Tuesday, January 6, 2009

Iceland bank sues UK government over collapse

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Iceland said on Monday state-controlled Kaupthing Bank was suing Britain over a decision to place the bank's British arm in administration, potentially reigniting a simmering diplomatic row.

The British Treasury placed Kaupthing Singer and Friedlander in administration on Oct 8, at the height of Iceland's financial crisis, saying it was doing so to protect British retail depositors.

A day later, Iceland took control of Kaupthing, the last of the three biggest commercial banks taken over as the North Atlantic island's financial system collapsed under the weight of tens of billions of dollars in foreign debts.

"The Resolution Committee of Kaupthing has decided to sue the British Government and has the full support of the government," a press release from the Icelandic prime minister's office said.

Iceland has long been angry at Britain's handling of the situation, which included the use of anti-terror legislation to seize the assets of Icelandic bank Landsbanki.

Prime Minister Geir Haarde referred to the matter repeatedly in the weeks that followed, always holding out the possibility of a lawsuit. Iceland has argued that Britain's actions helped bring about Kaupthing's failure prematurely.

The matter had threatened to derail a much-needed aid package for Iceland from the International Monetary Fund and several European countries. The aid was agreed in November but only after a breakthrough on how to compensate savers in Icelandic accounts in Britain, the Netherlands and Germany.

British Prime Minister Gordon Brown and the British Treasury have stood by the decisions taken.

A British Treasury spokesman said the Treasury was not aware of any legal action. But he said that the Financial Services Authority had judged Kaupthing's UK subsidiary to be unable to meet its obligations to depositors.

A spokesman for Haarde said Iceland felt that providing support for legal action, rather than bringing a suit directly, offered the best chance of success.

"The idea is that the Icelandic government provides financial support to the resolution committees," said Kristjan Kristjansson, press secretary for Haarde.

"After careful consideration, the government of Iceland believes that the resolution committees have a better case against British authorities, than the Icelandic government," Kristjansson said.

The statement said Iceland's government is also considering supporting a lawsuit by the resolution committee of Landsbanki and the government would discuss the matter on Tuesday.

US auto sales drop in 2008, recovery unclear

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After a year in which U.S. auto sales tumbled 18 percent and GM had its worst year in nearly a half-century amid slack demand fueled by a terrible economic outlook and growing job worries, automakers are reluctant to predict when a recovery might occur.

An even sharper sales decline in December alone means that record high rebates and low-interest financing deals will stick around until at least February. But those deals will likely disappear as the remaining 2008 models are sold and inventories are lowered to match demand.

One automaker, Hyundai Motor America, is trying to woo skittish buyers by promising to let them return cars for up to a year if they lose their jobs and can't make the payments.

Similar bold moves might be necessary throughout the year.

Toyota Motor Corp. said Tuesday that it is suspending production at all 12 of its Japan plants for 11 days over February and March.

The last time Toyota halted production at all its Japan plants was in August 1993, when demand plunged because of a rising yen, and that was for only one day, according to the company.

"We are coping with a slump in global sales," Toyota spokesman Hideaki Homma said Tuesday. "Demand in the world auto market is so depressed that every model is falling sharply in sales."

Toyota last year suspended production at its auto plants in Alabama, Indiana and Texas for three months, and shut down output for two days in December at all its North American vehicle factories including five in the United States, one in Canada and another in Mexico.

Chrysler LLC also shut down its plants for a month in December, longer than the usual two-week break, while General Motors Corp. has said it would shut down a plant in Thailand for up to two months.

On Monday, automakers said U.S. sales fell to 13.2 million in 2008, down 18 percent from 16.1 million in 2007. Consulting firm IHS Global Insight predicts that U.S. sales will drop to 10.3 million this year as the economy continues to sputter.

In December alone, U.S. sales plunged 36 percent.

Most automakers were pessimistic about the first quarter outlook. After that, some were hopeful that President-elect Barack Obama's stimulus package would kick in, coupled with a loosening of credit that could bring people back to the showrooms.

Every major manufacturer reported drops of more than 30 percent in December. Leading the largest year-over-year drop since the Arab oil embargo days of 1973-74 was struggling Chrysler LLC, which sold 53 percent fewer vehicles than last December and 30 percent fewer in 2008 than in 2007.

GM's sales of 2.9 million vehicles last year were down 23 percent and came in at the lowest number in 49 years.

Even Toyota and Honda Motor Co., which earlier in the year had seen increases, saw declines in December that were larger than their U.S.-based competitors'. Toyota was down 37 percent and Honda 35 percent, compared with Ford Motor Co.'s 32 percent drop and GM's 31 percent slide. Nissan Motor Co. sales also dropped 31 percent.

Ford's sales for 2008 fell 21 percent from a year earlier, keeping the Dearborn automaker in third place in the U.S. auto sales race behind GM and Toyota for the second straight year.

Chrysler, which received $4 billion in federal loans, attributed its nasty sales drop to the company reducing sales to low-profit fleet buyers such as rental car companies.

Some smaller manufacturers, though, fared better. Subaru of America Inc. said its U.S. sales crept 0.3 percent higher in 2008 on stronger sales of its Forester and Impreza models.

Auto sales started the year slightly under 2007's pace, but by May, U.S.-based automakers were suffering as gasoline prices started to rise toward $4 per gallon and people shifted from buying pickup trucks and sport utility vehicles to smaller, more efficient cars.

Then, in July, as gas prices neared their peak and the economy started to falter, sales tumbled and never recovered the rest of the year, even though gas subsided to under $2 per gallon.

Lower gas prices have cut into high-mileage gas-electric hybrid vehicles toward the end of the year. Toyota reported sales of the Prius, the top-selling hybrid in the U.S., fell 45 percent last month.

But Jim Lentz, president of Toyota Motor Sales USA, Lentz was optimistic that hybrid sales would rebound.

"We're going to see fuel prices creep up a bit," he said. "I think the overall greening of America is going to see an increase in hybrid (sales) as well."

GM's December results were boosted by heavy sales incentives, including financing offers announced last week after the Treasury Department said it would give $5 billion in federal aid to the Detroit automaker's ailing financing arm, GMAC LLC.

Michael Martin, who owns Chevrolet and Saturn dealerships in Manassas, Va., said he saw customer traffic and phone calls pick up almost immediately.

"I'd like to see (the financing offers) really take hold over the next 30 to 45 days," Martin said. "Hopefully, we'll start seeing some real upticks."

But Mark LaNeve, GM's vice president for North American marketing, said he expects sales incentives to drop as GM sells down 2008 models. It still will be competitive in areas such as midsize cars, where Toyota has been offering $3,500 incentives on its top-selling Camry model, LaNeve said.

Obama's Justice nominees signal end of Bush terror tactics

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By Greg Gordon

In filling four senior Justice Department positions Monday, President-elect Barack Obama signaled that he intends to roll back Bush administration counterterrorism policies authorizing harsh interrogation techniques, warrantless spying and indefinite detentions of terrorism suspects.

The most startling shift was Obama's pick of Indiana University law professor Dawn Johnsen to take charge of the Office of Legal Counsel, the unit that's churned out the legal opinions that provided a foundation for expanding President George W. Bush's national security powers.

Johnsen, who spent five years in the Office of Legal Counsel during the Clinton administration and served as its acting chief, has publicly assailed "Bush's corruption of our American ideals." Upon the release last spring of a secret Office of Legal Counsel memo that backed tactics approaching torture for interrogations of terrorism suspects, she excoriated the unit's lawyers for encouraging "horrific acts" and for advising Bush "that in fighting the war on terror, he is not bound by the laws Congress has enacted."

"One of the refreshing things about Dawn Johnsen's appointment is that she's almost a 180-degree shift from John Yoo and David Addington and (Vice President) Dick Cheney," said Harvard University law professor Laurence Tribe, referring to the main legal architects of the administration's approval of harsh interrogation tactics.

Walter Dellinger, a Duke University law professor, said that Johnsen's appointment "sends a very strong message that the administration intends to make sure that its power is exercised in conformity with constitutional rights and respect for civil liberties."

Obama also said that he'd nominate:

_ David Ogden, a top Justice Department official during the Clinton administration, as deputy attorney general, the No. 2 figure under attorney general nominee Eric Holder.

_ Elena Kagan, the dean of the Harvard University Law School and a former Clinton White House aide, as solicitor general. She'd be the first woman to hold the post.

_ Tom Perrelli, counsel to Clinton Attorney General Janet Reno from 1997 to 1999, as the associate attorney general who oversees civil matters.

Obama said that he hoped that the four appointees would restore "integrity, depth of experience and tenacity" to the lead federal law-enforcement agency, which has been battered by scandal.

"This is a superb set of appointments," said Dellinger, who headed the Office of Legal Counsel from 1993-96 and then served as U.S. solicitor general. "These four are highly accomplished in the profession and bring a stature to the job that will allow them to say no to the president when no is the correct answer."

While Obama fleshed out his Justice Department team, Democratic officials said that he'll name former Democratic congressman and Clinton White House chief of staff Leon Panetta to head the CIA, tapping a figure who once oversaw the secret budgets of spy agencies but lacks hands-on intelligence experience.

The Justice Department has yet to fully regain its image of independence since allegations of political influence mired the agency in scandal in 2007, leading to the resignations of Attorney General Alberto Gonzales and about a dozen other department and White House officials.

Congress still is seeking records related to allegations that nine U.S. attorneys were fired for political reasons, senior department employees skewed career hiring to favor Republican applicants and politics influenced the enforcement of voting-rights laws.

"It's clear that the Department of Justice has been savaged by the Bush administration and has been profoundly disgraced," Tribe said. "It's going to be a major task to rehabilitate it."

The task will be complicated, Tribe said, partly because Republican lawyers have been embedded in career jobs, and "a number of them will have to be reassigned to responsibilities and places where their ideological single-mindedness" doesn't interfere with their duties.

Obama's picks contrast with Bush's selection of Gonzales, who lacked Justice Department experience. Since stepping down as attorney general in September 2007, Gonzales has yet to find a job.

Without referencing Gonzales, Dellinger said that Obama's four picks are "great lawyers who have terrific jobs they can go back to and the strength to be a strong, independent voice for the law. They are not people who will be easily pushed around."

Erwin Chemerinsky, dean of the University of California-Irvine law school, praised them as "highly professional, experienced lawyers who are not partisans."

Ogden, a partner at the law firm of Wilmer Cutler Pickering Hale and Dorr, served as chief of the Justice Department's Civil Division from 1999 to 2001. He's led the Obama transition team's Justice Department review.

Kagan, the Solicitor General designate, lacks Supreme Court experience, but served as a Clinton White House adviser from 1995 to 1999 and has headed the Harvard Law School since 2003. Tribe hailed her as "the greatest dean I'd ever seen or imagined," and Chemerinsky said she "is held in incredibly high esteem across the spectrum.''

Perrelli, managing partner of the Washington office of the Chicago-based law firm of Jenner & Block, served for four years in the Clinton Justice Department, finishing as a deputy assistant attorney general in the Civil Division.

Johnsen, whom Dellinger hired to the Office of Legal Counsel, served in the unit for five years. During the presidential primaries, she joined Hillary Clinton's campaign in Indiana.

Willem Buiter warns of massive dollar collapse

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By Edmund Conway

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.

Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.

The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.

Writing on his blog , Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."

He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.

"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."

He said investors would, rightly, suspect that the US would have to generate major inflation to whittle away its debt and this dollar collapse means that the US has less leeway for major spending plans than politicians realise.

The Monstrosity of War

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By Dahr Jamail

"Foreseen for so many years: these evils, this monstrous violence, these massive agonies: no easier to bear."
-Robinson Jeffers, American poet

Agence France-Presse reports that the first person killed when the Israeli military began to enter Gaza on Saturday was a Palestinian child.

On Sunday, a Palestinian woman and her four children were blown to pieces when Israeli warplanes bombed their home. They are among the 521 victims (at the time of this writing) of the ongoing air and ground assault on the Gaza Strip by a 9,000 strong force, which the Israeli government has launched on one of the most densely populated tracts of land in the world, home to 1.5 million Palestinians, half of them under 17 years of age.

"The ground invasion was preceded by large scale artillery shelling from around 4 P.M., intended to ’soften’ the targets as artillery batteries deployed along the Strip in recent days began bombarding Hamas targets and open areas near the border," Israel’s Haaretz newspaper wrote of the onslaught. "Hundreds of shells were fired, including cluster bombs aimed at open areas."

Israel began the military assault on Gaza on November 4, breaking the truce that Hamas had observed for many months. It went on to block food supplies to be delivered into Gaza by the UN Relief Works and World Food Program. The next casualty was the crucial fuel delivery service used to run Gaza’s power plant. Finally, Israel banned journalists and aid workers from entering Gaza.

It is important to note that in mid-December, during a visit to Israel, UN Human Rights Investigator Richard Falk called the Israeli blockade of Gaza "a crime against humanity" and a "flagrant and massive violation of international law."

Falk, a professor emeritus of international law at Princeton University and United Nations special rapporteur on human rights in the Palestinian territories, urged the UN to invoke "the agreed norm of a responsibility to protect a civilian population being collectively punished by policies that amount to a Crime Against Humanity." Falk also called for an International Criminal Court investigation of Israeli military and civilian officials for potential prosecution.

For this, he was detained at Tel Aviv’s Ben Gurion Airport for 20 hours before being expelled from Israel.

As Israeli tanks and ground troops pour into Gaza to engage in the worst kind of combat (should we even measure types of warfare against one another?), urban warfare, the atrocities on both sides continue, and one may assume that the situation will only worsen with time, as it inevitably does in progressive stages of war.

"Operation Cast Lead" as Israel’s latest offensive is named, has claimed, since December 27, over 520 Palestinian lives. Gaza medical officials put the number of wounded at over 2,400, most of them civilians.

Hamas rockets have killed five Israelis, one of them a soldier and four of them civilians. As with Israeli attacks that kill and wound Palestinian civilians are a war crime, Hamas firing their grossly inaccurate rockets into Israel, which then wound and kill Israeli civilians, is also a war crime.

According to KPFA radio correspondent Sameh Habeeb, "Around 17 people [from the Al-Atatra family] were killed in Bait Lahia town north of Gaza. Amongst them were several children, two brothers, 20-year-olds and many old men who were all killed by one rocket." Habeeb also reports of Israeli war planes striking water plants, dozens of houses, the use of white phosphorous incendiary weapons and of at least 15 mosques having been bombed. Dozens of people have been killed in the attacks against the mosques. Israeli Foreign Minister Ms. Tzipi Livni explains patiently, "But a war is a war; these things can happen. This is not our intention, but we cannot avoid completely any kind of civilian casualties. But the responsibility for this lies on Hamas’ shoulders." The slaughter only compounds the hardships that Palestinians have suffered due to the severe shortages of food and medical supplies accruing from the two-year-old economic blockade imposed upon Gaza by Israel.

In 2006, Dov Weisglass, an adviser to the Israeli Prime Minister Ehud Olmert, said of the blockade: "The idea is to put the Palestinians on a diet, but not to make them die of hunger."

The UN has warned that there are "critical gaps" in aid reaching Gaza, despite claims from Livni that aid was getting through.

Christopher Gunness, the UN Relief and Works Agency (UNRWA) spokesman, dismisses the claim that there is no humanitarian crisis as an absurdity. He informs us, "The organization for which I work, UNRWA - has approximately 9 to 10,000 workers on the ground. They are speaking with the ordinary civilians in Gaza ... People are suffering. A quarter of all those being killed now are civilians [the majority of the over 2,400 wounded are civilians]. So when I hear people say we’re doing our best to avoid civilian casualties that rings very hollow indeed."

> From Iraq, I had reported on how the US military regularly blockaded cities during military operations, disconnecting power, food, water and medical supplies. Let us not forget the March 2003 US invasion of Iraq followed 12 and a half years of genocidal sanctions against that country, which claimed the lives of half a million children. The people of Iraq, like the people of Gaza, had been placed on a "diet."

Back in Gaza, the International Committee for the Red Cross said on Sunday its medical emergency team had been prevented by the Israeli military for a third day from entering the territory. Here again, is an uncanny similarity with the situation in Iraq, particularly during the two US sieges of Fallujah during 2004, when medical and aid teams were not allowed into the city, and teams already inside were regularly targeted by the military when they attempted to rescue the wounded.

KPFA correspondent Habeeb has reported of Israeli tanks preventing ambulances from reaching the wounded and of three paramedics and ambulance staff having been killed by the Israeli military while trying to rescue a family. Oxfam aid agency also reported on the incident. Journalist activist Ewa Jasiewicz reported, "On 31st December, around 2 am, two emergency medical services personnel were targeted by an Israeli missile as they attempted to reach injured in the Jabaliya region, northern Gaza. The first died immediately, the second soon after of complications from his internal injuries. Two days later, two more medics were injured in the area east of Gaza, again in the line of duty, again trying to reach the injured. Under the Geneva Conventions, Israel is obliged to allow and ensure safe passage to medical personnel to the injured. Instead, Israel routinely targets them."

I am aware that for those who have not experienced war firsthand, an accusation against a supposedly civilized government of the deliberate targeting of medical personnel, who are, in theory, protected by international law, is unbelievable and shocking. But there are others like me who have witnessed such tactics firsthand on several occasions. I saw it being used by the Israeli military during their assault on southern Lebanon during summer 2006, just as I had seen the US military doing in Fallujah in 2004.

Such is the madness of war.

Veteran journalist Robert Fisk describes war as "the total failure of the human spirit."

How can anyone expect the wide-scale butchering in Gaza to be any different when the dogs of war have been let loose? Psychosis, mental illness, the specious "logic" of it all: The fundamental assumption that war can ever solve a crisis is false. Has this not been apparent from the beginning of history?

"These events of war were performed not by atavistic savages following the code of archaic rituals, but usually by trained troops from societies boasting civilized values, humane laws, moral education, and aesthetic culture. Nor were these acts specific to one nation - typically Japanese, typically American, or German or Serbian ... Nor were they confined to exceptional psychopathic criminals among the troops. No: this is what wars do, what battles are; conventions of rampage on both a monstrous collective and monstrous individual scale, implacable archetypal behaviors, behaviors of an archetype, governed by, possessed by, commanded by Mars."

-James Hillman, Jungian psychologist, from "A Terrible Love of War"

At this point, it simply must be stopped. No human, no matter what their race, religion or nationality, should ever have to endure the effects of war.

Yet, impotent governments across the world remain unwilling to intervene, some conniving proactively to aggravate the distress of the targeted populations. Egypt has completely closed the Rafah crossing, effectively cutting off aid supplies to the hapless surviving residents of Gaza.

It is the United Nations, however, that must be granted the undisputed crowning glory of impotence. In a move tried and tested for years now, last Saturday evening, the United States, yet again wielding its veto power to protect the actions of Israel, blocked approval of a UN Security Council statement expressing concern at the escalation of violence between Israel and Hamas and calling for an immediate cease-fire in the Gaza Strip and southern Israel. Perhaps, there is consolation in the fact that this was no great loss because, had the statement been approved, it would still have remained an empty gesture unable to check the violence.

Frustrated by the untenable nature of the crisis and obviously angered by the veto power of the United States in the UN, president of the UN General Assembly, Miguel d’Escoto Brockman of Nicaragua, blasted the Israeli action, and said, "I think it’s a monstrosity; there’s no other way to name it ... Once again, the world is watching in dismay the dysfunctionality of the Security Council."

Professor Falk, in a recent article titled "Understanding the Gaza Catastrophe," writes, "The people of Gaza are victims of geopolitics at its inhumane worst: producing what Israel itself calls a ’total war’ against an essentially defenseless society that lacks any defensive military capability whatsoever and is completely vulnerable to Israeli attacks mounted by F-16 bombers and Apache helicopters. What this also means is that the flagrant violation of international humanitarian law, as set forth in the Geneva Conventions, is quietly set aside while the carnage continues and the bodies pile up. It additionally means that the UN is once more revealed to be impotent when its main members deprive it of the political will to protect a people subject to unlawful uses of force on a large scale. Finally, this means that the public can shriek and march all over the world, but that the killing will go on as if nothing is happening. The picture being painted day by day in Gaza is one that begs for renewed commitment to international law and the authority of the UN Charter, starting here in the United States, especially with a new leadership that promised its citizens change, including a less militarist approach to diplomatic leadership."

"And where two raging fires meet together, they do consume the thing that feeds their fury...," said Shakespeare in "The Taming of the Shrew." But one of the worst conflict conditions in the world indicates otherwise. The fury and the fire rage unabated.

Israeli Tank Fire Kills 40 at UN School: Medics

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By Nidal al-Mughrabi

Israeli tank shells killed at least 40 Palestinians on Tuesday at a U.N. school where civilians had taken shelter, medical officials said, in carnage likely to boost international pressure on Israel to halt a Gaza offensive.

A Palestinian boy, who fled his house with his family during Israel's offensive, stands at a United Nations school in Gaza January 6, 2009. (Suhaib Salem/Reuters)An Israeli army spokeswoman said she was looking into information on the incident at al-Fakhora school in Jabalya refugee camp, on the fourth day of a ground assault launched after a week of air strikes failed to end Hamas rocket salvoes.

People cut down by shrapnel lay in pools of blood on the street. Witnesses said two Israeli tanks shells exploded outside the school, killing at least 40 civilians -- Palestinians who had taken refuge there and residents of nearby buildings.

"I am not familiar with the news," Israeli Foreign Minister Tzipi Livni said, asked by reporters about incident.

"Unfortunately, (Hamas fighters) are hiding amongst civilians," she said, adding that Israel was trying to avoid civilian casualties.

In a separate incident earlier in the day, three Palestinians were killed in an air strike on another school run by the United Nations Relief and Works Agency.

The deaths in Gaza, home to 1.5 million people, raised to 75 the number of Palestinian civilians killed on Tuesday alone, according to medical officials.

The spike in civilian casualties could prove to be a turning point in Israel's "Operation Cast Lead," launched on December 19 with the declared aim of removing the Hamas rocket threat.

The killing of dozens of unarmed Lebanese in Israel's bombing in the village of Qana in the 2006 Lebanon war drained foreign support for its campaign against Hezbollah guerrillas. Israel said it had not known civilians were in the area.

In Washington, State Department spokesman Sean McCormack said the United States would like to seen "an immediate ceasefire that is durable, sustainable and not time-limited."

International efforts already under way to end the fighting have focused on securing a truce deal that would meet Israel's demand that Hamas, an Islamist group in charge of the Gaza Strip, could not rearm once hostilities end.

"If there is an end to terror, an end to the smuggling of ammunition from Sinai to Gaza, the Israeli fighting will stop," Israeli Prime Minister Ehud Olmert said, referring to rockets and other weaponry Hamas obtains through tunnels under the Gaza-Egypt border.

In fighting on Tuesday, Israeli forces pushed into the southern town of Khan Younis and battled Hamas militants on the outskirts of the city of Gaza. Palestinian medical officials said four militants were killed.

According to the Palestinian Health Ministry in the Gaza Strip, at least 629 Palestinians have been killed and more than 2,700 wounded since Israel began its offensive.

Ten Israelis, including three civilians hit by rocket fire, have been killed in the conflict. At least five rockets landed in Israel on Tuesday, including one that hit the town of Gadera, 28 km (17 miles) from Tel Aviv. A three-year-old girl was wounded.


A senior Israeli official said French President Nicolas Sarkozy, on a Middle East visit and in partnership with Egypt, was pursuing "a serious initiative" for a ceasefire.

Commenting on the deaths at Jabalya school, Sarkozy said during a visit to French U.N. peacekeepers in south Lebanon: "It reinforces my determination for all this to stop as quickly as possible. Time is working against us. We must find a solution."

Talks were focusing, the Israeli official said, on the size of an "international presence" along the blockaded Gaza-Egypt border, where rockets and other weapons have reached Hamas through a network of tunnels.

Tony Blair, the Middle East envoy of major powers sponsoring Israeli-Palestinian peace talks, said Sarkozy, the European Union and the United States were all in agreement that new anti-smuggling measures would be needed to clinch a ceasefire.

"What is being talked about is a credible plan to stop the smuggling," Blair, a former British prime minister, told reporters in Jerusalem.

He said he hoped the plan could be completed quickly and that enhanced Israeli security would lead to "a significant advance in opening up Gaza to the outside world."

Hamas, which has rebuffed Western demands to recognize Israel, end violence and accept existing interim peace deals, has demanded a lifting of the blockade of the Gaza Strip in any future ceasefire. It seized the territory in 2007.

Most of the deaths reported by Gaza hospitals in recent days have been civilians.

The Israeli military said it killed 130 militants since it began a ground assault on Saturday, a figure that suggested the total Palestinian death toll might be close to 700 and that bodies could still be on the battlefield.

Many of the Gaza Strip's 1.5 million people lack food, water or power. In southern Israel, schools remained closed and hundreds of thousands of people have been rushing to shelter at the sound of alarms heralding incoming rockets.

Iraqi Victims of Blackwater Shooting Await Trial With Guarded Hope

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By Jim Heintz

Iraqis wounded by gunfire in a Baghdad square 15 months ago are awaiting with guarded hopes the beginning of court proceedings against five former private Blackwater Worldwide security guards.

Abdul Amir Rahim shows a picture of his wounds during a meeting with a U.S. prosecutors to discuss the case against the Blackwater Worldwide guards indicted in the fatal September 2007 shooting in the Baghdad's Nisoor Square, in Baghdad, Saturday, Dec. 13, 2008. (AP Photo/Khalid Mohammed)The five men are to appear in a federal court in Washington, D.C., on Tuesday for an initial hearing on charges of manslaughter in the chaotic few minutes of shooting on Sept. 16, 2007 that killed 17 Iraqi civilians and wounded dozens more.

The defendants, who are expected to plead not guilty, contend they opened fire after coming under attack when a car in a State Department convoy they were escorting broke down. But people wounded in the outburst say the shooting was unprovoked.

"It all started when they began shooting without any cause," Samir Hobi, a taxi driver who was sitting in his car at the scene.

"Then the Blackwater vehicles came up on the wrong side and pushed my car away," said Hobi, who suffered a broken leg.

The North Carolina-based Blackwater is the largest contractor providing security in Iraq. Most of its work for the State Department is in protecting U.S. diplomats in Iraq - a job the agency is unable to handle on its own.

Many Iraqis saw the bloodshed in Nisoor Square as a demonstration of American brutality and arrogance and suspected the guards would never be called to account.

"I did not expect a trial to take place. I was really surprised and very happy to hear about the trial," said Farid Walid Hassoun, who was shot in the back as he cowered behind a concrete barrier.

"It never occurred to me that such a thing could happen," taxi driver Baraa Sadoun Ismael, another of the wounded, said of the trial. "Now I believe that justice does exist."

However, Ismael, like some of the other victims who spoke to The Associated Press, expressed disappointment that the guards would not face execution if convicted. The maximum sentence would be 30 years.

Kamil Amind, a director of the Iraqi Human Rights Ministry, also said the trial should have been held in Iraq. "It is a sovereignty issue. However, the trial in America represents the minimum level we can accept."

"The important thing for our ministry is to see that those who violated human rights take their punishment and that they should not escape from it," he said.

A sixth Blackwater guard struck a deal with prosecutors, turned on his former colleagues, and pleaded guilty to killing one Iraqi and wounding another.

But the case is far from open and shut. Blackwater radio logs made available to the AP in Washington last month cast doubt on prosecutors' claims that the guards' shooting was unprovoked. The log transcripts describe a hectic eight minutes in which the guards repeatedly reported incoming gunfire from insurgents and Iraqi police.

"Unless these guys are lying to their command watch in real time, making up stuff, that's real-time reporting that they were taking small arms fire," attorney Thomas Connolly, who represents one of the indicted guards, said in December.

The defense also is expected to argue that prosecutors used a law that covers soldiers and military contractors but not civilian contractors who work for the State Department.

Such arguments could seem obscure and inhumane to the victims.

"I don't know much about the American law system, but I want them to get the harshest punishment," said Hobi, the taxi driver whose leg was broken when his taxi was rammed by a Blackwater vehicle in the melee.

If convictions come, they could mollify the victims but not erase their memories of a horrific few minutes or the lingering physical pains

"They were shooting in the same way as my son does when he plays his video game, killing without remorse, without stopping," Hassoun said. "I lost the hearing in my right ear ... especially when I stand in a crowded area I hear only whistling, which annoys me very much."

Since that day, "I have visited many psychiatrists," said Hobi. "I have difficulty getting myself to sleep. If I sleep, I have nightmares reminding me of that incident."

Obama stimulus plan to include major corporate tax cuts

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By Jerry White

For weeks, spokesmen for the incoming Barack Obama administration have suggested that they would respond to the economic crisis by launching a massive program of public spending, with some supporters comparing the scope of the planned economic stimulus package to Roosevelt's New Deal measures during the Great Depression.

Details of Obama's proposals began to emerge on Monday, and it is clear that the US president-elect is proposing a relatively small "stimulus" package, which will include further massive tax incentives for corporate America. The provisions for ordinary people will do next to nothing to alleviate the impact of the greatest economic crisis since the Great Depression.

This weekend the Obama transition team revealed that 40 percent of the estimated $675-775 billion it plans to spend over the next two years on its economic package would be earmarked for tax cuts, with about half going to big business.

The Wall Street Journal noted that the "Obama tax-cut proposals, if enacted, could pack more punch in two years than either of George W. Bush's tax cuts did in their first two years." Many of Obama's proposals, the newspaper wrote, were, in fact, extensions of measures carried out by the Republican administration over the last eight years.

One such provision under the Obama plan would allow businesses to reduce taxes by claiming immediate depreciation of half of their spending on new equipment, rather than spreading out that depreciation over years.

Another would allow businesses to write off the huge losses they incurred last year and any suffered in 2009, enabling corporations to apply retroactively for refunds on taxes paid over the last five years.

Corporations will also get thousands of dollars in tax credits for each job supposedly created or retained.

Under the plan, ordinary working people will receive a tax credit worth up to $500 for individual workers and $1,000 for families—adding up to about $150 billion of the total package. This under conditions in which the decline in the value of US homes alone will lead to the wiping out of some $6 trillion in US household wealth.

This means families crushed by high levels of debt and other living expenses will either pay a little less in taxes or receive a rebate of a few hundred dollars. The new administration will also adjust payroll taxes for the current year, meaning an average worker is likely to see his or her paycheck increase by about $10 a week!

The proposed $300 billion in tax cuts were greater than expected and immediately won praise from Republicans who had criticized the previous focus on government spending. Senate Minority Leader Mitch McConnell (Rep.-Kentucky) praised the tax cuts, saying they were "the sort of thing we could have bipartisan agreement on," adding that "Republicans, by and large, think tax relief is a great way to get money to people immediately."

The Democrats, who will increase their majority when the 111th Congress convenes Tuesday, had said they hoped to have a stimulus package approved for Obama to sign immediately after being sworn in on January 20. Congressional leaders are now saying they will need until mid-February to craft a bipartisan agreement. Obama has said he wants an 80 percent approval from Congress—giving the Republican minority that was overwhelmingly defeated at the polls virtual veto power over the legislation.

In discussions with congressional leaders Monday, Republicans reportedly pressed for even larger tax cuts along with deep cuts to the federal budget to offset increased spending. For their part, Obama and leading Democrats, such as House Speaker Nancy Pelosi, insisted they would be "fiscally responsible" and vowed to carry out "radical reforms" to reduce spending.

Ten percent of the package is directed towards extending unemployment benefits or providing temporary extensions of health care coverage, even though millions are facing the loss of their incomes and medical benefits. On Friday, the Labor Department is expected to announce that another 500,000 jobs were lost in December, bringing to 2.4 million the number of jobs lost in 2008, the most since World War II.

While a portion of the stimulus money is directed toward public infrastructure improvements and aiding city and state governments, the Democrats, like the Republicans, insist these projects will be based on corporate profitability. Obama aides indicate that 80 percent of the 3 million jobs the package will supposedly create or "save" will be in the private sector, including private contractors working for the government.

In his weekly address, President-elect Obama said, "If we don't act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment." These measures, however, are likely to have little effect on the hemorrhaging of jobs, which is continuing unabated as manufacturing activity, consumer spending and lending contract sharply.

William Gale, a tax policy analyst at the Brookings Institution, told the Wall Street Journal that much of the money would likely go to companies that would have hired more people anyway. Other critics have noted that companies could simply add temporary or contract employees to qualify for the tax breaks. In addition, several corporations have already "retained" jobs by imposing unpaid holidays and reducing wages and benefits, as several corporations have already done.

During his campaign Obama said he would eliminate the Bush tax breaks for those making above $200,000. No tax increases on the wealthy, however, were included in the plan, with spokesmen for the incoming administration suggesting such measures would undermine efforts to encourage businesses to hire workers. According to the New York Times, his aides "have signaled that they will wait to let Mr. Bush's tax cuts for the wealthiest Americans expire in 2010, rather than try to repeal them sooner."

Just as he has done on foreign policy, Obama has embraced the most right-wing economic policies in order to defend the interests of America's financial elite. This will produce shock and disappointment, and ultimately anger and opposition, among working people who voted to end these reactionary policies.

On Monday Times columnist and economist Paul Krugman—who is one of the liberal media supporters of Obama—expressed concern over the Democrats' collaboration with the Republicans and warned that a stimulus package could be too little and too late to prevent a financial meltdown.

"The fact is that recent economic numbers have been terrifying, not just in the United States but around the world," he wrote. "Manufacturing, in particular, is plunging everywhere. Banks aren't lending; businesses and consumers aren't spending. Let's not mince words: This looks an awful lot like the beginning of a second Great Depression."

The precarious state of the US economy was underscored Monday with the reports of sharp declines in auto sales in December, closing out one of the worst years in the history of the US auto industry. GM, Ford, Toyota, Honda and Nissan all suffered more than 30 percent falloffs, with Chrysler sales plummeting by more than 50 percent.

Israel spreads death and destruction as it advances into Gaza

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By Barry Grey

The toll of Palestinians killed and wounded continues to rise rapidly as Israel intensifies its combined air and ground assault on the largely defenseless and starved Gaza Strip.

While Israel conducts a campaign of killing and collective punishment against the civilian population, the United States continues to block all diplomatic initiatives aimed at imposing a cease-fire. Since Israeli troops, tanks and artillery crossed the border into Gaza Saturday night, at least 64 more Palestinian civilians have been killed, bringing the total in the 11-day war to more than 530. The number of wounded is in the thousands.

According to press reports and statements from the Israeli military, Israeli forces have taken control of several towns north of Gaza City, cut the narrow enclave in half and surrounded Gaza City. There are also reports that Israeli forces are moving toward Gaza's southern border with Egypt in an attempt to cut off the last remaining connection, already restricted by the Egyptian regime, between the besieged population of 1.5 million Gazans and the outside world.

Israeli forces, enjoying total control of the air and advanced weaponry, are reportedly facing resistance from Hamas fighters, who are equipped only with primitive mortars and small arms. Israel has confirmed the death of one solider and the wounding of thirty others. Despite the Israeli ground assault and ongoing bombardment of homes, government buildings, mosques, fire stations, universities and ambulances, some 40 rockets were fired from Gaza into southern Israel on Sunday.

The ground offensive has cut power supplies and exacerbated an already catastrophic humanitarian crisis.

Gaza health officials said the dead since the start of the ground assault included a 12-year-old girl, five members of a single family, eight civilians killed by a tank shell in the northern Gaza town of Beit Lahiya and an ambulance driver.

At least five civilians were killed and many wounded on Sunday morning when Israeli shells fell on the market of Gaza City while people were stocking up on supplies.

Two young cousins and a five-year-old boy from another family were killed by shrapnel as they played on the flat roofs of their apartment buildings.

Israeli troops also killed a Palestinian demonstrator in the West Bank town of Qalqilya, near the separation barrier erected by Israel to wall in the inhabitants of the occupied West Bank.

Israel has called up tens of thousands of reservists for active duty and indicated it intends to remain in the areas it has seized for some time. It is not yet clear whether it intends to enter major urban centers such as Gaza City or the teeming refugee camps.

Israeli Defense Minister Ehud Barak said Saturday night that the fighting "won't be easy and it won't be short." A senior Israeli military official said Sunday the offensive was "not something measured in days or hours." "We are not desperate for an exit," the Israeli diplomat said.

The New York Times reported Monday that a senior Israeli military official said in a telephone briefing for foreign correspondents, "We don't plan to retake the Gaza Strip, but there are several places we control now and will control later. If it will be needed, we are prepared to stay there."

An Israeli Foreign Ministry spokesman said, "Regime change is not a stated goal." But "no one will shed too many tears if this eventually happens."

Reports from Gaza are sparse, since Israel has refused to allow correspondents into the territory. In so doing, the government is defying an order from the Israeli Supreme Court that it allow a small group of reporters into the region. The Western media, which is generally echoing the war propaganda of Israel, has said little about this enforced news blackout, which belies Israel's claims to be scrupulously avoiding civilian casualties and its repeated denials that a humanitarian crisis exists in Gaza. It is self-evident that Israel is banning reporters because it does not want the world to see up close the crimes it is committing against the Palestinian people.

However, no amount of propaganda and lies can conceal the fact that Israel, with the full support of the United States, is committing a war crime. Over the weekend, the European Commission condemned Israel, saying it was "blocking access to people who are suffering and dying," which it described as a breach of humanitarian law.

The scattered reports that are emerging from Gaza make clear that in the towns occupied by Israeli troops, such as Beit Lahiya and Beit Hanoun in the northern Gaza Strip, Israeli forces are going house to house, arresting the men and subjecting them to "interrogation." Many houses are being leveled in a campaign of collective punishment and mass terror.

According to some reports from the region close to the Israeli border, entire areas have been turned into virtual free-fire zones. USA Today on Monday cited Ashraf al-Masri, a 35-year-old taxi driver in Gaza, as saying Israeli troops are "shooting at anything that moves."

"There's no electricity. There's no water. There's fear," said al-Masri, who lives in Beit Hanoun. "What have we done to deserve this?"

The New York Times on Monday quoted a woman who came to the Shifa Hospital in Gaza City with a daughter, 15, who was wounded by shrapnel, "who said soldiers had taken over their house in Beit Lahiya and had detained the men, who she said were farmers. The family said the daughter was wounded when Israeli forces fired on the upper floors of the house."

The Times continued: "Another Gazan who lives near the border with Israel said the Israelis had destroyed many houses nearby that were identified as belonging to Hamas operatives."

From the press dispatches that have emerged, it is clear that a humanitarian crisis of immense proportions is unfolding in Gaza. The Financial Times on Monday cited Chris Gunness, spokesman for the United Nations Relief and Works Agency, who said "patients with injuries that were not life-threatening, even those who lost limbs during the bombardment, were being sent home for lack of beds and medical staff.

"He added that the ground attack has resulted in the destruction of more homes and prompted hundreds of Gazans to seek shelter with his agency."

Gaza City, with 400,000 people, has been left without electricity or water.

Tareq Abed Shafi, a professor of international law in Gaza City and a human rights activist, told the Financial Times, "I am 48 years old and I have never experienced such a terrifying situation in Gaza. They were striking everywhere."

The New York Times, hardly known for its sympathy for the Palestinians, published a front-page account Monday providing a sense of the suffering of ordinary Gazans. Entitled "Hospital Fills Up, Mainly With Civilians," the article described conditions in Gaza City's Shifa Hospital:

"The casualties at Shifa on Sunday—18 dead, hospital officials said, among a reported 30 around Gaza—were women, children and men who had been with children. One surgeon said he had performed five amputations.

"‘I don't know what kind of weapons Israel is using,' said a nurse, Ziad Abd al Jawwad, 41, who had been working 24 hours without a break. ‘There is so much amputation.'"

The article continued: "Dr. Mads Gilbert, a Norwegian who was allowed into Gaza last week to give emergency medical aid, and who has worked in many conflict zones, said the situation was the worst he had seen.

"The hospital lacked everything, he said: monitors, anesthesia, surgical equipment, heaters and spare parts..."

The article spoke of hospital workers constantly mopping up blood and noted, "A terrible stench is in the air."

It went on to quote Oved Yehezkel, the Israeli cabinet secretary, who said Sunday that "there is no humanitarian crisis in Gaza."

Separate diplomatic efforts have been launched by the European Union, French President Nicolas Sarkozy, Arab foreign ministers and Russia's special envoy to the Middle East to press for a cease-fire. The EU, Sarkozy and the Russian envoy are in the Middle East, meeting with the Israelis, the Egyptians, Palestinian Authority President Mahmoud Abbas and, in the case of Sarkozy, the Syrians. The Arab foreign ministers are in New York seeking to press the United Nations Security Council to take action.

However, they face the determined opposition of Israel and its main sponsor and military supplier, the United States. In any event, all of these groups are fundamentally hostile to Hamas and are seeking to fashion some agreement, acceptable to Israel, that would weaken Hamas's control over Gaza and block it from obtaining arms.

Some, such as Sarkozy, the EU and such Arab regimes as Egypt and Saudi Arabia, have echoed the propaganda of the US and Israel in placing the blame for the Israeli offensive on Hamas and legitimizing the Israeli assault as a matter of self-defense against Hamas rockets. In one way or another, they want to replace Hamas with an administration controlled by the US-Israeli puppet Abbas.

The specious claim that the Israeli offensive is a response to an increase in largely ineffectual, homemade rockets fired from Gaza into southern Israel was belied by an article in the fiercely pro-war Jerusalem Post, which noted on Monday:

"While a week passed between the beginning of the aerial strikes and the ground offensive, they are part of the same operation, the plan for which was drafted three years ago and had been practiced a number of times."

In other words, the Israeli plan to invade Gaza was drawn up at the time Hamas defeated the US- and Israeli-backed Fatah movement of Abbas and won Palestinian elections in January of 2006. Since then, Israel has been staging attacks and provocations designed to provide a pretext for carrying out its planned aggression.

President-elect Barack Obama continues to maintain his official silence on the Gaza crisis, thereby giving tacit support to Israel's actions. Other leading Democrats are not so discreet. Senate Majority Leader Harry Reid said on a Sunday talk show, "I think this terrorist organization, Hamas, has got to be put away."

Sections of the US media are all but openly calling for a settlement with Hamas and the Palestinians of genocidal proportions. The Wall Street Journal on Monday editorialized that "Hamas has to be destroyed as a military force." It praised the Israeli offensive, comparing it to the US "surge" in Iraq.

The same issue of the newspaper carried an op-ed piece by the prominent neo-conservative Max Boot, who said more than he intended when he wrote of the Israeli offensive: "The only comparable example of restraint is the conduct of the US armed forces in Iraq and Afghanistan."

Indeed, Israel is taking a page from US imperialism's book in its murderous attack on Gaza. Washington has killed over a million Iraqis in its neo-colonial war and occupation of that tortured country, destroying entire cities such as Fallujah. It has killed thousands in Afghanistan and is preparing to increase the bloodletting with a military "surge" there. Such is the model for Israel in Gaza.

US “surge” in Afghanistan threatens wider war

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The US and NATO are planning to create new supply lines from the Central Asian republics to occupation forces in Afghanistan, according to recent media accounts. The move comes in preparation for an expected doubling of US military personnel in Afghanistan under the Obama administration, and in response to an increasing number of attacks on its main supply route from Pakistan.

Currently, over 80 percent of all supplies for US and allied troops are unloaded at the Pakistani port of Karachi and then shipped northwards across Pakistan to Peshawar, ultimately arriving in Afghanistan through the Khyber Pass, the narrow mountain artery between the two countries.

As opposition to the US military among tribes in both Afghanistan and Pakistan has grown, attacks on supply convoys have become increasingly common. In a particularly bold attack, in December a large number of militants stormed supply depots in Peshawar, a Pakistani city of three million on the southern side of the Khyber Pass, destroying over 300 Humvees and trucks set for delivery to NATO forces in Afghanistan (See: "Insurgent attacks on NATO trucks highlight US military crisis in Afghanistan.")

The Pakistani military has responded to the degenerating security situation by occupying the Khyber Pass and carrying out reprisals against the tribes in the region. However, Islamabad's efforts will do little to allay Washington's concerns over the supply of material for its forces. It is doubtful that the Pakistani military will be able to reestablish control in the region, where fighters hostile to the US, and purportedly sympathetic to the Taliban, enjoy widespread support. Moreover, the survival of the Pakistani regime itself is in doubt, as a deepening economic and social crisis fuels popular hatred of the pro-American policies of the government.

The situation in US-occupied Afghanistan is even worse. The Karzai regime is universally hated, while militant attacks have taken place with increasing regularity and impunity throughout the nation. To cite one example, an Afghan tribal leader, Mullah Salam, from Musa Quala who last year announced his support for Karzai, has been the victim of repeated assassination attempts. Recently, a group of 30 fighters attacked Salam's house, killing more than 20 of his bodyguards.

It is in response to the tenuous nature of its main supply route through Pakistan, and in preparation for the intensification of the war in Afghanistan, that the US has stepped up efforts to gain cooperation among the former Soviet Republics along Afghanistan's northern border—Turkmenistan, Uzbekistan, and Tajikistan. It is also working to cut supply deals with Kazakhstan, the Caspian Sea state of Azerbaijan, and Russia.

The proposed expansion of the US supply routes for the Afghanistan war from Central Asia and the Caucuses is an ominous development. It reflects the expansionist and hegemonic aims of the US, which is determined to project its military, economic, and political influence into Central Asia at the expense of its main rivals in the region, China, Russia and Iran.

This was spelled out in a recent article in Asia Times Online by career Indian diplomat M K Bhadrakumar ("All roads lead out of Afghanistan"). "The US is robustly pushing for an increased military presence in the Russian (and Chinese) backyard in Central Asia," he writes, "on the ground that the exigencies of a stepped-up war effort in Afghanistan necessitate precisely such an expanded US military presence."

According to a recent account in the New York Times ("US to Widen Supply Routes in Afghan War") the US is trying to win concessions from the Central Asian countries, especially Uzbekistan and Tajikistan, by promising that shipments will be run by commercial enterprises and will not include weapons. Separately, NATO is attempting to work out an agreement whereby Russia would lift its ban on the transport of weapons via its airspace to Afghanistan.

However, the supply lines are only a first phase. The General Staff of the Russian armed forces, General Nikolai Makarov, who, according to Bhadrakumar "couldn't have spoken without Kremlin clearance," has recently "revealed Moscow had information to the effect that the US was pushing for new military bases in Kazakhstan and Uzbekistan."

As Bhadrakumar points out, the problem confronting the US is that there is currently no credible alternative land route to Afghanistan that does not traverse the territory of a rival power—either Russia, China, or Iran. The US may be preparing an alternative Caspian route that would pass through Georgia on the Black Sea, where the US is in the final stages of establishing a defense agreement, to Azerbaijan on the Caspian, and then the Central Asian states. This could also serve as an oil and gas route independent of Russia, and potentially expand NATO into the Caucuses and Central Asia, if European powers agree upon the necessity of a US-led defense of vital energy supplies.

The attempt to expand US influence in Central Asia comes after years in which its position in the region declined. The US used the 9/11 terrorist attacks on the World Trade Center in 2001 to launch the predatory war against Afghanistan. At the time, it was able to gain support from several Central Asian countries. But soon the US position eroded.

Rival organizations, such as the Collective Security Treaty Organization (CSTO) and the Shanghai Cooperation Organization (SCO) reasserted themselves. In 2005, Uzbekistan expelled US forces. Among the Central Asian states, currently only Kyrgyzstan allows the US to operate military bases on its territory.

During his campaign for the presidency, Barack Obama made the expansion of the US war in Afghanistan his central foreign policy objective. In so doing, he spoke for a section of the political establishment that believed the Bush administration's overriding emphasis on the war in Iraq had come at the expense of its position in Central Asia vis-à-vis China and Russia. The need for additional troops in Afghanistan has since become a consensus policy within the American ruling elite.

The US attempt to reverse its fortunes in Central Asia is being driven by very definite geo-strategic interests that will be pursued all the more aggressively under an Obama administration. Current Bush Defense Secretary, Robert Gates, who has been retained in the same position by Obama, outlines such a deepening war in the current issue of Foreign Affairs.

"To be blunt," Gates writes, "to fail—or to be seen to fail—in either Iraq or Afghanistan would be a disastrous blow to U.S. credibility, both among friends and allies and among potential adversaries ... Afghanistan in many ways poses an even more complex and difficult long-term challenge than Iraq—one that ... will require a significant U.S. military and economic commitment for some time."

The escalation of the US presence in Afghanistan and Central Asia stands as another warning that the economic crisis is exacerbating geopolitical tensions, posing the threat of a far wider and more destructive war.

The End of the Financial World as We Know It

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By Michael Lewis and David Einhorn

We enter the New Year in a strange new role: financial lunatics. We’ve been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet’s college graduates seemed to want nothing more out of life than a job on Wall Street.

This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don’t know what they are doing with money, who does?

Incredibly, intelligent people the world over remain willing to lend us money and even listen to our advice; they appear not to have realized the full extent of our madness. We have at least a brief chance to cure ourselves. But first we need to ask: of what?

To that end consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn’t be anything other than a fraud. Mr. Madoff’s investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.

In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the "Unlikely" scenario: Mr. Madoff, who acted as a broker as well as an investor, was "front-running" his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.’s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.

In the "Highly Likely" scenario, wrote Mr. Markopolos, "Madoff Securities is the world’s largest Ponzi Scheme." Which, as we now know, it was.

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 -- more than three years before Mr. Madoff was finally exposed -- but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff -- he wasn’t an unhappy investor or a disgruntled employee. There was no way to short shares in Madoff Securities, and so Mr. Markopolos could not have made money directly from Mr. Madoff’s failure. To judge from his letter, Harry Markopolos anticipated mainly downsides for himself: he declined to put his name on it for fear of what might happen to him and his family if anyone found out he had written it. And yet the S.E.C.’s cursory investigation of Mr. Madoff pronounced him free of fraud.

What’s interesting about the Madoff scandal, in retrospect, is how little interest anyone inside the financial system had in exposing it. It wasn’t just Harry Markopolos who smelled a rat. As Mr. Markopolos explained in his letter, Goldman Sachs was refusing to do business with Mr. Madoff; many others doubted Mr. Madoff’s profits or assumed he was front-running his customers and steered clear of him. Between the lines, Mr. Markopolos hinted that even some of Mr. Madoff’s investors may have suspected that they were the beneficiaries of a scam. After all, it wasn’t all that hard to see that the profits were too good to be true. Some of Mr. Madoff’s investors may have reasoned that the worst that could happen to them, if the authorities put a stop to the front-running, was that a good thing would come to an end.

The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it. "Greed" doesn’t cut it as a satisfying explanation for the current financial crisis. Greed was necessary but insufficient; in any case, we are as likely to eliminate greed from our national character as we are lust and envy. The fixable problem isn’t the greed of the few but the misaligned interests of the many.

A lot has been said and written, for instance, about the corrupting effects on Wall Street of gigantic bonuses. What happened inside the major Wall Street firms, though, was more deeply unsettling than greedy people lusting for big checks: leaders of public corporations, especially financial corporations, are as good as required to lead for the short term.

Richard Fuld, the former chief executive of Lehman Brothers, E. Stanley O’Neal, the former chief executive of Merrill Lynch, and Charles O. Prince III, Citigroup’s chief executive, may have paid themselves humongous sums of money at the end of each year, as a result of the bond market bonanza. But if any one of them had set himself up as a whistleblower -- had stood up and said "this business is irresponsible and we are not going to participate in it" -- he would probably have been fired. Not immediately, perhaps. But a few quarters of earnings that lagged behind those of every other Wall Street firm would invite outrage from subordinates, who would flee for other, less responsible firms, and from shareholders, who would call for his resignation. Eventually he’d be replaced by someone willing to make money from the credit bubble.

OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

The credit-rating agencies, for instance.

Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake -- one that deserves a lot more attention than it has received -- lies in their area of putative expertise: measuring corporate risk.

Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, "If you put one more risky asset on your balance sheet, you will face a serious downgrade."

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

This is a subject that might be profitably explored in Washington. There are many questions an enterprising United States senator might want to ask the credit-rating agencies. Here is one: Why did you allow MBIA to keep its triple-A rating for so long? In 1990 MBIA was in the relatively simple business of insuring municipal bonds. It had $931 million in equity and only $200 million of debt -- and a plausible triple-A rating.

By 2006 MBIA had plunged into the much riskier business of guaranteeing collateralized debt obligations, or C.D.O.’s. But by then it had $7.2 billion in equity against an astounding $26.2 billion in debt. That is, even as it insured ever-greater risks in its business, it also took greater risks on its balance sheet.

Yet the rating agencies didn’t so much as blink. On Wall Street the problem was hardly a secret: many people understood that MBIA didn’t deserve to be rated triple-A. As far back as 2002, a hedge fund called Gotham Partners published a persuasive report, widely circulated, entitled: "Is MBIA Triple A?" (The answer was obviously no.)

At the same time, almost everyone believed that the rating agencies would never downgrade MBIA, because doing so was not in their short-term financial interest. A downgrade of MBIA would force the rating agencies to go through the costly and cumbersome process of re-rating tens of thousands of credits that bore triple-A ratings simply by virtue of MBIA’s guarantee. It would stick a wrench in the machine that enriched them. (In June, finally, the rating agencies downgraded MBIA, after MBIA’s failure became such an open secret that nobody any longer cared about its formal credit rating.)

The S.E.C. now promises modest new measures to contain the damage that the rating agencies can do -- measures that fail to address the central problem: that the raters are paid by the issuers.

But this should come as no surprise, for the S.E.C. itself is plagued by similarly wacky incentives. Indeed, one of the great social benefits of the Madoff scandal may be to finally reveal the S.E.C. for what it has become.

Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors. (The task it has performed most diligently during this crisis has been to question, intimidate and impose rules on short-sellers -- the only market players who have a financial incentive to expose fraud and abuse.)

The instinct to avoid short-term political heat is part of the problem; anything the S.E.C. does to roil the markets, or reduce the share price of any given company, also roils the careers of the people who run the S.E.C. Thus it seldom penalizes serious corporate and management malfeasance -- out of some misguided notion that to do so would cause stock prices to fall, shareholders to suffer and confidence to be undermined. Preserving confidence, even when that confidence is false, has been near the top of the S.E.C.’s agenda.

IT’S not hard to see why the S.E.C. behaves as it does. If you work for the enforcement division of the S.E.C. you probably know in the back of your mind, and in the front too, that if you maintain good relations with Wall Street you might soon be paid huge sums of money to be employed by it.

The commission’s most recent director of enforcement is the general counsel at JPMorgan Chase; the enforcement chief before him became general counsel at Deutsche Bank; and one of his predecessors became a managing director for Credit Suisse before moving on to Morgan Stanley. A casual observer could be forgiven for thinking that the whole point of landing the job as the S.E.C.’s director of enforcement is to position oneself for the better paying one on Wall Street.

At the back of the version of Harry Markopolos’s brave paper currently making the rounds is a copy of an e-mail message, dated April 2, 2008, from Mr. Markopolos to Jonathan S. Sokobin. Mr. Sokobin was then the new head of the commission’s office of risk assessment, a job that had been vacant for more than a year after its previous occupant had left to -- you guessed it -- take a higher-paying job on Wall Street.

At any rate, Mr. Markopolos clearly hoped that a new face might mean a new ear -- one that might be receptive to the truth. He phoned Mr. Sokobin and then sent him his paper. "Attached is a submission I’ve made to the S.E.C. three times in Boston," he wrote. "Each time Boston sent this to New York. Meagan Cheung, branch chief, in New York actually investigated this but with no result that I am aware of. In my conversations with her, I did not believe that she had the derivatives or mathematical background to understand the violations."

How does this happen? How can the person in charge of assessing Wall Street firms not have the tools to understand them? Is the S.E.C. that inept? Perhaps, but the problem inside the commission is far worse -- because inept people can be replaced. The problem is systemic. The new director of risk assessment was no more likely to grasp the risk of Bernard Madoff than the old director of risk assessment because the new guy’s thoughts and beliefs were guided by the same incentives: the need to curry favor with the politically influential and the desire to keep sweet the Wall Street elite.

And here’s the most incredible thing of all: 18 months into the most spectacular man-made financial calamity in modern experience, nothing has been done to change that, or any of the other bad incentives that led us here in the first place.

SAY what you will about our government’s approach to the financial crisis, you cannot accuse it of wasting its energy being consistent or trying to win over the masses. In the past year there have been at least seven different bailouts, and six different strategies. And none of them seem to have pleased anyone except a handful of financiers.

When Bear Stearns failed, the government induced JPMorgan Chase to buy it by offering a knockdown price and guaranteeing Bear Stearns’s shakiest assets. Bear Stearns bondholders were made whole and its stockholders lost most of their money.

Then came the collapse of the government-sponsored entities, Fannie Mae and Freddie Mac, both promptly nationalized. Management was replaced, shareholders badly diluted, creditors left intact but with some uncertainty. Next came Lehman Brothers, which was, of course, allowed to go bankrupt. At first, the Treasury and the Federal Reserve claimed they had allowed Lehman to fail in order to signal that recklessly managed Wall Street firms did not all come with government guarantees; but then, when chaos ensued, and people started saying that letting Lehman fail was a dumb thing to have done, they changed their story and claimed they lacked the legal authority to rescue the firm.

But then a few days later A.I.G. failed, or tried to, yet was given the gift of life with enormous government loans. Washington Mutual and Wachovia promptly followed: the first was unceremoniously seized by the Treasury, wiping out both its creditors and shareholders; the second was batted around for a bit. Initially, the Treasury tried to persuade Citigroup to buy it -- again at a knockdown price and with a guarantee of the bad assets. (The Bear Stearns model.) Eventually, Wachovia went to Wells Fargo, after the Internal Revenue Service jumped in and sweetened the pot with a tax subsidy.

In the middle of all this, Treasury Secretary Henry M. Paulson Jr. persuaded Congress that he needed $700 billion to buy distressed assets from banks -- telling the senators and representatives that if they didn’t give him the money the stock market would collapse. Once handed the money, he abandoned his promised strategy, and instead of buying assets at market prices, began to overpay for preferred stocks in the banks themselves. Which is to say that he essentially began giving away billions of dollars to Citigroup, Morgan Stanley, Goldman Sachs and a few others unnaturally selected for survival. The stock market fell anyway.

It’s hard to know what Mr. Paulson was thinking as he never really had to explain himself, at least not in public. But the general idea appears to be that if you give the banks capital they will in turn use it to make loans in order to stimulate the economy. Never mind that if you want banks to make smart, prudent loans, you probably shouldn’t give money to bankers who sunk themselves by making a lot of stupid, imprudent ones. If you want banks to re-lend the money, you need to provide them not with preferred stock, which is essentially a loan, but with tangible common equity -- so that they might write off their losses, resolve their troubled assets and then begin to make new loans, something they won’t be able to do until they’re confident in their own balance sheets. But as it happened, the banks took the taxpayer money and just sat on it.

Mr. Paulson must have had some reason for doing what he did. No doubt he still believes that without all this frantic activity we’d be far worse off than we are now. All we know for sure, however, is that the Treasury’s heroic deal-making has had little effect on what it claims is the problem at hand: the collapse of confidence in the companies atop our financial system.

Weeks after receiving its first $25 billion taxpayer investment, Citigroup returned to the Treasury to confess that -- lo! -- the markets still didn’t trust Citigroup to survive. In response, on Nov. 24, the Treasury handed Citigroup another $20 billion from the Troubled Assets Relief Program, and then simply guaranteed $306 billion of Citigroup’s assets. The Treasury didn’t ask for its fair share of the action, or management changes, or for that matter anything much at all beyond a teaspoon of warrants and a sliver of preferred stock. The $306 billion guarantee was an undisguised gift. The Treasury didn’t even bother to explain what the crisis was, just that the action was taken in response to Citigroup’s "declining stock price."

Three hundred billion dollars is still a lot of money. It’s almost 2 percent of gross domestic product, and about what we spend annually on the departments of Agriculture, Education, Energy, Homeland Security, Housing and Urban Development and Transportation combined. Had Mr. Paulson executed his initial plan, and bought Citigroup’s pile of troubled assets at market prices, there would have been a limit to our exposure, as the money would have counted against the $700 billion Mr. Paulson had been given to dispense. Instead, he in effect granted himself the power to dispense unlimited sums of money without Congressional oversight. Now we don’t even know the nature of the assets that the Treasury is standing behind. Under TARP, these would have been disclosed.

THERE are other things the Treasury might do when a major financial firm assumed to be "too big to fail" comes knocking, asking for free money. Here’s one: Let it fail.

Not as chaotically as Lehman Brothers was allowed to fail. If a failing firm is deemed "too big" for that honor, then it should be explicitly nationalized, both to limit its effect on other firms and to protect the guts of the system. Its shareholders should be wiped out, and its management replaced. Its valuable parts should be sold off as functioning businesses to the highest bidders -- perhaps to some bank that was not swept up in the credit bubble. The rest should be liquidated, in calm markets. Do this and, for everyone except the firms that invented the mess, the pain will likely subside.

This is more plausible than it may sound. Sweden, of all places, did it successfully in 1992. And remember, the Federal Reserve and the Treasury have already accepted, on behalf of the taxpayer, just about all of the downside risk of owning the bigger financial firms. The Treasury and the Federal Reserve would both no doubt argue that if you don’t prop up these banks you risk an enormous credit contraction -- if they aren’t in business who will be left to lend money? But something like the reverse seems more true: propping up failed banks and extending them huge amounts of credit has made business more difficult for the people and companies that had nothing to do with creating the mess. Perfectly solvent companies are being squeezed out of business by their creditors precisely because they are not in the Treasury’s fold. With so much lending effectively federally guaranteed, lenders are fleeing anything that is not.

Rather than tackle the source of the problem, the people running the bailout desperately want to reinflate the credit bubble, prop up the stock market and head off a recession. Their efforts are clearly failing: 2008 was a historically bad year for the stock market, and we’ll be in recession for some time to come. Our leaders have framed the problem as a "crisis of confidence" but what they actually seem to mean is "please pay no attention to the problems we are failing to address."

In its latest push to compel confidence, for instance, the authorities are placing enormous pressure on the Financial Accounting Standards Board to suspend "mark-to-market" accounting. Basically, this means that the banks will not have to account for the actual value of the assets on their books but can claim instead that they are worth whatever they paid for them.

This will have the double effect of reducing transparency and increasing self-delusion (gorge yourself for months, but refuse to step on a scale, and maybe no one will realize you gained weight). And it will fool no one. When you shout at people "be confident," you shouldn’t expect them to be anything but terrified.

If we are going to spend trillions of dollars of taxpayer money, it makes more sense to focus less on the failed institutions at the top of the financial system and more on the individuals at the bottom. Instead of buying dodgy assets and guaranteeing deals that should never have been made in the first place, we should use our money to A) repair the social safety net, now badly rent in ways that cause perfectly rational people to be terrified; and B) transform the bailout of the banks into a rescue of homeowners.

We should begin by breaking the cycle of deteriorating housing values and resulting foreclosures. Many homeowners realize that it doesn’t make sense to make payments on a mortgage that exceeds the value of their house. As many as 20 million families face the decision of whether to make the payments or turn in the keys. Congress seems to have understood this problem, which is why last year it created a program under the Federal Housing Authority to issue homeowners new government loans based on the current appraised value of their homes.

And yet the program, called Hope Now, seems to have become one more excellent example of the unhappy political influence of Wall Street. As it now stands, banks must initiate any new loan; and they are loath to do so because it requires them to recognize an immediate loss. They prefer to "work with borrowers" through loan modifications and payment plans that present fewer accounting and earnings problems but fail to resolve and, thereby, prolong the underlying issues. It appears that the banking lobby also somehow inserted into the law the dubious requirement that troubled homeowners repay all home equity loans before qualifying. The result: very few loans will be issued through this program.

THIS could be fixed. Congress might grant qualifying homeowners the ability to get new government loans based on the current appraised values without requiring their bank’s consent. When a corporation gets into trouble, its lenders often accept a partial payment in return for some share in any future recovery. Similarly, homeowners should be permitted to satisfy current first mortgages with a combination of the proceeds of the new government loan and a share in any future recovery from the future sale or refinancing of their homes. Lenders who issued second mortgages should be forced to release their claims on property. The important point is that homeowners, not lenders, be granted the right to obtain new government loans. To work, the program needs to be universal and should not require homeowners to file for bankruptcy.

There are also a handful of other perfectly obvious changes in the financial system to be made, to prevent some version of what has happened from happening all over again. A short list:

Stop making big regulatory decisions with long-term consequences based on their short-term effect on stock prices. Stock prices go up and down: let them. An absurd number of the official crises have been negotiated and resolved over weekends so that they may be presented as a fait accompli "before the Asian markets open." The hasty crisis-to-crisis policy decision-making lacks coherence for the obvious reason that it is more or less driven by a desire to please the stock market. The Treasury, the Federal Reserve and the S.E.C. all seem to view propping up stock prices as a critical part of their mission -- indeed, the Federal Reserve sometimes seems more concerned than the average Wall Street trader with the market’s day-to-day movements. If the policies are sound, the stock market will eventually learn to take care of itself.

End the official status of the rating agencies. Given their performance it’s hard to believe credit rating agencies are still around. There’s no question that the world is worse off for the existence of companies like Moody’s and Standard & Poor’s. There should be a rule against issuers paying for ratings. Either investors should pay for them privately or, if public ratings are deemed essential, they should be publicly provided.

Regulate credit-default swaps. There are now tens of trillions of dollars in these contracts between big financial firms. An awful lot of the bad stuff that has happened to our financial system has happened because it was never explained in plain, simple language. Financial innovators were able to create new products and markets without anyone thinking too much about their broader financial consequences -- and without regulators knowing very much about them at all. It doesn’t matter how transparent financial markets are if no one can understand what’s inside them. Until very recently, companies haven’t had to provide even cursory disclosure of credit-default swaps in their financial statements.

Credit-default swaps may not be Exhibit No. 1 in the case against financial complexity, but they are useful evidence. Whatever credit defaults are in theory, in practice they have become mainly side bets on whether some company, or some subprime mortgage-backed bond, some municipality, or even the United States government will go bust. In the extreme case, subprime mortgage bonds were created so that smart investors, using credit-default swaps, could bet against them. Call it insurance if you like, but it’s not the insurance most people know. It’s more like buying fire insurance on your neighbor’s house, possibly for many times the value of that house -- from a company that probably doesn’t have any real ability to pay you if someone sets fire to the whole neighborhood. The most critical role for regulation is to make sure that the sellers of risk have the capital to support their bets.

Impose new capital requirements on banks. The new international standard now being adopted by American banks is known in the trade as Basel II. Basel II is premised on the belief that banks do a better job than regulators of measuring their own risks -- because the banks have the greater interest in not failing. Back in 2004, the S.E.C. put in place its own version of this standard for investment banks. We know how that turned out. A better idea would be to require banks to hold less capital in bad times and more capital in good times. Now that we have seen how too-big-to-fail financial institutions behave, it is clear that relieving them of stringent requirements is not the way to go.

Another good solution to the too-big-to-fail problem is to break up any institution that becomes too big to fail.

Close the revolving door between the S.E.C. and Wall Street. At every turn we keep coming back to an enormous barrier to reform: Wall Street’s political influence. Its influence over the S.E.C. is further compromised by its ability to enrich the people who work for it. Realistically, there is only so much that can be done to fix the problem, but one measure is obvious: forbid regulators, for some meaningful amount of time after they have left the S.E.C., from accepting high-paying jobs with Wall Street firms.

But keep the door open the other way. If the S.E.C. is to restore its credibility as an investor protection agency, it should have some experienced, respected investors (which is not the same thing as investment bankers) as commissioners. President-elect Barack Obama should nominate at least one with a notable career investing capital, and another with experience uncovering corporate misconduct. As it happens, the most critical job, chief of enforcement, now has a perfect candidate, a civic-minded former investor with firsthand experience of the S.E.C.’s ineptitude: Harry Markopolos.

The funny thing is, there’s nothing all that radical about most of these changes. A disinterested person would probably wonder why many of them had not been made long ago. A committee of people whose financial interests are somehow bound up with Wall Street is a different matter.

Atrocities in Gaza: Piecing Together the Story

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By Liliana Segura

A week ago, Israeli Defense Minister Ehud Barak announced that "Operation Cast Lead," as the current bombing of Gaza has been dubbed, "will continue until all its goals are met."

Whatever those goals are, exactly, they are clearly incomplete; Barak told Israel’s Army Radio, the strikes would intensify "as much as needed to meet the goals we set for ourselves, to bring quiet to the south."

Over a week after the start of this blood-soaked chapter in the Israel/Palestine saga, there is no quiet but the silence of the dead -- over 530, and counting. On Sunday, Israeli ground troops entered Gaza, escalating the violence. "At least 75 Palestinians have been killed since Saturday," the AFP reported on Monday, "when Israel upped a weeklong bombardment of Hamas targets in Gaza by pouring in ground troops into the densely populated territory."

More recently, it has been reported in the UK Times Online that the Israel Defense Forces is using white phosphorus in its attacks, a controversial substance that can cause excruciating burns, but nevertheless is not illegal if it is only used as a smokescreen. Banned by the Geneva conventions, white phosphorus has been used by the U.S. military in Iraq:

"...[T]he tell-tale shells could be seen spreading tentacles of thick white smoke to cover the troops’ advance. "These explosions are fantastic looking, and produce a great deal of smoke that blinds the enemy so that our forces can move in," said one Israeli security expert. Burning blobs of phosphorus would cause severe injuries to anyone caught beneath them and force would-be snipers or operators of remote-controlled booby traps to take cover. Israel admitted using white phosphorus during its 2006 war with Lebanon."

After a week of doing pretty much nothing, Western leaders have started to respond to the crisis, with French President Nicolas Sarkozy and (otherwise MIA) Middle East special envoy Tony Blair arriving in the region on Monday.

"We in Europe want a cease-fire as quickly as possible," Sarkozy said. "… The guns must fall silent, there must be a humanitarian truce. Everyone must understand that what is at stake here is not just an issue of Israel and Palestinians, it is a global issue, and it is the whole world which will help you find a solution."

Israeli officials continue to deny that there is a humanitarian crisis in Gaza. "There is no humanitarian crisis in the Strip, and therefore there is no need for a humanitarian truce," Israeli Foreign Minister Tzipi Livni said during a visit to Paris on New Year’s Day.

Reports out of Gaza prove otherwise. As of Sunday, local hospitals were relying on generators for electricity. "The U.N. has warned that power networks were down in large parts of the Gaza Strip on 4 January, with hospitals relying on generators," reported the U.N. Office for the Coordination of Humanitarian Affairs. "Without power for pumps, 70 percent of Gazans are estimated to be without tap water."

According to IRIN:

Israel has been blocking fuel supplies, and stocks are dwindling, the latest (Jan. 4) report by the U.N.’s humanitarian coordinator in the occupied Palestinian territories said.

The Israeli Gisha organization, a nongovernmental organization, said seven of the 12 electricity lines in the enclave (the 12 lines normally supply about 70 percent of Gaza’s electricity) were down and warned that the lack of power was causing sewage to flood into populated areas and farmland. There continued to be a risk of sustained flooding.

"The water and sewage system in Gaza is collapsing, cutting people off from the water supply and causing sewage to flood the streets," said Maher al-Najjar, deputy director of Gaza’s water utility, CMWU. He also said 48 of Gaza’s 130 wells were not working at all due to lack of electricity and damage to pipes. "At least 45 other wells are operating only partially and will shut down within days without additional supplies of fuel and electricity," al-Najjar said.

The question of whether there is a humanitarian crisis was further debated on Democracy Now on Monday morning, in a heated debate between Christopher Gunness of the United Nations Relief and Works Agency -- called in from Gaza, where he works to provide aid to some 750,000 refugees -- and Meagan Buren, a spokeswoman for the Israel Project in Washington.

Host Amy Goodman also interviewed Phyllis Bennis from the Institute for Policy Studies, who described the happenings over the weekend at the United Nations:

Bennis: … As we’ve seen so many times before, we have an instance of the United States preventing the Security Council from taking any action in the crisis in Gaza, whether it would be an actual move to impose a cease-fire, but they even went further than that to prevent even a statement from being issued, the sort of the lowest level of response from the Security Council. The U.N. diplomats essentially said exactly what Condoleezza Rice said two years ago at the time of the Israeli attack on Lebanon, when she went before the council and said, "We don’t want a cease-fire yet," essentially telling the world, there is not enough dead people yet. We want more dead people before we will call for a cease-fire. And that has been the consistent position of the Bush administration, including President Bush himself on his weekly radio address, and it was the same position taken this weekend.

Also on the program was Sameh A. Habeeb, a Palestinian journalist who has a blog, gazatoday.blogspot.com. Habeeb described the dividing of Gaza by the Israeli military:

… Gaza yesterday was being cut into two pieces. The north of Gaza and Gaza City are being cut from the south and the middle areas of the Gaza Strip. No one is allowed to go out or in …

In the area where I live, in the east of Gaza, the artillery shelling is still taking place. And a few minutes ago, around three shells landed in my area. And one guy was killed, and two were injured in hitting two houses. And this was one family.

Meanwhile, Israel’s ban on foreign reporters from Gaza is raising protest. "Israel has never restricted media access like this before, and it should be ashamed," said Ethan Bronner, the New York Times bureau chief in Jerusalem. "It’s betraying the principles by which it claims to live."

Not that the corporate U.S. media has been particularly balanced in its reporting to begin with. Over at the Huffington Post, Max Blumenthal examines the coverage since the start of the raids:

Almost as soon as the first Israeli missile struck the Gaza Strip, a veteran cheering squad suited up to support the home team. "Israel is so scrupulous about civilian life," Charles Krauthammer claimed in the Washington Post. Echoing Krauthammer, Alan Dershowitz called the Israeli attack on Gaza, "Perfectly ’Proportionate.’ " And in the New York Times, Israeli historian Benny Morris described his country’s airstrikes as "highly efficient."

Despite this, Blumenthal notes that Americans don’t seem to be showing the same lockstep support of Israel as the media is:

"So what accounts for the surprising trend in American opinion on Gaza? The proliferation of progressive online media and social networking sites could be a factor, but I have another theory: The same pundits who are cheerleading Israel’s assault on Gaza once sold the occupation of Iraq to America, and with a nearly identical set of arguments."

Meanwhile, Barack Obama has been coming under fire for his silence on the Gaza attacks. Chris Hedges recently wrote, the president-elect’s "only comment on the one-sided slaughter under way in Gaza was: ’If my daughters were living in a house that was being threatened by rocket attacks, I would do whatever it takes to end that situation.’ "

If self-defense applies to Israel, why doesn’t it apply to the Rayan family? -- while still-President George W. Bush seems hardly capable of mustering the energy to sound sincere about his hopes for a cease-fire (which he calls a "noble ambition"). "I understand Israel’s desire to protect itself," Bush said Monday. "The situation now taking place in Gaza was caused by Hamas."

At the same time, the media is littered with accounts of family members desperately worrying about their loved ones in Gaza (if you know where to look), from Laila al-Arian writing about her grandfather in the Nation to Sousan Hammad’s "Phoning Home to Gaza" in Counterpunch. Fares Akram, a correspondent for the Independent lost his father last week.

Of course, not all the victims fall under the category of innocent civilians. Over at Truthdig, Hedges writes about the death of a Palestinian who made no apologies for his support of suicide bombs.

"I often visited Nizar Rayan, who was killed Thursday in a targeted assassination by Israel, at his house in the Jabaliya refugee camp when I was in Gaza. The house is now rubble. It was hit by two missiles fired by Israeli F-16 fighter jets. Rayan, who would meet me in his book-lined study, was decapitated in the blast. His body was thrown into the street by the explosions. His four wives and 11 children also were killed.

Rayan supported tactics, including suicide bombings, which are morally repugnant. His hatred of Israel ran deep. His fundamentalist brand of Islam was distasteful. But as he and I were students of theology, our discussions frequently veered off into the nature of belief, Islam, the Quran, the Bible and the religious life. He was a serious, thoughtful man who had suffered deeply under the occupation and dedicated his life to resistance. He could have fled his home and gone underground with other Hamas leaders. Knowing him, I suspect he could not leave his children.

Many have pointed out the layers of hypocrisy that have surfaced in this conflict. As well as a mosque (reportedly hiding Hamas rockets), among the more shocking targets of Israel’s attacks was the Islamic University of Gaza, which was bombed last week, to the condemnation of virtually no one, a least not in U.S. academic circles. As Neve Gordon and Jeff Halper point out:

"Not one of the nearly 450 presidents of American colleges and universities who prominently denounced an effort by British academics to boycott Israeli universities in September 2007 have raised his or her voice in opposition to Israel’s bombardment of the Islamic University of Gaza earlier this week. Lee C. Bollinger, president of Columbia University, who organized the petition, has been silent, as have his co-signatories from Princeton, Northwestern and Cornell universities and the Massachusetts Institute of Technology. Most others who signed similar petitions, like the 11,000 professors from nearly 1,000 universities around the world, have also refrained from expressing their outrage at Israel’s attack on the leading university in Gaza. The artfully named Scholars for Peace in the Middle East, which organized the latter appeal, has said nothing about the assault."

As many others are pointing out, Israel’s actions are violently shortsighted when it comes to the lasting effects. As Robert Dreyfuss writes for the Nation:

"The outcome of Israel’s action is likely to be to strengthen, not weaken, Hamas. It will also have the following collateral effects: it will undermine the moderate wing of the Palestinian movement, perhaps fatally. It will weaken the government of Egypt, boosting the power of the radical-right Muslim Brotherhood there to the point where Egypt’s regime could collapse, with incalculable consequences. It will boost radicalism across the region, especially its Islamist variant, in Lebanon and Iraq in particular, and help Iran gain traction among otherwise-unreceptive Arab populations.

Hamas is unlikely to seek a deal now. Having watched Israel blunder into Lebanon two years ago in a futile effort to eradicate Hezbollah, only to see that movement emerge victorious and take control of part of Lebanon’s government, Hamas is not going to sue for peace.

…Israel’s objectives aren’t clear. Israeli hawks, including Benjamin Netanyahu -- appearing Sunday on CNN’s "Late Edition" -- insist that Israel cannot stop its action until Hamas is utterly defeated, whatever that means.

Despite Israel’s intractability, Western diplomats are reportedly seeking a "four-point agenda":

  • Stopping arms smuggling into Gaza
  • Financial support for Egypt in controlling the border and detecting tunnels
  • International monitoring, with the United Nations, European Union and Arab forces assisting Egypt
  • Reopening of all crossing points into the Gaza Strip -- a key Hamas demand