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Tuesday, September 30, 2008

Exit Olmert: The lessons of Rabin for the next Israeli leader. John Barry



Exit Olmert: The lessons of Rabin for the next Israeli leader.

John Barry

One morning back in 1975, I sat in the office of Israel's prime minister, Yitzhak Rabin, and listened to him tell stories. I had asked him about Israel's policies on the Palestinian issue. His response was characteristically edged and allusive.

The first story: There was once a Jew who was tutor to the children of a Hungarian nobleman. One day, the nobleman said to him: "Jew, you are such a fine tutor that I give you a great honor. You will teach my horse to read. I am sure you will succeed, but I warn that if you do not, I will have you killed."

The Jew replied calmly: "That is indeed an honor, excellency, but I will need a year."

"Agreed," said the nobleman.

That night, the Jew's wife was distraught. "We are doomed," she cried. "Calm yourself, my dear," said the Jew. "I have a year. And in that year, who knows? The horse may die, the nobleman may die, I may die."

The second story: Two hunters were tracking a deer in thick brush. They shot it, and began to drag it back to their pickup. But its antlers kept catching in the brush. Finally one hunter said: "Why don't we drag it the other way. Then its antlers will part the brush rather than catching in it." So they did. "See," the hunter said after a time, "I told you it would be easier this way."

"Yes," said the other, "but aren't we getting a long way from the pick-up?"

To grasp Israel's response to the challenge of the Palestinians, Rabin said, I needed only to understand those two tales.

News that Israel is shedding yet another government—its eleventh since Rabin's lesson that morning in Jerusalem—brings those stories back to mind. As he departs, Ehud Olmert is yet another Israeli leader who grasped, too late in his career, that a political settlement with the Palestinians is essential to Israel's hopes.

Rabin saw the issue more starkly. A settlement with the Palestinians, he believed, was vital to Israel's survival. Rabin was a great warrior. In 1948 he led the brigade that fought its bloody way up that winding road into Jerusalem. In 1967, he masterminded Israel's epic victory over the Arabs in the Six-Day War—a victory Rabin saw in retrospect as disastrous in its scope. Rabin's credentials as a defender of Israel were unsurpassed. But like Moshe Dayan, that other great warrior of Israel's founding days, Rabin had come to believe that military victories could not secure Israel's future. Only a political settlement with the Palestinians could do that. So in September 1993, Rabin signed the Oslo Accords with the Palestinian leader, Yasser Arafat. Rabin loathed and distrusted Arafat. But he saw Oslo, with its blueprint for an eventual two-state solution to the conflict, as the best hope for Israel. For this Rabin was assassinated by a young zealot who, like many Israelis, regarded the accords as a betrayal of the country's right to the West Bank.

Every Israeli government since then has observed the lessons of Rabin's two stories. They've cast about for some expedient to buy time—time to stave off the agonizing re-think inevitable in any agreement with the Palestinians (a wall; the ghettoes of Gaza and a fragmented West Bank). They've repulsed intermittent American pressure with successive promises, always broken, to halt the spread of Jewish settlements on the West Bank. They've fitfully searched for acceptable Palestinian interlocutors—acceptable being, in practice, defined as Palestinians who would accede to most of Israel's demands. (Israel's covert role in the rise of Islamist Palestinian factions like Hamas—initially seen by Israel as useful counter-weights to the "Marxist" PLO—will someday be a fruitful topic for a brave historian.)

Some Israeli governments, ignoring the battle-won insights of Rabin and Dayan, have put their faith in military might. The strategy that the neocons in Washington pressed upon President Bush had its roots in the notion that Israel (or the United States) could use its military superiority to impose unilateral solutions upon the Arabs. The long hemorrhage of Israel's occupation of Lebanon (1982-2000) and the bloodying of the Israeli army at the hands of Hezbollah in 2006 have discredited that strategy for Israel—much as the debacle of Iraq has exploded the neocons' prescription for American foreign policy.

Now yet another Israeli government departs, having failed in the basic task of any government: to bring security. What awaits Israel now?

Northern Ireland, and its thirty-year civil war (1968-1997), invites gloomy forebodings. Northern Ireland and Israel were twins from birth, both invented by the same man, Winston Churchill, at roughly the same time. Both states featured an immigrant settler population given license to rule indigenous people of a different faith. Both proved adept in beating back insurgencies whose base lay beyond their borders. What doomed the Protestant supremacy in Northern Ireland were the demands of the Catholics within Northern Ireland—a rising middle-class—for civil rights within the society. The Protestants saw this, accurately, as a challenge to the survival of Northern Ireland as an enclave for their faith, and elected to beat down the civil-rights movement as subversive. With the province on the brink of a bloodbath, the British Army had to intervene in 1969. Thirty years of bloodshed followed, until a settlement—always inevitable, still precarious—turned Protestant Northern Ireland into a bi-cultural state.

Israel surely faces the same agony. The real "threat" to Israel is not the insurgencies along its borders. It is the quite inevitable demand of the Arabs living within Israel for full equality in civil and political rights. Arabs, broadly defined, comprise 20 percent of Israel's population. Already they are a majority in Galilee to the north, and in much of the Negev to the south. Multiple surveys attest that their allegiance to the state has been fractured by Israel's suppression of the successive intifadas. Demographic projections are notoriously tricky, but Israel faces the prospect of something close to an Arab majority within Israel by its centenary year, 2048. That is the real challenge to a Jewish state. Everyone in Israel knows this. But Israel's fragmented political structure blocks movement to a settlement. Meanwhile, power in the Palestinian community slides inexorably toward the extremes; and the departing Olmert warns Israelis themselves that "an evil wind of extremism, of hatred, of malice, of violence...threatens Israel's democracy."

Northern Ireland's Protestant rulers—the shrewdest of them, at any rate—saw the gathering storm. But, like Israel's leaders since Rabin, they for the most part chose to temporize. One who didn't was Terence O'Neill, who as prime minister of Northern Ireland in the 1960s tried to push through a new political settlement. His efforts, like Rabin's, were met with violence—by die-hard supporters of Protestant rule forever. But O'Neill was luckier than Rabin: he was overthrown, but lived. I recall a conversation with O'Neill in his retirement. "We all knew what had to be done," he said. "But the politics were always too difficult." This was in 1971—the civil war in Northern Ireland was gathering momentum. "A generation ago, we might have resolved our differences without too much violence," O'Neill said. "Now, I think blood will determine the outcome."

Just so.

Olmert says Israel should pull out of West Bank Ethan Bronner

For those who missed this in the New York Times....



Olmert says Israel should pull out of West Bank

Ethan Bronner

JERUSALEM: Prime Minister Ehud Olmert said in an interview published Monday that Israel must withdraw from nearly all of the West Bank and East Jerusalem to attain peace with the Palestinians and that any occupied land it held onto would have to be exchanged for the same quantity of Israeli territory.

He also dismissed as "megalomania" any thought that Israel should attack Iran on its own to stop it from developing nuclear weapons, saying the international community and not Israel alone was charged with handling the issue.

In an unusually frank and soul-searching interview granted after he resigned to fight corruption charges - he remains interim prime minister until a new government is sworn in - Olmert discarded longstanding Israeli defense doctrine and called for radical new thinking in words that are sure to stir controversy as his expected successor, Foreign Minister Tzipi Livni, tries to build a coalition.

"What I am saying to you now has not been said by any Israeli leader before me," Olmert told the newspaper Yediot Aharonot in an interview to mark the Jewish new year that runs from Monday night until Wednesday night. "The time has come to say these things."

He said traditional Israeli defense strategists had learned nothing from past experiences and seemed stuck in the considerations of the 1948 Independence War.

"With them, it is all about tanks and land and controlling territories and controlled territories and this hilltop and that hilltop," he said. "All these things are worthless."

He added, "Who thinks seriously that if we sit on another hilltop, on another hundred meters, that this is what will make the difference for the state of Israel's basic security?"

Over the last year, Olmert has publicly castigated himself for his earlier rightist views and he did so again in this interview. On Jerusalem, for example, he said, "I am the first who wanted to enforce Israeli sovereignty on the entire city. I admit it. I am not trying to justify retroactively what I did for 35 years. For a large portion of these years, I was unwilling to look at reality in all its depth."

He said that maintaining sovereignty over an undivided Jerusalem, Israel's official policy, would involve bringing 270,000 Palestinians inside Israel's security barrier. It would mean a continuing risk of terrorist attacks against civilians like those carried out this year by Palestinian residents of Jerusalem with a bulldozer and earth mover.

"A decision has to be made," he said. "This decision is difficult, terrible, a decision that contradicts our natural instincts, our innermost desires, our collective memories, the prayers of the Jewish people for 2,000 years."

The government's public stand on Jerusalem until now has been to assert that the status of the city was not under discussion. But Olmert made clear that the eastern, predominantly Arab sector had to be yielded "with special solutions" for the holy sites.

Elsewhere in the interview, when discussing a land swap with the Palestinians, he said the exchange would have to be "more or less one to one."

Olmert also addressed the question of Syria, saying that Israel had to be prepared to give up the Golan Heights but that in turn Damascus knew it had to change the nature of its relationship with Iran and its support for Hezbollah, the Lebanese militia.

On Iran, Olmert said Israel would act within the international system, adding, "Part of our megalomania and our loss of proportions is the things that are said here about Iran. We are a country that has lost a sense of proportion about itself."

Reaction from the Israeli right was swift. Avigdor Lieberman, who heads the Yisrael Beiteinu party, said in a radio interview that Olmert was "endangering the existence of the state of Israel irresponsibly."

As they reacted to Olmert's remarks, Palestinian negotiators said that it was satisfying to hear Olmert's words but that the words did not match what he had offered them so far. Yasser Abed Rabbo, a senior Palestinian official, said on Palestinian Radio that it would have been better if Olmert had taken this position while in office rather than while leaving it and that Olmert had not yet presented a detailed plan for a border between Israel and a Palestinian state.

In theory, Olmert will continue peace negotiations while awaiting the new government. But most analysts believe that, having been forced to resign his post, he will not be able to close a deal.

Dysfunction in Washington Exacts a Heavy Price By GERALD F. SEIB

SEPTEMBER 30, 2008


Dysfunction in Washington Exacts a Heavy Price


The country has learned in recent weeks the price of financial failure. Now it will learn the price of political failure.

The collapse of the financial-rescue package in the House on Monday may well be reversed, at some point. Discouraged House leaders yesterday sounded as if they hoped the Senate could lead Congress back out of the wilderness in the next few days, giving the plan a second crack at passage.

WSJ Executive Washington Editor Jerry Seib gives his take on Monday's House vote on the bailout and its effects on the market, saying "we're now going to learn the consequences of political failure." (Sept. 29)

But even if senators manage to revive the bailout plan, a great deal of damage already has been done:

American voters, who didn't like the plan in the first place, will like even less the discovery that Washington's response to their concerns was to collapse into genuine dysfunction. Three-quarters of Americans already think the country is on the wrong track, and the same share disapproves of the job Congress is doing. Before Monday, it seemed unlikely those numbers could go much higher. They can, and now probably will.

Beyond that, the hope that Washington had gotten the message in this campaign year that Americans were yearning for an end to gridlock and partisan warfare has been shattered. There will be plenty of blame to go around. House Republicans demanded changes in the plan last week, got some of them, and yesterday delivered just 65 votes -- a third of their members -- for a rescue package that their party's president, their party's Treasury Secretary and their party's House and Senate leadership all called vital to the nation.

Then on Monday, it was Democratic House Speaker Nancy Pelosi's turn to hurt the effort. She chimed in with a bizarrely timed and distinctly partisan floor speech blaming Republicans for the market mess, just minutes before her party needed scores of Republican votes to make the bailout work. Whether she turned votes against the plan, or gave Republicans a convenient excuse to vote against it, was being hotly debated in the Capitol late Monday. But either way, the atmosphere is even more sour as a result.

As it happens, Democratic leaders also failed to convince 95 of their own members to back the rescue plan, showing that the splintering of support was widespread in the halls of Congress.

Now, though, the consequences of simultaneous political and economic breakdown ripple well beyond Wall Street and Washington. The effects could well be global.

The U.S. -- meaning both parties and the public and private sectors -- has to worry about what global investors make of the picture of disarray they now see in the U.S. That's a crucial consideration because the U.S. now depends on foreign capital to finance both a trade deficit of more than $700 billion and a $400 billion federal budget deficit. Today, foreign lenders hold about half of America's public debt, and the nation relies on them to finance more than 70% of its new debt, the nonpartisan Peter G. Peterson Foundation estimates.

The reason foreign investors have been willing to pony up this cash has been their basic, longstanding belief that the U.S. system -- financial and political -- makes America the ultimate safe haven.

At what point does that basic belief start to erode? And what are the consequences of that possibly happening? The question is even more acute because of the likelihood that even more foreign capital will be needed, at least in the short term, to help the American government finance the very bailout now being debated.

The more immediate question, of course, is what happens now. In the House, many of the Republicans who voted against the rescue bill actually sounded more eager afterward to get something done than they did beforehand.

But the atmosphere now is somewhere between tense and toxic. House Republican leader John Boehner said Rep. Pelosi's speech, in which she blamed the "right-wing ideology of anything goes" for bringing about the market crisis, had "poisoned" the atmosphere among his troops.

Democratic caucus leader Rahm Emanuel countered that such a charge masked a more basic Republican failure to deliver the votes needed for a measure that failed 228 to 205. Democrats "delivered 140 votes; we were supposed to deliver 125," Rep. Emanuel said. "They were supposed to deliver 100 votes. They delivered 65."

In normal times, the burden of picking up the pieces would fall on the president and his Treasury secretary. But President George W. Bush is mired in lame-duck status and has shown little ability to move House Republicans, except perhaps for the chamber's leaders. And in the aftermath of the House revolt Monday, rank-and-file Republicans didn't voice much more respect for Treasury Secretary Henry Paulson, architect of the rescue plan, than they did for their Democratic foes.

So now the hopes for action shift to the Senate, where support for the Paulson approach is far stronger. The bill the House defeated likely could pass the Senate with some votes to spare. But now that isn't enough; the need is to adjust that plan in a way to attract House Republicans. That might be done by playing up provisions House rebels prefer, such as greater reliance on insurance of bad debt rather than government assumption of such debt, and changes in accounting rules that will limit the severe hit financial firms have to take on their balance sheets if they choose to hang onto shaky debts.

Starting now, though, another highly unusual dynamic comes into play. Both of the major-party presidential nominees -- Barack Obama and John McCain -- are members of the Senate, where the fate of the bailout may well be determined. It isn't unreasonable to expect them to show some presidential-caliber leadership. It's an unusual role for presidential candidates to play, but the times are unusual indeed.

Write to Gerald F. Seib at

Copyright 2008 Dow Jones & Company, Inc.

Monday, September 29, 2008

Enough talk

Enough talk
By Gideon Levy

The most unstable country in the Middle East is changing its government again. Soon Israel will have a new government, with "continued peace negotiations with the Palestinians" engraved on its banner. Well, now it's time to end the farce after more than 15 years of futile negotiations that led nowhere and brought no peace. It's time to say enough already to the second most dangerous game after the war game - the "political process" game.

This mainly involves playing with ourselves, an idiom meaning masturbation in some languages, and thus a perfect metaphor for this "peace process" that must now be brought to an end. Snuff out this bonfire of vanities, this process of self-deception that pushes us ever further from any agreement. The time has come for decisions and actions - war or peace, annexation and a state of all its people, or dividing the land into two sovereign states. All this must take place during injury time; the 90th minute has long passed.

After 15 years of talking, nothing has been left unsaid or undiscussed. After endless peace plans, "drawer" and "shelf" plans, road maps and interim agreements, none of which has been carried out, we must scream to the new government: Don't start again with that futile negotiations carousel. Ehud Olmert and Mahmoud Abbas, Tzipi Livni and Ahmed Qureia, Yitzhak Rabin and Shimon Peres and Yasser Arafat, Yossi Beilin and Abu Mazen, Ami Ayalon and Sari Nusseibeh, Ehud Barak and Arafat - they've all said it all. Now's the time to decide - to pull the detailed plans out of Bill Clinton's or Yossi Beilin's or Barak's or Rabin's drawer. The differences between them are minimal.


There is only one plan on the table: the end of the occupation, the '67 borders and solving the refugee issue in exchange for peace - yes or no. All the rest is insignificant. It cannot take much more time, simply because time has long run out. Take the Clinton plan or Geneva initiative, who knows what the differences are, and start implementing it. There will be no other plans.

It's not merely a criminal waste of time, which always acts against peace. That which could have been achieved a decade ago cannot be achieved today, and that which is still attainable today will no longer be possible in a decade. This danger is real: At the end of each negotiating round lurks the next cycle of violence. Nothing is more dangerous in this region than another failed negotiation.

In addition, the very existence of peace negotiations enables Israel to pretend to be doing something about the situation, without actually doing anything. Israel can thus go through the motions with no intention of reaching a peace agreement and feel as if it were doing everything to achieve it.

But while critical time was being wasted, Israel did not stand idly by. Neither did the Palestinian Authority. While they were negotiating, Israel was building more and more homes in West Bank settlements. In fact, it never stopped. Even Barak, the bravest of them all, added 6,000 housing units to the unworthy project. From one negotiation to the next, more and more opportunities dissipated. The occupation became increasingly heartless and brutal, as did Palestinian terrorism.

The only missing ingredient in all the tedious, superfluous negotiations was sincere goodwill to reach peace. Nothing is more critical than this, which has never been on the table, not even in the great illusion era of Oslo. That is why Israel has never offered, even then, to evacuate a single potted plant in the West Bank settlements. All it did was build more and more, dunam after dunam of destroying every chance. There is no other conflict in the world, it seems, where the negotiations to solve it have lasted so many years while the solution moved ever further away, like the horizon.

If the new government is headed for peace - and this is extremely doubtful - it must start with actions, not talks. It is very easy to change the occupation's road map: Just take a few steps like a mass release of prisoners and taking down all internal roadblocks to signal that the government intends to make peace. This would advance the political process more than all the talks, as daring as they may be.

If I were a Palestinian leader, I'd tell the new government: You know what our positions are, as we know yours. Let's not start everything over again. If you are sincere, start acting, even before the first photo-op between Livni and Abbas. This is even more apt when it comes to peace with Syria - we know what the conditions are, there is nothing to talk about, only to decide. Enough talk. It's time to act.

It Can Happen Here


It Can Happen Here

THE GERMAN name Sternhell means bright as the stars. The name fits: the positions of Professor Ze'ev Sternhell indeed stand out sharply against the darkness of the sky. He warns against Israeli fascism. This week, Israeli fascists laid a pipe-bomb at the entrance of his apartment and he was lightly injured.

The choice of victim seems surprising at first. But the perpetrators knew what they were doing.

They did not attack the activists who demonstrate every week against the Separation Wall in Bil'in and Na'alin. They did not attack the leftists who mobilize every year - this year, too - to help the Palestinians pick their olives near the most dangerous settlements. They did not attack the "Women in Black" who demonstrate every Friday, or the women of "Machsom Watch", who keep an eye on events at the army checkpoints. They attacked a person whose entire activity is in the academic field.

The struggles on the ground are essential. But their main purpose is to influence public opinion. That is the main battlefield, and there the man of letters has an important part to play.

On this battlefield, two visions confront each other, two visions that are as far apart as the West is from the East. On the one side: An enlightened Israel, modern, secular, liberal and democratic, living in peace and partnership with Palestine as an integral part of the region. On the other side: a fanatical Israel, religious, fascist, cut off from the region and civilized humanity, a people that "dwells alone and shall not be reckoned among the nations" (Numbers, 23:9), where "the sword will devour for ever" (2 Samuel 2:26).

Ze'ev Sternhell is one of the outstanding guides of the enlightened vision. His positions are bright as the stars, resolute and incisive. Not a surprising target for the Neo-Nazi pipe-dreamers and pipe-bombers.

THE FIELD of Sternhell's academic expertise is the origins of Fascism, a subject that has occupied me all my life. The reasons for our interest are similar: Nazism left an indelible stamp on our childhood and fate. As a child, I witnessed the rise of Nazism in Germany. As a child, Sternhell saw it in Poland, when, after the death of his father, he lost his mother and sister in the Holocaust.

"He who has been scalded by boiling water is cautious even with cold water," a Hebrew adage goes. Those who experienced Fascism bursting into their lives in childhood are sensitive to the slightest symptom of the outbreak of this disease. In 1961 I wrote a book called "The Swastika" (which exists only in Hebrew), in which I tried to crack the code of the roots of Nazism. At the end of the book I posed the question: Can it happen here? My unequivocal answer was: Yes, indeed.

Because of this, I am sensitive to every warning sign in our society. As a journalist and magazine editor, I shone the searchlight on all such signs. As a political activist, I fought against them in the Knesset and in the street.

Sternhell, on his part, after a military career, is a pure academic. He uses the instruments of academia: research, teaching and publication. He strives for exact definitions, without seeking popularity or avoiding provocation. In one of his articles years ago he asserted that the violent response of the Palestinians to the settlements is quite natural. By this he attracted the lasting wrath of the settlers and the extreme Right, which made an effort to prevent him from receiving the Israel Prize, Israel's highest distinction.

Now the pipe-bombs are speaking.

WHO LAID the bomb? A lone individual? A group? A new underground? The terrorists from the settlements? That's for the police and the Shin-Bet to find out.

From the public point of view, the matter is much more simple: it is quite clear in which flowerbed these poisonous weeds grow, which ideology serves as fertilizer, and who is spreading it.

Israeli Fascism is alive and kicking. It is growing in the flowerbed that produced the various religious-nationalist underground groups of the past: the group that tried to bomb the Muslim shrines on the Temple Mount, the underground that tried to assassinate the Palestinian mayors, the "Kach" gang, the perpetrator of the Hebron massacre Baruch Goldstein, the murderer of peace activist Emil Gruenzweig, the murderer of Yitzhak Rabin and all the underground groups that were uncovered at an early stage before their deeds could bring them to public notice.

These acts cannot simply be attributed to individuals or "rogue groups". There exists a definite fascist fringe at the margin of Israel's political society. Its ideology is religious-nationalist, and its spiritual leaders are mostly "Rabbis", who formulate its world view and the practical application. These Jewish idolaters do not work in secret. On the contrary, they offer their wares on the open market.

This sector is concentrated in the "ideological" settlements. That does not mean that all settlers are fascists. But most fascists are settlers. They are concentrated in certain well-known settlements. By accident or not by accident, all these settlements are located in the heart of the West Bank, beyond the Separation Wall. The first of these, in the Hebron area, were installed with the help of "leftist" leader Yigal Allon, and in the Nablus area by "leftist" leader Shimon Peres.

DURING THE last months, there has been a marked increase in the number of incidents in which settlers attack Palestinians, soldiers, policemen and "leftists".

These acts are committed openly, in order to terrorize and deter. Settlers riot in the Palestinian villages whose lands they covet, or for revenge. These are "pogroms" in the classical sense of the term: riots by an armed mob intoxicated with hatred against helpless people, while the police and the army look on. The Pogromchiks destroy, injure and kill. These days it is happening more and more frequently.

In the few cases when the army or the police intervene, they do not turn on the settlers, but on the Israeli peace activists who come to help the beleaguered Palestinian farmers. The spokesmen of the Security Establishment and the commentators try to sound balanced and speak about "rioters from the Left and the Right". That is a false even handedness, which itself belongs to the Fascist arsenal of tricks.

The Settlers' pogroms are violent by nature, both in thought and deed, while the peace activists are non-violent on principle. If there is violence, it comes from the army and the border police, the pretext being that local boys have been throwing stones. What is not mentioned is that the well-protected soldiers and border policemen pursue the Palestinian demonstrators into the alleys of their villages.

The "boldness" of the extreme right-wing thugs - or "rightist activists" as the media insist on calling them courteously - is increasing by the day. They do whatever they want, knowing full well that no harm will befall them. The police do not interfere, since anyhow the courts will not mete out meaningful punishment.

ANYBODY WHO knows the history of Nazism is familiar with the shameful role played by the courts and the other law-enforcement agencies in the German republic vis-à-vis the law-breakers whose declared purpose was to put an end to the democratic system. The judges imposed ludicrously light penalties on Nazi rioters, whom they considered "misguided patriots", while treating Communist rioters as foreign agents and traitors.

Now we are experiencing this phenomenon here. The law-breaking settlers get symbolic sentences, while Palestinians who are accused of much lesser offenses get harsh penalties. Nowadays, even a settler who sets his dog on a company commander goes free, as does a settler who breaks the bones of a battalion chief.

The army's internal justice system can only be called monstrous: the commander who held up a bleeding woman in labor at a checkpoint causing the death of the child, was punished with two weeks detention. The commander who told a soldier to shoot a handcuffed Palestinian prisoner in the leg was "transferred", meaning that this war criminal can serve in another unit.

DOES THE increase in the number and severity of such incidents testify to the increasing power of Israeli Fascism? At first sight, one might get this impression.

However, on second thought I think that the opposite is true.

The fanatical settlers know that they have lost the support of public opinion in Israel, and that ordinary people consider them dangerous thugs. Their actions, as seen on television, arouse distaste, even abhorrence. The vision of "All of Eretz-Israel" has not only lost altitude - it has crashed on the ground of reality. The Zealots are acting out of weakness and frustration.

Much as the Nazis hated the German republic, these fanatics are starting to hate the State of Israel. And with good reason. They see that they have no place in a national consensus that is solidifying around the concept of "Two States for Two peoples", whether it is being accepted for negative reasons, such as demographic fears or the burdens of occupation, or for positive reasons, such as the hope for peace and prosperity after the withdrawal from the occupied territories.

The discussion about the borders is still going on, but the majority sees the Separation Wall as the future border. (As we made clear right from the beginning, the wall was not really being constructed in order to keep out Palestinian suicide bombers, as was claimed, but as a future border between the two states.)

The Israeli establishment wants to annex the lands between the wall and the Green Line, and is prepared to give the Palestinians Israeli areas in return. What does this tell the settlers?

Most settlers live in settlements near the Green Line, which according to this concept will be joined to Israel. These are, not by accident, the non-ideological "lifestyle" settlers, those who were looking for cheap apartments and "quality of life" at a short distance from Tel-Aviv or Jerusalem. These settlers will, probably, agree in the end to any peace that leaves them in Israel.

The great majority of the extreme settlers, those motivated by a religious-Fascist ideology, live in the small settlements east of the wall, which must be dismantled when peace comes. This is a small minority even among the settlers, supported by a radical minority on the extreme right. That is where violent Israeli Fascism is growing.

ONCE UPON a time it seemed that a Red Line ran parallel to the Green Line - that nationalist-religious terrorism would hurt "only" Palestinians, not Israelis. Even Rabbi Meir Kahane, a born fascist, said so.

That illusion was shattered with the murder of Yitzhak Rabin. Israeli Fascism was found to be like any other classical Fascism, which thunders against the "foreign enemy" but directs its terrorism against the "enemy within". The pipe-bomb at the entrance of Sternhell's home must turn on all the red lights, as it joins the murder of Emil Gruenzweig and the threats on the lives of other conspicuous peace activists.

The decisive battle, the battle for Israel, is entering a new phase - much more violent, much more dangerous. But more serious than any danger to individuals is the danger to Israeli society as a whole. Especially if it does not mobilize all its resources - government, police, Security Service, the law, the courts, the media and the educational system - for an all out battle against this danger.

I do not believe that Fascism will win in our society. I believe in the strength of Israel democracy. But if I am pushed into a corner and asked: "Can it happen here?" I am bound to answer: "Yes, it can."

They Just Don't Get It By Steven Pearlstein

They Just Don't Get It

By Steven Pearlstein
Tuesday, September 30, 2008;

The Washington Post D01

Oy vey.

That is the technical economic term that best sums up a day in which the House of Representatives refuses to pass a $700 billion rescue plan pushed by the White House and congressional leaders from both parties, Wachovia is taken over in a deal that will have the government potentially owning 10 percent of Citigroup, a few European banks fail, the Federal Reserve and other central banks are forced to inject an additional $300 billion into the global banking system, the Dow Jones industrial average plunges 777 points, and investors everywhere rush to the safety of gold and short-term Treasury bills.

The basic problem here is that too many people don't understand the seriousness of the situation.

Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system.

Politicians worry less about preventing a financial meltdown than about ideology, partisan posturing and teaching people a lesson. Financiers have yet to own up publicly to their own greed, arrogance and incompetence. And leaders of foreign governments still think that this is an American problem and that they have no need to mount similar rescue efforts in their own countries.

In the coming weeks and months, all of these people will come to understand how deep the hole really is and how we're all in it together.

They'll come to understand that the giant sucking sound they hear is of a massive deleveraging of the global economy and the global financial system as households and governments, businesses and investment funds adjust to living in a world with less debt and more inflation.

And they will come around, reluctantly, to the understanding that the only way to get out of these situations is to have governments all around the world borrow gobs of money and effectively nationalize large swaths of the financial system so it can be restructured, recapitalized, reformed and returned to private ownership once the crisis has passed and the economy has gotten back on its feet.

In the next few weeks, the center of attention here in the United States will shift from the Congress and an exhausted Treasury to the Federal Deposit Insurance Corp., which will now have to rescue any number of failing banks, either by taking them over directly or managing their transfer into stronger hands. It will also shift back to the Federal Reserve and other central banks, which will have to step up their efforts to maintain liquidity in money markets and prevent the credit crunch from taking down hedge funds, businesses, and state and local governments.

These will, alas, be only holding actions. Restoring real stability to financial markets will require the kind of systemic approach and extraordinary government interventions that the public has refused to authorize and finance. In better times, the public might have put aside its reluctance in response to the strong and unified recommendation of political and business leaders. But it is a measure of how little trust remains in both Washington and Wall Street that voters are willing to risk a serious hit to their wealth and income rather than follow their lead.

Steven Pearlstein can be reached

How the US presidential debate played overseas



How the US presidential debate played overseas

Barack Obama's tough talk scared Pakistanis and the Russians. But Afghans applauded. Iranians and Iraqis shrugged.

Mark Sappenfield

NEW DELHI - Pakistani political scientist Hasan Askari Rizvi is of two minds about Friday night's presidential debate in the United States. On one hand, he flinches at Barack Obama's swashbuckling comments about taking out Al Qaeda leaders on Pakistani soil – with or without Pakistan's consent. No policy could make him more unpopular in Pakistan, Mr. Rizvi says.

Then again, Rizvi acknowledges, he cannot rid himself of the idea that, despite his nuanced arguments Friday, Republican John McCain will be "George Bush III."

In the countries for which Friday night's debate perhaps held the most relevance – Pakistan, Afghanistan, Russia, Iran, and Iraq – the clear desire is for fresh ideas from US leaders. While this has generally led to more sympathy for Mr. Obama, Friday's debate did little to project this image in several regions central to US foreign policy.

"The debate [in Pakistan] is how much policy is going to change," say Rizvi. "Many are concerned by Obama's tough talking."

Indeed, the debate in many ways represented a reversal of expectations. "The line John McCain took was quite reasonable," says Rasul Baksh Rais, a political scientist at the Lahore University of Management Sciences, who teaches a class in American politics. "Extending the war into Pakistan has really aroused Pakistanis and made them much more interested in this race," he says.

The same is true in Afghanistan, but for the opposite reasons. Many Afghans see one of the main sources of their problems as being across the border in Pakistan, where Al Qaeda and the Taliban find refuge from the coalition forces in Afghanistan.

"[President] Bush said that after 9/11, he would smoke the terrorists out of their caves. But we know now that the terrorists aren't living in caves, they are living in luxury villas in Pakistan," says Haroun Mir, director of the Afghanistan Center for Research and Policy Studies in Kabul.

Right or wrong, this widespread perception in Afghanistan has led many people to favor Obama's tough talking. His comments Friday played well.

"He said that he will help Afghanistan fight terrorism," says Fazel Qazizada, a former political science student at Kabul University.

But he adds, "In the end, we think that Obama and McCain are not radically different from each other. We see some hope from the election campaigns and debates that they represent a new direction in American policy, but ultimately we will need to wait and see."

This caution is apparent throughout the region. Among Pakistan's highly educated, English-speaking classes – those most aware of the debate – there was an understanding that the event played to Americans, not the world.

"The candidates have to play to the gallery," says Professor Rais.

A sinking feeling in Russia

That was small solace in Russia, which received a bipartisan bludgeoning Friday. The exchange between McCain and Obama about Russia – in which both took a hard line, blaming it for aggression in Georgia – received massive play in the state TV news programs Saturday.

"This new consensus emerging in US politics, reflected by their exchange in the debate, is very worrisome," says Boris Kagarlitsky, director of the independent Institute for Globalization and Social Movements in Moscow. "There is this sinking feeling in Russia, listening to these two men, that the bad relations between us are just going to keep getting worse."

The traditional view is that Democrats talk moderately while Republicans talk tough, but it's the Republicans who end up delivering good things for Russia: détente and the end of the cold war, for example.

But this view is waning. In Russia, Bill Clinton was instrumental in bringing Russia into the G-8, and George W. Bush's relationship with former President Vladimir Putin has soured.

"It looked like a bidding war to see who could bash Russia harder to score points," says Peter Lavelle, a commentator for the English-language, state-run satellite TV station, Russia Today. "Russia is being turned into a whipping boy to hide the fact that the US has overreached itself and is not a positive force for change in the world."

In general, Pakistanis feel the same way. Though the Pakistani government has benefited most during Republican administrations – most notably the Eisenhower and Reagan years, when Pakistan was on the front lines of containing Communism – common Pakistanis resent their country's alliance with the US under Bush, seeing his policies as overbearing. "The [pro US] position Pakistan has taken is not popular in the streets," says Rais.

Iraq and Iran shrug

Yet most of the Muslim world paid little heed to the debate. The holy month of Ramadan ends this week, marking the biggest holiday of the Muslim calendar. In Iraq, for instance, citizens have spent their nights breaking the daily fasts with family and watching soap operas – Ramadan is Iraq's answer to sweeps week in America, featuring all the best shows.

Even when photo technician Zaid Nathem takes a break from watching a new Syrian miniseries, he says he focuses on Iraqi news. "Of course the US elections are important for us, but I don't spend my extra time following them," he says.

Although almost all Iraqis acknowledge that the results of the US election will have a major effect on their situation, they also know it is not their decision. Says Jabar Abu Ali, a restaurant manager in Baghdad: "Maybe [the candidates] will promise to withdraw troops, but after the elections we will find the same policy still in effect."

Though Iran was a key topic in the debate, it got little coverage. "Frankly speaking, the Iranian people don't care about this debate," says Saeed Laylaz, editor of the Sarmayeh or "Capital" economic newspaper in Tehran. "Iranians are suffering from local mismanagement of the economy much, much more than the atomic issue. This talk, and even the new UN Security Council resolution against Iran [passed on Saturday], is not very new."

As a critic of Iran's conservative government, he prefers Barack Obama. "Historically, the Republicans have been better for radicals and conservatives in Iran," says Laylaz. "And when Mr. Obama says that 'We have to talk to the Islamic Republic of Iran,' it is not so good for radicals in the country."

• Reported by Anand Gopal in Kabul, Afghanistan, Tom A. Peter in Baghdad, Mark Sappenfield in New Delhi, Scott Peterson in Istanbul, Turkey, and Fred Weir in Moscow.

Sunday, September 28, 2008

A Better Bailout, Joseph Stiglitz

A Better Bailout

Friday 26 September 2008

by: Joseph E. Stiglitz, The Nation

Joseph E. Stiglitz is a renowned American economist and the winner of the Nobel Prize in economics. (Photo: AFP/ Getty Images)

The champagne bottle corks were popping as Treasury Secretary Henry Paulson announced his trillion-dollar bailout for the banks, buying up their toxic mortgages. To a skeptic, Paulson's proposal looks like another of those shell games that Wall Street has honed to a fine art. Wall Street has always made money by slicing, dicing and recombining risk. This "cure" is another one of these rearrangements: somehow, by stripping out the bad assets from the banks and paying fair market value for them, the value of the banks will soar.

There is, however, an alternative explanation for Wall Street's celebration: the banks realized that they were about to get a free ride at taxpayers' expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands - called the American taxpayer.

The administration attempts to assure us that they will protect the American people by insisting on buying the mortgages at the lowest price at auction. Evidently, Paulson didn't learn the lessons of the information asymmetry that played such a large role in getting us into this mess. The banks will pass on their lousiest mortgages. Paulson may try to assure us that we will hire the best and brightest of Wall Street to make sure that this doesn't happen. (Wall Street firms are already licking their lips at the prospect of a new source of revenues: fees from the US Treasury.) But even Wall Street's best and brightest do not exactly have a credible record in asset valuation; if they had done better, we wouldn't be where we are. And that assumes that they are really working for the American people, not their long-term employers in financial markets. Even if they do use some fancy mathematical model to value different mortgages, those in Wall Street have long made money by gaming against these models. We will then wind up not with the absolutely lousiest mortgages, but with those in which Treasury's models most underpriced risk. Either way, we the taxpayers lose, and Wall Street gains.

And for what? In the S&L bailout, taxpayers were already on the hook, with their deposit guarantee. Part of the question then was how to minimize taxpayers' exposure. But not so this time. The objective of the bailout should not be to protect the banks' shareholders, or even their creditors, who facilitated this bad lending. The objective should be to maintain the flow of credit, especially to mortgages. But wasn't that what the Fannie Mae/Freddie Mac bailout was supposed to assure us?

There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products - which they created - and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer - and for no return. The second problem is that there is a big and increasing hole in bank balance sheets - banks lent money to people beyond their ability to repay - and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.

The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market - and letting it deteriorate at taxpayers' expense.

The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.

Paulson and others in Wall Street are claiming that the bailout is necessary and that we are in deep trouble. Not long ago, they were telling us that we had turned a corner. The administration even turned down an effective stimulus package last February - one that would have included increased unemployment benefits and aid to states and localities - and they still say we don't need another stimulus. To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn't they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.

The administration is once again holding a gun at our head, saying, "My way or the highway." We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public's downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the "lemons" problem - the government getting stuck with the worst or most overpriced assets.

Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won't have to be called upon again to finance Wall Street's foolishness.

If we design the right bailout, it won't lead to an increase in our long-term debt - we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt - already overburdened from a failed war and eight years of fiscal profligacy - will soar, and future living standards will be compromised. The president seemed to think that his new shell game will arrest the decline in house prices, and we won't be faced holding a lot of bad mortgages. I hope he's right, but I wouldn't count on it: it's not what most housing experts say. The president's economic credentials are hardly stellar. Our national debt has already climbed from $5.7 trillion to over $9 trillion in eight years, and the deficits for 2008 and 2009 - not including the bailouts - are expected to reach new heights. There is no such thing as a free war - and no such thing as a free bailout. The bill will be paid, in one way or another.

Perhaps by the time this article is published, the administration and Congress will have reached an agreement. No politician wants to be accused of being responsible for the next Great Depression by blocking key legislation. By all accounts, the compromise will be far better than the bill originally proposed by Paulson but still far short of what I have outlined should be done. No one expects them to address the underlying causes of the problem: the spirit of excessive deregulation that the Bush Administration so promoted. Almost surely, there will be plenty of work to be done by the next president and the next Congress. It would be better if we got it right the first time, but that is expecting too much of this president and his administration.


Joseph E. Stiglitz is University Professor at Columbia University. He received the Nobel Prize in Economics in 2001 for research on the economics of information. Most recently, he is the co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict. more...<>

Saturday, September 27, 2008

Israel asked US for green light to bomb nuclear sites in Iran logo

Israel asked US for green light to bomb nuclear sites in Iran

US president told Israeli prime minister he would not back attack on Iran, senior European diplomatic sources tell Guardian

Jonathan Steele,

Friday September 26 2008

nuclear enrichment plant of Natanz in central Iran

A view of the nuclear enrichment plant of Natanz in central Iran. Photograph: EPA

Israel gave serious thought this spring to launching a military strike on Iran's nuclear sites but was told by President George W Bush that he would not support it and did not expect to revise that view for the rest of his presidency, senior European diplomatic sources have told the Guardian.

The then prime minister, Ehud Olmert, used the occasion of Bush's trip to Israel for the 60th anniversary of the state's founding to raise the issue in a one-on-one meeting on May 14, the sources said. "He took it [the refusal of a US green light] as where they were at the moment, and that the US position was unlikely to change as long as Bush was in office", they added.

The sources work for a European head of government who met the Israeli leader some time after the Bush visit. Their talks were so sensitive that no note-takers attended, but the European leader subsequently divulged to his officials the highly sensitive contents of what Olmert had told him of Bush's position.

Bush's decision to refuse to offer any support for a strike on Iran appeared to be based on two factors, the sources said. One was US concern over Iran's likely retaliation, which would probably include a wave of attacks on US military and other personnel in Iraq and Afghanistan, as well as on shipping in the Persian Gulf.

The other was US anxiety that Israel would not succeed in disabling Iran's nuclear facilities in a single assault even with the use of dozens of aircraft. It could not mount a series of attacks over several days without risking full-scale war. So the benefits would not outweigh the costs.

Iran has repeatedly said it would react with force to any attack. Some western government analysts believe this could include asking Lebanon's Shia movement Hizbollah to strike at the US.

"It's over ten years since Hizbollah's last terror strike outside Israel, when it hit an Argentine-Israel association building in Buenos Aires [killing 85 people]", said one official. "There is a large Lebanese diaspora in Canada which must include some Hizbollah supporters. They could slip into the United States and take action".

Even if Israel were to launch an attack on Iran without US approval its planes could not reach their targets without the US becoming aware of their flightpath and having time to ask them to abandon their mission.

"The shortest route to Natanz lies across Iraq and the US has total control of Iraqi airspace", the official said. Natanz, about 100 miles north of Isfahan, is the site of an uranium enrichment plant.

In this context Iran would be bound to assume Bush had approved it, even if the White House denied foreknowledge, raising the prospect of an attack against the US.

Several high-level Israeli officials have hinted over the last two years that Israel might strike Iran's nuclear facilities to prevent them being developed to provide sufficient weapons-grade uranium to make a nuclear bomb. Iran has always denied having such plans.

Olmert himself raised the possibility of an attack at a press conference during a visit to London last November, when he said sanctions were not enough to block Iran's nuclear programme.

"Economic sanctions are effective. They have an important impact already, but they are not sufficient. So there should be more. Up to where? Up until Iran will stop its nuclear programme," he said.

The revelation that Olmert was not merely sabre-rattling to try to frighten Iran but considered the option seriously enough to discuss it with Bush shows how concerned Israeli officials had become.

Bush's refusal to support an attack, and the strong suggestion he would not change his mind, is likely to end speculation that Washington might be preparing an "October surprise" before the US presidential election. Some analysts have argued that Bush would back an Israeli attack in an effort to help John McCain's campaign by creating an eve-of-poll security crisis.

Others have said that in the case of an Obama victory, the vice-president, Dick Cheney, the main White House hawk, would want to cripple Iran's nuclear programme in the dying weeks of Bush's term.

During Saddam Hussein's rule in 1981, Israeli aircraft successfully destroyed Iraq's nuclear reactor at Osirak shortly before it was due to start operating.

Last September they knocked out a buildings complex in northern Syria, which US officials later said had been a partly constructed nuclear reactor based on a North Korean design. Syria said the building was a military complex but had no links to a nuclear programme.

In contrast, Iran's nuclear facilities, which are officially described as intended only for civilian purposes, are dispersed around the country and some are in fortified bunkers underground.

In public, Bush gave no hint of his view that the military option had to be excluded. In a speech to the Knesset the following day he confined himself to telling Israel's parliament: "America stands with you in firmly opposing Iran's nuclear weapons ambitions. Permitting the world's leading sponsor of terror to possess the world's deadliest weapon would be an unforgivable betrayal of future generations. For the sake of peace, the world must not allow Iran to have a nuclear weapon.''

Mark Regev, Olmert's spokesman, tonight reacted to the Guardian's story saying: "The need to prevent Iran from obtaining nuclear weapons is raised at every meeting between the prime minister and foreign leaders. Israel prefers a diplomatic solution to this issue but all options must remain on the table. Your unnamed European source attributed words to the prime minister that were not spoken in any working meeting with foreign guests".

Three weeks after Bush's red light, on June 2, Israel mounted a massive air exercise covering several hundred miles in the eastern Mediterranean. It involved dozens of warplanes, including F-15s, F-16s and aerial refueling tankers.

The size and scope of the exercise ensured that the US and other nations in the region saw it, said a US official, who estimated the distance was about the same as from Israel to Natanz.

A few days later, Israel's deputy prime minister, Shaul Mofaz, told the paper Yediot Ahronot: "If Iran continues its programme to develop nuclear weapons, we will attack it. The window of opportunity has closed. The sanctions are not effective. There will be no alternative but to attack Iran in order to stop the Iranian nuclear programme."

The exercise and Mofaz's comments may have been designed to boost the Israeli government and military's own morale as well, perhaps, to persuade Bush to reconsider his veto. Last week Mofaz narrowly lost a primary within the ruling Kadima party to become Israel's next prime minister. Tzipi Livni, who won the contest, takes a less hawkish position.

The US announced two weeks ago that it would sell Israel 1,000 bunker-busting bombs. The move was interpreted by some analysts as a consolation prize for Israel after Bush told Olmert of his opposition to an attack on Iran. But it could also enhance Israel's attack options in case the next US president revives the military option.

The guided bomb unit-39 (GBU-39) has a penetration capacity equivalent to a one-tonne bomb. Israel already has some bunker-busters.

Iran nuclear map

Map showing nuclear activity in Iran

Six Years Inside Gitmo: A Journalist's Tale



Six Years Inside Gitmo: A Journalist's Tale

Vivienne Walt

Both John McCain and Barack Obama have said they would shut the U.S. military detention facility at Guantanamo Bay, where about 250 men remain behind bars — some in their eighth year of captivity. But neither presidential candidate has outlined when and how they plan to do it. One man ready to offer them some free advice on the problem of Guantánamo is Sami Al-Hajj, an al-Jazeera TV cameraman recently freed, without facing charges, after six and a half years at Guantánamo. "It's worse than the fire of Hell," he wrote two years ago from his cell to his British attorney, Clive Stafford Smith. "It makes people lose their senses. Death may come at any time."

Al-Hajj survived Guantánamo, although he wrote his son a farewell letter from the prison camp and says he nearly went insane. Like almost all of the approximately 770 detainees who have been held there, Al-Hajj — the only journalist known to have been detained at Guantánamo — never had the opportunity to answer charges against him in any legal proceeding. With no explanation, U.S. military officials last May flew him to his native Khartoum, and handed him over to Sudanese authorities. In footage that is still being watched on YouTube, Al-Hajj is shown collapsing into the arms of his eight-year-old son Mohamed — who was a 14-month-old baby when Al-Hajj was arrested — weeping and squeezing him silently after his release.

Although Al-Hajj is still trying to comprehend how his life was so drastically transformed, he says he believes he was targeted simply because he worked for Al Jazeera. "Ninety percent of my interrogations were about Al Jazeera," he told TIME earlier this month. "I was interrogated more than 200 times, even a few hours before my release. I kept telling them I was just a cameraman." Al-Hajj believes his arrest in Afghanistan was largely a result of bad timing. As the Taliban's control over Kandahar evaporated in December 2001, the Jazeera man joined dozens of other journalists attempting to enter Afghanistan from Pakistan. Pakistani border officials singled him out, he says, telling him there was a problem with his passport. But even when an intelligence officer arrived to take him away, the cameraman had little sense of danger — he felt sure his arrest was a mistake. He believes that U.S. officials had ordered the arrest of the al-Jazeera cameraman who had recorded the network's October 2001 interview with Osama Bin Laden. Al-Hajj's passport showed that he had been at home in Qatar that month, but he still disappeared into U.S. captivity. Seven months passed before Red Cross officials were able to deliver a letter to Al-Hajj's wife in Qatar — the first proof that her husband was alive. "I am in Guantánamo," the letter read. "I don't know why."

Al-Hajj penned thousands more words during years as Prisoner 345 —including accounts of being force-fed through a tube during months of a hunger strike; of being locked in a cage for two weeks with no toothbrush or soap, after guards found an iron nail outside his cell window; and of being placed in a single cell with no blanket or bed, after refusing to submit to vaccinations he had already received in Qatar. Asked to comment on these claims, U.S. Navy Commander Jeffrey D. Gordon on Wednesday told TIME that Al-Hajj had "routinely made baseless assertions that are simply not supported by the facts". Stafford-Smith, his attorney, says Al-Hajj's written communications were submitted to military censors before they were taken out of Guantánamo. They include testimony he claims to have collected from scores of other detainees. "I decided to benefit from the experience," Al-Hajj says. "I was a journalist. So I practiced journalism."

At one point Al-Hajj compiled a list of 64 detainees younger than 18, challenging U.S. claims that no juveniles were in Guantánamo. "Sami was remarkable; the guards liked him and would tell him all sorts of stuff," says Stafford-Smith, legal director of the British prisoner-rights organization Reprieve, and who still represents about 35 detainees in Guantánamo.

When the Supreme Court ruled 5-4 last June that Guantánamo's remaining prisoners are entitled to habeas corpus hearings to justify their detention, Guantánamo became an election issue. McCain called the ruling "one of the worst decisions in the history of this country", although he later said it was not as bad as he had first described. Obama, who has called for terror suspects to face trial in the U.S. justice system rather than in military tribunals, welcomed the ruling. Since then government attorneys have presented few habeas corpus documents to justify holding the suspects, saying more time was needed to assemble and vet the evidence. "That is quite unbelievable in my mind," says Emi MacLean, staff attorney for the Center for Constitutional Rights in New York, which coordinates most of the Guantánamo cases. "These are men they have held for more than six years." Most, says MacLean, are either citizens of countries with little standing in Washington, or refugees with nowhere else to go.

Months after his release, Al-Hajj still walks with a limp and the aid of a cane, because of injuries he says were incurred when he was pushed from a military helicopter blindfolded after his arrest in 2001. U.S. military officials say that claim has never been substantiated. Unable to work as a cameraman, he was recently assigned to a new human-rights department in Al-Jazeera's Qatar newsroom, which is to launch a weekly human-rights show in Arabic next month. Despite his years in captivity for, he believes, no good reason, Al-Hajj insists he holds no animus towards Americans. "So many Americans wrote to me in Guantánamo. And I have many American friends."

The Islamization of East Jerusalem


The Islamization of East Jerusalem
In Arab East Jerusalem, Islamist groups are gaining more of a foothold through charity, such as free iftar meals during Ramadan, opening schools, and offering services.

Ilene R. Prusher

Jerusalem - Neat rows of white lay across the courtyard's stone floors like carpeting for an honor guard ready to receive a president or king.

Upon closer look, these lines are rolls of plastic tablecloth, and in minutes, workers will place hundreds of hot meals along the ground that will, when Yusuf Hamaze gives the signal, be paired with hungry people breaking the day's Ramadan fast.

"If you have kids, share yours with them!" Mr. Hamaze yells as scores of women rush into place to make sure they get meals of lamb and rice, pita, yogurt, and sweet dates.

"I eat here every day on Ramadan, because with the checkpoints, it would be impossible to get home anyway," says Imm Iyad, a woman who lives in Bethlehem, beyond the security barriers around Jerusalem, but spends her days in the Old City market, selling couscous to support her family. "I'm here because this is the only place I know where they do this," the mother shrugs. "All of the people who come here to eat are in need."

This phenomenon of serving free iftar, the meal that breaks the Ramadan fast, to the economically strapped – as well as those unable to get home to break the fast with family – is relatively new here. It comes at the munificence of several Islamic groups, but most notably, it's a project of Sheikh Raed Salah, the head of the Islamic Movement of the North, based in Umm el-Fahm, Israel.

To the growing numbers who appreciate and admire Sheikh Salah's work, he is not only providing a handout, but is also providing a framework for Palestinians and Israeli Arabs who feel the lack of leadership in Jerusalem.

To the Israeli authorities, however, Salah is a firebrand who inflames emotions, making repeated calls to Muslims that the Al Aqsa Mosque, the third-holiest site in Islam, is in danger. He's also adding, many say, to a growing Islamization of East Jerusalem.

Last month, Israeli security forces raided the offices of the Islamic Movement in Umm al-Fahm under suspicions that it was aiding Hamas. Dozens of police entered the offices of the Al Aqsa Heritage Institute, the new name of Salah's organization. They confiscated documents, computers, and close to $100,000 held in a safe, according to officials and news wires.

In August 2007, Salah was indicted for inciting racism and violence after he called for a "third intifada," or uprising, his response to an Israeli archaeological dig in the Old City that he says is endangering the foundations of the Al Aqsa Mosque.

Salah himself has been barred by Israel from coming to Jerusalem. But the reach of his organization continues to make an impact here, most prominently in the form of this iftar that feeds up to 5,000 people a day.

He is filling in where secular Palestinian leaders have left a vacuum, as other Islamic institutions have across East Jerusalem. There are a growing number of Islamic private schools, as well as a whole host of services provided by Muslim organizations to meet the many needs there.

In the past, this role was occupied by Faisal Husseini, who since the 1993 Oslo Accords was the Palestinian Authority's Minister for Jerusalem Affairs, based in East Jerusalem's Orient House. Mr. Husseini died in 2001, and during the height of the intifada, Israeli authorities shut the Orient House and did not allow it to reopen.

"East Jerusalemites are experiencing the worst situation economically, politically, and socially," says Rasem Abaidat, an East Jerusalem writer and activist. "In the 1980s we tried to adapt to the Israeli way of life. But this turned to disappointment that they felt during the late 80s and early '90s, in terms of house demolitions, imposing of heavy taxes along with lack of services, and this has made them realize that the Israeli occupation is not a fair ruler."

At the same time, he says, the Palestinian Authority headed by Yasser Arafat was incapable of assisting East Jerusalemites, in part because of the amorphousness of their situation. They hold Israeli-issued identity cards, but vote in elections for Palestinians.

"Arafat was not able to fill the vacuum. On the contrary, East Jerusalemites watched as the West Bank and Gaza got international help to flourish, while no one gave them any attention in terms of aid and funding," Mr. Abaidat continues. "Therefore their only hope was God."

Meanwhile, there have been disagreements over which Islamic Waqf, or religious body, controls Jerusalem's holy places. Both a Jordanian one and a Palestinian one claim to have ultimate authority over the Harem es-Sharif, or Noble Enclosure, which includes Al Aqsa and the Dome of the Rock.

"Sheikh Salah has managed to fill the vacuum left by the internal fighting between the Jordanian Waqf and Palestinian Waqf, and has succeeded in highlighting the conflict over the Al Aqsa Mosque locally, regionally, and internationally," he says.

The result, he says, is an increasing identification with an Islamic agenda. "The people of East Jerusalem have been swept into this wave of Islamicism and are enjoying the attention given to them by such activities."

The trend comes against a backdrop of an upswing in attacks on Israeli perpetrated by East Jerusalemites, who had not been particularly active in the midst of the last intifada. This week, a 19-year-old from East Jerusalem ran over a group of Israeli soldiers outside the Old City, injuring 17 of them before being shot to death. It was the third such attack since July.

Taher Ghbarieh, who works for Salah's organization in Umm el-Fahm, says he is worried about a flare-up in violence after a right-wing Jewish group opened a synagogue this week in the Muslim Quarter of the Old City.

"Our institution has been following up on this building and drilling under the synagogue, and we consider this latest situation as one of the most dangerous the Al Aqsa Mosque has been put in," says Mr. Ghbarieh. "This is the straw that breaks the camel's back. People are fed up with the way Israel is dealing with Palestinians."

Arabs slam Israel over settlement policy at UN meet

Department of pretty much unnoticed in the US press.... N.B. Bernard Kouchner's statement as well as that of the Saudi Foreign Minister. The two-state solution, not -- it appears -- highlighted in the rebuttal by Israel's ambassador, seems to be vanishing everywhere except in the minds of unreflective Americans and apologists for Israel.



Arabs slam Israel over settlement policy at UN meet

UNITED NATIONS (AFP) — Arab countries slammed Israel over its settlement expansion policy in the West Bank Friday during a UN Security Council debate held only hours before a ministerial session of the Middle East diplomatic Quartet.

"Settlement makes the creation of a viable Palestinian state impossible," Prince Saud al-Faisal said during the council debate.

"The only path to Israel's security is peace and it is time for Israel to understand that it cannot continue to exempt itself from behaving in accordance to international law," said the Saudi foreign minister, whose country formally called for the debate Monday.

The debate was taking place only hours before the Middle East diplomatic Quartet was due to hold a ministerial session here to review prospects for peace between Israelis and Palestinians in the wake of the US-sponsored Annapolis process launched last November.

In August, Israel approved construction of 400 new homes in a Jewish neighbourhood in annexed east Jerusalem and invited bids for construction of another 416 settler homes in the occupied West Bank.

The construction of settlements -- viewed as a major obstacle to reaching a peace deal -- has nearly doubled since 2007, despite Israel's pledge to freeze such activities, the Israeli watchdog Peace Now said last month.

Palestinian President Mahmud Abbas told the council Friday that the Israeli settlement blocs "will not allow for the emergence of a viable Palestinian state because they divide the West Bank into at least four cantons."

"How can I convince my people of the necessity of peace with Israel when settlement construction continues?" he added.

But Israel's new UN Ambassador Gabriela Shalev told council members that while the settlements are a "delicate issue," they "are not an obstacle to peace."

"They have been used here as another instrument to bash Israel instead of addressing the realities on the ground," she added.

"There is much that those in the region can do to support that (peace) process, but it is not about more UN meetings," Shalev said. "It is, first and foremost, about commitment to prepare the people of the region for the price of peace, to accept the true meaning of peace."

US Secretary of State Condoleezza Rice did not focus on the settlement issue in her remarks to the debate and instead urged Arab countries to "consider ways they might reach out to Israel."

She added that the Arab world needed to fully understand that "Israel belongs to the Middle East and will remain" in the Middle East.

French Foreign Minister Bernard Kouchner, whose country currently chairs the European Union, meanwhile restated the EU view that Israeli settlements, "wherever in the occupied Palestinian territories, are illegal under international law."

He added that settlement "harms the credibility of the process started in Annapolis and affects the viability of the future Palestinian state."

In Annapolis, Maryland last November, Israel and the Palestinians revived negotiations toward resolving core problems like the status of Jerusalem, the borders of a future Palestinian state and refugees.

The aid agencies said the Quartet -- the United States, the EU, Russia and the United Nations -- has failed to hold Israel to account for expanding settlements in the West Bank -- which the four powers oppose -- and had little impact on boosting freedom of movement for Palestinians.

Moreover, the "lack of progress on key goals" set by the Quartet called the group's entire approach into question, said a report from the coalition, which includes Oxfam, Save the Children, Christian Aid, CARE and CAFOD.

US 'will lose financial superpower status' By Bertrand Benoit in Berlin logo
US 'will lose financial superpower status'

By Bertrand Benoit in Berlin

Published: September 25 2008 11:55 | Last updated: September 25 2008 20:28

The US will lose its role as a global financial "superpower" in the wake of the financial crisis, Peer Steinbrück, the German finance minister, said on Thursday, blaming Washington for failing to take the regulatory steps that might have averted the crisis.

"The US will lose its status as the superpower of the world financial system. This world will become multi­polar" with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. "The world will never be the same again."

His were the most out­spoken comments by a senior European government figure since Wall Street fell into chaos two weeks ago.

He later told journalists: "When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative."

The minister, who has spearheaded German efforts to rein in financial markets in the past two years, attacked the US government for opposing stricter regulations even after the subprime crisis had broken out last summer.

The US notion that markets should remain as free as possible from regulatory shackles "was as simplistic as it was dangerous", he said.

But Mr Steinbrück had warm words for the US's crisis management in the past fortnight, including the government's planned $700bn rescue package for the financial sector. Washington, he said, had earned credit for acting not just in the US interest but also in the interest of other nations.

Yet he repeated Germany's refusal to mount a similar rescue operation using taxpayers' money to acquire toxic assets. "This crisis originated in the US and is mainly hitting the US," he said. In Europe and Germany, such a package would be "neither sensible nor ­necessary".

The US, Mr Steinbrück said, had failed in its oversight of investment banks, adding that the crisis was an indictment of the US two-tier banking system and its "weak, divided financial oversight".

He blamed Washington for refusing to consider proposals Berlin had made as it chaired the Group of Eight industrial nations last year. These proposals, he said, "elicited mockery at best or were seen as a typical example of Germans' penchant for over-regulation".

His comments followed calls this week by Nicolas Sarkozy, the French president and current holder of the European Union presidency, for an emergency G8 meeting on the crisis.

Mr Steinbrück's proposals include a ban on "purely speculative short selling"; a crackdown on variable pay for bank managers, which had encouraged reckless risk-taking; a ban on banks securitising more than 80 per cent of the debt they hold; international standards making bank managers personally responsible for the consequences of their trades; and increased co-operation between European super­visors.

Following a meeting with Christine Lagarde, his French counterpart, in Berlin, he said France and Germany would set up a working group of treasury, central bank and supervisory authority officials that would consider tougher regulation of short selling.

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Welcome to chaos: Arab nations hit hard as world markets crash By Zvi Bar'el, Haaretz Correspondent

Welcome to chaos: Arab nations hit hard as world markets crash
By Zvi Bar'el, Haaretz Correspondent

The long tables set every evening at the entrance of Cairo's Khal el-Khalili bazaar are a traditional sight. They represent efforts by the Egyptian government, the city of Cairo and charitable organizations to feed hundreds of residents who lack the means to buy the basic foodstuffs for Iftar, the meal that breaks the daylong fast during the Ramadan holy month. Although this gesture is not enough to satisfy the millions of Egyptians who earn less than $1 a day, it does create the feeling that the state "is at least doing one good thing for the country's poor," as one worker who was organizing the tables told me in Cairo.

These very tables are also the center of a political struggle between the government and the Muslim Brotherhood. This year, for example, the government prohibited the Islamic organization from holding its annual collective holiday meal and separate public meals in the poor neighborhoods.

To undercut the Muslim Brothers' allegations concerning the government's poor economic performance - the government is blamed for the steep rise in the prices of basic commodities - the minister of economic development, Osman Mohamed Osman, has issued a new report on Egypt's economic situation. The report does not specify how many Egyptians are living below the poverty line, noting only that their number has decreased by half; the proportion of people earning less than $2 a day is said to be 43 percent of the population - some 38 million people. A year ago, the minister explained that anyone who earns $2 a day cannot be considered poor. Realizing that this explanation will no longer do, he has now declared that the government hopes the country will reach a poverty level of 10 percent by 2011.
A few streets away from the tables in the bazaar, at the Cairo Stock Exchange, the poverty data are of no interest: The Egyptian stock market plummeted 10 percent in two days, and foreign investors withdrew hundreds of millions of dollars. "The state's roulette table is collapsing," a small investor was quoted as saying in the newspaper Al-Masri al-Yum. "This is the end of capitalism. Welcome to chaos."

The Egyptian pound has also fallen to its lowest level in half a year, and inflation has soared to 26.5 percent. The economic development minister's forecast of diminished poverty levels receded further into the distance, and the plan to privatize government companies, as a measure to improve the economy, has become a fantasy.

"When potential foreign investors see their capital evaporate in Western stock markets, the last thing they will want is to buy a failing factory in Helwan," says a journalist in the economic section of the daily Al-Ahram.

Jordan: 'The money's gone'

A Jordanian who returned to Amman this week related, in a phone call, that when he arrived at Queen Alia International Airport, he was informed that his investment broker had been arrested and that the fate of the money deposited with him was unclear: "The government may indict him, but how will that help me? Jordan is not Dubai or Saudi Arabia, and certainly not Washington, which can immediately inject billions into the market to allay fears. Here, if your investment broker is arrested, the money is gone."

This week, the Al-Arabiya network reported that indictments had been filed against 46 Jordanian companies traded on the stock market. The companies' owners will be tried before a special court for security offenses, as their actions are considered harmful to the national economy. If convicted, they face prison terms of up to 15 years. Now it turns out that these companies provided potential clients with false profit forecasts, and also broadcast fake presentations on TV screens about the stocks they recommended.

Thousands of investors filed complaints with the general prosecutor in Jordan, but are unlikely to recoup their funds, which are estimated to total half a billion Jordanian dinars.

The Gulf: Good times

Less concerned about the global market plunge are the Gulf states, which raked in a fortune from the rise in oil prices and created vast monetary reserves that allowed their governments to inject funds into their financial markets to stabilize them. This week, for example, the central bank of the United Arab Emirates (UAE) announced that it would transfer about $14 billion to the country's banks and financial institutions as a loan taken in extraordinary conditions, so they can maintain liquidity at a desirable level. The central bank is considering lowering the liquidity level from the current rate of 14 percent, and it will also buy bonds from the banks.

As was the case throughout the Arab world, foreign investors yanked capital out of the Gulf states immediately after the markets began to crash. The Gulf banks, which are underwriting colossal building projects in those countries, would have faced a real disaster if clients had demanded their money. Thus, after investing $7.5 billion last November to save Citigroup, the Dubai Development and Investment Authority had to repeat the move - this time to save the country's banks.

However, beyond the stability of the banks in the Gulf states and the inhabitants' certain knowledge that the state will not allow the banks to collapse - mainly because most of them are owned by the ruling families and their cronies - people in the Gulf are starting to worry that the big bubble is liable to burst in their faces. Their concern is specifically for the real-estate bubble, which attracted big investors primarily to the UAE, and more recently to Qatar and Kuwait. With all the luxury towers, the neighborhoods of seaside villas, the office buildings designed by the world's leading architects - local economists now think that the real-estate market has reached the saturation point and that a shift to different fields, notably industry, is desirable.

According to a report issued this week by the Gulf Organization for Industrial Consulting in Dubai, Gulf oil companies and governments indeed intend to divert a larger portion of their profits from petroleum to industry. Already now there are more than 12,000 industrial plants in the Gulf states, which employ about a million people. The plan is to expand the industrial sector by dozens of percent. Industrial growth demands knowhow and professional training along with long-term financing, which does not promise the quick profits that big investors became accustomed to in real estate.

The economic lesson from the fall of the stock markets will compel these countries to undergo a cultural transformation that will posit work in industry as valuable, and educate toward the nationalization of labor and its removal from the hands of foreign workers.

Every so often the Gulf governments launch campaigns to get rid of the latter by toughening the terms for importing them from Asian countries. Recently, the UAE prohibited the rental of villas to bachelors or foreign workers. These campaigns have not produced concrete results, because in the end someone has to build the huge towers and the villas - which is the kind of work the citizens of the Gulf states don't like to do.

In fact, Gulf residents are probably not very upset about these macro-economic analyses. Because when the state ensures the banks against collapse, and when the oil continues to flow, other areas are open to investment. For example, while the political squabbling over the public meals during Ramadan continues in Egypt, the Gulf states imported 119 million tons of food products, and that was only during the first half of Ramadan. Where did all that food go? Much was donated to other countries, a little went for domestic consumption. The good times in the Gulf are continuing, and worried eyes are turned to Washington, which may launch a war against Iran and put an end to the good life.

Related articles:
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# HExperts: Israel heading for economic crisis in 2009

Thursday, September 25, 2008

The Big Bank Job The Insanity of the $700 Billion Giveaway By MICHAEL HUDSON
The Big Bank Job
The Insanity of the $700 Billion Giveaway


The banksters’ plan now is for icing on the cake – to take Mr. Paulson’s $700 billion and run. It’s not a “bailout of the financial system.” It’s as giveaway – to insiders, to sell out all their bad bets. Companies across the board will get rid of their bad mortgages, and also their bad car loans, furniture time payments, credit-card loans, student loans – all the debts that any competent actuary could have told them never could have been paid in the first place.

This is not what Treasury Secretary Paulson is acknowledging, and shame on him for it. Last Friday, Sept., he was joined by Fed Chairman Ben Bernanke singing in unison an advertising jingle for America’s new kleptocracy that rings so false that Congress and the American public must hear the off-notes. London’s Financial Times, as well as a host of Europeans realize it. That is what has been driving the dollar’s exchange rate this week. It seems easier for foreigners to recognize the threat to turn American democracy into a rapacious kleptocracy.

This change always is sudden, arranged under emergency conditions. Those with a 12-year memory will see George Bush as playing the role of Boris Yeltsin in Russia in 1996, paying off his campaign contributors by giving them all the economic surplus that the government could expropriate in the notorious “loans for shares” plan applauded and supported by Clinton Treasury Secretary (and current Obama advisor) Robert Rubin. (The moral: do we have a Putin in our near future to lock in the anti-democratic coup?)

How ironic all this is! Back in the 1970s there was theorizing that the Russian and American economies were converging. The idea was that both were moving toward more centralized state control, state financing, state subsidy, and a military-industrial complex. Nobody expected the convergence to occur Yeltsin-style in government giveaways to insiders to create a new group of financial billionaires – the “seven bankers” under Yeltsin in 1996, and Mr. Paulson’s Crony Capitalist gang today.

Let’s look at the euphemisms as an exercise in doublethink. Mr. Paulson defended his “troubled asset relief program” (TARP) by claiming that “illiquid mortgage assets … have lost value … choking off the flow of credit that is so vitally important to our economy.” The credit that is “so vitally important” has taken the form of bad loans. Contra Mr. Paulson’s pretense, the problem is not that they are “illiquid.” If that were the problem, it would be merely temporary. The Federal Reserve banks are designed to provide liquidity – on good collateral, of course.

As Financial Times columnist Martin Wolf noted on Wednesday, Sept. 24, the problem is that the face value of mortgage loans and a raft of other bad loans far exceeds current market prices or prices that are likely to be realized this year, next year or the year after that. They are packaged into what the financial press rightly calls “toxic.” The bailout is not efficient, he writes, “because it can only deal with insolvency by buying bad assets at far above their true value, thereby guaranteeing big losses for taxpayers and providing an open-ended bail-out to the most irresponsible investors.” “The simplest way to recapitalize institutions,” He concludes, is “by forcing them to raise equity and halt dividends. If that did not work, there could be forced conversions of debt into equity. The attraction of debt-equity swaps is that they would create losses for creditors, which are essential for the long-run health of any financial system.” This is the key: if debts cannot be paid, then creditors must take losses.

These bad loans are toxic because they can only be sold at a loss – if at all, because foreign investors no longer trust the U.S. investment bankers or money managers to be honest. That is the problem that Congress is not willing to come out and face. Many of these loans are outright fraudulent. And they are being sold by crooks. Crooks who work for banks. Crooks who use accounting fraud – such as the fraud that led to the firing of Maurice Greenberg at A.I.G. and his counterparts at Fannie Mae, Freddie Mac and other companies engaging in Enron-type accounting.

This is not what the magic of compound interest promised. But it is where it had to end up, with mathematical inevitability. It was an advertising come-on for Wall Street money managers and promoters of “pension-fund capitalism” (or “peoples’ capitalism” as it was called in Chile by the Chicago Boys working for General Pinochet’s murderous regime, and Margaret Thatcher’s Conservatives in England). The promise is that if people consign these funds to individuals who make much, much more than they do but have the survival-of-the-fittest advantage of being much, much more greedy, they will receive a perpetual doubling of interest. That is how retirements for American workers are still supposed to be paid – by magic, not by direct investment. Prospective retirees are supposed to ensure a good life by investing savings in loans to corporate raiders who fire, lay off, downsize and outsource these very workers. The trick is to persuade employees to hand retirement funding over to financial managers whose idea was to make money off the economy by extracting interest and dividends off workers, homeowners and companies being bought on debt leverage. In the final analysis it is debt leverage by itself that is supposed to fuel capital gains.

This has led to madness. The maddest solution of all would be for the government to give the extractive financial sector even more money – funds that no private lenders have been willing to provide, not even vulture funds. No private firm has been able to discover what Mr. Paulson and the unfortunate Mr. Bernanke are sanctimoniously promising: that a viable deal, even an almost money-making one, can be made by buying junk now and waiting for “the economy” to make it good.

Just what is “the economy” that is supposed to perform this remarkable feat, if not its mortgage debtors and corporate debtors? The government is to do what law enforcement officials have moved to prevent Countrywide Financial and other predatory lenders from doing: squeezing exploding Adjustable Rate Mortgages and “negative equity” mortgages out of debtors, on terms that often were bait-and-switch to begin with. Private companies could be challenged and their array of penalty fees thrown out of court. But perhaps Congress can craft a law imposing these harsh terms on voters. It is not as if we live in a system where people vote their self-interest.

Promises that “taxpayers” will be able to recover a large part of this money are a fiction. If there were a hope of recovering this money, then investors abroad – foreign buyout funds, foreign banks, foreign sovereign wealth funds – would have been willing to buy Bear Stearns, Lehman Brothers, A.I.G. and other companies at some price. But they wouldn’t touch this at any price.

Why then should the U.S. Treasury pay three times as much as the Iraq War for money that will end up being lost after paying off the gamblers from their own bad bets. These are the bankers who already have placed all the risk onto their clients and, by lobbying to rewrite the bankruptcy laws, onto debtors. As matters now stand, the $700 billion is to be used to finance this year’s annual bonuses, this year’s million-dollar salaries and sales commission, and to contribute yet more to the retirement funds for the golden parachutes that financial managers have siphoned off to provide a safety net for themselves. So we are back to the basic motto these days: “You only have to make a fortune once in a lifetime.” Now is the time to make these fortunes as big as they’re going to get. Because it’s all down hill from here.
Why the banks won’t lend

Here’s why the government giveaway logic is fallacious: It’s a giveaway, not a bailout. A bailout is designed to keep the boat afloat. But the existing Wall Street boat crafted by the investment bankers seeking to unload their junk must sink. The question as it sinks is simply who will be able to grab the lifeboats, and who drowns.

There is a reason why the banks won’t lend: Housing and commercial real estate already are so heavily mortgaged that there is no rental value available (over and above operating expenses, current taxes and debt service) to pledge to the banks. It still costs more to buy a house than to rent it. No increase in the amount of credit, short of hyper-inflation can cure this. No lowering of interest rate, will lead banks to risk making a bad new loan – that is, a loan that probably will go bad and end up with the bank taking a loss after the borrower walks away or defaults.

Does Congress know what it is being told to do? Suppose that “taxpayers” are to squeeze money out of the “toxic” junk mortgages they buy from the investors that have bought these bad loans. The only way to do so would be for real estate prices to be raised to even higher levels. This means an even higher proportion of take-home pay by prospective homeowners.

Mr. Paulson realizes this. That’s why he’s directed Fannie Mae and Freddie Mac to inflate real estate prices all the more. At least, by the existing mortgage-holders to get paid off by existing debtors selling to the proverbial “greater fool.” The hope in Mr. Paulson’s plan is that there are enough “greater fools” with enough money to borrow from yet more foolish new mortgage lenders. Only Fannie Mae, Freddie Mac and the Federal Housing Agency are willing to make such foolish loans, and that is only because they are being directed to act in a foolish way by Mr. Paulson.

Here’s the problem with following Mr. Paulson’s orders and lending yet more: Every major real estate advisor on record has forecast a further drop of between 20 to 30 percent in property prices over the coming twelve months. This is now the standard forecast. It means that over and above the five million arrears and foreclosures that Mr. Paulson acknowledged already are on the books, yet more families are to give up the fight by this time next year. Is the $700 billion giveaway fund to try and recoup by evicting them too from their houses – to pay the “taxpayer” enough to bail out Countrywide, Washington Mutual and other predatory lenders for loans that state Attorneys General have accused of being fraudulent?

For the government to even begin to recover some of the value of the $700 billion in junk mortgages it has bought would force new homebuyers to pay even more of their income to the banks. And if they do that, they will have less income to spend on goods and services. The domestic market will shrink, and tax revenues will fall at the state, local and federal levels. The debt overhead will deflate the economy, causing shrinkage all down the line.

So here’s where the cognitive dissonance comes in: It is necessary, even inevitable, for the volume of debt to come down – not up – to restore equilibrium. The economy was well on its way to preparing the ground for this last week. As Alan Meltzer of the American Enterprise Institute (of all places!) explained on McNeill-Lehrer, Merrill Lynch was able to be sold at 22 cents on the dollar; and the economy survived Lehman Brothers and Bear Stearns being wiped out.

Such debt writes-offs are a precondition for writing down America’s mortgage debts to levels that are affordable. But Mr. Paulson’s plan is to fight against this tide. He wants the Wall Street to keep on raking in money at the expense of the economy at large. These are the big banks who lobbied Congress to appoint de-regulators, the banks whose officers paid themselves enormous bonuses and gave themselves enormous golden parachutes. They were the leaders in the great disinformation campaign about the magic of compound interest. And now they are to get their payoff.

The pretense is that not to pay them off would threaten “the economy.” The reality is that it only would stop their predatory behavior. Worse than that, for the economy at large a government take-over of these bad loans would prevent the debt write-down that the economy needs!

It gets worse. If Congress should be so destructive as to buy out $700 billion of bad loans (for starters), the sellers will do just what Russia’s kleptocrats did. They will take their money and move it abroad to a “hard” currency country. This will help collapse the dollar. Up will go gasoline costs and prices for other imports. America will be turned into a Russian-style post-Soviet economy, having endowed a new domestic kleptocracy of insiders, who use some of their gains to finance the campaigns of American Yeltsins such as McCain.

So let us admit that the economy has been taking a wrong track for a number of decades now. As John Kay noted : “When the dust settles, many banks and hedge funds will have lost more money on their trading activities in the past year or so than they had made in their entire history … The pursuit of shareholder value damaged both shareholder value and the business.”

I worry that Wednesday’s jump in the Dow Jones average signals that the big betters have decided that there is a good chance of the vast giveaway going through. The Republican protests seem to me to aim not so much at really stopping the measure, but on going on record that they opposed it – before they voted for it. When the public wakes up to the great giveaway, the Republicans can say, “It was a Democratic Congress that did it, not us. Read our anguished protests.” Everyone is trying to cover themselves. With good reason.

Don’t let them speak on behalf of voters and then act against the economy, claiming that they are trying to save it. A giveaway of unprecedented magnitude would cripple it for as far as the eye can see.

We have reached the point where it may finally be able to break through the membrane of cognitive dissonance that has been blinded people. The very first course in economics –starting in high school, followed up in college and then refined in graduate school – should explain to students why it is false to believe the advertisement that Wall Street has been trying to sell for the past half century: The deceptive promise that an economy can get rich off the mathematical “magic of compound interest.”

The unreality of this promise should be immediately apparent by looking at the math of exponential growth. Already at the time of the American Revolution, financial economists were popularizing the contrast that Malthus soon would imitate in his population theory: Debts grow at “geometric” rates, while the economy itself grows only “arithmetically,” in a slower and more linear way.

All that is needed is to put this idea together with the basic balance-sheet definition: One person’s savings are lent out to become other peoples’ debts. So the “magic of compound” interest to savers means an equal “magic of exploding debt” to somewhere else in the economy. And inasmuch as creditors insist on protecting themselves from inevitable default by possessing collateral, it is natural that most of the economy’s debts are owed on its largest asset: land and buildings. This explains why mortgage debts have become repayable and “gone toxic.”

The “magic of compound interest” refers to the tendency of savings to double and redouble exponentially, with a matching rise in what debtors owe on the other side of the balance sheet. These mathematics have been operated throughout history, ever since the charging of interest was invented in Sumer some time around 2750 BC. In every known society, the effect has been to concentrate wealth in the hands of people with money. In recent years, one’s own money is not even necessary to do this. The power to indebt others to oneself can be achieved by free credit creation. However, the resulting mushrooming exponential growth in indebtedness must collapse at the point where its interest and other carrying charges (now augmented by exorbitant late fees, bounced-check fees, credit-card costs and other penalties) absorb the entire economic surplus.

This is the point that has been reached – and passed – today. It has been developing for many decades. But there is a great reluctance to accept the fact that debts cannot be paid. “The poor are honest,” as one banker explained to me, and believe that “a debt is a debt” and must be paid. (This is not what Donald Trump, Bear Stearns or A.I.G. believe, but they are at the top of the economic pyramid, not its base.)

Numerous publishers turning down my proposed books on the subject over the years. As they have explained to me: “Nobody wants to read how the bubble will break – at least, not until after it bursts. Can’t you write a book on how you can make a million dollars off the coming economic collapse? That would be a winner, Prof. Hudson. But to tell people that they can’t put aside savings and pay for their retirement ‘in their sleep’ is like telling them that they will have bad sex after the age of 50. It’s a no-seller. Come back when you have good news.”

These are the words I’ve been hearing since the mid-1980s. I’ve spent much of my time looking through history to read up on how the failure to wipe out the debt overhead led to the collapse of Rome’s imperial republic, and to the Ottoman Empire as what was known as “the spoiling of Egypt” and “the ruin of Persia” toward the end of the 19th century. I’ve also published a series of four colloquia by assyriologists and archaeologists describing how earlier, from about 2500 to perhaps 300 BC, Babylonian and other Near Eastern rulers kept their citizens free and preserved their landholdings by annulling personal and agrarian debts when they took the throne – a true “tax holiday” – or when economic or military conditions warranted a general Clean Slate. (The series was funded and published by Harvard’s Peabody Museum and is now available from CDL Press.)

These Clean Slates were adopted literally, almost word for word, in the Biblical Jubilee Year of Leviticus 25. Even the same Hebrew word, deror, was used for the Babylonian andurarum proclaimed by rulers of Hammurapi’s dynasty from 2000 to 1600 BC. So it is remarkable to me that men claiming to be Christian leaders today should ignore the fact that in the very first sermon that Jesus gave, in Nazareth (Luke 4:14-30), he unrolled the scroll of Isaiah 61 and promised that he had come “to proclaim the Year of the Lord,” the Jubilee Year. That was the literal “good news” that the Bible preached, as the Dead Sea scrolls have abundantly illustrated.

Yet it is a sign of the power of creditor ideology that even the essence of this founding document of Western civilization has been ignored by a distorted view of what early Christianity, Judaism and other religions were all about. Hardly surprising. Luke’s passage on this founding sermon of Jesus concludes by pointing out that “all the people in the synagogue were furious when they heard this. They got up, drove him out of the town, and took him to the brow of the hill on which the town was built, in order to throw him down the cliff.”

Down the cliff! This is where the revolting right-wing Roman senators drove the followers of the Gracchi brothers on the Senate hill, in an exercise of political violence that prevented Rome from granting debt relief toward the end of the second century BC. Livy, Diodorus, Plutarch and other historians of the epoch attributed the prospective fall of the Roman Empire to its harsh creditor-oriented debt laws. But today, historians publish books speculating that perhaps the problem was lead piping or lead goblets for their wine, or disease, or imperial overreaching, or superstition – anything but the cause to which the Roman historians themselves pointed.

We are still living with the consequences of Rome’s oligarchic revolution. That is what makes this week’s Congressional hearings on the $700 billion giveaway so important. First with military force and then via debt bondage and serfdom, Rome bequeathed to Europe a property-based, creditor-oriented body of law. But since the 13th century, country after country has shifted the balance back to favor debtors – to save them from literal debt bondage, from debtor’s prisons, from permanent indebtedness, to give them Clean Slates on an individual level.

Handel arranged the first performance of The Messiah as a benefit to raise money to bail debtors out of Irish debtors’ prisons, and every year the oratorio was repeated for that charitable purpose. Martin Luther warned about the mathematics of compound interest as the monster Cacus, devouring all. Yet Luther’s denunciations of usury are excluded from his collected works in English, and are available in this language only in Vol. III of Marx’s Capital and Book III of his Theories of Surplus Value. The discussion of interest and banking has become so marginalized that even when I taught money and banking at the New School in New York City in the late 1960s and early ‘70s, it was not part of the core curriculum but treated as a special topic. (Fortunately, that is not the case where I am now happily situated at the University of Missouri in Kansas City. But it took a long time to get here.)

Behind this shift in legislative choice was the perception that no economy can keep up with the burden of debts growing at exponential rates faster than the economy itself is growing. No economy can grow at steady exponential rates; only debts can multiply in this way. That is why Mr. Paulson’s $700 billion giveaway to his Wall Street colleagues cannot work.

What it can do is provide a one-time transfer of wealth to insiders who already have been playing the debt-credit system and siphoning off its predatory financial proceeds to themselves. The Wall Street bankers, brokers and fund managers to whom I’ve been speaking for many decades all know this. That is why they pay themselves such large annual bonuses and large salaries each year. The idea is to take as much as you can. As the saying goes: “You only have to make a fortune once in a lifetime.” They have been salting away their fortunes year after year, mainly in hard assets: real estate (free of mortgages), fine furniture, boats and trophy art. One last $700 billion heist and they can make their getaway.

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website,

Martin Wolf, “Paulson’s plan was not a true solution to the crisis,” Financial Times, September 24, 2008.