virginia. The US president enjoyed some relative successes -- the December election in Iraq appears to be one of them -- but Sabato says they were few and far between, and that Bush will need to temper his plans for sweeping reform. A White House spokesman said: "The president uses this time, as many Americans do, to look back and to look forward." The spokesman said that 2005 "has been a year of strong progress toward a freer, more peaceful world and a more prosperous America." The US president might try to forget the more trying aspects of 2005 as he clears brush and bikes around his beloved Texas ranch here, but the political headaches will be waiting for him when he returns to Washington on Sunday. "The White House is planning a very busy January," according to Sabato. "They have to sustain the momentum gained with the December 15 elections (in Iraq). Bush can not afford to continue to decline" in the polls, Sabato said. The apparent success of the Iraqi polls looks to have given Bush a slight rebound in his domestic poll ratings. Despite this, many Iraqis want US troops to leave their country and the Bush administration is hoping the war-torn country will appoint a new government soon. But Iraq is not the only cloud hanging over Bush's New Year agenda. Republican lawmakers are expecting a tough fight ahead if they are to maintain their control of both houses of Congress after mid-term elections in November. A fierce congressional debate over the president's "war on terror" is also underway, and has been ignited in recent weeks by the leaked revelation that Bush authorized a secret eavesdropping and wiretapping program in 2002. The president has expended political capital vying to get the controversial Patriot Act reapproved by Congress, but the administration and its allies in Congress have had to weather opposition claims that they were eroding civil liberties. Citing concerns over civil liberties, lawmakers in Congress earlier this month refused to grant Bush's request for a permanent renewal and instead voted for a one-month extension. Opposition Democrats, envigorated by Bush's woes, are hoping to steal some Republican seats in Congress in the November polls. And in the coming weeks, Bush will have to defend his choice of nominating judge Samuel Alito to the US Supreme Court, as well as enduring likely battles over the budget. Bush will likely retain control over the Republican agenda, but "chastened by the experience and eager to play it safe in an election year, Republicans now are preparing for a new year of thinking small," according to The Los Angeles Times. Bush's grand ambitions at the start of 2005, sparked by his 2004 election victory, will be diminished, according to Sabato. "His two main goals for 2006 will be to assure the success of the Iraq war and make sure the Democrats do not take over the Congress," Sabato said, noting that an outright Democratic victory "is not likely, but possible." A third goal will be overseeing government efforts to repair the vast devastation and billions of dollars of damage caused to New Orleans and the US Gulf Coast by Hurricane Katrina, he added. If Bush does not achieve his goals, his presidency could become "a misery," Sabato predicted. "The rest of his second term has, traditionally, to be dedicated for consolidation," he said. The president is likely to map out his 2006 political agenda and ambitions in the State of the Union address at the end of January. "No one in the White House expects the speech to include anything of the magnitude of Social Security" which Bush had hoped to reform, but now appears to have dropped as a political goal, according to The Washington Post. In his last radio address, Bush underlined his priorities as establishing a free and independent Iraq, and maintaining US economic growth while trimming the country's budget deficits. Bush and Blair Plot Their Exit Strategy, as the Nation Falls Apart at the Seams By PATRICK COCKBURN 31 Dec 2005 This was the year in which the US admitted it was not going to defeat the insurgency. It was the ebb tide of American and British power in Iraq. By the end of the year both countries were urgently looking to withdraw their troops in circumstances not too humiliating to themselves and without precipitating the complete collapse of the Iraqi state. The failure of the US and Britain to win the war does not mean that the two-and-a-half year uprising among the Sunni Arabs has achieved all its aims. The beneficiaries from President George W Bush's invasion of Iraq in 2003 are not the Sunni but the Iraqi Shia and the Kurds. Outside Iraq, the country which has gained most from the fall of Saddam Hussein is Iran. The year began and ended with elections. The first, on January 30, was critical in demonstrating the electoral power of the Shia community. The United Iraqi Alliance, a coalition of Shia parties, triumphed. This was hardly surprising since the Shia make up 60 per cent of the Iraqi population. But it was a political earthquake in Iraq after so many centuries of Sunni dominance. The verdict of the January poll was confirmed by the election on December 15 for the National Assembly, which will sit for four years. The political landscape of post-Saddam Iraq is becoming clearer but the country still looks as if it will be a very violent place. A striking feature of present-day Iraq is that there are multiple centers of power, which as they conflict create numerous friction points. Authority is fragmented. The US has power, but so do the three main communities: the Sunni and Shia Arabs and the Kurds. This much is very evident on the ground in Baghdad. In a Sunni district of west Baghdad, the local police pack up and go home at 8pm. "I am leaving now and the resistance will take over," explained one policeman as he got into his car. "If I stayed around here I would be killed." In Ramadi, the capital of rebellious Anbar province, west of Baghdad, insurgents took over the city centre for four hours in December, despite the presence of powerful US and Iraqi military units. Precisely where real power lies in Iraq is not always obvious. In Basra the British forces are supposedly helping to build up the local police, but a confrontation in October sparked when two British soldiers, working undercover and in disguise, were arrested by the Iraqi police and then rescued by the Army, demonstrated the real state of affairs. Film of a British soldier, his clothes burning as he jumped from a blazing armored vehicle, was shown around the world. It is the Shia political parties and their militias in and out of the police who are the real masters of Basra and southern Iraq. The growing power of the militias is evident everywhere; so too is the influence of Iran. At some point, a new balance of power between the main communities, the militias, political parties, the foreign powers, the insurgent groups and the secret intelligence services will emerge in Iraq. It has not happened yet. The new rules of the game are not yet agreed. To give one example: the government has declared that the weekend will now fall on Friday and Saturday. But in western Iraq insurgents say it falls on Friday alone, and anything else is un-Islamic. They have threatened to kill headmasters who do not open their schools on Saturdays. There are also more serious disagreements. In northern Iraq, territory is disputed between Arabs and Kurds. The Kurds captured the oil city of Kirkuk, the so-called jewel of Kurdistan, in the war of 2003. They will not give it up. The future of the city and of the Turkoman and Arab communities living there is still disputed. But not all divisions in Iraq are getting wider. Sunni and Shia leaders now appreciate, in a way that they did not two years ago, that the Kurds, 20 per cent of the Iraqi population, already have quasi-independence. Most Kurds in the street would prefer outright autonomy. The main reasons their leaders want to stay inside Iraq for now is fear of neighbours like the Turks, the need to keep in with the US - and access to oil revenues. The US is learning to play communal politics. The US ambassador Zilmay Khalilzad, appointed this summer, is far more adept at this than the preceding envoys. The US has learned in the last two-and-a-half years that it may have been easy to overthrow Saddam Hussein, but it is dangerous to buck the Kurds, the Shia or the Sunni. During the rancorous negotiations on the new Iraqi constitution, President Bush even called Abul Aziz al-Hakim, the head of the Supreme Council for Islamic Revolution in Iraq, the Shia religious party, asking for concessions. In 2003 the US viewed SCIRI, not entirely wrongly, as a dangerous stalking horse for Iran, and US soldiers raided its Baghdad offices. But the US has begun to learn too late. Iraqis know that whatever Bush and Blair say, the political will to stay in Iraq is weakening in the US and Britain. The British role in Iraq is in any case small, however great it may loom in domestic politics. The 8,500-strong force was never going to be enough to confront the Shia militias in southern Iraq. The US was able to stick to its timetable for elections on January 30 and December 15, as well as the constitutional referendum on October 15. But this was primarily because it met the wishes of the Shia and Kurdish leaders. Even these "successes" had their price. The constitution was passed in the teeth of Sunni resistance, though the US tried to mitigate this with some last-minute cosmetic concessions. Under these the constitution can be amended by the newly elected National Assembly, although the Sunni parties are unlikely to have the votes to do so. The constitution institutionalizes the fragmentation of Iraq. The Kurds will have autonomy close to independence. They can drill for oil and will own what new reserves are discovered. But the surprise of the year is that the Shia leaders asked for and got the same concessions. There will be a Shia super region established, covering nine provinces in southern Iraq. This represents half of the 18 provinces in the whole country. One Iraqi minister lamented that the central government of Iraq might end up as a few buildings in the Green Zone. After the war in 2003, Arab Iraqis, both Sunni and Shia, would deride comparisons between Iraq and countries divided by sectarianism such as Northern Ireland and Lebanon. They pointed out that Sunni and Shia in Iraq were often married to each other. They did not have a history of massacring each other. These claims for Iraqi Arab solidarity were always a little exaggerated. Sunni friends claim to love the Shia, aside, of course, "from those that are really Iranians or their agents". The Shia, for their part, said they saw all Iraqi Sunni as their brothers "aside from those that are really Baathists". Claims of communal amity are made less often today. The divisions between them are deepening because Iraq was a Sunni state and is becoming a Shia one. The Sunni are fighting the US occupiers and the Shia are, for the moment at least, loosely allied to the US. Iraq's al-Qa'ida suicide bombers have repeatedly targeted Shia civilians such as day laborers waiting for jobs in the Khadamiyah district of Baghdad. Would-be army and police, almost always Shia, have been slaughtered again and again. So far the Shia response has been restrained. Grand Ayatollah Ali al-Sistani, the supreme religious leader who is vastly influential over the Shia, has forbidden retaliation. But the powerful Ministry of the Interior, once controlled by the Sunni, is now in the hands of the Shia. The minister, Bayan Jabr, was previously a leader of SCIRI's militia, the Badr Brigade. They dominate the fearsome paramilitary police commandos whom the Sunni see as nothing more than licensed death squads. At the end of the year, US troops raided an Interior Ministry bunker in the Jadriyah district of west Baghdad, where they found 158 tortured and starved prisoners, all allegedly Sunni. Bodies of men shot in the head and their hands in handcuffs are routinely found on dumps and beside the road in Baghdad. Many ministries have become the domain of a single sect or party. The health ministry under the interim government became famous for being run by the Dawa Shia Muslim group, while the transport ministry portfolio is held by a follower of the nationalist cleric, Muqtada al- Sadr. This has a disastrous impact because the government begins to resemble that of Lebanon. Ministers are representatives of their communities. They cannot be fired, however crooked or incompetent. The impact of the insurgency is exaggerated because the state in Iraq remains so weak. This remained strikingly true during 2005, when the government did extraordinarily little for its people. The electricity supply remains poor in Baghdad; kidnapping is rife; security is limited and Iraqis spend much of their time surviving from day to day. The police are not seen as protectors. Earlier this month, a student called Muammur Mohsin al-Obeidi said: "The Iraqi people know nobody is going to save them from criminals. They believe nobody will punish them. If gangsters are arrested they have enough money to bribe their way out of prison. There is no real government." It is a lament heard again and again from people in the streets of Baghdad. They believe government scarcely exists - and certainly not for their benefit. There have been three administrations of Iraq since the US invasion, and all have failed. There was the Coalition Provisional Authority, fairly undiluted US imperial rule, under Paul Bremer, which helped provoke the Sunni rebellion. On 28 June 2004, the US formally turned power over to the interim government of Iyad Allawi, whose administration was notoriously corrupt. On April 7, 2005, Ibrahim al-Jaafari became Prime Minister but his government has proved fractious. These divisions largely mirrored those between the contending groups in Iraq. In all three administrations, corruption was on a scale attributed to states like Nigeria in the past. In 2005 the entire defense procurement budget of $1.3bn disappeared in return for a few unusable helicopters and armored vehicles. This degree of corruption is now more difficult because ministers cannot spend money without authorization. There is a further reason why the Iraqi state is weak, which is not at first obvious. The US and Britain foresaw an Iraqi state whose armed forces were equipped only to cope with internal dissent. They have been determined not to hand over heavy weapons or modern equipment. The US has not been as generous in transferring power to Iraqis as might appear from formal announcements. The main intelligence service has no budget, but is paid for and run by the CIA. The US has tried to keep control of the Defense Ministry and the new Iraqi army, which is supposedly being built up to take the place of US forces when they are withdrawn. The US military speaks of the triumphs and failures of training and equipping Iraqi troops (they have given less attention to the police). But there is another problem that the US has not really tackled. The question is not just about the ability of the new army to fight, but about loyalty. Who, at the end of the day, will the soldiers fight for? Polls by Britain's Ministry of Defence show that the occupation is overwhelmingly unpopular among Shia as well as Sunni Iraqis. In the long run, the US cannot create an officer corps loyal to America. Then there is also the question of how far the army is a national institution. Its 115 battalions are reportedly 60 Shia, 45 Sunni, 9 Kurdish and one mixed. Over the next year we will see if Iraq is going to remain a single state or turn into a confederation. There are forces for unity as well as disintegration. Most Iraqi Arabs want to live in one country. But political observers fear that a Bosnian solution is on the cards, in which Baghdad will play the role of Sarajevo. Terrorists in High Places By Charles Sullivan 31 Dec 2005 ICH "[T]here are terrorists lurking in high places. They are in the Whitehouse. They are the enablers in Congress who serve the corporate interest, rather than justice. They are hidden behind the beckoning smiles of news anchor men and anchor women. They operate in the dark smoky recesses of corporate board rooms, out of public view. Their tentacles reach into every aspect of our lives. They lie concealed in the stinking breath of the Rush Limbaughs of this world in their awful ability to persuade. They are not on our side. "We must resist them at all cost. We must inform ourselves. Speak truth to power. Let them know that we see through their masks. Do not accept this." Wars are not waged by those who have to fight them. Those who fight wars know too well their terrible costs. Wars are waged by those who profit from them with minimal or no risk to themselves. War is big business and it is immensely profitable for a select few who are insulated from the effects of war’s environmental impacts and social costs. War never serves the interest of working class people. They are the result of menacing forces of greed and power masquerading as benevolent government, insulating us from contrived acts of terror. They are in fact anything but munificent. Never is the trait of deceit more treacherous than when it leads to the loss of precious innocent life. It was obvious from the outset that George Bush lied about the pretext for war with Iraq. His man servant, Colin Powell, sold the idea to the world in his infamous speech before the United Nations. It was widely known that Saddam Hussein had little war making capabilities; and he certainly did not pose a credible threat to the United States, Israel, or any Middle Eastern Country. U.N. weapons inspectors such as Scott Ritter made this fact known long before the invasion began. Saddam Hussein was the creation of the Central Intelligence Agency and the Boogey Man necessary to sell the American people on Bush’s illegitimate invasion and occupation of Iraq. Likewise, Osama Bin Laden was on the C.I.A. payroll. And like Saddam Hussein, he was another Boogey Man created to sell the American people on the invasion of Afghanistan. Based upon the evidence, it is unlikely that Bin Laden or any other Muslim had anything to do with the events of September 11. That, too, was in all probability another cruel hoax perpetrated on the American people by those who stood to make billions of dollars by plundering Afghanistan and Iraq. It also explains why so little effort has been spent finding Bin Laden, the supposed mastermind of the 9/11 attacks. The events of 9/11 were, I contend, an inside job. The findings of the 9/11 truth commission defy the laws of physics and ignore the most relevant physical evidence. They are a work of phantasmagoric fiction that requires us to believe the fantastic—that tall buildings can fall at free fall speed within their own footprint, for example. Or that small fires can melt steel pillars and cause massive sky scrapers to collapse. But that is another story. What is beyond dispute, however, is that the events of 9/11 set off a chain reaction of cause and effect in the Middle East. Soon after the U.S. bombing and invasion of Afghanistan, Unocal (recently merged with Chevron) had established a major oil pipeline through Afghanistan—a territory ruled by war lords hostile to U.S. imperialism. Soon the money from the plunder of Afghanistan was filling the corporate coffers with black gold. What is the loss of a few thousand innocent civilians when there is money to be made? Let them live in the Stone Age we have created for them. I fully understand what a profound and potentially shocking statement that is to those who have been deceived by the ‘official’ history of the United States. It would require that members of the Bush regime were knowingly complicit in the murder of thousands of innocent U.S. citizens. It might even require that they actually orchestrated those events as a pretext to war with Afghanistan and Iraq, even though neither country had anything to do with 9/11. As testimony to the commercial media’s proficiency at deception, forty-two percent of Americans still believe that Saddam Hussein was responsible for 9/11. Never mind that there isn’t a shred of evidence to substantiate that claim. It is a matter of faith. When Bush and his minions repeat those stale lies over and over and the media repeatedly broadcasts them, the ill informed can be made to believe anything. The bigger the lie, the more readily it is believed. The official version of the events of 9/11 could not take root in the public conscience without the complicity of the corporate media. Make no mistake: the commercial media is a vital and potent component of the Pentagon’s superb propaganda machine. In reality, the neocon agenda of global domination is the blueprint for the events of 9/11, as revealed in the ‘Project for the New American Century’ and ‘Rebuilding America’s Defenses’. Both of these revealing documents are online for public perusal. Reading them is imperative to understanding not only America’s veiled history, but also current events. They offer considerable insight into future military interventions. It is no irony that these documents, which call for regime change in Iraq and a host of other countries was authored by the very same people who are serving in the current Bush regime. They are the same people who stand to benefit financially and politically from the plunder and occupation of Iraq, as well as the rest of the world. Subsequent to the events of 9/11, the neocon brain trust declared that a catalyzing event was needed to galvanize the American people to back a plan of U.S. global domination—a New Pearl Harbor. On the morning of September 12, 2001, Secretary of Defense, Donald Rumsfeld, called for an immediate attack on Iraq, and Condoleezza Rice and Dick Cheney repeatedly referred to the events of 9/11 as “an opportunity.” George Bush declared that he “hit the trifecta.” The Bush people could hardly contain their glee. These statements of fact reveal much about the kind of people who are running the country. It should also make clear that in America there is no separation of commercial media and state—the two are as inseparable as newlyweds on a honeymoon. As unthinkable as it be to some, the wanton murder of American citizens by the government is not without precedent. America’s dark history is brimming with examples. Two well documented cases illustrate my point. In 2000 Robert Stinnett published a book entitled ‘Day of Deceit: the Truth about FDR and Pearl Harbor.’ In his book Stinnett paints an ugly picture that lead up to the American entrance into World War Two. Citing extensively from thousands of previously classified documents, Stinnett demonstrates that Franklin Delano Roosevelt knew about the invasion of Pearl Harbor a year before it happened. The newly declassified Pentagon documents reveal that U.S. naval ships and air craft were ordered to stand by and allow the attack to happen. The Japanese attack on Pearl Harbor was provoked by a popular American president who allowed American military personnel to be slaughtered by foreign invaders. Roosevelt’s tactic was wildly successful. The day before the attack only sixteen percent of Americans polled favored entry into the war. The following day, more than a million men signed up for the military. In effect, as commander-in chief, Roosevelt presided over a treasonous act of murder against his own military. But, like so many other events in American history, none of this is revealed in the ‘official’ version of written history. These events bear an uncanny similarity to the events of 9/11. More recently, in the prelude to the U.S. entrance into the Viet Nam war, a phantom attack on two U.S. destroyers cruising the Gulf of Tonkin was staged by the Pentagon and the C.I.A. The bogus attack occurred early in August, 1964. That evening President Lyndon Johnson went on television giving the grim details of the non-attack. Later, however, it was revealed that navy commander James Stockdale flew cover over the Gulf of Tonkin that night. Stockdale disclosed that U.S. ships were firing at phantom targets—targets that didn’t exist. The Gulf of Tonkin Incident that drew the U.S. into the quagmire of Viet Nam simply didn’t happen. Johnson, as presidents so often do, lied to the American people. The result was the rapid passage of the Gulf of Tonkin Resolution, which was the sole legal basis for the Viet Nam War. As a result of Johnson’s lie, three million Vietnamese people and fifty eight thousand U.S. soldiers died. The neocons, with their corporate handlers and their equally complicit counterparts, the neoliberals, are in fact a shadow government that runs America. They have names like Bush, Cheney, Perle, Wolfowitz, Rumsfeld, Rice, Kristol, Dulles, Kennedy and Rockefeller; Lockheed Martin, Halliburton, General Electric, Unocal, Shell Oil and Boeing. Democracy, freedom, liberty, organized labor, peace, and social justice are their avowed enemies. Their crooked, talonous fingers dig deep into the profits of war, while simultaneously clutching the broken spines of the moldering corpses they produce. They are the grim reapers of unrepentant capitalism run amok. George Bush got his anxiously awaited war on Iraq. Halliburton, Bechtel, and other corporations are raking in billions. It is easy money for the war profiteers who risk nothing and gain everything. It is our tax money that is subsidizing their obscene profits. Layers of our civil liberties were quietly repealed. It is our sons and daughters who die for the likes of Bush, Cheney, Rumsfeld, Halliburton and Bechtel. They are America’s shadow government—the unseen hands pulling the strings of atrocity. Someone has to tell our children what they are dying for. This is George Bush’s noble cause. Unless we stop them, their grim work is not done. It will never be done until there is nothing left to defile. There will be countless millions more corpses, broken lives and torn families to follow. Even more ghastly attacks on unwitting American citizens will be fabricated; and fools will play along with them. The flags will come out and Nationalism will spread like a lethal virus across the land. Dissenters will be denounced and imprisoned. These acts of contrived terrorism will be the pretext for the invasion and occupation of other sovereign nations. They will be the pretext for feeding the war machine the blood and the bones of our babies. You see, there are terrorists lurking in high places. They are in the Whitehouse. They are the enablers in Congress who serve the corporate interest, rather than justice. They are hidden behind the beckoning smiles of news anchor men and anchor women. They operate in the dark smoky recesses of corporate board rooms, out of public view. Their tentacles reach into every aspect of our lives. They lie concealed in the stinking breath of the Rush Limbaughs of this world in their awful ability to persuade. They are not on our side. We must resist them at all cost. We must inform ourselves. Speak truth to power. Let them know that we see through their masks. Do not accept this. Organize. Organize. Organize. Charles Sullivan is a furniture maker, photographer, and free lance writer residing in the eastern panhandle of West Virgina. He welcomes your comments at earthdog@highstream.net Some soldiers trying to get out of Army By MARTHA MENDOZA AP NATIONAL WRITER Seattle PI Increasing numbers of men and women in uniform are seeking honorable discharges as conscientious objectors. Others are suing the military, claiming their obligation has been wrongfully extended. Many have simply deserted, refusing to appear for duty. "As this war continues, we're going to see more refusals, disobeying of orders, stop-loss lawsuits," said Marti Hiken, who co-chairs the National Lawyers Guild Military Law Task Force. "There's going to be more and more resistance." Kevin Benderman spends his days sitting in a plastic chair in the stockade at Fort Lewis, Wash., completing a 15-month sentence for "missing movement" with his unit. Jeremy Hinzman is raising his baby boy in Toronto, awaiting a court date when he hopes the Canadian government will grant him political asylum. Aidan Delgado is back in school, studying religion at the New College of Florida and practicing Buddhism. All three are among a small but growing number of soldiers who have become disillusioned with the war in Iraq and are trying to get out of their required service. Increasing numbers of men and women in uniform are seeking honorable discharges as conscientious objectors. Others are suing the military, claiming their obligation has been wrongfully extended. Many have simply deserted, refusing to appear for duty. Some are more desperate: Last December, Army Spc. Marquise J. Roberts of Hinesville, Ga., persuaded a cousin to shoot him in the leg. The cousin was sent to jail, Roberts to the stockade. "You sign a contract and you're required to serve for whatever time period you've agreed to," said a Pentagon spokeswoman, Lt. Col. Ellen Krenke. "There are certain standards the enlistment contracts oblige soldiers to, and they are required to fulfill them." But Pentagon policies do have exceptions, and soldiers are increasingly challenging their mandatory service. Requests for conscientious objector status, which can qualify someone for an honorable discharge, have steadily increased since 2000 - about 110 soldiers filed the complex paperwork in 2004, about four times the number in 2000. Of those, about half were approved. Those who were rejected either went back to the war or refused to serve. Some are now on the lam. Others have been court-martialed and done time. Former Staff Sgt. Camilo Mejia, 30, of Miami Beach, Fla., says he had change of heart while on a two-week leave last year after spending a year in Iraq. "Going home gave me the opportunity to put my thoughts in order and to listen to what my conscience had to say. People would ask me about my war experiences and answering them took me back to all the horrors, the firefights, the ambushes, the time I saw a young Iraqi dragged by his shoulders through a pool of his own blood or an innocent man was decapitated by our machine gun fire," he said. When it was time to ship out, Mejia went into hiding. For the next five months he didn't use his cell phone or his computer. He stayed away from his family and friends. Eventually, with the help of anti-war advocates, he found a lawyer and turned himself in. But his request to be a conscientious objector - which he filed after he went on the lam - was denied. Mejia spent nine months in military prison and was dishonorably discharged in February. Mejia was among the first from Iraq to request to be a conscientious objector, and he now speaks at antiwar rallies and conferences, counseling other would-be resisters. "As this war continues, we're going to see more refusals, disobeying of orders, stop-loss lawsuits," said Marti Hiken, who co-chairs the National Lawyers Guild Military Law Task Force. "There's going to be more and more resistance." Conscientious objection, as defined by the military, is a "firm, fixed and sincere objection to war in any form or the bearing of arms" because of deeply-held moral, ethical, or religious beliefs. A soldier cannot be a conscientious objector just because of opposition to a particular war. To apply as a conscientious objector is a labyrinthine process that includes a written application and interviews with a psychiatrist, a military chaplain, and an investigating officer. "Being a conscientious objector is not an easy way to get out of the military and not a fast way to get out of the military," said JE McNeil, executive director of The Center on Conscience & War, a 65-year-old Washington D.C.-based nonprofit organization that supports the rights of conscientious objectors. The organization runs the GI Rights Hotline, and McNeil said it received more than 36,000 calls this year from soldiers interested in how to get out of their required service. That's up from fewer than 1,000 a year before the war in Iraq, she said. McNeil said her counselors usually get calls from soldiers who are already considered AWOL (absent without leave) or even deserters. She said they often counsel soldiers away from trying to be conscientious objectors, pointing them instead toward other types of discharge requests: hardship, parenthood, health problems, drug or alcohol use. These are usually more appropriate reasons, she said. Military studies show the main reason deserters cite for leaving the service are "dissatisfaction with Army life, family problems and homesickness." Simple desertion has been decreasing in the military in recent years - about 2,500 troops last year simply didn't show up for work, down from almost 5,000 in 2001, according to the Pentagon public affairs office. Some of these men and women are in hiding in Canada, where about 20 have applied for refugee status. Army paratrooper Jeremy Hinzman, who fled from Fort Bragg, N.C., in January 2004, weeks before his 82nd Airborne Division was due to go to Iraq, is awaiting a February hearing in Toronto. "Perhaps I made a mistake by enlisting in the Army, but the U.S. is putting the lives of its soldiers in jeopardy in order to the line the pockets of big money," he said. Hinzman said he vowed to his wife that he wouldn't go to Iraq, and then had to decide whether he would face a court martial or flee. He said he didn't want to miss out on his son's formative years, so he chose Canada. Hinzman's attorney said as many as 200 American war resisters are hiding in Canada, waiting to see how Hinzman's case plays out before coming forward. Hinzman said he and his wife plan to use every legal channel they can to stay where they are. "We simply want to be granted some sort of status here and then sink into an a life of obscurity where we can be decent, hard-working, tax-paying citizens," he said. About a dozen reservists have filed "stop loss" lawsuits, arguing that it is illegal to make them stay in the military once their required term of service is complete. The Bush Administration has argued with success so far that under federal law the Pentagon can involuntarily extend the deployment of any reserve officer who's on active duty, if the president believes it's essential to national security. Several of these objectors, like Army Spc. David W. Qualls, signed up for a so-called "Try One" program with Army National Guard which the Army says "allows a veteran to serve for only one year on a trial basis before committing to a full enlistment." Just a few months into his service last year, the Army told Qualls he was recalled to active duty and his "expiration of term of service" had been extended for an undetermined number of years. "What this boils down to in my opinion is a question of fairness," said Qualls. He filed a lawsuit, and even though he later accepted a $15,000 bonus and re-enlisted for six years, the suit has not been dropped, said his attorney, Staughton Lynd of Niles, Ohio. "He felt that his family was on the verge of bankruptcy and he had no economic alternative but to re-enlist," Lynd said. Many resisters complain that they were misled by recruiters. Others say their beliefs have changed. "When I enlisted I believed that killing was immoral, but also that war was an inevitable part of life and therefore, an exception to the rule," said Texas Army National Guard Spc. Katherine Jashinski, 22, who in November asked a federal judge to order her release from service. After joining the military, Jashinski said she "started to reevaluate everything that I had been taught about war as a child. I developed the belief that taking human life was wrong and war was no exception. I was then able to clarify who I am and what it is that I stand for." Jashinski, a cook, learned in October that her 2004 conscientious objector discharge application was denied. Now awaiting a hearing, she says she will not deploy with her unit. Although there have always been soldiers who refuse to fight on moral grounds, the U.S. government made conscientious objector status official in 1962. Four years later, during the Vietnam War, requests began to pour in. Desertion rates also hit historical highs, and thousands of soldiers who refused to deploy were court-martialed. In 1971, requests peaked when 4,381 members of the military applied to be conscientious objectors. Twenty years later, during the Gulf War, conscientious objector applications rose to 441 in 1991. At that time, about 500,000 soldiers were deployed in the Persian Gulf. Aidan Delgado decided he was a conscientious objector last year, after spending a year in Iraq where he was stationed at Abu Ghraib prison. His application was approved and he was honorably discharged last January. "When I met Iraqi prisoners firsthand, I saw the people who were supposed to be our enemies but I didn't hate them. They were young, poor guys without an education, like us. They were supposed to fight us and we were supposed to fight them. It didn't make sense," said Delgado, who speaks Arabic and lived for a while as a child in Egypt. "I told my commander that I wouldn't kill anyone. I turned in my rifle." Behind the Eavesdropping Story, a Loud Silence By BYRON CALAME January 1, 2006 The Public Editor NY Times THE New York Times's explanation of its decision to report, after what it said was a one-year delay, that the National Security Agency is eavesdropping domestically without court-approved warrants was woefully inadequate. And I have had unusual difficulty getting a better explanation for readers, despite the paper's repeated pledges of greater transparency. For the first time since I became public editor, the executive editor and the publisher have declined to respond to my requests for information about news-related decision-making. My queries concerned the timing of the exclusive Dec. 16 article about President Bush's secret decision in the months after 9/11 to authorize the warrantless eavesdropping on Americans in the United States. I e-mailed a list of 28 questions to Bill Keller, the executive editor, on Dec. 19, three days after the article appeared. He promptly declined to respond to them. I then sent the same questions to Arthur Sulzberger Jr., the publisher, who also declined to respond. They held out no hope for a f