Sunday, November 30, 2008

Asia Must Initiate Changes To Monetary, Financial Systems

Asia Must Initiate Changes To Monetary, Financial Systems

By Mohamad Nasir Yusoff,, November 27, 2008

NUSA DUA (Bali), Nov 27 (Bernama) -- It is important for Asian countries to initiate changes to the monetary and financial systems to reduce the impact of the current financial crisis of America and Europe, and perhaps enable earlier recovery, former Malaysian prime minister Tun Dr Mahathir Mohamad said Thursday.

He said that after witnessing all the systems of the West, which seemed to be crumbling now, the world was about to view Asian practices and systems more positively.

"Asian countries must therefore make their voices heard, including those of the small developing economies. It would be fatal for them if they allow, as in the past, the rich and the powerful to devise the systems by which they must all function.

"In particular, the banking system and practices need to be looked at from the Asian developing economies' point of view and interest," he said when delivering a keynote address at Indonesia's National Committee On Governance's 2nd Annual Top Executive Forum on Governance here.

Dr Mahathir said that in a Eurocentric world, Asians tend to accept everything that came from the West as right and proper and it was difficult for Asians to reject what originated from the Europeans.

"But that culture, that blind acceptance of the systems and ways of the Europeans must be modified, if not discarded. What we're seeing today is the collapse of a very fundamental European institution, that of money and banking," he added.

Dr Mahathir said it was not enough for Asian countries to just tweak their present system of governance as they must be prepared for radical change and Asian ideas must find a place in the development of those changes.

Asian countries, he stressed, must go back to the drawing board, question the system that have been used for centuries, consider redefining them, introduce new rules and regulations and provide for better governance.

"We may have to throw out the system altogether and devise a new one," he said, adding that all those were not in Asian culture.

"But our culture must not stand in the way of necessary reforms, if it means saving our economies and our states," he told the participants of the two-day forum.

Earlier, in his speech on "Governance Reform in Asia: Cultural Perspectives", Dr Mahathir told some 100 top executives of companies operating in Indonesia that Asians were culturally conservative and orthodox and also had an inferiority complex, believing that Europeans were superior people.

So, when Europeans came with ideas about globalisation, borderless world and free trade, the general tendency was to accept those ideas and reforms of governance must be made to accommodate the new vision of the world as a global village, to make possible the free flow of capital and the sanctity of unregulated markets, he said.

"But even as these things were being initiated, the world came to realise that the American financial crisis was not going to be confined to America alone but would engulf the whole world. Not only are they not delivering the expected benefits that they seem to have done to the world's economy in the past but they seem about to destroy it," he said.

Believing that Asian countries would not want to be dragged down by an economic and financial crisis not of their own making, he asked whether they should be carrying out reforms of governance to facilitate globalisation and free trade as they had been urged to do.

On the US dollar, Dr Mahathir said that without gold it had no backing at all and was basically a useless piece of paper and that only the demand for the US dollar to settle trade payments kept its value up.

"It is doubtful if the US knows how much US dollar is in circulation in the world. Its very poor security feature also makes it easy to forge," he said, adding that the US owed the world an estimated US$14 trillion dollars, an amount which it could never hope to pay, what more when every day the US government had to borrow US$1.5 billion to finance its administration.

Responding to a question later, Dr Mahathir reiterated his call made years ago that trade payments among countries be made in gold dinar and pointed out that the Bretton Woods agreement too provided for gold to back currencies as gold has real value.


Friday, November 28, 2008

RED ALERT - Possible Geopolitical Consequences of the Mumbai Attacks


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Fire at Mumbai's Taj Mahal hotel after Nov. 26 attack
A fire in the dome of the Taj Hotel in Mumbai on Nov. 26


If the Nov. 26 attacks in Mumbai were carried out by Islamist militants as it appears, the Indian government will have little choice, politically speaking, but to blame them on Pakistan. That will in turn spark a crisis between the two nuclear rivals that will draw the United States into the fray.

At this point the situation on the ground in Mumbai remains unclear following the militant attacks of Nov. 26. But in order to understand the geopolitical significance of what is going on, it is necessary to begin looking beyond this event at what will follow. Though the situation is still in motion, the likely consequences of the attack are less murky.

We will begin by assuming that the attackers are Islamist militant groups operating in India, possibly with some level of outside support from Pakistan. We can also see quite clearly that this was a carefully planned, well-executed attack.

Given this, the Indian government has two choices. First, it can simply say that the perpetrators are a domestic group. In that case, it will be held accountable for a failure of enormous proportions in security and law enforcement. It will be charged with being unable to protect the public. On the other hand, it can link the attack to an outside power: Pakistan. In that case it can hold a nation-state responsible for the attack, and can use the crisis atmosphere to strengthen the government’s internal position by invoking nationalism. Politically this is a much preferable outcome for the Indian government, and so it is the most likely course of action. This is not to say that there are no outside powers involved — simply that, regardless of the ground truth, the Indian government will claim there were.

That, in turn, will plunge India and Pakistan into the worst crisis they have had since 2002. If the Pakistanis are understood to be responsible for the attack, then the Indians must hold them responsible, and that means they will have to take action in retaliation — otherwise, the Indian government’s domestic credibility will plunge. The shape of the crisis, then, will consist of demands that the Pakistanis take immediate steps to suppress Islamist radicals across the board, but particularly in Kashmir. New Delhi will demand that this action be immediate and public. This demand will come parallel to U.S. demands for the same actions, and threats by incoming U.S. President Barack Obama to force greater cooperation from Pakistan.

If that happens, Pakistan will find itself in a nutcracker. On the one side, the Indians will be threatening action — deliberately vague but menacing — along with the Americans. This will be even more intense if it turns out, as currently seems likely, that Americans and Europeans were being held hostage (or worse) in the two hotels that were attacked. If the attacks are traced to Pakistan, American demands will escalate well in advance of inauguration day.

There is a precedent for this. In 2002 there was an attack on the Indian parliament in Mumbai by Islamist militants linked to Pakistan. A near-nuclear confrontation took place between India and Pakistan, in which the United States brokered a stand-down in return for intensified Pakistani pressure on the Islamists. The crisis helped redefine the Pakistani position on Islamist radicals in Pakistan.

In the current iteration, the demands will be even more intense. The Indians and Americans will have a joint interest in forcing the Pakistani government to act decisively and immediately. The Pakistani government has warned that such pressure could destabilize Pakistan. The Indians will not be in a position to moderate their position, and the Americans will see the situation as an opportunity to extract major concessions. Thus the crisis will directly intersect U.S. and NATO operations in Afghanistan.

It is not clear the degree to which the Pakistani government can control the situation. But the Indians will have no choice but to be assertive, and the United States will move along the same line. Whether it is the current government in India that reacts, or one that succeeds doesn’t matter. Either way, India is under enormous pressure to respond. Therefore the events point to a serious crisis not simply between Pakistan and India, but within Pakistan as well, with the government caught between foreign powers and domestic realities. Given the circumstances, massive destabilization is possible — never a good thing with a nuclear power.

This is thinking far ahead of the curve, and is based on an assumption of the truth of something we don’t know for certain yet, which is that the attackers were Muslims and that the Pakistanis will not be able to demonstrate categorically that they weren’t involved. Since we suspect they were Muslims, and since we doubt the Pakistanis can be categorical and convincing enough to thwart Indian demands, we suspect that we will be deep into a crisis within the next few days, very shortly after the situation on the ground clarifies itself.

Thursday, November 27, 2008

Workplace Violence: Myths and Mitigation


Workplace Violence: Myths and Mitigation
November 26, 2008
Global Security and Intelligence Report

By Fred Burton and Scott Stewart
Related Special Topic Page

* Surveillance and Countersurveillance

As the global financial crisis grinds on, it is doing more than generating foreclosures, bankruptcies and losses in the financial markets: It also means people are losing their jobs as many companies cut back on staff in an attempt to stay solvent. Last week, banking giant Citibank announced plans to lay off some 53,000 employees, and Citibank is not alone, as many other companies are being forced to adopt similar measures. These layoffs are not confined to the banking sector; the automotive, computer and transportation sectors have also been hit hard.

As we talk to our friends in corporate security and law enforcement about these layoffs, we are hearing a lot of concern over the fact that the layoffs could spawn incidents of workplace violence. Of course, there is always a risk of such incidents. Indeed, according to the U.S. Bureau of Labor Statistics, out of the 5,488 workplace fatalities in the United States in 2007, there were 610 homicides, of which 491 were shootings. But such concerns are frequently amplified and brought to the forefront during times when there are mass layoffs. (When discussing workplace violence, it is also important to understand that it is not just a U.S. phenomenon. Cases have also occurred in Canada, the United Kingdom, Germany, France, Switzerland, Japan, China, India and elsewhere.)

Additionally, workplace violence concerns have been elevated in recent days by the Nov. 14 triple homicide at SiPort, a Silicon Valley semiconductor company. In the SiPort incident, Jing Wu, an engineer who had been fired for performance issues, returned to the company later that day and killed the company’s CEO, vice president of operations and human resources manager. There are reports that Wu had asked for a meeting with the victims to discuss his termination, and had killed them in the meeting.
Workplace Violence Myths

In this environment, we believe it is prudent to explore some of the widespread myths surrounding workplace violence and to discuss some measures that can be taken to help mitigate potential workplace violence incidents.
‘He Just Snapped’

Perhaps the first workplace violence myth that needs to be addressed is the idea that a man “just snaps” and goes on a shooting rampage in his workplace. We intentionally say man rather than person here, because while incidents do occur in which a female shooter is involved, they are rare. Statistically, it is far more common for workplace homicides to be committed by men.

It is also important to note that workplace homicides seldom occur randomly. They are usually planned in advance, and in most cases the perpetrator intentionally targets a specific individual, usually a supervisor, human resources manager or co-worker, whom he believes is responsible for his plight. In the SiPort case, Wu intentionally targeted his supervisors and the human resources manager. The fact that he returned to the company’s office with a gun after being fired shows that the attack was premeditated.

In most cases of workplace violence, the violent outburst is driven by factors that build up over a long period of time, rather than by sudden, traumatic events. Failed romantic relationships or marriages, stress from financial problems, lack of job advancement and perceived (or actual) injustice at the hands of a co-worker or superior are all factors that have led to violent incidents in the workplace.
Current vs. Former Employees

Another significant myth that needs to be addressed is the idea that workplace violence is primarily a concern during times when employees are being laid off. This is simply not the case. In fact, studies by the Bureau of Labor Statistics and others show that only about 22 percent of workplace homicides involve former employees, compared to approximately 43 percent involving current employees. (The remaining incidents were committed by non-employees, with 21 percent involving domestic disputes and 14 percent involving customers or clients.) This means that while there are many examples of workplace violence involving fired employees, like the Wu case, companies are almost twice as likely to be targeted by a current employee as by an employee who was terminated. In other words, it is not only a concern for companies that are in the midst of layoffs. Workplace violence needs to be a constant concern for all companies.
Holidays and Suicides

It has been widely reported in the media that suicides spike during the holidays. This conventional wisdom, which has been adopted by many security managers and law enforcement officers, is also helping to increase concern about the possibility of workplace violence in the coming weeks. In spite of its wide acceptance, however, this concept is just another myth. According to respected sources such as the Centers for Disease Control and Prevention and the American Foundation for Suicide Prevention, suicides actually go down during the winter and peak during the spring. That said, workplace violence incidents can still occur during the holidays, but the holidays are not likely to bring such incidents in epidemic proportion.
Corporate Security

One dangerous myth common in many companies is that workplace violence is the corporate security department’s problem. Nothing could be further from the truth. Most corporate security departments are bare-bones operations, quite often among the first departments to be cut when companies face tough economic times. Most corporate security departments are focused on physical security, loss prevention and theft of company laptops. With their limited staff and large responsibilities, they have very little ability to learn what is going on with the angry guy sitting in that middle cubicle on the third floor. Even in companies with dedicated executive-protection teams charged with covering senior company officials, those teams are largely focused on the outside threat. They pay far more attention to protecting the CEO when he is on a trip to Mexico or India than when he is walking through the company cafeteria. Senior company executives also often seem to believe there is n o internal threat — not in their company — but this is clearly not the case.
The Technology Crutch

Another myth that is widely accepted as gospel by many in the corporate world is that technology is the answer to every security problem. Unfortunately, that is simply not true. In fact, while items like closed-circuit TV cameras are very good aids for investigating things like theft after the fact, they are rarely useful in preventing such incidents from occurring. This same principle applies to incidents of workplace violence, where physical security systems can act as a psychological crutch that induces a false sense of security or even complacency — attitudes that add to, rather than reduce, one’s vulnerability.

This is not to say that physical security measures should not be employed, or that companies should not use technology to help them establish proper access-control measures. However, such measures should be viewed as supplemental to the company’s main line of defense: its employees.

Employees have regular access to far more people and places than corporate security can ever hope to have, no matter how many officers and cameras the security department employs. When employees take ownership of their company’s security and are educated and encouraged to practice situational awareness, they can form an alert and robust network of trip wires who can identify when a person doesn’t belong in their area or when one of their colleagues is showing warning signs of workplace violence. In light of this, communication is vital — not only communication coming from the work force to the management and the security team, but also going the other way. If an employee is terminated, access-control officers and co-workers need to be informed so they know that person is no longer permitted in the work space.

Remember that current employees account for 43 percent of workplace violence incidents. Even if a company has state-of-the-art physical security systems, current employees can normally walk right through them. Additionally, former employees who are familiar with the systems can find ways to bypass them. These insiders know the security systems and procedures in place and are often also aware of gaps in the system. They know which side door gets propped open with a trash can when employees take their midmorning smoke break, or how to “tailgate” and get in through gates or doors controlled by card readers. Brute force has also proven effective in overcoming technology. In past shootings, we have seen intruders force employees to open doors at gunpoint, shoot employees and take their building passes to gain access to the rest of the facility, or simply get in by shooting the security guard at the main access point.

The bottom line is that most access controls can be overcome by someone with a determined intent. Because of this, effective security programs must be proactive — looking for threats — rather than reactive, initiating a response only once an attack has begun to unfold.
A Proactive Stance: Protective Intelligence and Countersurveillance

One very effective way to achieve a proactive stance is to use a combination of countersurveillance and protective intelligence as a critical element of a facility’s (or executive protection) security plan.

Protective intelligence teams can coordinate with managers, human resources professionals, mental health professionals and law enforcement to identify, investigate and flag potential perpetrators of workplace violence before they get to the point of launching an attack. Additionally, countersurveillance teams, which are proactive by their very nature, can help by noticing out-of-place behavior occurring in parking lots and outside of entrances — places a uniformed guard sitting inside the facility has very limited ability to monitor. By focusing on behavior and demeanor, countersurveillance teams can frequently pick out angry or mentally disturbed individuals before they can get to the building. When combined with an educated and alert workforce, these proactive measures can help provide protection that no technological system can match.
Warning Signs

The key element of a proactive security regime is the ability and willingness to identify the warning signs and take them seriously. As with school shootings, one of the biggest contributing factors to workplace violence is the failure to pick up on and thoroughly investigate such warnings. In many past workplace violence cases, the perpetrators clearly presented warning signs, and in several cases, investigations of the incidents later found that those warning signs were downplayed or ignored.

Although we have not yet seen all the details of the SiPort shooting, it would not be surprising if it is determined that Wu gave indications of his intent to friends, family members and co-workers that went unheeded.

Warning signs that an employee is at risk for committing acts of workplace violence include sudden changes in behavior, decreased productivity, uncharacteristic problems with tardiness and attendance, withdrawal from one’s circle of friends, or the sudden display of negative traits such as irritation, snapping at or abusing co-workers or even a sudden disregard for personal hygiene. The theft or sabotage of employer or co-worker property is another sign.

Perhaps the most indicative signs that serious trouble is looming are talk about suicide and/or the expression of actual or veiled threats. If co-workers or supervisors feel afraid of a person, even when the reason for that fear cannot be clearly articulated, that is also a significant warning sign (and has been noted in several past incidents). Another indication is when an employee suddenly begins carrying a gun to work or flashing it to co-workers.

Because, as noted above, corporate security departments are not omnipresent, they require other people within the company to be their eyes and ears and alert them to individuals who have the potential to commit acts of workplace violence. Co-workers and first-line managers know when John in the cubicle next to them has suddenly become really creepy and talks about killing the boss, or when Jane down the hall is being stalked by her psychotic ex-boyfriend.

Companies that are serious about preventing workplace violence should establish clear workplace violence policies — and ensure they are widely communicated and strictly followed. Any and all threats of violence expressed by employees must be taken seriously, even those that appear innocuous at first. Employees, managers and human resources personnel must be educated about workplace violence and encouraged to report all threats or other overt signs immediately. Most important, supervisors and human resources managers must be cognizant of the other, more subtle warning signs — and be encouraged to take them seriously. Clearly, in this situation, a false alarm is better than no alarm at all.

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Wednesday, November 26, 2008

Obama: First Moves

November 24, 2008

Graphic for Geopolitical Intelligence Report

By George Friedman
Related Special Topic Page

* The 2008 U.S. Presidential Race

Three weeks after the U.S. presidential election, we are getting the first signs of how President-elect Barack Obama will govern. That now goes well beyond the question of what is conventionally considered U.S. foreign policy — and thus beyond Stratfor’s domain. At this moment in history, however, in the face of the global financial crisis, U.S. domestic policy is intimately bound to foreign policy. How the United States deals with its own internal financial and economic problems will directly affect the rest of the world.

One thing the financial crisis has demonstrated is that the world is very much America-centric, in fact and not just in theory. When the United States runs into trouble, so does the rest of the globe. It follows then that the U.S. response to the problem affects the rest of the world as well. Therefore, Obama’s plans are in many ways more important to countries around the world than whatever their own governments might be planning.

Over the past two weeks, Obama has begun to reveal his appointments. It will be Hillary Clinton at State and Timothy Geithner at Treasury. According to persistent rumors, current Defense Secretary Robert Gates might be asked to stay on. The national security adviser has not been announced, but rumors have the post going to former Clinton administration appointees or to former military people. Interestingly and revealingly, it was made very public that Obama has met with Brent Scowcroft to discuss foreign policy. Scowcroft was national security adviser under President George H.W. Bush, and while a critic of the younger Bush’s policies in Iraq from the beginning, he is very much part of the foreign policy establishment and on the non-neoconservative right. That Obama met with Scowcroft, and that this was deliberately publicized, is a signal — and Obama understands political signals — that he will be conducting foreign policy from the center.

Consider Clinton and Geithner. Clinton voted to authorize the Iraq war — a major bone of contention between Obama and her during the primaries. She is also a committed free trade advocate, as was her husband, and strongly supports continuity in U.S. policy toward Israel and Iran. Geithner comes from the Federal Reserve Bank of New York, where he participated in crafting the strategies currently being implemented by U.S. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. Everything Obama is doing with his appointments is signaling continuity in U.S. policy.

This does not surprise us. As we have written previously, when Obama’s precise statements and position papers were examined with care, the distance between his policies and John McCain’s actually was minimal. McCain tacked with the Bush administration’s position on Iraq — which had shifted, by the summer of this year, to withdrawal at the earliest possible moment but without a public guarantee of the date. Obama’s position was a complete withdrawal by the summer of 2010, with the proviso that unexpected changes in the situation on the ground could make that date flexible.

Obama supporters believed that Obama’s position on Iraq was profoundly at odds with the Bush administration’s. We could never clearly locate the difference. The brilliance of Obama’s presidential campaign was that he convinced his hard-core supporters that he intended to make a radical shift in policies across the board, without ever specifying what policies he was planning to shift, and never locking out the possibility of a flexible interpretation of his commitments. His supporters heard what they wanted to hear while a careful reading of the language, written and spoken, gave Obama extensive room for maneuver. Obama’s campaign was a master class on mobilizing support in an election without locking oneself into specific policies.

As soon as the election results were in, Obama understood that he was in a difficult political situation. Institutionally, the Democrats had won substantial victories, both in Congress and the presidency. Personally, Obama had won two very narrow victories. He had won the Democratic nomination by a very thin margin, and then won the general election by a fairly thin margin in the popular vote, despite a wide victory in the electoral college.

Many people have pointed out that Obama won more decisively than any president since George H.W. Bush in 1988. That is certainly true. Bill Clinton always had more people voting against him than for him, because of the presence of Ross Perot on the ballot in 1992 and 1996. George W. Bush actually lost the popular vote by a tiny margin in 2000; he won it in 2004 with nearly 51 percent of the vote but had more than 49 percent of the electorate voting against him. Obama did a little better than that, with about 53 percent of voters supporting him and 47 percent opposing, but he did not change the basic architecture of American politics. He still had won the presidency with a deeply divided electorate, with almost as many people opposed to him as for him.

Presidents are not as powerful as they are often imagined to be. Apart from institutional constraints, presidents must constantly deal with public opinion. Congress is watching the polls, as all of the representatives and a third of the senators will be running for re-election in two years. No matter how many Democrats are in Congress, their first loyalty is to their own careers, and collapsing public opinion polls for a Democratic president can destroy them. Knowing this, they have a strong incentive to oppose an unpopular president — even one from their own party — or they might be replaced with others who will oppose him. If Obama wants to be powerful, he must keep Congress on his side, and that means he must keep his numbers up. He is undoubtedly getting the honeymoon bounce now. He needs to hold that.

Obama appears to understand this problem clearly. It would take a very small shift in public opinion polls after the election to put him on the defensive, and any substantial mistakes could sink his approval rating into the low 40s. George W. Bush’s basic political mistake in 2004 was not understanding how thin his margin was. He took his election as vindication of his Iraq policy, without understanding how rapidly his mandate could transform itself in a profound reversal of public opinion. Having very little margin in his public opinion polls, Bush doubled down on his Iraq policy. When that failed to pay off, he ended up with a failed presidency.

Bush was not expecting that to happen, and Obama does not expect it for himself. Obama, however, has drawn the obvious conclusion that what he expects and what might happen are two different things. Therefore, unlike Bush, he appears to be trying to expand his approval ratings as his first priority, in order to give himself room for maneuver later. Everything we see in his first two weeks of shaping his presidency seems to be designed two do two things: increase his standing in the Democratic Party, and try to bring some of those who voted against him into his coalition.

In looking at Obama’s supporters, we can divide them into two blocs. The first and largest comprises those who were won over by his persona; they supported Obama because of who he was, rather than because of any particular policy position or because of his ideology in anything more than a general sense. There was then a smaller group of supporters who backed Obama for ideological reasons, built around specific policies they believed he advocated. Obama seems to think, reasonably in our view, that the first group will remain faithful for an extended period of time so long as he maintains the aura he cultivated during his campaign, regardless of his early policy moves. The second group, as is usually the case with the ideological/policy faction in a party, will stay with Obama because they have nowhere else to go — or if they turn away, they will not be able to form a faction that threatens his position.

What Obama needs to do politically, then, is protect and strengthen the right wing of his coalition: independents and republicans who voted for him because they had come to oppose Bush and, by extension, McCain. Second, he needs to persuade at least 5 percent of the electorate who voted for McCain that their fears of an Obama presidency were misplaced. Obama needs to build a positive rating at least into the mid-to-high 50s to give him a firm base for governing, and leave himself room to make the mistakes that all presidents make in due course.

With the example of Bush’s failure before him, as well as Bill Clinton’s disastrous experience in the 1994 mid-term election, Obama is under significant constraints in shaping his presidency. His selection of Hillary Clinton is meant to nail down the rightward wing of his supporters in general, and Clinton supporters in particular. His appointment of Geithner at the Treasury and the rumored re-appointment of Gates as secretary of defense are designed to reassure the leftward wing of McCain supporters that he is not going off on a radical tear. Obama’s gamble is that (to select some arbitrary numbers), for every alienated ideological liberal, he will win over two lukewarm McCain supporters.

To those who celebrate Obama as a conciliator, these appointments will resonate. For those supporters who saw him as a fellow ideologue, he can point to position papers far more moderate and nuanced than what those supporters believed they were hearing (and were meant to hear). One of the political uses of rhetoric is to persuade followers that you believe what they do without locking yourself down.

His appointments match the evolving realities. On the financial bailout, Obama has not at all challenged the general strategy of Paulson and Bernanke, and therefore of the Bush administration. Obama’s position on Iraq has fairly well merged with the pending Status of Forces Agreement in Iraq. On Afghanistan, Central Command chief Gen. David Petraeus has suggested negotiations with the Taliban — while, in moves that would not have been made unless they were in accord with Bush administration policies, Afghan President Hamid Karzai has offered to talk with Taliban leader Mullah Omar, and the Saudis reportedly have offered him asylum. Tensions with Iran have declined, and the Israelis have even said they would not object to negotiations with Tehran. What were radical positions in the opening days of Obama’s campaign have become consensus positions. That means he is not entering the White House in a combat posture, facing a disciplined opposition waiting to bring him down. Rather, his most important positions have become, if not noncontroversial, then certainly not as controversial as they once were.

Instead, the most important issue facing Obama is one on which he really had no position during his campaign: how to deal with the economic crisis. His solution, which has begun to emerge over the last two weeks, is a massive stimulus package as an addition — not an alternative — to the financial bailout the Bush administration crafted. This new stimulus package is not intended to deal with the financial crisis but with the recession, and it is a classic Democratic strategy designed to generate economic activity through federal programs. What is not clear is where this leaves Obama’s tax policy. We suspect, some recent suggestions by his aides not withstanding, that he will have a tax cut for middle- and lower-income individuals while increasing tax rates on higher income brackets in order to try to limit deficits.

What is fascinating to see is how the policies Obama advocated during the campaign have become relatively unimportant, while the issues he will have to deal with as president really were not discussed in the campaign until September, and then without any clear insight as to his intentions. One point we have made repeatedly is that a presidential candidate’s positions during a campaign matter relatively little, because there is only a minimal connection between the issues a president thinks he will face in office and the ones that he actually has to deal with. George W. Bush thought he would be dealing primarily with domestic politics, but his presidency turned out to be all about the U.S.-jihadist war, something he never anticipated. Obama began his campaign by strongly opposing the Iraq war — something that has now be come far less important than the financial crisis, which he didn’t anticipate dealing with at all.

So, regardless of what Obama might have thought his presidency would look like, it is being shaped not by his wishes, but by his response to external factors. He must increase his political base — and he will do that by reassuring skeptical Democrats that he can work with Hillary Clinton, and by showing soft McCain supporters that he is not as radical as they thought. Each of Obama’s appointments is designed to increase his base of political support, because he has little choice if he wants to accomplish anything else.

As for policies, they come and go. As George W. Bush demonstrated, an inflexible president is a failed president. He can call it principle, but if his principles result in failure, he will be judged by his failure and not by his principles. Obama has clearly learned this lesson. He understands that a president can’t pursue his principles if he has lost the ability to govern. To keep that ability, he must build his coalition. Then he must deal with the unexpected. And later, if he is lucky, he can return to his principles, if there is time for it, and if those principles have any relevance to what is going on around him. History makes presidents. Presidents rarely make history.

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Saturday, November 22, 2008

U.S. influence is on the decline, report says,0,239346.story

U.S. influence is on the decline, report says
American intelligence agencies predict that China and India will cut into U.S. clout over the next two decades. The report also sees an increase in terrorist violence.
By Greg Miller
November 21, 2008
Reporting from Washington -- A new assessment by U.S. intelligence agencies predicts that American influence in the world will decline over the next two decades as surging powers such as China and India, as well as independent entities including tribes and criminal networks, gain international clout.

The report, meant to serve as a guidepost for President-elect Barack Obama's administration, offers a vision of a future in which the U.S., while the most powerful, is but "one of a number" of important players in the world.

Describing the findings, Tom Fingar, deputy director of National Intelligence for analysis, said there would be a "diminished gap between the United States and everybody else. . . . The unipolar moment is over."

The report, titled "Global Trends 2025: A Transformed World," represents the U.S. intelligence community's most comprehensive examination to date of long-term security issues. It sees a possible increase in terrorist violence even as support for extremism starts to wane.

Its central finding is that the U.S. will remain the world's foremost economic and military force, but its standing as an unrivaled superpower will probably diminish as a "global multipolar system" emerges.

China stands to have more effect on the world over the next 20 years than any other country, the report says, and India will strive to represent one of the world's economic poles.

How the world adjusts to their new roles will be up to the two countries, the report says.

"China and India must decide the extent to which they are willing and capable of playing increasing global roles and how each will relate to the other," the report says.

Japan could be caught between U.S. and Chinese influence, and Russia could grow or stall, depending on the economic decisions it makes, the report says. Brazil is poised to gain in influence and wealth.

The spread of influence could lead to larger roles for countries such as Iran, Indonesia and Turkey, the report adds.

The overall result will leave "less room for the U.S. to call the shots," the report says, and U.S. military power will be limited by the growing use by others of irregular warfare tactics and the proliferation of long-range precision weapons.

The document predicts the international alliances and networks that have dominated global affairs since the end of World War II "will be almost unrecognizable by 2025."

For years, U.S. analysts have anticipated that China, India and other emerging economic powers will gain international influence. But the report warns of another, possibly destabilizing, dynamic.

"The relative power of non-state actors -- businesses, tribes, religious organizations and even criminal networks -- will grow as these groups influence decisions on a widening range of social, economic and political issues," the report says.

The U.S. intelligence agencies compile reports on global trends every four years, and they have proved prescient.

In 2000, as George W. Bush was waiting to take office, a global trends report warned about the threat of large-scale terrorist attacks, noting that year's strike on the U.S. warship Cole.

"Such asymmetric approaches -- whether undertaken by states or non-state actors -- will become the dominant characteristic of most threats to the U.S.," the 2000 report said.

The document released Thursday, available at, examines an array of global issues, including climate change, economic dislocation and Islamic radicalism.

On terrorism, the report offers a mixed verdict. It concludes that Al Qaeda and other extremist terrorist groups face declining support across the Middle East and in other parts of the Muslim world.

But it warns that terrorist organizations will probably become more deadly because the spread of chemical and biological technologies "will place some of the world's most dangerous capabilities within their reach."

The report concludes that Al Qaeda will probably pose a lasting threat to the U.S. and other Western nations. But it cites the view of some experts that Al Qaeda "suffers from strategic weaknesses that could cause it to decay into marginality, perhaps shortening the life span of the Islamic terrorist wave."

Analysts said one factor that could lead to such an outcome is Al Qaeda's lack of a compelling vision that moderate Muslims might favor.

The report characterizes Al Qaeda's tactics and objectives -- including the use of violence against Muslims, strict observance of Islamic law and the subjugation of women -- as factors that undermine its long-term viability.

"The appeal of terrorism is waning," said Mathew J. Burrows, a member of the National Intelligence Council who played a leading role in drafting the report. "However, the lethality of terrorist groups is likely to grow."

The report touches briefly on the global economic crisis, concluding that it is not likely to lead to an extended depression but is accelerating "the global economic rebalancing."

Miller is a Times staff writer.

Friday, November 21, 2008

Advocates Call for Immediate Ban of All GM Foods and GM Crops

Austrian Government Study Confirms Genetically Modified (GM) Crops
Threaten Human Fertility and Health Safety

Advocates Call for Immediate Ban of All GM Foods and GM Crops

IMMEDIATE RELEASE (November 13, 2008)

(Los Angeles, CA.) - A long-term feeding study commissioned by the Austrian Agency for Health and Food Safety, managed by the Austrian Federal Ministry of Health, Family and Youth, and carried out by Veterinary University Vienna, confirms genetically modified (GM) corn seriously affects reproductive health in mice. Non-GMO advocates, who have warned about this infertility link along with other health risks, now seek an immediate ban of all GM foods and GM crops to protect the health of humankind and the fertility of women around the world.

Feeding mice with genetically modified corn developed by the US-based Monsanto Corporation led to lower fertility and body weight, according to the study conducted by the University of Veterinary Medicine in Vienna. Lead author of the study Professor Zentek said, there was a direct link between the decrease in fertility and the GM diet, and that mice fed with non-GE corn reproduced more efficiently.

In the study, Austrian scientists performed several long-term feeding trials over 20 weeks with laboratory mice fed a diet containing 33% of a GM variety (NK 603 x MON 810), or a closely related non-GE variety used in many countries. Statistically significant litter size and pup weight decreases were found in the third and fourth litters in the GM-fed mice, compared to the control group.

The corn is genetically modified with genes that produce a pesticidal toxin, as well as genes that allow it to survive applications of Monsanto's herbicide Roundup.

A book by author Jeffrey M. Smith, Genetic Roulette, distributed to members of congress last year, documents 65 serious health risks of GM products, including similar fertility problems with GM soy and GM corn: Offspring of rats fed GM soy showed a five-fold increase in mortality, lower birth weights, and the inability to reproduce. Male mice fed GM soy had damaged young sperm cells. The embryo offspring of GM soy-fed mice had altered DNA functioning. Several US farmers reported sterility or fertility problems among pigs and cows fed on GM corn varieties. Additionally, over the last two months, investigators in India have documented fertility problems, abortions, premature births, and other serious health issues, including deaths, among buffaloes fed GM cottonseed products.

The principle GM crops are soy, corn, cottonseed and canola. GM sugar from sugar beets will also be introduced before year's end.

Mr. Smith, who is also the Executive Director of the Institute for Responsible Technology says, "GM foods are likely responsible for several negative health trends in the US. The government must impose an immediate ban on these dangerous crops." He says, "Consumers don't need to wait for governmental action. They can download a free Non-GMO Shopping Guide at"

Monsanto press offices in the UK and USA were unable to provide a comment on the findings for journalists yesterday.

The Institute for Responsible Technology's Campaign for Healthier Eating in America mobilizes citizens, organizations, businesses, and the media, to achieve the tipping point of consumer rejection of genetically modified foods.

The Institute educates people about the documented health risks of GMOs and provides them with healthier non-GMO product choices.

The Institute also informs policy makers and the public around the world about the impacts of GMOs on health, environment, the economy, and agriculture, and the problems associated with current research, regulation, corporate practices, and reporting.


Institute For Responsible Technology
Media Contact: NJ Jaeger
Expert Contact: Jeffrey M. Smith
Phone: +1-310-377-0915

Wednesday, November 19, 2008

Will Holder Be Attorney General?

[JR: WHERE IS THE CHANGE? It seems Obama is installing all the old Clintin retreads, and we clearly remember all the shady and unconstitutional acts of the Clintin administration. The only reason Dubya was elected is because the Clintin Demoncrats had to be removed, but Dubya was able to build on the misdeeds of the Clintin era. This certainly makes it very hard to believe anything coming out of Washington, no matter which party is in charge, because NOTHING CHANGES.]
November 18, 2008, 3:53 pm

Will Holder Be Attorney General?
By Eric Lichtblau AND David Johnston
(Photo: Leslie E. Kossoff/Associated Press)

President-elect Barack Obama’s transition team has given strong signals to Eric H. Holder Jr., a senior official in the Clinton administration, that he will be chosen as attorney general, but no final decision has been made, people involved in the process said Tuesday.

Mr. Holder would be the first African-American to serve as the nation’s top law enforcement official. He has long been considered the front-runner for the job as a strong supporter of Mr. Obama who brings to the job a long record as a prosecutor and a judge.

But with the economic crisis as the top priority, Mr. Obama’s transition team appears to want to name a treasury secretary this week or next before moving on to the attorney general’s spot.

Now in private practice as a partner at the Washington law firm of Covington and Burling, Mr. Holder served as a federal prosecutor, a trial court judge, and United States attorney for the District of Columbia before becoming the top-ranking aide to Attorney General Janet Reno in 1997. He was the first African-American to serve in that post.

His last days at the Justice Department in 2001 were marred by his peripheral involvement in President Clinton’s controversial pardon of fugitive financier Marc Rich, as some Republicans blamed Mr. Holder for failing to oppose the pardon. Some Democrats are concerned that the issue will resurface if Mr. Holder is nominated for attorney general.

But officials in Mr. Obama’s transition appear to have overcome those concerns as they near an announcement about the attorney general’s job. Newsweek reported Tuesday that Mr. Obama had already made the decision to tap Mr. Holder. An official with the Obama camp, speaking on condition of anonymity, said that report was “wrong” and added that “no decision has been made.”

More on Eric Holder

Eric H. Holder Jr.

Eric H. Holder Jr., former deputy attorney general under Janet Reno in the Clinton administration, is being considered for attorney general in President-elect Barack Obama's administration.

Mr. Holder has a history of being sponsored for prominent positions by presidents of both parties. He was appointed a United States attorney and then deputy attorney general by President Clinton. For the previous five years, he served as a judge on the District of Columbia Superior Court, a post to which he was nominated by President Ronald Reagan.

Mr. Holder worked for 12 years with the Justice Department's Public Integrity section, prosecuting misconduct by state officials, judges, F.B.I. agents and a Federal prosecutor. In recent years, he has worked as a partner at Covington & Burling, representing big-name clients like the National Football League, Chiquita Brands International and Merck.

Mr. Holder, as deputy attorney general, did not play a direct role in President Bill Clinton’s controversial pardon of Marc Rich, the fugitive financier, who in 1983 fled to Switzerland rather than face tax evasion charges. But when queried about his view of the pardon, Mr. Holder told the White House he was “neutral, leaning towards favorable.” The comment was later seized on by Democrats to defend the pardon and by Republicans to blast Mr. Holder for endorsing what became the most heavily criticized pardon of Mr. Clinton’s presidency, in part because it turned out that Mr. Rich’s former wife, Denise Rich, donated large amounts of money to Mr. Clinton’s presidential library.

Mr. Holder is close to Valerie Jarrett, an Obama confidant and co-chairwoman of the Obama transition team. During the campaign, Mr. Holder was part of a vice-presidential advisory team that helped pick Senator Joseph R. Biden Jr. of Delaware as Mr. Obama’s running mate.

Born Jan. 21, 1951, in the Bronx and raised in New York City, Mr. Holder attended public schools and graduated from Columbia University and Columbia Law School.

Tuesday, November 18, 2008

The world has never seen such freezing heat

The world has never seen such freezing heat

By Christopher Booker
Last Updated: 12:01am GMT 16/11/2008

Have your say Read comments

A surreal scientific blunder last week raised a huge question mark about the temperature records that underpin the worldwide alarm over global warming. On Monday, Nasa's Goddard Institute for Space Studies (GISS), which is run by Al Gore's chief scientific ally, Dr James Hansen, and is one of four bodies responsible for monitoring global temperatures, announced that last month was the hottest October on record.

Snow in London
A sudden cold snap brought snow to London in October
Read more from Christopher Booker

This was startling. Across the world there were reports of unseasonal snow and plummeting temperatures last month, from the American Great Plains to China, and from the Alps to New Zealand. China's official news agency reported that Tibet had suffered its "worst snowstorm ever". In the US, the National Oceanic and Atmospheric Administration registered 63 local snowfall records and 115 lowest-ever temperatures for the month, and ranked it as only the 70th-warmest October in 114 years.

So what explained the anomaly? GISS's computerised temperature maps seemed to show readings across a large part of Russia had been up to 10 degrees higher than normal. But when expert readers of the two leading warming-sceptic blogs, Watts Up With That and Climate Audit, began detailed analysis of the GISS data they made an astonishing discovery. The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.
EU facing revolt over climate change target enforcement EU plans new energy deals Himalayan glaciers 'could disappear completely by 2035'

The error was so glaring that when it was reported on the two blogs - run by the US meteorologist Anthony Watts and Steve McIntyre, the Canadian computer analyst who won fame for his expert debunking of the notorious "hockey stick" graph - GISS began hastily revising its figures. This only made the confusion worse because, to compensate for the lowered temperatures in Russia, GISS claimed to have discovered a new "hotspot" in the Arctic - in a month when satellite images were showing Arctic sea-ice recovering so fast from its summer melt that three weeks ago it was 30 per cent more extensive than at the same time last year.

A GISS spokesman lamely explained that the reason for the error in the Russian figures was that they were obtained from another body, and that GISS did not have resources to exercise proper quality control over the data it was supplied with. This is an astonishing admission: the figures published by Dr Hansen's institute are not only one of the four data sets that the UN's Intergovernmental Panel on Climate Change (IPCC) relies on to promote its case for global warming, but they are the most widely quoted, since they consistently show higher temperatures than the others.

If there is one scientist more responsible than any other for the alarm over global warming it is Dr Hansen, who set the whole scare in train back in 1988 with his testimony to a US Senate committee chaired by Al Gore. Again and again, Dr Hansen has been to the fore in making extreme claims over the dangers of climate change. (He was recently in the news here for supporting the Greenpeace activists acquitted of criminally damaging a coal-fired power station in Kent, on the grounds that the harm done to the planet by a new power station would far outweigh any damage they had done themselves.)

Yet last week's latest episode is far from the first time Dr Hansen's methodology has been called in question. In 2007 he was forced by Mr Watts and Mr McIntyre to revise his published figures for US surface temperatures, to show that the hottest decade of the 20th century was not the 1990s, as he had claimed, but the 1930s.

Another of his close allies is Dr Rajendra Pachauri, chairman of the IPCC, who recently startled a university audience in Australia by claiming that global temperatures have recently been rising "very much faster" than ever, in front of a graph showing them rising sharply in the past decade. In fact, as many of his audience were aware, they have not been rising in recent years and since 2007 have dropped.

Dr Pachauri, a former railway engineer with no qualifications in climate science, may believe what Dr Hansen tells him. But whether, on the basis of such evidence, it is wise for the world's governments to embark on some of the most costly economic measures ever proposed, to remedy a problem which may actually not exist, is a question which should give us all pause for thought.

Toxic Chemicals Blamed for Gulf War Illness

Toxic Chemicals Blamed for Gulf War Illness
Report also cites drug given to U.S. troops to protect them from nerve gas

By Steven Reinberg, US News, November 17, 2008
HealthDay Reporter

MONDAY, Nov. 17 (HealthDay News) -- Gulf War illness, dismissed by some as a psychosomatic disorder, is a very real illness that affects at least 25 percent of the 700,000 U.S. veterans who took part in the 1991 Gulf War.
It's likely cause was exposure to toxic chemicals that included pesticides that were often overused during the war, as well as a drug given to U.S. troops to protect them from nerve gas, a frequent weapon of choice of former Iraqi leader Saddam Hussein.

And no effective treatments have been devised for the disorder.

Those are three key conclusions of a Congressionally mandated landmark report released Monday by a federal panel of scientific experts and veterans.

"It is very clear that Gulf War illness is a real condition that was not caused by combat stress or other psychological factors," said Lea Steele, scientific director of the Research Advisory Committee on Gulf War Veterans' Illnesses, which issued the report, and an associate professor at Kansas State University.

"This is something we need to take seriously," Steele said. "These folks were injured in wartime service, much as people who were shot with bullets or hit with bombs."

The committee presented the 450-page report to Secretary of Veterans Affairs James Peake.

Gulf War illness is frequently described as a collection of symptoms that includes memory and concentration problems, chronic headaches, fatigue and widespread pain. Other symptoms can include persistent digestive problems, respiratory symptoms and skin rashes.

The panel also said Gulf War veterans have much higher rates of amyotrophic lateral sclerosis (ALS, or Lou Gehrig's Disease) than other veterans, and soldiers who were downwind from large-scale munitions demolitions in 1991 have died from brain cancer at twice the rate of other Gulf War veterans.

In reaching its conclusions, the panel reviewed evidence about a wide range of possible environmental exposures that could cause Gulf War illness. That review included hundreds of studies of Gulf War veterans, research in other groups of populations, animal studies of toxic exposures, and government investigations about events and exposures during the Gulf War, which began after Hussein invaded Kuwait.

Speculation about the causes of Gulf War illness has included exposure to depleted uranium munitions, vaccines, nerve agents and oil well fires.

The new report says the illness was caused by soldiers' exposure to certain chemicals, Steele said.

"When you put all the evidence together there are two chemicals that jump out as the main causes," she said. One is a drug called pyridostigmine bromide, which is a cholinesterase inhibitor that was given to the troops to protect them against nerve gas.

"It turns out that people who took those pills have a higher rate of Gulf War illness," Steele said. "And people who took more pills have even higher rates of Gulf War illness."

In addition, soldiers were exposed to pesticides that were also cholinesterase inhibitors, Steele said. "The strongest evidence points to pyridostigmine bromide and pesticides as causal factors," she said. "This type of illness has not been seen after other wars."

While pyridostigmine bromide is still in use, its use is more limited than it was in the first Gulf War. It's currently being used against one type of nerve agent, but is not being given out on a widespread basis, Steele said.

"The Gulf War was the only time a lot of people used this drug," she said.

Steele added that the U.S. military has also cut back on its use of pesticides since the 1991 war.

There are other factors that, while not likely causes of Gulf War illness, can't be ruled out, Steele said. These include exposure to nerve agents, exposure to smoke from oil well fires, and vaccines given to the troops. The panel ruled out depleted uranium and anthrax vaccine as causes.

The panel also found government research and funding into Gulf War illness wanting. "There has not been sufficient attention given to Gulf War illness. It's a real problem," Steele said.

"In recent years, both the Department of Defense and the Department of Veterans Affairs have reported a lot of studies that weren't Gulf War illness as Gulf War research," Steele added. "Some of the money was misused."

The panel noted that overall federal funding for Gulf War research has declined substantially in recent years; the group urged lawmakers to devote $60 million annually to such programs.

When veterans with Gulf War illness go to Veterans Administration hospitals for treatment, their problems often aren't taken seriously, Steele said. "VA docs often know nothing about it and aren't able to help them. Sometimes they treat them as if they are head cases or malingering," she said.

James Binns is chairman of the U.S. Department of Veterans Affairs' Research Advisory Committee on Gulf War Veterans' Illnesses.

"We have no treatments that work," said Binns, a Vietnam veteran and former Pentagon official. "I would like to see the new administration take this more seriously. When you look at all the studies, it's as clear as the nose on your face that this [Gulf War illness] is real."

It took 20 years to admit that Agent Orange, a defoliant used in the Vietnam war, caused illness, Binns said. "It's now coming up to 17 years on Gulf War illness," he said. "Troop exposures [to these chemicals] were a serious but honest mistake. Covering it up rather than trying to help them has been unconscionable."

More information

Learn more about Gulf War illness from the University of Chicago Medical Center.

On G-20 and GM: Economics, Politics and Social Stability

On G-20 and GM: Economics, Politics and Social Stability
November 17, 2008

Graphic for Geopolitical Intelligence Report

By George Friedman
Related Special Topic Pages

* Political Economy and the Financial Crisis

The G-20 met last Saturday. Afterward, the group issued a meaningless statement and decided to meet again in March 2009, or perhaps later. Clearly, the urgency of October is gone. First, the perception of imminent collapse is past. Politicians are superb seismographs for detecting impending disaster, and these politicians did not act as if they were running out of time. Second, the United States will have a new president in March, and nothing can be done until he defines his policy.

Given the sense in Europe that this financial crisis marked the end of U.S. economic supremacy, it is ironic that the Europeans are waiting on the Americans. One would think they would be using their newfound ascendancy to define the new international system. But the fact is that for all the shouting, little has changed in the international order. The crisis has receded sufficiently that nothing more needs to be done immediately beyond “cooperation,” and nothing can be done until the United States defines what will be done. We feel that our view that the international system received fatal blows Aug. 8, when Russia and Georgia went to war, and Oct. 11, when the G-7 meeting ended without a single integrated solution, remains unchallenged. Now, it is every country for itself.
From Financial Crisis to Cyclical Recession

The financial crisis has been mitigated, if not solved. The problem now is that we are in a cyclical recession, and that every country is trying to figure out how to cope with the recession. Unlike the past two recessions, this one is more global than local. But unlike the 1970s, when recession was global, this one is not accompanied by soaring inflation and interest rates.

All recessions have different dynamics, but all have one thing in common: They impose punishment and discipline on economies run wild. This is happening around the world.

China, for example, faces a serious problem. China is an export-oriented economy whose primary market is the United States. As the United States goes into recession, demand for Chinese goods declines. Chinese businesses have always operated on very tight — sometimes invisible — profit margins designed to emphasize cash flow and to pay off debts to banks. As U.S. demand contracts, many Chinese firms find themselves in untenable positions, without room to decrease prices, lacking operating reserves and insufficiently capitalized. Recessions are designed to cull the weak from the herd, and a huge swath of the Chinese economy is ripe for the culling.

If the world were all about economics, culling is what the Chinese would do. But the world is more complex than that. A culling would lead to massive unemployment. Many Chinese employees live on Third World wages; indeed, the vast majority of Chinese have incomes of less than $1,000 a year. To them, unemployment doesn’t mean problems with their 401k. It means malnutrition and desperation — neither of which is unknown in 20th century Chinese history, including the Communist period. The Chinese government is rightly worried about the social and political consequences of rational economic policies: They might work in the long run, but only if you live that long.
Economic Restructuring vs. Stability

The Chinese have therefore prepared a massive stimulus package that is more of a development program to make up for declining U.S. demand. It aims to keep businesses from failing and spilling millions of angry and hungry workers into the street. For the Chinese, the economic problem creates a much larger and more serious issue. It is also an issue that must be solved quickly, and the amount of time needed outstrips the amount of time available.

This is not only a Chinese problem. Wherever there is an economic downturn, politicians must decide whether society — and their own political futures — can withstand the rigors recessions impose. Recessions occur when, as is inevitable, inefficiencies and irrationalities build up in the financial and economic system. The resulting economic downturn imposes a harsh discipline that destroys the inefficient, encourages everyone to become more efficient, and opens the doors to new businesses using new technologies and business models. The year 2001 smashed the technology sector in the United States, opening the door for Google Inc.

The business cycle works well, but the human costs can be daunting. The collapse of inefficient businesses leaves workers without jobs, investors without money and society less stable than before. The pain needed to rectify China’s economy would be enormous, with devastating consequences for hundreds of millions of Chinese, and probably would lead to social chaos. Beijing is prepared to accept a high degree of economic inefficiency to avoid, or at least postpone, the reckoning. The reckoning always comes, but for most of us, later is better than sooner. Economic rationality takes a back seat to social necessity and political common sense.

Every country in the world is looking inward at the impact of the recession on its economy and measuring its resources. Countries are deciding whether they have the ability to prop up business that should fail, what the social consequences of business failure would be, and whether they should try to use their resources to avoid the immediate pain of recession. This is why the G-20 ended in meaningless platitudes.

Each country is also trying to answer the question of how much pain it — and its regime — can endure. The more pain imposed, the healthier countries will emerge economically — unless of course the pain kills them. Ultimately, the rationality of economics and the reality of society frequently diverge.
Recession and the U.S. Auto Industry

For the United States, this choice has been posed in stark terms with regard to the dilemma of whether the U.S. government should use its resources to rescue the American auto industry. The American auto industry was once the centerpiece of the U.S. economy. That hasn’t been true for a generation, as other industries and services have supplanted it and other countries’ auto industries have surpassed it. Nevertheless, the U.S. auto industry remains important. It might drain the U.S. economy by losing vast amounts of money and destroying the equity held by its investors, but it employs large numbers of people. Perhaps more important, it purchases supplies from literally thousands of U.S. companies.

There can be endless discussions of why the U.S. auto industry is in such trouble. The answer lies not in one place but in many, from the decisions and makeup of management to the unions that control much of the workforce, and from the cost structure inherent in producing cars in the American economy to a simple systemic inability to produce outstanding vehicles. There might be varying degrees of truth to all or some of this, but the fact remains that each of the U.S. carmakers is on the verge of financial collapse.

This is what recessions are supposed to do. As in China and everywhere else, recessions reveal weak businesses and destroy them, freeing up resources for new enterprises. This recession has hit the auto industry hard, and it is unlikely that it is going to survive. The ultimate reason is the same one that destroyed the U.S. steel industry a generation ago: Given U.S. cost structures, producing commodity products is best left to countries with lower wage rates, while more expensive U.S. labor is deployed in more specialized products requiring greater expertise. Thus, there is still steel production in the United States, but it is specialty steel production, not commodity steel. Similarly, there will be specialty auto production in the United States, but commodity auto production will come from other countries. < /p>

That sounds easy, but the transition actually will be a bloodletting. Current employees of both the automakers and suppliers will be devastated. Institutions that have lent money to the automakers will suffer massive or total losses. Pensioners might lose pensions and health care benefits, and an entire region of the United States — the industrial Midwest — will be devastated. Something stronger will grow eventually, but not in time for many of the current employees, shareholders and creditors.

Here the economic answer, cull, meets the social answer, stabilize. Policymakers have a decision to make. If the automakers fail now, their drain on the economy will end; the pain will be shorter, if more intense; and new industries would emerge more quickly. But though their drain on the economy would end, the impact of the automakers’ failure on the economy would be seismic. Unemployment would surge, as would bankruptcies of many auto suppliers. Defaults on loans would hit the credit markets. In the Midwest, home prices would plummet and foreclosures would skyrocket. And heaven only knows what the impact on equity markets would be.

In the U.S. case, the healthful purgative of a recession could potentially put the patient in a coma. Few if any believe the U.S. auto industry can survive in its current form. But there is an emerging consensus in Washington that the auto industry must not be allowed to fail now. The argument for spending money on the auto industry is not to save it, but to postpone its failure until a less devastating and inconvenient time. In other words, fearing the social and political consequences of a recession working itself through to its logical conclusion, Washington — like Beijing — wants to spend money it probably won’t recover to postpone the failure. Indeed, governments around the world are considering what failures to tolerate, what failures to postpone, and how much to spend on the latter. General Motors is merely the American case in point.
The Recession in Context

The people arguing for postponement aren’t foolish. The financial system is still working its way through a massive crisis that had little to do with the auto industry. Some traction appears to be occurring; certainly there was no crisis atmosphere at the G-20 meeting. The economy is in recession, but in spite of the inevitable claims that we have never seen anything like this one before, we have. There is always some variable that swings to an extreme — this time, it is consumer spending — but we are still well within the framework of recent recessions.

Consider the equity markets, which we regard as a long-term measure of the market’s evaluation of the state of the economy. In January 2000, the S&P 500 peaked at 1,455. This was the top of the market. In July 2002, 18 months later, the S&P bottomed out at 935. Over the next five years it rose to 1,519 in July 2007, the height for this cycle. It fell from this point until Nov. 12, 2008, when it closed at 852.30. This past Friday, it was at 873.29.

We do not know what the market will do in the future. There are people much smarter than we are who claim to know that. What we do know is what it has done. And what it has done this time — so far — is almost exactly what it did last time, except that in 2000-2002 it took 18 months to do it, while this time it was done in about 16 and a half months (assuming it bottomed out Nov. 12). But even if the market didn’t bottom out then, and it falls to 775, for example, it will have lost 50 percent of its value from the peak. This would be more than in 2000-2002, but not unprecedented.

The point we are making here is that if we regard the equity markets as a long-term seismograph of the economy, then so far, despite all the storm and stress, the markets — and therefore the economy — remain within the general pattern of the 2000-2002 market at the 2001 recession. That recession certainly was unpleasant, what with the devastation of the tech sector, but the economy survived. At the same time, however, it is clear that things are balanced on a knife’s edge. Another hundred points’ fall on the S&P, and the markets will be telling us that the world is in a very different place indeed.

A massive bankruptcy in the automotive sector could certainly set the stage for an economic renaissance in the next generation. But at this particular moment in time (it’s no coincidence that the crisis in the U.S. automotive industry comes as we enter a recession), a wave of bankruptcies would dramatically deepen the recession. This probably would be reflected by the destruction of trillions more in net worth in the equity markets.

There is a powerful counterargument to bailing out the U.S. auto industry. This argument holds that the auto industry is a drain on the U.S. economy, that it will never be globally competitive, and that if it is dragged back from the edge, no one will then say it is time to push it to the edge and over. The next time it will be on the brink will be during the next recession, and the same argument to save it will be used. In due course, the United States, like China, will be so terrified of the social and political consequences of business failure that it will maintain Chinese-like state owned enterprises, full of employees and generation-old plants and business models. Clearly, short-run solutions can easily become long-term albatrosses.

The only possible solution would be a bailout followed by a Washington-administered restructuring of the auto industry. This causes us to imagine a collaboration between the auto industry’s current management and Washington administrators that would finally put Detroit on a path to where it can compete with Toyota. Frankly, the mind boggles at this. But boggle though we might, hitting the economy with another massive financial default, a wave of bankruptcies, massive unemployment surges and another blow to housing prices boggles our mind even more.

The geopolitical problem confronting the world at the moment is that it has been forced to offer massive support to the global financial system with sovereign wealth — e.g., via taxes and currency printing presses. The world might just have squeaked through that crisis. Now, the world is in an inevitable recession and businesses are on the brink of failure. A wave of massive business failures on top of the financial crisis might well move the global system to a very different place. Therefore, each nation, by itself and indifferent to others, is in the process of figuring out how to postpone these failures to a more opportune time — or to never. This will build in long-term inefficiencies to the global economy, but right now everyone will be quite content with that.

Thus the financial crisis became a recession, and the recession triggered bankruptcies. And because no one wants bankruptcies right now, everyone who can is using taxpayer dollars to protect the taxpayer from the consequences of mismanagement. And the last thing any one cared about was the G-20 concept for the future of the economic system.

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Monday, November 17, 2008

At global finance talks, 20 different agendas

International Herald Tribune

At global finance talks, 20 different agendas
By Mark Landler
Saturday, November 15, 2008

WASHINGTON: With 20 world leaders in town for 24 hours, there wasn't much time for grand gestures or bold promises at Saturday's summit meeting on the global financial crisis. But that did not stop the leaders from bringing 20 different agendas, some more ambitious than others.

There was the French president, Nicolas Sarkozy, without his glamorous wife, Carla, but with a raft of proposals to "change the rules of the game," as he said last week after a meeting of European leaders.

There was Hu Jintao, the president of China, heading a delegation of 100 people and wielding a fat checkbook — nearly $2 trillion in foreign exchange reserves — that Beijing could lend to distressed countries.

There was Prime Minister Gordon Brown of Britain, emboldened by his much-praised response to the banking crisis at home, and fresh from criticizing the proposed bailout of American carmakers in a speech in New York on Friday.

And finally, there was President George W. Bush, the reluctant host in his waning months in office. "The crisis was not a failure of the free-market system," Bush said in his weekly radio address on Saturday, trying to dial back expectations. "The answer is not to try to reinvent that system."

How world leaders approached the Summit on Financial Markets and the World Economy — as Bush called the meeting — had a lot to do with how the financial crisis affected their political fortunes.

For Bush, the upheaval delivered a final blow to an administration staggering under an unpopular war in Iraq and a weakening economy. With President-elect Barack Obama watching from Chicago, Bush was not even the most sought-after American at the meeting he organized, a meeting that was the idea of Sarkozy's. Instead, leaders from Mexico to Turkey lined up to meet two emissaries sent by Obama.

Sarkozy, on the other hand, only became president of France last year, after the seeds of the crisis had been planted. His call for greater regulation plays into France's historical preferences for a robust state role in the market, making Sarkozy an ideal point man for the effort.

"Sarkozy is in a very strong position of not owning the crisis, as other leaders do," said Kenneth Rogoff, a professor of economics at Harvard. "Like Obama, he can take a more detached view."

The French leader's high profile was not without risks. "This was his idea," said Simon Johnson, a former chief economist of the International Monetary Fund.

Besides Sarkozy and Bush were the leaders from Argentina, Australia, Brazil, Britain, Canada, China, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Spain, and Turkey.

Angela Merkel, the German chancellor, and President Cristina Fernández de Kirchner of Argentina were the only two women in the Group of 20 meeting — and neither, analysts said, brought a very strong hand.

The German economy just slipped into recession, and its government was slow to accept the need to recapitalize its banks, which purchased a lot of toxic mortgage-related assets from the United States.

Argentina, meanwhile, announced it would nationalize $26 billion of private pension funds, raising fears that the government was short on cash and putting Kirchner into an economic dog house with foreign investors, who are pulling their money out of the country.

The Russian president, Dmitri Medvedev, also came with arguably reduced influence, partly for economic reasons: as the price of oil has plummeted, so has Russia's economy, its foreign exchange reserves and perhaps some of its political muscle.

None of this has stopped Medvedev from striking a combative tone toward the United States.

"They let this currency bubble grow in the interests of stimulating domestic growth," he declared in a recent speech. "They did not listen to the numerous warnings from their partners, including from us. As a result they have caused damage to themselves and to others."

For Brown of Britain, the crisis has been a mixed bag. As chancellor of the Exchequer under Tony Blair, Brown is identified with the economic policies that gave Britain years of growth but brought some of the same excesses as in the United States.

However, by moving quickly to recapitalize the British banking system, Brown appeared decisive and won praise from economists. He also stopped, at least for now, a stream of political obituaries suggesting he would soon be ousted by the Tory leader, David Cameron.

On Friday, Brown was introduced at a breakfast at the Council on Foreign Relations in New York by Robert E. Rubin, the former Treasury secretary, with lavish praise for his role during the crisis.

"Not only the U.K. but the entire world has been very fortunate to have you as a leader," Rubin said.

Brown, smiling broadly, responded that he was "pleased to say that a large number of governments around the world have recognized" that injecting capital into banks is the best way to restore stability.

The prime minister felt confident enough to offer the United States some unsolicited advice, obliquely criticizing proposals supported by Obama to bail out the Big Three automakers.

Without referring to the companies by name, he warned against calls to save jobs in industries that were facing an irreversible decline in the face of global competition. The right response, he said, would be to say, "We can't help you keep your old job, but we can help prepare you for your next job."

To help countries hurt by the crisis, Brown is pushing for the resources of the International Monetary Fund to be expanded. The fund, he said, should function like an "international central bank."

The trouble with this idea is that there are only a handful of candidates with enough cash to pour money into the IMF — China, Japan, and oil producers like Saudi Arabia. The Japanese prime minister, Taro Aso, pledged up to $100 billion in additional lending to the fund.

To persuade these countries to increase their contributions would require giving them a larger role in the governance of the fund. And that would mean reducing the influence of Britain and other European countries.

China staked its claim to a significant role in another way: It announced a $586 billion stimulus package a week ago, allowing President Hu to seize the initiative on economic policy.

For leaders of emerging-market countries who have been clamoring for a seat at the summit meeting table, even being here was something of a victory. For the president of Brazil, Luiz Inácio Lula da Silva, it was partly a simple matter of protocol: Brazil currently leads the Group of 20, which gave da Silva some say over the agenda.

Beyond that, he has been outspoken about how developing countries are victims of a crisis not of their own making.

"No country is safe," da Silva said last weekend, opening a preparatory meeting of finance ministers in São Paulo. "They are all being infected by problems that originated in the advanced countries."

Pakistan Agrees to IMF Loan

KARACHI, Pakistan (AP) — Pakistan has agreed to borrow $7.6 billion from the International Monetary Fund to try to avoid an economic crisis, an official said on Saturday.

The official, Shaukat Tareen, Pakistan's finance chief, said the IMF had agreed "in principle" to the bailout after vetting government plans to tackle Pakistan's budget and trade deficits.

The loan will shore up Pakistan's foreign currency reserves and help alleviate the prospect of a run on the rupee and a default on international debt.

Saudi Arabia buys $3.5bn of gold in two weeks

Saudi Arabia buys $3.5bn of gold in two weeks

Peter Cooper
14 November 2008
There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices well above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think.

Peter Cooper

Freelance journalist & author
Dubai Media City
Dubai, United Arab Emirates

The Great Depression of the 21st Century: Collapse of the Real Economy

The Great Depression of the 21st Century: Collapse of the Real Economy

by Michel Chossudovsky, Global Research, November 15, 2008

The financial crisis is deepening, with the risk of seriously disrupting the system of international payments.

This crisis is far more serious than the Great Depression. All major sectors of the global economy are affected. Recent reports suggest that the system of Letters of Credit as well as international shipping, which constitute the lifeline of the international trading system, are potentially in jeopardy.

The proposed bank "bailout" under the so-called Troubled Asset Relief Program (TARP) is not a "solution" to the crisis but the "cause" of further collapse.

The "bailout" contributes to a further process of destabilization of the financial architecture. It transfers large amounts of public money, at taxpayers expense, into the hands of private financiers. It leads to a spiraling public debt and an unprecedented centralization of banking power. Moreover, the bailout money is used by the financial giants to secure corporate acquisitions both in the financial sector and the real economy.

In turn, this unprecedented concentration of financial power spearheads entire sectors of industry and the services economy into bankruptcy, leading to the layoff of tens of thousands of workers.

The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets.

Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources, infrastructure, etc.

Collapse of Consumer Demand

The real economy is in crisis. The resulting increase in unemployment is conducive to a dramatic decline in consumer spending which in turn backlashes on the levels of production of goods and services.

Exacerbated by neoliberal macro-economic policy, this downward spiral is cumulative, ultimately leading to an oversupply of commodities.

Business enterprises cannot sell their products, because workers have been laid off. Consumers, namely working people, have been deprived of the purchasing power required to fuel economic growth. With their meager earnings, they cannot afford to acquire the goods produced.

Overproduction Triggers a String of Bankruptcies

Inventories of unsold goods pile up. Eventually, production collapses; the supply of commodities declines through the closing down of production facilities, including manufacturing assembly plants.

In the process of plant closure, more workers become unemployed. Thousands of bankrupt firms are driven off the economic landscape, leading to a slump in production.

Mass poverty and a Worldwide decline in living standards is the result of low wages and mass unemployment. It is the outcome of a preexisting global cheap labor economy, largely characterized by low wage assembly plants in Third World countries.

The current crisis extends the geographic contours of the cheap labor economy, leading to the impoverishment of large sectors of the population in the so-called developed countries (including the middle classes).

In the US, Canada and Western Europe, the entire industrial sector is potentially in jeopardy.

We are dealing with a long-term process of economic and financial restructuring. In its earlier phase, starting in the 1980s during the Reagan Thatcher era, local and regional level enterprises, family farms and small businesses were displaced and destroyed. In turn, the merger and acquisition boom of the 1990s led to the concurrent consolidation of large corporate entities both in the real economy as well as in banking and financial services.

In recent developments, however, the concentration of bank power has been at the expense of big business.

What is distinct in this particular phase of the crisis, is the ability of the financial giants (through their overriding control over credit) not only to create havoc in the production of goods and services, but also to undermine and destroy large corporate entities of the real economy.

Bankruptcies are occurring in all major sectors of activity: Manufacturing, telecoms, consumer retail outlets, shopping malls, airlines, hotels and tourism, not to mention real estate and the construction industry, victims of the subprime mortgage meltdown.

General Motors has confirmed that "it could run out of cash within a few months, which could prompt one of the biggest bankruptcy filings in U.S. history". (, November 11, 2008)) In turn this would backlash on a string of related industries. Estimates of job losses in the US auto industry range from 30,000 to as much as 100,000.(Ibid).

Collapse of General Motors Share Price

In the US, consumer retail companies are in difficulty: the share prices of JC Penney and Nordstrom department store chains have collapsed. Circuit City Stores Inc. filed for Chapter 11 protection. The shares of Best Buy, the electronics retail chain, have plunged.

The Vodafone Group PLC, the world's biggest mobile phone company not to mention InterContinental Hotels PLC are in difficulty, following the collapse of stock values. (AP, Nov 12, 2008). Worldwide, over two dozen airlines have gone under in 2008, adding to a string of airline bankruptcies in the course of the last five years. (Aviation and Aerospace News, 30 October 2008). Denmark's Second commercial airline Stirling has declared bankruptcy. In the US, a growing list of real estate companies have already filed for bankruptcy protection.

Vodophone. Collapse of Share Price

InterContinental Hotels PLC

In the last two months, there have been numerous plant closures across America leading to the permanent layoff of tens of thousands of workers. These closures have affected several key areas of economic activity including the pharmaceutical and chemical industries, the automobile industry and related sectors, the services economy, etc.

US factory orders have declined dramatically. Research firm Autodata reported in October that "sales of cars and light trucks in September had declined 27 percent compared with a year earlier."(Washington Post, October 3, 2008)


According to the US Bureau of Labor Statistics, an additional 240,000 jobs were lost during the month of October alone:

"Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. October's drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries...

Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work rose by 615,000 to 4.4 million in October. Over the past 12 months, the size of this group has increased by 1.7 million." (Bureau of Labor Statistics, November, 2008)

The official figures do not describe the seriousness of the crisis and its devastating impact on the labor market, since many of the job losses are not reported.

The situation in the European Union is equally disturbing. A recent British report points to the potential plight of mass unemployment in North Eastern England. In Germany, a report published in October, suggests that 10-15% of all automotive jobs in Germany could be lost.

Job cuts have also been announced at General Motors and Nissan-Renault plants in Spain. Sales of new cars in Spain plummeted by 40 percent in October in relation to sales in the same month last year.

Workers of Nissan automaker protest in front of the Japanese company's building in Barcelona (AFP)

Bankruptcies and Foreclosures: A Money-spinning Operation for the Financial Giants

Among the companies on the verge of bankruptcy are some highly lucrative and profitable operations. The important question: who takes over the ownership of bankrupt giant industrial corporations?

Bankruptcies and foreclosures are a money-spinning operation. With the collapse in stock market values, listed companies experience a major collapse of the price of their stock, which immediately affects their creditworthiness and their ability to borrow and/ or to renegotiate debts ( which are based on the quoted value of their assets).

The institutional speculators, the hedge funds, et al have cashed in on their windfall loot.

They trigger the collapse of listed companies through short selling and other speculative operations. They then cash in on their large scale speculative gains.

According to a report in the Financial Times, there is evidence that the plunge of the US automobile industry was in part the result of manipulation: "General Motors and Ford lost 31 per cent to $3.01 and 10.9 per cent to $1.80 despite hopes that Washington may save the industry from the brink of collapse. The fall came after Deutsche Bank set a price target of zero on GM." (FT, November 14, 2008, emphasis added)

The financiers are on a shopping-spree. America's Forbes 400 billionaires are waiting in limbo.

Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy.

The next step consists in transforming liquid assets, namely money paper wealth, into the acquisition of real economy assets.

In this regard, Warren Buffett's Berkshire Hathaway Inc. is a major shareholder of General Motors. More recently, following the collapse in stock values in October and November, Buffett boosted his stake in oil producer ConocoPhillips, not to mention Eaton Corp, whose price on the NYSE tumbled by 62% in relation to its December 2007 high (Bloomberg).

The target of these acquisitions are the numerous highly productive industrial and services sector companies, which are on the verge of bankruptcy and/or whose stock values have collapsed.

The money managers are picking up the pieces.

Ownership of the Real Economy

As a result of these developments, which are directly related to the financial meltdown, the entire ownership structure of real economy assets is in turmoil.

Paper wealth accumulated through insider trading and stock market manipulation is used to acquire control over real economic assets, displacing the preexisting ownership structures.

What we are dealing with is an unsavory relationship between the real economy and the financial sector. The financial conglomerates do not produce commodities. They essentially make money through the conduct of financial transactions. They use the proceeds of these transactions to take over bona fide real economy corporations which produce goods and services for household consumption.

In a bitter twist, the new owners of industry are the institutional speculators and financial manipulators. They are becoming the new captains of industry, displacing not only the preexisting structures of ownership but also instating their cronies in the seats of corporate management.

No Reform Possible under the Washington-Wall Street Consensus

The November 15 G-20 Financial Summit in Washington upholds the Washington-Wall Street consensus.

While formally presenting a project to restore financial stability, in practice, the hegemony of Wall Street remains unscathed. The tendency is towards a unipolar monetary system dominated by the United States and upheld by US military superiority.

The architects of financial disaster under the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA) have been entrusted with the task of mitigating the crisis, which they themselves created. They are the cause of financial collapse.

The G20 Financial Summit doesn't question the legitimacy of the hedge funds and the various instruments of derivative trade. The final Communiqué includes an imprecise and blurred commitment "to better regulate hedge funds and create more transparency in mortgage-related securities in a bid to halt a global economic slide."

A solution to this crisis can only be brought about through a process of "financial disarmament", which forcefully challenges the hegemony of the Wall Street financial institutions including their control over monetary policy. "Financial disarmament" would also require freezing the instruments of speculative trade, dismantling the hedge funds and democratizing monetary policy. The term "financial disarmament" was initially coined by John Maynard Keynes in the 1940s.

Obama Endorses Financial Deregulation

Barack Obama has embraced the Washington-Wall Street consensus. In a bitter twist, former Congressman Jim Leach, a Republican who sponsored the 1999 FSMA in the House of Representatives is now advising Obama on formulating a timely solution to the crisis.

Jim Leach

Jim Leach, Madeleine Albright and former Treasury Secretary Larry Summers, who also played a key role in pushing through the FSMA legislation, were in attendance at the November 15 G-20 Financial Summit, as part of President-elect Barack Obama's advisory team:

"President-elect Barack Obama and Vice President-elect Joe Biden announced that former Secretary of State Madeleine Albright and former Republican Congressman Jim Leach would be available to meet with delegations at the G-20 summit on their behalf. Leach and Albright are holding these unofficial meetings to seek input from visiting delegations on behalf of the president-elect and vice president-elect. (, November 15, 2008)

Related Article

Who are the Architects of Economic Collapse?
Will an Obama Administration Reverse the Tide?
- by Michel Chossudovsky - 2008-11-09
The engineers of financial disaster are being considered by President-Elect Barack Obama for the position of Treasury Secretary.

The Globalization of Poverty and the New World Order

by Michel Chossudovsky

In this new and expanded edition of Chossudovsky’s international best-seller, the author outlines the contours of a New World Order which feeds on human poverty and the destruction of the environment, generates social apartheid, encourages racism and ethnic strife and undermines the rights of women. The result as his detailed examples from all parts of the world show so convincingly, is a globalization of poverty.

This book is a skilful combination of lucid explanation and cogently argued critique of the fundamental directions in which our world is moving financially and economically.

In this new enlarged edition –which includes ten new chapters and a new introduction-- the author reviews the causes and consequences of famine in Sub-Saharan Africa, the dramatic meltdown of financial markets, the demise of State social programs and the devastation resulting from corporate downsizing and trade liberalisation.

Michel Chossudovsky is Professor of Economics at the University of Ottawa and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website . He is a contributor to the Encyclopedia Britannica. His writings have been translated into more than 20 languages.