Military Industrial Complex 2.0

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By Frida Berrigan

Cubicle Mercenaries, Subcontracting Warriors, and Other Phenomena of a Privatizing Pentagon

Seven years into George W. Bush’s Global War on Terror, the Pentagon is embroiled in two big wars, a potentially explosive war of words with Tehran, and numerous smaller conflicts – and it is leaning ever more heavily on private military contractors to get by.

Once upon a time, soldiers did more than pick up a gun. They picked up trash. They cut hair and delivered mail. They fixed airplanes and inflated truck tires.

Not anymore. All of those tasks are now the responsibility of private military corporations. In the service of the Pentagon, their employees also man computers, write software code, create integrating systems, train technicians, manufacture and service high-tech weapons, market munitions, and interpret satellite images.

People in ties or heels, not berets or fatigues, today translate documents, collect intelligence, interpret for soldiers and interrogators, approve contracts, draft reports to Congress, and provide oversight for other private contractors. They also fill prescriptions, fit prosthetics, and arrange for physical therapy and psychiatric care. Top to bottom, the Pentagon’s war machine is no longer just driven by, but staffed by, corporations.

Consider the following: In fiscal year 2005 (the last year for which full data is available), the Pentagon spent more contracting for services with private companies than on supplies and equipment -- including major weapons systems. This figure has been steadily rising over the past 10 years. According to a recent Government Accountability Office report, in the last decade the amount the Pentagon has paid out to private companies for services has increased by 78% in real terms. In fiscal year 2006, those services contracts totaled more than $151 billion.

Ever more frequently, we hear generals and politicians alike bemoan the state of the military. Their conclusion: The wear and tear of the President’s Global War on Terror has pushed the military to the breaking point. But private contractors are playing a different tune. Think of it this way: While the military cannot stay properly supplied, its suppliers are racking up contracts in the multi-billions. For them, it’s a matter of letting the good times roll.

What a Difference a War Makes

As we prepare to close the book on the Bush presidency, it is worth exploring just how, in the last seven-plus years, the long War on Terror has actually helped build a new, privatized version of the Pentagon. Call it Military Industrial Complex 2.0.

Consider fiscal year 2001, which conveniently ended in September of that year. It serves as a good, pre-War on Terror baseline for grasping just how the Pentagon expanded ever since -- and how much more it is paying out to private contractors today.

Back then, the Pentagon’s top 10 suppliers shared $58.7 billion in Department of Defense (DoD) contracts, out of a total of $144 billion that went to the top 100 Pentagon contractors. Number 100 on the list was The Carlyle Group with $145 million in contracts. Keep in mind, of course, that this was the price of "defense" for a nation with no superpower rival.

Fast forward to 2007 and the top 10 companies on the Pentagon’s list of private contractors were sharing $125 billion in DoD contracts, out of a total of $239 billion being shared among the top 100 contractors. The smallest contract among those 100 was awarded to ARINC and came in at $495 million.

In those seven years, in other words, contracts to the top 10 more than doubled, the size of the total pay-out pie increased by two-thirds, and the lowest contract among the top 100 went up almost four-fold.

Just as revealing, almost half the companies on the Pentagon’s Top 100 list in 2007 were not even on it seven years earlier, including McKesson, which took in a hefty $4.6 billion in contracts and MacAndrews and Forbes which garnered $3.3 billion.

And here’s a fact that makes sense of all of the above: Given the spectrum of services offered and the level of integration that has already taken place between the Pentagon and these private companies, the United States can no longer wage a war or even run payroll without them.

These have been the good times for defense contractors, if not for the military itself. Since September 2001, many companies have made a quantum leap from receiving either no Pentagon contracts or just contracts in the low hundred millions to awards in the billion-dollar range. Here are just a few portraits of companies that are booming, even as the military goes bust.

URS Corporation: This engineering, construction, and technical services firm based in San Francisco employs more than 50,000 people in 34 countries. A publicly-held firm, which recently acquired Washington Group International, it had numerous reconstruction contracts in Iraq. More than 40% of the company’s revenue ($5.4 billion in 2007) comes from the federal government. Between 2001 and 2007, its Pentagon contracts increased more than a thousand fold (by 1,400%) from $169 million to $2.6 billion.

URS began the War on Terror at number 91 on the Pentagon’s Top 100 list. It is now number 15.

Electronic Data Systems Corporation: Founded by political maverick Ross Perot, EDS is a global technology services company headquartered in Plano, Texas. In March, the Pentagon awarded it a $179 million contract to provide information technology support services to the Pentagon’s Defense Manpower Data Center, its central archive of all kinds of data on personnel, manpower and casualties, pay and entitlements, as well as the whole gamut of financial information. The company -- which employs 139,000 people in 65 countries -- boasted $22.1 billion in revenue in 2007. Computer giant HP bought EDS in August 2008.

In 2001 the company occupied slot 71 on the DoD’s Top 100 list with $222 million in contracts. By 2007, it had climbed to number 16 with $2.4 billion in contracts, an increase of almost 1,000%.

Harris Corporation: This communications and information technology company is headquartered in Melbourne, Florida, and employs 16,000 people. Harris boasted $4.2 billion in revenue in 2007, with more than one-quarter of that ($1.6 billion) coming from Pentagon purchases of communications and electronics capabilities like Falcon II high-frequency radio systems.

When the Global War on Terror began, Harris had a modest $380 million in Pentagon contracts (and was number 43 on that top 100 list); over the last seven years, it has steadily risen in rank and now is number 30.

KBR: Gaming the System

The United States first heard the phrase "military industrial complex" during President Dwight David Eisenhower’s January 17, 1961 Farewell Address. As he left public office, our last general-turned-president warned that the "conjunction of an immense military establishment and a large arms industry is new in the American experience" and its influence -- "economic, political, even spiritual -- is felt in every city, every Statehouse, every office of the Federal government…

"In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."

If, in many ways, Ike’s comment is still applicable, in the last 47 years the Military Industrial Complex (MIC) he described has evolved in startling ways -- and massively. Today, it does more than wield influence; it has created unparalleled dependence and unrivaled profit.

What this means in practice can be illustrated by KBR, a privately-held company that does not publish quarterly reports. Nonetheless, its recent history provides an object lesson in what the MIC 2.0 can do for the profitability of a private contractor.

KBR has shadowed the U.S. military every step of the way through the invasion and occupation of Iraq: first as Kellogg Brown and Root, a subsidiary of Halliburton (for which Dick Cheney was once CEO), and then as KBR, an independent company. It has, in fact, made its corporate fortune on the Pentagon’s now infamous "no-bid," "cost-plus contracts." Since December 2001, KBR has been working for the Pentagon under the Logistics Civil Augmentation Program (LOGCAP) -- a multi-billion dollar agreement that guarantees the company those cost-plus profits for fulfilling contracted tasks.

This huge and sweeping contract was awarded without the rigors of the competitive marketplace. Its "no-bid" nature was a sign that KBR was anything but a run-of-the-mill Pentagon contractor. A second sign lay in the Pentagon’s acceptance of that cost-plus arrangement. A rarity in the business world, "cost plus" means that the more a job costs, the more profit the company pockets. Professor Steve Schooner, a contract expert at George Washington University Law School, commented, "Nobody in their right mind would enter into a contract that basically says, ’come up with creative ways to spend my money and the more you spend the happier I’ll be.’" Under this contract, the Pentagon has doled out $20 billion to KBR to build and staff facilities for military personnel in Iraq and provide food and other necessities to U.S. troops there.

Ironically, the Pentagon isn’t even getting what it paid for… not by a long shot. KBR’s fraudulent activities have, according to the Government Accountability Office, included the failure to adequately account for more than a billion dollars in contracted funds; the leasing of vehicles to be used by company personnel for up to $125,000 a year (despite the fact that these vehicles could have been purchased outright for $40,000 or less); the purchase of unnecessary luxuries such as monogrammed towels for use in company-run recreation facilities for military personnel; the overcharging for fuel brought into Iraq from Kuwait for military use; the charging to the Pentagon’s tab three to four times as many meals as were actually consumed by U.S. military personnel; and the provision of unclean water for U.S. troops.

All of these abuses came to light thanks to investigations by Representative Henry Waxman (D-CA), the Pentagon’s own Office of the Inspector General, and others, but Halliburton and its former subsidiary got off with little more than such wrist slaps as the revocation of the fuel supply contract and of KBR’S exclusive LOGCAP contract for Iraq. That was recently divided into three parts and put out to bid. KBR was, however, allowed to join the bidding, and is now sharing the contract with DynCorp and Fluor Corporation. Each company has received a $5 billion contract that includes nine one-year options for renewal that could be worth, in total, up to $150 billion, according to Dana Hedgpeth of the Washington Post.

The most recent of many black marks against KBR came when members of Congress and investigators charged that substandard electrical work by company employees in showers at military bases in Iraq had resulted in the electrocution deaths of 16 American soldiers.

To understand what privatization means in action at the Pentagon, consider just one modest example of the corruption that infects KBR and how it was addressed. In 2004, the company submitted requests for reimbursement on more than one billion dollars in charges that Army auditors deemed "questionable," in part because they weren’t backed up by reliable records. Charles Smith, the Army official managing Pentagon contracts, refused to approve the payments and threatened to levy fines against the company if it did not get a better handle on its spending. Later, he told James Risen of the New York Times that KBR had "a gigantic amount of costs they couldn’t justify. Ultimately, the money that was going to KBR was money being taken away from the troops."

Despite his 31 years with the Army, and without notice, Smith was transferred from his post, while the requested payments were subsequently sent to KBR. According to the New York Times, the Army argued that "blocking the payments to KBR would have eroded basic services to the troops. They said that KBR had warned that if it was not paid, it would reduce payments to subcontractors, which in turn would cut back on services."

In other words, the Pentagon -- in charge of hundreds of billions of dollars and more than a million personnel in and out of uniform -- was essentially held hostage by a company which threatened to withhold services that (just to be clear) had been pretty shoddy to begin with.

Senator Robert Byrd (D-WV) saw the problem: "We have found ourselves dependent on profit-oriented companies for even the day-to-day basics of feeding and housing our troops, [and] for carrying out a myriad of other functions of the mission, including security. These kinds of contracts opened the door for every manager to game the system in order to maximize profits."

And game the system they do. For example, the sort of corruption that seems endemic to KBR has created a profitable new market for another kind of private military corporation -- one specializing in oversight and accountability.

After the Army replaced Smith, it hired RCI Holding Corporation to review KBR’s records. Smith says the private company "came up with estimates, using very weak data from KBR," while ignoring audit information gathered within the Pentagon. While KBR was subsequently awarded high performance bonuses and a portion of that new 10-year contract with the Army, Serco (RCI Holding’s parent company) also received a new contract -- to continue to oversee KBR’s contracts.

And so dependency begets deeper dependency, while corruption, incompetence, and callous indifference become ever more ingrained in the military way of life.

During his first presidential campaign, George W. Bush identified Christ as his favorite political philosopher. But as the first American President with a Masters of Business Administration (and from Harvard, no less), he has done a much better job of applying the profit-first principles of Donald Trump and Jack Welch than exemplifying the man from Galilee who promised the rich young man "treasure in heaven" once he sold all he owned and gave it to the poor. As president, Bush has brought a corporations-can-do-no-wrong perspective to the Oval Office and quickly sought to give the private sector an ever freer rein over a smorgasbord of public works and services. Today, the military sector leans remarkably heavily on private corporations to perform what used to be their basic functions, from war to disaster relief to washing the dishes. KBR is just one multi-billion dollar example of the MBA presidency’s legacy.

Beyond Blackwater: The Pentagon’s Cubicle Mercenaries

The new Complex 2.0 regularly employs companies whose job it is to send armed mercenaries into action beside U.S. soldiers or to guard U.S. diplomats and high military officers. Fighting wars for hire has become an essential part of the Pentagon’s MO since 2001, and the Blackwater employee gunning through Baghdad in a Kevlar vest, a kafiyah, and wrap-around shades is the ultimate symbol of the new moment.

But there’s another dimension of the Bush era’s privatization surge at the Pentagon that has gotten far less coverage: Private military firms are also doing the paperwork of war. According to a March 2008 GAO report, Additional Personal Conflict of Interest Safeguards Needed for Certain DoD Contractor Employees, in offices throughout the Department of Defense, cubicle mercenaries in startling numbers are working shoulder-to-shoulder with uniformed military staff and federal employees.

The Government Accountability Office (GAO) looked at 21 different Pentagon offices and found that private contractors outnumbered Department of Defense employees in more than half of them. In the engineering department of the Missile Defense Agency, for example, employees from private contractors made up more than 80% of the work force. The GAO found that contractors were responsible for carrying out a wide range of tasks and were not subject to federal laws and regulations designed to prevent conflicts of interest -- including the rules that concern personnel who want to take positions with companies they had awarded contracts to as federal employees.

Another March 2008 GAO report assessed the Army’s Contracting Center of Excellence where private contractors made up less than 20% of the workforce. The average hourly cost of an employee from a private contractor, however, was more than 26% higher than that of a government employee. Similar disparities in pay can be seen even more starkly in Iraq, where a soldier is paid little more than minimum wage, while a private military contractor can earn well above $100,000 a year tax-free.

For perhaps the ultimate contrast in military privatization, consider this: Testifying at a Congressional hearing in July, Blackwater CEO Erik Prince offered a ballpark estimate for his annual salary -- "more than a million." He assured Representative Peter Welch (D-VT) that he would "get back" to him with a more exact figure. Welch noted at the time that General David Petraeus -- then responsible for more than 160,000 U.S. military personnel in Iraq -- earned $180,000 a year.

Privatization at the Bottom

Once private companies take on military and war-making tasks, where does the buck stop? It is not uncommon, for example, for a company hired to perform a service for the Pentagon to subcontract part of the job to another company, which may then subcontract part of its task to a third. Who, then, is in charge? When something goes wrong, who is culpable?

A recent investigation by Craig and Marc Kielburger, Canadian co-founders of the NGO Free the Children, and Toronto-based journalist Chris Mallinos found that KBR has subcontracted to more than 200 different firms -- many based in Kuwait -- to transport materials into Iraq.

One result of this: The United States has ended up paying companies that are essentially enslaving Filipinos, Sri Lankans, and other "third country nationals" who drive supplies into Iraq. In a recent article in Epoch Times, the trio recount a series of fact-finding trips to Kuwait to meet with dozens of South Asian and Filipino men "recruited to the Middle East with the promise of good jobs, only to be hired by Kuwaiti transport companies driving into Iraq." A Filipino described how Jassin Transport and Stevedoring Company -- one of KBR’s sub-subcontractors -- took his passport, nullified the contract he had signed in the Philippines, and issued him a new contract written in Arabic. Employees were "given an ultimatum: sign or be abandoned." Then they were handed the keys to unarmored tractor-trailer trucks and told to drive fast along roads known to be dangerous. The authors concluded that these companies "openly flout U.S. labor laws by using cheap imported labor, withholding employee passports and housing workers in decrepit conditions."

Officially, nothing like this is supposed to happen. The Philippines, Nepal, and other countries bar their citizens from taking work in Iraq. In 2006, the Defense Department actually issued stricter regulations forbidding such labor trafficking, and KBR and other companies pledged that they and their subcontractors would follow local labor laws. But regulations or no, the truth is that the Pentagon is no longer really in control of the process, and sub-sub-subcontracting is how you make the big money in places like Iraq.

Oh… and despite hearings, investigations, and legislation, Congress isn’t in control either. In an attempt to address the privatization of the military, for example, the Senate’s Democratic Policy Committee has held a total of seventeen hearings on waste, fraud, and corruption in Iraq. Representative Henry Waxman’s Oversight and Government Reform Committee has made the role of congressional gadfly respectable. Hearings in both the House and Senate have offered riveting, sometimes shocking, inside-the-Beltway theater, but subsequent legislation created to make decent Pentagon reporting and oversight a reality, close gaping loopholes in accountability, criminalize fraud, and curb some of the worst abuses of private contractors has proven well-meaning but hopelessly weak and ineffective in practice.

Is MIC 3.0 in our Future?

President Bush will leave office boasting that the United States has the most powerful and professional military machine in the world. We have paid dearly for this machine in the past seven-plus years. The bill for all that might and muscle comes to more than $3.8 trillion since 2001 -- plus another $900 billion plus for actually flexing it in Iraq, Afghanistan, and elsewhere.

And if the U.S. military machine is now both oversized and staggeringly expensive, it is also more prone to breakdown in a more dangerous and unstable world. So think of George W. Bush’s legacy to us as a Pentagon bloated almost beyond recognition and crippled by its dependence on private military corporations.

As for Bush’s legacy to the Lockheed Martins, the KBRs and the Pentagon’s whole "Top 100" crew, it’s been money beyond measure, enough to leave them all hard at work on Military Industrial Complex 3.0. They naturally want to make sure that the money continues to pour into their ever upgrading war machine, no matter who takes over the White House in 2009.

Capital Punishment: Lehman on its way to the Gallows?

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By Mike Whitney

Bank of America is buying Merrill Lynch for $45 billion, AIG needs an emergency $40 billion bail-out from Uncle Sam to stay afloat, and Lehman Bros is kaput. Whew! The financial world has been turned upside-down overnight and the opening bell hasn’t even rung at the NYSE. It’ll be a rough day of trading ahead. Paul Krugman summed up the prevailing feeling of anxiety on Wall Street like this:

"Will the U.S. financial system collapse today, or maybe over the next few days? I don’t think so — but I’m nowhere near certain. You see, Lehman Brothers, a major investment bank, is apparently about to go under. And nobody knows what will happen next."

The news of Wall Street’s Sunday night massacre has already send foreign stock markets into a deep swoon. Shares tumbled in Asia and dropped more than 4 per cent in Europe. The dollar is steadily losing ground to the euro and gold is on the rise. The question is not whether the Dow will fall, but "how far" and what affect that will have on increasingly fragile financial institutions.


Lehman Brothers, the 158 year old Wall Street warhorse, announced Sunday that it will file for bankruptcy after weekend rescue plans broke down without finding a buyer. Fears of credit contagion and a global recession have resurfaced and become more widespread. Lehman’s failure suggests that that the other Wall Street giants will soon be following the same path to extinction. Economist Nouriel Roubini put it like this:

"All of the independent broker dealers are going to disappear. In March it was Bear Stearns. Tonight it was Lehman and Merrill Lynch. Morgan Stanley and Goldman Sachs should go find a buyer tomorrow. The business model of broker dealers is fundamentally flawed. They cannot survive."


Roubini may be right. The funny thing about capitalism is that you need capital to play. When the bank-vault is full of nothing but worthless mortgage-backed securities (MBS) and overvalued junk bonds; the whole thing goes belly-up fast. That appears to be the case with Lehman Bros, the century-old Wall Street warhorse that has joined the long procession of underwater banking establishments now ambling lemming-like towards the cliff. Lehman had a great go of it during the boom times when all it took to make oodles of money was a predictable flood of low interest credit from the Fed and a compliant ratings agency that would stamp every crappy securitized pool of mortgages with a big Triple A before hawking it to some gullible investor in Shanghai or Heidelberg. Lehman travails are not much different from anyone else in the banking fraternity. The problem is that the entire system is under-capitalized and over-leveraged. When Bear Stearns went down last year, it was levered at a ratio of 26 to 1. When Hedgie Carlyle Capital blew up, it was levered at 32 to 1. And when Fannie and Freddie were finally subsumed by the US Treasury; the two behemoths were levered at a whopping 80 to 1, which is to say that they had a paltry one dollar capital cushion for every $80 they had loaned out. That’s no way to run a business. They would have continued on the same erratic path---buying up toxic mortgages and MBS from people who had no chance of ever repaying their loans--had they not been taken into federal "conservatorship", which is a fancy way of saying they were insolvent. Treasury Secretary Henry Paulson unwisely attached a 6 inch-wide money-hose from the bowels of the Treasury to Fannies front office so the two mortgage giants could continue to teeter-along at taxpayer expense regardless of the fact that the securitization business model has completely broken down and foreign investors--including China--have already started cutting back on their purchases of GSE debt. This is no laughing matter. The $700 billion US current account deficit is financed through the generosity of foreign investors who are getting increasingly jittery about sinking money into a system that looks more like casino-poker all the time. Here’s a clip from China daily on Friday:

"China, which holds a fifth of its currency reserves in Fannie Mae and Freddie Mac debt, may cut the portion held in US dollars, according to China International Capital Corp (CICC), one of the nation’s biggest investment banks.

"The crisis has made Chinese officials realize it’s a bad idea to put all their eggs in one basket," wrote CICC Chief Economist Ha Jiming. "This will likely lead to greater diversification of foreign exchange reserve investments." China held $447.5 billion of US agency bonds as of June 2008, according to the CICC calculations using disclosures by the US Treasury. It is likely to reduce the portion of reserves in dollar assets from the current 60 percent by purchasing more non-dollar assets with new reserves, he said." (China Daily)

Naturally, foreign investors and central banks will curtail their purchases of US securities and Treasuries until there’s some indication that US markets have stabilized and will be able to withstand the ferocious headwinds of the biggest housing crash in history, a frozen corporate bond market, a paralyzed banking system, and steadily waning consumer demand. But Americans still seem breezily unaware of what all this means for the country’s future. They’d rather savor every new bit of gossip about some Bible beating, Grizzly-hunting prom queen who wants to lead the country back to the glory days of the 13th century than learn about the about the firestorm raging through the financial markets.



When the net foreign purchases of US financial assets begin to slow; the game is over. The Fed will be forced to raise interest rates to attract foreign capital which will put downward pressure on the economy and accelerate the housing crash. Paulson’s decision to provide unlimited capital to Fannie and Freddie, will stack more and more debt atop the faltering dollar and US Treasuries. It is the equivalent of lashing the greenback to an anvil and tossing it overboard. Paulson’s attempts to stave off a systemic banking crisis ensures that the federal government will undergo an unprecedented funding crisis sometime in the near future. There will be higher taxes for the battered middle class and higher interest rates for businesses and consumers. This will trigger a protracted economic slowdown and weaker growth. Credit will get tighter, banks will default, unemployment will soar and GDP will shrivel. A negative feedback loop will develop from the faltering financial system to the real economy; a vicious circle ending in massive layoffs, weakening demand, falling stock prices, and withering consumer confidence. Welcome to Soup kitchen USA.

Presently, Paulson and New York Fed chief Timothy Geithner are pressing Wall Street banking elites to pony-up enough money to buy up Lehman’s devalued real estate assets. The Fed’s proposal is similar to Greenspan’s rescue of Long-Term Management LP (LTCM) which roiled financial markets in the late 1990s. Paulson has signaled that there be NO government bailout like Bear Stearns when the Fed bought up $29 billion in mortgage-related assets. The Fed is tapped-out having already committed half of its balance sheet--nearly $500 billion-- in repos through its "auction facilities" which have recently skyrocketed to record highs of $19 billion per week for the last 3 weeks. The crisis is deepening by the day. Similarly, the Treasury has hitched its wagon to Fannie and Freddie which expands the National Debt by another $5.2 trillion and seriously undermines the "full faith and credit" of the US in the process. Keep in mind, the biggest source of American power is its access to cheap capital via the US taxpayer. Paulson has now put that source of revenue at risk by nationalizing the housing industry and burdening the taxpayer with (potentially) astronomical future obligations, even though he knows full-well that the market could drop another 15 to 20% before the end of 2010. Paulson’s recklessness has doomed the country to years of struggle.

As of Sunday afternoon, no deal had been struck to buy Lehman Bros. and it looked like the bank was headed for bankruptcy. Wall Street is preparing for the worst. Many of the big players are busy working out the details on thorny derivatives contracts to avoid a sudden shock to the market. The fear is palpable and there’s no way of knowing what will happen when the Asia markets open in just a few hours. It could be nothing more than a hiccup or it could be utter pandemonium ; nobody knows. Nouriel Roubini gave a particularly grim assessment of a Lehman default in his latest post on his blogsite Global EconoMonitor:

"It is now clear that we are again – as we were in mid- March at the time of the Bear Stearns collapse – an epsilon away from a generalized run on most of the shadow banking system, especially the other major independent broker dealers (Lehman, Merrill Lynch, Morgan Stanley, Goldman Sachs). If Lehman does not find a buyer over the weekend and the counterparties of Lehman withdraw their credit lines on Monday, you will have not only a collapse of Lehman but also the beginning of a run on the other independent broker dealers...Then this run would lead to a massive systemic meltdown of the financial system. That is the reason why the Fed has convened in emergency meetings the heads of all major Wall Street firms on Friday and again today to convince them not to pull the plug on Lehman and maintain their exposure to this distressed broker dealer." (Nouriel Roubini’s Global EconoMonitor)

Roubini may be right if the Big Boyz fail to intervene, but will they really risk everything just to force the Treasury’s hand and get Uncle Sam to pick up the tab for Lehman’s bad paper? After all, the giant investment banks are inescapably trapped in a net of complex, unregulated, over-the-counter derivatives contracts which--given the right conditions---could bring every skyscraper in lower Manhattan crashing to earth in one bloody afternoon of trading on the NYSE. But, that probably won’t happen. It’s more likely that cooler heads will prevail as the big-hand inches closer to midnight.


A sizable portion of Lehman’s $128 billion in long-term debt will probably be ring-fenced in a "bad bank" which will hold its toxic mortgage-backed assets and be financed by either the Treasury or the other Wall Street banks. The good assets can then be separated and sold off to either Bank of America or Barclays, the two prospective buyers. That way, according to Forbes, "the bad bank would be kept afloat while its assets could be unwound over a period of time in a way that wouldn’t disrupt the financial system more than it already has been."

Some variation of the "Forbes solution" will probably be enacted, but, let’s be clear; this is really no solution at all. It’s just a way of buying time by rolling-over debt to avoid the ugly consequences of accounting for the massive losses. In other words, it is cheaper to keep burning up capital to prop up moribund assets than take the loss and make a genuine effort to restructure the dysfunctional system. Here’s how former Fed chief Paul Volcker summed it up just two weeks ago:

"This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down. Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation. The current financial system is dysfunctional. That is a polite way of saying it failed.’’

Securitization has failed. The cuts to the Fed’s Funds rate have failed. The auction facilities--TAF, PDCF, and TSLF---have all failed. The off-balance sheets operations, the debt-pyramiding asset-inflation, the Enron-style accounting, the SIVs, the CP, MBS, CDOs, have failed. The subprimes, the piggybacks, the option-ARMs, the Alt-As have all failed. Structured finance has failed. The system doesn’t work; won’t work; can’t work. It’s built on the misguided assumption that capitalism can thrive without capital; that one dollar can be infinitely magnified by complex debt-instruments and mega-leveraging to generate real wealth and keep the wheels of finance and industry humming along. It can’t be done. The system is under-water. Economist and author Henry Liu put it like this:

"Yet this approach is preferred by those in authority, trapped in self deception about unregulated market capitalism being still fundamentally sound. They try to calm markets by asserting that the current turmoil is merely a minor liquidity bottleneck that can be handled by the central bank releasing more liquidity against the full face value of collateral of declining worth. (There are) No signs of any coherent grand strategy or plan to save the cancerous system from structural self-destruction."


Instead, the marauding of a handful of Wall Street "innovators"--drunk with hubris and blinded by their own bizarre sense of entitlement---have thrust the financial markets to the brink of catastrophe and pushed the the broader "real" economy towards a painful retrenchment. Now everyone will pay for the greed of the few.

So, what’s next?

An article in the Financial Times spells it out, but government officials will undoubtedly deny it until after the November presidential election.

From the Financial Times:

“The debate over whether an RTC-style (Resolution Trust Corporation)vehicle is needed – perhaps just to ring-fence troubled mortgage assets – also gained traction among central bankers at the Jackson Hole symposium hosted by the Federal Reserve Bank of Kansas City in August....
The problem that an RTC vehicle could help to solve is that there are very few buyers for troubled mortgage assets, and few investors now willing to inject fresh capital into the tattered balance sheets of the banks left holding them. As a result, banks such as Lehman and Washington Mutual have struggled to sell their soured mortgage portfolios, and to broker deals for fresh capital. The takeover of Fannie and Freddie, which virtually wiped out preferred equity holders, has also made banks’ access to the preferred capital market increasingly difficult. Through a new RTC, the government could provide financial support if needed in return for a share in potential profits once the assets were liquidated. “

What the Feds are refusing to admit, is that there is already a plan in place to make the government an an active, "shareholding" partner in failing commercial banks. (There’s no way the FDIC could pay for all the projected losses anyway) That will give the US Treasury the authority to provide insolvent banks with enough capital to muddle through while their impaired assets are liquidated via the RTC; a morgue for distressed mortgage-backed garbage.

How this will affect the already-anemic dollar is anyone’s guess. But it won’t be pretty.

It might be a good time to stock up on Krugerrands and buy a rosary.

There Is an Alternative to Corporate Rule

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By Mark Engler

All over the world, truly democratic approaches are bubbling up from the grassroots.

One of the remarkable features of modern political life is how consistently global elites deny that viable alternatives to the current global order exist, even as the terrain of international politics rapidly shifts. The "imperial globalists" that rose to power in the Bush years contend that without U.S. military strength decisively projected abroad, the forces of evil will sweep the globe. Meanwhile, "corporate globalists" of Wall Street persist in their belief that, in the post-Cold War world, we have no choice but to embrace the continual advance of the "free" market.

Neither idea is credible. The disastrous war in Iraq has firmly contradicted the neocons’ argument that preemptive war can create security. Meanwhile, mainstream pundits continue to proclaim neoliberalism -- the radical free market doctrine that has defined the "Washington Consensus" in international economics in recent decades -- to be inevitable and irreplaceable. Yet as that ideology falls into disrepute across the globe, their contention is revealed as ever more deeply disingenuous. Today, there exist scores of books and hundreds of reports that offer new directions for the global order -- plus innumerable initiatives at local, national, and international levels to create political and economic systems that uphold human rights and defend the environment.

In truth, a lack of viable ideas is hardly the problem for those who reject both corporate and imperial models of globalization. Whether they are part of boisterous national uprisings or quiet, persistent community efforts to fuel a truly democratic globalization -- a globalization from below -- members of grassroots networks are now engaged in a debate about the proper balance of vision, program, political strategy, and tactics needed to move forward.

Changes in the Global Justice Movement

Part of what has fueled public confusion about alternatives was specific to the political moment when globalization protests captured the attention of the mainstream media. During the period around the year 2000, global justice organizing was being covered only in contexts where participants were providing a voice of opposition -- at the summit meetings of institutions like the World Trade Organization (WTO), World Bank, and International Monetary Fund (IMF). These events became flash points of resistance for a reason: the summit meetings were remarkably effective at drawing together a tremendously diverse body of global citizen activists.

Yet the globalization scene began to shift early in the Bush years, with the attacks of 9/11 playing an important role in the change. Just as abruptly as the major news outlets had announced the arrival of a "new" global movement after the Seattle protests against the WTO, challenges to the Washington Consensus became virtually invisible to their reporters once again after 9/11. This only partially reflected what was happening on the ground. In the months following the attacks, some protests -- notably a major mobilization against World Bank and IMF meetings in Washington, DC -- were cancelled as the world rose to express sympathy for the victims. However, the Bush administration’s reckless response wiped out global good will and ultimately widened the scope of protests.

As strategies to impose elite visions of globalization continued, global justice protests throughout the world resumed. Many people, particularly in Southern countries, combined outrage at U.S. militarism with a repudiation of corporate globalization. When Bush traveled abroad, he was met with huge protests, many of which raised economic issues as well as anti-war concerns. Yet media outlets mostly reported these demonstrations as incoherent anti-American riots when they covered them at all. Beltway pundits rushed to declare the global justice movement dead. Leading the pack was Edward Gresser of the Progressive Policy Institute, the think-tank of the pro-"free trade" Democratic Leadership Council, who pronounced the movement "destined for irrelevance" in a realigned world.

Millions of people had reason to protest. These activists were about to redraw the political map of Latin America, preside over the collapse of neoliberalism’s legitimacy, lead a worldwide rebellion against preemptive war, and push issues of economic justice to ever more prominent places in the global development debate. Their efforts for a democratic globalization, they would assert, were very much alive.

The View From Porto Alegre

As it turned out, a most visible manifestation of the next stage of global justice movement would come from a modest city of 1.5 million people deep in the south of Brazil, a place whose name has become synonymous with the pursuit of a more just and democratic global order. Today, mention of Porto Alegre, the original home of the World Social Forum, should be sufficient to forever put to rest the knee-jerk contention that there is no alternative to dominant visions of globalization.

Even as progressives within the U.S. turned to resisting Bush administration policies of preemptive war and its reactionary assaults on Constitutional rights, international movements have not waited for regime change in the U.S. to further the decline of the Washington Consensus. Massive crowds have joined Americans in rallying against the war in Iraq, as on February 15, 2003, when upwards of ten million people in over 500 cities took to the streets, constituting the largest coordinated global day of action in history. But, at the same time, local communities have waged battles to reverse privatization of public utilities and transnational campaigns have fought for reforms like debt cancellation. In countries throughout Latin America, they have successfully overthrown neoliberal governments, elected leaders who oppose the Washington Consensus, and they have pressured those officials to enact social policies that serve working people.

Reflecting this sustained torrent of global activity, the World Social Forum has grown and matured. While the first global forum in 2001 hosted 12,000 participants, subsequent events have grown larger and larger, drawing crowds of up to 150,000 people. In addition to returning to Porto Alegre for three additional years after the initial summit, the global event has also convened in Mumbai, India and Nairobi, Kenya, with smaller forums taking place at the regional level. At World Social Forum, community leaders, nonprofit representatives, scholars, organizers, and progressive lawmakers have presented, debated, and refined ideas that collectively represent as comprehensive a set of policies for the global economy as any wonky campaign office could ever hope to devise. These spaces have served as physical embodiments of the proposals for a democratic globalization.

Groups meeting in tents designated for discussion of energy and the environment have strategized about ways to break our dependence on the oil economy. They have proposed investment in mass public transportation, high mileage standards for cars, and shifting government subsidies for hydrocarbon exploitation to alternative energy. Other environmentalists have worked to promote an international carbon tax to penalize polluters -- something undoubtedly in the public interest, especially given mounting evidence about the perils of global warming. All these represent perfectly viable public policies, but have been vehemently opposed by the oil industry.

In other tents, family farmers and food safety advocates from throughout the world have gathered to promote models for redistributive land reform. Even the international financial institutions acknowledge that land reform would be beneficial for the poor, but it has been pushed off the political map by national elites and agribusiness conglomerates. Other advocates explained how current government subsidies for exports and for pesticides boost large-scale "mono-cropping" over organic agriculture; in response, they argued for a shift in public funds to support sustainable farming. Indigenous communities further asserted their right to self-determination, particularly with regard to maintaining traditional systems of land ownership and food production.

Tents holding discussions on the need to curb corporate power have advanced a slate of innovative proposals. These include public financing of elections to end what U.S. Senator Russ Feingold has called "a system of legalized bribery and legalized extortion." They include laws that allow victims of corporate abuses in the developing world to sue in U.S. or European courts. And they include detailed proposals for strengthening anti-trust law in order to break up business monopolies -- among them the massive media empires that do much to set the limits of public debate.

A group called ATTAC, one of the organizations that founded the World Social Forum, has set up tents promoting campaigning for the Tobin Tax. First proposed by Nobel Prize-winning economist James Tobin in the 1970s, the initiative would impose a low percentage tax on the hundreds of billions of dollars worth of international financial transactions that take place each day. This would provide a disincentive for short-term gambling on currencies, and it would encourage longer-term and more productive investment. Moreover, even a miniscule levy could create an annual fund of upwards of $100 billion that could be used to stop the spread of disease and alleviate global poverty.

Warehouse workspaces hosting labor organizations have offered myriad methods for protecting workers’ rights and ending sweatshop conditions. Over seventy cities and localities in the United States have passed Living Wage laws since the early 1990s. These go beyond paltry minimum wage requirements and mandate that businesses pay employees at least enough to keep their families out of poverty. At the social forums, U.S. advocates discussed how to spread these campaigns. Meanwhile, representatives from the estimated 180 worker-run factories that formed after capital fled Argentina’s collapsing neoliberal economy in 2001 spoke about their experiences in self-management. And groups like the Women’s International Coalition for Economic Justice have stressed that U.N.-backed summits and other international efforts to advance women’s rights must not be subordinated to multilateral trade agreements.

Finally, workshops organized by representatives from the fair trade movement profiled endeavors to build direct ties between producers in the global South and Northern consumers. The fair trade model aims to eliminate exploitative middlemen, ensure that workers get a living wage for their labor, and give local collectives a greater say in the determining the conditions under which international economic exchanges take place. Like organic food, fair trade remains a niche market, and it cannot substitute for wider structural changes in global economy. But it provides both a living alternative to exploitative trade and a hopeful model for future change.

Even this wide range of activity hardly constitutes an exhaustive survey. Unlike the corporate and imperial models, a globalization from below does not take the form of one-size-fits-all prescription for the global economy. With regard to alternative policies, the model of participatory democracy produces, in the words of another slogan, "One No, Many Yeses." It generates a strong challenge to structures of neoliberalism and empire, but allows for a wider sense of what might replace them.

Contrary to individual manifestos that presume that a lack of ideas is the problem for progressives, the advocates at Porto Alegre have presented an agenda for change rooted in local struggles and campaigns that have long been underway. Excellent volumes such as Alternatives to Economic Globalization, a book compiled by the San Francisco-based International Forum on Globalization, have profiled other aspects of this agenda. The Human Development Reports produced annually by the United Nations Development Program have backed many of these same initiatives. A number of progressive proposals have even been introduced as legislation in the U.S. Congress in such measures as the recent TRADE Act, advanced by fair trade advocates this summer. Needless to say, the elite beneficiaries of corporate and imperial rule, still steadfast in their contention that no alternatives exist, would prefer that the public not take notice of any of these developments.

Just Saying No, or First Do No Harm

The ideas, experiences, and proposals of the World Social Forum provide a trove of information for all those who want to construct a new agenda for the global economy. At the same time, as long as democratic movements do not have the power to overrule political and economic elites, there exists an important case for just saying "no" -- for first insisting that those now in power stop doing harm.

When Wall Street neoliberals and Washington militarists ask, "What is the alternative?" they base the question on faulty assumptions. Their question serves to naturalize very radical agendas of empire and corporate rule, suggesting that these are normal and acceptable states of affairs. They are not. In a situation where power is grossly imbalanced, where crimes are being perpetuated in the name of democracy, and where ever larger sections of public life are being handed over to the market, saying "no" to these radical agendas can be a perfectly worthy task in itself.

In an important respect, the alternative to invading Iraq is not invading Iraq. The alternative to NAFTA is no NAFTA. The neocons’ invasion of Iraq has cost thousands of American lives, taken the lives of hundreds of thousands of Iraqi civilians, produced some two million refugees, and is set to squander over a trillion dollars of public funds. It has generated heightened regional tensions, greater instability, and more terrorism. Given the disastrous history of U.S. interventions -- not just in Iraq, but also, to mention some particularly ignoble examples of the past 60 years, in Vietnam, Indonesia, Chile, Guatemala, El Salvador, Iran, the Dominican Republic, and Nicaragua -- calling for a moratorium on such military actions, official and covert, is a first step in stemming the damage of imperial globalization.

The agenda of corporate globalization, which unfortunately thrived during the Clinton presidency and is still popular within the right wing of the Democratic Party, is subtler. But this, too, has relied on forceful maneuvering to come into existence. Neoliberalism involves aggressively opening markets, clearing the way for a previously unheard of level of speculative capital transfer, and dictating the restructuring of local economies. None of these things occur naturally, and they deserve opposition. A moratorium on harmful "free trade" deals and on further expansion of the WTO, especially into areas beyond the traditional realm of trade, is a vital immediate demand.

Simply refusing each of the mandates of the Washington Consensus -- or at least rejecting the idea that they should be imposed world as a one-size-fits-all uniform for development -- would itself allow for a substantial restructuring of globalization politics. The true utopians in the global economy are people who embraced the market fundamentalist fantasy that unchecked capital would serve the common good. Refuting this idea can be fairly straightforward.

Neoliberal corporate globalization prescribes the elimination of tariffs and other protections for local enterprises. An alternative would be to allow poorer countries to keep these intact, reviving what is known in trade agreements as "special and differential treatment." This model would give developing countries more flexibility in choosing to nurture infant industries and to protect agricultural commodities that are important to traditional cultures and to the security of their food supply. When the Washington Consensus demands the privatization of public industry and the division of the commons into private property, an alternative is to keep these things in the hands of the public, defending the provision of public goods as a way of ensuring economic human rights -- including guaranteed public access to water, electricity, and health care. If it calls for cuts in social services, an alternative is to reject the cuts, maintaining or bolstering these services and instead pushing for a redistributive tax system that makes the wealthy pay their fair share.

When Washington mandates a more "flexible" labor market -- one without unions or worker protections -- an alternative is to defend living wages, collective bargaining, and the right to associate. And when IMF bailouts for wealthy investors create a situation in which, to paraphrase author Eduardo Galeano, "risk is socialized while profit is privatized," an alternative is simply to end these bailouts, making speculators bear the cost of their gambles.

The demand to reverse neoliberal structural adjustment policies proposes a fundamentally different relationship between wealthy nations and the global South than currently exists. It would grant countries the freedom to determine their own economic policies, priorities for government spending, and rules for controlling foreign investment. Instead of imposing a single hegemonic model on the entire world, this new relationship would allow for broader diversity and experimentation in international development. While this does not by itself constitute a vision for ensuring human rights or protecting the environment, it nevertheless represents an important strategic gain. It alone would likely bring change of great enough magnitude to make the politics of the global economy look virtually unrecognizable to those who have grown accustomed to Washington-dictated corporate globalization.

Those who reject corporate and imperial models of globalization have a wealth of ideas at their disposal, a healthy internal debate to refine their strategies, and a vibrant, growing international network of citizens that see their efforts as part an interconnected whole. They also have very powerful enemies. Fortunately, as we enter the post-Bush era, the international community has voiced a firm rejection of unilateralism and preemptive war. Likewise, ever-larger swaths of the globe view the neoliberal doctrine of corporate expansion as a failed and discredited vision. This creates unique opportunities for citizens to fight to bring a democratic globalization into existence. More exciting still is that many people are already doing so, and, on key issues like debt relief and across entire regions like the Latin America, they are winning. The punditry is increasingly taking notice. For there is nothing so dangerous to those who insist that the world must remain as it is as the simple, stubbornly defiant doctrine of hope.

Cheney Scales New Heights of Hypocrisy

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By ROBERT FANTINA

The Veep Goads Russia

While Alaska Governor and Republican vice-presidential nominee Sarah Palin is getting all the attention, the current vice president, Dick Cheney, was able to pontificate about Russia and Georgia with barely any notice from the media. However, while hardly anyone was watching, Mr. Cheney echoed the hypocrisy of his boss, President George Bush. While traveling in Italy, Mr. Cheney decided to become the moral arbiter of Russia’s foreign policies. His incredible remarks are worth studying.

“Recent occurrences in Georgia, beginning with the military invasion by Russia, have been flatly contrary to some of our most deeply held beliefs. Russian forces crossed an internationally recognized border into a sovereign state; fueled and fomented an internal conflict; conducted acts of war without regard for innocent life, killing civilians and causing the displacement of tens of thousands.”

If anyone doubted the vice president’s disdain for those who elected him and kept him in power, this speech should have been an eye-opener. How he could make that statement with a straight face is beyond comprehension. Was he not a major force in the U.S. military invasion of Iraq? Mr. Bush may not have needed much encouragement to embark on this deadly oil grab, but whatever encouragement he may have needed was gladly provided by the vice president.

Did not U.S. forces cross an internationally recognized border into a sovereign state? At least Russia’s incursion was to a country it bordered; the U.S. sent 130,000 soldiers halfway across the world to invade and occupy sovereign Iraq.

Russia, says Mr. Cheney, ‘fueled and fomented an internal conflict.’ It has been some time since people have been talking about civil war in Iraq, possibly because with the increase of 30,000 soldiers, Iraq may have finally, after five bloody, terrifying years, been cowed into submission. The U.S. overthrew the government with nothing to put in its place, disbanded the police, and turned a once peaceful nation into an inferno of deadly, daily violence.

He goes on to decry the idea that Russia ‘conducted acts of war without regard for innocent life, killing civilians.’ When Mr. Bush’s horrific and unspeakable ‘Shock and Awe’ campaign began, residential areas were targeted. The president said he was invading Iraq because it had weapons of mass destruction aimed at the U.S., but since he didn’t know exactly where they were, he would simple practice genocide on the Iraqi people and hope the weapons of mass destruction would turn up eventually (they didn’t). At the time his bombers were dropping death from the air over Baghdad, over half the population of that city was under the age of 15.

As far as conducting acts of war is concerned, could someone point out to Mr. Cheney that the invasion of a sovereign nation is probably the ultimate act of war? Occupying it for years, killing a million of its citizens and terrorizing much of the population for over five years may be business as usual for U.S. foreign policy, but that does not make those actions any less acts of war.

One could also point out that torturing political prisoners, some as young as 15, is an horrific act of war. The torture chamber that the U.S. operates at Guantanamo Bay is only the most famous; the U.S. uses ‘rendition’ sites around the world to torture those it considers dangerous. The supposedly cherished rights, such as due process, that the U.S. is said to stand for are meaningless to those who get in the way of Mr. Bush and Mr. Cheney’s imperial designs.

The Russian incursion, said Mr. Cheney, caused ‘the displacement of tens of thousands.’ That number pales in comparison to the millions who have been displaced in Iraq due to the U.S. invasion and occupation. At least a million Iraqis are in crowded refugee camps, forgotten by the media and certainly ignored by that master terrorist, Dick Cheney. Perhaps two million more have had to leave their homes, although they remain in Iraq.

“The United States and many in Europe have made clear that Russia's actions are an affront to civilized standards and are completely unacceptable.” Mr. Cheney did not bother to explain why these behaviors exhibited by Russia are ‘an affront to civilized standards,’ and why they are ‘completely unacceptable,’ but when the exact same acts are perpetrated by the U.S., although on a far larger scale, they are, apparently, just fine.

“For its part, Russia has offered no satisfactory justification for the invasion -- nor could it do so.” In over five years since the U.S. invaded Iraq, it has offered ‘no satisfactory justification’ for doing so. All the original lies, including the falsehoods that Iraq had weapons of mass destruction, was close to developing nuclear weapons, etc., have faded into oblivion, like the blood of millions of Iraqis on the desert sands. Mr. Bush also stated the need for ‘regime change;’ why he and his neocon cohorts felt this was their right has also never been explained.

“Differing views on the status of these two areas, within the sovereign borders of the Georgian democracy, cannot justify a sudden and violent incursion by Russia. This much, at a minimum, should be understood by all people of good will in the year 2008.”

Yet apparently the belief that Iraq posed an imminent threat to the U.S., despite the fact that United Nations weapons inspectors were combing Iraq and finding nothing, could justify a sudden and violent incursion by the U.S. People of good will in the year 2008 understand that that is simply wrong, as they did in 2003.

“This chain of aggressive moves and diplomatic reversals has only intensified the concern that many have about Russia's larger objectives.” The U.S. invasion and occupation of Iraq, continued threats against Iran and Cuba, and the fact that the U.S. has enough weapons of mass destruction to destroy the entire planet several times over have certainly intensified concern about the U.S.’s larger objectives.

Eight long years ago, Mr. Bush promised to bring dignity back to the White House. In his war-mongering mind the fact that President Bill Clinton had had an extra-marital affair was so disgraceful that the reputation of the U.S. was in tatters as a result. Today, following the Iraqi invasion and occupation that most of the world, including most of the U.S.’s allies, opposed from the start, the U.S. is the most hated and feared nation on the planet. With Mr. Bush and Mr. Cheney now prancing around the world, criticizing Russia for actions that parallel in action but not in scope, the exact behaviors they have practiced and continue to practice, another mark of hypocrisy has been struck against the U.S.

As the U.S. plods towards the conclusion of its every-four-year election farce, the race for president is said to be too close to call. The Republican presidential candidate, the elderly Arizona Senator John McCain, the man who is so wealthy he does not even know how many houses he owns (or perhaps it is simply senility), calls for change by offering more of the same. This is the model his idol, Mr. Bush, used following the 2006 Congressional elections. After the war-mongering Republicans were thrown out of Congress, replaced by the spineless but equally war-mongering Democrats, Mr. Bush led the country on a ‘new way forward,’ by escalating the war. Mr. McCain has consistently supported Mr. Bush’s worst policies.

Mr. McCain’s Democratic challenger, Illinois Senator Barack Obama, has inspired many with his call for ‘change we can believe in.’ Whether or not we can actually believe in his idea of change, at the very least he offers a glimmer of the hope that U.S. citizens and the world have lived without for eight long years. He selected as his running mate Senator Joe Biden, a distinguished senator with a thorough knowledge of foreign policy, having served for many years on the senate Foreign Relations Committee, which he currently chairs. Mr. McCain selected Mrs. Palin, an (almost) one-term governor of a state with a population of less than 1,000,000. Her previous political experience was as mayor of an Alaskan town with a population of less than 7,000. She opposes every progressive movement known to man, encourages the shooting of wolves from airplanes, and believes that global warming is a natural occurrence, and not a man-made threat.

One wonders how more of the same will help to rebuild the reputation of the U.S. throughout the world, especially when it is ushered in by a cowgirl brandishing a gun and a chastity belt. Yet that is what change means to Mr. McCain.

The world is watching to see if the U.S. voters will make the same disastrous mistake in 2008 that they made in 2004. There was no excuse for it then, and there will be even less so if they do it again. The consequences of those mistakes grow with each one. It will not be long before those consequences are irreversible, to the detriment of the entire world population.

New Transcripts of Kissinger's Role in Chilean Coup

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By Peter Kornbluh

35 Years After Original 9/11

When Henry Kissinger began secretly taping all of his phone conversations in 1969, little did he know that he was giving history the gift that keeps on giving. Now, on the 35th anniversary of the September 11, 1973, CIA-backed military coup in Chile, phone transcripts that Kissinger made of his talks with President Nixon and the CIA chief among other top government officials reveal in the most candid of language the imperial mindset of the Nixon administration as it began plotting to overthrow President Salvador Allende, the world’s first democratically elected Socialist. "We will not let Chile go down the drain," Kissinger told CIA director Richard Helms in a phone call following Allende’s narrow election on September 4, 1970, according to a recently declassified transcript. "I am with you," Helms responded.

The "telcons"--telephone conversations transcripts made by Kissinger’s secretary from audio tapes that were later destroyed--captured for posterity all of Kissinger’s outgoing and incoming phone calls during his tenure as national security advisor and secretary of state. When Kissinger left office in January 1977, he took more than 30,000 pages of the transcripts, claiming they were "personal papers," and using them, selectively, to write his memoirs. In 1999, my organization, the National Security Archive, initiated legal proceedings to force Kissinger to return these records to their rightful owner--the government. At the request of Archive senior analyst William Burr, telcons on foreign policy crises from the early 1970s, including four previously unknown conversations on Chile, were recently declassified by the Nixon Presidential library.

’The Big Problem Today Is Chile’

September 15, 1970, when Richard Nixon ordered the CIA to ""prevent Allende from coming to power or to unseat him," has been considered, the starting point of the covert operations that eventually helped topple the socialist government, until now. According to the transcripts, however, Nixon and Kissinger set in motion plans to roll back Allende’s election three days earlier on September 12. At noon on that day, Kissinger called Helms to schedule an urgent meeting of the "40 Committee"--an elite group that oversaw covert operations. And approximately 35 minutes later, in the middle of briefing Nixon on a major terrorist hijacking/hostage crisis in Amman, Jordan, Kissinger is recorded as telling the President: "The big problem today is Chile."

The transcript of their conversation, kept secret for 35 years, reveals just how focused the U.S. president became on overseeing the effort to block Allende. In that call, Nixon demanded to see all instructions being sent to U.S. ambassador Edward Korry in Santiago; indeed, he ordered that the State Department be alerted that "I want to see all cables to Chile."

"I want an appraisal of what the options are," Nixon told Kissinger. When Kissinger told him that the State Department’s position was to "let Allende come in and see what we can work out," Nixon immediately vetoed the idea: "Like against Castro? Like in Czechoslovakia? The same people said the same thing. Don’t let them do that."

But Nixon cautioned: "We don’t want a big story leaking out that we are trying to overthrow the Govt."

Secretary of State William Rogers, who Nixon and Kissinger largely excluded from deliberations over Chile, was similarly sensitive to such a story leaking out. Indeed, the transcript of his conversation with Kissinger two days later underscored just how concerned the State Department was to the possibility that Washington might get caught trying to undermine Chile’s electoral democracy. In their September 14th discussion, Rogers accurately predicted that "no matter what we do it will probably end up dismal." He also cautioned Kissinger to cover up any paper trail on U.S. operations "to be sure the paper record doesn’t look bad."

"My feeling--and I think it coincides with the President’s--is that we ought to encourage a different result from the [censored reference]," Rogers conceded to Kissinger, "but should do so discretely so that it doesn’t backfire." Their conversation continues:

Kissinger: The only question is how one defines ’backfire.’

Rogers: Getting caught doing something. After all we’ve said about elections, if the first time a Communist wins the U.S. tries to prevent the constitutional process from coming into play we will look very bad.

Kissinger: the President’s view is to do the maximum possible to prevent an Allende takeover, but through Chilean sources and with a low posture."

The next day, during a 15 minute meeting at the White House attended by Kissinger, Nixon instructed CIA director Helms that Allende’s election was "not acceptable" and ordered the agency to "make the economy scream" and "save Chile," as Helms recorded in his notes. The CIA launched a massive set of covert operations--first to block Allende’s inauguration, and, when that failed, to undermine his ability to successfully govern. "Our main concern in Chile is the prospect that [Allende] can consolidate himself and the picture projected to the world will be his success," Nixon told his National Security Council on November 6, 1970, two days after Allende took office.

’That Chilean Guy Might Have Some Problems’

So far, the declassification of Kissinger’s telcons has not yielded much evidence of phone discussion on Chile as CIA operations to destabilize Allende evolved over the next several years. But at 11am on July 4, 1973, Kissinger’s clandestine tape recorder captured another previously unknown conversation with President Nixon. Two weeks after an aborted coup in Santiago, Nixon phoned Kissinger from his summer home in San Clemente, California, to chat about Allende and the prospects that he might be soon overthrown.

Nixon: You know, I think that Chilean guy might have some problems.

Kissinger: Oh, he has massive problems. He has definitely massive problems.

Nixon: If only the Army would get a few people behind them.

Kissinger: And that coup last week - we had nothing to do with it but still it came off apparently prematurely.

Nixon: That’s right and the fact that he just set up a Cabinet without any military in it is, I think, very significant.

Kissinger:. It’s very significant.

Nixon: Very significant because those military guys are very proud down there and they just may - right?

Kissinger: Yes, I think he’s definitely in difficulties.

Only ten weeks later, the military did move to overthrow Allende in a bloody coup on September 11, 1973. On September 15, Nixon called Kissinger again. They commiserated about what Kissinger called "the bleeding [heart] newspapers" and the "filthy hypocrisy" of the press for focusing on the Chilean military’s repression and the condemnations of the U.S. role. In this telcon--which was declassified in May 2004--Nixon noted that "our hand doesn’t show on this, though." "We didn’t do it," Kissinger replied on the issue of direct involvement in the coup. I mean we helped them. [Deleted] created the conditions as great as possible."

As Kissinger told the President: "In the Eisenhower period we would be heroes."

You can see all the new Kissinger documents at www.nsarchive.org.

The Syria-Israel Peace Gambit

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By Ramzy Baroud

Few would argue that the indirect Israel-Syria talks through Turkish mediation, which were first announced 21 May, were a sign of political maturity and readiness for peace. In fact, while the discussions seemed concerned with the occupied Syrian Golan Heights and Israel's desire for security at its northern borders, the true objective behind the sudden engagement of Syria is largely concerned with Iran, Hizbullah and Hamas.

A precarious report published in The Jerusalem Post -- citing a news report in the Kuwaiti newspaper Al-Rai on 2 September -- claimed that the Damascus-based Hamas leader Khaled Meshaal has left Syria and moved to Sudan. "Palestinian sources told the paper that Meshaal had come to an understanding with Damascus whereby the Hamas chief would agree to leave the state," according to the report. It suggested that the indirect negotiations between Syria and Israel "may have played a part in the decision". Hamas soon denied the report.

Whether the report is fully, partially or not at all accurate, the fact remains that Israel's key objective in engaging Syria is to further isolate Hamas and to deny its leadership safe haven. Syria opened its doors to several Palestinian factions, who have operated politically with a degree of unison, following the September 1993 Oslo Accords. The relationship between Syria and Hamas in particular was often scrutinised as a Syrian bargaining chip in any future negotiations with Israel over the fate of the Golan. It is no secret that Israel would not transfer the Golan back to its rightful owner if Hamas and other Palestinian groups continue to use Damascus as their headquarters, a platform of political freedom and a degree of legitimacy.

But this is an issue that even Hamas itself doesn't seem to be concerned with, at least at the moment, for it's equally understood that Israel is not serious about its negotiations with Syria, and that the whole affair is a political manoeuvre aimed at disturbing the Syria-Iran alliance, cutting off the supposed Hizbullah weapon supply route, and further de-legitimising Hamas, while propping up its Palestinian rivals. Israel is "engaging" Syria because it's simply running out of options.

Consider A Clean Break: A New Strategy for Securing the Realm, a report prepared and signed by major Washington-based neoconservatives in 1996. It made the following recommendation to the Israeli government at the time: "Negotiations with repressive regimes like Syria's require cautious realism. One cannot sensibly assume the other side's good faith. It is dangerous for Israel to deal naïvely with a regime murderous of its own people, openly aggressive towards its neighbours, criminally involved with international drug traffickers and counterfeiters, and supportive of the most deadly terrorist organisations."

The mindset behind the report had great sway over Israeli thinking, as was made clear in 2000 when then Israeli Prime Minister Ehud Barak froze Israeli-Syrian negotiations at a point that an agreement was reportedly at hand. The thrust of Israel's policy towards Syria was predicated on the latter's presence in Lebanon. Even after Hizbullah forced Israel out of Lebanon in the summer of 2000, Israel never disavowed its interests in that small country, and thoroughly focussed on removing Syria, a task that was made possible with backing from Washington.

"Syria challenges Israel on Lebanese soil. An effective approach, and one with which Americans can sympathise, would be if Israel seized the strategic initiative along its northern borders by engaging Hizbullah, Syria and Iran, as the principal agents of aggression in Lebanon," the Clean Break report recommended.

That was tried and failed miserably. Israel's goals were trashed in its war on Lebanon in July-August 2006. The war delivered more than a military blow to Israel and a political blow to its benefactors in Washington. It empowered Hizbullah to emerge as Lebanon's strongest party without any direct Syrian involvement.

Since then, Israel has resorted to a strategy of scare tactics against Syria and its Iranian ally. French President Nicolas Sarkozy used a recent four-way summit in Damascus to deliver an essentially Israeli message. He warned Iran of a "catastrophic" Israeli strike if it insists on pursuing its nuclear programme. Although the message was to Iran, the hope was for Syria to take notice as well.

But Sarkozy's choice of Damascus to promote Israel's ominous threat further highlights the relevance of Iran to his efforts, which would not have actualised without prior Israeli consent. Considering how quickly the Iraqi regime fell following the US invasion in 2003, and the succumbing of the Libyan government soon after, Syria is treading carefully, while trying to hold on to several winning cards, its strong relationship with Iran being one.

Although Syria is eager to reclaim the Israeli occupied Syrian Golan Heights, its leaders must also realise that the current Israeli leadership is in no position to negotiate withdrawal from what was illegally annexed by the Israeli Knesset in 1982. To override the strong opposition to withdrawal, the Israeli leadership must be indisputably interested in ending the occupation -- which it is not -- and strong enough to pull off such a major "concession", which is also not the case.

Nonetheless, Syria carries on with its indirect talks with Israel, one round after the other, with much enthusiasm, coupled with talks about economic development, investment, etc.

It is clear that neither Israel nor Syria is anticipating a "breakthrough" anytime soon. For now, talking is an end in itself. Concurrently, Israel wishes to woo Syria to break with Hamas and other Palestinian groups, break with Iran and, at least, twist Hizbullah's arm in Lebanon. Syria, on the other hand, knows well that indirect talks with Israel are an unmatched act of political validation in the West, enough to lessen US threats, win France's friendship, and appear in a positive light internationally.

Both parties want to come across as accommodating, willing partners in peace and, at a future point, there might be a few overtures, the extent of which could be devastating to Palestinian factions in Damascus. Meshaal might not be in Sudan, but if he is, or will be soon, one cannot be entirely surprised.

The End of the Myths

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By Bill Noxid

It took a particularly long time to find any hint of reality on television yesterday. I decided that I wasn’t interested in watching the still complicit media and criminally culpable government pretend to morn the deaths of September 11, so my options were even more limited than usual. All of the cable networks were obviously covering themselves ( MSNBC even went as far as to cover itself covering itself minute by minute seven years ago ) and CSPAN was at the Pentagon. What fantastic choices… a seven year ditch or a false-flag memorial park. Therefore, unless I felt like tracking Ike, CNBC financial was my only remaining option.

To my surprise however, CNBC turned out to be a reasonably good choice. Not that the unfortunate masses of this country would know about anything other than lipstick and pigs but this imaginary economy is collapsing like the house of cards that it is, and they were actually talking about it for a change. I suspect after eight years of blowing smoke up each other’s behinds about how great the economy is, they’ve run out of ways to convince themselves this isn’t really happening. Even Jim Cramer, when asked by Erin Burnett if we were really at risk of Great Depression II, gave a very enthusiastic full body nod in the affirmative…

Obviously, this shouldn’t come as a surprise to anyone anyway. It’s been developing for quite a long time. Eight years of stealing your children’s futures to pay for killing someone else’s children while you allow your own ability to produce anything to be shuttled off to the next generation corporate slave countries, does not make for a healthy economy. If you didn’t care so much about flag pins, ceiling cracks, and pastors, you might have noticed. Not that they are helping you understand anything - considering they control all major media outlets and political parties, but that shouldn’t come as a surprise either. Their only intent is to feed your ego and keep you stupid, so ( as you can plainly see ) you don’t even notice when they are taking your lives and livelihood.

To be perfectly honest, it’s even hard for me to believe how much damage ( or how much success - depending on how you look at it ) they fashioned in a mere eight years… and I saw it coming a decade before that. They took virtually all of your rights, all of your future, all of your money, all of your health, all of your respect, and all of your dignity, and yet some of you would still rather hear how great this country is than accept the truth about what is happening and why. It’s the impenetrable American egotism that has led to this abyss and that has led you to be the least educated, most imprisoned, least healthy, most destructive, least honest, most hated populous and culture in the history of the world… and that is no small feat on this planet.

Believe it or not, I used to accept the myth they disseminate in this country ( and force on the rest of the world ) too. Unfortunately, the truth of the matter is everything they taught you was cover story for the criminal and diabolical enterprises you know as finance and government. As you should be able to discern from the hundreds of billions of dollars in “write-downs” ( lost, stolen, and imaginary value ) and the hundreds of billions of dollars in bail-outs ( tax-slaves having no say in giving them back the money they have already stolen in order to perpetuate the illusion of an economy ), criminal enterprise is exactly what it is.

If it’s any consolation, we are hardly alone. All of us on this planet are in the same predicament. The corporation purchased all of our governments a long time ago, and that should be obvious to everyone - by now. Think for a moment… When is the last time you saw a government take genuine action on behalf of its people that it couldn’t reap ludicrous power and profit from? The only ( theoretical ) purpose of government is to tend to the needs and advancement of its people, but find yourself discarded by the corporation or get swindled out of your house by the mortgage syndicate and you’ll find out very quickly what assistance the government won’t have for you, and who’s side they are actually on. They are quick to bail each other out to the tune of hundreds of billions of dollars of your money, but if you are in need of a couple of bucks after a hurricane - you’re out of luck.

Go to C-SPAN.org and take a look at the latest hearing on the wonderful new Medicaid system they have developed for you, if you need another example. If it wasn’t so tragic, it would be hilarious. You can expect to quite literally die on the phone trying to get help from a system specifically designed to ensure that you don’t get the help. You, your children, and your children’s children pay before they are even born for every crime and scam they perpetrate on the masses, and all you’ll receive in return is speeches about flags, forefathers, patriotism, and your bootstraps…

Yet in spite of all of this empirical and inescapable every day evidence, there are those that still cling ( yes, that right… I said cling ) to the shallow mythologies that justify their continued denial of their own behavior, and the enslavement and molestation of the peoples and lands of this world… all while claiming to know and serve God.

A key component of the intentionally missed message of Reverend Wright was that:

“To say “I am a Christian” is not enough. Why? Because the Christianity of the slaveholder is not the Christianity of the slave. The God to whom the slaveholders pray as they ride on the decks of the slave ship is not the God to whom the enslaved are praying as they ride beneath the decks on that slave ship.”

No true follower of God could make a distinction on something as primitive as shade of skin, and call one Son and one Not, yet you have built an entire society and global economy on exactly that belief. It is the only way such a shallow mind could justify the atrocities you commit and condone against your own kind on this planet. You claim to understand the reality that God knows your every thought and action, yet you think what you think, and you do what you do.

Worst above all things, you still think you’re the highest and only form of intelligence created by God. Your arrogance is only matched by your stupidity. It doesn’t phase you one bit that in order to create a world small enough for you to be king, you have to negate hundreds of billions of years of reality and civilization on this planet alone, just so you can believe you walked with your pet dinosaurs in fig leaves like Fred and Wilma - before there were people of color… By far, the funniest myth of all.

But before you get too offended ( I know, far too late for that ), bear in mind that I am one of you ( sort of ), and I am on your side. The side of Mankind, that is. Coming to this awareness about my own country, planet, and species was no comfortable journey for me either, but it is necessary to understand in order to evolve. The alternative of living a lie and serving the corporations that purposefully suppress and poison the true nature of this glorious planet and all of its inhabitants was just not mentally, physically, or spiritually an option for me anymore.

Believe me when I tell you… It’s not an option for you anymore either. The Universe is watching and you cannot afford to wait one more second to face the truth. It is imperative that you become the stewards and contributors to the Universal Consciousness that you are designed to be, before you face the threat of the end of your time on Earth.

By air, boat and truck, search on for Ike victims

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By CHRISTOPHER SHERMAN and PAULINE ARRILLAGA

Rescuers in boats, helicopters and high-water trucks set out across the flood-stricken Texas coast Saturday in a monumental effort to reach tens of thousands of people who stubbornly ignored warnings of "certain death" and tried to ride out Hurricane Ike.

The storm roared ashore hours before daybreak with 110 mph winds and towering waves, smashing houses, flooding thousands of homes, blowing out windows in Houston's skyscrapers, and cutting off power to more than 3 million people, perhaps for weeks.

By evening, it appeared that Ike was not the single calamitous stroke that forecasters had feared. But the full extent of the damage — or even a rough sense of how many people may have perished — was still unclear, in part because many roads were impassable.

Some authorities feared that this could instead become a slow-motion disaster, with thousands of victims trapped in their homes, waiting for days to be rescued.

"We will be doing this probably for the next week or more. We hope it doesn't turn into a recovery," said Sheriff's Sgt. Dennis Marlow in Orange County, where more than 300 people had to be rescued from flooded homes. He said that was only "a drop in the bucket" compared with the number still stranded.

By some estimates, more than 140,000 of the 1 million or so people who had been ordered to evacuate the coast as Ike drew near may have tried to tough it out. Many of them evidently realized the mistake too late, and pleaded with authorities in vain to save them overnight.

Since Ike made landfall, there have been 940 rescues statewide of people stranded in homes, vehicles and elsewhere, said Texas Gov. Rick Perry's spokeswoman Allison Castle. Louisiana officials said they had no immediate report late Saturday on the number of rescues.

Downgraded to a tropical storm Saturday, Ike was about 50 miles southwest of Texarkana at 8 p.m. EDT and expected to begin speeding to the northeast toward western Arkansas, taking the threat of tornadoes and heavy rains inland, the National Hurricane Center in Miami said. Maximum sustained winds dropped to near 40 mph but stretched about 100 miles from Ike's core.

Ronnie Sharp, 65, and his terrier-mix Princess, had to be rescued from his trailer in Orange County when water reached his knees. "I was getting too many snakes in the house, otherwise I would have stayed," Sharp said. He said he lost everything in the flood but his medicine and some cigarettes.

After the storm had passed, National Guardsmen, members of the Coast Guard, FEMA representatives and state and local law enforcement authorities mobilized for what Gov. Rick Perry pronounced "the largest search-and-rescue operation in the history of the state of Texas."

Some emergency officials were angry and frustrated that so many people ignored the warnings.

"When you stay behind in the face of a warning, not only do you jeopardize yourself, you put the first responders at risk as well," Homeland Security Secretary Michael Chertoff said. "Now we're going to see this play out."

Steve LeBlanc, Galveston's city manager, said: "There was a mandatory evacuation, and people didn't leave, and that is very frustrating because now we are having to deal with everybody who did not heed the order. This is why we do it, and they had enough time to get out."

Because Ike was so huge — some 500 miles across, making it nearly as big as Texas itself — hurricane winds pounded the coast for hours before and after the storm's center came ashore. Ike soon weakened to a tropical storm as it made its way inland, but continued to pound the state with 60 mph winds and rain.

Officials were encouraged to learn that the storm surge topped out at only 15 feet — far lower than the catastrophic 20-to-25 foot wall of water forecasters had feared.

Preliminary industry estimates put the damage at at least $8 billion.

Damage to the nation's biggest complex of refineries and petrochemical plants appeared to be slight, but gasoline prices shot up for fear that the supply would be interrupted by power outages and the time necessary to restart a refinery. In some parts of the country, gas prices surged briefly to $5 a gallon.

As the day wore on, hundreds of people were rescued from their flooded-out homes, in many cases by emergency crews that had to make their way through high water and streets blocked by peeled-away roofs, wayward yachts and uprooted trees.

But the day was already half over before the winds died down enough for authorities to begin the rescue, and the search was almost certain to be suspended before dark because of the dangers posed by downed power lines and flooded roads. A portion of hard-hit Galveston had yet to be examined.

The storm, which killed more than 80 in the Caribbean before reaching the U.S., was blamed for at least two lives in Texas. A woman was killed in her sleep when a tree fell on her home near Pinehurst. A 19-year-old man slipped off a jetty near Corpus Christi and was apparently washed away. Louisiana officials said a 16-year-old boy drowned Saturday after falling out of a fishing boat in Ike-flooded Bayou Dularge.

Lisa Lee spent hours on the roof of her Bridge City home with her husband, John, her 16-year-old brother, William Robinson, and their two dogs. They dove into 8-foot floodwaters and swam to safety after a sheriff's deputy arrived in a truck and drove as close to their home as he could. Their dogs paddled to safety behind them.

"It was like a dream," said William Robinson, while his sister shivered in a blanket at a shelter set up at a Baptist church in Orange.

A convoy of search-and-rescue teams from Texas and California drove into Galveston — where the storm came ashore at 3:10 a.m. EDT — after bulldozers cleared away mountains of debris. Interstate 45, the only road onto the island, was littered with large overturned yachts, dead pelicans and twisted debris from homes and docks.

Homes and other buildings in Galveston and homes burned unattended during the height of Ike's fury; 17 collapsed because crews couldn't get to them to douse the flames. There was no water or electricity on the island, and the main hospital, the University of Texas Medical Branch, flew critically ill patients to other medical center.

Sedonia Owen, 75, and her son, Lindy McKissick, stayed to shoo off looters. She was armed with a shotgun, watching floodwaters recede from her front porch. "My neighbors told me, `You've got my permission. Anybody who goes into my house, you can shoot them,'" Owen said.

President Bush declared a major disaster in his home state of Texas and ordered immediate federal aid.

In downtown Houston, shattered glass rained down on the streets below the JPMorgan Chase Tower, the state's tallest building at 75 stories. Trees were uprooted in the streets, road signs mangled by wind.

"I think we're like at ground zero," said Mauricio Diaz, 36, as he walked along Texas Avenue across the street from the Chase building. Metal blinds from the tower dotted the street, along with red seat cushions, pieces of a wood desk and office documents marked "highly confidential."

Southwest Louisiana was spared a direct hit, but Ike's surge of water penetrated some 30 miles inland, flooding thousands of homes, breaching levees and soaking areas still recovering from Labor Day's Hurricane Gustav. Officials said the flooding was worse than it was during 2005's Hurricane Rita, which hit the Louisiana-Texas line.

But there was good news: A stranded freighter with 22 men aboard made it through the storm safely, and a tugboat was on the way to save them. And an evacuee from Calhoun County gave birth to a girl in the restroom of a shelter with the aid of an expert in geriatric psychiatry who delivered his first baby in two decades.

In Surfside Beach, retired carpenter and former Marine Ray Wilkinson became something of a celebrity for a day: He was the lone resident in the town of 805 to defy the order to leave. Authorities found him Saturday morning, drunk.

"I consider myself to be stupid," Wilkinson, 67, said through a thick, tobacco-stained beard. "I'm just tired of running from these things. If it's going to get you, it's going to get you."

He added: "I didn't say I had all my marbles, OK?"