Tuesday, February 13, 2007

Ulster on the Euphrates: The Anglo-American Dirty War in Iraq

By Chris Floyd
t r u t h o u t | UK Correspondent

Tuesday 13 February 2007

Paint It Black

Imagine a city torn by sectarian strife. Competing death squads roam the streets; terrorists stage horrific attacks. Local authority is distrusted and weak; local populations protect the extremists in their midst, out of loyalty or fear. A bristling military occupation exacerbates tensions at every turn, while offering prime targets for bombs and snipers. And behind the scenes, in a shadow world of double-cross and double-bluff, covert units of the occupying power run agents on both sides of the civil war, countenancing - and sometimes directing - assassinations, terrorist strikes, torture sessions, and ethnic cleansing.

Is this a portrait of Belfast during "The Troubles" in Northern Ireland? Or a picture of Baghdad today? It is both; and in both cases, one of Britain's most secret - and most criminally compromised - military units has plied its trade in the darkness, "turning" and controlling terrorist killers in a dangerous bid to wring actionable intelligence from blood and betrayal. And America's covert soldiers are right there with them, working side-by-side with their British comrades in the aptly named "Task Force Black," the UK's Sunday Telegraph reports.

Last week, the right-wing, pro-war paper published an early valentine to the "Joint Support Group," the covert unit whose bland name belies its dramatic role at the center of the Anglo-American "dirty war" in Iraq. In gushing, lavish, uncritical prose that could have been (and perhaps was) scripted by the unit itself, the Telegraph lauded the team of secret warriors as "one of the Coalition's most effective and deadly weapons in the fight against terror," running "dozens of Iraqi double-agents," including "members of terrorist groups."

What the story fails to mention is the fact that in its Ulster incarnation, the JSG - then known as the Force Research Unit (FRU) - actively colluded in the murder of at least 15 civilians by Loyalist deaths squads, and an untold number of victims were killed, maimed, and tortured by the many Irish Republican Army double-agents controlled by the unit. What's more, the man who commanded the FRU during the height of its depredations - Lt. Col. Gordon Kerr - is in Baghdad now, heading the hugger-mugger Special Reconnaissance Regiment (SRR), a large counter-terrorism force made up of unnamed "existing assets" from the glory days in Northern Ireland and elsewhere.

This despite the fact that a 10-year, $100 million investigation by Britain's top police officer, Lord Stevens, confirmed in 2003 that the Kerr-led FRU "sanctioned killings" through "institutionalized collusion" with both Protestant and Catholic militias during the 1980s and 1990s. Stevens sent dossiers of evidence against Kerr and 20 other security apparatchiks to the Blair government's Director of Public Prosecutions, in the expectation that the fiery Scotsman and the others would be put on trial.

But instead prosecuting Kerr, Blair promoted him: first to a plum assignment as British military attaché in Beijing - effectively the number two man in all of UK military intelligence, as Scotland's Sunday Herald notes, then, with the SRR posting to Baghdad, where Kerr and his former FRU mates now apply the "methods developed on the mean streets of Ulster during the Troubles," as the Telegraph breathlessly relates.

The Telegraph puff piece is naturally coy about revealing these methods, beyond the fact that, as in Ireland, the JSG uses "a variety of inducements ranging from blackmail to bribes" to turn Iraqi terrorists into Coalition agents. So, to get a better idea of the techniques employed by the group in Baghdad, we must return to those "mean streets of Ulster" and the unit's reign of terror and collusion there, which has been thoroughly documented not only by the exhaustive Stevens inquiries, but also in a remarkable series of investigative reports by the Sunday Herald's Neil Mackay, and in extensive stories by the BBC, the Guardian, the Independent, the Times and others.

We will also see how the operations of the JSG and "Task Force Black" dovetail with U.S. efforts to apply the lessons of its own dirty wars - such as the "Salvador Option" - to Iraq, as well as long-running Bush Administration initiatives to arm and fund "friendly" militias while infiltrating terrorist groups in order to "provoke them into action." It is indeed a picture painted in black, a glimpse at the dark muck that lies beneath the high-flown rhetoric about freedom and civilization forever issuing from the lips of the war leaders.

Whacking for the Peelers

Gregory Burns had a problem. He was one of Gordon Kerr's FRU informers planted deep inside the IRA, along with two of his friends, Johnny Dignam and Aidan Starrs. But as Mackay noted in a February 2003 story, the already-partnered Burns had acquired a girlfriend on the side, Margaret Perry, 26, a "civilian" Catholic with no paramilitary ties. Forbidden fruit is sweet, of course - but pillow talk is dangerous for an inside man. "Burns didn't keep his mouth shut and [Perry] found out he was working for British intelligence," an FRU officer told Mackay. "He tried to convince her he was a double-agent the IRA had planted in the [British] army - but she didn't buy it."

Burns called his FRU handlers and asked to come in from the cold. He'd been compromised, he said, and now he and his friends needed to get out, with new identities, relocation, good jobs - the usual payoff for trusted agents when the jig was up. But Kerr refused: "He said [Burns] should silence Perry," the FRU man told Mackay. Burns, panicking at thought of the IRA's horrific retributions against informers, insisted: he would have to kill the woman if they didn't bring him in, he told Kerr. Again Kerr refused.

And so Burns arranged a meeting with his lover, to "talk over" the situation. His friends, Aidan and Johnny, volunteered to drive her there: "On the way, they pulled into a forest, beat her to death and buried her in a shallow grave," Mackay notes. Two years later, when her body was found, the IRA put two and two together - and slowly tortured Burns and his two friends to death, after first extracting copious amounts of information about British intelligence operations in Ireland.

"In Kerr's eyes, Burns just wasn't important enough to resettle," the FRU source told the Sunday Herald. "So we ended up with four unnecessary deaths and the compromising of British army intelligence officers, which ultimately put soldiers' lives at risk. To Kerr, it was always a matter of the ends justifying the means."

Then again, Kerr could well afford to sacrifice a few informers here and there to the wrath of the IRA's dreaded "security unit" - because his own, prize double agent was the head of that security unit. Codenamed "Stakeknife," Kerr's man presided over, and sometimes administered, the grisly torture-murders of up to 50 men during his tenure in the IRA's upper ranks. The victims included other British double agents who were sacrificed in order to protect Stakeknife's cover, as the Guardian and many other UK papers reported when the agent's work was revealed in 2003. ("Stakeknife" was later identified in the press as Alfredo Scappaticci - an Irishman despite the Italian name, although he continues to deny the charge.)

The FRU also "knowingly allowed soldiers, [police] officers and civilians to die at the hands of IRA bombers in order to protect republican double agents," the Sunday Herald's investigations found. As Mackay reports: "FRU sources said around seven police and army personnel died as a result of military intelligence allowing IRA bombs to be placed during Kerr's time in command of the FRU. They estimate that three civilians also died this way, with casualties in the hundreds."

But some of the worst excesses came from the FRU's handling of operatives on the other side, in the fiercely pro-British Protestant militia the Ulster Defense Association (UDA). Here, among the Loyalists, Kerr's top double agent was Brian Nelson, who became head of intelligence for the UDA. As John Ware put it in the Guardian: "Kerr regarded Nelson as his jewel in the crown ... For the next three years [from 1987], Nelson colluded with murder gangs to shoot IRA suspects. Month after month, armed and masked men crashed into homes. Sometimes they got the wrong address or shot the wrong person."

A wrong person like Gerald Slane, a 27-year-old Belfast man shot down in front of his three children. A gun had been found dumped on his property; this, and his Catholicism, was enough to get him assassinated at the order of Kerr's man Nelson. Afterwards, it was found that Slane had no IRA connections.

Another "wrong person" killed by the FRU's agents was the Belfast attorney Pat Finucane, who was shot 14 times in front of his wife and children. Finucane was a civil rights activist who had defended both Catholics and Protestants, but was considered an IRA sympathizer by Loyalists - and a thorn in the side by British authorities. He was killed at Nelson's order by a fellow FRU informer in the UDA, Ken Barrett, who was convicted of the murder but freed last year as part of an amnesty program in the Northern Ireland peace process. Barrett was unapologetic about his FRU "wetwork" on Finucane. "The peelers [authorities] wanted him whacked," he told a BBC documentary team after his release. "We whacked him and that is the end of the story."

Kerr gave Nelson packages of intelligence files to help facilitate the assassination of UDA targets, including at least four "civilians" with no IRA ties, the Stevens inquiry found. The FRU also obtained "restriction orders" from other British security and military units in Northern Ireland, whereby they would pull their forces from an area when Kerr's UDA agents were going to make a hit there, allowing the killers to get in and get out without hindrance, investigator Nick Davies reports.

Yet the FRU was wary of sharing its own intelligence with other security services - which was the ostensible reason for running the double-agents in the first place. Instead, Kerr engaged in fierce turf wars with other agencies, while "stovepiping" much of his intelligence to the top circles of the UK government, including the cabinet-level Intelligence Committee chaired by then-Prime Minister Margaret Thatcher. Indeed, when Nelson was finally exposed and brought to trial on five counts of conspiracy to commit murder, Kerr testified in his behalf, noting for the court that Nelson's intelligence "product and his reporting was passed through the intelligence community and at a high level, and from that point of view he has to be considered a very important agent."

As one FRU man told Mackay: "Under Kerr's command...the mindset was one of 'the right people would be allowed to live and wrong people should die.'"

This is the "mindset" now operating in the heart of the Green Zone in Baghdad, where the JSG is carrying out - as we are told in glowing terms - precisely the same mission it had in Ulster. a unit which has allowed its agents to torture, murder and commit acts of terrorism, including actions that killed local civilians and the soldiers and intelligence operatives of their own country.

The White House Green Light

Of course, Kerr and his Baghdad black-op crew are not alone in the double-dealing world of Iraqi counterinsurgency. The Pentagon's ever-expanding secret armies are deeply enmeshed in such efforts as well. As Sy Hersh has reported ("The Coming Wars," New Yorker, Jan. 24, 2005), after his re-election in 2004, George W. Bush signed a series of secret presidential directives that authorized the Pentagon to run virtually unrestricted covert operations, including a reprise of the American-backed, American-trained death squads employed by authoritarian regimes in Central and South America during the Reagan Administration, where so many of the Bush faction cut their teeth.

"Do you remember the right-wing execution squads in El Salvador?" a former high-level intelligence official said to Hersh. "We founded them and we financed them. The objective now is to recruit locals in any area we want. And we aren't going to tell Congress about it." A Pentagon insider added: "We're going to be riding with the bad boys." Another role model for the expanded dirty war cited by Pentagon sources, said Hersh, was Britain's brutal repression of the Mau Mau in Kenya during the 1950s, when British forces set up concentration camps, created their own terrorist groups to confuse and discredit the insurgency, and killed thousands of innocent civilians in quashing the uprising.

Bush's formal greenlighting of the death-squad option built upon an already securely-established base, part of a larger effort to turn the world into a "global free-fire zone" for covert operatives, as one top Pentagon official told Hersh. For example, in November 2002 a Pentagon plan to infiltrate terrorist groups and "stimulate" them into action was uncovered by William Arkin, then writing for the Los Angeles Times. The new unit, the "Proactive, Pre-emptive Operations Group," was described in the Pentagon documents as "a super-Intelligence Support Activity" that brings "together CIA and military covert action, information warfare, intelligence and cover and deception."

Later, in August 2004, then deputy Pentagon chief Paul Wolfowitz appeared before Congress to ask for $500 million to arm and train non-governmental "local militias" to serve as U.S. proxies for "counter-insurgency and "counterterrorist" operations in "ungoverned areas" and hot spots around the world, Agence France Presse (and virtually no one else) reported at the time. These hired paramilitaries were to be employed in what Wolfowitz called an "arc of crisis" that just happened to stretch across the oil-bearing lands and strategic pipeline routes of Central Asia, the Middle East, Africa and South America.

By then, the Bush Administration had already begun laying the groundwork for an expanded covert war in the hot spot of Iraq. In November 2003, it created a "commando squad" drawn from the sectarian militias of five major Iraqi factions, as the Washington Post reported that year. Armed, funded and trained by the American occupation forces, and supplied with a "state-of-the-art command, control and communications center" from the Pentagon, the new Iraqi commandos were loosed on the then-nascent Iraqi insurgency - despite the very prescient fears of some U.S. officials "that various Sunni or Shiite factions could eventually use the service to secretly undermine their political competitors," as the Post noted.

And indeed, in early 2005 - not long after Bush's directives loosed the "Salvador Option" on Iraq - the tide of death-squad activity began its long and bloody rise to the tsunami-like levels we see today. Ironically, the first big spike of mass torture-murders, chiefly in Sunni areas at the time, coincided with "Operation Lightning," a much ballyhooed effort by American and Iraqi forces to "secure" Baghdad. The operation featured a mass influx of extra troops into the capital; dividing the city into manageable sectors, then working through them one by one; imposing hundreds of checkpoints to lock down all insurgent movements; and establishing a 24-hour presence of security and military forces in troubled neighborhoods, the Associated Press reported in May 2005. In other words, it was almost exactly the same plan now being offered as Bush's "New Way Forward," the controversial "surge."

But the "Lightning" fizzled in a matter of weeks, and the death squads grew even bolder. Brazen daylight raids by "men dressed in uniforms" of Iraqi police or Iraqi commandos or other Iraqi security agencies swept up dozens of victims at a time. For months, U.S. "advisers" to Iraqi security agencies - including veterans of the original "Salvador Option" - insisted that these were Sunni insurgents in stolen threads, although many of the victims were Sunni civilians. Later, the line was changed: the chief culprits were now "rogue elements" of the various sectarian militias that had "infiltrated" Iraq's institutions.

But as investigative reporter Max Fuller has pointed out in his detailed examination of information buried in reams of mainstream news stories and public Pentagon documents, the vast majority of atrocities then attributed to "rogue" Shiite and Sunni militias were in fact the work of government-controlled commandos and "special forces," trained by Americans, "advised" by Americans and run largely by former CIA agents. As Fuller puts it: "If there are militias in the Ministry of Interior, you can be sure that they are militias that stand to attention whenever a U.S. colonel enters the room." And perhaps a British lieutenant colonel as well

With the Anglo-American coalition so deeply embedded in dirty war - infiltrating terrorist groups, "stimulating" them into action," protecting "crown jewel" double-agents no matter what the cost, "riding with the bad boys," greenlighting the "Salvador Option" - it is simply impossible to determine the genuine origin of almost any particular terrorist outrage or death squad atrocity in Iraq. All of these operations take place in the shadow world, where terrorists are sometimes government operatives and vice versa, and where security agencies and terrorist groups interpenetrate in murky thickets of collusion and duplicity. This moral chaos leaves "a kind of blot/to mark the full-fraught man and best indued/With some suspicion," as Shakespeare's Henry V says.

What's more, the "intelligence" churned out by this system is inevitably tainted by the self-interest, mixed motives, fear and criminality of those who provide it. The ineffectiveness of this approach can be seen in the ever-increasing, many-sided civil war that is tearing Iraq apart. If these covert operations really are intended to quell the violence, they clearly have had the opposite effect. If they have some other intention, the pious defenders of civilization - who approve these activities with promotions, green lights and unlimited budgets - aren't telling.


Chris Floyd is an American journalist. His work has appeared in print and online in venues all over the world, including The Nation, CounterPunch, Columbia Journalism Review, the Christian Science Monitor, Il Manifesto, the Moscow Times and many others. He is the author of Empire Burlesque: High Crimes and Low Comedy in the Bush Imperium, and is co-founder and writer/editor of the political blog, Empire Burlesque. He can be reached at cfloyd72@gmail.com.

Blame it on Iran!!!

The Alamo, Iraq

Bush's Last Stand

Dangerous District in Baghdad

Aired February 8, 2007 - 10:59 ET

Now CNN takes to you the front lines and what is called one the most dangerous districts in Baghdad. It is the turf of Charlie Company and the base they call the Alamo.

Our Michael Holmes spent two days embedded with the troops and has their story.



MICHAEL HOLMES, CNN INTERNATIONAL CORRESPONDENT]: We're with Charlie Company, 126th Infantry, based at forward operating base Apache. Although it's not really a base, it's actually a house. A hundred and twenty men in the middle of probably the city's most dangerous area.

HENDRIX: Some guys call it the Alamo, you know. It's just a house in the middle of Adhamiya. Nobody else around. No other units.

HOLMES: They are fired on regularly by insurgents, both Sunni and Shia. The house shows the scars.

A couple of months ago, insurgents attacked her. Charlie Company killed 38 of them. Around here, something as simple as leaving a house after speaking with the owners requires smoke grenades for cover.

UNIDENTIFIED MALE: We unfortunately, you know, learn some hard lessons.

HOLMES: Since arriving here in August, Charlie Company has never left, never stopped patrolling, 24/7. They've lost five men, two dozen wounded, and earned a fistful of medals for bravery.

(on camera): Is there a day here where something doesn't happen?



Posted on Thu, Feb. 01, 2007

"People (in America) think it's bad, but that we control the city. That's not the way it is. They control it, and they let us drive around. It's hostile territory."
--1st Lt. Dan Quinn, platoon leader, 1st Infantry Division in eastern Baghdad


CNN.com - Iraq insurgency in 'last throes,' Cheney says - May 31, 2005

CNN.com - Cheney: Iraq will be 'enormous success story' - Jun 24, 2005

CHENEY: “If you look at what’s transpired in Iraq, Chris, we’ve made enormous progress.” [1/14/07]


Cheney won't testify in Libby perjury trial

Totalitarianism and Obedience

Don't believe the official 'conspiracy' theory


We have to ask who stood to gain the most from the appalling events of 9/11, says Tim Sparke

Tuesday February 13, 2007
The Guardian

George Monbiot's explicit attack on the film Loose Change (A 9/11 conspiracy virus is sweeping the world ..., February 6) has no basis in fact. While we accept that there are flaws in the current version of the film, we stand by its overarching theme that the official "conspiracy" theory of 9/11, constructed in the hours, days, weeks and months after 9/11, is false.

In uncritically endorsing the National Institute of Standards and Technology (NIST) report, Monbiot neglects to say that the collapse mechanism for the entire World Trade Centre building was never documented by NIST - it didn't see it as its job. Additionally, in accepting that the towers collapsed at virtually free-fall speed ("the weight of the collapsing top storeys generated a momentum the rest of the building could not arrest"), Monbiot shows no awareness that this explanation violates the law of conservation of momentum.

Monbiot also appears oblivious to NIST's failure to explain that, although fire could not have melted any steel, there were pools of molten metal under the rubble, and these pools remained molten for weeks after the collapse; that dozens of people, including firefighters, news reporters and fleeing victims, all reported massive explosions; the clear video evidence of explosions taking place; that virtually all the concrete was pulverised into tiny particles; the apparent disintegration of the central steel core; and the destruction of all the evidence from America's biggest crime scene, which was covertly transported to Asian and African shores before any forensic examination could take place.

Monbiot then endorses the idea that Building 7 collapsed because "thousands of gallons of diesel [were poured] on to the fire" - oblivious to the fact that, even if an enormous fire could have caused a symmetrical collapse (which required all 81 steel columns to miraculously fail simultaneously), there was, as photographs and eyewitnesses reveal, no enormous fire. Monbiot also appears unaware that several engineers and demolition experts, after studying videos, have declared that this collapse can only have been caused by explosives.

Monbiot suggests that thousands of people must have been involved in the conspiracy, as if the official story must therefore be true. We have no clue as to how many (though some suggest probably fewer than 1,000); but wasn't the Manhattan project, involving 100,000, kept secret, even from Vice-President Truman, until weeks before the first atom bomb was dropped?

Monbiot then suggests that CounterPunch - by refuting the film's claims - has to be correct, because it is a left-leaning newspaper. But acceptance of the official "conspiracy" theory is not a left or right political issue. It is about whether we should accept unconditionally a story which defeats the laws of physics, denies the abundance of witness testimony, and rejects video evidence put forward by an organisation, which, in hindsight, we know had the means, motive and opportunity, and also has a record of being economical with the truth.

We agree that our movie can't answer all the questions that millions of people now have - but the fact that Loose Change is the most downloaded film in internet history is the strongest argument for an honest public debate, and a truly independent inquiry. As we say in the 9/11 Truth Movement: ask questions, demand answers, investigate 9/11.

Tim Sparke is executive producer of Loose Change Final Cut. tim@joiningthedots.tv

· If you wish to respond to an article in which you have featured, email response@guardian.co.uk or write to Response, The Guardian, 119 Farringdon Road, London EC1R 3ER. We cannot guarantee to publish all responses, and we reserve the right to edit pieces for both length and content

The Douglas Feith lawyers up and talks, the guiltier Wolfowitz & Co. look

RE: Feith-Libby Lies Exposed

Anonymous said...

The more Douglas Feith lawyers up his rhetoric about the faults of the CIA, and continues to rectify his approach in cherry picking (critiquing) intelligence, the guiltier Wolfowitz & Co. look.

The New York Times is now putting out the word, George Tenent is the guy with the false intelligence, he’s the one to blame for Iraq. For the NY Times this might be the best strategy, it’s better than not reporting about Feith & Co. at all, which is what they’re doing.
But what is in a defense that puts Tenent at the helm?

He’s CIA.

Feith has been on a lecture/education tour explaining how the CIA was getting it wrong and that Bush needed a go between, a B-team, to get it right. Its what Feith calls good government, groups that critique it all! Sounds good, coming from a guy within a group, that was never critiqued! Untill now.

Feith blames Tenent for the bad intelligence that Bush sold to the public, which in turn forced Congress’ hand in going after Saddam. How can Feith blame the CIA? It was his Iraq think tank, with the power to critique information, by using power-point presentations that make the ultimate decision maker (Bush), get it wrong!
Or did they?

Wolfowitz & Co. were this countries last defense against faulty intelligence, at least this is how they sold it. This cast of well-known Zionists got it right for Israel and wrong for America. And now they (Eric Edelman & Co) expect the us, the Americans, to thank these traitors for their service? Lets leave that to Israel and the Bush team.

Inside AIPAC, it's just fine to joke about the Israel lobby controlling Congress

This is really annoying, don't you think?

Bad moons rising

Tue, Feb 13, 2007 12:22pm EST

Altercation by Eric Alterman

More on Edwards and the bloggers: The Pandagon woman has resigned, here. Isn't it weird that the Times would not print the letter from the woman from Catholics for a Free Choice, the one where Donohue is explained to be the right-wing hysteric/anti-Semite he is? Again, I ask: Why is the Times in the tank for this dangerous, McCarthyite crank? What does he have on the editors -- or the owners?

What kind of person accuses a Jew of helping the Nazis, basing his information on already-discredited lies perpetrated by a Scaife-owned and directed publication, and then does not apologize when corrected? More Marty Peretz.

P.S. When you think about it, Peretz and Richard Mellon Scaife have a great deal in common. Neither would matter whatsoever without their inherited moneys -- though in Marty's case, it was his (second incredibly wealthy) wife's. Both use their inherited fortunes to slander their ideological enemies and reward their allies. Both are taken seriously exclusively because they sign the checks.

Giant credit bubble behind yen slide: if it bursts, could destabilise the global financial system

Financial News
Sunday February 11, 05:14 AM

Giant credit bubble behind yen slide: analysts

TOKYO (AFP) - The recent sharp depreciation of the yen is believed by economists to be the result of a giant credit bubble which, if it bursts, could destabilise the global financial system.

The bubble is the result, they say, of the gap between Japan's super-low interest rates of 0.25 percent and those in the United States and the eurozone, which encourages investors to borrow cheaply in yen to invest overseas.

This practice, known as 'carry trade', means that speculators exchange yen into other, higher yielding currencies, driving the weakness of the Japanese currency, which was a hot topic at a weekend meeting of world finance chiefs.

The Swiss franc has also been affected by carry trade -- though to a lesser degree -- due to relatively low Swiss interest rates of 2.0 percent.

The more the carry trade succeeds, the more people it attracts, said Noriko Hama, an economics professor at Doshisha University in Kyoto.

"It tends to feed the depreciation" of the yen, she added.

No one knows the exact magnitude of the yen carry trade. Conservative estimates put its value at upwards of 200 billion dollars.

Some others estimate it to be much higher. Tim Lee of the US research firm Pi Economics reckons that the true size could be in excess of one trillion dollars -- equivalent to the annual national output of Canada.

He believes the yen is 29 percent undervalued against the dollar.

"The yen is a foolproof indicator that we are in the midst of a gigantic bubble. The yen has been falling persistently despite being undervalued and despite Japan having zero inflation," he wrote in a recent study.

"The yen carry trade is ballooning as never before and is now larger than ever. There is no doubt whatsoever that this credit bubble will end extremely badly," he warned.

Analysts say it is very hard to estimate the exact extent of the phenomenon.

"It is very difficult to come to grips with the depth of the carry trades," said Markus Krygier, the head of forex strategy at the German investment bank Dresdner Kleinwort.

However, he predicted that carry trade would start shrinking if the US Federal Reserve moves to cut interest rates by the end of the year as he expects.

Many economists expect the Bank of Japan meanwhile to raise its interest rates again at some point this year, reducing the appeal of carry trade.

"To deflate a bubble orderly has a lot to do with luck. It is something that is very difficult to engineer, particularly if the bubble has been inflated" for quite a long time, said Krygier.

He said that the current situation has echoes of 1998 when the yen shot up almost 20 percent in just three days as the Russian financial crisis and prospects of a Japanese interest rate rise triggered a reverse in carry trades.

Krygier expects the dollar to finish 2007 at 100 yen, down from about 121 now. Lee at Pi Economics goes even further, predicting the dollar will sink to 70 yen over the next year.

"As long as the credit bubble goes on the yen will be weak. When the credit bubble turns to bust the yen will be extremely strong," he wrote.

Such a sharp appreciation of the yen would pose a serious threat to Japanese exports and the overall economy, analysts said.

"If you start to see an appreciation of the yen, then the carry trade unwinds very quickly, the rush for the exit gathers momentum, and not everyone can get out to the door," said John Shepperd, another economist at Dresdner Kleinwort.

"In terms of the global economy, we will see a massive withdrawal of liquidity," he said, adding that there could be a "sharp setback in equity markets" in the United States and Europe.

For analysts at the investment bank Barclays Capital, it would be risky for global monetary authorities to try to deflate the credit bubble.

"Carry trades are a function of the low volatility environment in financial markets, which is partly due to G7 (the Group of Seven rich nations) central bankers' success in maintaining low and stable inflation," they argued.

"Policy coordination against carry trades would only fuel a sharp unwinding of those trades and pose the very risks to financial market stability that G7 officials seek to avoid," they wrote in a note to clients.

With a bang, not a whimper: "rebellion goes global"

A final summing-up on the Independent Jewish Voices debate from one of the signatories.

February 12, 2007 9:45 AM

Brian Klug

At the end of a week of intense debate on the Guardian's Comment is Free website, I shall try to take stock of how the launch of Independent Jewish Voices (IJV) has been received.

Not with a whimper but with a bang, it would be fair to say. When a number of us got together with the idea that it was time to stake a claim for the principles set out in the IJV statement, we hoped we would have an impact. We even expected that our initiative would not fall entirely flat. But we did not realise that the tinder of public opinion was quite so dry and that news of our ideas would spread like wildfire.

"The rebellion goes global" is the headline of the lead article on the front page of this week's Jewish Chronicle (JC), which prides itself on being the "world's oldest and most influential Jewish newspaper". "International drive to challenge communal leaders' 'unquestioning support' for Israel reaches Britain" explains the strap line. The article reports that in just three days over 1,000 entries on the subject were posted on the Comment is Free site. This is not to say that the JC is sympathetic to IJV, as it makes clear in an editorial [subscription only]. But its extensive coverage reflects the extent of public interest, not least in Jewish circles, in the issues raised by the launch.

It's the issues, not the IJV as such, that count. As one email writer put it: "Judging by the enormous response, it is clear that these issues have been smouldering beneath the surface for some time". He thought that the launch of IJV has "catalysed the debate".

Another wrote: "You have said openly what many of us have felt for a very long time but have lacked a vehicle for expressing our views."

These sentiments, which have been expressed in abundance over the last week, provide part of the answer to an objection raised frequently - in the threads of comments on this site and elsewhere - during the week. We stand accused of being a clique of marginal Jews who have ample opportunity to express our views in the media; who have invented or imagined the figment of censorship; and who simply cannot bear the heat of vigorous debate.

It would take a while to unpack this accusation in full. Briefly, there is no clique. The two email writers I just quoted are not members of the glitterati. They do not have automatic access to the comment pages of newspapers. Like many signatories to the IJV statement, they are individuals who feel alienated by the prevailing climate of debate over Israel and Zionism within the Jewish world.

Numerous Jews in Britain fit this description. They are at the heart of our initiative. We are seeking to enfranchise people who are effectively disfranchised by the current ethos, whether the lives they lead are within an organised Jewish community or not. Some negative responses to IJV seem to suggest that people who are not in the Jewish mainstream have less right to a voice as Jews; as if living on the margins of "the Jewish community" makes you a marginal Jew. This idea is as invalid as it is offensive.

Furthermore, contrary to the construction put on our words by some critics, none of us is suggesting that there is an unofficial censor who prevents individuals from expressing unpopular views about Israel or Zionism. It's what happens after people speak out - how their words are received - that is the point. Moreover, individual dissenting voices get lost or drowned out when weighty bodies (like the Board of Deputies or the Chief Rabbi) appear to speak on behalf of all Jews in Britain. It is the combination of these two factors that closes down a debate that should be open.

An open debate on a controversial subject is bound to be vigorous. But vigour is one thing, vilification another. The difference can be seen in the range of reactions to the launch of IJV. There have been reasoned objections and legitimate questions. But there has also been an extraordinary amount of abusive language, ridicule and attacks on our character or motives.

Who are we? We are a network of Jews in Britain who share a commitment to certain principles, especially with the Israeli-Palestinian conflict in mind: putting human rights first, rejecting all forms of racism, and giving equal priority to Palestinians and Israelis in their quest for a peaceful and secure future.

We believe that these principles, rather than group loyalty, should determine the parameters of legitimate debate. What is there to hate? Yet the vitriol is ubiquitous. One leading commentator refers to us as "Jews for genocide". Nothing could offer a clearer illustration of the climate we are describing than an epithet like this.

There is a larger context. Domestically, the IJV statement bears on the current public debate in Britain about the nature of a plural society: Sunny Hundal makes the connection in his article on the Comment is Free website. And there are initiatives like ours abroad, as the front page article in the JC reports. Developments in America are described by Richard Silverstein in his piece on this site and by Gaby Wood in Sunday's Observer.

At the end of the launch week it is clear that IJV has struck a chord - hence the degree of support we have received - and hit a nerve - hence the scale of the hostility. Things are changing, at home and abroad, and this is just the beginning.

Click here for a full list of articles in the Independent Jewish Voices debate.

Dr Brian Klug is senior research fellow & tutor in philosophy at St Benet’s Hall, Oxford and member of the Faculty of Philosophy at Oxford University. He is an honorary fellow in the Parkes Institute for the Study of Jewish/non Jewish Relations at the University of Southampton, associate editor of Patterns of Prejudice and a founder member of the Jewish Forum for Justice and Human Rights. He has published widely on race, antisemitism, Jewish identity, Zionism and related subjects. Books include, Children as Equals: Exploring the Rights of the Child (co-editor) and Ethics, Value and Reality: Selected Papers of Aurel Kolnai (co-editor).

Jerusalem’s apartheid tramway

The politics of urban planning

Two French companies are involved in the construction and operation of a light rail system from the centre of Jerusalem to a northern terminus. It is promoted as a unifying project: in fact, it will be yet another way to isolate the Palestinians.

By Philippe Rekacewicz and Dominique Vidal

THE tram will not operate before 2009 but it’s already a presence across Jerusalem, and garish ads show it running beside the walls of the Old City. The strangest ad features a pensive Theodor Herzl; in his book Altneuland, published two years before his death in 1902, Herzl dreamed of an electric tram system as a symbol of the Jerusalem of the future.

A century later this ecological and economic solution is a necessity. “Our city is in gridlock,” said Shmulik Elgarbly, Israeli spokesman for the mass transit system. “Ever since cars got cheaper, we’ve had terrible congestion in Jerusalem. By 1980 the percentage of urban dwellers using public transport dropped from 76% to 40%.” New roads jam up almost as soon as they are finished. Most streets are too narrow for bus lanes. The geological structure under the city would be ideal for the construction of a subway system, but why not let passengers see the most beautiful city in the world?

Ten years ago those arguments convinced Jerusalem’s mayor, then Ehud Olmert, of the need for a light rail system. The project would be financed by the private sector under a Build-Operate-Transfer (BOT) contract and the network would be handed over after 30 years. An international tender was put out in 2000 and the French company Alstom won the construction bid. Two years later Connex, the subsidiary of another French company, Veolia, won the operating rights. They formed a consortium called Citypass with two Israeli companies, Ashtrom Construction and Pollar Investment, as well as two banks, Hapaolim and Leumi. The contract was signed in July 2005. The initial aim is to carry 500 passengers by 2009 on each of 25 trains running between the terminus points of Pisgat Ze’ev and Mount Herzl.

According to Elgarbly, the project will be profitable if two conditions are met: “It must be perfectly safe and not a target for suicide attacks; and the route must meet the needs of the greatest possible number of inhabitants. We based our projections on 150,000 passengers a day. That is why the tram must serve the Jewish quarters [Israel’s politically correct term for settlements] such as Pisgat Ze’ev, as well as Arab quarters like Shu’fat. At present there are two separate bus networks serving those areas but there’s no room for two separate tramlines in Jerusalem. We’re building a single, peacetime tramway.”

The road to hell is paved with good intentions, even in the holy city. This project has raised many urban and, more important, political objections. It uses a stretch of Route 60, depriving Palestinians of a vital artery to the city and, beyond it, between the north and south of the West Bank. Yet Elgarbly insists that: “We will serve both populations in Jerusalem.” That seems doubtful. The fare, which is reasonable for Israeli passengers at $1.37, will be expensive for those Palestinians currently using the small buses, on which the fare is just 82 cents. There is also the question of how the continuing safety of the tram can be assured. How will the settlers react to seeing Arabs travelling on the tram? One person we spoke to wondered whether there should be separate carriages for Arabs and Israelis.

Who will park and ride?

At the North Shu’fat stop, planners have designed park-and-ride lots for suburban commuters, especially Palestinians. The Israeli project director, Shmulik Tsabari, who came with us on our site tour, seemed oddly unaware of the fact that a large number of potential passengers, such as the inhabitants of Ras Khamis, or the Shu’fat and Anata refugee camps, live behind the separation wall. One checkpoint in the wall is open at present, but that doesn’t mean it will remain so in the future. The army already often closes it during the rush hour so that settlers can circulate more easily.

So who will use the park-and-ride lots — if they are built? “The 50 dunum (5 hectare) plot belongs to dozens of Palestinian families and the town hall has stymied negotiations,” explained lawyer Mahmud al-Mashni. “But a permit is required to build on the land since it’s in a green zone. The city authorities plan to use part of the area for the parking lot and allow the owners to build a shopping centre and homes on the remainder. But the owners can’t afford to do that — they won’t be able to pay the taxes, which are far higher on building land. According to Israeli law, the owners should get 60% of the land’s value in the event of state expropriation. Instead they’re being offered a ‘generous’ 25%.”

Many observers believe that at the first security threat the trams will cease to go via Shu’fat. Instead they will follow the safer roundabout route inside the wall. It will mean explaining away the expensive infrastructure that may already have been built, but that is not the point. According to international law, the route currently planned is illegal. It brings the Israeli settlements in East Jerusalem closer to the city centre in West Jerusalem: French Hill, then Pisgat Zeev, then Neve Yaakov in the north, and later, with eight more routes planned, many more. The tram facilitates colonisation.

This goes against the Fourth Geneva Convention of 12 August 1949, ratified on several occasions since by the United Nations Security Council. Resolution 465 of 1 March 1980 stipulates: “All measures taken by Israel to alter the physical character, the demographic composition, the institutional structure or status of the Palestinian territories including Jerusalem, have no legal validity.” So if this new project is to be used specifically for colonisation, Israel should not get assistance from other countries.

For a long time the Palestinians did not react, but now they are sounding the alarm. In October 2005 President Mahmoud Abbas raised the issue with a visibly embarrassed President Jacques Chirac. A month later the French foreign minister, Philippe Douste-Blazy, sent a carefully worded letter to the chairman of the Association France-Palestine Solidarité, which is campaigning against the tram, saying: “Private companies bidding for international tenders in no way reflect a change in France’s well-known stance on Jerusalem.”

He went on to stress France’s attachment to Jerusalem’s international status as laid down when partition was declared in 1947: “France and the European Union have a clear and consistent position on the illegal nature of the settlements in the territories occupied by Israel in 1967 as well as the security wall that Israel is building, which violates international law” (1).

Occupation entrenched

This clarification did not prevent Nasser al-Kidwa, then the Palestinian Authority’s foreign minister, from writing to Alstom CEO Patrick Kron on 6 January 2006, to criticise Alstom’s involvement “which is not purely commercial, but carries extremely important implications in terms of aid to Israel in its illegal settlement policy in and around East Jerusalem, and which is viewed [by the Palestinian Authority] as an attempt to legitimise this policy”. This, he claimed, runs counter to “the principles that have long been held in France”. In Jerusalem two advisers from the Palestine Liberation Organisation, Fouad Hallak and Wassim H Khazmo, confirmed this view: “Ultimately, the tramline will connect West Jerusalem with the Jewish settlements in East Jerusalem. It is therefore entrenching the occupation. Without East Jerusalem, there cannot be a Palestinian state.”

Meanwhile, the Arab League condemned the illegal construction of the tramline at its March 2006 summit in Khartoum. Alstom and Connex were invited to withdraw immediately from the project to avoid steps being taken against them, and the friendly French government was urged to adopt a position on this issue in accordance with its responsibilities and international law.

Never has there been a greater divide in the official and unofficial positions of French diplomacy. This is a far cry from “business is business”, which is what an economic adviser to the French embassy in Tel Aviv (2) was quoted as having said. The consortium for the $518m Jerusalem tramway had also hoped to win the $1.29bn contract for Tel Aviv (in December 2006 it found out that it hadn’t). Even before Douste-Blazy, there were other French ministers, including Nicolas Sarkozy, who had talked about the profits to be made.

Yet there are laws behind the money. According to international lawyer Monique Chemillier-Gendreau: “A state is accountable for the actions of its country’s major companies if they break international law and if the state does not do what it can to prevent them.” Doubtless aware of the risk, a French consulate official in Jerusalem stressed that neither Alstom nor Connex benefited from any export credits or guarantees from Coface, the official French export guarantee department.

A diplomat in Paris, who wished to remain anonymous, went further: “The French foreign office has always discouraged companies from taking part in this venture.” Maybe. But in that case why did Gérard Araud, France’s ambassador to Israel, take part in the official contract-signing ceremony in the offices of Prime Minister Ariel Sharon?

The diplomat confirmed that the foreign ministry “always had strong reservations about French companies taking part in this project”. In the event of confrontation “it would give rise to a crisis on the scale of the Muhammad cartoons row”. France would be in violation of international law. He added “That tram is the tram of apartheid” and claimed that the lawyers hired by Alstom and Connex are “dubious”, which confirmed recent comments by the two companies.

Despite all this, the contract was signed. Our diplomat saw that as an expression of “the climate in 2004 when there was a reconciliatory mood in Tel Aviv. But even so, that goal doesn’t justify stupidity. And that’s exactly what this tramway is. Pure stupidity”. He added that the stupidity owed much to the personality of the then French ambassador, Gérard Araud, who was “a firm believer in the project. He certainly asked to take part in the contract-signing ceremony.”

The light rail system may be a good solution for the inhabitants of Jerusalem, but why did the Israeli government not discuss it with the Palestinian Authority first? Since they made no attempt to do so, the Israeli government is open to accusation, at home and abroad, of using the tram to strengthen its policy of occupation, colonisation and annexation.

Having Theodor Herzl as the tramway’s poster boy may be a Freudian slip. Herzl certainly extolled modernity. But first and foremost he was the founder of Zionism.

  • -See also
  • Jerusalem: whose very own and golden city?, by Philippe Rekacewicz and Dominique Vidal
  • Limits to tolerance, by Amnon Kapeliouk
  • Translated by Krystyna Horko

    * Philippe Rekacewicz is a geographer and cartographer for ‘Le Monde diplomatique’ and the United Nations Environment Programme (UNEP/Grid-Arendal in Norway)

    (1) This and the following quotations are from the AFPS website, www.france-palestine.org

    (2) Jerusalem Post, 7 June 2005.

    Iran Omelette - Cooked By Feith/Franklin/Pipes

    The Larry Franklin Spy Probe/Daniel Pipes Connection
    To Washington’s small and sometimes fractious community of Iran experts, it was becoming obvious: What to do about Iran and its fast-developing nuclear program was set to rival Iraq as the most pressing foreign-policy challenge for the person elected president in 2004. By the spring and early summer of this year, the city was awash in rival Iran task forces and conferences. Some recommended that Washington engage in negotiations with Tehran’s mullahs on the nuclear issue; they drew scorn from the other side, which preached regime change or military strikes.

    YIKES - Warmongering Top Neocon Daniel Pipes Testifies in Congress

    Thanks to qrswave for the headline.

    The Great Unwind is coming, warn Dresdner pair

    It’s the sort of analysis that, as an investment banking analyst focusing on the investment banking sector, might seriously damage your career prospects.

    No matter! Stefan-Michael Staimann and Susanne Knips at Dresdner Kleinwort have published a detailed tome on the importance of hedge funds to the investment banking industry. Their conclusion? Head for the hills, because “The Great Unwind” is coming — and it’s going to hurt.

    Here’s the thesis:

    • Transaction costs run to 4 per cent of the $1,300bn of hedge fund assets under management. Manager salaries and performance fees take another 4-5 per cent, meaning hedge funds need to generate average annual returns of close to 20 per cent to keep everyone (including their investors) happy. Yet the strategies employed to produce these returns are not necessarily sustainable.
    • A clear majority of hedge funds can be thought of as leveraged sellers of deep-out-of-the-money put options. They employ long-short strategies - removing market risk with what are essentially spread or arbitrage bets with a relatively low return. To boost returns they employ extensive leverage. These spread positions do produce what look like low-risk returns most of the time — but, once in a blue moon, what are effectively options written by the hedge funds will get called. Think LTCM.
    • While hedge fund strategies across the industry may look diversified, there is actually a high degree of correlation, since many funds are effectively running leveraged bets on stable or tightening risk premia. Any widening of risk premia will force large-scale liquidations of positions, with margin calls by the banks and redemptions by investors reinforcing the process.
    Staimann and Knips declare: “We believe that the great unwind is inevitable, but impossible to time. It looks like the process of building up leveraged spread bets has already run quite far. Risk premia in many markets are very low, making it increasingly difficult to find spread bets for new money. Market volatility has been driven to record lows (remember: selling a put is like shorting volatility). The process may not have much more room to run and may start to be more sensitive to factors that could threaten its delicate balance (such as a deterioration of corporate credit risk).”

    “The virtuous cycle on the slow way up (the supply and demand from building spread bets
    leads to tightening spreads, which in turn raises confidence to build new positions) turns
    into a vicious cycle on the fast way down.”

    So how vicious is this great unwind going to be? Well, the Dresdner pair estimate that investment banks sucked roughly $40-50bn in revenue out of hedge funds last year, mainly through sales/trading and services other than prime brokerage. That is about 15-20% of all industry revenues in investment banking.

    P.S. If you do get hold of a copy of the Dresdner report, do have a look at Appendix 2, titled “Are hedge funds banks. It compares Citadel with Deutsche’s investment banking division and, in a word, answers “yes” — and then goes on to compare Citadel with LTCM.

    Banks That Took Greenspan's Advice Pay the Price

    By Caroline Baum

    Feb. 12 (Bloomberg) -- It was bound to happen sooner or later, an out-of-the-blue reminder that the froth or the boom or the disconnect between prices and fundamentals in the housing market would have a financial after-shock.

    HSBC Holdings Plc, Europe's biggest bank, dropped a small bomb last week when it announced that it was setting aside more money as a cushion against the accelerating pace of loan delinquencies. Yes, Virginia, subprime mortgages -- home loans to folks with a spotty credit history -- do carry some risk after all.

    In addition to making those loans, HSBC bought packages of subprime and second-lien loans from other mortgage originators. It seems the best models HSBC's quants could design didn't adequately reflect the inherent risk in lending to deadbeats when house prices stop soaring.

    Before folks could say, ``sell,'' New Century Financial Corp., the No. 2 subprime lender in the U.S., delivered its bad news, saying it would have to restate 2006 earnings because of an increase in loan-loss provisions. The stock lost 40 percent of its value.

    Isolated examples? Probably not. Confined to the subprime market? Doubtful.

    ``There is no way the conditions that existed in the subprime market between borrowers and lenders weren't a multiple of what went wrong,'' said Michael Aronstein, chief investment strategist at Oscar Gruss & Co. ``The incentives are perverse. You're paid for volume, not for being a schoolmarm.''


    Subprime loans carry rates 2 or 3 percentage points higher than those extended to prime borrowers. They accounted for about 20 percent of new mortgages last year and 13.5 percent of the total home loans outstanding, according to the Mortgage Bankers Association.

    The issue isn't whether loans defined as risky carry risk; they do. The real question is whether the risk was priced correctly; whether rising delinquency rates on subprime loans, sometimes made without proper documentation, will spill over into the rest of the home-loan market; whether borrowers will default when teaser rates on adjustable-rate mortgages reset higher at a time when home prices are falling; and -- the big kahuna, the one that matters to the Federal Reserve -- whether any of the bad- loan problems will affect financial institutions' ability to lend.

    In its January survey on bank lending practices, the Fed said that a net 15 percent of domestic banks reported tightening credit standards on residential mortgage loans over the past three months, the biggest net increase since the early 1990s. That was the last time banks were saddled with -- guess what? -- bad real-estate loans. More banks and thrifts failed in the early '90s than at any time since the Great Depression.

    Ripple Effects

    The Fed's survey also found that a net 37 percent of the banks reported weaker mortgage demand to purchase a home. (It's not clear based on the limitations of the survey whether weaker demand was a result of tighter standards.)

    The ripple effects of the housing slowdown aren't confined to the financial sector, according to Asha Bangalore, an economist at the Northern Trust Corp. in Chicago.

    ``Production in housing-related industries has dropped sharply in the past year,'' she says. ``For example, production in furniture, household appliances and carpeting has fallen for five straight quarters.''

    A reasonable person might conclude that layoffs in these industries will compound the declines in residential construction, Bangalore says.

    Job Losses

    ``Housing and housing-related employment made up a little over 40 percent of all payroll employment from November 2001 to April 2005,'' she says. ``Employment in residential construction declined in nine out of the 10 months ended January 2007,'' with 104,000 jobs in residential specialty trade contracting lost since the February 2006 peak, according to the Bureau of Labor Statistics.

    The residential job losses were more than offset by gains in non-residential contracting, the BLS said.

    Falling employment in one sector of the economy or one region of the country is not an expansion killer in and of itself. The Southwest oil patch was depressed when oil prices slumped to $10 a barrel in 1986 even as the economy logged four more years of strong growth. The Northeast real-estate market was slower to recover from the 1990-1991 recession than other sectors.

    The danger comes when the financial system is impaired, as it was in the early 1990s in the U.S. and during the 1990s and part of the current decade in Japan.

    Sage Advice?

    That's when the Fed would start to get concerned about the ramifications, which so far have been limited to a decline in the prices of subprime mortgage bonds and the stocks of mortgage lenders.

    It's too soon to know the extent of the problem from all the option ARMs (the interest is optional, but the principal is not!). Only three years ago, former Fed Chairman Alan Greenspan said homeowners could have saved a heck of a lot of money had they opted for adjustable-rate mortgages during the past decade.

    Ex post, that was good advice. Ex ante, it's not looking good.

    ``American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed- rate mortgage,'' Greenspan said in a speech to the Credit Union National Association in Washington.

    Lenders took his advice. Borrowers jumped at the opportunity. Everyone may suffer the consequences.

    (Caroline Baum, author of ``Just What I Said,'' is a columnist for Bloomberg News. The opinions expressed are her own.)

    To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net .

    Last Updated: February 12, 2007 00:05 EST

    Israel=Zionism=Terrorism? God Forbid!!

    Part of Haitham's adventure

    11. February 2007

    ! Warning ! The following documentaries contain extremely graphic footage of atrocities that are accruing in Palestine, perpetrated by Zionists. If you may feel offended, consider how the people in these videos , who are not actors but experiencing these Zionist terrorism firsthand, feel.

    To start, here is a light one (not less graphic!):

    That was a fast one. Now here is a long documentary (nearly one hours). Again, you have been warned:

    Maybe Mr. Blaschke would like to argue that this is not terrorism, or this is “not deliberate killing,” etc…

    I would really like to hear from USDOS what is this supposed to be called?

    in Palestine, Israel, Terrorism, Video, Zionism

    Those who decide the (foreign) policy of the United States of America

    Hat tip to yankhadenuf

    Market collapse? Who ya gonna call?

    A revealing synchronicity in today's Wall Street Journal and New York Times:

    In a WSJ article on growing problems in the subprime lending industry, James R. Hagerty and Ruth Simon wonder whether the trouble will spread to the holders of "mortgage-backed securities" -- the disparate group of investors who have assumed the risk of potential mortgage defaults:

    That could be a problem for regulators. In 1998, the Fed convened investment banks and worked out a rescue plan for hedge fund Long Term Capital Management LP, which was on the verge of collapse. But in today's splintered mortgage-securities market, the Fed wouldn't be able to "get the involved players into a room" to work out a plan to help a distressed institution sell off assets in an orderly manner, says Josh Rosner, managing director of Graham Fisher & Co., a New York investment research firm.

    Over at the New York Times, in the middle of Jenny Anderson's laudatory profile of New York Fed president Timothy Geithner, who is struggling manfully to rein in the exploding world of credit derivatives, a remarkably similar paragraph occurs, as Anderson discusses Geithner's primary concern: credit derivatives are thought to be a way to spread risk as widely as possible, but this thesis has never really been tested in a true crisis situation.

    Regulators struggle to imagine what the shock could be, but do know that the reaction will be far different from crises of the past. When Long-Term Capital Management tottered on the brink of collapse in 1998, the credit markets in the United States were controlled by such a small number of institutions that the New York Fed had to make calls to 14 Wall Street banks to try to resolve the crisis. Today, the number of institutions would be vastly higher.

    One reaction to these parallel exercises in financial reporting is to realize that, dating back to the end of the Asian financial crisis of 1997, the last decade has been so calm (dot-com bust notwithstanding) on Wall Street that if you want to cite an example of something that could potentially have seriously disrupted the U.S. economy, your only option is to point to the Long Term Capital Management debacle.

    Is this proof of what some economists call "The Great Moderation" -- a quarter-century or so in which the ups and downs of the business cycle have flattened out, inflation has been more or less under control, and overall growth far less volatile than in previous eras? (One caveat: for some reason, those who like to attribute the Great Moderation to the age of deregulation unleashed by Ronald Reagan and Maggie Thatcher rarely include rising income inequality in their list of benefits.)

    Many economists attribute at least some of the credit for the relatively financial stability of modern times to the "financial innovations" that have spread risk out from traditional lenders, i.e. banks, to an ever more complex array of institutional investors, hedge funds, and other entities. Mortgage-backed securities and credit derivatives are two primary examples of these innovations.

    The subtext of the Wall Street Journal article is that the housing bust is killing the subprime lending business. This is not all that surprising: if you choose to do business loaning money to people who are bad credit risks, then you asking to get burned. But will the pressure exerted by a reeling mortgage lending industry turn into the kind of shock to the system that sends serious ripples through the larger ecology of institutions who have been busy buying and selling off risk in an ever-growing frenzy? That is indeed the question, and to see both the Times and the Journal bring up exactly the same point -- if something goes wrong, it won't be easy to fix -- just reinforces how big the stakes are in determining the answer.

    -- Andrew Leonard

    How to Start a War with Iran

    Tuesday, February 13, 2007

    by Jacob G. Hornberger

    Amidst all the denials by U.S. officials of an intent to attack Iran, another country that has never attacked the United States, perhaps this would be an appropriate time to recall the words of Hermann Goering, Hitler’s Reichsmarshall:

    “Why, of course, the ‘people’ don't want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece. Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship…. The people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.”

    If President Bush wants war with Iran, he has several avenues to bring it about.

    One, he can manipulate and squeeze Iran with sanctions, embargoes, and humiliations, the tactics that Franklin Roosevelt successfully employed to secure a Japanese attack on U.S. forces in the Pacific, thereby enabling Roosevelt to secure U.S. entry into World War II.

    Or Bush could simply do what another Texas president — Lyndon Johnson — did to escalate U.S. involvement in Vietnam — just make up an attack, like Johnson did with the fake Gulf of Tonkin attack.

    In either event, the president would be able to excitedly exclaim, “We’ve been attacked! We’ve been attacked! Iran has attacked us! We’re innocent! It’s another day that will live in infamy.”

    Or President Bush could simply do to Iran what he did to Iraq — attack a country that has never attacked the United States, killing and maiming countless Iranian people, many of whom have nothing but the utmost respect for our country (but not for our government).

    However the war with Iran would come, Bush and other U.S. officials would be certain that they could count on a certain segment of American society, including many in the press, that, once again infected by war fever, would excitedly exclaim, “The time for debate and discussion is over. We are now at war and we must support the troops, as they drop their bombs on the Iranian people. We’ve got to help the president and the troops win their war against Iran. They’re our team. That’s what ‘morality’ and ‘patriotism’ are all about.”

    Mr. Hornberger is founder and president of The Future of Freedom Foundation.

    The Bombing of the Golden Dome Mosque; one year later

    Feb 12, 2007

    By Mike Whitney

    According to the Muslim calendar, today--February 12--is the one year anniversary of the bombing of Samarra’s Golden Dome Mosque. The blast is frequently pointed to as the event which transformed the conflict from an armed struggle against foreign occupation into a civil war. This change in the narrative has had some real benefits for the Bush administration by diverting attention from the nonstop fighting between American troops and the Sunni-led resistance.

    The notion that Iraq is in the throes of civil war is rarely challenged in the western media despite the fact that Iraq has no history of the type of sectarian violence which is now ripping the country apart. Veteran journalist Robert Fisk put it this way:

    “Iraq is not a sectarian society. People are intermarried. Shiites and Sunnis marry each other…Some from the militias and death squads want a civil war (but) there has never been a civil war in Iraq. The real question I ask myself is: who are these people who are trying to provoke a civil war? The Americans will say that it’s al Qaida or the Sunni insurgents; it is the death squads. Many of the death squads work for the Ministry of Interior? Who pays the militia men who make up the death squads? We do; the occupation authorities.” (Robert Fisk, “Somebody is trying to provoke a Civil War in Iraq”)

    So, if we accept the idea that Iraq is in a civil war, aren’t we ignoring the fact that other forces may be at play just below the surface?

    There’s no doubt that the Bush administration is engaged in a secret war in Iraq. A great deal has already been written about “the Salvador Option” which involves the arming and training of death squads for spreading terror among sympathizers of the resistance. But it is also likely that many of the bombings we see are, in fact, false flag operations intended to pit Arab against Arab, and thereby undermine the greatest threat of all, Iraqi nationalism.

    False flag operations are commonplace in foreign occupation. Robert Fisk cites a few examples in his article, “All This Talk of Civil War, Now This” (UK Independent, 2006):

    “I think of the French OAS in Algeria in 1962, setting off bombs among France's Muslim Algerian community. I recall the desperate efforts of the French authorities to set Algerian Muslim against Algerian Muslim which led to half a million dead souls.

    And I'm afraid I also think of Ireland and the bombings in Dublin and Monaghan in 1974, which, as the years go by, appear to have an ever closer link, via Protestant "loyalist" paramilitaries, to elements of British military security.”

    It’s impossible to know how much of the violence we see is real and how much is “black-ops”. Divide and rule is an adage that is as old as war itself and it is certainly being used in Iraq. In fact, the Bush administration commissioned the Rand Corporation to draw up a plan which promotes this very strategy.

    The Rand Study was called: “US Strategy in the Muslim World after 9-11”. The document provided “A framework to identify major ideological orientations within Islam, examines critical cleavages between Muslim groups.” The goal of the paper was to develop a Shaping Strategy for pacifying Muslim populations where the US has commercial or strategic interests. The conclusions of the document are enlightening. Rand suggests the US, “Align its policy with Shiite groups who aspire to have more participation in government and greater freedoms of political and religious expression. If this alignment can be brought about, it could erect a barrier against radical Islamic movements and may create a foundation for a stable U.S. position in the Middle East.”

    Clearly, the administration is following the recommendations Rand study and has decided elevate the Shiites over the previously dominant Sunnis.

    The Bush administration also appears to be applying parts of another theory which was conjured up by the fiercely nationalistic, Oded Yinon, in his “The Zionist Plan for the Middle East”. Yinon said:

    "It is obvious that the above military assumptions, and the whole plan too, depend also on the Arabs continuing to be even more divided than they are now, and on the lack of any truly mass movement among them... Every kind of inter-Arab confrontation will assist us in the short run and will shorten the way to the more important aim of breaking Iraq up into denominations as in Syria and Lebanon... Syria will fall apart."

    Similar to the Rand study’s recommendations, Yinon’s strategy is to pit Sunni against Shiite in a way that destroys Arab unity and to leaves the country weak and fragmented.

    Again, there’s nothing new in these theories, but we should realize that much of the media narrative is crafted in a way that conceals the truth while promoting the objectives of the US occupation. Beyond the smokescreen of “civil war” (some of which is real, of course) is a coherent and carefully articulated plan to quash the resistance and steal Iraq’s resources. That is the real force which is generating much of the violence that we see on the ground.

    In practical terms, Robert Fisk provides a credible description of how these black-ops are executed in Iraq. In his article, “Seen through a Syrian Lens” (UK Independent 4-29-06) the Fisk gives the details of a conversation he had with a trusted “security source” who told Fisk that: (the US) “is desperately trying to provoke a civil war around Baghdad in order to reduce its own military casualties.”

    "I swear to you that we have very good information," Fisk recounts, "One young Iraqi man told us that he was trained by the Americans as a policeman in Baghdad and he spent 70 per cent of his time learning to drive and 30 per cent in weapons training. They said to him: 'Come back in a week.' When he went back, they gave him a mobile phone and told him to drive into a crowded area near a mosque and phone them. He waited in the car but couldn't get the right mobile signal. So he got out of the car to where he received a better signal. Then his car blew up."

    As incredible as it seems, Fisk assures us that he’s heard the same story many times from different sources.


    "There was another man, trained by the Americans for the police. He too was given a mobile and told to drive to an area where there was a crowd - maybe a protest - and to call them and tell them what was happening. Again, his new mobile was not working. So he went to a landline phone and called the Americans and told them: 'Here I am, in the place you sent me and I can tell you what's happening here.' And at that moment there was a big explosion in his car."

    Fisk is a hardnosed journalist not easily given to exaggeration. His account of these incidents simply adds to the growing body of “hearsay” evidence that US intelligence agencies are directly involved in inciting sectarian violence. These stories cannot be corroborated, but, of course, that hasn’t stopped many Iraqis from believing that the US is behind the daily bombings.

    Of course, the question of “who” is funding and facilitating the terrorism in Iraq presents a serious challenge to an administration that has based its foreign policy in terms of a war on terror. Public support would quickly erode if the American people knew that Bush was directly involved in the same activities as our nemesis, al Qaida.

    Traditionally, the United States has no problem supporting Islamic extremists as long as they serve our overall foreign policy objectives. The CIA funded the mujahideen in Afghanistan, the KLA (Kosovo Liberation Army) in Kosovo, and now provides material support and weaponry to the MEK Mujahideen-e- Khalq; a Marxist militant group which is on the State Dept list of terrorist organizations. What matters is not ideology but whether or not the groups can advance Washington’s imperial aspirations.

    This demonstrates that Bush’s finger-wagging against “ideological extremism” or “radical Islam” is just more empty rhetoric. Ideology plays a very small part in the current war. Dick Cheney’s comments in a speech to the Institute of Petroleum in London in 1999 may shed a bit of light on this point. He said, “By 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from? ... While many regions of the world offer great oil opportunities, the Middle East with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies."

    While depletion of oil reserves have accelerated beyond Cheney’s expectations at the time ;( the world’s 4 largest oil fields are in a state of irreversible decline) the facts remain the same. The world is running out of oil and the US intends to deploy its military to seize vital reserves wherever they may be. The war on terror is simply the mask that conceals this ongoing struggle.

    The Bush administration seems less and less concerned that their “divide and rule” strategy remains hidden from the public. There’ve been a number of articles in the mainstream press about Bush’s $86 million gift to Mahmoud Abbas’ to train and equip special shock-troops to crush the democratically-elected Hamas government. And, there’s been ample coverage of the CIA’s covert operations in Lebanon that are directed against Hezbollah. The only conclusion we can draw from this, is that Bush really doesn’t care anymore if the world knows that the US is purposely fueling the anarchy which is quickly spreading across the entire Middle East. (The latest accusation that Iran is supplying roadside bombs to the Iraqi resistance just shows how sloppy the administration has gotten in managing its propaganda. Iran, of course, is Shiite, whereas, the Iraqi resistance is predominantly Sunni. The likelihood that Iran is providing roadside bombs to the former members of Saddam’s army is remote to say the least.)

    Bush’s “dirty war” in Iraq has become increasingly violent and confused. The neocon trust in “creative destruction” has succeeded in fragmenting Iraqi society, but the long-term prospects for normalization (or resource extraction) appear bleak. At this point, it seems irrelevant whether the bombing of the Golden-dome Mosque was the work of Sunni extremists or the US intelligence agencies. After all, propaganda may be useful for shaping public opinion but it cannot win wars. And that is the dilemma that Bush now faces.

    It has been exactly one year since the Askirya Mosque was flattened. Most Americans now believe that we are mired in an "unwinnable" war. Public support is eroding, the violence is escalating, the administration is drifting sideways, and the end is nowhere in sight. The inability of the administration to think politically or change course has thrust America to the brink of its worst defeat in history.

    U.S. financial aid to Israel supports apartheid, threatens world peace

    Posted February 13, 2007


    A European Commission poll of 7,500 Europeans in 15 countries once cited Israel as the top threat to world peace, ahead of North Korea and Iran (the U.S. came in second). With military combat power ranked at number three in the world, Israel's hair trigger war machine invades its neighbors and maintains an illegal occupation of Palestinian territories entrenching an apartheid rule that looks similar to that of the former South African regime.

    Former President Jimmy Carter's new book Palestine; Peace Not Apartheid offers a fascinating perspective on the current system of apartheid "with Israelis totally dominant and suppressing violence by depriving Palestinians of their basic human rights," treating them as second-class citizens and prisoners in their own land. Carter has no doubt that the U.S. submissive attitude towards Israel is a major source of anti-American sentiment and terrorist activity throughout the world.

    Moreover, U.S. tax-payers are funding Israel's illegal occupation of Palestine with an aid package worth over $5 billion per-year, every dollar of which must be raised through U.S. government borrowing. Total U.S. aid to Israel equals approximately one-third of our foreign aid budget, yet Israel compromises .001 percent of the world's population and has one of the world's higher per capita incomes.

    The financial aid received from the U.S. allows Israel to purchase tanks, Apache helicopter gun ships, F-16 planes, machine guns and bullets all used to commit atrocities against a population that has no military, no rights, and no basic protections. Furthermore; U.S. funding allows continued building of illegal settlements on Palestinian land in violation of UN resolution 242.

    Any word against the occupation by a Palestinian will bring swift retribution in the form of torture, imprisonment, and sometimes death. Family members of so called "activists" may have their homes bulldozed to the ground; their crops destroyed or may be imprisoned and sentenced by military courts that rarely meet the standards of international law. Palestinian children are tried and sentenced at the age of 12 and a child can receive 6-months in prison for throwing a stone. At the age of 14 Palestinian children are tried as adults, another violation of international law.

    Illegal Jewish settlements are carved from the choicest land leaving Palestinians destitute within small fragmented sections of land divided by an ever-growing wall being built to create a barrier and force the separation of the two peoples. When finished the wall is projected to be three and one-half times as long as Israel's border. Carter's book explains how the wall already "cuts directly through Palestinian villages, divides family from their gardens and farmlands" causing economic and social hardships. The International Court of Justice (the judicial arm of the UN) has called upon Israel to cease construction, dismantle what has already been erected, and compensate those who have suffered losses, but construction continues.

    It's no wonder that U.S. support and funding of Israel has created a growing Arab hostility toward the United States and we are now less secure than ever from the threat of terrorism at home and against our interests abroad. Perhaps we should consider what the Europeans and Arabs already know, that fundamentalist Islam is not the cause of terrorism. From Pogo; "We have met the enemy, and he is us".

    Northwestern community columnist Wendy Laird Suzuki was born and raised in Seattle and has lived in San Francisco and Tokyo, Japan. She's traveled extensively in Asia, Europe and the Middle East and is an advocate of human rights, freedom and environmental awareness. She is a pharmceutical representative who lives in Oshkosh with her 15-year-old son Ian, two dogs and a parrot.