Meltdown and Bailout: Why Our Economic System Is on the Verge of Collapse

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By Joshua Holland

The immediate cause of our financial meltdown is unchecked, unbridled greed. Mainstream newspapers and the business press are doing a fairly good job of explaining how the lack of regulatory oversight led us into this nightmare.

But you have to dig down one layer to find the cause of that situation. Under cover of the ideological euphemism known as the "free market" and with enormous cash investments over the past four decades, business elites have captured the regulatory organs of powerful democratic states -- nowhere more so than the United States -- and promoted their own narrow economic agendas for short-term gain.

There’s an enormous amount of discussion about that in the independent media. But to drill down a layer deeper, to the bedrock of the crisis, you have to go to some deep thinkers who don’t get much play in our mainstream economic discourse.

As foreign policy analyst Mark Engler notes in his new book, How to Rule the World, declining returns on traditional investments in manufacturing and industry since the 1970s go a long way toward explaining today’s highly speculative economy -- pushing capital into developing countries and into bubble after speculative bubble in search of a better profit margin.

It’s important to understand what’s going on at all three levels, because we may have come to a fork in the road, a point at which the decisions made now may determine the future of the global economy.

We may or may not also be on the verge of another Great Depression.

The Bush Bailout: Privatizing Gains and Socializing Risk

On Saturday, hoping to stave off that dark possibility, the Bush administration proposed an unprecedented bailout for investors, a scheme that would authorize the Treasury Department to spend as much as $700 billion in tax dollars over the next two years to buy up bad securities, with little Congressional oversight save for a semiannual report on the process.

The move came after the federal government had already sunk a total of $900 billion into America’s financial institutions this year, potentially bringing the total value of the Fed’s tinkering to $1.6 trillion over three years.

The White House, Congressional leaders and Treasury officials are haggling over the details. Things are moving quickly, with a mammoth intervention that was unspeakable in economic circles a month ago now looking more and more inevitable.

The structure of the proposed bailout may change during those negotiations -- Democrats in Congress are pushing to save more homeowners and tie the package to some sort of limits on CEO pay for institutions that get a lifesaver -- but the deal outlined in the brief document released on Sept. 20 epitomizes the principle of privatizing gains while socializing risk. In other words, we’re splitting an oil well with the Big Boys on Wall Street: They get the oil, we get the shaft.

It is, in short, a draft of what could be one of the greatest rip-offs in history. Bush, on the way out of power, is trying to create a publicly financed honeypot for the private sector on a scale never before imagined.

Those who played fast and loose with newer, ever shakier investment instruments in order to squeeze a few more bucks out of the markets’ "irrational exuberance" about the housing sector would get a payday that would save their bacon. According to the New York Times, this huge pile of taxpayers’ cash may even be available to foreign investors.

Home prices would continue to tank, though, as banks shed their bad loans at discounted prices to the government. Those subsidized assets would then be liquidated -- on the cheap because they’re so overvalued -- to resuscitate the financial system. Rick Sharga, a senior officer with RealtyTrac, which monitors the housing market, told Reuters, "We’ve seen fewer and fewer properties go through the auction process because there’s either little equity in them or even negative equity. So there’s no incentive for people to buy them at the auctions."

Sharga added that "bank repossessions continue to grow at a pretty rapid clip," but an analyst told me recently that he knew of banks that simply weren’t taking possession of foreclosed properties because they didn’t want them on their balance sheets.

As those assets are disposed of, the value of all Americans’ homes will continue to fall, because sales of comparable properties determine their worth. That would, in turn, leave a greater number of Americans with mortgages worth more than the amount of equity in their homes, and the cycle would continue. Things are already bleak on that front; the rate of U.S. foreclosures increased 75 percent in 2007 and 55 percent in the year ending this June. The Associated Press reported, "More than four million American homeowners with a mortgage, a record nine per cent, were either behind on their payments or in foreclosure at the end of June."

Many more will lose their homes, and all of us will get the tab: higher taxes, swelling deficits, higher interest rates and a moribund economy.

The plan doesn’t specify what, if anything, U.S. taxpayers will get in return for their largesse. The government isn’t spending more than a trillion dollars to nationalize failed institutions in order to protect stakeholders and liquidate those overvalued assets in an orderly manner. That might make a lot of sense, and it would essentially make Joe and Jane taxpayer owners of something that might rebound in value down the road.

Instead, Bush’s proposal would take bad paper off the books of institutions that are ailing but haven’t yet gone belly-up, and we wouldn’t necessarily get a stake in those institutions; they’d only become "financial agents of the government," according to the draft released Saturday.

As Paul Krugman notes, "historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets."

The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the (Resolution Trust Corporation, founded in the wake of that crisis). The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.

The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system -- that is, convince creditors of troubled institutions that everything’s OK -- simply by buying assets off these institutions.

Making matters even worse is the fact that it’s almost impossible to put a fair market value on this massive pile of bad debt. As Peter Goodman of the New York Times notes, "no one really knows what this cosmically complex web of finance will be worth, making the final price tag for the taxpayer unknowable. One may just as well try to predict the weather three years from Tuesday."

There will be a fight in Washington, and much debate, about which ideological direction the bailout should lean, and the version offered up by the Bush administration is -- no surprise here -- tilted heavily in favor of those at the top of the economic pile.

What’s clear is that there is going to be a massive transfer of public wealth to the private sector, and at least the lion’s share of that cash, if not all of it, will end up in the hands of an investor class whose recklessness got us into this mess in the first place.

Meltdown

This bailout is a desperate attempt to save the modern economic system from falling under the weight of its deep structural imbalances. As such, it’s unlikely to work over the medium and long terms, even if it has the desired immediate effect of propping up creaky markets and restoring their (largely unjustified) sense of security.

The proximate cause of the financial system’s meltdown is not all that hard to grasp. The decades-long supremacy of the ideology euphemistically called "free trade" resulted in capital being unmoored from national economies and freed to move around the world with few limitations (under the imperative of government not "intervening" in markets). Unconstrained by borders and investment rules, those dollars, yen, euros and what have you roamed the planet seeking a better rate of return. Investors moved in packs, rushing lemming-like to whatever hot up-and-coming market the Economist was writing about in a given month, and a series of bubbles resulted.

Those bubbles made some people incredibly rich, and hurt others badly.

Of late, real estate was the can’t-miss investment, and as enormously overvalued housing bubbles sprang up, notably in the United States, Wall Street’s financial whizzes started offering newer and more "creative" investment vehicles, bundling mortgages and selling them off to investors from around the globe.

That was driven by an era of relentless deregulation, both at home and abroad. Here in the United States, the trend of deregulation culminated in 1999 with the death of the Glass-Steagall Act, the New Deal-era legislation that had forced financial institutions to choose between investment banking and commercial lending. Meanwhile, international bodies like the WTO and the IMF were pressuring the governments of all countries to drop their controls on the flow of cash and goods.

Without fear of a regulatory backlash, the banks pushed their new investments hard, and investors gobbled them up with glee. Writing in the Columbia Journalism Review, Dean Starkman cited reports from the business press about loan agents at Ameriquest being ordered to watch "Boiler Room," the film about sleazy financial brokers pushing bad investments on gullible retirees (Ameriquest was a predatory subprime lender that went down last year). Starkman quoted an executive with Morgan Stanley’s mortgage unit as saying, "It was unbelievable. We almost couldn’t produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce."

In the end, investors were basically buying up paper that had only a distant relationship with anything concrete. The link that had long existed between homeowners and lenders was broken, and debt -- in this case debt tied to housing, but also commercial and consumer debt -- became a hot investment vehicle.

Convinced that the market would continue to grow indefinitely -- or maybe that they’d get bailed out if things headed south -- investors leveraged their assets further and further, in effect buying on margin just like the bad old days before the Crash.

The banks and investment houses worked hard to find new ways to make their own pounds or rubles, creating not only new types of debt-based securities, but also coming up with new forms of insurance to (supposedly) shield investors against the risk those loans represented.

That was all well and good for them, if not for the rest of us, until the housing market started to tank. Despite assurances from the government earlier this year that the disaster had been "contained" to the subprime market, it began to spread. As the Associated Press reported, the tanking real estate market "shifted from subprime loans made to borrowers with poor credit to homeowners who had solid credit but took out exotic loans with ballooning monthly payments." Bloomberg reported that 3 million American homeowners are holding prime (or, actually, semi-prime) "alt-A" loans (don’t ask) worth about $1 trillion, or $150 billion more than the entire outstanding subprime market.

As those loans -- many of which were taken on investment properties by people expecting a nice, quick turnover -- started to go belly-up, a panic ensued. As the rot spread, banks started going down and investors essentially began a stampede on an already weakened financial sector. It was the modern-day equivalent of a bank run, but on a global scale.

That posed a risk to the mammoth and wholly unregulated market in insurance on bad loans that had grown up around these new kinds of investments. The market in what are known as "credit default swaps" is of unknown size, but it’s estimated to be worth as much as $60 trillion, most of it essentially paper backed by too little in the way of hard assets.

The government knew that if that market tanked, it could take down the global economy. That threat was, in large part, the thinking behind the $85 billion dollar bailout of AIG less than a week ago -- AIG was a key player in this huge but hazy market, and it did business with banks around the world.

At that point, a feeling of panic was spreading, and lawmakers in Washington felt that they had to do something, anything, to stop the meltdown. The banking sector’s crisis threatens the entire economy, as the capital needed for new investment and expansion has begun to dry up. Jared Bernstein of the Economic Policy Institute told the New York Times that "Wall Street isn’t this island to itself" and warned that if the finance sector "gets worse, we’re going to be stuck in the doldrums for a very long time, because that directly blocks healthy economic activity."

Global Capitalism’s Crises of Poverty and Overproduction

The financial meltdown in the United States is huge, but it isn’t unique. Think of the Asian financial crisis, Mexico’s "peso crisis" or the dot com crash. All had one thing in common: an investor class that at one time valued thrift, limited risk and steady growth plunged trillions with almost suicidal abandon into one bubble after the next.

All of which begs the question of what it is about our modern economic system that creates this cycle of inflating and bursting bubbles.

The answer, in large part, comes down to a decline in profitability in investments in concrete things, which has sent investors scurrying for abstract financial instruments in search of a fat return.

That shift, in turn, results from a simple aberration: a small fraction of the planet’s population is tied to an economic system in which productivity is effectively an end unto itself. It makes tons and tons of widgets, always seeking new widget markets (and sucking up most of the planet’s raw materials). At the same time, the powerhouses of the global economy -- the United States, Europe, Japan and the "Asian Tigers" -- have given woefully low priority to economic development in the rest of the world. They’ve essentially relegated it to NGOs and an underfunded United Nations, and in their own development funding they’ve prioritized geopolitics -- their "national interests" -- over poverty relief.

That’s left much of the rest of the world’s population (and this includes people in the wealthiest countries as well as the poorest) with barely enough money to feed their families, much less buy all those widgets. According to the UN, 80 percent of the people on the planet live on $10 dollars a day or less, and they’re not going to take many flights on Boeing’s shiny new airplane, buy GE’s dishwashers or use Nortel’s broadband. Over just the past two years, the number of people living on the "edge of emergency" -- in imminent danger of starvation or death from disease epidemics -- has doubled, zooming from 110 million people to 220 million, according to CARE International.

In other words, at the heart of the current crisis, like those that preceded it in recent years, is a massive imbalance inherent in the modern system of capitalism. It is caused by twin crises inherent in the structure of our global economy: a crisis of overproduction in the "core" states with advanced economies, and soul-crushing poverty in much of the "periphery."

In the booming years after World War II, the wealthy countries, led by the United States, did very well manufacturing goods for the entire planet. But as Europe and Japan rose from the ashes, and later, as production in countries like Taiwan, South Korea and Singapore increased, the industrial world simply started making more crap than there were consumers to purchase it.

Capitalism’s tendency toward overproduction has been something with which thinkers dating back to Karl Marx have wrestled. If, as one definition holds, capitalism is all about maximizing efficiency, what happens when meaningful production becomes so efficient that the system ends up cranking out more goods than the population needs -- more than it can absorb?

The answer is simple. Since the middle of the last century, investors’ returns on real production -- manufacturing -- has been in steady decline. Economist Robert Brenner described it as a "long downturn" in the world’s most advanced economies. He noted that the seven leading industrial economies grew by a steady rate of 5 percent or more annually from the end of World War II through the 1960s, but in the 1970s that fell to 3.6 percent, and it has averaged around 3 percent since 1980.

The social critic Walden Bello has arguably been the clearest voice connecting the problem of overproduction to the rush of speculation that has led to today’s financial crash. Bello noted that in the 1990s, the heyday of corporate globalization, the "U.S. computer industry’s capacity was rising at 40 percent annually, far above projected increases in demand."

The world auto industry was selling just 74% of the 70.1 million cars it built each year. So much investment took place in global telecommunications infrastructure that traffic carried over fiber-optic networks was reported to be only 2.5 percent of capacity. Retailers suffered as well, with giants like K-Mart and Wal-Mart hit with a tremendous surfeit of floor capacity. There was, as economist Gary Shilling put it, an "oversupply of nearly everything."

A report in the Economist, cited by Bello, found that the world of Clinton’s "New Economy" was "awash with excess capacity in computer chips, steel, cars, textiles and chemicals," and noted that "the gap between capacity and output was the largest since the Great Depression."

An inevitable result of that imbalance was a massive migration of capital from real, productive industry to the "speculative sector" run by financial giants like AIG and Lehman Brothers. As Bello noted:

So profitable was speculation that in addition to traditional activities like lending and dealing in equities and bonds, the ’80s and ’90s witnessed the development of ever more sophisticated financial instruments such as futures, swaps and options -- the so-called trade in derivatives, where profits came not from trading assets but from speculation on the expectations of the risk of underlying assets.

Exacerbated by a relentless assault on public interest regulation and economic nationalism under the guise of "free trade," the increasingly speculative tendencies of global investors created fertile ground for the growth of that pile of bad paper to which the Bush administration is reacting with its trademark brand of top-down reverse socialism.

In a nutshell, our modern economic system has become divorced from what an "economy" is supposed to do in human terms. It was anthropologist Karl Polanyi who argued that the term "economics" has both a formal meaning -- a system of exchange of goods and services designed to maximize efficiency -- and a "substantive" one: the survival strategy of humans in their natural environment. It’s a concept that transcends conventional economic concepts of supply and demand, markets and states, and it’s one that we’ve ignored for too long.

As the financial sector threatens to fall apart around us, it’s important to understand the crisis on all of these levels, or we run the risk of losing sight of the forest for the trees. One has to keep in mind that this is all happening during the era of the $100-plus barrel of oil, with the global economy integrated more than ever before and during a period of deep environmental peril due to global climate change and related problems of drought and desertification.

With the Bush administration pumping more than a trillion dollars into the private sector, Jim Bunning, the junior senator from Kentucky, lamented that the "free market for all intents and purposes is dead in America." As more mainstream economists talk about the possibility of sliding into a full-blown depression, we may well be in the grip of a kind of economic "Grotian Moment." The term, named for the 17th century Dutch legal philosopher Hugo Grotius, describes an event that has such a great impact that it results in fundamental changes to the prevailing system.

Slavoj Zizek wrote that "One of the clearest lessons of the last few decades is that capitalism is indestructible. Marx compared it to a vampire, and one of the salient points of comparison now appears to be that vampires always rise up again after being stabbed to death." That’s true; for a generation, we’ve been constrained from even discussing the fundamental structures of the prevailing system -- its excesses and shortfalls. This may be a moment in which we can do so, and should.

If we are at such a juncture, then we as a society have a serious question to answer: Will we bail out the speculator class so that it can regroup and move on to the next bubble, precipitating the next crisis of capitalism, or will we address the underlying problems of underdevelopment and overproduction in a way that’s adequately sustainable in an era of serious environmental peril?

So far, Bush and the Congress appear to have the wrong answer.

The Evolution of John McCain

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By Chip Ward

Why He Picked Sarah Palin, Carbon Queen

Despite the media feeding frenzy, we still may be asking ourselves, "Just who exactly is Sarah Palin?" Mixed in with the Davy-Crockett-meets-SuperMom vignettes -- all those moose hunting, ice fishing, snowmobiling, baby-juggling, and hockey-momming moments -- we’ve also learned that she doesn’t care much for her former brother-in-law and wasn’t afraid to use her office to go after his job as a state trooper; that she was for the "bridge to nowhere" before she was against it; that she’s against earmarks unless they benefit her constituents; that she can deliver a snappy wisecracking speech, thinks banning books in libraries is okay, considers herself a pit bull with lipstick, and above all else, wants to drill the ever-lovin’ daylights out of every corner of her home state (which John McCain’s handlers have somehow translated into being against Big Oil, since she insisted on a marginally bigger cut of the profits for Alaskans).

Oh, and -- not that this is very important to Americans or the planet -- she now thinks that global warming might possibly be human-made… sorta… though she didn’t before, despite the fact that the state she governs is on the frontline of climate change. And, of course, she’s a classic right-wing, fundamentalist Christian: against abortion -- check; against same-sex marriage -- check; against stem-cell research -- check; favors teaching Creationism in public schools -- check.

It’s that last item, her willingness to put Creationism up against the teaching of evolutionary science in the classroom on a he-says-she-says basis, that’s far more revealing of just who our new Republican vice presidential candidate is than we generally assume. It deserves the long, hard look that it hasn’t yet gotten. Most Democrats and progressives tend to think of the teaching of Creationism as a mere sidebar item on their agenda of political don’t-likes, but it’s not. Sarah Palin’s bias towards Creationism is a window into her political soul and a measure of John McCain’s hypocrisy.

It’s possible that the public has been fooled into thinking of McCain as a "maverick" when it comes to his party’s abysmal record on the environment, but his selection of Palin as his running mate sends quite a different message. In fact, he’s potentially put future generations on a "bridge to nowhere" (or perhaps to the fourteenth century). Whether we know it or not, we should now be duly warned: The Palin nomination is the equivalent of launching a "surge strategy" in the Republican war on the environment.

The Republican Holy War on Nature (Continued)

For the past eight years, the Bush administration’s assault on environmental quality has been so deliberate, destructive, and hostile that the usual explanations -- while not wrong -- are hardly adequate. Yes, Republican animosity to government regulation is long-standing. Yes, they believe in the power of an unrestricted marketplace to shape our collective behaviors. And yes, they emphasize property rights over notions of the commons and have often been comfortable sacrificing wildlife, air, and water quality in the pursuit of profits. In addition, despite recent claims, they are indeed the party of Big Oil. But none of this quite explains the Bush administration’s shameful record on the environment. In the final analysis, the only explanation that fits the nightmare of the last eight years is this: It has been on a holy war against nature -- and the nomination of Sarah Palin is essentially an insurance policy taken out on its continuation.

The idea that the environment matters is ingrained in Americans, even those who don’t think of themselves as environmentally inclined. Democrats and Republicans alike have learned the hard way that the decisions we make about what we allow into our air, water, and soil gets translated into our skin, blood, and bones. We now sense that we all live downwind and downstream from one another, and that it is prudent to practice restraint and take precautions when making environmental decisions.

This unspoken consensus is one of the great accomplishments of the modern environmental movement. The policies of the Bush regime have been shocking and shameful exactly because they fly in the face of these shared values and beliefs. Only when we grasp that the narrow Republican base both Bush and McCain pander to no longer shares these basic values and beliefs, does their war on the natural world make sense.

If you believe that a look-alike God made the world for you to dominate and use, that you are among God’s chosen few, and that He will provide for you no matter what you do to your surroundings, then you are likely to see yourself as above the natural order. If you believe that the world will be ending soon anyway, that you will be "raptured" while non-believers are "left behind" (as fundamentalist Tim LeHay so vividly describes the process in his bestselling novels), then precaution and restraint are moot. Remember, more than 60% of the nation’s 60 million evangelicals believe that the Bible is literally true, every last word of it, and more than a third believe the end of the world will occur in their lifetime.

That’s why a pro-Creationist stand is no sideline issue, but the litmus test that reveals whether a politician shares the religious right’s ideology -- a literal interpretation of the Bible, a disparaging attitude towards science, belief in mankind’s unfettered dominion over the natural world, and a willingness to impose its religious doctrines on others.

Both of Sarah Palin’s churches -- the Wasilla Assembly of God where her faith was shaped as a child and the Wasilla Bible Church that she attends today -- believe in just such a literal interpretation of the Bible. From Biblical study, Creationists have calculated that the Earth is only about 6,000 years old. That this is contradicted by the fossil record matters little to those who also think Revelations is a reasonable guide to foreign policy in the twenty-first century. Asked during her run for governor if Creationism should be taught in the public schools, Palin responded that the theory of evolution and Creationism should be taught side by side, and then "the students could debate" which is true.

Why Evolution Matters

When many Americans think "evolution," they probably recall that illustration of an ape, then a Neanderthal, then a hairy caveman, and finally, a modern homo sapiens walking in a line and growing ever more upright as they proceed. That illustration crudely highlights the aspect of evolutionary theory that pinches the nerves of Christian zealots who prefer a creation scenario like the one painted on the roof of the Sistine Chapel -- God tagging Man with life, finger to finger. But the human common ancestry with primates is just a fraction of what evolutionary theory is all about.

Evolution is largely about connection and interaction -- the linear connection of one species evolving into another (speciation), but also how species fill niches created by one another, how they interact, exchanging energy and information, how they compete as well as cooperate, and how all of them -- from microbial soils to migrating birds -- form dynamic communities that, in turn, are also woven together, web within web within web. Pull one thread of that living tapestry and you tug at so many others, which is why precaution is so wise.

Evolutionary theory does not preclude God. It uncovers the how of life, but leaves the why of it quite open. Many devout Jews and Christians, even evangelicals, believe in evolution, just not Biblical literalists.

Evolutionary theory shapes and informs the ecological sciences that are the very basis for our environmental laws and policies. The emerging, European-led global movement -- so far lacking U.S. participation -- that aims to deal with global climate chaos and restore the earth’s vital operating systems is premised on understandings gained through the evolutionary sciences. Cast doubt on those sciences and you undermine the basis for changes that are urgently needed.

The Creationist campaign means to dumb-down and confuse our kids by pushing the evolutionary sciences off the educational stage. America’s Taliban want to make room for Creationism’s dull sister, Intelligent Design, in order to undermine the emerging environmental consensus that is our best hope for a sustainable future. According to that consensus, we humans are embedded in natural systems that are in crisis; our well-being, even our survival, depends on the vitality of those systems.

Kiss the Polar Bear Goodbye

So how does all this translate into actual behavior? As governor, Sarah Palin recently sued the Interior Department to keep the polar bear -- the iconic symbol of her state -- from being listed as a threatened species under the provisions of the Endangered Species Act. Additional protections, she argued, might inhibit oil and gas drilling and pipeline construction in the region.

The Endangered Species Act is a favorite target of the religious right since they are convinced it elevates lowly creatures to, or above, the status of human beings. They see "charismatic carnivores" and other protected species as the means used by conservationists to pursue broader protections for whole ecosystems. And that’s true enough, in that "keystone species" like the polar bear regulate a wide network of relationships within a whole ecosystem. Those bears, for example, keep a lid on seal populations that could otherwise devastate fish populations and skew the arctic food web. Numerous animal and bird species depend on scavenging bear kills for food. But without reference to ecological science, the role of a keystone species and the value of biodiversity itself are hard to appreciate.

Palin, of course, also wants to drill for oil in the ecologically fragile Arctic National Wildlife Refuge and has expressed her hope that she can convince McCain to abandon his opposition to it. She is an active promoter of Alaska’s aerial hunting program where wolves and bears (again, keystone species) are shot from the air or chased until exhausted, after which the pilot lands the plane and a gunner can shoot them point blank. She tried to raise the bounty on wolves to encourage more killing and strongly opposed a ballot initiative to end the aerial hunting program. In the Lower 48, we learned the hard way that eliminating top predators upsets a chain of relationships in their ecosystems. No wolves in Yellowstone meant big, lazy herds of elk trashing streams, driving away beavers, and thus eliminating the wetlands that beavers create -- a cascade of unintended, harmful consequences. That’s why naturalists are reintroducing wolves in parts of the West, and health is returning to the land with them. Under Palin, Alaska is going to relive our old mistakes at a time when Alaskans -- and humanity -- can ill afford it.

The Carbon Queen

Even in Alaska, known oil reserves are dropping. Nonetheless, Palin is determined above all else to keep the current flow of energy moving, explore and develop new oil fields, and ramp up natural gas and coal production. She gave special permission to Chevron to triple the toxic waste it can pour into the waters of the Cook Inlet, despite scientific research concluding that the Beluga whale population there is endangered. She has refused to pressure Exxon to pay-up for damages caused by the infamous Exxon-Valdez oil spill. She has supported virtually every mining proposal that has landed on her desk, including one for a vast gold mine in the Bristol Bay watershed that would risk the world’s largest run of sockeye salmon. She favors open-cast mining for coal in the pristine Brooks Range. She has refused to enhance safety measures for trans-Pacific shipping along the Alaskan coast. All that and she’s been governor for barely two years!

Her deplorable environmental record was such common knowledge that John McCain couldn’t have missed it, even if he napped through his vetting committee’s report.

So if the McCain/Palin ticket is elected, you should know what to expect. Although John McCain may once have openly refused to subscribe to the beliefs of the Republican Party’s religious right, famously describing them as "agents of intolerance," his selection of Sarah Palin is a message (and not just to the Party’s fundamentalist right): If you thought that he understands the need to kick our fossil-fuel addiction and address global warming, if you believed his promises to build a green economy, forget about it. A McCain/Palin administration, just like the one before it, will continue -- and this is the best-case scenario -- to fiddle while the planet burns.

Driving Into the Future Without a Map

Ed Kalnins is Sarah Palin’s former pastor at the Wasilla Assembly of God Church which she attended for 26 years. He sees powerful signs that the end of the world is drawing nigh and assured a London Times reporter that Biblical scripture specifically mentions shortages of oil and wars for its control. When the end comes, he expects to be "raptured" with other righteous Christians and spared the suffering of those of us who will be left behind. He believes the apocalyptic destruction of our planet will happen in his own lifetime; in fact, that is exactly the future he hopes for. He has urged his congregation to make ready a "refuge" for good Christians fleeing northward in "the Last Days." Although Kalnin’s orientation may seem -- to be polite -- extreme, it is typical enough of those who push a Creationist agenda. And it’s a perspective Sarah Palin knows well, having spent a lifetime in Kalnin’s Pentecostal church, and even now, she is in no hurry to disown it.

We need environmental science in our schools more than ever. An ecologically illiterate generation of students will be ill-prepared to meet our real, less than rapturous future. They won’t have a clue about what’s happening around them or how to deal with the damage we’ve done. They won’t be able to create new technologies that mimic nature’s models for recycling waste and energy. They will drive blindly into the future, burning fossil fuels, without a map they can read. They may even let the Ed Kalnins of our world take the wheel.

The Evolution vs. Creationism debate appears to be an argument over the distant past. But it’s actually about the future. It’s about, in fact, who will define the cultural mindset that will generate that future. Let us pray it is not defined by a pit bull with lipstick who thinks she is "tasked by God" to drill for oil.

The Destabilization of Bolivia and the "Kosovo Option"

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By Michel Chossudovsky

The secession of Bolivia’s Eastern provinces is part of a US sponsored covert operation, coordinated out of the US State Department, in liaison with US intelligence.

The death squads armed with automatic weapons responsible for killing supporters of Evo Morales in El Porvenir are supported covertly by the US. According to one report, "USAID has an "Office of Transition Initiatives" operating in Bolivia, funneling millions of dollars of training and support to right-wing opposition regional governments and movements."(The Center for Economic and Policy Research, September 2008). The US also provides support to various opposition groups through the National Endowment for Democracy (NED).

The expelled US Ambassador Philip S. Goldberg worked under the helm of Deputy Secretary of State John Negroponte, who directly oversees the various "activities" of US embassies around the World. In this regard Negroponte plays a far more important role, acting behind the scenes, than Secretary of State Condoleeza Rice. He is also known as one of the main architects of regime change and covert support to paramilitary death squads both in Central America and Iraq.

Philip S. Goldberg’s mandate as ambassador to Bolivia was to trigger the fracture of Bolivia as a country. Prior to his appointment as ambassador in early 2007, he served as US Chief of Mission in Pristina, Kosovo (2004-2006) and was in permanent liaison with the leaders of the KLA paramilitary, who had integrated civilian politics, following the NATO occupation of Kosovo in 1999.

Supported by the CIA, the Kosovo Liberation Army (KLA), whose leaders now head the Kosovar government, was known for its extensive links to organized crime and the trade in narcotics. In Kosovo, Goldberg was involved in setting the stage for the subsequent secession of Kosovo from Serbia, leading to the installation of an "independent" Kosovar government.

In the course of the 1990s, Goldberg had played an active role in the break up of Yugoslavia. From 1994-1996 he was responsible for the Bosnia Desk at the State Department. He worked closely with Washington’s Special Envoy Richard Holbrooke and played a central role as Chief of Staff of the US negotiating team at Dayton, leading up to the signing of the Dayton Accords in 1995. These accords were conducive to the carving up of Bosnia-Herzegovina. More generally they triggered the destruction and destabilization of Yugoslavia as country. In 1996, Goldberg worked directly as Special Assistant to the Deputy Secretary of State Strobe Talbott (1994-2000), who together with Secretary of State Madeleine Albright, played a key role in launching the war on Yugoslavia in 1999.

The Central Role of John Negroponte

Deputy Secretary of State John Negroponte plays a central role in the conduct of covert operations. He served as US ambassador to Honduras from 1981 to 1985. As Ambassador in Tegucigalpa, he played a key role in supporting and supervising the Nicaraguan Contra mercenaries who were based in Honduras. The cross border Contra attacks into Nicaragua claimed some 50 000 civilian lives. During the same period, Negroponte was instrumental in setting up the Honduran military death squads, "operating with Washington support’s, [they] assassinated hundreds of opponents of the US-backed regime." (See Bill Venn, Bush Nominee linked to Latin American Terrorism, Global Research, November 2001)

"Under the rule of General Gustavo Alvarez Martnez, Honduras’s military government was both a close ally of the Reagan administration and was "disappearing" dozens of political opponents in classic death squad fashion.

(See Peter Roff and James Chapin, Face-off: Bush’s Foreign Policy Warriors , Global Research, July 2001)

This did not prevent his nomination to the position of US Permanent Representative to the UN under the Clinton administration.

The Salvador Option

Negroponte became Ambassador to Iraq in 2004, where he set up a "security framework" for the US occupation, largely modeled on the Central American death squads. This project was referred to by several writers as the "Salvador Option".

While in Baghdad, Negroponte hired as his Counselor on security issues, a former head of special operations in El Salvador. The two men were close colleagues going back to the 1980s in Central America. While Negroponte was busy setting up the death squads in Honduras, Colonel Steele had been in charge of the US Military Advisory Group in El Salvador, (1984-86) "where he was responsible for developing special operating forces at brigade level during the height of the conflict.":

"These forces, composed of the most brutal soldiers available, replicated the kind of small-unit operations with which Steele was familiar from his service in Vietnam. Rather than focusing on seizing terrain, their role was to attack ‘insurgent’ leadership, their supporters, sources of supply and base camps." (Max Fuller, For Iraq, "The Salvador Option" Becomes Reality, Global Research, June 2005)

In Iraq, Steele was "assigned to work with a new elite Iraqi counter-insurgency unit known as the Special Police Commandos". In this context, Negroponte’s objective was to encourage ethnic divisions and factional strife, by triggering covert terrorist attacks directed against the Iraqi civilian population.

Negroponte was appointed as the Head of the Directorate of National Intelligence in 2005, and subsequently in 2007 came to occupy the Number Two position in the State Department.

The Kosovo Option: Haiti

This is not the first time that the "Kosovo model" of supporting terrorist paramilitaries has been applied in Latin America.

In February 2003, Washington announced the appointment of James Foley as Ambassador to Haiti. Ambassadors Goldberg and Foley are part of the same "diplomatic stable". Foley had been a State Department spokesman under the Clinton administration during the war on Kosovo. He was involved at an earlier period in channeling support to the Kosovo Liberation Army (KLA).

Amply documented, the Kosovo Liberation Army (KLA) was financed by drug money and supported by the CIA. ( See Michel Chossudovsky, Kosovo Freedom Fighters Financed by Organized Crime, Covert Action Quarterly, 1999 )

At the time of the Kosovo war, the then ambassador to Haiti James Foley had been in charge of State Department briefings, working closely with his NATO counterpart in Brussels, Jamie Shea. Barely two months before the onslaught of the NATO led war on 24 March 1999, James Foley, had called for the "transformation" of the KLA into a respectable political organization:

"We want to develop a good relationship with them [the KLA] as they transform themselves into a politically-oriented organization,’ ..`[W]e believe that we have a lot of advice and a lot of help that we can provide to them if they become precisely the kind of political actor we would like to see them become... "If we can help them and they want us to help them in that effort of transformation, I think it’s nothing that anybody can argue with..’ (quoted in the New York Times, 2 February 1999)

In other words, Washington’s design was "regime change": topple the Lavalas administration and install a compliant US puppet regime, integrated by the "Democratic Platform" and the self-proclaimed Front pour la libération et la reconstruction nationale (FLRN), whose leaders are former FRAPH and Tonton Macoute terrorists. (For further details see Michel Chossudovsky, The Destabilization of Haiti, Global Research, February 2004)

Following the 2004 coup d’Etat which led to the downfall of the Aristide government, KLA advisers were brought into Haiti by the United States Agency for International Development (USAID) to assist in the country’s reconstruction. (See Anthony Fenton, Kosovo Liberation Army helps establish "Protectorate" in Haiti, Global Research, November 2004)

Specifically, the KLA consultants were to assist in restructuring the Haitian police force, bringing into its ranks, former members of FRAPH and the Tonton Macout.

[In support of] the "Office of Transition Initiatives," (OTI) ... USAID is paying three consultants to help consult for the integration of the former brutal military into the current Haitian police force. And who are those three consultants? Those three consultants are members of the Kosovo Liberation Army." (Flashpoints interview, November 19, 2004, www.flashpoints.net )

USAID’s "Office of Transition Initiatives" (OTI)

The Salvador/ Kosovo option is part of a US strategy to fracture and destabilize countries. The USAID sponsored OTI in Bolivia performs much the same function as a similar OTI in Haiti.

It is also worth noting that there was an Office of Transition Initiatives (OTI) in Venezuela, where a plot, according to reports, was recently uncovered to allegedly assassinate President Hugo Chavez. The role of the OTI office in Venezuela is discussed in Eva Golinger’s recent book "Bush vs. Chavez."

The stated purpose of US covert operations is to provide support as well as as training to "Liberation Armies" ultimately with a view to destabilizing sovereign governments. In Kosovo, the training of the Kosovo Liberation Army (KLA) in the 1990s had been entrusted to a private mercenary company, Military Professional Resources Inc (MPRI), on contract to the Pentagon.

Pakistan and the "Kosovo Option"

It is worth noting that in Pakistan, recent developments point towards direct forms of US military intervention, in violation of Pakistani sovereignty.

Already in 2005, a report by the US National Intelligence Council and the CIA forecast a "Yugoslav-like fate" for Pakistan "in a decade with the country riven by civil war, bloodshed and inter-provincial rivalries, as seen recently in Balochistan." (Energy Compass, 2 March 2005).

According to a 2006 report of Pakistan’s Senate Committee on Defence, British intelligence was involved in supporting the Balochistan separatist movement. (Press Trust of India, 9 August 2006). The Bolochistan Liberation Army (BLA) bears a canny resemblance to Kosovo’s KLA, financed by the drug trade and supported by the CIA.

Washington favors the creation of a "Greater Balochistan" [similar to a Greater Albania] which would integrate the Baloch areas of Pakistan with those of Iran and possibly the Southern tip of Afghanistan, thereby leading to a process of political fracturing in both Iran and Pakistan. (Michel Chossudovsky, The Destabilization of Pakistan, December 30, 2007)

Cheney Is Ordered to Preserve Records

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A federal judge on Saturday ordered Dick Cheney to preserve a wide range of records from his time as vice president.

The decision by the judge, Colleen Kollar-Kotelly, is a setback for the Bush administration in its effort to promote a narrow definition of materials that must be safeguarded under the Presidential Records Act.

The Bush administration’s legal position “heightens the court’s concern” that some records might not be preserved, Judge Kollar-Kotelly said.

A private group, Citizens for Responsibility and Ethics in Washington, is suing Mr. Cheney and the Executive Office of the President to ensure that no presidential records are destroyed or handled in a way that makes them unavailable to the public.

In a 22-page opinion, Judge Kollar-Kotelly revealed that in recent days, lawyers for the Bush administration balked at a proposed agreement between the two sides on how to proceed with the case.

Mr. Cheney and the other defendants in the case, Judge Kollar-Kotelly wrote, “were only willing to agree to a preservation order that tracked their narrowed interpretation” of the Presidential Records Act.

The administration, the judge said, wanted any court order on what records are at issue in the suit to cover only the office of the vice president, not Mr. Cheney or the other defendants in the lawsuit. The other defendants include the National Archives and the archivist of the United States.

In response to the ruling, a spokesman for Mr. Cheney, James R. Hennigan, said, “We will not have any comment on pending litigation.”

The lawsuit stems from Mr. Cheney’s position that his office is not part of the executive branch of government.

This summer, Mr. Cheney’s chief of staff, David S. Addington, told Congress that the vice president belongs to neither the executive nor legislative branch of government, but rather is attached by the Constitution to Congress. The vice president presides over the Senate.

The lawsuit alleges that the Bush administration’s actions over the past seven and a half years raise questions over whether the White House will turn over records created by Mr. Cheney and his staff to the National Archives in January.

Wall Street Is Licking Its Chops at the Bush Team's Multi-Hundred Billion Dollar Giveaway Plan

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By William Greider

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: Dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses -- many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public -- all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics -- exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough -- using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: Accept our objectives and follow our instructions or you are left on your own -- cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership -- temporarily -- of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets -- property, houses, shopping centers -- that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value -- not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC -- profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza -- the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and "too big to fail" institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss -- their situation is too dire -- but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy -- businesses, solvent banks, buyers and sellers in consumer markets. We don't know how much damage has been done to economic growth or how long the cold spell will last, but I don't trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America's Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary -- maybe permanent -- reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

Republicans Allege McCain Covered up His Collaboration with the North Vietnamese While a POW

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By Steven Rosenfeld

A 1992 video featuring a Republican senator, Republican congressman and top Capitol Hill staffers who worked on Vietnam prisoner of war and missing in action issues say John McCain collaborated with North Vietnamese while a POW, and then covered up that involvement to the detriment of POW/MIA families seeking access to classified Pentagon records about their own family members.

The video raises probing questions about the 2008 Republican presidential nominee’s war record, especially after McCain made his captivity a major part of his qualifications for the presidency at the Republican National Convention. In 2004, the GOP focused on Democratic nominee John Kerry’s war record to criticize his candidacy.

To date, the video has been posted on a handful of blogs but has been ignored by the mainstream media. While it features Republican stalwarts on POW/MIA issues, it also suggests that McCain’s war records at the Pentagon and in North Vietnam would reveal potentially very controversial details about the GOP’s presidential candidate.

The nearly eight-minute video is posted on YouTube under "Vietnam Veterans Against McCain." It begins with the title, "1992 Senate Select Committee on POW/MIAs," and features ex-Sen. Bob Smith (R-NH), Rep. Robert Dornan (R-CA), senate staffers Tracy Usry, James Lucier, and military family members Lynn O’Shea, of the National Alliance of Families and retired Army Cpl. Bob Dumas, whose brother was a POW lost in the Korean War, and Joseph Douglass, Jr., author of Betrayed, about America’s missing POWs. The video has no author credits.

The footage begins with Douglass, Usry, O’Shea and Smith all saying that McCain worked to kill legislation that would have opened the Pentagon’s classified archive of POW/MIA files. "Many, many documents were held back for no reason," former Sen. Smith said. Dorman said legislation that passed the House with no opposing votes was single-handedly blocked in the Senate by McCain. "On the Senate side, we had one person standing in the way," Dornan said, referring to McCain.

Dumas then gave the reason why - the Pentagon’s records would reveal McCain had collaborated with the Vietnamese. "He didn’t want nobody to check his background because a lot of POWs who were with him in the camp said he was a collaborator with the enemy," Dumas said. "He gave the enemy information they wanted."

Lucier, identified as a former U.S. Senate Chief of Staff, said "we do know that when he was over there, he cooperated with Communist news services in giving interviews that were not flattering to the United States." Usry, identified as U.S. Senate Minority Staff former chief investigator, said "information shows that he made over 32 tapes of propaganda for the Vietnamese government."

Dornan said there were transcripts of other POWs reacting to McCain’s false statements, saying, "Oh my God, is that Admiral McCain’s son Is that the admiral’s son? Is that Johnny, telling us that our principle targets are schools, orphanages, hospitals, temples, churches? That was Jane Fonda’s line." Dornan said those transcripts are in war museums in North Vietnam, where McCain, as a senator, pressured the country not to release them or face opposition concerning normalization of relations with the United States.

"McCain could not have wanted those to turn up in the middle of a presidential race," the ex-congressman said. "He knows that. I know that. And a few other people know that. That’s why he was against Bob Dole’s legislation."

Dornan then offered another interesting explanation why McCain refused an offer by the North Vietnamese to be released. Dornan said those released first were collaborators, which would have ended McCain’s military career and hurt the Navy, where his father commanded the Pacific fleet.

"Nobody takes that one step beyond that," Dornan said, speaking of McCain’s refusal to be released. "If Admiral John McCain’s son had accepted this princely status and come home in 1967, while others sat there for five years, what would the Navy have done with the son of an admiral who opted to get special treatment and come home? No Navy career. No House seat. No Senate seat. It would have been the end of his career."

Why the Polls Drive Us Crazy (and Shouldn't)

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By Joshua Holland

There was a lot of talk last week about John McCain’s "momentum" -- about the Republican brand rebounding.

And a dark cloud of gloom descended over many of those hoping to bring an end to the Bush era. "We’ve seen this before," was a common sentiment. A reader recently sent me a story, written during the lead-up to the 2004 election, about Kerry’s seemingly indomitable lead in the polls -- a lead similar to Barack Obama’s 8-point (average) advantage in the horse race a few weeks ago.

Then, this week, the storm clouds parted and the sun shone down on progressive America as Obama seemingly regained his mojo. Now he has surged back into the lead!

This emotional roller coaster is bad for one’s psychic health and entirely unwarranted. The bigger picture is this: For about 10 days during the past 10 months -- after Sarah Palin’s introduction to the country but before Americans got a good look at her beliefs -- McCain inched ahead of Obama in the national head-to-heads. Now, the tide appears to be turning back in Obama’s favor: As the electorate has gotten enough of a look at Palin to distrust her, her once-high approval numbers have taken a nosedive. And McCain continues to say brilliant things like the economy is fundamentally sound and he won’t meet with the dastardly prime minister of Spain.

More to the point, the significance of those head-to-head polls -- the yardstick featured in so much political reporting -- is completely overblown. The reality is that nobody knows what’s going to happen in November. It’s an unprecedented election in two ways: a black man is vying to become the president of the United States; and in the midst of an economic meltdown, voters are feeling an unprecedented degree of pessimism about the direction the country is heading.

Clearly, there is reason to believe that the "Bradley effect" -- the historical fact that some of those who tell pollsters that they’re ready to vote for a person of color won’t -- will have an impact on the election. How big will that impact be? Nobody knows.

Just as clearly, Obama has inspired a massive groundswell of interest, particularly among younger voters. Will they vote in numbers we’ve never seen before? Nobody knows (many have only a cell phone, and cell phone users are rarely polled).

At the same time, we know that in times of pronounced pessimism, people tend to vote the ruling party out of office. Yet, John McCain has spent a career carefully nurturing an image of independence from his party. Will he overcome the tarnished Republican brand? Nobody knows.

Those uncertainties are what ultimately make the polls almost meaningless. Pollsters don’t offer us their raw data; they weight their results in various ways -- by age, party identification, past voting records, etc., in order to make their samples conform more or less with past experience. In an election for which we essentially have no past experience, it all becomes much more art than science.

Consider how they did during the primaries. Through the first five months of this year, Zogby’s polling was off by an average of almost 7 points, Fox News by 4 points and Survey USA by 4.5 points. Mason-Dixon’s average error was more than 8 points, and Rasmussen was off by more than 7.

Don’t get me wrong -- those national polls, taken as a whole, are a good indication of broad trends in the mood of the electorate and are not without value. But the reality is that the nationwide polls we see being released almost every day are a poor indicator of what will happen come November.

Remember that we don’t vote for president in the United States -- we vote state by state for electors who vote for the president. As I write, new polls show Obama up by 9 points in Michigan, 5 points in Pennsylvania and a couple of points in Ohio -- all crucial swing states.

The problem is that it’s costly to poll each and every state, so many of those electoral college maps one sees in various publications are based on "trend estimates" -- on statisticians essentially reading the tea leaves, and often doing so using stale data. Of the 12 states that are in play this year according to The Politico, only three have had polls of registered voters within the past week, and all three of them show Obama in the lead. (There are more recent polls of "likely voters," but pollsters’ "likely voter" models are a source of quite a bit of controversy and should be taken with more than just a grain of salt until just before the election.)

The second reason is that modern elections in America are largely mechanical affairs. It’s true that Americans are not as deeply divided on the issues as they are commonly portrayed in the "red states versus blue states" narrative, but they are sharply divided in terms of partisan loyalty, or at least they have been during the past few elections. That means that winning will often come down to which campaign can better motivate its respective ground troops in a handful of swing districts in a handful of swing states. Obama’s chief strategist, David Plouffe, told the Los Angeles Times that he ignores the national polls almost entirely because the campaign’s focus is on registration and turnout in the 18 states they identified as the battleground (which is now down to maybe 10). "We stay laser-focused on these two factors," he told the Times. That may have been a bit of bravado, but there’s no question that the Obama campaign has put an enormous emphasis on local organizing. As Daniel Nichanian wrote recently, "It increasingly looks as though this close election may be determined by investments on the ground, in local precincts across the country, an area of the campaign that Barack Obama’s organization and supporters have excelled at." Nichanian added: "But this is not the type of edge pollsters pick up on."

There’s quite a bit happening that polls have a hard time tracking, and much of it should be encouraging for Obama’s supporters. The partisan identification of voters in many swing states (which I should point out is a less-than-rock-solid indication of voting, but important nonetheless) is looking very good for the Dems. Consider this graphic from Brian Schaffner at Pollster.com:

(click for larger version)

Not all states keep track of these data, but in six of the seven states included in the analysis, Democratic registration is on the rise, while the number of Republican loyalists appears to be declining.

But even those numbers don’t tell the whole story. As Time Magazine reported, younger voters -- people under 35 -- a demographic in which Obama beats the socks off of McCain, are registering in pretty significant numbers. In 10 of the swing states, more than half of all new registrants this year are under 35.

Also not necessarily reflected in the partisan breakdowns are new citizens who will be eligible to vote for the first time. In 2006, there were 15 million naturalized immigrants who were eligible to vote. A huge effort on the part of immigrant-rights groups is expected to raise that number by 10 percent in 2008. If they can pull of the feat, that would be 1.5 million new voters, many of whom are clustered in swing states like New Mexico, Nevada, Florida and Colorado -- each of which Bush won by less than 5 points in 2004. Among Latino voters, 40 percent of whom voted for George Dubya in 2004, the key question is whether McCain can overcome the Republican brand, now seen by many as a party dominated by nativists. A recent poll of "Hispanic" preferences in four key battleground states showed that Obama is doing better among that group than Kerry did in 2004, and by a significant margin.

The other part of that equation is whether and whose votes are being counted. There’s quite a bit of agreement across the political spectrum that America’s electoral system is deeply flawed, and whether one believes its biggest problems are hackable voting machines and Republican voter suppression or Democrats registering people who are ineligible to vote, the polls aren’t going to say whether it will be a fair contest.

The takeaway from all this is that those inclined to mope when the polls don’t look good -- especially the national polls -- shouldn’t. There’s no point, because they mean little. If one wants to see an end of the Bush era, or a continuation of it, a better use of one’s time is to get involved. Drive an old lady to her polling place. Put in some hours at a phone bank.

This is an American election, and the party that does a better job motivating its loyalists -- and perhaps expanding their numbers -- and protecting their votes will win. You don’t need a poll to tell you that.

Popular Scams of the Rich and Famous

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By Richard Backus

There are an ever-increasing number of linkages between politicians, big businesses, and rich individuals designed to promote their joint prosperity at the expense of the general public. Money flows in both directions between these “players” under various “pay for play” schemes. Because they unfairly absorb federal tax revenue or deprive the general public of legitimately earned benefits, I refer to these schemes as “scams'. Most are technically “legal' being based upon law or statute, or founded upon government policy and practice, but have been set up in ways designed to benefit favored individuals. In most cases, these practices are promoted by Republican politicians serving their primary clients, rich individuals and “big business”. Hopefully, in the coming elections, legislators will be chosen which will have the courage to rectify these abuses. The following are just a few of the more popular scams.

Social laws, uncertain as to constitutionality, have been passed to control the general populace, and are generally ignored by those creating them, as evident in many recent court cases. Prostitutes do quite a brisk business during political party conventions, and a “madam” recently interviewed claimed that the "family values" group, the Republicans, are the the best customers. But all this has been pretty well hidden from public awareness by the establishment media, and grudgingly and belatedly disclosed, if at all, after previously promulgated on blogger sites. This situation was not reported during the 2004 conventions by a single major U.S. media, and I read about it only in foreign news sources, the Guardian and Reuters. So much for the fearless American press! But news media in the U.S . practice self-censorship because they are fully aware of what they can and cannot report. Anything critical of the rich and famous is forbidden.

There has been no effort to contain medical expenses that have caused a great many of the financial problems currently plaguing the U.S. The AMA and ADA have so well financed the campaigns of our legislators that we are now facing multiple financial crises substantially directly cause by health care costs. The 2007 federal government deficit of approximately $180 billion would have become a $300 billion surplus simply with a reform of this sector. Americans pay, on average, nearly $7,000 per person for medical costs, whereas citizens in the next-highest-cost developed pay around $3,200 per person. Bringing the U.S. health costs in line with those of the rest of the western world would save U.S. citizens directly $720 billion and the federal government $480 billion more. The U.S. physician's claim is that costs are so high because we get the best health care in the world. This is a real con job. The World Health Organization ranks the U.S. 26th in quality of health care of the advanced countries. The major problem is that a monopoly has been created by limiting the number of teaching hospitals as well as the number of students who are entitled to enroll. The selection process for medical school positions involves the usual custom of picking predominantly children of those politically connected. The "special" qualifier for positions in the few medical schools places offered, that determines appointment more often than demonstrated academic excellence, is participation in extra-curricular activities indicating "leadership" abilities. This is a standard trick for all appointments in this vast conspiracy, made to benefit unqualified candidates supported by political elites. It avoids the serious business of determining the truly deserving (who are frequently passed over because they are considered “nerds” (because they study so much)) and for admission committees to give preference to candidates whose academic performance is not quite up to par. George W. qualified as a possible “leader” because he was a cheerleader at Andover, and others are selected because of their participation in college political activities. When training people for highly technical and critical jobs (e.g., physicians), the last thing the candidate should be doing is playing political tricks or scheming for political office. They should be studying.

The whole system of "globalization" is simply a way to exploit workers worldwide thereby maximizing the profits of essentially western-owned multinationals. The results are now coming in, as demonstrated by the current disinflation in the western countries. By allowing multinationals special tax breaks and accounting practices the U.S. government has encouraged the transfer of almost all high wage U.S. jobs overseas to low wage (exploited) workers. By simply calling these lost jobs "low skilled" they have convinced U.S. workers that they really deserve less for their labor, which in many cases were the most stressful and demanding in the country, Soon middle level professional jobs will be moved overseas as well, and similarly described, no doubt, as "low skilled". This includes engineering and product design, paralegal and brokerage back office jobs, and accounting and auditing jobs as well. Even radiologists will miraculously end up as "low tech" workers.

Still extant farm subsidies unfortunately not only violate those “economically sacrosanct” principles of globalization but result in higher prices for the American consumer as well as increased cost to the American taxpayer. As a bonus, they frequently produce serious economic consequences for other "global" players, especially for our South American "partners" (and incur their resentment).

The U.S. government has made no effort whatsoever to assist in providing support for displaced U.S. workers by demanding reciprocity of employment opportunity with those countries whose citizens are flooding the U.S. labor market. While surveying foreign papers in Europe and Australia/New Zealand for jobs in the IT business, I found loads of ads promising unlimited amount of IT opportunities in the U.S. But ads for IT jobs in these same countries all ended with statements that these local jobs are reserved for their own citizens. Recently the U.S. government passed an amendment to its visa rules allowing other country's workers to enter the U.S. for 6 months without a prior job offer. Most other western countries did the same I believe, offering job opportunities for U.S. workers. But there was a limit to the ages of these workers, 27 years I believe, suspiciously approximating the average age of the children of our current members of Congress. These job opportunities can not possibly benefit those most damaged by U.S. outsourcing policies, those who had irreplaceable (at their ages) experience, without finances to retrain, and facing huge and continuing family bills in the U.S. They still have no realistic possibilities to work overseas even though the great god “globalization” based its legitimacy on the free movement of capital and labor. What a joke!

The entire USAID program has become an excellent way to feed money to political supporters. This scam involves granting taxpayers money as USAID “aid money” to friendly foreign governments with "tied" aid (agreements to purchase in most cases U.S.-made products and services). The so-called "aid" money never reaches the country supposedly receiving it. The "receiving" country gets products and "advice" from U.S. corporations and individuals selected from the U.S. governments "preferred list" of suppliers. The organizations providing these services and products are basically weapons suppliers and "international" accounting and law firms providing "advice" to the recipient country's government. These “select” suppliers and “advisers” are, of course, those companies and individuals who are the major suppliers of campaign finance funds. The recipient country gets weapons systems and armaments used by the local military to control discontented locals (and also expected to support U.S. regional political goals). The result is a lot of money is transferred to American multinationals and private companies located in the U.S. with the bill payed out of taxpayers funds. This is an excellent way to create campaign finance funds with the bill paid by U.S. taxpayers.

Flight of capital from the U.S., (unrestrained by laws regularly established by other more prudent governments) is increasing the risk of a banking default in the U.S. and a drastic drop in the dollar. It is accelerating at the same time that foreigners dollar holders (private and public) are thinking twice about keeping their funds here because the U.S. government has shown no interest or willingness to restrain this process.

The much ballyhooed one-man, one-vote election under a democracy simply does not exist. With the caucus system still being practiced in many states, the candidates the public finally gets to vote for (essentially one of 2 choices) have been chosen by the powers-that-be within each state, and under these conditions, the private citizen's vote is practically meaningless.

Most of the efforts of the U.S. government to contain Communism have involved the setting up of American-friendly foreign governments who were willing to turn a blind eye to exploitation of their country's resources and populace by U.S. corporations. To make matters worse, the U.S. Government, which has established these regimes, insist on calling the resulting U.S.-friendly governments (oligarchies of the rich at best) as "democracies" when,in reality, the government which it replaced was far more democratic than the one established by the U.S. government. This was all done under the pretext of constraining Communism, but was also a handy scheme for U.S. businesses to gain possession or control of the few assets these poor countries possessed and a new supply of exploitable local workers. Now that Communism is no longer a realistic treat there is no longer any pretext for doing this. No governments should be overthrown by actions of the U.S. government regardless of its having a political or economic system inimical to presumed western interests, and certainly no one should be going around bragging about setting up a "democracy" when the opposite occurred.

Bidding on all levels of government contracts is also riddled with ways to allow the contract manager to give the contract to a friend. If the manager's friend is not the low bidder, the manager can simply reopen the bidding on any number of pretexts and advise his friend what he needs to bid to get the contract. Bids can be thrown out as "non-serious" bids without notice, on the basis that the bidder is incapable of performing at that price. This device is used when the winning bid is so low that even the manager's friend can't compete even knowing the prospective winning bid price. This is because he is really a 'prime contractor', won't be doing the work, and needs extra funds to cover his “cut” and to cover possible gratuities for the contract manager. The government has even set up a separate agency, at taxpayer expense, to "prove" this type of fraud can not occur. All the public exposure over the years of these practices puts the lie to the honesty of this organization.

The FED's constant claim of incipient inflation over the last 18 years (when none has ever materialized) has finally resulted in our current economic crises. The latest FD-sponsored recession might well be the final straw that breaks the back of U.S. consumers. There is a serious "moral hazard" involved in improper disclosures of these continuing, unpredictable, and totally uncalled- for adjustments in interest rates as well.

The federal government has been playing footsie with fascism for quite a long time, supported only by the inability of the general public to recognize it. Ecclesiastic appointments, corporate management, charity, "brain trust" ,foundations, university appointments, and even scholarship awards are controlled by political elites, with the consequent assurances that these appointees will play ball with the politicians and their “sponsors”. The Pols now essentially control everything under the direction of the rich and famous.

The “justness” of the U.S. legal system can be compromised by anyone with unlimited funds. The Constitution certainly would not have countenanced the use of multiple lawyer (with political connections) for any one case, for jury selection advisors, and the abusive use (and misuse) of expert witnesses.

Foundations, “brain trusts”, charities, and other non-profits are the most dangerous potential source of political influence-buying of all these “scamers”. Foundations, formed by individuals to avoid inheritance taxes, can provide jobs, grant contracts, and purchase goods and services from a large number of politically-sponsored individuals and companies. They pay no taxes even when they accumulate funds, which they call “surplus”. These surpluses can be invested with the proceeds not subject to taxes. Their employees are well compensated and live quite luxuriously while on 'company business'. Contract awards and grants tend be generous, and the foundations can purchase supplies and services without oversight. Most recipients of this largess are politically-connected and are expected to promote political goals and to funnel funds to political campaigns.

There are literally hundreds of thousands of other varieties of non-profits,categorized as NGOs, which conduct their businesses in essentially the same way. They are set up to perform certain socially-beneficial services, but after all the above-mentioned expenses, only a small percentage of their income are used in this way. Typically, 30 percent of their income (tax deductible write offs from corporations and individuals, and government giveaways) are spent on salary and payroll taxes to top employees and their generous “business expenses” (5-star hotel accommodations, chic restaurant and 1st class air travel costs). The remaining 70 percent can be used for “public relation fees” (to supporters) and some is even spent on legitimate promotion programs. What is left, perhaps 50 percent, can, by the “50 percent rule” be passed on to another tax-exempt having similar expenses, with the result that the claimed public-service, used to obtain tax-exempt status, can end up with practically nothing. Certain charities are particularly offensive perpetrators of this same scheme, disbursing for political purposes the monies donated for the most-needy individuals of all, the poor and defenseless, mostly children. Principles of those organizations practicing this blatant “welfare to the rich” scheme should be, but seldom are, prosecuted.

All in all, most of the American populace's problems derive from a lack of understanding of how their job opportunities and financial success are being jeopardized by these practices. A great deal of the blame for these scam's success can be attributed to the establishment media's self-censorship on these important issues, with a consequent inability of the public to correctly determine what is going on. Thankfully, there is now a self-appointed group who are now providing the news so instrumental in allowing the public to make necessary political decisions. They are called "blog sites" and are America's version of the old soviet "samizdat". Hopefully the government can be prevented from meddling with them.

In Hard Times, Tent Cities Rise Across the Country

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Since foreclosure mess, homeless advocates report rise in encampments

A few tents cropped up hard by the railroad tracks, pitched by men left with nowhere to go once the emergency winter shelter closed for the summer.

Then others appeared — people who had lost their jobs to the ailing economy, or newcomers who had moved to Reno for work and discovered no one was hiring.

Within weeks, more than 150 people were living in tents big and small, barely a foot apart in a patch of dirt slated to be a parking lot for a campus of shelters Reno is building for its homeless population. Like many other cities, Reno has found itself with a "tent city" — an encampment of people who had nowhere else to go.

Nearly 61 percent of local and state homeless coalitions say they've experienced a rise in homelessness since the foreclosure crisis began in 2007, according to a report by the National Coalition for the Homeless. The group says the problem has worsened since the report's release in April, with foreclosures mounting, gas and food prices rising and the job market tightening.

"It's clear that poverty and homelessness have increased," said Michael Stoops, acting executive director of the coalition. "The economy is in chaos, we're in an unofficial recession and Americans are worried, from the homeless to the middle class, about their future."

Caught by surprise
The phenomenon of encampments has caught advocacy groups somewhat by surprise, largely because of how quickly they have sprung up.

"What you're seeing is encampments that I haven't seen since the 80s," said Paul Boden, executive director of the Western Regional Advocacy Project, an umbrella group for homeless advocacy organizations in Los Angeles, San Francisco, Oakland, Calif., Portland, Ore. and Seattle.

The relatively tony city of Santa Barbara has given over a parking lot to people who sleep in cars and vans.

The city of Fresno, Calif., is trying to manage several proliferating tent cities, including an encampment where people have made shelters out of scrap wood.

In Portland, Ore., and Seattle, homeless advocacy groups have paired with nonprofits or faith-based groups to manage tent cities as outdoor shelters.

Other cities where tent cities have either appeared or expanded include include Chattanooga, Tenn., San Diego, and Columbus, Ohio.

The Department of Housing and Urban Development recently reported a 12 percent drop in homelessness nationally in two years, from about 754,000 in January 2005 to 666,000 in January 2007. But the 2007 numbers omitted people who previously had been considered homeless — such as those staying with relatives or friends or living in campgrounds or motel rooms for more than a week.

In addition, the housing and economic crisis began soon after HUD's most recent data was compiled.

"The data predates the housing crisis," said Brian Sullivan, a spokesman for HUD. "From the headlines, it might appear that the report is about yesterday. How is the housing situation affecting homelessness? That's a great question. We're still trying to get to that."

In Seattle, which is experiencing a building boom and an influx of affluent professionals in neighborhoods the working class once owned, homeless encampments have been springing up — in remote places to avoid police sweeps.

The Wall Street Model: Unintelligent Design

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By PAM MARTENS

Wall Street is collapsing not because of bad mortgage debt or lack of capital or over-leverage. Those are merely symptoms. Wall Street is collapsing because it deserves to collapse; it needs to collapse in order for America to survive. The economist Joseph Schumpeter called it creative destruction, a system where outdated models collapse to make room for new innovation.

Wall Street of the past decade never really had a business model as much as it had a business creed: greed is good; leveraged greed is even better.

The fact that Wall Street is collapsing is a given. How it survived as long as it did under its corrupted model is the question that will be debated in history books for the next generation.

For example, imagine a business model that bases remuneration to brokers on how much money they make for their Wall Street employer and not one dime for how well their customers’ portfolios perform. A Wall Street broker receives remuneration that rises from approximately 30 to 50 per cent of the gross commission based on their cumulative trading commissions with zero regard to how well the clients’ accounts have done. There is no acknowledged internal mechanism in any of the major Wall Street firms to gauge the overall success of the accounts the broker is managing.

The industry has been irreconcilably incentivized to corruption just as brokers have been socialized to silence. The reason we are seeing a stampede this week into U.S. Treasury securities is that much of this money belonged there in the first place, not in esoteric mortgage backed securities, junk bonds, commodity funds or annuities backed by AIG. Brokers put their clients “safe money” in these unsuitable investments because their Wall Street employer dangled a seductive financial inducement. A broker receives less than $1,000 in gross commissions (“gross” meaning before their firm takes their 50 to 70 per cent cut) on $100,000 of longer dated Treasuries. Putting that same $100,000 in a junk bond or mortgage-backed security or annuity could generate $3,000 or more. In other words, the financial incentive has created an artificial demand. And, as must inevitably happen, the true state of that demand is just now catching up with the true glut of supply.

What would be the incentive for Wall Street firms to offer higher commissions for some products over others? Because on top of their cut of the brokers commissions, they receive origination and syndication fees for the more esoteric investment products. These firms so despised the low-paying Treasuries that they replaced Treasuries with Freddie Mac and Fannie Mae paper in mutual funds bearing the name “U.S. Government Fund.” (This misleading practice and the fact that billions of dollars of public money resided in these misnamed funds has certainly played a role in the government’s decision to nationalize Freddie Mac and Fannie Mae.)

Then there is the insane model of bringing flim-flam new businesses to market. If we look at the people who are at the helm of today’s collapsing Wall Street, they have shifted in their chairs, but they are mostly the same conflicted individuals who brought America the NASDAQ bust that began in March 2000 and evaporated $7 trillion of American wealth. There is no longer any incentive on Wall Street to bring about initial public offerings of only companies that will stand the test of time and create new jobs and new markets to make America strong and globally competitive. There is only an incentive to collect the underwriting fee and cash out quickly on private equity stakes.

Next is the corrupted model of housing a trading desk for the firm inside the same company that is supposed to issue unbiased research to the public. For example, let’s say that XYZ Brokerage buys a big stake in ABC Company on its proprietary trading desk (the desk that trades for profits for the firm) on Wednesday afternoon. On Thursday afternoon, it could almost guarantee profits for itself by issuing a research report upgrading the stock. Conversely, it could short the stock on Wednesday and issue a negative report to drive down the price on Thursday, also guaranteeing itself a profit. Other than a fictional Chinese Wall, there is absolutely nothing to stop this type of public looting.

Now, ask yourself this. With the multitude of other ways that Wall Street has to make money, why are they allowed to have their own trading desk while simultaneously issuing conflicted research to the public. After the NASDAQ scandals that revealed Wall Street issuing biased research for personal profit, why weren’t proprietary trading desks and public research issuance shut down at these firms. There are plenty of boutique research firms to fill the void. The only conclusion to be drawn is what Europe is calling “regulatory capture” here in the U.S. That’s a phrase similar to what Nancy Pelosi was calling “crony capitalism” on Wednesday, September 17 before she decided to join the crony capitalists at a microphone on Thursday, September 18 to promise bipartisanship on the mother of all bailouts to Wall Street.

This unintelligent design business model would have cracked and imploded long ago but for one saving grace: it came with its own unintelligent design justice system called mandatory arbitration. Gloria Steinem once called mandatory arbitration “McJustice.” It’s really more like Burger King; Wall Street can have it their way. In a system designed by Wall Street’s own attorneys, arbitrators do not have to follow the law, or legal precedent, or write a reasoned decision, or pull arbitrators from a large unbiased pool as is done in jury selection. Industry insiders routinely serve over and over again. Had there been ongoing trials in open, public courtrooms, the magnitude of the leverage, worthless securities, and corrupted business model would have been exposed before it brought America to the financial brink.

That Wall Street and its Washington coterie are stilled embraced in regulatory capture and unintelligent design is most keenly evidenced by the recent merger of Merrill Lynch, the brokerage/investment firm, with Bank of America, the commercial bank and ongoing discussions to merge Morgan Stanley, the brokerage/investment firm with a commercial bank. (Memo to Enemy Combatants Against Taxpayers a/k/a Wall Street/Washington: this new model is the failed model of Citigroup. Why do you hate America?)

Make no mistake that what ever the dollar amount announced next week to funnel into an entity to buy bad debts from banks and Wall Street firms, it won’t be enough. It’s a Band-Aid on a malignant tumor. That tumor is Credit Default Swaps (CDS) with over $60 trillion now owed through secret contracts in an unregulated market created, financed and owned by the unintelligent design masters, Wall Street firms themselves. (See “How Wall Street Blew Itself Up,” CounterPunch, January 21, 2008.)

There is no sincere plan by this administration to help America or Americans. There is only a plan to slow the financial collapse until after the November elections by throwing a politically palatable amount of money at it and a plan to continue to blame it on a housing bust.

If we, the American people, allow this to happen, we’re enablers to the unintelligent design model. Before one more penny of our taxes are spent on this ruse, we must demand a seat at the table (I think Ralph Nader should occupy that seat) to discuss breaking up Wall Street, crushing this model, innovating a sensible model that serves the individual investor and deserving businesses, and promises our children a future of more than a banana republic.

Paulson Bailout Plan a Historic Swindle

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By William Greider

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses--many hundreds of billions, maybe much more. What's not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public--all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called "responsible opinion." If this deal succeeds, I predict it will become a transforming event in American politics--exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Christopher Whalen of Institutional Risk Analytics, a brave conservative critic, put it plainly: "The joyous reception from Congressional Democrats to Paulson's latest massive bailout proposal smells an awful lot like yet another corporatist lovefest between Washington's one-party government and the Sell Side investment banks."

A kindred critic, Josh Rosner of Graham Fisher in New York, defined the sponsors of this stampede to action: "Let us be clear, it is not citizen groups, private investors, equity investors or institutional investors broadly who are calling for this government purchase fund. It is almost exclusively being lobbied for by precisely those institutions that believed they were 'smarter than the rest of us,' institutions who need to get those assets off their balance sheet at an inflated value lest they be at risk of large losses or worse."

Let me be clear. The scandal is not that government is acting. The scandal is that government is not acting forcefully enough--using its ultimate emergency powers to take full control of the financial system and impose order on banks, firms and markets. Stop the music, so to speak, instead of allowing individual financiers and traders to take opportunistic moves to save themselves at the expense of the system. The step-by-step rescues that the Federal Reserve and Treasury have executed to date have failed utterly to reverse the flight of investors and banks worldwide from lending or buying in doubtful times. There is no obvious reason to assume this bailout proposal will change their minds, though it will certainly feel good to the financial houses that get to dump their bad paper on the government.

A serious intervention in which Washington takes charge would, first, require a new central authority to supervise the financial institutions and compel them to support the government's actions to stabilize the system. Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Only with these conditions, and some others, should the federal government be willing to take ownership--temporarily--of the rotten financial assets that are dragging down funds, banks and brokerages. Paulson and the Federal Reserve are trying to replay the bailout approach used in the 1980s for the savings and loan crisis, but this situation is utterly different. The failed S&Ls held real assets--property, houses, shopping centers--that could be readily resold by the Resolution Trust Corporation at bargain prices. This crisis involves ethereal financial instruments of unknowable value--not just the notorious mortgage securities but various derivative contracts and other esoteric deals that may be virtually worthless.

Despite what the pols in Washington think, the RTC bailout was also a Wall Street scandal. Many of the financial firms that had financed the S&L industry's reckless lending got to buy back the same properties for pennies from the RTC--profiting on the upside, then again on the downside. Guess who picked up the tab? I suspect Wall Street is envisioning a similar bonanza--the chance to harvest new profit from their own fraud and criminal irresponsibility.

If government acts responsibly, it will impose some other conditions on any broad rescue for the bankers. First, take due bills from any financial firms that get to hand off their spoiled assets, that is, a hard contract that repays government from any future profits once the crisis is over. Second, when the politicians get around to reforming financial regulations and dismantling the gimmicks and "too big to fail" institutions, Wall Street firms must be prohibited from exercising their usual manipulations of the political system. Call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

More important, if the taxpayers are compelled to refinance the villains in this drama, then Americans at large are entitled to equivalent treatment in their crisis. That means the suspension of home foreclosures and personal bankruptcies for debt-soaked families during the duration of this crisis. The debtors will not escape injury and loss--their situation is too dire--but they deserve equal protection from government, the chance to work out things gradually over some years on reasonable terms.

The government, meanwhile, may have to create another emergency agency, something like the New Deal, that lends directly to the real economy--businesses, solvent banks, buyers and sellers in consumer markets. We don't know how much damage has been done to economic growth or how long the cold spell will last, but I don't trust the bankers in the meantime to provide investment capital and credit. If necessary, Washington has to fill that role, too.

Finally, the crisis is global, obviously, and requires concerted global action. Robert A. Johnson, a veteran of global finance now working with the Campaign for America's Future, suggests that our global trading partners may recognize the need for self-interested cooperation and can negotiate temporary--maybe permanent--reforms to balance the trading system and keep it functioning, while leading nations work to put the global financial system back in business.

The agenda is staggering. The United States is ill equipped to deal with it smartly, not to mention wisely. We have a brain-dead lame duck in the White House. The two presidential candidates are trapped by events, trying to say something relevant without getting blamed for the disaster. The people should make themselves heard in Washington, even if only to share their outrage.

Why does the US think it can win in Afghanistan?

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By Robert Fisk

The Taliban are better trained, and – sad to say – increasingly tolerated by the local civilian population

Poor old Algerians. They are being served the same old pap from their cruel government. In 1997, the Pouvoir announced a "final victory" over their vicious Islamist enemies. On at least three occasions, I reported – not, of course, without appropriate cynicism – that the Algerian authorities believed their enemies were finally beaten because the "terrorists" were so desperate that they were beheading every man, woman and child in the villages they captured in the mountains around Algiers and Oran.


And now they're at it again. After a ferocious resurgence of car bombing by their newly merged "al-Qa'ida in the Maghreb" antagonists, the decrepit old FLN government in Algiers has announced the "terminal phase" in its battle against armed Islamists. As the Algerian journalist Hocine Belaffoufi said with consummate wit the other day, "According to this political discourse ... the increase in attacks represents undeniable proof of the defeat of terrorism. The more terrorism collapsed, the more the attacks increased ... so the stronger (terrorism) becomes, the fewer attacks there will be."

We, of course, have been peddling this crackpot nonsense for years in south-west Asia. First of all, back in 2001, we won the war in Afghanistan by overthrowing the Taliban. Then we marched off to win the war in Iraq. Now – with at least one suicide bombing a day and the nation carved up into mutually antagonistic sectarian enclaves – we have won the war in Iraq and are heading back to re-win the war in Afghanistan where the Taliban, so thoroughly trounced by our chaps seven years ago, have proved their moral and political bankruptcy by recapturing half the country.

It seems an age since Donald "Stuff Happens" Rumsfeld declared,"A government has been put in place (in Afghanistan), and the Islamists are no more the law in Kabul. Of course, from time to time a hand grenade, a mortar explodes – but in New York and in San Francisco, victims also fall. As for me, I'm full of hope." Oddly, back in the Eighties, I heard exactly the same from a Soviet general at the Bagram airbase in Afghanistan – yes, the very same Bagram airbase where the CIA lads tortured to death a few of the Afghans who escaped the earlier Russian massacres. Only "terrorist remnants" remained in the Afghan mountains, the jolly Russian general assured us. Afghan troops, along with the limited Soviet "intervention" forces, were restoring peace to democratic Afghanistan.

And now? After the "unimaginable" progress in Iraq – I am quoting the fantasist who still occupies the White House – the Americans are going to hip-hop 8,000 soldiers out of Mesopotamia and dump another 4,700 into the hellfire of Afghanistan. Too few, too late, too slow, as one of my French colleagues commented acidly. It would need at least another 10,000 troops to hope to put an end to these Taliban devils who are now equipped with more sophisticated weapons, better trained and increasingly – sad to say – tolerated by the local civilian population. For Afghanistan, read Irakistan.

Back in the late 19th century, the Taliban – yes, the British actually called their black-turbaned enemies "Talibs" – would cut the throats of captured British soldiers. Now this unhappy tradition is repeated – and we are surprised! Two of the American soldiers seized when the Taliban stormed into their mountain base on 13 July this year were executed by their captors.

And now it turns out that four of the 10 French troops killed in Afghanistan on 18 August surrendered to the Taliban, and were almost immediately executed. Their interpreter had apparently disappeared shortly before their mission began – no prizes for what this might mean – and the two French helicopters which might have helped to save the day were too busy guarding the hopeless and impotent Afghan President Hamid Karzai to intervene on behalf of their own troops. A French soldier described the Taliban with brutal frankness. "They are good soldiers but pitiless enemies."

The Soviet general at Bagram now has his amanuensis in General David McKiernan, the senior US officer in Afghanistan, who proudly announced last month that US forces had killed "between 30 and 35 Taliban" in a raid on Azizabad near Herat. "In the light of emerging evidence pertaining (sic) to civilian casualties in the ... counter-insurgency operation," the luckless general now says, he feels it "prudent" – another big sic here – to review his original investigation. The evidence "pertaining", of course, is that the Americans probably killed 90 people in Azizabad, most of them women and children. We – let us be frank and own up to our role in the hapless Nato alliance in Afghanistan – have now slaughtered more than 500 Afghan civilians this year alone. These include a Nato missile attack on a wedding party in July when we splattered 47 of the guests all over the village of Deh Bala.

And Obama and McCain really think they're going to win in Afghanistan – before, I suppose, rushing their soldiers back to Iraq when the Baghdad government collapses. What the British couldn't do in the 19th century and what the Russians couldn't do at the end of the 20th century, we're going to achieve at the start of the 21 century, taking our terrible war into nuclear-armed Pakistan just for good measure. Fantasy again.

Joseph Conrad, who understood the powerlessness of powerful nations, would surely have made something of this. Yes, we have lost after we won in Afghanistan and now we will lose as we try to win again. Stuff happens.