Wednesday, March 19, 2008

Iraq-"Taxi to the Dark Side

Iraq-"Taxi to the Dark Side

The only lesson we ever learn is that we never learn

The only lesson we ever learn is that we never learn

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By Robert Fisk

Five years on, and still we have not learnt. With each anniversary, the steps crumble beneath our feet, the stones ever more cracked, the sand ever finer. Five years of catastrophe in Iraq and I think of Churchill, who in the end called Palestine a "hell-disaster".

But we have used these parallels before and they have drifted away in the Tigris breeze. Iraq is swamped in blood. Yet what is the state of our remorse? Why, we will have a public inquiry – but not yet! If only inadequacy was our only sin.

Today, we are engaged in a fruitless debate. What went wrong? How did the people – the senatus populusque Romanus of our modern world – not rise up in rebellion when told the lies about weapons of mass destruction, about Saddam's links with Osama bin Laden and 11 September? How did we let it happen? And how come we didn't plan for the aftermath of war?

Oh, the British tried to get the Americans to listen, Downing Street now tells us. We really, honestly did try, before we absolutely and completely knew it was right to embark on this illegal war. There is now a vast literature on the Iraq debacle and there are precedents for post-war planning – of which more later – but this is not the point. Our predicament in Iraq is on an infinitely more terrible scale.

As the Americans came storming up Iraq in 2003, their cruise missiles hissing through the sandstorm towards a hundred Iraqi towns and cities, I would sit in my filthy room in the Baghdad Palestine Hotel, unable to sleep for the thunder of explosions, and root through the books I'd brought to fill the dark, dangerous hours. Tolstoy's War and Peace reminded me how conflict can be described with sensitivity and grace and horror – I recommend the Battle of Borodino – along with a file of newspaper clippings. In this little folder, there was a long rant by Pat Buchanan, written five months earlier; and still, today I feel its power and its prescience and its absolute historical honesty: "With our MacArthur Regency in Baghdad, Pax Americana will reach apogee. But then the tide recedes, for the one endeavour at which Islamic people excel is expelling imperial powers by terror or guerrilla war.

"They drove the Brits out of Palestine and Aden, the French out of Algeria, the Russians out of Afghanistan, the Americans out of Somalia and Beirut, the Israelis out of Lebanon. We have started up the road to empire and over the next hill we will meet those who went before. The only lesson we learn from history is that we do not learn from history."

How easily the little men took us into the inferno, with no knowledge or, at least, interest in history. None of them read of the 1920 Iraqi insurgency against British occupation, nor of Churchill's brusque and brutal settlement of Iraq the following year.

On our historical radars, not even Crassus appeared, the wealthiest Roman general of all, who demanded an emperorship after conquering Macedonia – "Mission Accomplished" – and vengefully set forth to destroy Mesopotamia. At a spot in the desert near the Euphrates river, the Parthians – ancestors of present day Iraqi insurgents – annihilated the legions, chopped off Crassus's head and sent it back to Rome filled with gold. Today, they would have videotaped his beheading.

To their monumental hubris, these little men who took us to war five years ago now prove that they have learnt nothing. Anthony Blair – as we should always have called this small town lawyer – should be facing trial for his mendacity. Instead, he now presumes to bring peace to an Arab-Israeli conflict which he has done so much to exacerbate. And now we have the man who changed his mind on the legality of war – and did so on a single sheet of A4 paper – daring to suggest that we should test immigrants for British citizenship. Question 1, I contend, should be: Which blood-soaked British attorney general helped to send 176 British soldiers to their deaths for a lie? Question 2: How did he get away with it?

But in a sense, the facile, dumbo nature of Lord Goldsmith's proposal is a clue to the whole transitory, cardboard structure of our decision-making. The great issues that face us – be they Iraq or Afghanistan, the US economy or global warming, planned invasions or "terrorism" – are discussed not according to serious political timetables but around television schedules and press conferences.

Will the first air raids on Iraq hit prime-time television in the States? Mercifully, yes. Will the first US troops in Baghdad appear on the breakfast shows? Of course. Will Saddam's capture be announced by Bush and Blair simultaneously?.

But this is all part of the problem. True, Churchill and Roosevelt argued about the timing of the announcement that war in Europe had ended. And it was the Russians who pipped them to the post. But we told the truth. When the British were retreating to Dunkirk, Churchill announced that the Germans had "penetrated deeply and spread alarm and confusion in their tracks".

Why didn't Bush or Blair tell us this when the Iraqi insurgents began to assault the Western occupation forces? Well, they were too busy telling us that things were getting better, that the rebels were mere "dead-enders".

On 17 June 1940, Churchill told the people of Britain: "The news from France is very bad and I grieve for the gallant French people who have fallen into this terrible misfortune." Why didn't Blair or Bush tell us that the news from Iraq was very bad and that they grieved – even just a few tears for a minute or so – for the Iraqis?

For these were the men who had the temerity, the sheer, unadulterated gall, to dress themselves up as Churchill, heroes who would stage a rerun of the Second World War, the BBC dutifully calling the invaders "the Allies" – they did, by the way – and painting Saddam's regime as the Third Reich.

Of course, when I was at school, our leaders – Attlee, Churchill, Eden, Macmillan, or Truman, Eisenhower and Kennedy in the United States – had real experience of real war. Not a single Western leader today has any first-hand experience of conflict. When the Anglo-American invasion of Iraq began, the most prominent European opponent of the war was Jacques Chirac, who fought in the Algerian conflict. But he has now gone. So has Colin Powell, a Vietnam veteran but himself duped by Rumsfeld and the CIA.

Yet one of the terrible ironies of our times is that the most bloodthirsty of American statesmen – Bush and Cheney, Rumsfeld and Wolfovitz – have either never heard a shot fired in anger or have ensured they did not have to fight for their country when they had the chance to do so. No wonder Hollywood titles like "Shock and Awe" appeal to the White House. Movies are their only experience of human conflict; the same goes for Blair and Brown.

Churchill had to account for the loss of Singapore before a packed House. Brown won't even account for Iraq until the war is over.

It is a grotesque truism that today – after all the posturing of our political midgets five years ago – we might at last be permitted a valid seance with the ghosts of the Second World War. Statistics are the medium, and the room would have to be dark. But it is a fact that the total of US dead in Iraq (3,978) is well over the number of American casualties suffered in the initial D-Day landings at Normandy (3,384 killed and missing) on 6 June, 1944, or more than three times the total British casualties at Arnhem the same year (1,200).

They count for just over a third of the total fatalities (11,014) of the entire British Expeditionary Force from the German invasion of Belgium to the final evacuation at Dunkirk in June 1940. The number of British dead in Iraq – 176 – is almost equal to the total of UK forces lost at the Battle of the Bulge in 1944-45 (just over 200). The number of US wounded in Iraq – 29,395 – is more than nine times the number of Americans injured on 6 June (3,184) and more than a quarter of the tally for US wounded in the entire 1950-53 Korean war (103,284).

Iraqi casualties allow an even closer comparison to the Second World War. Even if we accept the lowest of fatality statistics for civilian dead – they range from 350,000 up to a million – these long ago dwarfed the number of British civilian dead in the flying-bomb blitz on London in 1944-45 (6,000) and now far outnumber the total figure for civilians killed in bombing raids across the United Kingdom – 60,595 dead, 86,182 seriously wounded – from 1940 to 1945.

Indeed, the Iraqi civilian death toll since our invasion is now greater than the total number of British military fatalities in the Second World War, which came to an astounding 265,000 dead (some histories give this figure as 300,000) and 277,000 wounded. Minimum estimates for Iraqi dead mean that the civilians of Mesopotamia have suffered six or seven Dresdens or – more terrible still – two Hiroshimas.

Yet in a sense, all this is a distraction from the awful truth in Buchanan's warning. We have dispatched our armies into the land of Islam. We have done so with the sole encouragement of Israel, whose own false intelligence over Iraq has been discreetly forgotten by our masters, while weeping crocodile tears for the hundreds of thousands of Iraqis who have died.

America's massive military prestige has been irreparably diminished. And if there are, as I now calculate, 22 times as many Western troops in the Muslim world as there were at the time of the 11th and 12th century Crusades, we must ask what we are doing. Are we there for oil? For democracy? For Israel? For fear of weapons of mass destruction? Or for fear of Islam?

We blithely connect Afghanistan to Iraq. If only Washington had not become distracted by Iraq, so the narrative now goes, the Taliban could not have re-established themselves. But al-Qa'ida and the nebulous Osama bin Laden were not distracted. Which is why they expanded their operations into Iraq and then used this experience to assault the West in Afghanistan with the hitherto – in Afghanistan – unheard of suicide bomber.

And I will hazard a terrible guess: that we have lost Afghanistan as surely as we have lost Iraq and as surely as we are going to "lose" Pakistan. It is our presence, our power, our arrogance, our refusal to learn from history and our terror – yes, our terror – of Islam that is leading us into the abyss. And until we learn to leave these Muslim peoples alone, our catastrophe in the Middle East will only become graver. There is no connection between Islam and "terror". But there is a connection between our occupation of Muslim lands and "terror". It's not too complicated an equation. And we don't need a public inquiry to get it right.

Bush Says Iraq War Was Worth It

Bush Says Iraq War Was Worth It

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President Bush says he has no doubts about launching the unpopular war in Iraq despite the ``high cost in lives and treasure,'' arguing that retreat now would embolden Iran and provide al-Qaida with money for weapons of mass destruction to attack the United States.

Bush is to mark the fifth anniveresary of the U.S.-led invasion of Iraq on Wednesday with a speech at the Pentagon. Excerpts of his address were released Tuesday night by the White House.

At least 3,990 members of the U.S. military have died since the beginning of the war in 2003. It has cost taxpayers about $500 billion and estimates of the final tab run far higher. Nobel Prize-winning economist Joseph E. Stiglizt and Harvard University public finance expert Linda Bilmes have estimated the eventual cost at $3 trillion when all the expenses, including long-term care for veterans, are calculated.

Democrats offered a different view from Bush's.

``On this grim milestone, it is worth remembering how we got into this situation, and thinking about how best we can get out,'' said Rep. John Dingell, D-Mich. ``The tasks that remain in Iraq - to bring an end to sectarian conflict, to devise a way to share political power, and to create a functioning government that is capable of providing for the needs of the Iraqi people are tasks that only the Iraqis can complete.''

In his remarks, Bush repeated his oft-stated determination to prosecute the war into the unforeseen future.

``The successes we are seeing in Iraq are undeniable, yet some in Washington still call for retreat,'' the president said. ``War critics can no longer credibly argue that we are losing in Iraq, so now they argue the war costs too much. In recent months, we have heard exaggerated estimates of the costs of this war.

``No one would argue that this war has not come at a high cost in lives and treasure, but those costs are necessary when we consider the cost of a strategic victory for our enemies in Iraq,'' Bush said.

Bush has successfully defied efforts by the Democratic-led Congress to force troop withdrawals or set deadlines for pullouts. It is widely believed he will endorse a recommendation from Gen. David Petreaus, the top U.S. commander in Iraq, for no additional troop reductions, beyond those already planned, until at least September.

The U.S. now has about 158,000 troops in Iraq. That number is expected to drop to 140,000 by summer in drawdowns meant to erase all but about 8,000 troops from last year's buildup.

``If we were to allow our enemies to prevail in Iraq, the violence that is now declining would accelerate and Iraq could descend into chaos,'' Bush said. ``Al-Qaida would regain its lost sanctuaries and establish new ones fomenting violence and terror that could spread beyond Iraq's borders, with serious consequences to the world economy.

``Out of such chaos in Iraq, the terrorist movement could emerge emboldened with new recruits ... new resources ... and an even greater determination to dominate the region and harm America,'' Bush said in his remarks. ``An emboldened al-Qaida with access to Iraq's oil resources could pursue its ambitions to acquire weapons of mass destruction to attack America and other free nations. Iran could be emboldened as well with a renewed determination to develop nuclear weapons and impose its brand of hegemony across the broader Middle East. And our enemies would see an American failure in Iraq as evidence of weakness and lack of resolve.''

Looking back, Bush said, ``Five years into this battle, there is an understandable debate over whether the war was worth fighting ... whether the fight is worth winning ... and whether we can win it. The answers are clear to me: Removing Saddam Hussein from power was the right decision and this is a fight America can and must win.''

Bush said the past five years have brought ``moments of triumph and moments of tragedy,'' from free elections in Iraq to acts of brutality and violence.

``The terrorists who murder the innocent in the streets of Baghdad want to murder the innocent in the streets of American cities. Defeating this enemy in Iraq will make it less likely we will face this enemy here at home,'' Bush said.

Bush said anew that the war was faltering a little more than a year ago, prompting him in January 2007 to order a big troop buildup known as the ``surge.''

``The surge has done more than turn the situation in Iraq around; it has opened the door to a major strategic victory in the broader war on terror,'' he said.

``In Iraq, we are witnessing the first large-scale Arab uprising against Osama bin Laden, his grim ideology, and his terror network. And the significance of this development cannot be overstated ,'' the president said.

``The challenge in the period ahead is to consolidate the gains we have made and seal the extremists' defeat. We have learned through hard experience what happens when we pull our forces back too fast - the terrorists and extremists step in ... fill the vacuum, establish safe havens and use them to spread chaos and carnage.''

Truncating the Antecedents

Truncating the Antecedents

How Americans Have Been Misled about World War II

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By Robert Higgs

Whereas historians obsessively trace every event’s causal lineage further and further into the past, nonhistorians tend toward the opposite extreme: they assume in effect that the world began immediately before the event they have in mind. I call this unfortunate tendency "truncating the antecedents." Among the general public, it has given rise to mistaken interpretations of historical causation in cases too numerous to mention, and mistakes of this sort continue to occur frequently, in part because politicians and other conniving parties have an interest in propagating them.

I was recently struck by this tendency while reading comments at a group blog associated with the History News Network. A commentator there had mentioned that the blame for World War II is not as cut and dried as Americans typically assume it to be, and hence some revisionism is long overdue. In response, another discussant, whose previous contributions to the blog show that he is an intelligent man, expressed bafflement: "Yes, obviously some revisionism regarding the ’great allied leaders’ of WWII is called for. But an attempt to be revisionist about the justness of a war where U.S. territory is attacked by one opponent and war is declared on the U.S. by the other opponent is sort of like justifying the War on Iraq on the basis of mythical WMD."

Like Americans in general, this man takes the Japanese attack at Pearl Harbor on December 7, 1941, and the German declaration of war on December 11, 1941, as dispositive evidence that Japan and Germany started the war that ensued between these nations and the United States, and therefore he concludes that they should be held responsible for it. In a later post, he persists in this interpretation by saying: "Nation X attacks Nation Y. One or the other is right. Either Nation Y is a victim or the attack was a ’justified pre-emptive attack.’ Yes, the response may be disproportionate, etc., but those really aren’t reasons to declare Nation Y ’wrong.’ Or the two ’equally wrong.’" This view represents a classic case of truncating the antecedents.

Many people are misled by formalities. They assume, for example, that the United States went to war against Germany and Japan only after its declarations of war against these nations in December 1941. In truth, the United States had been at war for a long time before making these declarations. Its warmaking took a variety of forms. For example, the U.S. navy conducted "shoot [Germans] on sight" convoys, which might include British ships, in the North Atlantic along the greater part the shipping route from the United States to Great Britain, even though German U-boats had orders to refrain (and did refrain) from initiating attacks on American shipping. The United States and Great Britain entered into arrangements to pool intelligence, combine weapons development, test military equipment jointly, and undertake other forms of war-related cooperation. The U.S. military actively cooperated with the British military in combat operations against the Germans, for example, by alerting the British navy of aerial or marine sightings of German submarines, which the British then attacked. The U.S. government undertook in countless ways to provide military and other supplies and assistance to the British, the French, and the Soviets, who were fighting the Germans. The U.S. government provided military and other supplies and assistance, including warplanes and pilots, to the Chinese, who were at war with Japan. The U.S. military actively engaged in planning with the British, the British Commonwealth countries, and the Dutch East Indies for future combined combat operations against Japan. Most important, the U.S. government engaged in a series of increasingly stringent economic warfare measures that pushed the Japanese into a predicament that U.S. authorities well understood would probably provoke them to attack U.S. territories and forces in the Pacific region in a quest to secure essential raw materials that the Americans, British, and Dutch (government in exile) had embargoed.

Consider these summary statements by George Victor, by no means a Roosevelt basher, in his recently published, well-documented book The Pearl Harbor Myth: Rethinking the Unthinkable (Dulles, Va.: Potomac Books, 2007).

Roosevelt had already led the United States into war with Germany in the spring of 1941 – into a shooting war on a small scale. From then on, he gradually increased U.S. military participation. Japan’s attack on December 7 enabled him to increase it further and to obtain a war declaration. Pearl Harbor is more fully accounted for as the end of a long chain of events, with the U.S. contribution reflecting a strategy formulated after France fell. . . . In the eyes of Roosevelt and his advisers, the measures taken early in 1941 justified a German declaration of war on the United State – a declaration that did not come, to their disappointment. . . . Roosevelt told his ambassador to France, William Bullitt, that U.S. entry into war against Germany was certain but must wait for an "incident," which he was "confident that the Germans would give us." . . . Establishing a record in which the enemy fired the first shot was a theme that ran through Roosevelt’s tactics. . . . He seems [eventually] to have concluded – correctly as it turned out – that Japan would be easier to provoke into a major attack on the Unites States than Germany would be. (pp. 179–80, 184, 185, emphasis added)

The claim that Japan attacked the United States without provocation was . . . typical rhetoric. It worked because the public did not know that the administration had expected Japan to respond with war to anti-Japanese measures it had taken in July 1941. . . . Expecting to lose a war with the United States – and lose it disastrously – Japan’s leaders had tried with growing desperation to negotiate. On this point, most historians have long agreed. Meanwhile, evidence has come out that Roosevelt and Hull persistently refused to negotiate. . . . Japan . . . offered compromises and concessions, which the United States countered with increasing demands. . . . It was after learning of Japan’s decision to go to war with the United States if the talks "break down" that Roosevelt decided to break them off. . . . According to Attorney General Francis Biddle, Roosevelt said he hoped for an "incident" in the Pacific to bring the United States into the European war. (pp. 15, 202, 240)

These facts and numerous others that point in the same direction are for the most part anything but new; many of them have been available to the public since the 1940s. As early as 1953, anyone might have read a collection of heavily documented essays on various aspects of U.S. foreign policy in the late 1930s and early 1940s that showed the various ways in which the U.S. government bore responsibility for the country’s eventual engagement in World War II – showed, in short, that the Roosevelt administration wanted to get the country into the war and worked craftily along various avenues to ensure that, sooner or later, it would get in, preferably in a way that would unite public opinion behind the war by making the United States appear to have been the victim of an aggressor’s unprovoked attack. (See Perpetual War for Perpetual Peace: A Critical Examination of the Foreign Policy of Franklin Delano Roosevelt and Its Aftermath, edited by Harry Elmer Barnes [Caldwell, Id.: Caxton Printers, 1953].) As Secretary of War Henry Stimson testified after the war, "we needed the Japanese to commit the first overt act" (qtd. in Victor, Pearl Harbor Myth, p. 105).

At present, however, sixty-seven or more years after these events, probably not one American in 1,000 – nay, not one in 10,000 – has an inkling of any of this history. So effective has been the pro-Roosevelt, pro-American, pro-World War II faction that in this country it has utterly dominated teaching and popular writing about U.S. engagement in the "Good War." Only a few years ago, when an essay of mine was included in a collection being considered for publication by the University of Chicago Press, the press’s expert outside reader expressed shock that I had mentioned in passing Roosevelt’s pre-Pearl Harbor maneuvers to bring the country into the war, and he declared that crackpot statements of this sort would discredit the entire volume. (In deference to the editor and to discourage the volume’s rejection by the press, I removed the single obnoxious sentence, which was not central to my purposes in the essay in any event, and eventually the book was published, notwithstanding this "expert’s" negative appraisal of my own contributions to it.)

Observations such the foregoing ones tend to elicit angry accusations of "Holocaust denial" and "moral equivalence," among many others. For the record, then, let me avow that I do not deny the Holocaust, nor do I regard the Roosevelt administration as morally equivalent to Hitler’s regime. While I am making my innocence plain, let me also avow that I do not regard the Roosevelt administration as morally equivalent to Stalin’s regime. This latter comparison comes up surprisingly seldom, however, given that the two regimes were close allies in the war, and, most important, that the major outcome of the war was to leave Stalin and his puppet regimes astride the greater part of the European continent in an area that stretches from the Urals to Bohemia and from Estonia to Azerbaijan. In short, if anyone deserves to be recognized as the war’s "winner," that person is Stalin. Somehow this fact has never seemed to me to fit comfortably into a characterization of this horrible conflict as the "Good War." Perhaps I’m just unduly squeamish.

The fate of the European Jews also requires mention, inasmuch as after the war many people professed to believe that saving the Jews was the war’s prime justification. Aside from the fact that none of the Allied leaders held that view – Roosevelt himself was a genteel anti-Semite of the sort typical in his time, place, and class – the undeniable truth is that the Jews were not saved: approximately 80 percent of them had perished by the end of the war. Little wonder, too, because U.S. and British war plans did not give high priority to saving them; as a rule, those plans completely disregarded the urgent need to rescue the surviving Jews.

Few Americans have ever entertained the idea that their country ought not to have entered World War II. They persist in believing that they – the ordinary people of the country, as distinct from its political leaders and their foreign legionnaires – were genuinely threatened by the Japanese and the Germans and therefore that the war "had to be fought." Even George Victor, from whose honest and useful book The Pearl Harbor Myth I quoted earlier, has brought himself to believe that Roosevelt had excellent motives for his persistent provocation of Germany and Japan. Thus, he writes: "As Germany began to prepare for conquest, genocide, and destruction of civilization, the leader of only one major nation saw what was coming and made plans to stop it. As a result of Roosevelt’s leadership, a planned sequence of events carried out in the Atlantic and more decisively in the Pacific brought the United States into one of the world’s greatest cataclysms. The American contribution helped turn the war’s tide and saved the world from a destructive tyranny unparalleled in modern history" (p. 16).

Unparalleled? What about Stalin’s tyranny or Mao’s? Regardless of one’s answer to this question, however, another question remains – whether Nazi Germany, as evil as it certainly was, had the ability to defeat the United States, much less to "destroy civilization." Americans love to speculate about German acquisition of atomic weapons, intercontinental ballistic missiles, and other military capabilities the Nazis, in fact, never came close to acquiring. As things actually stood, Germany lacked the capability to invade and conquer even Great Britain. Conquering the United States, thousands of miles across the Atlantic, was realistically inconceivable. Whatever else one may take U.S. leaders’ motives for war to have been in the early 1940’s, national self-preservation could not have been among them, unless they were shockingly ill-advised as to the economic, logistical, and technological constraints on the German war machine. In reality, that machine had its hands more than full in dealing with the Soviets on the eastern front, not to mention the British and others who were pestering it on other fronts.

Thirty-six years ago, Bruce M. Russett’s little book No Clear and Present Danger: A Skeptical View of the U.S. Entry into World War II (New York: Harper & Row, 1972) was published. Russett noted at the outset that "[p]articipation in the war against Hitler remains almost wholly sacrosanct, nearly in the realm of theology" (p. 12). In this regard, nothing has changed since 1972. Yet Russett argued forcefully, with logic and evidence, that this orthodoxy rests on shaky grounds. He concluded that World War II "may well have been an unnecessary war that did little for us and that we need not have fought" (p. 20). Nor did he concede that although the war may have been imprudent on instrumental grounds, it was well justified on moral grounds: "it is precisely moral considerations that demand a reexamination of our World War II myths," he insisted (p. 21). Although much has been added to the corpus of World War II scholarship since the publication of Russett’s book, this little volume remains unjustly neglected, and its argument deserves serious consideration even now.Of course, many other great events in American history might be examined as I have suggested U.S. participation in World War II ought to be examined – by taking the relevant antecedents fully into account. For historians, this advice should be unnecessary; if they know anything, they know that history did not begin yesterday. The American people at large, however, remain extremely vulnerable to misleading descriptions of the government’s actions, especially its plunges into foreign wars – accounts of which generally disregard many relevant antecedents, particularly those that cast blame on the United States for stirring up enmities abroad. Yet, any honest account of U.S. foreign policy reveals that this country’s government has engaged again and again in foreign interventions whose official justifications cannot withstand critical scrutiny. Many of these interventions amounted to little more than armed errand-running for privileged American business interests seeking to beat foreigners into line and, not coincidentally, to line their own pockets. This aspect of U.S. foreign policy famously led General Smedley Butler to declare that war is a racket.Time, some wit has said, is God’s way of keeping everything from happening at once. Taking this idea to heart, we may remind ourselves and others that whenever the U.S. government launches a new war abroad, we would be well advised to look into what happened in that part of the world previously, perhaps over the course of several decades. We may well discover that the locals have legitimate grievances against our government or some of its corporate cronies. Or we may simply discover that the situation is more complicated than it has been made out to be. We know one thing for certain at the outset, however: we cannot rely on the government to tell us the truth, the whole truth, and nothing but the truth. Unvarnished truth is to our rulers as holy water is to vampires.

The Fed is just an Extension of the Banking Establishment; The Bear bailout proves it

The Fed is just an Extension of the Banking Establishment; The Bear bailout proves it

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By Mike Whitney

One picture tells the whole story. It’s a photo of five grim looking men in gray suits staring ahead blankly like they were in the dock with Saddam awaiting sentencing. Every one of them looks downcast and dejected; shoulders rounded and jaws set. This is what desperation looks like, which is why the photo was kept off the front pages of our leading newspapers.

The group took no questions and, as far as the media was concerned, the meeting never happened. But it did happen; and it happened on Monday at the White House at 2PM. That’s when President Bush convened the Working Group on Financial Markets, also known as the Plunge Protection Team, to explain their strategy for dealing with deteriorating conditions in the financial markets. The details of the meeting remain unknown, but judging by the sudden (and irrational) recovery in the stock market yesterday; their plan must have succeeded.

The Plunge Protection Team is a panel that includes Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson, Securities and Exchange Commission Chairman Christopher Cox, and acting Commodity Futures Trading Commission head Walter Lukken. According to John Crudele of the New York Post, the Plunge Protection Team’s (PPT) objective is to redirect the stock market by “buying market averages in the futures market, thus stabilizing the market as a whole.” In the event of a terrorist attack or a natural disaster, the group’s activities could play an extremely positive role in saving the market from an unnecessary meltdown. However, direct intervention into supposedly “free markets” is less defensible when it is merely a matter of saving an over-leveraged banking system from its inevitable Day of Reckoning. And, yet, that appears to be the reason for the White House confab.

The psychology behind the PPT’s activities are explained in greater detail by Robert McHugh Ph.D. who provides a description of how it works in his essay “The Plunge Protection Team Indicator”:

“The PPT decides markets need intervention, a decline needs to be stopped, or the risks associated with political events that could be perceived by markets as highly negative and cause a decline, need to be prevented by a rally already in flight. To get that rally, the PPT’s key component -- the Fed -- lends money to surrogates who will take that fresh electronically printed cash and buy markets through some large unknown buyer’s account. That buying comes out of the blue at a time when short interest is high. The unexpected rally strikes blood, and fear overcomes those who were betting the market would drop. These shorts need to cover, need to buy the very stocks they had agreed to sell (without owning them) at today’s prices in anticipation they could buy them in the future at much lower prices and pocket the difference. Seeing those stocks rally above their committed selling price, the shorts are forced to buy -- and buy they do. Thus, those most pessimistic about the equity market end up buying equities like mad, fueling the rally that the PPT started. Bingo, a huge turnaround rally is well underway, and sidelines money from Hedge Funds, Mutual funds and individuals’ rushes in to join in the buying madness for several days and weeks as the rally gathers a life of its own. (Robert McHugh Ph.D., “The Plunge Protection Team Indicator”)

The powers of the PPT are greatly exaggerated; eventually the liquidity they provide has to be drained from the system. The popular myth that the Fed simply creates as much money as it chooses and spreads it around wherever it likes; is pure rubbish. The Fed has very defined balance constraints. The system is not quite as rigged as many people imagine. According to Bloomberg News, the Fed has already depleted most of its arsenal:

“The Fed has committed as much as 60 percent of the $709 billion in Treasury securities on its balance sheet to providing liquidity and opened the door to more with yesterday’s decision to become a lender of last resort for the biggest Wall Street dealers.” (“Bernanke May Run Low on Ammunition for Loans, Rates”, Bloomberg)

The troubles in the credit markets and real estate are bigger than the Fed or the PPT; and they know it. The next step is massive government intervention; rate freezes, bailouts and fiscal stimulus. Big government is back; Reaganism has gone full-circle. That doesn’t mean that the PPT cannot have an important psychological affect in soothing jittery markets and stalling a system-wide collapse. It just means, that markets will eventually correct regardless of what anyone does. The sharp downturn in the financial markets is the result of unsustainable credit expansion that can’t be fixed by the parlor tricks of the PPT. The rate at which financial institutions are deleveraging and destroying capital will inevitably trigger an economic crisis equal to the Great Depression. What is needed is strong leadership and a re-commitment to transparency, rather than the “business as usual” deception of the public that keeps the balls in the air for another day or two.

“Sucker rallies”, like yesterday’s 400 point surge on Wall Street just obfuscate the systemic problems that need to be addressed before investor confidence is restored. Blogger Rick Ackerman summed it up succinctly in last night’s entry:

“These psychotic, 400-point rallies in the Dow do not augur renewed confidence. They are being driven almost entirely by short-covering, and even the otherwise clueless news anchors are starting to dismiss them as meaningless. One of these days, moments after the last surviving bear’s short position has been liquidated, stocks are going to fall so steeply that even the Plunge Protection Team will call for back-up. Then, the financial collapse that so many have been expecting will unfold in just a few days, with enough power to leave the global economy in ruins for a generation.” (Rik’s Piks Rick Ackerman)

Whether Ackerman’s dire predictions materialize or not, there’s no denying that the situation is getting worse by the day. In just the last week, two major financial institutions, Carlyle Capital and Bear Stearns, have either gone under or been bailed out wiping out tens of billions in market capitalization. These flameouts increase the rate of the deflation adding to the already-prodigious losses from housing foreclosures, delinquent credit card debt, defaulting car loans, and the accelerating deleveraging in the hedge fund industry. Fortress America has sprung a leak, and capital is escaping in a torrent.

"One thing is for certain, we’re in challenging times," Mr. Bush opined on Monday after meeting with his top economic aides. “But we are on top of the situation”.

That’s comforting. Bush is all over it.

Yesterday’s 75 basis point rate cut by the Fed is a further sign of desperation. The Fed Funds rate is now 2 percentage points below the rate of inflation; a obvious attempt on Bernanke to reflate the equity bubble at the expense of the dollar. Is that why Wall Street was so happy; another savage blow to the currency?

The Fed’s statement was as bleak as any they have ever released sounding more like passages from the Book of the Dead than minutes of the Federal Open Market Committee:

"Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen...... uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

Today’s policy action..should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain.”

Wall Street rallied on the cheery news.

Also, on Tuesday, the battered investment banks began posting first quarter earnings which were better than expected. Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. beat estimates which added to the giddiness at the NYSE. Unfortunately, a careful reading of the reports, shows that things are not as they seem. The jubilation is unwarranted; it’s just more smoke and mirrors.

“Lehman Brothers Holdings Inc. reported a 57% drop in fiscal first-quarter net income amid weakness in its fixed-income business, though results topped analysts’ expectations.” (Wall Street Journal)

The same was true of financial giant Goldman Sachs:

“Goldman Sachs Group Inc.’s fiscal first-quarter net income dropped 53% on $2 billion in losses on residential mortgages, credit products and investments ...The biggest Wall Street investment bank by market value reported net income of $1.51 billion, or $3.23 a share, for the quarter ended Feb. 29, compared to $3.2 billion, or $6.67 a share, a year earlier....Results included $1 billion in losses on residential mortgage loans and securities, and nearly $1 billion in losses on credit products and investment losses ...” (Wall Street Journal)

The bottom line is that both companies first quarter earnings dropped by more than a half in just one year alone while, at the same time, they booked heavy losses. Hardly a reason for celebration. The major investment banks remain on the critical list because of the billions of dollars of toxic debt they still carry on their balance sheets. Consider industry titan Goldman Sachs for example, which is sitting on a backlog of bad paper from the subprime/securitization debacle as well as an unknown amount of LBOs (Leveraged buyouts) and commercial real estate deals (CREs) that are heading south fast. Economic’s analyst, Mark Gongloff, has compiled some interesting figures in his article “Crunch Proves A Test of Faith For Street Strong”:

“All of the brokerage houses are highly leveraged, with a high ratio of assets to shareholders’ equity, a sign they have used debt heavily to build up positions in hope of greater returns. Morgan Stanley, which will report Wednesday, had a leverage ratio of 32.6-to-1 at the end of last year, nearly as high as Bear’s 32.8-to-1. Lehman was leveraged 30.7-to-1, and Merrill Lynch 27.8-to-1. And the would-be rock, Goldman? It was leveraged 26.2-to-1.”

Remember, Carlyle Capital was leveraged 32 to 1 ($22 billion equity) and went “poof” in a matter of days when it couldn’t scrape together a measly $400 million for a margin call. How vulnerable are these other maxed-out players now that the credit bubble has popped and the whole system is quickly unwinding?

Not very safe, at all. As Gongloff points out:

“Based in part on numbers reported at the end of Bear’s fourth quarter, estimated that Bear Stearns had $35 billion in liquid assets and borrowing capacity, enough to operate for 20 months. Turns out it had enough for three days.”

That’s right; three days and it was over. Why would anyone think it will be different with these other equally-exposed banks? These institutions are basically insolvent now. The Federal Reserve is making a big mistake by protecting them from the consequences of their speculative excesses. As hyper-inflated assets continue to lose altitude, and structured investments and arcane hedges against default begin to disintegrate; these wastrel institutions will be crushed by a stampede of panicking investors running for the exits. The flight to safety has already begun. Cash is king.

Look what has transpired just since Monday.

“Crude oil, copper and coffee led a decline in commodities that may be the biggest ever recorded on speculation that a U.S. recession will stall demand for raw materials.” (Bloomberg) Yes, all asset classes fall in a deflationary spiral even commodities which many people believe are a safe bet. Not so. In fact, even gold has begun to retreat as hedge funds and other market participants are forced to relinquish their positions.

In other news, Reuters reports:

“The yield on U.S. 3-month Treasury bills fell below 1 percent on Monday to levels not seen in 50 years prompted by intense safety bids for cash spurred by the ongoing global credit crunch...Investors were pulling money out of stocks and even the booming commodity market even after the Federal Reserve conducted a fresh round of measures over the weekend to alleviate the credit crisis.”

Again, the “flight to safety” as investors recognize the warning signs of deflation. This trend will further intensify even though the Fed will continue to cut rates and real earnings on Treasuries will go negative. In another report from Reuters:

“The Chicago Board Options Exchange Volatility Index or VIX on Monday surged to its highest level in nearly two months as a fire sale of Bear Stearns and an emergency Federal Reserve cut in the discount rate reignited credit fears.

"Fear is higher now than it has been in a long time. Option traders are loading up on index puts in the Standard & Poor’s 500 index.” The “Fear Gage, as it is called, is soaring to new heights as credit problems continue to mount and business begins to slow to a crawl.

And, perhaps most important of all: “The cost of borrowing in dollars overnight rose by the most in at least seven years after the Federal Reserve’s emergency cut in the discount interest rate stoked concern that credit losses are deepening....The London interbank offered rate, or Libor climbed 81 basis points to 3.86 percent, the British Bankers’ Association said today. It was the biggest increase since at least January 2001. The comparable pound rate rose 28 basis points to 5.59 percent, the largest gain since Dec. 31, 2007.” (Bloomberg)

This may sound like technical gibberish geared for market junkies, but it is critical to understanding the gravity of what is really going on. The Fed’s rate cuts are not affecting the lending between banks which is actually deteriorating quite rapidly. And, when banks don’t lend to each other (because they are worried about getting their money back) the wheels of capitalism grind to a halt. The banks are the essential conduit for providing credit to the broader economy, so there must be traffic between the major lending institutions. The banks are hoarding cash to cover losses on their steadily downgraded mortgage-backed assets and to shore up their skimpy capital reserves. As a result, consumer spending will slow, housing will continue to falter, business will contract and GDP will shrink.

“We know we’re in a sharp (decline), and there’s no doubt that the American people know that the economy has turned down sharply,” said Henry Paulson on NBC television on Sunday. “There’s turbulence in our capital markets and it’s been going on since August. We’re looking for ways to work our way through it.”

But Paulson is clearly out of his depth. He’s just not the man to deal with a crisis of this magnitude. His only interest is bailing out his friends in the banking industry. The interests of workers and consumers are just brushed aside. Has anyone from the Dept of the Treasury (or the Fed) suggested a bailout for the 14,000 Bear Stearns employees who lost not only their jobs but the entire retirement when the company was purchased by JP Morgan?

Of course, not. Because both Paulson and Bernanke take a class oriented approach to the problem that narrows their range of vision and limits their ability to pose viable remedies. They are unable to see the whole playing field. For example, Bernanke assumes that if he keeps cutting rates, he can reflate the equity bubble by reenergizing consumer spending. But that won’t happen. First of all, the banks are not passing on the savings to customers. And, second, the banks are only lending to applicants with a flawless credit history. In other words, the Fed’s cuts may be good for Bernanke and Paulson’s buddies, but they do nothing for either the consumer or the broader economy. Also, as Michael Hudson notes in his latest article “Save the Economy, Dismantle the Empire” ( the banks are making no attempt to stimulate the economy, but simply turn a profit with capital borrowed from the Fed:

“This week the Fed tried to reverse the plunge in asset prices by flooding the banking system with $200 billion of credit. Banks were allowed to turn their bad mortgage loans and other loans over to the Federal Reserve at par value (rather at just 20% "mark to market" prices). The Fed’s cover story is that this infusion will enable the banks to resume lending to "get the economy moving again." But the banks are using the money to bet against the dollar. They are borrowing from the Fed at a low interest rate, and buying foreign euro-denominated bonds yielding a higher interest rate--and in the process, making a currency gain as the euro rises against dollar-denominated assets. The Fed thus is subsidizing capital flight, exacerbating inflation by making the price of imports (headed by oil and other raw materials) more expensive. These commodities are not more expensive to European buyers, but only to buyers paying in depreciated dollars.”

The Fed’s strategy has even failed to lower mortgage rates which are pinned to the 30 year Treasury and which has actually gone up since Bernanke began slashing rates. This inability to pass on the Fed’s rate cuts to potential mortgage applicants ensures that the housing meltdown will continue unabated well into 2009 and, perhaps, 2010.

In the last few days, the Fed has provided $30 billion to buy up the least liquid speculative debts of a privately-owned business, Bear Stearns, which was leveraged at 32 to 1 and which will remain unsupervised by federal regulators. How does that address the underlying issues of the credit crunch? Are Bernanke and Paulson really trying to put the financial markets back on solid footing again or are they merely expressing their bank-centered cultural bias?

That question was answered in an article on Tuesday by the Wall Street Journal which offered this explanation of the real reasons behind the Bear bailout:

“That illusion was shattered Saturday morning, when Mr. Paulson was deluged by calls to his home from bank chief executives. They told him they worried the run on Bear would spread to other financial institutions. After several such calls, Mr. Paulson realized the Fed and Treasury had to get the J.P. Morgan deal done before the markets in Asia opened on late Sunday, New York time.

"It was just clear that this franchise was going to unravel if the deal wasn’t done by the end of the weekend," Mr. Paulson said in an interview yesterday.’” (“The Week that Shook Wall Street”, Wall Street Journal)

Ah-ha! So all it took was a little nudge from his banking buddies to put Paulson over the top.

The Bear bailout was engineered to serve the needs of the banking establishment; nothing more. The Federal Reserve and the US Treasury are merely an extension of the financial industry. The Bear bailout proves it.

Part One: Toxin Agency Looks the Other Way

Part One: Toxin Agency Looks the Other Way

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By Suemedha Sood

Critics claim toxins arm of the CDC ignores science in public health cases.

Jarrett McElheney was four-years-old when the pain started. His joints ached. He was tired but couldn’t sleep. His fever wouldn’t go away and he lost his appetite. After three months of suffering, he was diagnosed with leukemia.

When Jarrett began chemotherapy, his mother, Jill, sat with him in the hospital and read about his disease. She spent a lot of time reading information sent to her by the Leukemia and Lymphoma Society and she learned that a petroleum byproduct called benzene was a known cause of leukemia. That set off alarm bells, because the McElheneys lived 500 feet from a petroleum tank farm, the term for a petroleum storage facility.

Jill eventually went to talk to the Agency for Toxic Substances and Disease Registry, a division of the Centers for Disease Control that investigates such public health problems. Seven years later, the agency still hasn’t finished its analysis.

(Matt Mahurin) Six other children living in the area were diagnosed with cancer around the time Jarrett was. The McElheneys have since moved away from their Athens, Ga. home and, over the last few years, have warned other families about living near the hazardous waste site. Since moving, Jarrett’s cancer has gone into remission and he’s now strong at age 13.

In many states, including Georgia, Pennsylvania, Texas, Louisiana and the eight Great Lakes states, citizens and scientists have accused the Agency for Toxic Substances and Disease Registry of failing to make links between public health problems and industrial sources of pollution, contrary to scientific findings.

National coverage of the toxic trailers housing New Orleans residents after Katrina and of the suppression of a study on environmental hazards in the Great Lakes has put the spotlight on the agency. Many public activists and citizen groups across the nation say these are just two examples of cases that demonstrate an agency pattern of political interference in public health data. The agency spokesperson Charles Green, however, said he is not aware of any problems regarding political interference in science at the agency.

Scientists at the agency told The Washington Independent that political appointees interfere with science that could benefit public health. The Washington Independent looked into this and found evidence of negligence and a lack of scientific approach in four ATSDR public health consultations it investigated. By suppressing health studies, downplaying or avoiding links between industry and environmental hazards and threatening agency whistleblowers’ careers, the agency may be failing to put science first in public health investigations.

The Paper Trail

In many cases, evidence shows that the agency suppressed vital public health information. Both agency officials and citizens have waved flags of possible cover-ups regarding two studies: one in the Great Lakes states and one in eastern Pennsylvania.

Last month, the nonprofit investigative journalism group, the Center for Public Integrity, obtained and published a suppressed study by the ATSDR called "Public Health Implications of Hazardous Substances in the Twenty-Six U.S. Great Lakes Areas of Concern." The 400-plus page report found that more than 9 million people living in 26 "areas of concern" have elevated health risks associated with exposure to dioxins, pesticides, lead, mercury, PCBs or six other toxins. These areas include the major metropolitan areas of Chicago, Cleveland, Detroit and Milwaukee.

In many of the Great Lakes areas studied, agency scientists found low birth weights, high infant mortality rates, high rates of premature births and high rates of death from breast cancer, colon cancer and lung cancer.

The study was scheduled for release in July 2007, but a few days before publication, the agency withdrew the report. Dr. Christopher De Rosa, director of ATSDR’s division of toxicology and environmental medicine, pushed for the study’s release. In an email to Dr. Howard Frumkin, the agency chief, De Rosa said suppressing the report had "the appearance of censorship of science and distribution of factual information regarding the health status of vulnerable communities." De Rosa was demoted for "not being a team player."

Similar events occurred in eastern Pennsylvania. Last year, the agency conducted an epidemiological study to analyze the high rates of an extremely rare form of blood cancer called polycythemia vera, or PV.

The agency released an abstract (available here) in December 2007. It found the rate of PV in three counties surrounding the Tamaqua borough at least 4.5 times higher than the national average. The national PV rate is 0.9 in 100,000, but the rate of confirmed cases in the three Pennsylvania counties is more than 4 in 100,000, in a population of 527,000. That number only represents patients registered with the National Cancer Registry, who were tested for a genetic mutation associated with PV for the study. When including data from patients who self-reported being diagnosed with PV, that would bring the rate up to roughly 15 times the national average.

The study linked the high PV rates to environmental influence. It also noted that 18 of the 38 patients confirmed to have PV lived within a 13-mile radius of the MacAdoo Associates Superfund Site for more than five years during the period of 1975 to 1979, when "large quantities of toxic chemicals were dumped directly into old mine shafts." Those chemicals included heavy metals and low levels of volatile organic compounds found to be contaminating the soil. The EPA has since financed clean-up of the site.

Top agency officials issued a statement saying the results "were based on an ATSDR analysis that was later determined to be inappropriate." They did not define what they meant by inappropriate. The statement denies any link between environmental factors and PV cases-contrary to scientific data ruling out other causes. It also says that more analysis is needed to "understand whether there is any linkage between PV cases and where patients lived in the past." That would suggest that these PV patients randomly moved to the same place by coincidence.

The agency says it retracted support of the abstract because the ATSDR authors used analysis that was later determined inadequate. "The decision was discussed amongst senior leadership of ATSDR," said spokesperson Bernadette Burden. "Not the authors."

Dr. Ronald Hoffman, a PV expert at Mount Sinai’s School of Medicine, is the lead scientist on the report. He says he’s not sure why the the agency released its statement. "I honestly don’t know why they said that," Hoffman said. "They tried to indicate some problem with the data, but in reality, the cases were validated. … Using very rigorous diagnostic criteria, we found an excess of patients in those areas."

Hoffman, who has spent more than a year working on the report, says that the study’s purpose is not to determine any specific external sources linked with the illness. "It does appear that there are a lot of environmental challenges in that area, and we’re not sure what is causing [the disease]," he said. "But my opinion is that it’s something that’s real, and requires further, rigorous investigation."

Oncologist/hematologist Zev Wainberg of Santa Monica-UCLA’s Medical Center and Orthopedic Hospital told The Washington Independent in a January interview that high rates of PV in such a small population would suggest an environmental cause.

The authors of the PV study are now getting ready to submit their work to scientific journals for review, despite criticism by the agency. The abstract was presented to the American Hematology Society in December 2007 and it was published in its journal, Blood.

Delta Seeks to Cut Jobs; United Aims to Trim Fleet

Delta Seeks to Cut Jobs; United Aims to Trim Fleet

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Delta Air Lines said Tuesday that it would offer voluntary severance payouts to roughly 30,000 employees - more than half its work force - and cut domestic capacity by an extra 5 percent this year as part of a plan to deal with soaring fuel prices.

A rival, United Airlines, said it would ground as many as 20 airplanes, or 4 percent of its fleet, in the face of soaring oil prices.

Delta executives said in a memorandum to employees that the airline's goal was to cut 2,000 jobs in administration, management and frontline positions like flight attendants and gate and ticket agents.

A Delta spokeswoman, Betsy Talton, said that if more than that number agreed to take the voluntary severance, more departures would be allowed. The severance program will not affect Delta pilots, who have a union contract with the company, or employees at the Delta regional carrier Comair.

One part of the program is for employees who are already eligible for retirement or for those whose age and years of service add up to at least 60 with 10 or more years of service. The other part of the program is an "early-out" offer for frontline employees with 10 or more years of service and for administrative and management employees with one or more years of service.

Delta had 55,044 total full-time employees as of the end of last year.

United Airlines said it would ground and sell back to lessors 15 to 20 older narrow-body Boeing 737s that are less fuel-efficient than others in its 460-plane fleet. It did not immediately specify which domestic routes or flights could be trimmed.

The UAL Corporation, United's parent, has been increasingly aggressive in trying to pass on higher fuel costs to its customers. It raised round-trip ticket prices by as much as $50 last week - an increase matched by other carriers - and is adding fees, like $25 for checking a second bag.

Aged Ships a Toxic Export

Aged Ships a Toxic Export

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By Mark Clayton

A looming spike in retired vessels could send tons of PCBs and asbestos to South Asia’s "ship breakers" before new international regulations take hold.

Somewhere in the Pacific Ocean, an empty passenger liner is being towed on her last voyage - bound possibly for one of the infamous "ship-breaking" beaches of Asia to be cut up and sold as scrap.

While the 682-foot SS Oceanic might still survive as a floating hotel or casino, her voyage is controversial. That’s because the ship left San Francisco last month laden with an estimated 460 tons of asbestos and toxic PCBs embedded in its electrical and engine-room systems.

Just how dangerous that 58-year-old vessel would be if it is scrapped on a beach in the developing world, and how it managed to leave US waters despite laws prohibiting PCB waste exports are questions the US Environmental Protection Agency (EPA) is investigating.

But the Oceanic case also highlights a serious regulatory failure, observers say. While overseas scrapping of US-government-owned vessels is prohibited, scores of privately owned commercial ships flying the US flag have in recent years been granted permission to be reregistered and sold for scrap overseas with scant attention paid by federal authorities to the tons of PCBs they likely carry with them and in conflict with a US law banning PCB waste exports, the Monitor has learned.

In the US, such reregistering or "reflagging" of a ship under a new foreign owner for the explicit purpose of scrapping it overseas is a longstanding regulatory pro cess overseen by the US Maritime Admin istration (MARAD). Yet neither MARAD, the EPA, or the US Coast Guard routinely monitor whether ship owners are complying with warnings on the reflagging application that they must obey US environmental laws.

The result: A commercial US ship owner can easily reflag a vessel to get the top price for its steel hull from overseas scrap yards - while skirting US environmental laws that might otherwise restrict a US-flag vessel from being disposed of there, experts say. With steel scrap prices at record levels, some ships today may bring $700 a ton in Bangladesh. That’s around $20 million for a typical retired tanker.

"This is something people have been exploiting for years, and MARAD has codified this practice into a regulation that makes it legal," says John Graykowski, a former acting administrator of MARAD under President Clinton who now works with US-based ship-recycling companies. "It’s high time the agency took a hard look at this issue in light of the global reforms going on in the ship-scrapping industry."

Thousands of Tons of Toxins

The Oceanic is not thought to have been reflagged to be scrapped just yet, environmentalists say. But the fact that it soon could be underscores an emerging global threat in the next few years: A tidal wave of hundreds of old ships carrying PCBs and asbestos expected to be cut up and their contents spilled onto beaches in developing nations.

Polychlorinated biphenyls are a mixture of chlorinated compounds, often an oily liquid or solid. Because they don’t burn easily and are good insulators, PCBs are often used in electrical equipment in wiring and transformers.

But while PCBs and asbestos were phased out of US shipbuilding in the 1980s, many ships like the Oceanic that are more than 25 years old often contain hundreds of tons of asbestos and PCBs. Now these ships are coming up for scrapping, experts say.

With prospects cooling for the global economy, legions of older commercial ships now plying the world’s oceans are expected to be scrapped when shipping volumes fall from current high levels and they become uneconomical to operate.

The London-based International Mari time Organization is developing tougher global ship-recycling standards to protect workers and the environment. But these won’t take effect until 2013 at the earliest - too late to offer meaningful protection from the coming surge of old ships.

Before they take effect, hundreds of ships weighing a total of 55 million tons - more than double the volume of the past five years - may be scrapped, a European Commission study on the global ship-scrapping industry estimated last year. A peak of 18 million tons of ships is expected in 2010.

"We all know about this looming problem," says Frank Stuer-Lauridsen, a Copenhagen-based maritime expert who co-wrote the study. "But nobody seems to have the energy to address this interim period, and the signs are not good."

While "green" ship recycling using sustainable environmental and safe labor practices is maturing in the US and elsewhere, the lure of higher prices paid by unsafe, polluting ship-scrapping operations overseas is strong, experts say. As a result, "the vast majority" of European Union-flagged vessels "along with the rest of the world’s obsolete vessels" still make their last voyages to beaches and ship yards in India, Bangladesh, or Pakistan where safety practices are far less stringent, the EC report found.

In Alang, India, for instance, ships are often driven onto the beach, where workers with minimal personal protection cut them up with torches, spilling toxins into sea and air, maritime experts say. With fewer environmental and labor requirements, ship recycling in places like Alang can be highly profitable, but highly dangerous for workers, the EC report on ship recycling found.

The official tally of people killed at Alang from scrap-yard accidents in 2003-04 was 26; the unofficial total was 103, the EC report said. (There have apparently been improvements among some of India’s ship- breaking companies, including moves toward safety certification, the EC report acknowledges.)

"The impact these ships will have on the environment and workers is horrible to contemplate," says Jim Puckett, coordinator of the Basel Action Network, an environmental group that spotlighted the SS Oceanic for possibly carrying PCBs.

By contrast, ship-recycling practices in the US have improved and are now among the best in the world, the EU study found. After the Baltimore Sun won a Pulitzer Prize for its 1997 reporting that the US was sending its old warships to India for scrapping under horrendous working conditions, Congress halted that practice and mandated US-only recycling. Now government-owned vessels overseen by MARAD are scrapped at seven certified US ship-recycling yards.

But that’s not the case for privately owned commercial vessels. For them, American laws to deal with the toxic materials aboard ships bound for the scrap yard are a slender reed. The US, for instance, did not sign the Basel Convention of 1989, an international law barring toxic waste exports from one country to another without formal notification.

Limits to EPA’s Policing

Yet the US does have one powerful legal cudgel: the Toxic Substances Control Act of 1976 or TSCA. Under it, PCB waste - including entire ships if they carry high-enough concentrations of PCBs - may not be exported overseas. That law applies to all federal agencies and the private sector, with the EPA as a key enforcer, legal experts say.

If the EPA believes an owner "intends to export a ship for scrapping in violation of [TSCA], it can take appropriate enforcement action including an inspection, to determine the presence of PCBs on the vessel," an EPA enforcement expert writes in an e-mail response to Monitor questions.

The EPA has indeed taken action to keep a handful of former government ships containing PCBs from leaving the US. But it has a critical problem: It rarely knows in advance which ships may soon be bound for scrapping overseas - unless environmental groups or ship aficionados blow the whistle. That’s what happened - too late - with the Oceanic. Historic ship watchers found out the ship was leaving and told environmentalists, who informed the US Coast Guard and the EPA - but by that time the ship had left port.

The reason that US-flag ships like the Oceanic exist at all is so the government can use them during wartime. In order to retain sufficient vessels for national-security reasons, MARAD has long been required to approve any sale to a foreign owner or the reregistering of a vessel to another nation.

Still, there is no interagency agreement for MARAD to routinely notify the EPA when ships are to be reflagged for scrapping abroad, the two agencies concur. As a result, MARAD does not tell the EPA of any ships that may receive a "transfer order." Nor does the EPA routinely request such information.

"These are agencies working at cross purposes that should know a ship is departing in possible violation of US environmental law - and they don’t do anything," says Basel Action Network’s Mr. Puckett.

Onus on Ship Owners

Spokesmen for the EPA and MARAD requested and answered e-mailed questions as well as by phone about PCB and reflagging issues. But requests to interview senior officials were refused.

"Ship owners are responsible for complying with the PCB export ban," Roxanne Smith, an EPA spokeswoman, wrote in a statement. Since clamping down recently on some vessels, the EPA "is continuing to work with MARAD and other federal agencies to examine ways to improve our interagency coordination so that all federal enforcement capabilities and resources can be employed to thwart violations."

But a number of ships have sailed already. Since 2000, at least 91 vessels - including old oil tankers - were approved by MARAD for reflagging under a provision for overseas scrapping.

It isn’t known whether those ships were inspected for PCBs. But even though ships of that vintage typically contain hundreds of tons of PCBs, MARAD currently does not require a proof of inspection from owners that shows a ship is free of PCBs before it grants a transfer order permitting reflagging and scrapping overseas, the agency confirms. Although not now required, such certification is within MARAD’s right to demand under its regulations, Mr. Graykowski says.

Shannon Russell, a MARAD spokeswoman, denies that her agency, an arm of the US Department of Transportation, has routinely overlooked environmental laws in ship reflagging.

"I would completely disagree with that," she says. "At the end of every form we have, we say: ’You must comply with rules of the US, including its environmental laws.’ We are a promotional agency, not a regulatory agency. We have no authority over any of these environmental laws."

In the US, companies have been scrapping old single-hull oil tankers as required by international agreement, 28 of them since 2000, says MARAD’s website. At least some of those were reflagged and sold to a foreign owner for scrapping overseas, MARAD records show and Ms. Russell confirms.

For instance, in 2006, MARAD approved a Florida company’s application to sell the tanker Chelsea to Grand International Shipping Co., a Liberian corporation, according to the agency’s public notice. The agency expected "transfer of said vessel to Mongolia registry and flag for scrapping in India."

It’s not known if PCBs were on board the Chelsea or any of the other 90 ships - or precisely where they were ultimately scrapped. Yet few ship owners seek bids from the lower-paying US shipyards where costs associated with tight regulation are higher than in the scrapping centers of India, Bangladesh, or Pakistan, maritime experts say.

"I don’t know where US flag [commercial] ships are going.... I just know we aren’t seeing them here in the US," says Werner Hoyt, program manager for Allied Defense Recycling of Petaluma, Calif., a start-up ship-recycling company.

At least some ship owners are concerned, according to Kathy Metcalf, maritime affairs director for Chamber of Shipping of America, a Washington-based trade organization whose membership includes several companies with fleets of oil tankers.

"We’ve had members consider sending their ships [to developing nations] and then they discover conditions there are just as bad as they always were," Ms. Metcalf says. "The option is to go somewhere else, and our members do. Unfortunately, there are always ships that will go and make headlines."

The Oceanic’s End?

Until recently, the owner of the SS Oceanic was California Manufacturing Corporation, Coast Guard records show. That company appears to be affiliated with Miami-based NCL Corporation, Ltd., which operates Norwe­gian Cruise Line. The Oceanic was reportedly sold last summer, but its current owner has not been publicly revealed. Requests for an interview with NCL officials to clarify the vessel’s ownership went answered.

Originally christened the SS Independence at the Quincy, Mass., shipyard in 1950, the SS Oceanic could easily follow another former NCL ship - the SS Norway, also known as the Blue Lady, Puckett says. That liner was driven onto a beach in Alang for scrapping in 2006.

"We no longer own the Oceanic," a woman answering NCL’s press line in Miami said.

Iraq War Protesters Take to the Streets

Iraq War Protesters Take to the Streets

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By Michael Ruane, Sue Anne Pressley Montes and Petula Dvorak

Hundreds of antiwar demonstrators this morning tried to stop workers from entering federal government buildings, sat down in busy streets to block traffic, and staged a "March of the Dead" parade from Arlington National Cemetery into the District to protest five years of fighting in Iraq.

Small roving bands of protesters moved from intersection to intersection in the downtown D.C. area, slowing traffic before police officers hurried them along. There was some street theater -- eight women in white death masks and black robes sat for nearly an hour in the intersection of 17th and L streets NW until police dragged them away. But even participants said they were disappointed at the low turnout.

The demonstrations, which began at 8 a.m., were to continue throughout the evening. District transportation officials said they expected the evening rush to be affected and advised motorists to avoid the area along K Street between 13th and 17th streets.

The activities targeted an array of institutions that organizers blame for prolonging the Iraqi conflict, including the Internal Revenue Service and news outlets such as The Washington Post. It was the second day of a two-day protest marking the fifth anniversary of the start of the war.

"The war continues. People continue to die. We don't want our tax dollars spent on funding the war in Iraq and Afghanistan," said Ed Hedemann, 63, from Brooklyn, N.Y., who hoped to shut down the IRS for the day. "I refuse to pay my taxes for it."

The IRS, however, remained open. Police said the protesters had caused no major disruptions, but Federal Protective Service officers, who have jurisdiction in and around federal buildings, had arrested about 35 people for crossing police lines. D.C. police had made one arrest, as of late morning, for crossing a police line.

"We anticipate more arrests because the protesters are expected to try to block rush hour traffic later this afternoon. . . . We anticipate rolling street closures," said D.C. police spokeswoman Traci Hughes, who added that the process will be streamlined "They will pay a fine and be on their merry way."

Today's activities began early as several hundred demonstrators gathered at McPherson Square and Franklin Square, then moved on to their targets at the IRS, the American Petroleum Institute and other locations.

A ragtag band of about 20 people, dressed in old bright-green band uniforms, led a parade of about 150 marchers down 12th Street NW to the IRS headquarters at 1111 Constitution Ave. NW. Members of the antiwar group Code Pink, dressed in their signature hot pink, held high a banner that said: "Not one more death. Not one more dollar. No Funds for War Crimes." Federal officers in black shades stood guard on the steps of the building.

Organizers handed out fliers that labeled the IRS building as "part of a crime against humanity" for funneling money to the Pentagon to finance the war. Donna Gould, a retired psychotherapist from New York, was wearing a white poncho that said in black letters: "Shut Down the IRS."

"I object to the fact that our tax money is used for war, killing, atrocities, and torture when it should be used for things that are life-affirming like health care, schools, housing, arts, bicycles, and converting to renewable energy," Gould said.

Officers began making arrests when the demonstrators, one by one, stepped over the metal barriers and police lines at the IRS entrance, making for the front steps. They did not fight their arrests and sat down quietly on the sidewalk, their hands handcuffed behind them. They were later loaded into a van.

But police did not seem eager to arrest anyone.

At 11:30 a.m., about 30 demonstrators were sitting in a circle, blocking one lane of L Street NW at 13th St. A ring of D.C. police officers on bicycles surrounded them. This had been going on for an hour, but a police captain on the scene said he did not plan to arrest anyone.

At about the same time, a group of about 100 veterans called Veterans for Peace was walking up Constitution Avenue, after a rally at the National Museum of the American Indian. Some of the older members were longtime protesters, their clothing covered with badges from the peace marches they've attended. But others were new to this. At the front of the line were about a dozen young veterans from the Iraq conflict, Dan Murphy, 23, among them.

"After the first time I got back, all I heard were lies -- how we were going to spread democracy, the weapons of mass destruction, Saddam Hussein and Sept. 11," said Murphy, now a college student, who served in the Army for 4 1/2 years. "All of those were lies, and we all knew it."

Foreign investors veto Fed rescue

Foreign investors veto Fed rescue

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By Ambrose Evans

As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its rescue measures.

Asian, Mid East and European investors stood aside at last week’s auction of 10-year US Treasury notes. "It was a disaster," said Ray Attrill from 4castweb. "We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed."

The share of foreign buyers ("indirect bidders") plummeted to 5.8pc, from an average 25pc over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns.

Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.

It is not my view. I believe the forces of debt deflation now engulfing America - and soon half the world - are so powerful that nobody will be worrying about inflation a year hence.

Yes, the Fed caused this mess by setting the price of credit too low for too long, feeding the cancer of debt dependency. But we are in the eye of the storm now. This is not a time for priggery.

The Fed’s emergency actions are imperative. Last week’s collapse of confidence in the creditworthiness of Fannie Mae and Freddie Mac was life-threatening. These agencies underpin 60pc of the $11,000bn market for US home loans.

With the "financial accelerator" kicking into top gear - downwards - we may need everything that Ben Bernanke can offer.

"The situation is getting worse, and the risks are that it could get very bad," said Martin Feldstein, head of the National Bureau of Economic Research. "There’s no doubt that this year and next year are going to be very difficult."

Even monetary policy à l’outrance may not be enough to halt the spiral. Former US Treasury secretary Lawrence Summers says the Fed’s shower of liquidity cannot cure a bankruptcy crisis caused by a tidal wave of property defaults.

"It is like fighting a virus with antibiotics," he said.

We can no longer exclude a partial nationalisation of the American banking system, modelled on the Nordic rescue in the early 1990s.

But even if you think the Fed has no choice other than to take dramatic action, the critics are also right in warning that this comes at a serious cost and it may backfire.

The imminent risk is that global flight from US Treasury and agency debt drives up long-term rates, the key funding instrument for mortgages and corporations. The effect could outweigh Fed easing.

Overall credit conditions could tighten into a slump (like 1930). It’s the stuff of bad dreams.

Is this the moment when America finally discovers the meaning of the Faustian pact it signed so blithely with Asian creditors?

As the Wall Street Journal wrote this weekend, the entire country is facing a "margin call". The US has come to depend on $800bn inflows of cheap foreign capital each year to cover shopping bills. They may have to pay a much stiffer rent.

As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to 66pc of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103). Who is jumping ship?

The Chinese have quickened the pace of yuan appreciation to choke off 8.7pc inflation, slowing US bond purchases. Petrodollar funds, working through UK off-shore accounts, are clearly dumping dollars amid rumours that Gulf states - overheating wildly - are about to break their dollar pegs. But mostly likely, the twin crash in the dollar and US agency debt reflects a broad exodus by global wealth managers, afraid that America is spinning out of control. Sauve qui peut.

The bond debacle last week tallies with the crash in the dollar index to an all-time low of 71.58, down 14.6pc in a year. The greenback is nearing parity with the Swiss franc - shocking for those who remember when it was 4.375 francs in 1970. Against the euro it has hit $1.57, from $0.82 in 2000. Against the yen it has smashed through Y100. Spare a thought for Toyota. It loses $350m in revenues for every one yen move. That is an $8.75bn hit since June. Tokyo’s Nikkei index is crumbling. Less understood, it is also causing a self-reinforcing spiral of credit shrinkage throughout the global system.

Japanese investors and foreign funds are having to close their yen "carry trade" positions. A chunk of the $1,400bn trade built up over six years has been viciously unwound in weeks. The harder the dollar falls, the further this must go.

It is unsettling to watch the world’s reserve currency disintegrate. Commodities from gold to oil and wheat are taking on the role of safe-haven "currencies". The monetary order is becoming unhinged.

I doubt the dollar can fall much further. What is it to fall against? The spreading credit contagion will cause large parts of the globe to downgrade in hot pursuit - starting with Europe.

Few noticed last week that the Italian treasury auction was also a flop. The bids collapsed. For the first time since the launch of EMU, Italy failed to sell a full batch of state bonds.

The euro blasted higher anyway, driven by hot money flows. The funds are beguiled by Germany’s "Exportwunder", for now. It cannot last. The demented level of $1.57 will not be tolerated by French, Italian and Spanish politicians. The Latin property bubbles are deflating fast.

The race to the bottom must soon begin. Half the world will be slashing rates this year to stave off credit contraction. The dollar will have a lot of company. Small comfort.

Pentagon’s Mind-Reading Computers Replicate

Pentagon’s Mind-Reading Computers Replicate

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"Augmented Cognition," the Darpa program to build computer interfaces that adapt to their users’ brains, has officially run its course. But efforts to build mind-reading PCs continue throughout the military establishment.

Augmented Cognition relies on the idea that people have more than one kind of working memory, and more than one kind of attention; there are separate slots in the mind for things written, things heard and things seen. By monitoring how taxed those areas of the brain are, it should be possible to change a computer’s display to compensate. If people are getting too much visual information, send them a text alert. If they reading too much at once, present some of the data visually -- in a chart or map.

The Air Force has tapped Design Interactive, Inc. to build a battlefield command-and-control system that works along these lines. It’s supposed to use EEG and eye-tracking monitors to "assess the operator’s actual cognitive state." That way, the system can play around with its "information display" to "avoid cognitive bottlenecks before they occur." And that’s just the start. Eventually, the company wants the program to "anticipate future mission state and operator functional state ahead of time," too.

This Air Force has also handed out a contract to Quantum Applied Science and Research, Inc. -- that’s right, QUASAR for short -- to perfect a mind-reading interface for squads of killer drones. Supervising all those armed, flying robots might be doable when things are relatively calm. But, in the heat of battle, it might be too much for one puny human mind to handle unassisted.

Darpa isn’t done with these technologies, either. The agency plans to spend $12 million next year on brain-science programs like Neurotechnology for Intelligence Analysts. It’s an AugCog-inspired effort to tap the firings of the subconscious mind to sort through satellite pictures quickly. Early tests have shown as much as a six-fold increase in the analysts’ efficiency, when the computer and the brain work together.

Photo: Jeff Corwin Photography, Boeing