Sunday, November 9, 2008

Iraqis seek more 'withdrawal' talks; U.S. says they're over

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By Leila Fadel, Nancy A. Youssef and Warren P. Strobel

The United States delivered Thursday what it said was the final text of the controversial accord on the stationing of U.S. forces in Iraq, but Iraq said more talks are needed before the government can accept it.

"We have gotten back to the Iraqi government with a final text. Through this step, we have concluded the process on the U.S. side," said Susan Ziadeh, the U.S. Embassy spokeswoman in Baghdad. "Iraq will now need to take it forward through their own process."

The accord, which calls for complete withdrawal of U.S. forces by the end of 2011, has been the subject of tense negotiations for the past seven months.

According to State Department officials, the United States yielded to several important Iraqi demands, including Baghdad's proposal to inspect mail and cargo for U.S. forces in Iraq. One official said he did not know the details of how those inspections would be carried out, adding, "I don't think it's going to be overly intrusive."

He and other officials spoke on condition of anonymity, because the details of the American response were not being made public.

Bush also accepted Iraq's request for firmer language in its call for U.S. troops to withdraw by the end of 2011, two defense officials said, although they did not know the details of the wording.

While the U.S. government signaled that it will not engage in further negotiations over the pact, which has been repeatedly delayed, the government spokesman, Ali al Dabbagh, indicated that Iraq expects further discussions with the United States before the process is completed.

"These amendments need meetings with the American side to reach the bilateral understanding, and the environment is positive," Dabbagh said in a statement on a government-funded television channel. "The Iraqi side needs time to give the main blocs to have their opinions, suggestions and notes on the amendments suggested by the American side."

Many Iraqi officials are now calling the status-of-forces accord, or SOFA, "the withdrawal agreement," possibly as a way of marketing it to a wary public.

The accord is controversial in Washington as well. The White House has pushed aggressively to reach the deal, but some Pentagon officials expressed concern that the concessions will set a precedent for current and future status-of-forces agreements with other countries. The United States is not believed to have agreed to another nation monitoring mail in status agreements with more than 80 other countries, for example.

Earlier this week, a senior Pentagon official who requested anonymity to speak candidly said he found it "hard to believe we could find aspects there that are acceptable" in the Iraqi proposal to search mail and cargo, adding: "What kind of precedents would we be setting?"

Administration officials said President Bush sees the agreement as key to shaping his legacy on Iraq. They said Bush wanted to leave the presidency with a solidified relationship between the United States and an indisputably sovereign Iraq.

To the White House, "SOFA is a sign of success," a second U.S. defense official, who also requested anonymity to speak candidly, told McClatchy.

That said, the Bush administration refused to accept one major Iraqi proposal, which would have given Iraq expanded legal jurisdiction over U.S. soldiers alleged to commit wrongdoing while in the country. U.S. officials have called that a "non-starter."

The agreement has to be completed by the end of this year in order to replace a U.N. mandate that provides the legal basis for the U.S. presence in Iraq.

Iraqi officials were tight-lipped Thursday about whether the changes were acceptable. The changes first must be presented to the cabinet. If the cabinet agrees, the draft will be presented to the Iraqi parliament. One of the main sticking points for Prime Minister Nouri al Maliki's government has been the issue of jurisdiction over U.S. soldiers in Iraq.

Shiite Muslim officials who raised new demands when the accord was completed two weeks ago have been accused of succumbing to Iranian influence not to sign the agreement. At the time, Iraqi officials openly predicted that the government would be forced to extend the United Nations mandate. In recent days, officials have sounded more positive about the outcome.

"The next step is for the cabinet to meet to look at the responses," Iraq's foreign minister, Hoshyar Zebari, told McClatchy. "I hope it will be very soon."

The latest draft calls for U.S. forces to withdraw from Iraqi cities by June 2009 and withdraw from Iraq by 2011. It also lifts immunity for private U.S. contractors such as Blackwater, whose security guards were accused of uncontrolled shooting while on patrol duty, resulting in the deaths of Iraqi civilians.

It also allows for a joint U.S. and Iraqi committee to decide whether a U.S. soldier who's committed a crime outside a U.S. base was off-duty and where he should be tried. Iraqi officials wanted to make that decision on their own, but the Bush administration has apparently rejected the demand.

President-elect Barack Obama has long advocated a U.S. withdrawal by the summer of 2010, a date that Maliki originally demanded in the agreement.

U.S. officials are pushing to get the deal done before the end of the month. If it's not done by the beginning of December, the government will have to begin the process to renew the U.N. mandate, one U.S. official in Iraq said. The parliament must approve the agreement when it's back in session next week and before it adjourns just before the end of the month for the Hajj season, when millions of Muslims make the holy pilgrimage to Mecca in Saudi Arabia.

"Look, the government of Iraq has debated this agreement thoroughly. ... They forwarded to us their suggested amendments. We got back to them," State Department spokesman Robert Wood said Thursday. "Now the negotiating process has come to an end."

Banks ease credit for themselves but not you

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By Sam Zuckerman

If you're a financial institution, it has become a little easier to borrow money. But for most of the rest of us, it's tougher than ever.

It was the freeze-up of the wholesale lending markets used by banks to fund day-to-day operations that caused the financial system to break down in September. That crisis has eased significantly, thanks to government intervention to guarantee loans and prop up financial institutions.

But the credit crunch hasn't gone away. It has just moved to Main Street, where businesses and consumers are hard-pressed to get loans. And the scarcity of credit is intensifying the economy's downward spiral.

"Lending standards on most forms of credit are now tighter than at any time in recent memory," Ryan Sweet, an economist with Moody's, wrote in a recent report. "The reduction in credit availability threatens to lengthen and deepen the recession."

In an October survey of bank lending practices, the Federal Reserve noted a broad move to restrict credit.

About 85 percent of domestic banks told the Fed they had imposed stricter lending standards on large and mid-size commercial borrowers, while 75 percent said they had done so for small businesses. At the same time, 60 percent indicated they had tightened criteria for credit cards, and 65 percent clamped down on other consumer loans.

Tighter standards
"This matches my observation of institutions in the West," said Steven Buster, chief executive officer of Mechanics Bank in Richmond. "It's very clear to me there has been a tightening of credit standards."

With banks on the receiving end of hundreds of billions of dollars in aid from Washington, the credit cutback could become a significant political issue. Institutions will find themselves under pressure from political leaders to open the spigots.

Last week, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, fired a shot across the banking industry's bow, warning that it faced the wrath of Congress if it used bailout money to pay dividends and bonuses or buy out other institutions.

"Increased lending activity is the only legitimate purpose for taxpayer funding of these institutions," Frank declared. "It is very important if congressional and public support for this program is to continue that we receive assurances ... that the money being advanced will be used only for relending and for no other purpose."

Bankers argue that it's legitimate to use public money to buy securities such as corporate debt, because those markets also were shut by the credit lockdown. And they say allowing strong banks to buy weak ones also serves the public good because it means taxpayer money wouldn't be needed to pay off depositors at failing institutions. They point to JPMorgan Chase's takeover of insolvent Washington Mutual in September, carried out without use of Federal Deposit Insurance Corp. funds.

The Treasury Department plans to buy ownership stakes in an array of strong banks, providing additional capital to fund loans. The problem, bankers say, is that in a recession there aren't a lot of good lending opportunities. For example, no lender would finance expansion of a shopping center when retail sales are falling fast.

Mechanics Bank, one of the larger community banks in Northern California, is an exception in that it hasn't tightened loan qualifications. It has long been a conservative lender with strict standards on commercial loans, according to Buster.

"Our underwriting hasn't changed at all in the last two years," he said. "It's just that fewer projects meet our underwriting criteria."

The bank used to assume it would take roughly 18 months from construction for a developer to sell the units in a condominium. The borrower had to demonstrate they had the resources to carry the project during that absorption period. Now, the bank assumes it would take substantially longer to fill up the condo, which would make it a lot harder for the developer to qualify for a loan, Buster said.

Things are similar for consumers, where a combination of stiffer standards and worsening household finances are undermining borrowing power for credit cards and home and auto loans.

With credit cards, lenders have become much more aggressive about segmenting the market, cherry-picking consumers with the best credit records and squeezing everybody else.

"Credit card issuers are playing defense and are being much more selective about which cardholders qualify for the best rates," said Greg McBride, senior analyst with, a personal finance Web site. "They're also being more proactive in reducing exposure by cutting down credit lines."

It's a similar story for home loans. "Good credit, proof of income and money for a down payment - if you have those three ingredients, credit is widely available," McBride said.

But, he noted, the best rates are reserved for customers with credit scores above 740, a tiny elite among borrowers.

Bush officials plan to dial back environmental protections

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By Renee Schoof

In the next few weeks, the Bush administration is expected to relax environmental-protection rules on power plants near national parks, uranium mining near the Grand Canyon and more mountaintop-removal coal mining in Appalachia.

The administration is widely expected to try to get some of the rules into final form by the week before Thanksgiving because, in some cases, there's a 60-day delay before new regulations take effect. And once the rules are in place, undoing them generally would be a more time-consuming job for the next Congress and administration.

The regulations already have had periods of public comment, and no further comments are being taken. The administration has proposed the rules and final approval is considered likely.

It's common for administrations to issue a spate of regulations just before leaving office. The Bush administration's changes are in keeping with President Bush's overall support of deregulation.

Here's a look at some changes that are likely to go into effect before the inauguration.


Higher prices for uranium, driven by expanded interest in nuclear power, have resulted in thousands of mining claims being filed on land within three miles of the Grand Canyon.

The House of Representatives and Senate natural resources committees have the authority under the Federal Land Policy and Management Act to order emergency withdrawals of federal land from future mining claims for three years, while Congress decides whether a permanent ban is needed. The House committee issued such a withdrawal order in June for about 1 million acres near the Grand Canyon, including the land the claims were filed on.

Now the Department of Interior has proposed scrapping its own rule that puts such orders from the congressional committees into practice.

The Interior Department could decide to use its own power to halt new claims, but it doesn't see any emergency that would prompt such action, department spokesman Chris Paolino said. The department would require environmental impact studies before it approved any mining on the claims, he added.

One of the main hazards from uranium mining is seepage from tailings piles that poisons water. A report for the Arizona Department of Game and Fish said people would be at risk if they ingested radium-226, arsenic and other hazardous substances from water and tainted fish.

Environmental groups say the government must consider the possible danger of uranium leaching into the Colorado River, a source of drinking water for Phoenix, Las Vegas and Los Angeles. Arizona Gov. Janet Napolitano in March urged Interior Secretary Dirk Kempthorne to halt new claims and order a study of uranium mining near the canyon.


Another proposed rule change from the Department of Interior would change rules on dumping the earth removed for mining into nearby streams.

The current rule, dating from the Reagan administration, says that no surface mining may occur within 100 feet of a stream unless there'd be no harm to water quality or quantity. The rule change essentially would eliminate the buffer by allowing the government to grant waivers so that mining companies can dump the rubble from mountaintops into valleys, burying streams.

The new rule would let companies explain why they can't avoid dumping into streams and how they intend to minimize harm. A September report on the proposal by the department's Office of Surface Mining said that environmental concerns would be taken into account "to the extent possible, using the best technology currently available."

The government and mining companies have been ignoring the buffer since the 1990s, said Joan Mulhern, an attorney with Earthjustice, a nonprofit law firm for environmental protection.

Before the rule can be changed, however, the Department of Interior must get written approval from Environmental Protection Agency Administrator Stephen Johnson.

"In order to concur, the EPA would have to find that the activities authorized by the rule would not violate water-quality standards, and all the evidence is to the contrary," Mulhern said.


Two rule changes would apply to electric power plants and other stationary sources of air pollution.

The first mainly concerns older power plants. Under the Clean Air Act, plants that are updated must install pollution-control technology if they'll produce more emissions. The rule change would allow plants to measure emissions on an hourly basis, rather than their total yearly output. This way, plants could run for more hours and increase overall emissions without exceeding the threshold that would require additional pollution controls.

The other change would make it easier for companies to build polluting facilities near national parks and wilderness areas. It also would change the way that companies must measure the impact of their pollution.


The Endangered Species Act prohibits any federal actions that would jeopardize the existence of a listed species or "adversely modify" critical habitats. The 1973 law has helped save species such as the bald eagle from extinction.

Bush administration officials have argued that the act can't be used to protect animals and habitats from climate change by regulating specific sources of greenhouse gas emissions.

A proposed rule change would allow federal agencies to decide for themselves whether timber sales, new dams or other projects harm wildlife protected under the act. In many cases, they'd no longer have to consult the agencies that are charged with administering the Endangered Species Act, the Fish and Wildlife Service and the National Marine Fisheries Service.


Among the rule changes and plans that might become final are commercial oil-shale leasing, a new rule that would allow loaded, concealed weapons in some national parks, and oil and gas leasing on wild public lands in West Virginia and Utah.

In Washington, Automakers Plead for Aid

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Executives of Detroit’s Big Three automakers traveled to Washington on Thursday to press their case for more financial aid from the federal government because of the bleak prospects for their industry.

And those prospects are likely to dim further on Friday, when General Motors and Ford are expected to report deeper job and production cuts, along with huge third-quarter losses. Analysts expect each to report losses of more than $2 billion, excluding special charges or write-downs.

The meeting in Washington, with Capitol Hill’s top Democrats — the House speaker, Nancy Pelosi, and the Senate majority leader, Harry Reid — centered on a request by G.M., the Ford Motor Company and Chrysler for up to $25 billion in loans to help the companies as they burn through their cash cushions during the worst sales market in 15 years.

The loan request is in addition to $25 billion in low-interest loans to be available from the Energy Department to assist automakers in developing more fuel-efficient vehicles.

The meeting, which lasted an hour and a half, was attended by G.M.’s chairman, Rick Wagoner; Ford’s chief executive, Alan R. Mulally; Chrysler’s chairman, Robert L. Nardelli; and the president of the United Automobile Workers, Ron Gettelfinger.

After the meeting, Representative John D. Dingell, Democrat of Michigan, called the discussions “extremely productive” but offered no details on when, or if, an aid package might be forthcoming.

Ms. Pelosi issued a statement saying the group discussed “how to protect hundreds of thousands of workers and retirees, safeguard the interests of American taxpayers, and use cutting-edge technology to transform blue-collar jobs to green-collar jobs for generations to come.”

When a spokesman for Ms. Pelosi, Nadeam Elshami, was asked if Congress would take up a proposal when it returns to Washington on Nov. 17, he said, “I wouldn’t go that far.”

Mr. Reid was also not specific about what aid Congress might provide. The Detroit executives slipped out of meetings with Ms. Pelosi and Mr. Reid, avoiding reporters in both places.

A spokesman for G.M., Greg Martin, said the executives had a “frank and constructive discussion” about Detroit’s “deteriorating liquidity situation.”

“We are committed to working closely with Speaker Pelosi and Senate Majority Leader Reid to ensure immediate and necessary funding to keep the auto industry viable and its transformation on track during this critical time,” Mr. Martin said.

The expected third-quarter losses from G.M. and Ford, the two largest American automakers, will come on top of dismal financial results for the first six months of the year, during which G.M. lost $18.8 billion and Ford lost $8.6 billion. The companies will also reveal how quickly they are burning through their available cash.

“I have never seen anything like this,” said David Healy, who recently retired after 40 years as an auto analyst, most recently with Burnham Securities. “But if they can get the federal money, I think there’s a decent chance they can survive.”

Both G.M. and Ford are expected to announce measures on Friday to conserve their rapidly dwindling cash reserves.

G.M. is likely to announce another round of cuts for white-collar jobs, as well as temporary layoffs at factories, early holiday shutdown of facilities and delays in developing new vehicles.

Ford is expected to take some plants offline to reduce production of slow-selling models, and possibly seek more buyouts from employees.

Both companies, along with Chrysler, have been furiously downsizing to compensate for a steady erosion of their combined United States market share. Together, Detroit’s Big Three have cut more than 100,000 jobs and closed dozens of factories since 2006.

But the cost cuts and turnaround plans have not been enough to keep pace with the drastic downturn in sales of new cars and trucks this year.

United States vehicle sales have fallen by 14.6 percent this year through October and are expected to remain slow well into next year.

The downturn began in spring with rising gas prices but has become progressively worse because of a weak economy, the tightening of credit for prospective buyers and sinking consumer confidence.

In October, industry sales dropped 31.9 percent from the period a year earlier. G.M. sales fell 45.1 percent in the month, while Ford dropped by 30.2 percent and Chrysler by 34.9 percent.

Of the three Detroit companies, G.M. appears to be in the most perilous condition. G.M. had been burning through an estimated $1 billion a month this year, and analysts say that figure probably increased significantly in the third quarter.

As a result, the company could run out of the necessary cash to pay its bills and finance operations by next year.

In making his pleas for government aid, Mr. Wagoner of G.M. has outlined in detail how the failure of Detroit’s auto companies would have a ripple effect on the economy that could cost hundreds of thousands, perhaps even millions, of jobs in the United States.

“The negative effects of such a corporate collapse on an already weakened economy could wreak additional havoc on individuals and businesses across the country,” said Louis E. Lataif, a business professor at Boston University and a former Ford executive.

Georgia Claims on Russia War Called Into Question

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Newly available accounts by independent military observers of the beginning of the war between Georgia and Russia this summer call into question the longstanding Georgian assertion that it was acting defensively against separatist and Russian aggression.

Instead, the accounts suggest that Georgia’s inexperienced military attacked the isolated separatist capital of Tskhinvali on Aug. 7 with indiscriminate artillery and rocket fire, exposing civilians, Russian peacekeepers and unarmed monitors to harm.

The accounts are neither fully conclusive nor broad enough to settle the many lingering disputes over blame in a war that hardened relations between the Kremlin and the West. But they raise questions about the accuracy and honesty of Georgia’s insistence that its shelling of Tskhinvali, the capital of the breakaway region of South Ossetia, was a precise operation. Georgia has variously defended the shelling as necessary to stop heavy Ossetian shelling of Georgian villages, bring order to the region or counter a Russian invasion.

President Mikheil Saakashvili of Georgia has characterized the attack as a precise and defensive act. But according to observations of the monitors, documented Aug. 7 and Aug. 8, Georgian artillery rounds and rockets were falling throughout the city at intervals of 15 to 20 seconds between explosions, and within the first hour of the bombardment at least 48 rounds landed in a civilian area. The monitors have also said they were unable to verify that ethnic Georgian villages were under heavy bombardment that evening, calling to question one of Mr. Saakashvili’s main justifications for the attack.

Senior Georgian officials contest these accounts, and have urged Western governments to discount them. “That information, I don’t know what it is and how it is confirmed,” said Giga Bokeria, Georgia’s deputy foreign minister. “There is such an amount of evidence of continuous attacks on Georgian-controlled villages and so much evidence of Russian military buildup, it doesn’t change in any case the general picture of events.”

He added: “Who was counting those explosions? It sounds a bit peculiar.”

The Kremlin has embraced the monitors’ observations, which, according to a written statement from Grigory Karasin, Russia’s deputy foreign minister, reflect “the actual course of events prior to Georgia’s aggression.” He added that the accounts “refute” allegations by Tbilisi of bombardments that he called mythical.

The monitors were members of an international team working under the mandate of the Organization for Security and Cooperation in Europe, or O.S.C.E. A multilateral organization with 56 member states, the group has monitored the conflict since a previous cease-fire agreement in the 1990s.

The observations by the monitors, including a Finnish major, a Belarussian airborne captain and a Polish civilian, have been the subject of two confidential briefings to diplomats in Tbilisi, the Georgian capital, one in August and the other in October. Summaries were shared with The New York Times by people in attendance at both.

Details were then confirmed by three Western diplomats and a Russian, and were not disputed by the O.S.C.E.’s mission in Tbilisi, which was provided with a written summary of the observations.

Mr. Saakashvili, who has compared Russia’s incursion into Georgia to the Nazi annexations in Europe in 1938 and the Soviet suppression of Prague in 1968, faces domestic unease with his leadership and skepticism about his judgment from Western governments.

The brief war was a disaster for Georgia. The attack backfired. Georgia’s army was humiliated as Russian forces overwhelmed its brigades, seized and looted their bases, captured their equipment and roamed the country’s roads at will. Villages that Georgia vowed to save were ransacked and cleared of their populations by irregular Ossetian, Chechen and Cossack forces, and several were burned to the ground.

Massing of Weapons

According to the monitors, an O.S.C.E. patrol at 3 p.m. on Aug. 7 saw large numbers of Georgian artillery and grad rocket launchers massing on roads north of Gori, just south of the enclave.

At 6:10 p.m., the monitors were told by Russian peacekeepers of suspected Georgian artillery fire on Khetagurovo, an Ossetian village; this report was not independently confirmed, and Georgia declared a unilateral cease-fire shortly thereafter, about 7 p.m.

During a news broadcast that began at 11 p.m., Georgia announced that Georgian villages were being shelled, and declared an operation “to restore constitutional order” in South Ossetia. The bombardment of Tskhinvali started soon after the broadcast.

According to the monitors, however, no shelling of Georgian villages could be heard in the hours before the Georgian bombardment. At least two of the four villages that Georgia has since said were under fire were near the observers’ office in Tskhinvali, and the monitors there likely would have heard artillery fire nearby.

Moreover, the observers made a record of the rounds exploding after Georgia’s bombardment began at 11:35 p.m. At 11:45 p.m., rounds were exploding at intervals of 15 to 20 seconds between impacts, they noted.

At 12:15 a.m. on Aug. 8, Gen. Maj. Marat M. Kulakhmetov, commander of Russian peacekeepers in the enclave, reported to the monitors that his unit had casualties, indicating that Russian soldiers had come under fire.

By 12:35 a.m. the observers had recorded at least 100 heavy rounds exploding across Tskhinvali, including 48 close to the observers’ office, which is in a civilian area and was damaged.

Col. Gen. Anatoly Nogovitsyn, a spokesman for the Russian Defense Ministry, said that by morning on Aug. 8 two Russian soldiers had been killed and five wounded. Two senior Western military officers stationed in Georgia, speaking on condition of anonymity because they work with Georgia’s military, said that whatever Russia’s behavior in or intentions for the enclave, once Georgia’s artillery or rockets struck Russian positions, conflict with Russia was all but inevitable. This clear risk, they said, made Georgia’s attack dangerous and unwise.

Senior Georgia officials, a group with scant military experience and personal loyalties to Mr. Saakashvili, have said that much of the damage to Tskhinvali was caused in combat between its soldiers and separatists, or by Russian airstrikes and bombardments in its counterattack the next day. As for its broader shelling of the city, Georgia has told Western diplomats that Ossetians hid weapons in civilian buildings, making them legitimate targets.

“The Georgians have been quite clear that they were shelling targets — the mayor’s office, police headquarters — that had been used for military purposes,” said Matthew J. Bryza, a deputy assistant secretary of state and one of Mr. Saakashvili’s vocal supporters in Washington.

Those claims have not been independently verified, and Georgia’s account was disputed by Ryan Grist, a former British Army captain who was the senior O.S.C.E. representative in Georgia when the war broke out. Mr. Grist said that he was in constant contact that night with all sides, with the office in Tskhinvali and with Wing Commander Stephen Young, the retired British military officer who leads the monitoring team.

“It was clear to me that the attack was completely indiscriminate and disproportionate to any, if indeed there had been any, provocation,” Mr. Grist said. “The attack was clearly, in my mind, an indiscriminate attack on the town, as a town.”

Mr. Grist has served as a military officer or diplomat in Northern Ireland, Cyprus, Kosovo and Yugoslavia. In August, after the Georgian foreign minister, Eka Tkeshelashvili, who has no military experience, assured diplomats in Tbilisi that the attack was measured and discriminate, Mr. Grist gave a briefing to diplomats from the European Union that drew from the monitors’ observations and included his assessments. He then soon resigned under unclear circumstances.

A second briefing was led by Commander Young in October for military attachés visiting Georgia. At the meeting, according to a person in attendance, Commander Young stood by the monitors’ assessment that Georgian villages had not been extensively shelled on the evening or night of Aug. 7. “If there had been heavy shelling in areas that Georgia claimed were shelled, then our people would have heard it, and they didn’t,” Commander Young said, according to the person who attended. “They heard only occasional small-arms fire.”

The O.S.C.E turned down a request by The Times to interview Commander Young and the monitors, saying they worked in sensitive jobs and would not be publicly engaged in this disagreement.

Grievances and Exaggeration

Disentangling the Russian and Georgian accounts has been complicated. The violence along the enclave’s boundaries that had occurred in recent summers was more widespread this year, and in the days before Aug. 7 there had been shelling of Georgian villages. Tensions had been soaring.

Each side has fresh lists of grievances about the other, which they insist are decisive. But both sides also have a record of misstatement and exaggeration, which includes circulating casualty estimates that have not withstood independent examination. With the international standing of both Russia and Georgia damaged, the public relations battle has been intensive.

Russian military units have been implicated in destruction of civilian property and accused by Georgia of participating with Ossetian militias in a campaign of ethnic cleansing. Russia and South Ossetia have accused Georgia of attacking Ossetian civilians.

But a critical and as yet unanswered question has been what changed for Georgia between 7 p.m. on Aug 7, when Mr. Saakashvili declared a cease-fire, and 11:30 p.m., when he says he ordered the attack. The Russian and Ossetian governments have said the cease-fire was a ruse used to position rockets and artillery for the assault.

That view is widely held by Ossetians. Civilians repeatedly reported resting at home after the cease-fire broadcast by Mr. Saakashvili. Emeliya B. Dzhoyeva, 68, was home with her husband, Felix, 70, when the bombardment began. He lost his left arm below the elbow and suffered burns to his right arm and torso. “Saakashvili told us that nothing would happen,” she said. “So we all just went to bed.”

Neither Georgia nor its Western allies have as yet provided conclusive evidence that Russia was invading the country or that the situation for Georgians in the Ossetian zone was so dire that a large-scale military attack was necessary, as Mr. Saakashvili insists.

Georgia has released telephone intercepts indicating that a Russian armored column apparently entered the enclave from Russia early on the Aug. 7, which would be a violation of the peacekeeping rules. Georgia said the column marked the beginning of an invasion. But the intercepts did not show the column’s size, composition or mission, and there has not been evidence that it was engaged with Georgian forces until many hours after the Georgian bombardment; Russia insists it was simply a routine logistics train or troop rotation.

Unclear Accounts of Shelling

Interviews by The Times have found a mixed picture on the question of whether Georgian villages were shelled after Mr. Saakashvili declared the cease-fire. Residents of the village of Zemo Nigozi, one of the villages that Georgia has said was under heavy fire, said they were shelled from 6 p.m. on, supporting Georgian statements.

In two other villages, interviews did not support Georgian claims. In Avnevi, several residents said the shelling stopped before the cease-fire and did not resume until roughly the same time as the Georgian bombardment. In Tamarasheni, some residents said they were lightly shelled on the evening of Aug. 7, but felt safe enough not to retreat to their basements. Others said they were not shelled until Aug 9.

With a paucity of reliable and unbiased information available, the O.S.C.E. observations put the United States in a potentially difficult position. The United States, Mr. Saakashvili’s principal source of international support, has for years accepted the organization’s conclusions and praised its professionalism. Mr. Bryza refrained from passing judgment on the conflicting accounts.

“I wasn’t there,” he said, referring to the battle. “We didn’t have people there. But the O.S.C.E. really has been our benchmark on many things over the years.”

The O.S.C.E. itself, while refusing to discuss its internal findings, stood by the accuracy of its work but urged caution in interpreting it too broadly. “We are confident that all O.S.C.E. observations are expert, accurate and unbiased,” Martha Freeman, a spokeswoman, said in an e-mail message. “However, monitoring activities in certain areas at certain times cannot be taken in isolation to provide a comprehensive account.”

The Road to Economic Recovery

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By Sen. Bernie Sanders

As the Bush administration sputters to an end, the official unemployment rate rose from 6.1 to 6.5 percent in October, and the number of unemployed persons increased by 603,000 to 10.1 million -- for a total of 10.1 million unemployed -- a 14 year high. In the last year alone of the Bush administration, unemployment has increased by 2.8 million, and the unemployment rate has risen by 1.7 percentage points. The news is deeply disheartening.

And these figures are conservative. They do not include workers who want a full-time job but are working part time or workers who have given up looking for work completely. The number of involuntary part-time workers rose by 645,000 last month, to 6.7 million. The figures do not include another half million workers so discouraged they have stopped looking for work. If we total these numbers, the unemployment and underemployment figures are very stark: almost 17 million Americans are jobless or unable to find the full-time employment they want.

These are very difficult times for Vermonters and Americans throughout this country. Consumer confidence is at an all-time low; while the foreclosure rate is at an all-time high. More than 100,000 Americans filed for bankruptcy just last month. Many of those fortunate enough to have a job are seeing their wages go down, while prices have been going up. Recent declines in the stock market are shattering the retirement dreams of many older Americans and forcing many more to delay their retirement plans for years to come (you can read testimonials here).

Since Bush has been president, nearly six million Americans have slipped out of the middle class and into poverty; over seven million Americans have lost their health insurance; more than 4 million Americans have lost their pensions, and median income for working-age Americans has gone down by over $2,000.

In these very difficult economic conditions, doing nothing is not an option.

When the Senate reconvenes of November 17th, I intend to fight for an economic recovery program that is significant enough in size and scope to respond to the major economic crisis this country now faces.

If we can commit more than $1 trillion to rescue bankers and insurance companies from their reckless and irresponsible behavior, we certainly should be investing in millions of good-paying jobs that rebuild our nation and improve its economy.

In my view, the size of this economic recovery plan should be, at a minimum, $300 billion.

This economic recovery package should first improve our crumbling infrastructure by improving our roads, bridges and public transportation. We need to bring our water and sewer systems into the 21st century. We need to make certain that high-quality Internet service is available in every community in America. Not only are these investments desperately needed, every billion dollars that we put into these initiatives will create up to 47,000 new jobs.

We also need to make a major financial commitment to energy efficiency and sustainable energy. With a major investment, we can stop importing foreign oil in 10 years, produce all of our electricity from sustainable energy within a decade, and substantially cut greenhouse gas emissions. We can also make the United States the world leader in the construction of solar, wind, bio-fuel and geothermal facilities for energy production, as well as create a significant number of jobs by making our homes, offices, schools and factories far more energy efficient.

In these harsh economic times, we should also make sure that, at the very least, all Americans have access to primary health care and dental care, which we can do by substantially increasing funding for the highly-effective community health center program. We should extend unemployment benefits, so that more than 1 million Americans do not run out of their benefits by the end of this year. We should assure that no one in America, in these hard times, goes hungry or homeless.

Finally, with towns and states like Vermont facing deep deficits, we must make a major, immediate financial commitment to states and municipalities. Their crisis will only grow worse as homes are foreclosed, as incomes decline, and as fees on sales of homes and motor vehicles diminish. For too long, unfunded federal mandates have drained the budgets of states and communities. The strength and vitality of our communities must be restored.

George Bush
As the Bush administration sputters to an end, the official unemployment rate rose from 6.1 to 6.5 percent in October, and the number of unemployed persons increased by 603,000 to 10.1 million -- for ...
As the Bush administration sputters to an end, the official unemployment rate rose from 6.1 to 6.5 percent in October, and the number of unemployed persons increased by 603,000 to 10.1 million -- for ...

Tough Times Strain Colleges Rich and Poor

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Arizona State University, anticipating at least $25 million in budget cuts this fiscal year — on top of the $30 million already cut — is ending its contracts with as many as 200 adjunct instructors.

Boston University, Cornell and Brown have announced selective hiring freezes.

And Tufts University, which for the last two years has, proudly, been one of the few colleges in the nation that could afford to be need-blind — that is, to admit the best-qualified applicants and meet their full financial need — may not be able to maintain that generosity for next year’s incoming class. This fall, Tufts suspended new capital projects and budgeted more for financial aid. But with the market downturn, and the likelihood that more applicants will need bigger aid packages, need-blind admissions may go by the wayside.

“The target of being need-blind is our highest priority,” said Lawrence S. Bacow, president of Tufts. “But with what’s happening in the larger economy, we expect that the incoming class is going to be needier. That’s the real uncertainty.”

Tough economic times have come to public and private universities alike, and rich or poor, they are figuring out how to respond. Many are announcing hiring freezes, postponing construction projects or putting off planned capital campaigns.

With endowment values and charitable gifts likely to decline, the process of setting next year’s tuition low enough to keep students coming, but high enough to support operations, is trickier than ever.

Dozens of college presidents, especially at wealthy institutions, have sent letters and e-mail to students and their families describing their financial situation and belt-tightening plans.

At Williams College, for example, President Morton Owen Schapiro wrote that with last year’s negative return on the endowment and the worsening situation since June, some renovation and facilities spending would be reduced and nonessential openings left unfilled.

Many students, increasingly conscious of costs, are flocking to their state universities; at Binghamton University, part of the New York State university system, applications were up 50 percent this fall. But with this year’s state budget problems, tuition increases at public universities may be especially steep. Some public universities have already announced midyear tuition increases.

With endowment values shrinking, variable-rate debt costs rising and states cutting their financing, colleges face challenges on multiple fronts, said Molly Corbett Broad, president of the American Council on Education.

“There’s no evidence of a complete meltdown,” Ms. Broad said, “but the problems are serious enough that higher education is going to need help from the government.”

And as in other sectors, she said, some financially shaky institutions will most likely be seeking mergers.

Nationwide, retrenchment announcements are coming fast and furious, as state after state reduces education financing.

The University of Florida, which eliminated 430 faculty and staff positions this year, was told recently to cut next year’s budget by 10 percent, probably requiring more layoffs. Financing for the University of Massachusetts system was cut $24.6 million for the current fiscal year.

On Thursday, Gov. Arnold Schwarzenegger of California proposed a midyear budget cut of $65.5 million for the University of California system — on top of the $48 million reduction already in the budget.

“Budget cuts mean that campuses won’t be able to fill faculty vacancies, that the student-faculty ratio rises, that students have lecturers instead of tenured professors,” said Mark G. Yudof, president of the California system. “Higher education is very labor intensive. We may be getting to the point where there will have to be some basic change in the model.”

Private colleges, too, are tightening their belts — turning down thermostats, scrapping plans for new gardens or quads, reducing faculty raises.

But many are also increasing their pool of financial aid.

Vassar College will give out $1 million more in financial aid this year than originally budgeted, even though the endowment, which provides a third of its operating budget, dropped to $765 million at the end of September, down $80 million from late June. President Catharine Bond Hill of Vassar said the college would reduce its operating costs, but remain need-blind.

Many institutions with small endowments, however, will probably become more need-sensitive than usual this year, quietly offering places to fewer students who need large aid packages.

At Dickinson College in Pennsylvania, Robert J. Massa, the vice president for enrollment and student life, said that about 200 applicants last year might have been accepted if they had not needed so much financial help, but that that number might rise to 250 this year.

Dickinson’s endowment was $280 million in mid-October, Mr. Massa said, down from $350 million in June. And while more than three quarters of the college’s operating budget comes from student fees, some endowment revenue will have to be replaced.

“Here’s the rub,” Mr. Massa said. “I really don’t think that colleges can afford to increase their tuition price at higher than inflation this year. I don’t think the public will stand for it. What we’ve done in higher education is let our dreams and aspirations dictate our cost structure.”

Most colleges will have a better sense next month of how many students are struggling, when second-semester tuition bills come due.

Paola Aguilar, a sophomore at Shenandoah University in Winchester, Va., is worrying about whether she can afford to return next year.

“My mom became a Realtor last year to try to earn more money, but that didn’t help,” Ms. Aguilar said. “I’ve talked to the people here, and they’ve helped me out a little more for next semester, but as of right now, if I don’t get more help, I’ll have to leave next year and go somewhere cheaper, near home.”

Tracy Fitzsimmons, Shenandoah’s president, said she began hearing about students’ financial anxieties in mid-September.

“They’d tell me they were thinking they might have to move off campus next semester and stay three to a bedroom, or give up the meal plan and just eat one meal a day,” Ms. Fitzsimmons said.

Shenandoah has started an emergency grant fund for students, increased its loan program and prepared to stretch out spring tuition payments for hard-pressed families.

Economic uncertainty touches every facet of higher education.

“We are planning to begin a capital campaign of $150-185 million,” said Karen R. Lawrence, president of Sarah Lawrence College. “We will still do that. We’re not compromising our ambitions, but the timing will be a little bit deferred.”

At the wealthiest institutions, endowment revenue usually covers about a third of operating costs, and most colleges and universities spend a percentage of their endowment, based on its average value over the previous three years, helping to smooth out economic ups and downs.

In recent years, with tuition rising faster than inflation, college affordability has become a significant issue. And with the sharp growth of endowments in recent years — Harvard’s hit $36.9 billion this summer — some politicians, notably Senator Charles E. Grassley, Republican of Iowa, have pushed for a requirement that colleges spend 5 percent of their endowments. Many of the wealthiest institutions responded by expanding financial aid last year, with dozens of them replacing loans with grants.

This fall, more universities are taking steps to increase affordability. Benedictine University, a Roman Catholic institution in Illinois, is freezing tuition; Vanderbilt University will replace loans with grants; Boston University has expanded scholarships for students who graduated from Boston public schools; and the University of Toledo announced free tuition for needy, high-performing graduates of Ohio’s six largest public school systems.

Presidents of many expensive private colleges are wondering how much more tuition pressure families can bear.

“I wouldn’t deny that a tuition freeze has occurred to me, but we can’t afford heroic gestures,” said Sandy Ungar, president of Goucher College in Baltimore.

Given the current climate, some say, colleges need to re-examine all of their economic assumptions.

“Several years ago, we started thinking about sustainability in environmental terms,” said Dick Celeste, the president of Colorado College. “Now we need to be thinking about sustainability in economic terms.”

Tough Sledding Ahead,Surviving A Coming USD Collapse

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By Christopher Laird

Now that the US election is over, we get to think about the Future. And, no matter how you look at it, the entire world, the West particularly, is in for tough sledding financially.

First, we will continue to battle an emerging economic slowdown. Then, later, we will be battling world currency instability – we already have signs of this now.

Even though gold and commodities have taken a big hit because of a general liquidation in everything, there is one thing none of us should lose sight of, and that is what happens when the USD finally lets go.

Why the USD is presently rallying

Just because the USD happens to be rallying now (with weekly fluctuations) does not mean that its fate is not bleak. There are many reasons the USD is rallying right now. They include flight to cash in general during market liquidations in all areas, but also cash hoarding because businesses cannot roll over the short term credit they use to do payrolls and ongoing operations. Then we have the usual end of year cash surge for businesses and financial institutions. Then of course there is flight to the USD for safety, and then finally, other countries currencies are adjusting to the slowing world economy, and the once hot foreign markets are cooling and there is lots of money moving out of the ‘emerging’ markets.

But, we are going to be facing two particular problems in 09 that none of us is really used to, that we really have never seen. The world is going to have a severe recession bordering on an economic depression. Essentially no one alive today knows what that is like. Only the oldest of us have lived through that experience.

But then, on top of that, at some point later the USD will finally collapse. This is not something way way out there in the future. This issue is becoming a near term threat.

What has held the USD up and why that’s going to change

The primary reason the USD has held up so well in the last decades, in spite of ever worsening US trade and budget deficits that add to over $1 trillion a year combined, is that the US was an export economy’s dream customer. Because the US was such a good customer to the world, they bought our US Treasury bonds, and lent trillions in other ways to the US consumer. As long as the US consumer could carry that process out, our trade partners could make bank on the US and USD.

However, once the US consumer is tapped out, and cannot effectively make a return on investment of our trade partners, the rationale for the continuation of the USD goes away. All that remains after that is a budget busted US Federal government. At that point, why would our trade partners continue to buy all the US treasury bonds and such, and debase their currencies, if the US cannot be such a good customer anymore? At that point, the USD will rapidly fall into a devaluation crisis.

None of us in the US has ever dealt with the twin threats coming our way in the next few years. The first is a real economic depression. The second will be the demise of the US dollar, or at the very least, its severe devaluation like 70% or more (at first).

I would like to point out that in the last great depression in the US in the 1930’s, we did not have a combination of a currency crisis with the economic crisis. The USD, although it fell compared to gold, held up well. Deflation increased the value of anything called cash, including gold.

This time, the outcome will be different. This time, the US faces an economic depression AND a currency crisis soon after. How far off is this?

Well, first, we are already well into the beginning of the economic depression. The damage done to the world credit and financial markets has been stunning since August 07. Over $35 trillion of value has been lost in the world financial markets. That has spilled over into the real economy now, and we will start to see bigger and bigger layoff notices. Economic demand will decline and we won’t see any mere one year recession, like all the pundits say ‘we foresee 5 quarters of economic decline in the US…’

This time we are talking on the scale of 5 years of economic decline and unemployment getting over 20%. The Great Depression lasted ten years, and the US had well over 25% unemployment. US economic production was halved!

The China situation

The rest of the world fared worse. And, we hear that China has this great economic growth, still on the order of 8% a year, a number any nation would kill for. But, China needs to ADD 15 million jobs a year merely to keep up with population growth, having 1.3 billion people!

So, this 8% growth in China is mandatory, not merely a luxury since China still has 800 million peasants in the rural areas all clamoring to move to the cities for better pay. Even at the lowest levels, Chinese city pay is three times the basic rural income which is starvation wages.

And then consider that there are 130 million undocumented Chinese who flocked to the cities for work (not residents of the city) who have nowhere to go now that their export dependent economy is slowing rapidly. The recipe here is for a revolution in China if they cannot keep 800 plus million people working… and this is just beginning to happen. And this issue is widely known to scare the hell out of the Chinese government.

But, to avoid a revolution, they MUST have 8% economic growth indefinitely? That is not going to happen. The party is about over in China.

The point here of emphasizing China’s demographics is that, without big exports to the West, they cannot sustain stability economically or politically. They are the poster child to what happens when the export economies slow drastically when the US export markets slow significantly.

Not going to stop economic contraction this time

But, getting back to the issue of economic depression and the USD. The whole point here is that the world economic engine is grinding to a halt and there is no way to stop it. The US Fed and other central banks have found out they cannot reflate the world economies this time, like they did after 2001 and 911 and the Tech bubble. This time reflation efforts are failing. Things are slowing down too fast this time, and that is combined with the imploding credit markets in every nation of the world.

Without credit, the world economies contract badly. Everything is credit based. Businesses need it to merely do daily operations, and people need it for purchases. The only other way is to have cash and pay as you go. The world economy is not structured to operate that way (things don’t have to be credit based but our world economy is inextricably addicted to it, and credit collapse equates to a world economic depression if the credit does not come back right soon).

And the credit is NOT coming back. Sure, we hear that Libor rates (interbank borrowing rates that is the lifeblood of financial institutions for short term funding needs) have improved. But, these lenders are not lending it out, they are merely covering their own needs and hoarding cash, just like businesses are being forced to since the short term credit markets are still frozen, and there is little chance of that improving for a good while.

So what does all this mean for the USD?

Now, what all this means for the USD is that, as the world loses its economic engine and goes into an economic depression, the highly abused USD will lose its reason to stay strong.

At some point all the US trade partners of the world will find the US is abusing the currency too much. With all the bailouts now, that starts to become more certain. Then, as an economic depression makes its way, the US fiscal deficits, which are already $1 trillion a year, will cause flight from the USD. At some point, our trade partners will simply stop buying the US Treasury notes/bills. This is going to happen, friends.

Then, the USD goes to hell fast. Now when is this? Well, a few years ago I wrote several articles which stated that, when the US consumer reached a point of not being able to give our trade partners a return on their massive subsidies to the US government and buy our bonds, then the USD game is over.

The only reason the USD has managed to avoid a huge devaluation, and even a currency crisis, is because since 1945 after WW2 ended, every time the US economy contracted the US was able to grow out of it. Or, in many cases the US was able to lower interest rates (meaning borrow out of it) and stimulate the economy.

Now, that stimulation process is broken, to say the least. Lower interest rates are not working this time. This time, we are not going to stimulate out of an economic depression. This time we get a depression. Why?

Because, we have two irresolvable problems to avoid a depression this time. This time, we are in the same situation generally as what happened in 1929, and then the ensuing world deflation.

The Two insoluble problems that will lead to a depression and ultimately the final USD collapse

  • Deleveraging cannot be stopped, there is too much
  • The USD is only supported by a healthy world economy and is subsidized

The world is deleveraging in totality and we have a breaking world finance bubble. I estimate that way over $1000 trillion of world financial markets alone are deleveraging. That number is calculated by adding up all the leverage out there, and the biggest one is the derivatives of all types that are really only big HUGE leveraged bets. They are nothing more than that. The BIS states that world derivatives alone are over $1 quadrillion worth – that’s 1000 trillion.

Even if central banks move heaven and earth with their now $7 trillion of infusions to every market imaginable now, that’s a drop in the bucket compared to what’s out there. So, the deleveraging will continue relentlessly this time.

Why did that happen? Quite simply, the Western consumers got tapped out. They borrowed more than they can sustain a return on. So, for example, we see the housing bubble collapse and then all the mortgage bonds collapse, and then all the banks collapse – get the idea? Then all the credit disappears everywhere and we get an assured economic depression. And that will lead to 20% unemployment or worse in the entire world – mark my words.

The overall picture is that the world economic/credit bubble since 1945 has just burst before our eyes since August 07. That is one huge bubble.

And, as they say, for every Ying there is a corresponding Yang, or more simply, what goes up must come down. And it’s coming down hard. And… we haven’t seen nothing yet either. The down has a long way to go; we are merely in the first stages. And, boy is the world already suffering.

So then, follow along here, the next victim of this emerging depression will be the USD. As I said, the only thing keeping the USD afloat with the massive fiscal deficits has been an ever spending US consumer who bought trillions of dollars worth of exports. When they get tapped out there is no reason for our trade partners to keep that up is there? The USD subsidies (primarily our trade partners buying US bonds of all types) will end this time around (this economic cycle).

How can we get out of this mess?

Well, first I have to say I don’t think we will avoid a long, possibly ten years, depression. But there are some ways it might be avoided.

First, if the US abrogated the $60 trillion of promises to Social Security and Medicare, maybe that would save the USD. But that won’t happen. Probably, what the US will do is just pay it all, but with worthless dollars.

The second thing that might get the world out of this impending economic depression and a collapse of the USD later would be to forgive all debts. Possibly that would wipe out the USD too anyway. But that would set the stage for a huge world economic recovery.

The trouble with debt forgiveness is it never seems to happen. Believe me, I am not talking hogwash about debt forgiveness. The Bible, for example, talks about how every 7 years and every 70 years there is to be total debt forgiveness. It’s called the Jubilee. The idea is a legitimate concept that can work and has worked.

You don’t think that’s viable? Well it can work because all that happens is that the lenders who offer credit have to factor in either payment in full or forgiveness over a 7 year period. This can be done and would actually result in the biggest sustained world economic boom ever imagined.

The thing that causes world economic depressions are debt and financial bubbles. The two go together.

But, getting back to the fate of the USD. The problem is, the lenders won’t forgive debt or make it amortize in a short time. They insist on ever bigger debts. They do things like making the bankruptcy laws far more stringent (recently done in the US). And thus, they guarantee that the world consumers ultimately will get tapped out (just a matter of time) and then a world bubble collapse and economic depression.

The interesting thing that happens is that there is ultimately dept repudiation in depressions anyway. Which leads us to the USD’s fate in coming years.

I don’t think we will have to wait for 30 years to see Social Security and Medicare to bankrupt the US. What will happen sooner is that, as the US enters economic depression this time, the return on investment for our trade partners will disappear. The US won’t keep our trade parnters’ hundreds of millions employed, and they will then stop buying US Treasury bonds. And then the USD devalues 70% in a year. Maybe going to zero soon after that. The US is then bankrupted.

When can this happen? Possibly mid way into the next US economic depression (not recession). And, since I think we are now entering the beginning of a US depression, then if it lasts ten years, that means we have about 4 years to go for the USD to finally give up the ghost.

Yes, I mean that. We have maybe 4 years left, maybe even only 2 years for the USD to remain anything at all.

What can you do about all this?

Well, aside from dealing with the certain political and social chaos and those dangers when the USD collapses, you need to move your money into a combination of other currencies and also into paid off real things. It’s conceivable that some stocks in real things like mines would do well too. But stocks and financial products in general, like annuities, will be destroyed in value because, in an economic depression, companies either go out of business or shrink.

And in a currency crisis (USD) that Social Security check, that bank CD, that Treasury bond, that insurance annuity becomes worthless. Sorry, but that is the reality.

So, to escape losing all your income and losing all your wealth in a currency crisis, you have to have money in other currencies, and also in paid off real things that are still there after the currency is destroyed. Obviously, gold and precious metals figure in here. The falling prices right now are quite beside the point. What really matters is what happens in the next 4 or so years to the USD. That’s the BIG issue.

The reason why gold and such are dropping now is because of the general financial and commodity deleveraging. When that bottoms, then gold will still be there. The only thing is, when this world deleveraging bottoms, I don’t think much else will still be there. The problem is how to survive it.

Anyway, we have ongoing discussions of these topics at our PrudentSquirrel newsletter. Since our beginning in 2005, we have grown constantly and now have more active paying subscribers than ever. We also have an enviable renewal rate.

The Prudent Squirrel newsletter is our financial and gold commentary. Subscribers get 44 newsletters a year on Sundays, and also mid week email alerts as needed. We alerted our subscribers April 20 that the USD was bottoming. The USD has strengthened significantly since. The alerts include quick notification of important financial news developments by email. Subscribers tell us that the alerts alone are worth subscribing for.

I had one potential subscriber ask me if the newsletter has much more content than these public articles, ie, if it was worth subscribing. The answer is that the public articles have less than 10% of our research and conclusions that subscribers see, not to mention the subscriber email alerts of important breaking financial news. We have anticipated many significant market moves in the last year, such as imminent drops in world stock markets within days of them happening, and big swings in the gold markets within days of them occurring. We have also made a number of good calls on big currency swings, such as with the USD, the Euro and the Yen.

Obama advisers discuss preparations for war on Iran

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By Peter Symonds

On the eve of the US elections, the New York Times cautiously pointed on Monday to the emergence of a bipartisan consensus in Washington for an aggressive new strategy towards Iran. While virtually nothing was said in the course of the election campaign, behind-the-scenes top advisers from the Obama and McCain camps have been discussing the rapid escalation of diplomatic pressure and punitive sanctions against Iran, backed by preparations for military strikes.

The article entitled “New Beltway Debate: What to do about Iran” noted with a degree of alarm: “It is a frightening notion, but it not just the trigger-happy Bush administration discussing—if only theoretically—the possibility of military action to stop Iran’s nuclear weapons program… [R]easonable people from both parties are examining the so-called military option, along with new diplomatic initiatives.”

Behind the backs of American voters, top advisers for President-elect Barack Obama have been setting the stage for a dramatic escalation of confrontation with Iran as soon as the new administration takes office. A report released in September from the Bipartisan Policy Center, a Washington-based think tank, argued that a nuclear weapons capable Iran was “strategically untenable” and detailed a robust approach, “incorporating new diplomatic, economic and military tools in an integrated fashion”.

A key member of the Center’s task force was Obama’s top Middle East adviser, Dennis Ross, who is well known for his hawkish views. He backed the US invasion of Iraq and is closely associated with neo-cons such as Paul Wolfowitz. Ross worked under Wolfowitz in the Carter and Reagan administrations before becoming the chief Middle East envoy under presidents Bush senior and Clinton. After leaving the State Department in 2000, he joined the right-wing, pro-Israel think tank—the Washington Institute for Near East Policy—and signed up as a foreign policy analyst for Fox News.

The Bipartisan Policy Center report insisted that time was short, declaring: “Tehran’s progress means that the next administration might have little time and fewer options to deal with this threat.” It rejected out-of-hand both Tehran’s claims that its nuclear programs were for peaceful purposes, and the 2007 National Intelligence Estimate by US intelligence agencies which found that Iran had ended any nuclear weapons program in 2003.

The report was critical of the Bush administration’s failure to stop Iran’s nuclear programs, but its strategy is essentially the same—limited inducements backed by harsher economic sanctions and the threat of war. Its plan for consolidating international support is likewise premised on preemptive military action against Iran. Russia, China and the European powers are all to be warned that their failure to accede to tough sanctions, including a provocative blockade on Iranian oil exports, will only increase the likelihood of war.

To underscore these warnings, the report proposed that the US would need to immediately boost its military presence in the Persian Gulf. “This should commence the first day the new president enters office, especially as the Islamic Republic and its proxies might seek to test the new administration. It would involve pre-positioning US and allied forces, deploying additional aircraft carrier battle groups and minesweepers, [and] emplacing other war materiel in the region,” it stated.

In language that closely parallels Bush’s insistence that “all options remain on the table”, the report declared: “We believe a military strike is a feasible option and must remain a last resort to retard Iran’s nuclear program.” Such a military strike “would have to target not only Iran’s nuclear infrastructure, but also its conventional military infrastructure in order to suppress an Iranian response.”

Significantly, the report was drafted by Michael Rubin, from the neo-conservative American Enterprise Institute, which was heavily involved in promoting the 2003 invasion of Iraq. A number of Obama’s senior Democratic advisers “unanimously approved” the document, including Dennis Ross, former senator Charles Robb, who co-chaired the task force, and Ashton Carter, who served as assistant secretary for defense under Clinton.

Carter and Ross also participated in writing a report for the bipartisan Center for a New American Security, published in September, which concluded that military action against Iran had to be “an element of any true option”. While Ross examined the diplomatic options in detail, Carter laid out the “military elements” that had to underpin them, including a cost/benefit analysis of a US aerial bombardment of Iran.

Other senior Obama foreign policy and defense advisers have been closely involved in these discussions. A statement entitled, “Strengthening the Partnership: How to deepen US-Israel cooperation on the Iranian nuclear challenge”, drafted in June by a Washington Institute for Near East Policy task force, recommended the next administration hold discussions with Israel over “the entire range of policy options”, including “preventative military action”. Ross was a taskforce co-convener, and top Obama advisers Anthony Lake, Susan Rice and Richard Clarke all put their names to the document.

As the New York Times noted on Monday, Obama defense adviser Richard Danzig, former navy secretary under Clinton, attended a conference on the Middle East convened in September by the same pro-Israel think tank. He told the audience that his candidate believed that a military attack on Iran was a “terrible” choice, but “it may be that in some terrible world we will have to come to grips with such a terrible choice”. Richard Clarke, who was also present, declared that Obama was of the view that “Tehran’s growing influence must be curbed and that Iran’s acquisition of a nuclear weapon is unacceptable.” While “his first inclination is not to pull the trigger,” Clarke stated, “if circumstances required the use of military force, Obama would not hesitate.”

While the New York Times article was muted and did not examine the reports too deeply, writer Carol Giacomo was clearly concerned at the parallels with the US invasion of Iraq. After pointing out that “the American public is largely unaware of this discussion,” she declared: “What makes me nervous is that’s what happened in the run-up to the Iraq war.”

Giacomo continued: “Bush administration officials drove the discussion, but the cognoscenti were complicit. The question was asked and answered in policy circles before most Americans know what was happening… As a diplomatic correspondent for Reuters in those days, I feel some responsibility for not doing more to ensure that the calamitous decision to invade Iraq was more skeptically vetted.”

The emerging consensus on Iran in US foreign policy circles again underscores the fact that the differences between Obama and McCain were purely tactical. While millions of Americans voted for the Democratic candidate believing he would end the war in Iraq and address their pressing economic needs, powerful sections of the American elite swung behind him as a better vehicle to prosecute US economic and strategic interests in the Middle East and Central Asia—including the use of military force against Iran.

Obama's Toughest Challenge

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By Michael T. Klare

America's Energy Crunch Comes Home

Of all the challenges facing President Barack Obama next January, none is likely to prove as daunting, or important to the future of this nation, as that of energy. After all, energy policy -- so totally mishandled by the outgoing Bush-Cheney administration -- figures in each of the other major challenges facing the new president, including the economy, the environment, foreign policy, and our Middle Eastern wars. Most of all, it will prove a monumental challenge because the United States faces an energy crisis of unprecedented magnitude that is getting worse by the day.

The U.S. needs energy -- lots of it. Day in and day out, this country, with only 5% of the world’s population, consumes one quarter of the world’s total energy supply. About 40% of our energy comes from oil: some 20 million barrels, or 840 million gallons a day. Another 23% comes from coal, and a like percentage from natural gas. Providing all this energy to American consumers and businesses, even in an economic downturn, remains a Herculean task, and will only grow more so in the years ahead. Addressing the environmental consequences of consuming fossil fuels at such levels, all emitting climate-altering greenhouse gases, only makes this equation more intimidating.

As President Obama faces our energy problem, he will have to address three overarching challenges:

1. The United States relies excessively on oil to supply its energy needs at a time when the future availability of petroleum is increasingly in question.

2. Our most abundant domestic source of fuel, coal, is the greatest emitter of greenhouse gases when consumed in the current manner.

3. No other source of energy, including natural gas, nuclear power, biofuels, wind power, and solar power is currently capable of supplanting our oil and coal consumption, even if a decision is made to reduce their importance in our energy mix.

This, then, is the essence of Obama’s energy dilemma. Let’s take a closer look at each of its key components.

Excessive Reliance on Oil

No other major power relies on getting so much of its energy from oil. Making that 40% figure especially daunting is this: the world supply of oil is about to contract. The competition for remaining supplies will then intensify, while most of what remains is located in inherently unstable regions, threatening to lead the U.S. into unceasing oil wars.

Just how much of the world’s untapped oil supply remains to be exploited, and how quickly we will reach a peak of sustainable daily world oil output, are matters of some contention, but recently the scope of debate on this question has narrowed appreciably.

Most energy experts now believe that we have consumed approximately half of the planet’s original petroleum inheritance and are very close to a peak in production. No one knows whether it will arrive in 2010, 2012, 2015, or beyond, but it is certainly near. In addition, most energy professionals now believe that global oil output will peak at far lower levels than only recently imagined -- perhaps 90-95 million barrels per day, not the 115-125 million barrels once projected by the U.S. Department of Energy. (Here I’m speaking only of conventional, liquid petroleum; there are some "unconventional" sources of oil -- Canadian tar sands, Venezuelan extra-heavy crude, and the like -- that may boost these numbers by a few millions of barrels per day, without altering the global energy equation significantly.)

What underlies these more pessimistic assumptions? To begin with, the depletion rate of existing fields is accelerating. Most of the giant fields on which the world now relies for the bulk of its oil supplies were discovered 30 to 60 years ago and are now reaching the end of their productive life cycles.

It used to be thought that the depletion rate of these fields was about 4% to 5% a year, but in a study to be released November 12, the International Energy Agency (IEA), an affiliate of the Organization for Economic Cooperation and Development (the club of wealthy industrialized nations), is expected to report that the decline rate is closer to 9%, an astonishingly high figure. At this rate of decline, the world’s major fields will be depleted of their remaining supplies of oil relatively quickly, leaving us dependent on a constellation of smaller, less productive fields, often located in difficult to reach or unstable areas, as well as whatever new deposits the oil industry is able to locate and develop.

And this is the second big problem: Despite huge increases in the funds devoted to exploration, the oil companies are not finding giant new fields comparable to the "elephants" discovered in previous decades. Only two such fields were discovered between 1970 and 1990, and only one since -- the Kashagan field in Kazakhstan’s corner of the Caspian Sea. True, the companies have discovered some large fields in the deep waters of the Gulf of Mexico and off the coasts of Angola and Brazil, but these are neither on a par with the largest fields now in production, nor anywhere near as easy to bring on line. They will not be able to reverse the coming decline in global output.

Given these factors, it is clear that the global supply of oil is destined to begin contracting in the not-too-distant future, and that the global peak in production -- when it does arrive -- will be at a level much lower than previously assumed. The current global economic downturn and the sudden fall in energy prices may, for a while, mask this phenomenon, but they won’t change it in any significant way.

Our excessive reliance on oil in good times and bad is made all the more problematic by the fact that, just as supplies are dwindling, global demand is expected to rise mainly because of increased consumption in China, India, and other developing nations.

As recently as 1990, the developing nations of Asia accounted for only a relatively small 10% of global oil consumption. Their economic growth has been so rapid, however, and their need for oil so voracious that they now consume about 18% of the world’s supply. If current trends persist, that will rise to 27% in 2030, exceeding North American net consumption for the first time. This means -- if energy habits and present energy use don’t change radically -- that Americans will be competing with Chinese and Indian consumers for every barrel of spare oil available on world markets, driving up prices and jeopardizing the health of our petroleum-dependent economy.

To make matters worse, more and more of the world’s remaining oil production will be concentrated in the Middle East, Central Asia, and sub-Saharan Africa. That these areas are chronically unstable is hardly accidental: many bear the scars of colonialism or are delineated by borders drawn up by the colonial powers that bear no resemblance to often fractious ethnic realities on the ground. Many also suffer from the "resource curse": the concentration of power in the hands of venal elites that seek to monopolize the collection of oil revenues by denying rights to the rest of the population, thereby inviting revolts, coups, and energy sabotage of every sort.

As it has grown more reliant on oil deliveries from these areas, the United States has attempted to enhance its energy "security" by an increasing reliance on military force, even though such efforts have largely proved ineffectual. Despite all the money and effort devoted to enforcement of what was once known as the Carter Doctrine -- which stated that the uninterrupted flow of Persian Gulf oil to the United States is a vital national interest to be protected by any means necessary, including military force -- the Persian Gulf is no more stable or peaceful today than it was in 1980, when President Jimmy Carter issued his famous decree.

Our over-reliance on oil, then, is our greatest energy vulnerability. But what are the alternatives?

The Problem with Coal

The energy source which the United States possesses in greatest abundance is coal. This country has the world’s largest reserves, 247 billion metric tons, and is second only to China in using coal. In this country, coal is primarily employed to produce electricity, but it can also be converted into a diesel fuel -- known as coal-to-liquids or CTL -- to power cars and trucks. Although CTL, widely used by Germany during World War II to power its war machine, is still in its infancy in the U.S., it could conceivably be used to supplement future declining gas supplies.

When coal is burned in the conventional manner, however, it emits more climate-altering greenhouse gases than any other fossil fuel -- twice as much as natural gas and one-and-a-half times that of oil to produce the same amount of energy. As a result, any increase in our reliance on coal will lead to ever greater emissions of carbon dioxide, only accelerating the already perilous rate of global warming.

In addition, an increased U.S. reliance on coal would only flash a green light to China, India, and other countries eager to do likewise. The bottom line? Any hope of reversing the buildup of greenhouse gases in the atmosphere in time to avert the most severe consequences of climate change would go out the window (possibly quite literally).

During the recent election campaign, Barack Obama and John McCain both spoke of speeding the development of "clean coal technology." In the present context, however, clean coal is a deceptive term, if not an outright misnomer. It generally refers to pollution-free coal, not to coal free of carbon emissions. Coal that would burn without damaging the climate is best referred to as climate-friendly coal, or "safe coal." At present, there are no power plants anywhere on the planet capable of burning coal in a climate-safe manner.

Right now, there is only one technology being seriously discussed that would burn coal safely: carbon capture and storage, or carbon sequestration. Under this process, powdered coal is combined with steam and turned into a gas; then the carbon is stripped away and eventually buried. This is a tricky and costly technique that has yet to be fully tested. But at the moment, it is the only foreseeable path to using coal in a climate-friendly way. President-elect Obama has spoken of his interest in this technology, but without a lot more support and investment -- no small matter in economically tough times -- it will never get the boost it deserves.

Consider the Alternatives

So what’s left to satisfy our future energy needs?

Natural gas is the next biggest source and it possesses a number of advantages. Of all the fossil fuels, it releases the least amount of carbon dioxide when burned. We possess substantial, if not overwhelming, reserves of natural gas in this country. But like oil, it is a finite substance. Eventually, it, too, will peak and begin a decline of its own. Energy experts are less certain about when exactly this is likely to occur, but most see it coming a decade or so after oil’s peak.

Our biggest problem with natural gas is that we are gradually running out of North American reserves and so must increasingly rely on supplies from elsewhere -- in this case, in the form of liquefied natural gas, or LNG. Fully 45% of the world’s remaining reserves are, however, held by just three countries, Russia, Iran, and Qatar, while large amounts are also held by Algeria, Iraq, Kazakhstan, Saudi Arabia, Turkmenistan, and Venezuela. This means, of course, that we face the same geopolitical problems relying on natural gas as we do with oil.

Some say we should increase our reliance on nuclear power. Nuclear power’s attraction is that, once in operation, it does not emit carbon dioxide. It does, however, raise enormous safety issues and produces toxic radioactive wastes that must be stored for thousands, or even tens of thousands, of years in ultra-safe containers -- a technological challenge that has yet to be overcome. Given these problems, the rising costs and legal problems of building new reactors have deterred all but a few utilities from considering their construction, putting distinct limits on nuclear power’s capacity to overcome America’s energy crisis.

By far the most attractive alternative to oil and coal is obviously renewable energy, especially wind and solar power -- much praised but inadequately supported by politicians of both parties. These need no fuel source (save the sun and wind), are never used up, and emit no carbon dioxide. They seem the perfect solution to the planet’s energy and climate crises.

The full potential of wind and solar power, however, cannot be realized until at least two other hurdles are overcome: the development of efficient storage systems to collect energy when the sun and wind are strong and release it when they are not, and the construction of an expanded nationwide electrical grid to connect areas of reliable wind (especially the mountain states and high plains) and sunshine (the Southwest) with the areas of greatest need. These are bound to be costly endeavors, but until they are fully funded, wind and solar power will not be capable of replacing more than a tiny fraction of oil and coal in the nation’s overall energy mix. Unfortunately, against a backdrop of bad times in a new era of "cheap" oil that will not last, the likelihood of such funding at the levels needed has declined precipitously.

Much can be said about the potential of advanced biofuels (those not reliant on food crops like corn), geothermal energy, wave power, hydrogen power, and nuclear fusion, but these all remain in the same category as wind and solar (only more so): they show a lot of potential, but without substantially more research, development, and investment, they cannot help wean us from our reliance on oil and coal.

The Challenge to be Met

If this assessment is accurate, President Obama will face a tough, if not overwhelming, challenge in attempting to get the nation’s long-term energy crisis in hand. On coming into office in increasingly tough times, he will be besieged by a host of immediate crises and demands for funds. On energy, his natural inclination, given limited financial resources, will undoubtedly be to make a series of modest gestures toward "green energy independence." This coming crisis, the central one of our lifetimes and those of our children and grandchildren, cannot, unfortunately, be solved via small-scale course corrections.

Needed is a major White House-led initiative on the scale of the World War II Manhattan Project that produced the first atomic bomb or the Apollo Moon Project. The principal goals of such an epic undertaking would have to include:

1. Reducing oil’s contribution to America’s total energy supply by half over the next quarter century. This would require a comprehensive program of conservation, increased development of public transport, the accelerated development of electric-powered vehicles and advanced biofuels, and other technological innovations.

2. Gradually reducing U.S. reliance on coal, unless consumed in a climate-friendly manner, as well as providing government support for the development of carbon capture and storage technology.

3. Increasing the contribution of renewable energy sources to America’s total energy mix from their current 6% to at least 25%, if not significantly more, by 2030. This would require substantial public investment in new technologies and electrical power lines.

4. Demilitarizing America’s reliance on imported petroleum. This means repudiating the Carter Doctrine, dismantling the vast military apparatus created since 1980 to enforce that policy, and using the resulting savings -- as much as $150 billion per year, says a new report from the National Priorities Project -- to help finance the initiatives described above.

Only by embracing such goals can President Obama hope to overcome the long-term, potentially devastating energy crisis now facing this nation.

Obama's Historic Victory

Go to Original
By Howard Zinn

Those of us on the Left who have criticized Obama, as I have, for his failure to take bold positions on the war and on the economy, must join the exultation of those Americans, black and white, who shouted and wept Tuesday night as they were informed that Barack Obama had won the presidential election. It is truly a historic moment, that a black man will lead our country. The enthusiasm of the young, black and white, the hopes of their elders, cannot simply be ignored.

There was a similar moment a century and a half ago, in the year 1860, when Abraham Lincoln was elected president. Lincoln had been criticized harshly by the abolitionists, the anti-slavery movement, for his failure to take a clear, bold stand against slavery, for acting as a shrewd politician rather than a moral force. But when he was elected, the abolitionist leader Wendell Phillips, who had been an angry critic of Lincoln’s cautiousness, recognized the possibility in his election.

Phillips wrote that for the first time in the nation’s history “the slave has chosen a President of the United States.” Lincoln, he said, was not an abolitionist, but he in some way “consents to represent an antislavery position.” Like a pawn on the chessboard, Lincoln had the potential, if the American people acted vigorously, to be moved across the board, converted into a queen, and, as Phillips said, “sweep the board.”

Obama, like Lincoln, tends to look first at his political fortunes instead of making his decisions on moral grounds. But, as the first African American in the White House, elected by an enthusiastic citizenry which expects a decisive move towards peace and social justice, he presents a possibility for important change.

Obama becomes president in a situation which cries out for such change. The nation has been engaged in two futile and immoral wars, in Iraq and Afghanistan, and the American people have turned decisively against those wars. The economy is shaken by tremendous blows, and is in danger of collapsing, as families lose their homes and working people, including those in the middle class, lose their jobs, So the population is ready for change, indeed, desperate for change, and “change” was the word most used by Obama in his campaign.

What kind of change is needed? First, to announce the withdrawal of our troops from Iraq and Afghanistan, and to renounce the Bush doctrine of preventive war as well as the Carter doctrine of military action to control Mideast oil. He needs to radically change the direction of U.S. foreign policy, declare that the U.S. is a peace loving country which will not intervene militarily in other parts of the world, and start dismantling the military bases we have in over a hundred countries. Also he must begin meeting with Medvedev, the Russian leader, to reach agreement on the dismantling of the nuclear arsenals, in keeping with the Nuclear Anti-Proliferation Treaty.

This turn-around from militarism will free hundreds of billions of dollars. A tax program which will sharply increase taxes on the richest 1% of the nation, and will tax their wealth as well as their income, will yield more hundreds of billions of dollars.

With all that saved money, the government will be able to give free health care to everyone, put millions of people to work (which the so-called free market has not been able to do). In short, emulate the New Deal program, in which millions were given jobs by the government. This is just an outline of a program which could transform the United States and make it a good neighbor to the world.