Tuesday, January 31, 2012

Germany's Role in Europe and the European Debt Crisis


Germany's Role in Europe and the European Debt Crisis
January 31, 2012 | 1217 GMT

By George Friedman

The German government proposed last week that a European commissioner be appointed to supplant the Greek government. While phrasing the German proposal this way might seem extreme, it is not unreasonable. Under the German proposal, this commissioner would hold power over the Greek national budget and taxation. Since the European Central Bank already controls the Greek currency, the euro, this would effectively transfer control of the Greek government to the European Union, since whoever controls a country's government expenditures, tax rates and monetary policy effectively controls that country. The German proposal therefore would suspend Greek sovereignty and the democratic process as the price of financial aid to Greece.

Though the European Commission rejected the proposal, the concept is far from dead, as it flows directly from the logic of the situation. The Greeks are in the midst of a financial crisis that has made Greece unable to repay money Athens borrowed. Their options are to default on the debt or to negotiate a settlement with their creditors. The International Monetary Fund (IMF) and European Union are managing these negotiations.

Any settlement will have three parts. The first is an agreement by creditors to forego repayment on part of the debt. The second is financial help from the IMF and the European Union to help pay back the remaining debt. The third is an agreement by the Greek government to curtail government spending and increase taxes so that it can avoid future sovereign debt crises and repay at least part of the debt.
Bankruptcy and the Nation State

The Germans don't trust the Greeks to keep any bargain, which is not unreasonable given that the Greeks haven't been willing to enforce past agreements. Given this lack of trust, Germany proposed suspending Greek sovereignty by transferring it to a European receiver. This would be a fairly normal process if Greece were a corporation or an individual. In such cases, someone is appointed after bankruptcy or debt restructuring to ensure that a corporation or individual will behave prudently in the future.

A nation state is different. It rests on two assumptions. The first is that the nation represents a uniquely legitimate community whose members share a range of interests and values. The second is that the state arises in some way from the popular will and that only that popular will has the right to determine the state's actions. There is no question that for Europe, the principle of national self-determination is a fundamental moral value. There is no question that Greece is a nation and that its government, according to this principle, is representative of and responsible to the Greek people.

The Germans thus are proposing that Greece, a sovereign country, transfer its right to national self-determination to an overseer. The Germans argue that given the failure of the Greek state, and by extension the Greek public, creditors have the power and moral right to suspend the principle of national self-determination. Given that this argument is being made in Europe, this is a profoundly radical concept. It is important to understand how we got here.
Germany's Part in the Debt Crisis

There were two causes. The first was that Greek democracy, like many democracies, demands benefits for the people from the state, and politicians wishing to be elected must grant these benefits. There is accordingly an inherent pressure on the system to spend excessively. The second cause relates to Germany's status as the world's second-largest exporter. About 40 percent of German gross domestic product comes from exports, much of them to the European Union. For all their discussion of fiscal prudence and care, the Germans have an interest in facilitating consumption and demand for their exports across Europe. Without these exports, Germany would plunge into depression.

Therefore, the Germans have used the institutions and practices of the European Union to maintain demand for their products. Through the currency union, Germany has enabled other eurozone states to access credit at rates their economies didn't merit in their own right. In this sense, Germany encouraged demand for its exports by facilitating irresponsible lending practices across Europe. The degree to which German actions encouraged such imprudent practices -- since German industrial production vastly outstrips its domestic market, making sustained consumption in markets outside Germany critical to German economic prosperity -- is not fully realized.

True austerity within the European Union would have been disastrous for the German economy, since declines in consumption would have come at the expense of German exports. While demand from Greece is only a small portion of these exports, Greece is part of the larger system -- and the proper functioning of that system is very much in Germany's strategic interests. The Germans claim the Greeks deceived their creditors and the European Union. A more comprehensive explanation would include the fact that the Germans willingly turned a blind eye. Though Greece is an extreme case, Germany's overall interest has been to maintain European demand -- and thus avoid prudent austerity -- as long as possible.

Germany certainly was complicit in the lending practices that led to Greece's predicament. It is possible that the Greeks kept the whole truth about the Greek economy from their creditors, but even so, the German demand for suspension of Greek national self-determination is particularly striking.

In a sense, the German proposal merely makes very public what has always been the reality. For Greece to have its debt restructured, it must impose significant austerity measures, which Athens has agreed to. The Germans now want a commissioner appointed to ensure the Greek government fulfills its promise. In the process, the debt crisis will profoundly circumscribe Greek democracy by transferring fundamental elements of Greek sovereignty into the hands of commissioners whose primary interest is the repayment of debt, not Greek national interests.
The Judgment of Athens

The Greeks have two choices. First, they can accept responsibility for the debts on the terms negotiated and accede to the constraints on their budget and tax discretion whether imposed by a commissioner or by a less formal structure. Second, they can default on all debts. As we have learned from corporate behavior, bankruptcy has become a respectable strategic option. Therefore, the Greeks must consider the consequences of simply defaulting.

Default might see them frozen out of world financial markets. But even if they don't default, they will be present in those markets only under the most constrained circumstances, and to the primary benefit of creditors at that. Moreover, as many corporations have found, borrowing becomes more attractive after default, as it clears the way to new post-default debt. It is not clear that no one would lend to Greece after a default. In fact, Greece has defaulted on its debt several times and managed to regain access to international lending.

More significantly, defaulting would allow Greece to avoid fueling its internal political crisis by forfeiting its national sovereignty. Much of the political crisis inside of Greece stems from the Greek public's antipathy to austerity. But another part, which would come to the fore under the German proposal, is that the Greeks do not want to lose national sovereignty. In their long history, the Greeks have lost their sovereignty to invaders such as the Romans, the Ottomans and, most recently, the Nazis. The brutal German occupation still lives in Greek memories. The concept of national self-determination is thus not an abstract concept to the Greeks. Its loss plus austerity imposed by foreign powers would create a domestic crisis in which the Greek state would be seen as an economic and political enemy of Greek national interests along with the commissioner or some other mechanism. The political result could be explosive.

It is unclear if the Greeks will opt not to default. The certain price of default -- being forced to use their national currency instead of the euro -- actually would increase national sovereignty. There will be economic pain if the Greeks continue with the euro, and there will be economic pain if the Greeks leave the euro; the political consequences of losing sovereignty in the face of such pain could easily be overwhelming. Default, while painful to Greece, might well be less painful than the alternative.
The German Dilemma

The Germans are caught in a dilemma. On the one hand, Germany is the last country in Europe that could afford general austerity in troubled states and the resulting decline in demand. On the other hand, it cannot simply tolerate Greek-style indifference to fiscal prudence. Germany must have a structured solution that to some degree maintains demand in countries such as Spain or Italy; Germans must show there are consequences to not complying with the orderly handling of debt without default. Above all, the Germans must preserve the European Union so they can enjoy a European free-trade zone. There is thus an inherent tension between preserving the system and imposing discipline.

Germany has decided to make an example of the Greeks. The German public largely has bought into Berlin's narrative of Greek duplicity and German innocence. German Chancellor Angela Merkel has needed to frame the discussion this way, and she has succeeded. The degree to which the German public is aware of the complexities or the consequences of a generalized austerity for Germany is less clear. Merkel must now satisfy a German public that questions bailouts and sees Greece as simply irresponsible. Capitulation from Greece is necessary for her as a matter of domestic politics.

The German move into questions of sovereignty has raised the stakes in the debt crisis dramatically. Even if the Germans simply back off this demand, the Greek public has been reminded that Greek democracy is effectively at stake. While Greece may have borrowed irresponsibly, if the price of that behavior is yielding sovereignty to an unelected commissioner, that price not only would challenge Greek principles, it would bring Europe to a new crisis.

That crisis would be political, as the ongoing crisis always has been. In the new crisis, sovereign debt issues turn into threats to national independence and sovereignty. If you owe too much money and your creditors distrust you, you lose the right to national self-determination on the most important matters. Given that Germany was the historical nightmare for most of Europe, and it is Germany that is pushing this doctrine, the outcome could well be explosive. It could also be the opposite of what Germany needs.

Germany must have a free-trade zone in Europe. Germany also needs robust demand in Europe. Germany also wants prudence in borrowing practices. And Germany must not see a return to the anti-German feeling of previous epochs. Those are several needs, and some of them are mutually exclusive. In one way, the issue is Greece. But more and more, it is the Germans that are the question mark. How far are they willing to go, and do they fully understand their national interests? Increasingly, this crisis is ceasing to be a Greek or Italian crisis. It is a crisis of the role Germany will play in Europe in the future. The Germans hold many cards, and that's their problem: With so many options, they must make hard decisions -- and that does not come easily for postwar Germany.

Saturday, January 28, 2012

Jim Willie CB: Inflation: The Only Tool Left


Jim Willie CB: Inflation: The Only Tool Left
by Cameron H. (News), Gold & Silver Staff

Jim Willie CB, GoldenJackass.com

-- Posted Friday, 20 January 2012 | Share this article | Source: GoldSeek.com

Any perusal around the world these days features Southern Europe crippled, preparing for the inevitable Greek Govt Bond default. It features a crippled US housing market, a mockery of statistical accounting in the US Gross Domestic Product, the plight of the COMEX with established veterans clearing out desks (not trading), the extreme physical demand reported by the London Trader, and the indictment of the SLV iTrust Silver Fund tool used by the cartel. The survey does not look favorable toward stability. The banking, economic, and political leaders have not pursued reform and remedy in any remote sense. Their only tool left is hyper inflation. The central banks of the Western nations have coordinated Global Quantitative Easing, as the USFed concealed its own QE3. Operation Twist was an enormous ruse, to cover the grand disposal sale (dump) by USGovt creditors and maintain a semblance of stability in the USTreasury market. The global financial crisis continues for a simple reason. No financial reform or remedy has been attempted, only bank-owned bond redemption and colossal aid to the financial sector that controls government ministries and law enforcement. Therefore, the crisis hurtles toward a series of climax events. The Chinese are accumulating physical Gold still in a big way. US finance minister, the diminutive Geithner admitted to the Chinese officials that the USGovt has no more tools left with which to stimulate or lift the USEconomy and its fumbling financial sector. An honest admission, except that hyper monetary inflation remains the all-in-one tool.

The Greek default could trigger some grand unintended consequences. Despite all the planning in the controlled event, likening it to the demolition of a 50-story hotel in an urban center, the better image might be to attempt to hold within a corral 500 cats released from a large truck. In no way can the technocrats, central banks, and bank officials contain the animal spirits coming. The only solution in the end will be the most massive hyper inflation project in history. They must recapitalize the broken banks of Europe, where fallout will surely extend in non-trivial manner to London and New York. Two major pressures will work to lift the Gold & Silver prices. The Commitment of Traders report on commercials points to a significant sequence where they covered their Gold shorts and Silver shorts since the summer months. The road is prepared for a big rise in price after some closing notes are played on the Dollar Death Dance. Details are seen in the January Hat Trick Letter. Also, the acute financial crisis in Europe and the West in general demands some important decisions to manage the Greek default. Look for talk of a monetary solution but action perhaps in a vast recapitalization program for the big banks. A footnote, the Citigroup earnings included a $1.5 billion release from their Loan Loss Reserves. The funds will be needed to cover bond impairment and mortgage related lawsuits. They also had a nice bump in the Credit Value Adjustment, a blatant accounting fraud that exploits gradual impairment to their own corporate bond value. Accounting for banks is a farce.


Although the entire southern rim is deeply affected, a look at Italy is telling as a microcosm of continental illness. Italy has imposed capital controls on the banks.Movement of funds is being closely monitored. Money cannot be withdrawn in volume at the bank windows. Borders have cameras and registries at the customs checkpoints.Italy has gone fascist with blazing speed, the most blatant indication is the installation of Monti as prime minister. Its banks are ready to capsize, like the cruise liner. The effects of the Fascist Business Model are being acutely felt in Italy. Nothing goes without monitor. The credit card companies must report to the fiscal authorities all transactions carried out by Italians, in the country and abroad. Limits have been imposed on bank withdrawals of 10,000 Euros, equal to US$13,000. Cameras have been installed by finance police at the border checkpoints with Switzerland to register all license plates. In addition, currency sniffing dogs have been deployed at the border. The Monti regime can be seen imposing Fascism, plain and simple. Their opening salvo was to attack private capital by raising the capital gains tax. The situation is degrading rapidly. The wealthy of Italy have a new game in removing money from Italy and to escape themselves.

The irony is thick, the tragedy stirring. The Italian cruise liner Costa Concordia went aground, a fitting symbol of the nation of Italy succumbing, a toppled elected regime in a sea of liquidity. Individual decks named after nations went underwater, liquidity of a different type. Parallels between the financial structure and ship structure, along with perceptions and reactions, are interesting. People believing such an accident as incredible in the 21st century need to awaken to reality on the mainland. Italians will make the same comments when their banking system collapses, in the wake of their elected political leadership being dismissed from the helm. The cruise liner was badly off course, as the captain changed paths to salute friends on the nearby island (mistress?). So is the Italian banking sector, hardly alone as the Spanish fleet of banks is also off course, taking on water, the banks derelicts at sea.

The ship crew was not trained for such accident, having advised passengers to return to their cabins incredibly. Neither is the Italian system prepared to handle rough waters, given the most egregious nepotism in all of Europe. Half of million gallons of fuel are being retrieved before salvage operations begin, in an effort to avoid an environmental disaster of contaminated beaches. Contrast to the toxic paper running through the Italian banking system. The ship's insurers may be liable for total costs of about EUR 405 million (=US$500 mn) as a resuilt of standing policies. Unlike the ship liability, the Credit Default Swap contracts, the debt insurance flagships, are forbidden to kick in for awards at docks. The ship's problem might be more low hull draft and high center of gravity ship design, much like the inefficient stream in Italian business practices and the high bank leverage.



Any bank or credit analyst worth his or her salt expects a Greek Govt Bond default. The event is inevitable, unavoidable, and a certainty. All solutions to date have been patchwork applications of tourniquets and needlepoint stitching, with full acquiescence to the banker class. The concept of a new Euro Bond to supplant the toxic bond is ludicrous, which exhibits the ignorance of the central bankers on conceptual constructs pertaining to monetary matters. The concept of a leaning upon the Intl Monetary Fund for a grand issuance of Special Drawing Rights is again ludicrous. A basket of water-logged debt-soaked currencies does not make for a viable raft to float any bodies in any seas. The contagion from a forced accord on Greek bonds will have a notable fallout value effect to Italian bonds, even to Spanish bonds. If the accord ignores the effect traveling with light speed to Italy, the plan is doomed from the outset. The default in Greece should trigger a Credit Default Swap event and award payments. But decisions might follow the trend seen to date, where contract law is trampled upon. The supposed redefinitions of debt securities were a travesty, not yet sufficiently challenged by the legal warriors and the court system. Then consider that the biggest creditor to Italy lies within the major French banks. A likely collapse of French banks in the wake seems the path that nature will take.

The contagion would spread to the London and New York bank centers, where insolvent hollow banks have stood for three years. They have long lost their credit engine role, thus the economic stalls in reverse gear. Lastly, any solution, apart from a new monetary system, must address the dire need for recapitalization of the Western banking system. The accord must begin with Europe. The accord must begin with $2 trillion or more to rebuild banks. A figure of $5 trillion is floated. The accord must dispose of the entire sovereign debt and its toxic paper from Southern Europe. Expect the greatest event in modern financial history before too many more weeks or months, the sovereign bond default and bank recapitalization. The impact on the USDollar could be profound and life altering for the planet. Expect unfortunately for half measures that sidestep any new monetary system and proper role for Gold. The half measures in the accord will bring great new attention on Gold, which should be at the core of the solution, both in the currency and banking system.


The US-based shadow home inventory is vastly larger than estimated. The bank owned inventory is enormous, but so is the variation in those estimates. What is certain is the vast overhang of home inventory held by banks, and the steady flow to replenish the hidden inventory tumor, prevent any bottoming process to prepare for any recovery. Accurate housing data is hard to come by. The housing crisis is arguably a national emergency, which crushed both the banking system and the USEconomy. The USGovt-owned Fannie Mae still prevents the public from gaining access to loan data in detail, probably because multi-$trillion fraud is buried. It is far too difficult to obtain data from Freddie Mac also, and the MERS title database remains a black hole. My Jackass loose estimate has been tossed around frequently of one million bank owned homes in inventory, unsold, hanging over the market, rendering clearance and stability an absolute impossibility, with more home seizures always in the pipeline. The market cannot digest such an overhang, and cannot stop the price decline, especially since new foreclosures keep the flow into REO bank inventory. Banks refuse to clear their inventory, and are encouraged to hold that inventory since 0% financing is offered by the USGovt. If the shadow inventory is much larger than one million homes, then housing prices have much farther to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy. It also means the US banking system is deader than dead.

On December 21st, less than one month ago, HousingWire reported that CoreLogic projected shadow inventory to be 1.6 million homes throughout the entire United States. Definition of a shadow inventory property varies widely. For example, the Wall Street Journal published an article last November, in which inventory size varied from the CoreLogic higher estimate to about 3 million by Barclays Capital. Other estimates are approximately 4 million by LPS Applied Analytic, roughly 4.3 million by Capital Economics. But the highest calculation comes from the source of most impressive methodology. Laurie Goodman of Amherst Securities offers the estimate of between 8.2 million and 10.3 million homes. Hers is regarded by many experts as having the most carefully crafted model, despite being the most dire of estimates. Michael Olenick of Naked Capitalism has his own large reliable database. He has been on the job in analyzing liability to taxpayers, investors, and banks. He submits his assumptions in calculations, an honorable practice based in integrity. The Olenick analysis arrives at a total close to the Goodman range. Using a more narrow definition of what constitutes shadow inventory, he estimates 9.8 million homes are in bank inventory, or suspended animation within the system, waiting for liquidation, suppressing price further. Long past critical mass, only radical out-of-the-box solutions will work. Massive loan forgiveness is the only solution, but it will never be done. USGovt ownership of one quarter of American homes is more likely. Conclude as inevitable that the nation will soon face widespread bank failures and even more staggering loss in home values, since the overhang of home inventory will force home prices down another 20%, my ongoing estimate that has been repeated and repeated ad nauseum. The problem is so great that the mortgage bond market can no longer be described as having viable parties and counter-parties. Too much bond counterfeit. Too much duplicate income streams used in mortgage bond securitization. Therefore, the principal parties do not want liquidations or scrutiny. See the Naked Capitalism articles (HERE & HERE).


Grossly Distorted Procedures on GDP calculations must be explained. Both hedonics and imputations contribute to one third of the entire reported Gross Domestic Product. The Chinese have long complained that half of the US GDP is mythical, due to interchange of debt paper across desks. The USEconomy is a fraction of its stated size, and it is stuck in chronic recession. A big hat tip to Michael Shedlock, whose analysis is excellent in focused economic sector topics. He provides an excellent overview on Hedonics and Imputations, to reveal their corruption of thought, whose concoctions he labels Grossly Distorted Procedures. Shedlock wrote, "Hedonics is a way of accounting for the changing quality of products when calculating price movements. For example, today's computers are 2 to 3 times faster and have more memory than models produced just a few years ago. If someone can buy a better computer today than last year for the same price, have not prices really fallen? Here is another example. Is it realistic to compare the price of a 1955 Chevy with the price of a 2005 Toyota with air conditioning, DVD player, anti-lock brakes, seat belts, air bags, side air bags, power steering, power brakes, etc? To say that cars have gone from 1955 prices to 2005 prices and calling the ENTIRE rise inflation is obviously wrong although many inflation alarmists do just that. Sorry folks, but that is not a straight up valid comparison. Would you be willing to drive to work a Model T ford today? If not, then comparisons of car prices today versus 1920 or 1950 or whenever are pretty absurd."

The USGovt makes unilateral decisions on value, in order to offset the rise in production costs from energy and materials, even labor. They justify their methods by pointing to manufacturing efficiency and economies of scale in production. They use the falling technology prices as justification for other abusive methods to reduce prices from inherent value on features which actually are subjected to strong price pressures.Shedlock rightfully points out how the potential greater hedonic abuse has entered into methods applied to the Gross Domestic Product, a mainstay not to be cut out. The accounted size of the USEconomy is subjected to vast distortions in the calculations. As the measured price inflation is kept low by force, the estimated GDP result is lifted higher by the same force. The lie in the CPI has been 6% to 8% for the last few years. That means the GDP has been running consistently negative in the most profound and harmful economic recession in American history. My analysis relies upon the indefatigable work of the Shadow Govt Statistics group. They measure the GDP as one quarter versus the same quarter a year ago to demonstrate a clear downward trend, a chronic recession. Conclude that the US GDP has been in decline by 4% to 6% for consecutive years. Shedlock has reported by means of Bureau of Economic Analysis data, that the US GDP is artificially lifted by a whopping $2.257 trillion in hedonic adjustments, equal to 22% of the entire GDP. That portion of the US GDP is pure myth. The United States is the only major country that hedonically adjusts its GDP, or needs to. The USEconomy is among the weakest in the entire industrialized world from industrial gutting and chronic consumption and pursuit of asset inflation.

The other major abuse is Imputations, a part of GDP calculation that the USGovt fabricates in estimated value where no cash changes hands. The imputation derives from homeowner self-paid rent and checking account services. These are pure fairy tale absurdities. For example, homeowners are assigned an imputed rent, that they pay to themselves as though renters. The BEA treats homeowners as businesses, which pay rent to themselves for the service of shelter. Be sure to know that mortgage payments and property taxes are also accounted for, a double counting process steeped in corrupt accounting. Self-paid homeowner rent tallies a ripe $153.8 billion in imputed rent as part of the GDP calculations. There is more. Free checking account services from banks are not to go without abuse. Self-paid check account services tallies a ripe $335.2 billion in imputed bank services. The beneficiary is in Personal Income data reported by the clownish USGovt stat labs.

Shedlock has reported by means of Bureau of Economic Analysis data, that the GDP is artificially lifted by a whopping $1.635 trillion in hedonic adjustments, equal to 13% of the entire GDP. Shedlock cites the total fabrication folly was a staggering 35% of the reported US GDP in 2003!! See the Global Economic Analysis article (CLICK HERE).


US-based railway traffic is down hard, contradicting the vacant claims of an economic recovery in the United States. The slowdown is across North America, the worst brunt felt in Mexico. The Assn of American Railroads reported intermodal volume for the second week of January totaled 193,812 trailers and containers, down 9.3% versus the same week last year. The Eastern half of the nation was notably slower. The slowdown is across all North America. Canadian railroads reported cumulative volume of 40,281 trailers and containers for 2012, down 9.8% from last year. Cumulative volume on Mexican railroads for 2012 into only January is 10,857 carloads, down 15.2% compared to last year. Conclude that North American is in a severe deep recession, with the worst brunt felt in Mexico. Talk of recovery is Orwellian in its deception. My favorite data series to demonstrate recession is the USGovt payroll tax withholdings. They continue in decline. It is a pure series without adjustment. The USEconomic recession is the New Normal, Mr El-Erian.



Ann Barnhardt confirmed the COMEX is going into obscurity and irrelevance. Players are exiting. Risk of theft is perceived. Trust has gone. Metal inventory will vanish next from honest players in retreat, seeking more legitimate arenas. The normal methods of risk hedging are going away, turning to private means, or quitting altogether. Ann Barnhardt made a huge splash last month in her decision to shut down BCM Capital brokerage firm, for fear that client funds were at great risk of theft. She outlines many carefully laid points. Here are some of her main points with fortified evidence. Notice the point about high frequency trading, which indirectly indicts the GLD & SLV (gold and silver) funds, whose inventory is likely connected to futures arbitrage schemes, as their bullion metal is drained. Notice the perceived spread of futures hedge exposure at the market peripheries. Barnhardt compared events of MFGlobal and JPMorgan to economic treason and betrayal of the American system. Here are some of her main points.

The futures markets are withering and dying on the vine, as business is totally evaporating. Many explicitly state that they are done trading and hedging with futures, both speculators and hedgers.
The volume increases in recent months were due to the veritable fungal infection of the market that is the high frequency algorithm trading systems.
Nobody in the trading pits believes the statistics that come out of the USGovt or the Federal Reserve. Anyone who believes them must be mentally disabled (her words).
Exposure to futures is itself contagious. If producers enter into a private treaty forward delivery contract with a grain elevator or a feedlot, they would still be exposed to the futures market, and to the risk of a futures market collapse, or even just another wealth confiscation. If any contract participant utilizes futures contracts in risk hedge, all parties are exposed. Even private treaty forward contracting is exposed, since someone along the line laid risk off on the futures market.


The SLV exchange traded fund is drained of silver bars from the back door. Numerous blemishes can be identified. The fund cannot stand scrutiny. It is one of the most effective criminal fraud vehicles ever designed. Thousands of investors have been duped, buying what they believed was physical gold & silver, when they have aided the cartel in suppressing their prices. Their inventory is routinely raided from custodial shorting practices that have become glaringly clear in recent months from simple tracking of inventory and short interest. The SLV fund, formally called the iShares Silver Trust, contains much slippery language in its prospectus. The SLV provides funds for itself and custodian costs (managed by JPMorgan) by selling bullion, from the same fund. They actually achieve a benchmark price target for silver based upon their own sales. Their prospectus carefully states that the SLV share price reflects the value of the trust's silver holdings, NOT the spot silver price. It is a circular practice of self-fulfilling price achievement in suppression efforts.

BrotherJohn gives the excellent analysis in clear understandable terms, with focus on SLV fund shenanigans. A big hat tip goes to him. The SLV fund does not hold sufficient silver bars to correspond to all shares outstanding, but that fraud is carefully permitted under its prospectus and current legal structure. Track the shenanigans in a fine classroom style forensic analysis in YouTube video form by BrotherJohn (CLICK HERE). He covers a wide range of topics. Here are some of his main points. Adam Hamilton, are you paying attention?

The SLV fund has 300 million shares, each worth one ounce of silver, valued at almost $9.0 billion. But it has over 25 million shorted shares, or 8% of the float.
The practice of shorting SLV shares keeps the Silver price suppressed, enabling inventory raids from the fund. Around 25 million shares are short on SLV. Any suspicion that JPMorgan is the predominant party holding short shares would probably be correct, the shares provided by Bank of America, which owns a surprising 22 million shares, always a willing player to help push down the silver price.
The SLV fund rigs their own market, pushing silver to a desired lower price. In fact, the number of silver ounces per share is falling consistently, just over 0.97 oz in recent weeks. Check out September 30th, when the silver price fell hard from 40 to 30 per oz. The SLV fund had numerous big sellers that day in their listing.
A smoking gun is revealed on May 5th, when the silver price was busy falling from 48 to 34 per oz. The SLV fund had a single day volume of 300 million shares on that day in May, equal to its entire float. Conclude that naked shorting was taking place in coordinated fashion with a leveraged arbitrage between the fund and the COMEX using futures contracts. Leverage must be involved. Many fingers point to such arbitrage since the volumes are so great.

The lessons and signals are vividly clear. Purchase and invest in Gold & Silver bars and coins, the mainstay for financial survival and avoidance of debt serfdom. The crisis is working toward a series of climax events stretched over the next year. The outcome will be shocking. The events will awaken the masses finally, who are all too often perplexed and dismayed while many place their heads in the sand. The Gold & Silver prices are heading multiples higher. Efforts to confiscate by government will in all likelihood backfire, raising attention, pointing out value.


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Jim Willie CB, editor of the “HAT TRICK LETTER”

Friday, January 27, 2012

Soros Warns of Violent Riots In America, Financial Collapse, Government Clampdown

Bob Chapman's Future Warning For USA - "Its Over" - Understand?

Indonesia’s Naval Modernisation: A Sea Change?

RSIS presents the following commentary Indonesia’s Naval Modernisation: A Sea Change? by Ristian Atriandi Supriyanto. It is also available online at this link. (To print it, click on this link.). Kindly forward any comments or feedback to the Editor RSIS Commentaries, at RSISPublication@ntu.edu.sg

No. 020/2012 dated 27 January 2012
Indonesia’s Naval Modernisation:
A Sea Change?
By Ristian Atriandi Supriyanto

To meet its maritime security needs, Indonesia is slowly modernising its naval capabilities. With a better fiscal climate, hopes abound that Indonesia can purchase or build more warships. Some obstacles, though, still prevent the Navy from hoisting its sail even higher.
A JAVANESE proverb alon-alon asal kelakon - slowly but surely - seems to reflect Indonesia’s naval modernisation bid. Since 2004, Jakarta has begun to beef up its naval muscles at a modest pace. Indonesia aims to have a “Green-Water Navy” by 2024 – a navy second to none in Southeast Asia - an expectation that some may find too far-fetched. But recent increases in military spending might prove the sceptics wrong.

The Stockholm International Peace Research Institute (SIPRI) reports that Indonesia’s military expenditure has risen 28% in 2010, the largest relative increase in Asia. Furthermore, IHS Jane’s forecasts that Indonesia’s military spending to rise by 46% to US$9.29 billion from 2011 to 2015, with 71% increase on procurement alone. This bulkier purse could embark Indonesia on the largest naval shopping spree in 40 years.

Why modernise?
As the world’s largest archipelagic state sitting astride major global shipping lanes, Indonesia puts a high premium on its maritime security. One of the main responsibilities of the Indonesian Navy (TNI-AL) is to patrol vast swathes of Indonesian waters despite Indonesia having a Sea and Coast Guard (KPLP). However, lack of resources made monitoring of Indonesian seas difficult and resulted in rampant maritime crimes, such as piracy, illegal fishing and smuggling, which annually could cost Indonesia more than US$1 billion.

Furthermore, natural disasters have stressed the versatility of naval power. Following the 2004 Aceh tsunami, TNI-AL played a major role in transporting relief workers and humanitarian aid using its amphibious assets; considering that land infrastructures, such as roads and airfields, were too severely damaged for military transport trucks and aircraft to use.

Maritime boundary disputes too have prompted urgent calls for the government to revamp Indonesia’s naval defences. Indonesia still has over ten unresolved maritime boundary disputes with neighbouring states; some of them, like in Ambalat and Natuna Sea, often resulted in naval skirmishes among the disputants. Indonesia and Malaysia are currently in dispute over Ambalat waters off East Kalimantan and Sabah, known to contain huge hydrocarbon reserves. In May 2009, naval skirmishes almost led a TNI-AL vessel to fire upon a Malaysian patrol boat.

Similarly, China’s “cow’s tongue” claim in the South China Sea which overlapped with Indonesia’s exclusive economic zone (EEZ) in the Natuna Sea is a brewing storm. In 2010, a Chinese armed vessel threatened to fire on a TNI-AL patrol boat after the latter had earlier detained a Chinese trawler suspected of fishing illegally in Indonesian EEZ. Therefore, a robust navy is a strategic imperative.

A government report states that Indonesia’s naval operational readiness in 2008 was less than 50% on average. Maintenance cycles and repair works are also grossly impaired by the US arms embargo imposed in 1991 and 1999. Spare parts were scarce and some platforms were “cannibalised” in order to keep the others in service.

Green Water Navy
Hence, in 2005, TNI-AL announced its “Green-Water Navy” blueprint to achieve a 274-ship force structure by 2024, divided into a Striking Force (110 ships), Patrolling Force (66 ships), and Supporting Force (98 ships). In addition, it is also upgrading existing assets with new systems and armaments. This is Indonesia’s largest naval modernisation plan in over 40 years. The last major modernisation was during 1959-1961 when Indonesia purchased a substantial number of Soviet-made naval vessels.

The blueprint has since been gradually realised with some new platforms joining the fleet. All four Sigma-class corvettes built in the Netherlands have been in service with TNI-AL since 2009. In 2011, Indonesia’s amphibious capabilities were also boosted with the commissioning of the fourth Makassar-class Landing Platform Dock (LPD) vessel. One of them even participated in a hostage rescue operation in the Gulf of Aden in March 2010.

For its patrol muscle, Indonesia’s naval shipyard, PT PAL, has been able to manufacture fast attack craft and arm them with Chinese C-802 anti-ship missiles. PT PAL is also keen to integrate various naval weapon systems into different platforms. In April 2011, a Russian Yakhont missile mounted aboard an ex-Dutch Van Speijk frigate was successfully test-fired. Such integration of “hybrid” systems would most likely characterise Indonesia’s naval shipbuilding capacity in the near term, rather than the more ambitious whole-platform construction of submarines or frigates.

Regardless, TNI-AL also has plans for a major procurement for this decade. PT PAL is about to jointly construct frigates and submarines with foreign naval shipbuilding companies. In August 2010, a project was agreed to locally construct four to 16 guided missile escorts (Perusak Kawal Rudal, PKR) in cooperation with Dutch Damen Schelde. This 2,400 tonne 105m multi-purpose frigate will be fitted with an array of anti-submarine, anti-surface, anti-air, and electronic warfare systems. TNI-AL’s two Cakra-class (Type-209/1300) submarines will also be complemented with three Type-209 Chang Bogo procured from South Korea. With the procurement budget recently increased from Rp.47.5 trillion (US$5.28 billion) in 2011 to Rp.64.4 trillion (US$ 7.15 billion) in 2012, TNI-AL’s future fleet might be one step closer to fruition.

Obstacle Course

Nevertheless, Indonesia still has to face several obstacles. Corruption, a hodgepodge of platforms and systems, and a continental-based defence strategy have often plagued Indonesia’s naval modernisation schemes and warfighting effectiveness. Former Defence Minister Juwono Sudarsono acknowledged corruption practices, in that up to 40 percent of procurement proposals could be mark-ups. Standardisation is also a significant challenge as the Indonesian Defence Forces (TNI) operates 173 main weapon systems from seventeen different countries. Lastly, Indonesia still retains its “Total Defence” strategy which puts heavy emphasis on manpower and land operations.

For the Navy to be effective, an overarching maritime defence strategy is required. This means that the sea, rather than the land, should become TNI’s main operational environment. As the Senior Service, the Army would be strenuously opposed to such a shift. Given that these obstacles remain unaddressed, Indonesia’s naval modernisation is not something for other countries to get nervous about. Though not a sea change yet, it is still quite a change to be reckoned with.

Ristian Atriandi Supriyanto is a research analyst in the Maritime Security Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University and a former researcher at the Center for East Asian Cooperation Studies (CEACoS), University of Indonesia.

We must become adult, as a human mankind

The following is the transcript of an address to a private meeting of diplomats in Washington DC on Wednesday, January 25, by Helga Zepp-LaRouche, the head of the political movement in Europe associated with her husband, Lyndon LaRouche, and the founder of the International Schiller Institute. Mrs. LaRouche presents the stark danger facing mankind of global economic collapse and the threat of near-term global thermonuclear warfare, but also presents the pathway out of the crisis and the potential for both a new economic paradigm for the world, and a new Renaissance. The discussion following this address was off the record.
Mike Billington

We must become adult, as a human mankind
Helga Zepp LaRouche

The problem is that mankind is presently confronted with two
existential crises, which we have to solve if there is supposed
to be continued existence of civilization in the form as we have
known it so far. One of these existential crises is the fact that
we are in the absolute last phase of a financial disintegration
of the global monetary system. Now the second related crisis is
the fact that we are right now maybe millimeters away from the
danger of a global thermonuclear Third World War, which could be
triggered by a whole number of problems, but obviously, right
now, it's focusing on Syria and Iran.
But let me first speak on the financial crisis.
The problem is that when the secondary mortgage crisis
erupted in the July 2007, my husband, Mr. LaRouche, had a
proposal which would have stopped that crisis right there. It was
the Homeowners and Bank Protection Act. It was a kind of
introduction of Glass-Steagall by eliminating the usurious
element of the casino economy, the so-called derivatives
speculation and the entire bubble. Now, unfortunately, this
proposal, even if it had a lot of traction in the United States
Congress, among hundreds of city councils, and state legislators,
it was defeated because of massive pressure from financial
And what the G20 did instead is to have, for four and a half
years, one bailout project, one bailout package, after the other.
Altogether, even though these figures are somewhat blurred, we
are probably talking about anywhere between $30 and $40 trillion
of bailouts of bankrupt banks.
In these four and a half years, the G20 countries have
failed completely to re-regulate an out-of-control financial
system, and what they have done, the only thing they have
accomplished, is to tranform private speculator debt, gambling
debt, into state debt, through the mechanism of these bailout
If you talk to some financiers, they would say, "Oh,
no, there is no problem with the financial system. It's a state
debt crisis."
Now, the state debt crisis has been the result of these
bailout packages, entirely.
This has reached a situation where the euro is collapsing. I
think it could collapse, actually while we are sitting here
eating lunch, or it could collapse in February, March, April, but
even renowned economists like the chief economist of Deutsche
Bank, Thomas Mayer, recently said that he would be surprised if
the euro still exists on the first of May.
This situation has reached the situation where the
effort to maintain the euro, through vicious austerity policies,
is alienating the European nations, the populations of the
European countries, against their governments, and against the
EU, in such a way that we are truly talking about a mass strike
process; we're talking about a revolutionary situation; and we're
talking about potential civil war.
Now, the country where the brutality of the present EU
policy is most obvious is Greece. Greece has been imposed with
austerity packages one after the other, and the country is in
despair. The people of Greece are right now really looking at no
future: All the young people and the academically trained people
are leaving the country; you have parents who are giving away
their children because they cannot any longer nourish them; and
people are dying as a result, because the pharmaceutical concerns
are no longer delivering certain medicines to hospitals, because
there is no money to pay. Now, you can draw your own conclusion
what that does for the life-expectancy of the people who don't
get these medicines, because obviously they're not in the
hospital for luxury purposes.
This thing is coming to an explosion. The negotiations
with Greece are not moving forward. They cannot move forward,
because you cannot squeeze a lemon which has been squeezed to the
last drop.
A similar situation exists in Italy, where you have a mass
strike, involving taxi drivers, truck drivers, all kinds of
pharmacists, doctors, lawyers, so that basically what is called
the "pitchfork strike," which first started in Sicily, has now
spread to the entire country of Italy, and this was all triggered
by a decree of the Monti government -- which is, after all, a
technocratic government imposed by the EU, and not elected -- by
basically refusing to respond to all of this protest, by simply
making a decree of these brutal cuts in all areas. And the
population is not accepting it.
Now one member of our organization is a leader of this
strike movement. He was repeatedly covered on national TV as a
leader. He has had meetings with the Monti government, and this
thing is heading toward a complete confrontation. Because you
cannot deprive populations of their life earnings in the way the
present policies are doing this.
After the downgrading of nine EU members, through the
Standard & Poor's rating agency last week, you have practically a
situation where you have a deleveraging of all the major banks in
France, but also in many other countries, so there is a frantic
effort right now by IMF Managing Director Mrs. Lagarde, to
increase the money for the EFSF, the European Financial Stability
Fund, by another EU500 billion. They are pulling up the ESM, the
European Stability Mechanism, which is supposed to be the
permanent bailout fund, to July of this year. Mrs. Lagarde
demanded another several hundred million contribution from
Germany. Zoellick from the World Bank also demanded that Germany
must pay more, to which Mrs. Merkel responded that the German
capacity to pay all of that is not limitless.
So, this thing will not function, and the financial press in
Europe is already using a language which I prided myself to have
been the only one using these words, but now the headlines of the
popular press are saying, "The ECB Has Become a Money-Printing
Machine," "We Are Looking at Hyperinflation like 1923 in
Germany," and this is, if you think a couple of years back, the
"H word," meaning hyperinflation, was one of the absolute taboo
words which were not allowed to ever be mentioned.
My best inclination is to say, the euro will collapse,
simply because some of the countries have no other choice than to
leave it. And this is a good thing. The euro was a
misconstruction from the beginning. It's a failed experiment. I
predicted that before it came into being. If you go into the
archives of our newspapers, I have written about it immediately
after '89, '90, when it was decided, because it {could} not
The EU zone, the Eurozone, was never a so-called optimal
currency space, because it united completely agrarian countries,
like Greece, Portugal, and others, with highly industrialized
countries like Germany, and for ten years, you had the illusion
that this would somehow function, but all it did was to develop
bubbles in the so-called secondary, moving-up countries, like
Greece and Portugal, Spain, while the domestic market in Germany
has shrunk. Real wages in Germany in these 10 years have gone
down. They're being eaten up right now, already, by that
inflation, so you have a de facto reduction in the living
standard. So this thing is not functioning.
You all remember, or some of us remember, and have
written about it, that the euro had never had an economic sound
basis, but it was purely political. It had a geopolitical
intention, to keep Germany contained after the German
reunification, to prevent Germany from playing an important
economic role -- for example, in the cooperation with Russia --
by forcing Germany in the straitjacket of the EU.
At that time, Margaret Thatcher, Francois Mitterrand, and
President Bush Sr. decided to impose the introduction of the euro
as the price for the German unification.
If you have a political intention, which is not
economically sound, you should not be surprised that such an
experiment fails, and that is what is happening right now.
If the euro collapses in an uncontrolled way, obviously this
brings immediately into danger the entire global financial
system: first, the trans-Atlantic system, because of the
entanglement of the banking system. If the euro collapses in a
disorderly way, then naturally all the U.S. banks will go
bankrupt also, and the collapse of the trans-Atlantic system will
immediately spread into Asia, and other areas of the world.
So, this is the situation.
The irony is that, right now you have the Davos meeting
going on in Switzerland, where a large part of the world economic
elite is meeting -- 40 heads of state are there -- and they are
discussing the collapse of the capitalist system. They're
discussing about, where is the way out. They are clueless, and
it's not a surprise. Because all of these people are guided by
axioms which contributed to the emergence of this crisis.
There is a solution. The solution is very simple: to go
back to the Glass-Steagall standard, which Franklin D. Roosevelt
introduced in the 1930s, and with which he brought the United
States out of the Depression. We are campaigning in Germany, and
France, in all European countries, for a Glass-Steagall. The
French Socialist candidate, Mr. Hollande, just came out for a
Glass-Steagall solution for France. We have very important people
in Switzerland, Italy -- Mr. Tremonti, the former economic
minister, just published a book that Glass-Steagall is the only
way. We have important parliamentarians in Denmark, in Sweden, in
Belgium, in Holland, we have important people in Germany -- all
fighting for Glass-Steagall.
So, it is an option. If the United States would put the
Glass-Steagall law back on the table, which they already did
repeatedly, this could immediately lead to a reorganization of
the financial system.
However, that is not enough. We need to draw the lesson out
of the fact that the euro has failed. We need to go back to the
national currencies. This may be a short shock for some
countries, or actually, all countries, but if you go back to
sovereignty over your own currency, and are in charge of your
economic policy, your currency, and you can, especially then,
issue credits for industrial investment, after a short shock, all
of these countries would do much better.
So, that is part of the solution.
Now, let me briefly touch on the war danger. Now, the war
danger comes from the fact that, when the Soviet Union and the
Comecon collapsed in 1989-91, we -- that is, the LaRouche
movement -- we had the proposal for an international peace order,
which was first called the Productive Triangle. And then, when
the Soviet Union had disappeared in '91, we enlarged it to the
Eurasian Land-Bridge, which was the idea to integrate the entire
Eurasian continent through large infrastructure projects,
transport corridors, an integrated system of fast trains, maglev
trains, waterways, highways, building so-called development
corridors with energy production and distribution, with
communications, so that you would have uplifted the land-locked
areas of Eurasia to an infrastructure situation like, for
example, you find in Germany.
We proposed this in really hundreds of conferences. We
had such meetings in Moscow, Beijing, New Delhi -- just all over
the world. And as you can see, Russia and China and many other
Asian countries are moving in this direction, but naturally, it
was not accepted by the Atlantic countries.
Now, instead of going with a peace order for the 21st
Century, which would have been very easy, because there was no
more enemy -- you could have said, we now have the chance to make
a peace order for the 21st Century, which allows the living for
all nations on this planet -- unfortunately the reaction of
Anglo-American elite was different. They decided to go for a
policy of empire, to basically get rid of every government which
would be in their way.
This policy was called regime change, and this had been
lingering even in the period where President Clinton was there.
It was called Clean Break; it was pushed by such people as
Richard Perle, Netanyahu. It was a counter to the Oslo Accord.
And naturally, we saw it in the form of the war against Iraq,
Saddam Hussein. You look at Iraq today, which is in much worse
shape than with Saddam Hussein.
It was later continued with the war against Libya. You look
at Libya today, it's eaten up in civil war and chaos, in much
worse shape. And now, regime change is on the agenda for Syria
and for Iran.
We have made interviews with very influential
representatives of the International Atomic Energy Agency, like
the former head of it, Hans Blix, and others, who have
maintained, Iran does not have the bomb in the near future. I
cannot say this one way or another, but in any case, there are
always possibilities to negotiate something. There were Russian
offers to Iran, to assist them in the development of peaceful
nuclear energy. In any case, there is no reason -- and there must
be no reason -- to go for a military strike against Iran.
Because many European experts and others know, that once you
start a military strike against Iran, in this situation, where
the world is already disintegrating, this could very well be --
and probably will be -- the beginning of World War III.
Now, this is just one picture. You have to see also the fact
that what was started with the Bush Administration, the European
Missile Defense program in Poland and the Czech Republic, which
Russia always looked at as part of the encirclement policy of
NATO against Russia, and unfortunately, contrary to his election
promises, President Obama has continued this policy. And more
recently, both President Medvedev and the Russian Chief of Staff,
General Makarov, basically said that this policy could trigger a
regional war in Europe, in which nuclear weapons could be used.
Now, if you then take, in addition, the expansion of the
British and U.S. policy into Asia, which China has also already
said that they are not going to accept a violation of their vital
interests there, you can see that we are looking at a potential
World War III deployment.
And if you then look at the incredible amount of military
forces being massed right now in the Indian Ocean, in the Gulf,
in the Eastern Mediterranean, this is a very, very hot situation.
We have basically said: Look. If this war would ever
erupt, a nuclear war, especially with the use of thermonuclear
weapons, could make the human species extinct in any form worth
talking about.
Obviously, this comes all at the end of an era, at the end
of a system, and I think what we have to do, is to basically call
upon people to come up with ideas for a new order of mankind
which fits the interests of all nations on this planet.
The obvious thing would be to respond, as a collective
assembly of nations, to the existential threats we all face. One
of the threats is the collapse of the financial system. The other
threat is the danger of war.
But we also have larger threats, namely, threats coming from
the galactic cycles, which have caused tremendous weather
changes, which have caused earthquakes, tsunamis. In the case of
Japan, we had the events from Fukushima, which had much more
effects in Germany than in Japan, because of ideological problems
in that country. But there is no question, there is heightened
solar activity; there is right now, today and tomorrow, huge
solar storms, with warnings that satellite systems may be put out
of communication. Flight routes, routes of airline companies over
the North Pole, have been shifted because of that. So, there are
real questions, where obviously, our point of view is that the
answer to that, is that we should do what mankind always did when
confronted with existential dangers: namely, to use the human
ingenuity and creativity, and define the next step of human
And, for a whole variety of reasons, that has to be manned
space travel, because as one friend of ours, the great
German-born scientist Krafft Ehricke, once termed it, that
mankind will only become adult when we respond to the
extraterrestrial imperative, i.e., when we start talking about
industrialization of the Moon, of Mars, and from there, to other
planets. Because it will force civilization to act rationally,
and to become truly human.
We have since a long time, proposed a reconstruction
program for the world. We call it the World Land-Bridge. It's the
idea to not only have Eurasia connected through infrastructure
corridors, but to take these corridors, through great
infrastructure projects like NAWAPA, all the way down to Chile.
To take the Eurasian Land-Bridge all the way through Egypt,
through a bridge or tunnel from Sicily to Tunisia, and through
the Strait of Gilbraltar, into Africa. And I've said many times
that the great moral test, especially for people in Europe, is to
develop Africa. Because if we cannot manage to save a continent
which right now is threatened by hunger and starvation, then we
are morally not fit to survive ourselves.
All of these polices are eminently feasible. Nothing of
what I have said is an insurmountable problem, except you need to
mobilize the political will to do it. And I think that the
decision, if we are able to solve these problems, and work
together for the common aims of mankind -- for example, the
former Russian foreign minister, Igor Ivanov, just had an article
yesterday where he criticized the American Ambassador McFaul, the
new ambassador in Moscow, who is meeting with the opposition,
extraparliamentary opposition, people who are financed by the
same people who have done the Orange Revolution, or the Rose
Revolution in Georgia. And Mr. Ivanov said, why not have Russia
and the United States working together in the development of the
Arctic; and other proposals, where we have to work together, in
the joint development of space, manned space travel.
And I think that that is the task. Can we at this point,
where we are threatened with extinction as a species, get our act
together, and say, this old paradigm, which led to this crisis,
must be finished, and we must become adult as a human mankind,
and work together for the common aims of mankind.

Thursday, January 26, 2012

Considering a U.S.-Iranian Deal


Considering a U.S.-Iranian Deal
January 24, 2012 | 1211 GMT

By George Friedman

Last week, I wrote on the strategic challenge Iran faces in its bid to shape a sphere of influence stretching from western Afghanistan to Beirut on the eastern Mediterranean coast. I also pointed out the limited options available to the United States and other Western powers to counter Iran.

One was increased efforts to block Iranian influence in Syria. The other was to consider a strategy of negotiation with Iran. In the past few days, we have seen hints of both.

Rebel Gains in Syria

The city of Zabadani in southwestern Syria reportedly has fallen into the hands of anti-regime forces. Though the city does not have much tactical value for the rebels, and the regime could well retake it, the event could have real significance. Up to this point, apart from media attention, the resistance to the regime of President Bashar al Assad has not proven particularly effective. It was certainly not able to take and hold territory, which is critical for any insurgency to have significance.

Now that the rebels have taken Zabadani amid much fanfare -- even though it is not clear to what extent the city was ceded to their control, much less whether they will be able to hold it against Syrian military action -- a small bit of Syria now appears to be under rebel control. The longer they can hold it, the weaker al Assad will look and the more likely it becomes that regime opponents can create a provisional government on Syrian soil to rally around.

Zabadani also gives outside powers something to help defend, should they choose to do so. Intervening in a civil war against weak and diffused rebels is one thing. Attacking Syrian tanks moving to retake Zabadani is quite another. There are no indications that this is under consideration, but for the first time, there is the potential for a militarily viable target set for outside players acting on behalf of the rebels. The existence of that possibility might change the dynamic in Syria. When we take into account the atmospherics of the Arab League demands for a provisional government, some meaningful pressure might actually emerge.

From the Iranian point of view, this raises the risk that the sphere of influence Tehran is pursuing will be blocked by the fall of the al Assad regime. This would not pose a fundamental challenge to Iran, so long as its influence in Iraq remains intact, but it would represent a potential high-water mark in Iranian ambitions. It could open the door to recalculations in Tehran as to the limits of Iranian influence and the threat to their national security. I must not overstate this: Events in Syria have not gone that far, and Iran is hardly backed into a corner. Still, it is a reminder to Tehran that all might not go the Iranians' way.

A Possibility of Negotiations

It is in this context that the possibility of negotiations has arisen. The Iranians have claimed that the letter the U.S. administration sent to Iranian supreme leader Ayatollah Ali Khamenei that defined Iran's threats to Strait of Hormuz as a red line contained a second paragraph offering direct talks with Iran. After hesitation, the United States denied the offer of talks, but it did not deny it had sent a message to the Iranian leadership. The Iranians then claimed such an offer was made verbally to Tehran and not in the letter. Washington again was not categorical in its denial. On Friday, U.S. Secretary of State Hillary Clinton said during a meeting with the German foreign minister, "We do not seek conflict. We strongly believe the people of Iran deserve a better future. They can have that future, the country can be reintegrated into the global community ... when their government definitively turns away from pursuing nuclear weapons."

From our perspective, this is a critical idea. As we have said for several years, we do not see Iran as close to having a nuclear weapon. They may be close to being able to test a crude nuclear device under controlled circumstances (and we don't know this either), but the development of a deliverable nuclear weapon poses major challenges for Iran.

Moreover, while the Iranians may aspire to a deterrent via a viable nuclear weapons capability, we do not believe the Iranians see nuclear weapons as militarily useful. A few such weapons could devastate Israel, but Iran would be annihilated in retaliation. While the Iranians talk aggressively, historically they have acted cautiously. For Iran, nuclear weapons are far more valuable as a notional threat and bargaining chip than as something to be deployed. Indeed, the ideal situation is not quite having a weapon, and therefore not forcing anyone to act against them, but seeming close enough to be taken seriously. They certainly have achieved that.

The important question, therefore, is this: What would the United States offer if Iran made meaningful concessions on its nuclear program, and what would Iran want in return? In other words, forgetting the nuclear part of the equation, what did Hillary Clinton mean when she said that Iran can be reintegrated into the international community, and what would Iran actually want?

Recall that in our view, nuclear weapons never have been the issue. Instead, the issue has been the development of an Iranian sphere of influence following the withdrawal of the United States from Iraq, and the pressure Iran could place on oil-producing states on the Arabian Peninsula. Iran has long felt that its natural role as leader in the Persian Gulf has been thwarted, first by the Ottomans, then the British and now by the Americans, and they have wanted to create what they regard as the natural state of things.

The United States and its allies do not want Iran to get nuclear weapons. But more than that, they do not want to see Iran as the dominant conventional force in the area able to use its influence to undermine the Saudis. With or without nuclear weapons, the United States must contain the Iranians to protect their Saudi allies. But the problem is that Iran is not contained in Syria yet, and even were it contained in Syria, it is not contained in Iraq. Iran has broken out of its containment in a decisive fashion, and its ability to exert pressure in Arabia is substantial.

Assume for the moment that Iran was willing to abandon its nuclear program. What would the United States give in return? Obviously, Clinton would like to offer an end to the sanctions. But the sanctions on Iran are simply not that onerous with the Russians and Chinese not cooperating and the United States being forced to allow the Japanese and others not to participate fully. But it goes deeper.

Iran's Historic Opportunity

This is a historic opportunity for Iran. It is the first moment in which no outside power is in a direct position to block Iran militarily or politically. Whatever the pain of sanctions, trading that moment for lifting the sanctions would not be rational. The threat of Iranian influence is the problem, and Iran would not trade that influence for an end to sanctions. So assuming the nuclear issue was to go away, what exactly is the United States prepared to offer?

The United States has assured access to oil from the Persian Gulf -- not only for itself, but also for the global industrial world -- since World War II. It does not want to face a potential interruption of oil for any reason, like the one that occurred in 1973. Certainly, as Iran expands its influence, the possibility of conflict increases, along with the possibility that the United States would intervene to protect its allies in Arabia from Iranian-sponsored subversion or even direct attack. The United States does not want to intervene in the region. It does not want an interruption of oil. It also does not want an extension of Iranian power. It is not clear that Washington can have all three.

Iran wants three things, too.

First, it wants the United States to reduce its presence in the Persian Gulf dramatically. Having seen two U.S. interventions against Iraq and one against Afghanistan, Iran is aware of U.S. power and the way American political sentiment can shift. It experienced the shift from Jimmy Carter to Ronald Reagan, so it knows how fast things can change. Tehran sees the United States in the Persian Gulf coupled with U.S. and Israeli covert operations and destabilization campaigns as an unpredictable danger to Iranian national security.

Second, the Iranians want to be recognized as the leading power in the region. This does not mean they intend to occupy any nation directly. It does mean that Iran doesn't want Saudi Arabia, for example, to pose a military threat against it.

Third, Iran wants a restructuring of oil revenue in the region. How this is formally achieved -- whether by allowing Iranian investment in Arabian oil companies (possibly financed by the host country) or some other means -- is unimportant. What does matter is that the Iranians want a bigger share of the region's vast financial resources.

The United States doesn't want a conflict with Iran. Iran doesn't want one with the United States. Neither can be sure how such a conflict would play out. The Iranians want to sell oil. The Americans want the West to be able to buy oil. The issue really comes down to whether the United States wants to guarantee the flow of oil militarily or via a political accommodation with the country that could disrupt the flow of oil -- namely, Iran. That in turn raises two questions. First, could the United States trust Iran? And second, could it live with withdrawing the American protectorate on the Arabian Peninsula, casting old allies adrift?

When we listen to the rhetoric of American and Iranian politicians, it is difficult to imagine trust between them. But when we recall the U.S. alliance with Stalin and Mao or the Islamic republic's collaboration with the Soviet Union, we find rhetoric is a very poor guide. Nations pursue their national interest, and while those interests are never eternal, they can be substantial. From a purely rhetorical point of view it is not always easy to tell which sides' politicians are more colorful. It will be difficult to sell an alliance between the Great Satan and a founding member of the Axis of Evil to the respective public of each country, but harder things have been managed.

Iran's ultimate interest is security against the United States and the ability to sell oil at a more substantial profit. (This would entail an easing of sanctions and a redefinition of how oil revenues in the region are distributed.) The United States' ultimate interest is access to oil and manageable prices that do not require American military intervention. On that basis, Iranian and American interests are not that far apart.

The Arabian Factor and a Possible Accommodation

The key point in this scenario is the future of U.S. relations with the countries of the Arabian Peninsula. Any deal between Iran and the United States affects them two ways. First, the reduction of U.S. forces in the Persian Gulf requires them to reach an accommodation with the Iranians, something difficult and potentially destabilizing for them. Second, the shift in the financial flow will hurt them and probably will not be the final deal. Over time, the Iranians will use their strengthened position in the region to continue pushing for additional concessions from them.

There is always danger in abandoning allies. Other allies might be made uncomfortable, for example. But these things have happened before. Abandoning old allies for the national interest is not something the United States invented. The idea that the United States should find money flowing to the Saudis inherently more attractive than money flowing to the Iranians is not obvious.

The main question for the United States is how Iran might be contained. The flow of money will strengthen Iran, and it might seek to extend its power beyond what is tolerable to the United States. There are potential answers. First, the United States can always return to the region. The Iranians do not see the Americans as weak, but rather as unpredictable. Challenging the United States after Iran has achieved its historic goal is not likely. Second, no matter how Iran grows, it is far behind Turkey by every measure. Turkey is not ready to play an active role balancing Iran now, but in the time it takes Iran to consolidate its position, Turkey will be a force that will balance and eventually contain Iran. In the end, a deal will come down to one that profits both sides and clearly defines the limits of Iranian power -- limits that it is in Iran's interest to respect given that it is profiting mightily from the deal.

Geopolitics leads in one direction. Ideology leads in another direction. The ability to trust one another is yet a third. At the same time, the Iranians cannot be sure of what the United States is prepared to do. The Americans do not want to go to war with Iran. Both want oil flowing, and neither cares about nuclear weapons as much as they pretend. Finally, no one else really matters in this deal. The Israelis are not as hardline on Iran as they appear, nor will the United States listen to Israel on a matter fundamental to the global economy. In the end, absent nuclear weapons, Israel does not have that much of a problem with Iran.

It would not surprise me to find out that the United States offered direct talks, nor to discover that Clinton's comments could not be extended to a more extensive accommodation. Nor do I think that Iran would miss a chance for an historic transformation of its strategic and financial position in favor of ideology. They are much too cynical for that. The great losers would be the Saudis, but even they could come around to a deal that, while less satisfactory than they have now, is still quite satisfactory.

There are many blocks in the way of such a deal, from ideology to distrust to domestic politics. But given the knot that is being tied in the region, rumors that negotiations are being floated come as no surprise. Syria might not go the way Iran wants, and Iraq is certainly not going the way the United States wants. Marriages have been built on less.

London's Hand Behind Drive for World War III Exposed

If the on-rushing war on Iran is to be stopped, and the global war which is the intended result, then the role of the UK, using their controlled assets Bibi Netanyahu and Barack Obama, must be exposed, and Obama removed from office. This article appears in the January 20, 2012 issueof Executive Intelligence Review. Mike Billington

London's Hand Behind Drive
for World War III Exposed
by Nancy Spannaus and Jeffrey Steinberg

[PDF version of this article]
Jan. 16—Two dramatic developments in recent days have served to further expose the direct British hand behind the drive for thermonuclear World War III, principally targeted against Russia, China, and the United States.
As has been the case with imperial wars since the time of the Roman Empire, the objective is always to pit one nation or people against another, while the imperial power sits on the sidelines to reap the benefits of the slaughter. In this case, London's goal is the destruction of Russia, China, India, and the United States, and the mass extermination of billions of people in a thermonuclear holocaust, centered in the heart of Eurasia, that they somehow delude themselves into believing they will survive.
Assassination a War Provocation
On Jan. 11, a 32-year-old Iranian nuclear physicist, Mostafa Ahmadi Roshan, was assassinated when a bomb was attached to his car as he was being driven to the Natanz nuclear enrichment facility. Roshan was the director of the facility. He was the fifth Iranian nuclear scientist to be targeted for assassination in the past two years (four were successful). Thousands of Iranians turned out for his funeral several days later, and the government accused Israel, Britain, and the United States of being involved in the murder.
Secretary of State Hillary Clinton issued a strenuous denial on behalf of the U.S. after Iran released a formal letter to the Obama Administration, claiming to have evidence of CIA involvement in training of the assassins.
Four days after the cold-blooded murder, Rupert Murdoch's Sunday Times of London printed a blood-curdling account of the assassination, purportedly from a confidential Israeli intelligence source. While claiming that it was agents of the Israeli Mossad who conducted the carefully planned assassination, the Times story implied that the Mossad's string of assassinations and sabotage bombings inside Iran have been fully blessed by both London and Washington.
While London's hand in the asymmetric warfare cannot be doubted, Clinton's strong statement that the U.S. was not involved rings true. On Jan. 15, the Pentagon announced that the United States had indefinitely postponed scheduled joint missile defense manuevers with Israel. "Austere Challenge 12" was to be the largest such joint maneuvers ever, and had been scheduled to take place in April, with the participation of thousands of American military personnel.
While the official announcement of the delay attributed it to logistical constraints, and claimed it was a mutual decision by the U.S. European Command (Eurcom) and the Israeli Defense Forces, high-ranking U.S. intelligence sources have told EIR that the cancellation was in direct response to the Roshan assassination, which was not cleared by or coordinated with Washington.
American officials in the Pentagon and the intelligence community, who have been involved in non-stop war avoidance efforts since the time of the Libyan regime-change operation, were furious at the assassination, which came at a moment when efforts are underway to resume UN Security Council Permanent Five plus Germany (P5+1) talks with Iran over its nuclear program.
In one of the clearest statements from this patriotic American intelligence faction, Paul Pillar, the former Middle East director of the National Intelligence Council, wrote just hours after the Roshan assassination in The National Interest of Jan. 11: "The killing of an individual foreigner overseas, if carried out for a political or policy purpose by either a nonstate actor or clandestine agents of a state, is an act of international terrorism." That is the criterion that the U.S. State Department has used for decades in placing foreign nations on its list of state sponsors of terrorism.
Pillar condemned the Roshan assassination and challenged:

"Imagine the response if even just one scientist (let alone four or five) who was employed, say, at one of the U.S. national laboratories, had been similarly assassinated and a foreign hand was suspected. There would be screams of 'act of war' and the U.S. president would be hard-pressed to hold back impulses to strike back forcefully."

Pillar indicated that he agreed with other experts, like Dr. Trita Parsi, who accused Israel of carrying out the assassination, because they "prefer a military confrontation with Iran over a compromise that would permit Iran to retain nuclear enrichment capabilities, even if it doesn't build a bomb." Pillar warned that such actions, combined with other hostile threats and acts against Iran, will only drive the Islamic Republic to conclude that it needs a nuclear weapon as a deterrent to fend off its enemies.
"The proper U.S. response to all this," he concluded, "is to pursue—vigorously—negotiations with Iran, with the starting point being the most recent Iranian proposal for a new round of talks with the P5+1. That is the only way out of the larger spiral of mutually reinforcing hostility of which the assassinations are only a part.... To do otherwise would be, to use a hackneyed phrase, a victory for the terrorists."
Israeli False Flag Operation
While London exposed itself in terms of the Roshan assassination, U.S. military historian and Middle East peace activist Mark Perry laid bare another of their dirty operations as well. In an act of defiance against the Anglo-Israeli war schemes, on Jan. 13, the online magazine Foreign Policy published an article by Perry exposing an Israeli "false flag" operation that targeted Iran for terrorist attacks, while passing itself off as a CIA program.
Perry obtained details of a string of CIA memos from the latter years of the George W. Bush Administration, which revealed that Israeli intelligence operatives, using American passports and presenting themselves as CIA agents, were recruiting terrorists from the Balochistan, Pakistan-based Jundallah group, to carry out terrorist attacks inside Iran. Jundallah, a Sunni fundamentalist group operating along the border between Iran and Pakistan, have been responsible for dozens of terrorist attacks, some against innocent women and children, as well as Iranian Revolutionary Guard (IRGC) outposts along the border.
In November 2010, the U.S. State Department placed Jundallah on its list of international terrorist organizations.
Perry reported that the CIA station in London became aware of the Mossad false flag operations, which were run out in the open. He quoted one U.S. intelligence officer who was privy to the probe of the Israeli program: "It's amazing what the Israelis thought they could get away with," the officer said.

"Their recruitment activities were nearly in the open. They apparently didn't give a damn what we thought."

What Perry did not draw out, was the fact that London was the perfect place for the Mossad to recruit Jundallah members, because the British government and MI6 were giving sanctuary to the group, as part of Britain's longstanding policy of promoting an independent "Greater Balochistan" to maintain permanent conflicts along the borders of the entire Southwest, South, and Central Asian region.[1] For identical reasons, the British have provided safe haven in London for the separatist terrorists of the Kurdish Workers Party (PKK), Uighur terrorists from the Xinjiang Province of Western China ("Eastern Turkistan"), Chechen separatists from the Russian Northern Caucasus, and many similar brutal terrorist groups. Even the British media frequently refer to the presence of all of these terrorist networks, all enjoying British intelligence protection, as "Londonistan."
Will the U.S. Go Along?
In short, a combined British-Israeli apparatus is driving the world to the very edge of thermonuclear confrontation, and is hell-bent on drawing the United States in, taking advantage of the London levers of control over President Barack Obama.
The question is: Will the British Empire, with its control over President Obama and brainwashing of the American population into monetarist madness, succeed in leading humanity into genocidal devastation in the weeks ahead, either by thermonuclear war, or mass chaos, starvation, and disease? The answer to that question will depend upon whether leading policy-makers, particularly in the United States, recognize and respond appropriately to reality.
That reality, as Lyndon LaRouche and this publication have repeatedly emphasized, is that, in the midst of an obvious general breakdown crisis of the entire trans-Atlantic financial system, the British Empire is pursuing a thermonuclear confrontation with Russia, China, and other nations of Asia. And despite notable war avoidance measures being taken by the Russian government and leading military-intelligence circles in the United States, the danger of triggering such a war, through confrontation with Iran or one of many other British-manipulated "hotspots," has notably advanced over the last week.
LaRouche has outlined the unique solutions, both in terms of the immediate action of removing Obama from the Presidency, and the necessary mindset, which are required to defuse this existential crisis. Here, we review the recent major developments in the strategic arena.
The Target Is Asia
During the last week, Russian and Chinese high-level spokesmen have spoken out boldly, to emphasize that NATO policy toward the Middle Eastern cockpit, especially Syria and Iran, represents a direct threat to their own security, and will be responded to as such.
On Jan. 12, Russian Security Council Secretary Nikolai Patrushev warned that military escalation is likely in Iran, with "real danger" of a U.S. strike, in an interview published by the daily Kommersant. Also, Syria, which has refused to break its ties with Tehran, could be a target for Western intervention, he said.
"There is a likelihood of military escalation of the conflict, and Israel is pushing the Americans towards it," Patrushev said. "At present, the U.S. sees Iran as its main problem. They are trying to turn Tehran from an enemy into a supportive partner, and to achieve this, to change the current regime by whatever means."
"They use both economic embargo and massive help to the opposition forces," Patrushev said, adding that "for years we have been hearing that practically by next week the Iranians are going to create an atomic bomb; still nobody has proved the existence of a military component of Iran's nuclear program."
Patrushev said the current tension over Syria is linked to the Iran issue. "They want to punish Damascus not so much for the repression of the opposition, but rather for its refusal to break off relations with Tehran," he insisted. "There is information that NATO members and some Arab Persian Gulf states, acting in line with the scenario seen in Libya, intend to turn the current interference with Syrian affairs into a direct military intervention."
LaRouche responded to Patrushev's warning by pointing to the danger of a possible thermonuclear confrontation between the British-controlled U.S., and Russia and China. This represents "a danger to humanity as a whole," he said.
On Jan. 13, the Russians escalated, choosing an international forum to underscore Patrushev's message. Russian Deputy Prime Minister Dmitri Rogozin, the former ambassador to NATO, returned to Brussels to give his final press conference at NATO headquarters. Rogozin's message is provided here in EIR's translation. Asked about Iran, he said:

"For the Americans, that is very far away, on completely the opposite side of the Earth, the planet, the globe. But for us, it is just south of our Caucasus. And therefore, if something happens with Iran, if it becomes involved in some kind of military action, then this is a direct threat to our security" (emphasis added).

After stressing that Russia "will conduct a very tough policy, designed to prevent countries, while we are helping them to develop modern sources of energy, from acquiring technologies for using the atom for military purposes," he added that it is the right of every country

"to have everything they need, to feel comfortable and secure. Iran has this type of right, as well. Therefore we would like to say to all the participants in this agitated game around Iran: 'Calm down. Tone down your discussions and public statements. Bear in mind that every public statement has material consequences.'... We hope that the current crisis around Iran will be cooled out jointly by us all. If tension continues to grow around Iran, and then multiply that by the situation in Syria, the aftermath of the civil war in Libya, and the oncoming 'Arab Summer' in North Africa, nobody is going to say that that's something insignificant. So we repeat, 'Take a drink of cold mineral water and calm down.' "

Rogozin's criticism of the sanctions against Iran was reiterated the same day by Deputy Foreign Minister Gennady Gatilov, who said,

"Additional sanctions against Iran, or a possible military strike against the Islamic Republic of Iran, will unquestionably be perceived by the international community as pursuing the goal of 'regime change' in Tehran."

While less direct, the Chinese government is utilizing various outlets to make clear that it sees the policy against Iran, in particular, as aimed at its security. China get 13% of its oil from Iran, and would suffer significantly from the cut-off of supplies being pressed by the Obama Administration and others. In an editorial in Global Times Jan. 14, the writer gave the view of many in the Chinese leadership:

"China should not bend to U.S. pressure... Iran's oil resources and geopolitcal value are crucial to China."

War on Iran Has Begun
But the Empire and its tools, notably including Barack Obama, and British agent Israeli Prime Minister Benjamin Netanyahu, have shown absolutely no signs of backing down from their belligerence. Indeed, through both tightening of sanctions against Iran's vital oil trade, and a policy of assassinations and terrorism within Iran, the British-Israeli-U.S. nexus has already launched that war. This is the context for seeing the strategic significance of the Roshan killing.
Within two days of his assassination, the Iranian government had sent off letters to Great Britain and the United States, charging that they are behind the assassinations, and lodging official protests. The government has also sent an official demand for investigation of the incident to the United Nations.
While some Iranian leaders clearly are keeping their wits about them, and refusing to be provoked into a "tit-for-tat" response against Israel for the hits, despite statements from some Israelis almost taking credit for the mayhem, it is not clear that they can necessarily maintain that control within the factionalized Iranian political class. As some statements from the Iranians threatening to close the Strait of Hormuz, through which approximately 60% of the world's crude oil flows, indicate, there are those in Iran who are threatening to respond with rage, not strategy.
Thus, on Jan. 14, LaRouche issued a sharp warning that any kind of provocations at this point, particularly in the Persian Gulf and the Strait of Hormuz, would be insane. LaRouche was responding, in part, to reports from a senior U.S. intelligence source that a "pro-war" faction within the Revolutionary Guard was contemplating a "limited" military incident in the Strait, to allow them to consolidate power on the eve of the March parliamentary elections.
"The only people who would benefit from such an irresponsible provocation at this moment would be the worst enemies of Iran," LaRouche warned. "If some element within the Revolutionary Guard were to consciously provoke even a minor incident in the Strait of Hormuz, I would have to ask: Whose side are you on? Are you an Israeli agent?"
War-Avoidance Efforts
Meanwhile, efforts to defuse the tensions, combat the lies about Iran's nuclear program, and get diplomacy between Iran and the West back on track, have gone into high gear. The Pentagon's cancellation of "Austere Challenge 12" has been the most direct action to date.
Simultaneously, there is a broad outpouring of war-avoidance efforts coming from American political and military-intelligence professionals, who are pulling no punches on their assessment that the current trajectory is leading straight to World War III.
Over Jan. 13-14, a number of public calls were issued for the activation of a war-avoidance back-channel between Washington and Tehran, modeled on the Robert Kennedy-Anatoly Dobrynin channel during the Cuban Missile Crisis, which successfully averted a thermonuclear world war between the United States and the Soviet Union. On Jan. 13, David Ignatius published an explicit call for such a back-channel in the Washington Post, and Jan. 14, former Carter Administration National Security Council staffer Gary Sick called, on CNN, called for the U.S. and Iran to reach an agreement based on Iran turning over its 20% enriched uranium, in exchange for 20% enriched nuclear fuel rods, needed for its isotope reactor which is part of Iran's medical system.
LaRouche gave his full endorsement to Sick's proposal.
Meanwhile, several well-known analysts raised the alarm that the U.S. strategic posture on Iran, including its heavy military deployments in the Persian Gulf, portend a thermonuclear confrontation.
In a Jan. 13 piece, "The Next War on Washington's Agenda," former Reagan Administration official Paul Craig Roberts reviewed the U.S. pre-war provocations, concluding that the United States would only be willing to risk the Fifth Fleet to create justification for a nuclear strike versus Iran, which would then target Russia and China.
"The consequences," he wrote, "would be that the world would face a higher risk of nuclear armageddon than existed in the mutually assured destruction of the US-Soviet standoff." Roberts calls this a "silly pointless provocation of Washington's largest creditor," referring to the targeting of China. The article ends with a pointed warning, based on U.S. provocations against Russia and China: "Where do we go from here? If not to nuclear destruction, Americans must wake up. Football games, porn and shopping malls are one thing. Survival of human life is another...."
On Jan. 11, former CIA analyst Phil Giraldi published a column on antiwar.com, "What War with Iran Might Look Like," in which he referenced a previous piece he wrote in September 2007, titled "What World War III Might Look Like," and updated it based on some changed circumstances. Iran remains the target, and the U.S. is already conducting economic war against Iran as Obama shuns all opportunities to negotiate in good faith, Giraldi charged.
Under his scenario, a minor skirmish between a local Iran Revolutionary Guard naval commander and a U.S. frigate leads to limited exchanges of fire, a standing-order U.S. bombing of the site from which the IRGC boats were launched, and a temporary standdown and emergency session of the UN Security Council demanding American restraint. Israel uses the occasion to bomb Bushehr and Natanz, killing 13 Russian scientists and technicians working at the two facilities. The Congress votes overwhelmingly to demand that the President support Israel militarily, leading to full-scale American bombing campaign. The scenario escalates to thermonuclear World War III.
Want to avoid it? Break from London now.