Thursday, July 31, 2008

We are made wise not by the recollection of our past, but by the responsibility for our future.~George Bernard Shaw




EXCLUSIVE: To Provoke War, Cheney Considered Proposal To Dress Up Navy Seals As Iranians And Shoot At Them»

Speaking at the Campus Progress journalism conference earlier this month, Seymour Hersh — a Pulitzer-Prize winning journalist for The New Yorker — revealed that Bush administration officials held a meeting recently in the Vice President’s office to discuss ways to provoke a war with Iran.

In Hersh’s most recent article, he reports that this meeting occurred in the wake of the overblown incident in the Strait of Hormuz, when a U.S. carrier almost shot at a few small Iranian speedboats. The “meeting took place in the Vice-President’s office. ‘The subject was how to create a casus belli between Tehran and Washington,’” according to one of Hersh’s sources.

During the journalism conference event, I asked Hersh specifically about this meeting and if he could elaborate on what occurred. Hersh explained that, during the meeting in Cheney’s office, an idea was considered to dress up Navy Seals as Iranians, put them on fake Iranian speedboats, and shoot at them. This idea, intended to provoke an Iran war, was ultimately rejected:

HERSH: There was a dozen ideas proffered about how to trigger a war. The one that interested me the most was why don’t we build — we in our shipyard — build four or five boats that look like Iranian PT boats. Put Navy seals on them with a lot of arms. And next time one of our boats goes to the Straits of Hormuz, start a shoot-up.

Might cost some lives. And it was rejected because you can’t have Americans killing Americans. That’s the kind of — that’s the level of stuff we’re talking about. Provocation. But that was rejected.

Watch it:

Hersh argued that one of the things the Bush administration learned during the encounter in the Strait of Hormuz was that, “if you get the right incident, the American public will support” it.

“Look, is it high school? Yeah,” Hersh said. “Are we playing high school with you know 5,000 nuclear warheads in our arsenal? Yeah we are. We’re playing, you know, who’s the first guy to run off the highway with us and Iran.”

Transcript:

HERSH: There was a meeting. Among the items considered and rejected — which is why the New Yorker did not publish it, on grounds that it wasn’t accepted — one of the items was why not…

There was a dozen ideas proffered about how to trigger a war. The one that interested me the most was why don’t we build — we in our shipyard — build four or five boats that look like Iranian PT boats. Put Navy seals on them with a lot of arms. And next time one of our boats goes to the Straits of Hormuz, start a shoot-up. Might cost some lives.

And it was rejected because you can’t have Americans killing Americans. That’s the kind of — that’s the level of stuff we’re talking about. Provocation. But that was rejected.

So I can understand the argument for not writing something that was rejected — uh maybe. My attitude always towards editors is they’re mice training to be rats.

But the point is jejune, if you know what that means. Silly? Maybe. But potentially very lethal. Because one of the things they learned in the incident was the American public, if you get the right incident, the American public will support bang-bang-kiss-kiss. You know, we’re into it.

…What happened in the Gulf was, in the Straits, in early January, the President was just about to go to the Middle East for a visit. So that was one reason they wanted to gin it up. Get it going.

Look, is it high school? Yeah. Are we playing high school with you know 5,000 nuclear warheads in our arsenal? Yeah we are. We’re playing, you know, who’s the first guy to run off the highway with us and Iran.

Update: Kevin Drum adds:
If this story sounds familiar, that's because it is. In one of David Manning's famous memos describing a prewar meeting between George Bush and Tony Blair, he says that Bush admitted that WMD was unlikely to be found in Iraq and then mused on some possible options for justifying a war anyway:
"The U.S. was thinking of flying U2 reconnaissance aircraft with fighter cover over Iraq, painted in U.N. colours," the memo says, attributing the idea to Mr. Bush. "If Saddam fired on them, he would be in breach."
In the end, of course, we didn't do this. We just didn't bother with any pretext at all.
Poland in World War II September 1, 1939 - May 8, 1945
The world in August 1939 was a world that held its breath. Fighting had ended in Spain, and the war in China had stagnated. But few people believed war would be avoided

What was not certain was where and when. Adolf Hitler enjoyed tremendous popularity at home, and pro-Nazi factions were active in the United States, France, and Great Britain. His recent occupation of Czechoslovakia had raised alarms in capitals across Europe, even though many people ignorant of the violence and terror of the German political machine still looked to Hitler as a role model for their own governments.

Then the unthinkable happened. Joaquim von Ribbentrop, Hitler’s Foreign Minister, went to Moscow the last week of August to secure a Nazi-Soviet Nonaggression Pact. Stalin, perhaps trying to buy time with Hitler himself, ordered his Foreign Minister, Molotov, to sign on August 21, 1939. When this agreement was announced to the world, it left out some key terms: the dismemberment of Poland.

Anyone reading Mein Kampf could see what Hitler thought of Poland. A former province of Czarist Russia, Poland had been guaranteed access to the sea — the “Free Corridor” of Danzig — by the League of Nations. This agreement separated Prussia from Greater Germany by cutting a path through to the seaport of Danzig. This angered Hitler and many Germans, who saw the land as the birthright of Germans everywhere.

Moreover, Poland was not an Aryan land. Poles were untermensch, “inferior people,” only good as slaves or corpses. After the dismemberment of Czechoslovakia, Hitler ordered his general staff to draw up plans for the invasion of Poland. The Germans would invade from the West, the Soviets from the East, and divide the country along previously agreed upon lines.

The SS took twelve prisoners out of Buchenwald, drove them to the Polish border and forced them to take poison after putting on Polish uniforms. The corpses were shot. An SS Officer yelled in Polish into a radio that they had come to invade Germany, and then the SS fled.

On September 1, 1939, Hitler told the Nazi Reichstag that Poland had tried to invade Germany, and the Wehrmacht was returning fire since 5:45 AM. Actually, in a carefully planned and highly mobile attack codenamed Fall Weiss (Case White) planned by Generalfeldmarschall Walther von Brauchitsch, German land, sea, and air forces were moving rapidly into Poland.

Poland’s army in 1939 was totally unprepared for the new warfare it found itself in. Poland, like many armies, had large cavalry forces. What modern aircraft the Polish Air Force had were caught on the ground.

England and France wearily knew that they could not sacrifice Poland the way Czechoslovakia had been. On September 3, 1939, the Allies declared war against National Socialist Germany. The declaration did not save Poland. Lodz was about to fall, and Krakow fell on September 6. The fort at Danzig fell on September 7, after a week of direct fire from German battleships.

After a surprise Polish maneuver inflicted heavy casualties, the Germans rallied and took 100,000 prisoners. By September 16, German artillery ringed Warsaw, and the Nazis gave the Poles an ultimatum: surrender or face bombardment. The Poles demurred, and endured heavy shelling until September 27. German troops occupied Warsaw on October 1.

On September 17, Soviet troops entered Western Poland. They stopped at Brest-Litovsk, where Germans had allowed the Bolsheviks to withdraw from World War I. Again the two nations carved up Poland.

Organized Polish resistance ended on October 6, 1939. Some 100,000 Polish soldiers would escape to form the Free Polish Brigade in England, where they would fight in the air during the Battle of Britain and on land after the Normandy invasion.

The Nazis appointed former SA stormtrooper Hans Frank to Gauleiter (Governor General) of Poland. Under his direction over 6,000,000 Poles died, including 3,000,000 Jews.

As the Red Army approached Warsaw during their 1944 offensive, Stalin ordered a halt. The pro-west Polish Home Army was destroyed by the Germans. Only after the western Poles were annihilated did the Red Army resume the advance.

As Germany was near collapse in 1945, most of the forced laborers in Germany were French. There were no longer enough Poles left alive to feed Germany’s slave labor requirements.

Burning the Reichstag

From SourceWatch

On the 27. February in 1933, one month after Adolf Hitler was declared Reichskanzler, the Reichstags-building in Berlin was burning.

The Burning Reichstag Newspaper - Reichstag's burning

When the police arrived they found Marinus van der Lubbe on the premises.
After being tortured by the Gestapo he confessed to starting the Reichstag Fire.
However he denies that he was part of a Communist conspiracy.
Hermann Goering refused to believe him and he ordered the arrest of several leaders of the German Communist Party (KPD).

When Hitler heard the news about the fire he gave orders that all leaders of the German Communist Party should "be hanged that very night."
Paul von Hindenburg vetoed this decision but did agree that Hitler should take "dictatorial powers". KPD candidates in the election were arrested and Hermann Goering announced that the Nazi Party planned "to exterminate" German communists.

 Communists burned the Reichstag!


As well as Marinus van der Lubbe the German police charged four communists with setting fire to the Reichstag. This included Ernst Torgler, the chairman of the KPD and Georgi Dimitrov of the Soviet Comintern.

Marinus van der Lubbe was found guilty of the Reichstag Fire and was executed on 10th January, 1934. Adolf Hitler was furious that the rest of the defendants were acquitted and he decided that in the future all treason cases were to be taken from the Supreme Court and given to a new People's Court where prisoners were judged by members of the National Socialist German Workers Party (NSDAP).

The burning of the Reichstag was very useful for the German Government. On the 28. of February, the Reichstagsbrandverordnung (similiar to Patriot Act) was set in power.

This Decree of the Reich President for the Protection of the People and State abrogates the following constitutional protections.

  • Free expression of opinion
  • Freedom of the press
  • Right of assembly and association
  • Right to privacy of postal and electronic communications
  • Protection against unlawful searches and seizures
  • Individual property rights
  • Federal States' right of self-government

A supplemental decree creates the SA (Storm Troops) and SS (Special Security) Federal police agencies.

ANALYSIS

The events in 1933 can be summarized as follows:

  • While it is not clear whether the Nazis intentionally set the Reichstag fire in order to create a national crisis, or whether the Nazis simply were opportunistic, the event was used as justification for a sharp curtailment in constitutionally guaranteed civil liberties.
  • The Nazis took advantage of the additional Federal police powers to suppress opponents.
  • It is clear that in other situations, the Nazis did use the tactic of creating a "law and order" crisis so that they could provide a solution which further eroded civil liberties and entrenched their power.
  • The right-wing Nazis and the left-wing communists were cut from the same cloth -- the point is not that the far right destroyed civil rights. Rather, the point is that a democracy can be destroyed by creating a law-and-order crisis and offering as a 'solution' the abdication of civil liberties and state's rights to a powerful but unaccountable central authority.

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Fools, Damn Fools and Republicans


US elections: Obama accused of playing race card as presidential campaign turns nasty

The battle for the White House took a nasty turn today when John McCain's team accused Barack Obama of "playing the race card".

McCain's team said it was responding to a speech the previous day by Obama in which the Democratic candidate claimed his Republican rival was trying to frighten voters by saying he had a strange name and did not look like other presidents.

McCain's team interpreted this as Obama implying his rival was a racist. Rick Davis, McCain's campaign manager, said Obama had "played the race card and played it from the bottom of the deck".

He described Obama's comments as "divisive, negative, shameful and wrong". Obama's team responded by calling Davis's statement low politics.

Now that race is out as an issue, it is likely to remain a subtext for the remainder of the election. If many Americans remain privately racist, McCain could benefit. Alternatively, voters could take the opportunity to choose Obama to demonstrate that race is no longer a significant factor.

The row came after a week in which McCain launched a series of personal attacks on Obama, including a TV ad accusing him of engaging in celebrity politics and comparing him to Paris Hilton and Britney Spears.

Obama, seeking to become the first African-American president, was not helped by a song by the Grammy award-winning rapper Ludacris endorsing him and abusing McCain, George Bush and Clinton.

The campaign has shifted from promises made by McCain earlier this year to fight on policy not personality and to respect his opponent.

The switch came shortly after McCain reshuffled his team and made Steve Schmidt his chief strategist. Schmidt, launching the new ad, asked whether the American people wanted to elect the world's biggest celebrity, Obama, or an American hero, McCain.

Race first surfaced as an issue in December in the fight between Obama and Clinton when Obama's team blamed Bill Clinton for bringing it up, a charge the former president denied.

McCain's team made the subject an issue after Obama said in a speech in Springfield, Missouri: "So nobody really thinks that Bush or McCain have a real answer for the challenges we face, so what they're going to try to do is make you scared of me. You know, he's not patriotic enough. He's got a funny name. You know, he doesn't look like all those other presidents on those dollar bills, you know. He's risky. That's essentially the argument they're making."

On the campaign trail in Cedar Rapids, Iowa, today, Obama had not yet heard about the race card remark. Instead, he turned on McCain over the celebrity ad. "So far all we have heard is Paris Hilton and Britney Spears," he said. To cheers from the audience, he added: "I have to ask my opponent: 'Is that the best you can come up with?'"

Obama, who has resisted personal criticism of McCain, went on to say that such attacks would not help bring down petrol prices or address other public concerns.

David Plouffe, Obama's campaign manager, referred to the celebrity ad in an appeal for funds today, describing it as the "lowest in a series of misleading attack ads" and, in a reference to Bush's former campaign strategist, calling ita "Karl Rove-style ploy".

Negative campaigning, while ritually denounced by politicians in public, tends to be effective. It is too early yet to see any impact in the polls but one by Quinnipiac University, Connecticut, today confirmed that Obama retained a lead over McCain in the three main battleground states, though small in two of them: 46% to McCain's 44% in Florida; the same in Ohio; and 49%-42% in Pennsylvania.

A theme adopted by the McCain team this week was to portray Obama as arrogant, behaving as if he were already president, citing his speech in Berlin in front of 200,000 people. In the Quinnipiac poll 37% of respondents said they thought he was arrogant.

The Obama team denounced as "outrageously offensive" the Ludacris song Politics: Obama is here. In it, Ludacris says: "Hillary hated on you, so that bitch is irrelevant … McCain don't belong in any chair unless he's paralysed. Yeah I said it cause Bush is mentally handicapped."

Bill Burton, Obama's spokesman, said: "As Barack Obama has said many, many times in the past, rap lyrics too often perpetuate misogyny, materialism and degrading images that he doesn't want his daughters or any children exposed to … While Ludacris is a talented individual he should be ashamed of these lyrics."

Yeah, the Black guy is the racist. McCain didn't want America to celebrate MLK Day but, hey, that's okay. OMG, shitslide history!-java (P.S.: Do you suppose "presumptuous" is just another word for "uppity"?)

Popular Art and Racism: Embedding Racial Stereotypes in the American Mindset--
Jim Crow and Popular Culture


Ronald L. F. Davis, Ph. D.

The onset of Jim Crow laws and customs rested upon the racist characterization of black people as culturally, personally, and biologically inferior. This image functioned as the racial bedrock of American popular culture after 1900, especially manifested in minstrel shows, the vaudeville theatre, songs and music, film and radio, and commercial advertising. So pervasive was the racial demeaning of black people, and so accepted was it by white Americans throughout the nation, that blackness became synonymous with silliness, deprivation, and ignorance. Most white Americans believed that all Africans and their descendants were racially inferior to whites, and that their common inferiority tied them together wherever they might live in the modern world.

In America, black people were portrayed as inferior almost from the time of their enslavement in the colonies in the 1620s. This racial characterization enabled white masters to justify slavery as something positive. Using racial stereotypes to justify the enslavement of blacks was especially pronounced after 1830 as white Southerners defended slavery against attacks by northern abolitionists.

This historic view of blacks became deeply embedded in American popular culture with the emergence of the minstrel show in the 1840s. By 1900, the image of silly and exaggerated black men and women in comic routines was the mainstay of musical acts, songs, and skits that dominated the theatrical scene in America well into the twentieth century. (For further discussion of the relationship of Jim Crow and minstrel shows, see Creating Jim Crow, In-Depth Essay.

The image of black people in the white mind focused on outrageous depictions of individual blacks and their assumed cultural practices. Countless representations of impoverished blacks with ink-black skin, large thick red lips, and bulging eyeballs appeared almost everywhere in the public arena. Dozens of graphic artists and illustrators prospered as racial commercial artists by drawing such images to sell products and to illustrate show bills and magazines. Most prominent was Edward W. Kemble, whose racist illustrations were notorious in America and Europe, including his 1896 "classic," Kemble's Coons.

Perhaps, the most popular of all the Jim Crow industries by 1900 was the sheet music field, which made the derogatory word "coon" a part of everyday language. The black American Vaudeville performer and composer, Ernest Hogan, did more than anyone else, ironically, to popularize the so-called "coon" craze and racist characterization of blacks. His wildly popular 1896 song, "All Coons Look Alike to Me," appeared, usually illustrated with the images of ridiculously dressed black men and women, on billboards and sheet music all over the nation.

At the same time, as Jim Crow music, dance, theatre, and illustrations distorted the image of black Americans, a wave of racially driven commercial advertising flooded the landscape. Most popular were the racist trading or advertisement cards that used the outrageous images of black people to sell everything from yeast to furniture, pillows, fertilizers, hardware, cigars, breakfast food, and tobacco. Of these cards, racist advertisements that depicted a Mammy-like black woman (Aunt Jemima) selling pancakes were, perhaps, most popular. The silly "Gold Dust Twins," who performed as half-dressed, house-cleaning pickaninnies dispensing commercial washing powder, were also especially popular. Everywhere one turned were brightly colored and skillfully drawn images of big-eyed and thick-lipped blacks eating corn, sporting fanciful attire and riding a wild pig or some other farm animal, aping white elites to comic effect, trying to ice skate, clumsily walking along a high fashion boulevard, haplessly trying to ride horses in the manner of an English gentleman, and strutting proudly in exaggerated dress at parties and "darkey" balls.

And soon, the images became products themselves--racist dolls and Mammy-style metal banks flooded the consumer market as children's toys. By 1900, so accepted was the popular concept of black inferiority that racist brand names, such as "Niggerhead," began to appear--usually selling some aspect of blackness, such as ink or dye.

This outpouring of images, performances, and music was supported by a largely racist or else highly romanticized literary tradition. The novels and writings of Joel Chandler Harris, especially his Uncle Remus tales, written from 1888 through 1906, looked back at the days of plantation slavery as a time of racial harmony in which happy and simple-minded blacks lived with respect and dignity as slaves.

Thomas Nelson Page, whose early novels and short stories, usually narrated by elderly freedmen, portrayed, like Harris, a tranquil life in slavery where faithful blacks adored their masters and were cared for with affection and tenderness. By 1898, Page had turned bitter, however, and began depicting blacks as sinister characters that could not be trusted in freedom. No author was more racist or more popular than Thomas Dixon, whose novel, The Clansman, published in 1905, blamed all of the South's woes on the inferior blacks who roamed the land unchecked following their emancipation.

When film and radio burst onto the American scene in the new century, the racial stereotypes were easily adapted and strengthened in these revolutionary forms of popular culture. Radio captured the imaginations of millions of passive listeners who tuned in for broadcasts of the Amos and Andy shows--the most popular radio show in America in the 1930s. Rooted in the old minstrel shows and blackfaced vaudeville acts, the program portrayed two southern black men who had moved to Chicago. Its characters of the Kingfish, a dishonest and lazy confidence man who massacred the English language by mispronouncing words, and Sapphire, his loud, abrasive, bossy, and emasculating wife, became permanent fixtures in the minds of white Americans. The program dominated radio in the 1930s and 1940s, and played as a popular television show in the 1950s.

Like radio, Hollywood films also presented blacks within the context of images from the minstrel shows and vaudeville. Usually, blacks were presented as faithful and often wise or hapless servants, resolute and devoted Mammy-type characters, and often stupid and silly chicken-stealing blacks. Many of the classic film landmarks of American culture featured such stereotypical portrayals of African Americans. These films included such classics as Birth of a Nation (1915), The Jazz Singer (1927), which was the first sound film, Gone with the Wind (1939), the most popular film of all time, and the sentimental Song of the South (1946), an animated film produced by Walt Disney and based upon the Uncle Remus stories of Joel Chandler Harris.

Birth of a Nation was truly a product of its times when it hit the nation's movie houses in 1915. It fused the two most basic racial themes of the Jim Crow South, demonstrating the close link between the two: the minstrel show and lynching. And, in the latter case, it greatly strengthened the racist image of black men as beasts who lusted after innocent white women and girls. The film, which was the blockbuster of its day, raking in over $200 million dollars from its debut in 1915 to the mid 1920s, launched a wave of "Negrophobia," which is the fear of and/or contempt for black people and their culture. After viewing this film, many white males honestly worried about leaving their wives and children at home alone out of fear that black beasts lurked in the shadows all around. In some communities, after seeing the film, the whites randomly attacked and beat any blacks they found on the streets. The movie helped revive the long dead Ku Klux Klan and inspired a new wave of white supremacy in the 1920s.

Most "Southern Films," although far less viciously anti-black than Birth of a Nation, played, nevertheless, to the white supremacy convictions of most Americans. Continuously voted the most popular film of all times whenever surveys are made, the epic Gone With the Wind, based on the novel by Margaret Mitchell, presented a range of black characters who exemplified various aspects of the accepted racial stereotypes. Although the black actresses Mattie McDaniel and Butterfly McQueen brilliantly played the Mammy character and the witless house servant, both women were barred from the week's events surrounding the Atlanta premier of the film in 1939. McDaniel, who went on to be the first African American to win an Oscar for her performance as the strong and resolute Mammy, was viewed by white audiences as a loyal and faithful servant--which was an acceptable black image.

And McQueen, who had starred in dozens of black theatrical performances during the Harlem Renaissance, displayed a genuine comic talent in ways that sadly supported the racist views of blacks as incompetent people. Her performance, along with those of the popular black actors Stepin Fetchet, who portrayed a lazy, whining, clown-like character in numerous films in the 1930s and 1940s, and Billy "Bo Jangles" Robinson, the tap dancing house servant in several Shirley Temple films in the 1930s, continued the long line of racial characterizations stretching from the minstrel shows through vaudeville and radio.

At the same time that black stereotypes and racist characterizations dominated the popular culture of white supremacy, significant contrasts did exist and provided refuge for black Americans. The Harlem and Chicago Renaissance movements in literature and the arts of the 1920s presented richly creative and genuine black achievements in contrast to the popular images of white supremacy.

In film, for example, over 200 "race movies" were produced between 1915 and 1945. Most of these films countered the stereotypical images of blacks, presenting them instead as doctors, lawyers, soldiers, cowboys, gangsters, and men and women of character. Most importantly, they featured all-black casts. Three Oscar Micheaux films were among the best of these: Within Our Gates (1920), which presents the lynching of Leo Frank in Atlanta; The Brute (1920), which is the story of a black man standing up to a lynch mob; and Birthright (1939), which tells of a black Ivy League man who returns to the South after college. In the white mainstream, moreover, the popular musical, Show Boat, featuring the great black actor and singer, Paul Robeson, was one of the first films to show black people as strong and complex men and women victimized by racism in America.

Still, images of blacks as lazy, thieving, conniving people; hapless or faithfully devoted servants; or dangerously sex-crazed beasts dominated the media during the Jim Crow era. The accepted racial stereotypes supported a racist America in which lynching, the Ku Klux Klan, disfranchisement, and segregation ruled the land. At a sold out charity benefit during the premier of Gone With the Wind in Atlanta in 1939, local promoters recruited blacks to sing in a "slave choir" on the steps of a white-columned plantation mansion built for the event. Among the local African Americans in the choir was a young black man dressed as a slave who made his first appearance that evening in the national spotlight. His name was Martin Luther King, Jr.


July 31, 2008, 2:56 PM

Obama: "Is That The Best You Can Come Up With?"

Posted by Allison O'Keefe

From CBS News' Allison O'Keefe:

(Cedar Rapids, Iowa) – Barack Obama is trying to make John McCain's recent TV ad backfire on the Republican.

At a town hall meeting in Iowa today, Obama reiterated his assertion that since Republicans have no new ideas, they continue to make the election about him. "All of those negative ads that he's running won't do a thing to lower your gas prices," Obama told a crowd of about a thousand.

Sen. McCain's new ad "Celeb," which showcases Obama's celebrity status, is getting a lot of attention, especially from Obama himself. "All we have been hearing about is Paris Hilton and Britney Spears. I do have to ask my opponent, is that the best you can come up with? Is that really what this election is about?" The comment received a welcome reception. At one point, when Obama was referring to his opponent, someone in the audience shouted, "Hater!"

When Obama walked onto the stage here in Cedar Rapids, he was greeted with a chorus of "Happy Birthday, Mr. President." Obama will be 47 on Monday. The town hall was geared toward energy policy and Obama used the opportunity to point to the news today that Exxon Mobile's profit this quarter clocked in at a record high. "No U.S. corporation has ever made that much in a quarter. But while big oil is making record profits, you are paying record prices at the pump, and our economy is leaving working people behind," he said.

At the end of his prepared remarks, Obama reminisced about the origins of his campaign. Cedar Rapids, Iowa was the first stop following his announcement that he was running for president. “It was the dead of the winter. The skeptics predicted we wouldn't get very far. The cynics dismissed it as a lot of hype, a lot of celebrity, a little too much hope."
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Mr. McCain, I am NOT Your Friend and, Apparently, Neither is the Truth.





Acts of War

Truthdighttp://www.truthdig.com/report/item/20080729_acts_of_war/

Posted on Jul 29, 2008

By Scott Ritter

The war between the United States and Iran is on. American taxpayer dollars are being used, with the permission of Congress, to fund activities that result in Iranians being killed and wounded, and Iranian property destroyed. This wanton violation of a nation’s sovereignty would not be tolerated if the tables were turned and Americans were being subjected to Iranian-funded covert actions that took the lives of Americans, on American soil, and destroyed American property and livelihood. Many Americans remain unaware of what is transpiring abroad in their name. Many of those who are cognizant of these activities are supportive of them, an outgrowth of misguided sentiment which holds Iran accountable for a list of grievances used by the U.S. government to justify the ongoing global war on terror. Iran, we are told, is not just a nation pursuing nuclear weapons, but is the largest state sponsor of terror in the world today.

Much of the information behind this is being promulgated by Israel, which has a vested interest in seeing Iran neutralized as a potential threat. But Israel is joined by another source, even more puzzling in terms of its broad-based acceptance in the world of American journalism: the Mujahadeen-e Khalk, or MEK, an Iranian opposition group sworn to overthrow the theocracy in Tehran. The CIA today provides material support to the actions of the MEK inside Iran. The recent spate of explosions in Iran, including a particularly devastating “accident” involving a military convoy transporting ammunition in downtown Tehran, appears to be linked to an MEK operation; its agents working inside munitions manufacturing plants deliberately are committing acts of sabotage which lead to such explosions. If CIA money and planning support are behind these actions, the agency’s backing constitutes nothing less than an act of war on the part of the United States against Iran.

The MEK traces its roots back to the CIA-orchestrated overthrow of the democratically elected Prime Minister Mohammed Mossadeg. Formed among students and intellectuals, the MEK emerged in the 1960s as a serious threat to the reign of Reza Shah Pahlevi. Facing brutal repression from the Shah’s secret police, the SAVAK, the MEK became expert at blending into Iranian society, forming a cellular organizational structure which made it virtually impossible to eradicate. The MEK membership also became adept at gaining access to positions of sensitivity and authority. When the Shah was overthrown in 1978, the MEK played a major role and for a while worked hand in glove with the Islamic Revolution in crafting a post-Shah Iran. In 1979 the MEK had a central role in orchestrating the seizure of the U.S. Embassy in Tehran, and holding 55 Americans hostage for 444 days.

However, relations between the MEK and the Islamic regime in Tehran soured, and after the MEK staged a bloody coup attempt in 1981, all ties were severed and the two sides engaged in a violent civil war. Revolutionary Guard members who were active at that time have acknowledged how difficult it was to fight the MEK. In the end, massive acts of arbitrary arrest, torture and executions were required to break the back of mainstream MEK activity in Iran, although even the Revolutionary Guard today admits the MEK remains active and is virtually impossible to completely eradicate.

It is this stubborn ability to survive and operate inside Iran, at a time when no other intelligence service can establish and maintain a meaningful agent network there, which makes the MEK such an asset to nations such as the United States and Israel. The MEK is able to provide some useful intelligence; however, its overall value as an intelligence resource is negatively impacted by the fact that it is the sole source of human intelligence in Iran. As such, the group has taken to exaggerating and fabricating reports to serve its own political agenda. In this way, there is little to differentiate the MEK from another Middle Eastern expatriate opposition group, the Iraqi National Congress, or INC, which infamously supplied inaccurate intelligence to the United States and other governments and helped influence the U.S. decision to invade Iraq and overthrow Saddam Hussein. Today, the MEK sees itself in a similar role, providing sole-sourced intelligence to the United States and Israel in an effort to facilitate American military operations against Iran and, eventually, to overthrow the Islamic regime in Tehran.

The current situation concerning the MEK would be laughable if it were not for the violent reality of that organization’s activities. Upon its arrival in Iraq in 1986, the group was placed under the control of Saddam Hussein’s Mukhabarat, or intelligence service. The MEK was a heavily militarized organization and in 1988 participated in division-size military operations against Iran. The organization represents no state and can be found on the U.S. State Department’s list of terrorist organizations, yet since the U.S. invasion of Iraq in 2003, the MEK has been under the protection of the U.S. military. Its fighters are even given “protected status” under the Geneva Conventions. The MEK says its members in Iraq are refugees, not terrorists. And yet one would be hard-pressed to find why the 1951 Geneva Convention on Refugees should confer refugee status on an active paramilitary organization that uses “refugee camps” inside Iraq as its bases.

The MEK is behind much of the intelligence being used by the International Atomic Energy Agency in building its case that Iran may be pursuing (or did in fact pursue in the past) a nuclear weapons program. The complexity of the MEK-CIA relationship was recently underscored by the agency’s acquisition of a laptop computer allegedly containing numerous secret documents pertaining to an Iranian nuclear weapons program. Much has been made about this computer and its contents. The United States has led the charge against Iran within international diplomatic circles, citing the laptop information as the primary source proving Iran’s ongoing involvement in clandestine nuclear weapons activity. Of course, the information on the computer, being derived from questionable sources (i.e., the MEK and the CIA, both sworn enemies of Iran) is controversial and its veracity is questioned by many, including me.

Now, I have a simple solution to the issue of the laptop computer: Give it the UNSCOM treatment. Assemble a team of CIA, FBI and Defense Department forensic computer analysts and probe the computer, byte by byte. Construct a chronological record of how and when the data on the computer were assembled. Check the “logic” of the data, making sure everything fits together in a manner consistent with the computer’s stated function and use. Tell us when the computer was turned on and logged into and how it was used. Then, with this complex usage template constructed, overlay the various themes which have been derived from the computer’s contents, pertaining to projects, studies and other activities of interest. One should be able to rapidly ascertain whether or not the computer is truly a key piece of intelligence pertaining to Iran’s nuclear programs.

The fact that this computer is acknowledged as coming from the MEK and the fact that a proper forensic investigation would probably demonstrate the fabricated nature of the data contained are why the U.S. government will never agree to such an investigation being done. A prosecutor, when making a case of criminal action, must lay out evidence in a simple, direct manner, allowing not only the judge and jury to see it but also the accused. If the evidence is as strong as the prosecutor maintains, it is usually bad news for the defendant. However, if the defendant is able to demonstrate inconsistencies and inaccuracies in the data being presented, then the prosecution is the one in trouble. And if the defense is able to demonstrate that the entire case is built upon fabricated evidence, the case is generally thrown out. This, in short, is what should be done with the IAEA’s ongoing probe into allegations that Iran has pursued nuclear weapons. The evidence used by the IAEA is unable to withstand even the most rudimentary cross-examination. It is speculative at best, and most probably fabricated. Iran has done the right thing in refusing to legitimize this illegitimate source of information.

A key question that must be asked is why, then, does the IAEA continue to permit Olli Heinonen, the agency’s Finnish deputy director for safeguards and the IAEA official responsible for the ongoing technical inspections in Iran, to wage his one-man campaign on behalf of the United States, Britain and (indirectly) Israel regarding allegations derived from sources of such questionable veracity (the MEK-supplied laptop computer)? Moreover, why is such an official given free rein to discuss such sensitive data with the press, or with politically motivated outside agencies, in a manner that results in questionable allegations appearing in the public arena as unquestioned fact? Under normal circumstances, leaks of the sort that have occurred regarding the ongoing investigation into Iran’s alleged past studies on nuclear weapons would be subjected to a thorough investigation to determine the source and to ensure that appropriate measures are taken to end them. And yet, in Vienna, Heinonen’s repeated transgressions are treated as a giant “non-event,” the 800-pound gorilla in the room that everyone pretends isn’t really there.

Heinonen has become the pro-war yin to the anti-confrontation yang of his boss, IAEA Director General Mohamed ElBaradei. Every time ElBaradei releases the results of the IAEA probe of Iran, pointing out that the IAEA can find no evidence of any past or present nuclear weapons program, and that there is a full understanding of Iran’s controversial centrifuge-based enrichment program, Heinonen throws a monkey wrench into the works. Well-publicized briefings are given to IAEA-based diplomats. Mysteriously, leaks from undisclosed sources occur. Heinonen’s Finnish nationality serves as a flimsy cover for neutrality that long ago disappeared. He is no longer serving in the role as unbiased inspector, but rather a front for the active pursuit of an American- and Israeli-inspired disinformation campaign designed to keep alive the flimsy allegations of a nonexistent Iranian nuclear weapons program in order to justify the continued warlike stance taken by the U.S. and Israel against Iran.

The fact that the IAEA is being used as a front to pursue this blatantly anti-Iranian propaganda is a disservice to an organization with a mission of vital world importance. The interjection of not only the unverified (and unverifiable) MEK laptop computer data, side by side with a newly placed emphasis on a document relating to the forming of uranium metal into hemispheres of the kind useful in a nuclear weapon, is an amateurish manipulation of data to achieve a preordained outcome. Calling the Iranian possession of the aforementioned document “alarming,” Heinonen (and the media) skipped past the history of the document, which, of course, has been well explained by Iran previously as something the Pakistani nuclear proliferator A.Q. Khan inserted on his own volition to a delivery of documentation pertaining to centrifuges. Far from being a “top-secret” document protected by Iran’s security services, it was discarded in a file of old material that Iran provided to the IAEA inspectors. When the IAEA found the document, Iran allowed it to be fully examined by the inspectors, and answered every question posed by the IAEA about how the document came to be in Iran. For Heinonen to call the document “alarming,” at this late stage in the game, is not only irresponsible but factually inaccurate, given the definition of the word. The Iranian document in question is neither a cause for alarm, seeing as it is not a source for any “sudden fear brought on by the sense of danger,” nor does it provide any “warning of existing or approaching danger,” unless one is speaking of the danger of military action on the part of the United States derived from Heinonen’s unfortunate actions and choice of words.

Olli Heinonen might as well become a salaried member of the Bush administration, since he is operating in lock step with the U.S. government’s objective of painting Iran as a threat worthy of military action. Shortly after Heinonen’s alarmist briefing in March 2008, the U.S. ambassador to the IAEA, Gregory Schulte, emerged to announce, “As today’s briefing showed us, there are strong reasons to suspect that Iran was working covertly and deceitfully, at least until recently, to build a bomb.” Heinonen’s briefing provided nothing of the sort, being derived from an irrelevant document and a laptop computer of questionable provenance. But that did not matter to Schulte, who noted that “Iran has refused to explain or even acknowledge past work on weaponization.” Schulte did not bother to note that it would be difficult for Iran to explain or acknowledge that which it has not done. “This is particularly troubling,” Schulte went on, “when combined with Iran’s determined effort to master the technology to enrich uranium.” Why is this so troubling? Because, as Schulte noted, “Uranium enrichment is not necessary for Iran’s civil program but it is necessary to produce the fissile material that could be weaponized into a bomb.”

This, of course, is the crux of the issue: Iran’s ongoing enrichment program. Not because it is illegal; Iran is permitted to enrich uranium for peaceful purposes under Article IV of the Nuclear Non-Proliferation Treaty. Not again because Iran’s centrifuge program is operating in an undeclared, unmonitored fashion; the IAEA had stated it has a full understanding of the scope and work of the Iranian centrifuge enrichment program and that all associated nuclear material is accounted for and safeguarded. The problem has never been, and will never be, Iran’s enrichment program. The problem is American policy objectives of regime change in Iran, pushed by a combination of American desires for global hegemony and an activist Israeli agenda which seeks regional security, in perpetuity, through military and economic supremacy. The specter of nuclear enrichment is simply a vehicle for facilitating the larger policy objectives. Olli Heinonen, and those who support and sustain his work, must be aware of the larger geopolitical context of his actions, which makes them all the more puzzling and contemptible.

A major culprit in this entire sordid affair is the mainstream media. Displaying an almost uncanny inability to connect the dots, the editors who run America’s largest newspapers, and the producers who put together America’s biggest television news programs, have collectively facilitated the most simplistic, inane and factually unfounded story lines coming out of the Bush White House. The most recent fairy tale was one of “diplomacy,” on the part of one William Burns, the No. 3 diplomat in the State Department.

I have studied the minutes of meetings involving John McCloy, an American official who served numerous administrations, Democratic and Republican alike, in the decades following the end of the Second World War. His diplomacy with the Soviets, conducted with senior Soviet negotiator Valerein Zorin and Soviet Premier Nikita Khrushchev himself, was real, genuine, direct and designed to resolve differences. The transcripts of the diplomacy conducted between Henry Kissinger and Le Duc Tho to bring an end to the Vietnam conflict is likewise a study in the give and take required to achieve the status of real diplomacy.

Sending a relatively obscure official like Burns to “observe” a meeting between the European Union and Iran, with instructions not to interact, not to initiate, not to discuss, cannot under any circumstances be construed as diplomacy. Any student of diplomatic history could tell you this. And yet the esteemed editors and news producers used the term diplomacy, without challenge or clarification, to describe Burns’ mission to Geneva on July 19. The decision to send him there was hailed as a “significant concession” on the part of the Bush administration, a step away from war and an indication of a new desire within the White House to resolve the Iranian impasse through diplomacy. How this was going to happen with a diplomat hobbled and muzzled to the degree Burns was apparently skipped the attention of these writers and their bosses. Diplomacy, America was told, was the new policy option of choice for the Bush administration.

Of course, the Geneva talks produced nothing. The United States had made sure Europe, through its foreign policy chief, Javier Solana, had no maneuvering room when it came to the core issue of uranium enrichment: Iran must suspend all enrichment before any movement could be made on any other issue. Furthermore, the American-backed program of investigation concerning the MEK-supplied laptop computer further poisoned the diplomatic waters. Iran, predictably, refused to suspend its enrichment program, and rejected the Heinonen-led investigation into nuclear weaponization, refusing to cooperate further with the IAEA on that matter, noting that it fell outside the scope of the IAEA’s mandate in Iran.

Condoleezza Rice was quick to respond. After a debriefing from Burns, who flew to Abu Dhabi, United Arab Emirates, where Rice was holding closed-door meetings with the foreign ministers of six Arab nations on the issue of Iran, Rice told the media that Iran “was not serious” about resolving the standoff. Having played the diplomacy card, Rice moved on with the real agenda: If Iran did not fully cooperate with the international community (i.e., suspend its enrichment program), then it would face a new round of economic sanctions and undisclosed punitive measures, both unilaterally on the part of the United States and Europe, as well as in the form of even broader sanctions from the United Nations Security Council (although it is doubtful that Russia and China would go along with such a plan).

The issue of unilateral U.S. sanctions is most worrisome. Both the House of Representatives, through HR 362, and the Senate, through SR 580, are preparing legislation that would call for an air, ground and sea blockade of Iran. Back in October 1962, President John F. Kennedy, when considering the imposition of a naval blockade against Cuba in response to the presence of Soviet missiles in that nation, opined that “a blockade is a major military operation, too. It’s an act of war.” Which, of course, it is. The false diplomacy waged by the White House in Geneva simply pre-empted any congressional call for a diplomatic outreach. Now the president can move on with the mission of facilitating a larger war with Iran by legitimizing yet another act of aggression.

One day, in the not-so-distant future, Americans will awake to the reality that American military forces are engaged in a shooting war with Iran. Many will scratch their heads and wonder, “How did that happen?” The answer is simple: We all let it happen. We are at war with Iran right now. We just don’t have the moral courage to admit it.

Scott Ritter is a former U.N. weapons inspector and Marine intelligence officer who has written extensively about Iran.

AP photo / Brennan Linsley

Members of the Iranian resistance group Mujahadeen-e Khalk, or MEK, guard a road leading to the group’s main training camp, watched over by a U.S. Army Abrams tank in background, near Baqubah in north-central Iraq.

Published on Tuesday, July 22, 2008 by Haaretz

Israel Fears Scathing US Report On Its West Bank Policies

by Amos Harel and Avi Issacharoff

The United States security coordinator for the Israeli-Palestinian conflict, retired general James Jones, is preparing an extremely critical report of Israel’s policies in the territories and its attitude toward the Palestinian Authority’s security services.

A few copies of the report’s executive summary (or, according to some sources, a draft of it) have been given to senior Bush Administration officials, and it is reportedly arousing considerable discomfort. In recent weeks, the administration has been debating whether to allow Jones to publish his full report, or whether to tell him to shelve it and make do with the summary, given the approaching end of President George Bush’s term.

Jones was appointed by Secretary of State Condoleezza Rice following the Annapolis peace conference last November. His assignment was to draft a strategic plan to facilitate stabilization of the security situation, as a necessary accompaniment to Israeli-Palestinian final-status negotiations. In this context, he assessed the PA security forces in the West Bank, whose reform is being overseen by another American general, Keith Dayton. Jones has visited the region several times and met with senior Israeli government officials and army officers.

According to both Israeli and American sources, the envoy’s conclusions about Israel are scathing. Israelis who met with Jones on his most recent visit here a few weeks ago, including Israel Defense Forces officers, said their impression was that the report would be “very harsh, and make Israel look very bad.”

Jones is apparently critical of Israel on two key issues. One is its fairly broad definition of its security interests in the West Bank under any final-status agreement. The other is its attitude toward the PA security services.

However, the sources said, Jones also had some criticism for Washington: He said its efforts to reform the PA security services fell short and complained that U.S. government agencies are not coordinating their assistance for these forces. In addition, he reportedly concluded that the PA forces are not yet capable of effectively enforcing the law in the West Bank.

The harsh criticisms contained in the executive summary are reportedly upsetting the Bush administration. Some senior U.S. officials are demanding that the full report not be published, so as not to create a storm in advance of the presidential elections in November. Jones, however, is apparently insisting that his full report be published,
just as the report he issued last year on the Iraqi security forces was.

Officials at the U.S. embassy in Tel Aviv declined to comment.

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Wouldn't Be Nice If All Those Pretty Lies, Like You Can Wage A War and Have A Tax Cut, Were Really True?


Encyclopedia > Con artist

A confidence trick, confidence game, or con for short, (also known as a scam) is an attempt to intentionally mislead a person or persons (known as the mark) usually with the goal of financial or other gain. The confidence trickster, con man, scam artist or con artist often works with an accomplice called the shill, who tries to encourage the mark by pretending to believe the trickster. In a traditional con, the mark is encouraged to believe that he will obtain money dishonestly by cheating a third party, and is stunned to find that due to what appears to be an error in pulling off the scam he is the one who loses money; in more general use, the term con is used for any fraud in which the victim is tricked into losing money by false promises of gain.


Some confidence tricks exploit the inherent greed and dishonesty of their victims; it has been said by confidence tricksters that it is impossible to con a completely honest man. Often, the mark tries to out-cheat the conmen, only to discover that they have been manipulated into this.


Sometimes conmen rely on na�ve individuals who put their confidence in get-rich-quick schemes such as 'too good to be true' investments. It may take years for the wider community to discover that such 'investment' schemes are bogus, and usually it is too late as many people have lost their life savings in something they have been confident of investing in....

How to Spot a Con or Con Artist at work

June 20, 2008

Red Flags: Flattery, Inflated Credentials, Fast talking for fast decisions

Sooner or later, you will have a run-in with a sociopath or psychopath.

There are just too many of them and they aren’t necessarily locked up in jail. Sociopaths and psychopaths roam through all parts of society all over the world and are in all walks of life.

There is only one way to protect yourself from them. You must know what they are and put up your guard when you start seeing the symptoms or sense something is not right.

Sociopaths are prolific con artists. Here are some typical con artist tricks.

For even more information about how con artists work, read The Complete Idiot’s Guide to Frauds, Scams, and Cons, by Duane Swierczynski.

Lavish flattery

If you’ve just met someone who is overwhelming you with praise, attention and concern, be careful. Be particularly careful if you’re lonely and looking for love—con artists know exactly how to play that tune.

Credentials sound exaggerated and fabricated

Sure Hong Kong may have a high concentration of extremely rich people driving around in Maseratis, Lamborginis and Ferraris. However, Con artists may need to ”prove” themselves by namedropping, volunteering detailed resumes and credentials. If you’re at all suspicious, check their references. Really, if they were that rich would they tell you right off the bat?

Building your trust

Con artists will sometimes honor their commitments in the beginning so that you begin to trust them. They’ll pay back initial loans, or appear to be unselfishly helping other people. Their objective is to get you to drop your guard.

The story doesn’t quite add up

The con artist’s story may have small inconsistencies or unexplained loose ends. It’s a wonder how he keeps track of all the lies he fabricates.

If you ask questions, the con will glibly provide an explanation — which may also not add up. Or, he or she will sidestep the issue by accusing you of paranoia or mistrust.

“I need an answer now.”

A crisis needs to be averted, an opportunity will disappear — whatever the reason, a con artist will want an answer right away. If you have time to think, research or ask advice, you may realize that con artist’s plan is a ploy. The con will want your money before you figure it out.

Intense eye contact

Typically, when people talk to each other, they look each other in the eyes and then briefly look away. Sociopathic con artists often exhibit a “predatory stare” — unblinking, fixated and emotionless. It’s not a sign of empathy—it’s an effort to assert control. (In Kevin’s case, he’s also always on his Blackberry or mobile phone pretending to be super busy since he needs to keep track of his targets at any one time.)

Isolation

A con artist will slowly and subtly separate you from people who may question his plans. He may intercept phone calls from your friends. He may refuse to associate with your family. He’ll tell you, “It’s you and me against the world, baby.” Soon, you’re alone with him, snared in his net.

U.S. Stocks Slide After Economic Growth Trails Forecasts

``The data put the market on notice that the economy is slowing,'' said Quincy Krosby, who helps manage $380 billion as chief investment strategist at the Hartford in Hartford, Connecticut. ``It's not equity friendly.''

Caterpillar Inc., Boeing Co. and Walt Disney Co. led the retreat after the Commerce Department said the economy grew at a 1.9 percent rate last quarter and contracted at the end of 2007. Exxon Mobil fell, extending the worst monthly slump for S&P 500 energy companies since at least 1989, after declining production slowed earnings growth. Benchmark indexes extended their tumble late in the day after former Federal Reserve Chairman Alan Greenspan said the housing slump will worsen.

The S&P 500 slid 16.88 points, or 1.3 percent, to 1,267.38, leaving the benchmark index down 1 percent in July. The Dow Jones Industrial Average lost 205.67, or 1.8 percent, to 11,378.02. The Nasdaq Composite Index slipped 4.17, or 0.2 percent, to 2,325.55. Almost three stocks retreated for each that rose on the New York Stock Exchange.

Jobs Concern

The S&P 500 trimmed its rebound from an almost three-year low on July 15 to 4.3 percent. The 448,000 increase in jobless claims weighed on stocks as investors await tomorrow's government report forecast to show the nation lost 75,000 jobs in July. Even though the majority of companies have beaten estimates, S&P 500 profit growth has slumped 17 percent on average from a year earlier, according to data compiled by Bloomberg.

The Dow ended the month with a 0.3 percent gain, while the Nasdaq posted a 1.4 percent increase.

Caterpillar, the largest maker of bulldozers, slumped 3.5 percent to $69.52 today. Boeing, the world's second-biggest commercial airplane maker, lost 4.3 percent to $61.11.

Disney, the biggest theme-park operator, dropped $1.32, or 4.2 percent, to $30.35 even after posting a 9 percent gain in third-quarter profit and beating analysts' estimates.

The Commerce Department report on gross domestic product showed the drag from the worst housing slump since the Great Depression and rising unemployment blunted the impact of federal tax rebates. Economists surveyed by Bloomberg had forecast growth of 2.3 percent in the second quarter.

The economy shrank 0.2 percent in the fourth quarter last year, compared with a previously reported 0.6 percent gain. The report also contained annual revisions that lowered the growth rate back to 2005.

``The markets don't like it,'' said Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York. ``You listen to a market of optimists who think the worst is over and that it's gonna be OK, but this data is showing you it's not.''

Exxon, MasterCard

Exxon slid $3.95, or 4.7 percent, to $80.43. Production tumbled 7.8 percent after assets were seized in Venezuela, Nigerian workers went on strike and record prices triggered contract clauses that give oil-rich governments a bigger share of output.

The S&P 500 Energy Index slumped 3.4 percent, extending its July retreat to 14 percent.

MasterCard Inc. dropped $29.36, or 11 percent, to $241.37. The world's second-biggest credit-card company posted a $746.7 million loss on costs to settle an antitrust lawsuit with American Express Co.

Akamai Technologies Inc. fell the most in the S&P 500, losing $7.91, or 25 percent, to $23.34. The largest supplier of software to speed up Web services lowered its profit forecast.

U.S. stocks likely will keep falling until consumer and business loans are more readily available, Merrill Lynch & Co.'s chief investment strategist said.

`Pretty Hard'

``It's going to be pretty hard for the stock market to bottom and form a bull market without credit conditions easing,'' said Richard Bernstein in a Bloomberg Television interview. ``Clearly credit issues aren't easing just yet.''

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: July 31, 2008 16:09 EDT
PSST...The more money the government borrows to fund deficit spending (see sidebar) the less money is available to private borrowers: businesses, mortgages and credit transactions...There are two ways to fund deficits, one is to borrow the money and the other is to get the Federal Reserve to print more, Bush has exhausted both options.--java

Economic Free Fall?

By William Greider

This article appeared in the August 18, 2008 edition of The Nation.

July 30, 2008

AVENGING ANGELS

Washington can act with breathtaking urgency when the right people want something done. In this case, the people are Wall Street's titans, who are scared witless at the prospect of their historic implosion. Congress quickly agreed to enact a gargantuan bailout, with more to come, to calm the anxieties and halt the deflation of Wall Street giants. Put aside partisan bickering, no time for hearings, no need to think through the deeper implications. We haven't seen "bipartisan cooperation" like this since Washington decided to invade Iraq.

In their haste to do anything the financial guys seem to want, Congress and the lame-duck President are, I fear, sowing far more profound troubles for the country. First, while throwing our money at Wall Street, government is neglecting the grave risk of a deeper catastrophe for the real economy of producers and consumers. Second, Washington's selective generosity for influential financial losers is deforming democracy and opening the path to an awesomely powerful corporate state. Third, the rescue has not succeeded, not yet. Banking faces huge losses ahead, and informed insiders assume a far larger federal bailout will be needed--after the election. No one wants to upset voters by talking about it now. The next President, once in office, can break the bad news. It's not only about the money--with debate silenced, a dangerous line has been crossed. Hundreds of billions in open-ended relief has been delivered to the largest and most powerful mega-banks and investment firms, while government offers only weak gestures of sympathy for struggling producers, workers and consumers.

The bailouts are rewarding the very people and institutions whose reckless behavior caused this financial mess. Yet government demands nothing from them in return--like new rules for prudent behavior and explicit obligations to serve the national interest. Washington ought to compel the financial players to rein in their appetite for profit in order to help save the country from a far worse fate: a depressed economy that cannot regain its normal energies. Instead, the Federal Reserve, the Treasury, the Democratic Congress and of course the Republicans meekly defer to the wise men of high finance, who no longer seem so all-knowing.

Let's review the bidding to date. After panic swept through the global financial community this spring, the Federal Reserve and Treasury rushed in to arrange a sweetheart rescue for Bear Stearns, expending $29 billion to take over the brokerage's ruined assets so JPMorgan Chase, the prestigious banking conglomerate, would agree to buy what was left. At the same time, the Fed and Treasury provided a series of emergency loans and liquidity for endangered investment firms and major banks. Investors were not persuaded. Their panic was not "mental," as former McCain adviser Phil Gramm recently complained. The collapse of the housing bubble had revealed the deep rot and duplicity within the financial system. When investors tried to sell off huge portfolios of spoiled financial assets like mortgage bonds, nobody would buy them. In fact, no one can yet say how much these once esteemed "safe" investments are really worth.

The big banks and investment houses are also stuck with lots of bad paper, and some have dumped it on their unwitting customers. The largest banks and brokerages have already lost enormously, but lending portfolios must shrink a lot more--at least $1 trillion, some estimate. So wary shareholders are naturally dumping financial-sector stocks.

Most recently, the investors' fears were turned on Fannie Mae and Freddie Mac, the huge quasi-private corporations that package and circulate trillions in debt securities with implicit federal backing. Treasury Secretary Henry Paulson (formerly of Goldman Sachs) boldly proposed a $300 billion commitment to buy up Fannie Mae stock and save the plunging share price--that is, save the shareholders from their mistakes. So much for market discipline. For everyone else, Washington recommends a cold shower.

Talk about warped priorities! The government puts up $29 billion as a "sweetener" for JP Morgan but can only come up with $4 billion for Cleveland, Detroit and other urban ruins. Even the mortgage-relief bill is a tepid gesture. It basically asks, but does not compel, the bankers to act kindlier toward millions of defaulting families.

A generation of conservative propaganda, arguing that markets make wiser decisions than government, has been destroyed by these events. The interventions amount to socialism, American style, in which the government decides which private enterprises are "too big to fail." Trouble is, it was the government itself that created most of these mastodons--including the all-purpose banking conglomerates. The mega-banks arose in the 1990s, when a Democratic President and Republican Congress repealed the New Deal-era Glass-Steagall Act, which prevented commercial banks from blending their business with investment banking. That combination was the source of incestuous self-dealing and fraudulent stock valuations that led directly to the Crash of 1929 and the Great Depression that followed.

Even before Congress and Bill Clinton repealed the law, the Federal Reserve had aggressively cleared the way by unilaterally authorizing Citigroup to cross the line. Wall Street proceeded, with accounting tricks described as "modernization," to re-create the same scandals from the 1920s in more sophisticated fashion. The financial crisis began when these gimmicky innovations blew up.

Democrats who imagine they can reap partisan advantage from this crisis don't know the history. The blame is bipartisan; so also is the disgrace. In 1980, before Ronald Reagan even came to town, Democrats deregulated the financial system by repealing federal interest-rate ceilings and other regulatory restraints--a step that doomed the savings and loan industry and eliminated a major competitor for the bankers. Democrats have collaborated with Republicans on behalf of their financial patrons every step of the way.

The same legislation also repealed the federal law prohibiting usury--the predatory practices that ruin debtors of modest means by lending on terms that ensure borrowers will fail. Usurious lending is now commonplace in America, from credit cards and "payday loans" to the notorious subprime mortgages. The prohibition on usury really involves an ancient moral principle, one common to Judaism, Christianity and Islam: people of great wealth must not be allowed to use it to ruin others who lack the same advantages. A decent society cannot endure it.

The fast-acting politicians may hope to cover over their past mistakes before the public figures out what's happening (that is, who is screwing whom). But the Federal Reserve has a similar reason to move aggressively: the Fed was a central architect and agitator in creating the circumstances that led to the collapse in Wall Street's financial worth. The central bank tipped its monetary policy hard in one direction--favoring capital over labor, creditors over debtors, finance over the real economy--and held it there for roughly twenty-five years. On one side, it targeted wages and restrained economic growth to make sure workers could not bargain for higher compensation in slack labor markets. On the other side, it stripped away or refused to enforce prudential regulations that restrained the excesses of banking and finance. In The Nation a few years back, I referred to Alan Greenspan as the "one-eyed chairman" [September 19, 2005] who could see inflation in the real economy--even when it didn't exist--but was blind to the roaring inflation in the financial system.

The Fed's lopsided focus on behalf of the monied interests, combined with its refusal to apply regulatory laws with due diligence, eventually destabilized the overall economy. Trying to correct for previous errors, the Fed, with its overzealous free-market ideology, swung monetary policy back and forth to extremes, first tightening credit without good reason, then rapidly cutting interest rates to nearly zero. This erratic behavior encouraged a series of financial bubbles in interest-sensitive assets--first the stock market, during the late 1990s tech-stock boom, then housing--but the Fed declined to do anything or even admit the bubbles existed. The nation is now stuck with the consequences of its blindness.

The Federal Reserve's dereliction of duty is central to the financial failures. It betrayed the purpose for which the central bank was first created, in 1913, abandoning the sense of balance the Fed had long pursued and that Congress requires. Most politicians, not to mention the press, are too intimidated to question the Fed's daunting power, but their ignorance is about to compound the problem. Instead of demanding answers, the political system is about to expand the Fed's governing powers--despite its failure to protect us. Treasury Secretary Paulson proposed and Democratic leaders have agreed to make the insulated Fed the "supercop" that oversees not only commercial banks and banking conglomerates but also the largest investment houses or anyone else big enough to destabilize the system. This "reform" would definitely reassure club members who are already too cozy with the central bankers. Everyone else would be left deeper in the dark.

The political system, once again, is rewarding failure. The Fed is an unreliable watchdog, ideologically biased and compromised by its conflicting obligations. Is it supposed to discipline the big money players or keep them afloat? Putting the secretive central bank in charge, with its unlimited powers to prop up troubled firms, would further eviscerate democracy, not to mention economic justice.

If Congress enacts this concept early next year, the privileged group of protected financial interests is sure to grow larger, because other nonfinancial firms could devise ways to reconfigure themselves so they too would qualify for club membership. A very large manufacturing conglomerate--General Electric, for instance--might absorb elements of banking in order to be covered by the Fed's umbrella (GE Capital is already among the largest pools of investment capital). Private-equity firms, with their buccaneer style of corporate management, are already trying to buy into banking, with encouragement from the Fed (the Service Employees International Union has mounted a campaign to stop them). A new President could stop the whole deal, of course, but John McCain has surrounded himself with influential advisers who were co-architects of this financial disaster. For that matter, so has Barack Obama.

The nation, meanwhile, is flirting with historic catastrophe. Nobody yet knows how bad it is, but the peril is vastly larger than previous episodes, like the savings and loan bailout of the late 1980s. The dangers are compounded by the fact that the United States is now utterly dependent on foreign creditors--Japan and China lead the list--who have been propping us up with their lending. Thanks to growing trade deficits and debt, foreign portfolio holdings of US long-term debt securities have more than doubled since 1994, from 7.9 percent to 18.8 percent as of June 2007. If these countries get fed up with their losses and pull the plug, the US economy will be a long, long time coming back.

The gravest danger is that the national economy will weaken further and spiral downward into a negative cycle that feeds on itself: as conditions darken, people hunker down and wait for the storm to pass--consumers stop buying, banks stop lending, producing companies cut their workforces. That feeds more defaulted loan losses back into the banking system's balance sheets. This vicious cycle is essentially what led to the Great Depression after the stock market crash of 1929. I offer not a prediction but a warning. The comparison may sound farfetched now, but US policy-makers and politicians are putting us at risk of historic deflationary forces that, once they take hold, are very difficult to reverse.

A more aggressive response from Washington would address the real economy's troubles as seriously as it does Wall Street's. Financial firms have lost capital on a huge scale--more of them will fail or be bought by foreign investors. But Wall Street cannot get well this time if the economy remains stuck in the ditch. Washington needs to revive the "animal spirits" of the nation at large. The $152 billion stimulus package enacted so far is piddling and ought to be three or four times larger. Instead of sending the money to Iraq, we should be spending it here on getting people back to work, building and repairing our tattered infrastructure, investing in worthwhile projects that can help stimulate the economy in rough weather.

An agenda of deeper reforms can boost public confidence even as it undoes a lot of the damage caused by the financiers and bankers. Some suggestions:

§ Nationalize Fannie Mae and other government-supported enterprises instead of coddling them. Restore them to their original status as nonprofit federal agencies that provide a valuable service to housing and other markets. Make the investors eat their losses. Buy the shares at 2 cents on the dollar. Without a federal guarantee, these firms are doomed anyway.

§ Resolve the democratic contradiction of "too big to fail" bailouts by dismantling the firms that are too big to fail--especially the newly created banking conglomerates that have done so much harm. Restore the boundaries between commercial banking and investment banking. In any case, market pressures are likely to shrink those behemoths as banks sell off their parts to survive. For the remaining big boys, revive antitrust enforcement. Set stern new conditions for emergency lending from government--supervised receivership, stricter lending rules to prevent recidivism and severe penalties for greed-crazed shareholders and executives.

§ Assign the Federal Reserve's regulatory role to a new public agency that is visible and politically accountable. Make the Fed a subsidiary agency of the Treasury Department and reform its decision-making on money and credit to restore an equitable balance between competing goals and interests--seeking full employment but also stable money and moderate inflation.

§ Begin the hard task of re-creating a regulated financial system Americans can trust, one that recognizes its obligations to the broad national interest. This requires regulatory reforms to cover moneypots like private-equity funds and to clear away the blatant conflicts of interest and double-dealing on Wall Street, and also to give responsible shareholders, workers and other interests a greater voice in corporate management and greater protection against rip-offs of personal savings.

§ Re-enact the federal law against usury. The details are difficult and can follow later, but this would be a meaningful first step toward restoring moral obligations in the financial sector. People would understand it, and so would a lot of the money guys. Maybe in the deepening crisis, Washington will begin to grasp that money is also a moral issue.

About William Greider

National affairs correspondent William Greider has been a political journalist for more than thirty-five years. A former Rolling Stone and Washington Post editor, he is the author of the national bestsellers One World, Ready or Not, Secrets of the Temple, Who Will Tell The People, The Soul of Capitalism (Simon & Schuster) and--due out in February from Rodale--Come Home, America. more...

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