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Tuesday, March 31, 2009

Government to Sell Nuclear Assets

Government to Sell Nuclear Assets
BBC News
The government has announced that it is putting the commercial arm of the UK's Atomic Energy Agency, UKAEA Limited, up for sale.

http://news.bbc.co.uk/1/hi/business/7972293.stm

Towards Zero: Obama Grasps the Nuclear Nettle

Towards Zero: Obama Grasps the Nuclear Nettle
Philip Stephens, Financial Times
Fixing the economy, withdrawing from Iraq, overtures to Iran, a plan for Afghanistan, a thaw with Moscow and a bargain with Beijing . . . I could go on. The issues on Barack Obama's agenda rush by like station names seen from a fast-moving train. This is a US president who wants to do more than walk and chew gum.

http://www.ft.com/cms/s/0/6303026e-1a70-11de-9f91-0000779fd2ac.html?nclick_check=1

No U.S. Plans to Stop Korea on ICBM Test

No U.S. Plans to Stop Korea on ICBM Test
Thom Shanker, The New York Times The United States has no plans for military action to pre-empt the launching of a long-range missile by North Korea and would act only if the missile or its parts appeared to be headed toward American territory, Defense Secretary Robert M. Gates said Sunday.
http://www.nytimes.com/2009/03/30/washington/30military.html?_r=1

* Expert: NKorea Has Several Nuclear Warheads
http://www.google.com/hostednews/ap/article/ALeqM5g5bCbd3G8qFoX7H4TvQbUWvBQ08QD978T9180

Obama, Medvedev to Sign Declaration on Treaty

Obama, Medvedev to Sign Declaration on Treaty
Simon Shuster and Oleg Shchedrov, Reuters
MedvedevThe United States and Russia will commit to new talks on reducing their nuclear arsenals when Barack Obama meets President Dmitry Medvedev for the first time next month, the Kremlin said on Saturday.

The two leaders will also sign a document on U.S.-Russian relations in general at a meeting in London, and seek to coordinate policies on Iran, North Korea and Afghanistan, Sergei Prikhodko, an aide to President Dmitry Medvedev, told reporters.

http://www.reuters.com/article/newsOne/idUSTRE52R0PB20090328

Saturday, March 28, 2009

Obama's Latest No Banker Left Behind Scheme by Stephen Lendman

Obama's Latest No Banker Left Behind Scheme

by Stephen Lendman


Global Research, March 27, 2009


On Wall Street, that is. So hyped by advance fanfare, Timothy Geithner unveiled his Public-Private Investment Program (PPIP) on March 23, the latest in a growing alphabet soup of handouts topping $12.5 trillion and counting - so much in so many forms, in "gov-speak" language, with so many changing and moving parts, it's hard for experts to keep up let alone the public, except to sense something is very wrong. They're being fleeced by a finance Ponzi scheme, sheer flimflam, and here's how from what we know:

-- $400 billion in taking over Fannie and Freddie;

-- $42 billion for the auto giants; billions more coming for their suppliers;

-- approaching $200 billion for AIG with more coming on request;

-- $350 billion to Citigroup in handouts and loan guarantees;

-- tens of billions to other banks, including $87 billion to JP Morgan Chase for bad Lehman Brothers trades;

-- $700 billion for TARP I; half the money released under TARP II;

-- over $200 billion and counting for the Term Asset-Backed Securities Loan Facility (TALF) to extend government-guaranteed loans for investors to buy "certain AAA-rated asset-backed securities (as a) component" of the Consumer and Business Lending Initiative (CBLI), established under the Emergency Economic Stabilization Act (EESA) of 2008;

-- the $787 billion stimulus under the American Recovery and Relief Act of 2009 (ARRA);

-- around $300 billion under the Homeowner Affordability and Stability Plan (HASP) - the so-called mortgage bailout plan;

-- $50 billion backing for short-term corporate IOUs held by money market funds - from the Exchange Stabilization Fund (ESF), a vehicle established by a provision in the 1934 Gold Reserve Act for foreign exchange intervention to stabilize the value of the dollar;

-- $500 billion for various credit market rescues;

-- $620 billion for industrial nations' currency swaps;

-- $120 billion for emerging economies' currency swaps;

-- $1.25 trillion for Fannie and Freddie mortgage backed securities;

-- $200 billion for Fannie, Freddie, and Federal Home Loan Bank bonds;

-- way more than the announced $300 billion for longer-term Treasuries (mostly with 7 - 10 year maturities); the Fed's been buying billions of them since last year;

-- Fed-expanded overnight lending to $2.4 trillion - free money at 0% interest;

-- a reported $750 billion for banks in the FY 2010 budget - yet to be voted on and appropriated;

-- a proposed $470 billion increase for the FDIC to borrow from the Treasury;

-- perhaps hundreds of billions more in unannounced or hidden handouts in amounts and to whom the Fed and Treasury won't say; on March 14, AIG named its big counterparties for the first time with firms like Goldman Sachs, Societe Generale, Deutsche Bank, and Barclays showing up prominently; and now

-- PPIP - the latest gift to Wall Street courtesy of taxpayers getting none of the gain and all the pain.

A Treasury Fact Sheet explains it on its web site. In "gov-speak," it cites the "challenge of legacy assets" comprised of (distressed commercial and household) "loans"/mortgages and (toxic) "securities" (mortgage-backed and others) with a new Public-Private Investment Program (PPIP) in conjunction with the FDIC and Fed to finance and guarantee it. The idea is to "repair balance sheets," encourage banks to lend, and "help drive us toward recovery." It expands TALF "to bring private investors back into the market" by offering deals too sweet to pass up:

-- a public-private (open-ended) trillion dollar partnership with Washington contributing up to 95-97% of the cash and investors the other 3-5%;

-- the Fed and FDIC (through low-cost loans and guarantees) acting as middlemen to transfer "legacy asset" losses to the public while buyers get government financing and guarantees (for no-risk investments) to purchase them on the cheap for themselves and well above fair value for the banks;

-- PPIP particulars are for $100 billion in mostly TARP and some private capital with Fed and FDIC $500 billion in leverage financing to expand it to $1 trillion or more in purchasing power.

In a March 23 Wall Street Journal op-ed, Geithner called it "My Plan for Bad Bank Assets (to) increase the flow of credit and expand liquidity (and do it by) shar(ing) risk with the private sector (to) rid banks of legacy assets." These "policies will work," says Geithner, even though everything tried to date failed, and the only achievement is what they planned - the greatest ever wealth transfer in the shortest span of time, now increased by another trillion or more through PPIP and whatever else the masters of the universe have in mind.

"Toxic-Asset Plan Lifts Stocks," headlined the Wall Street Journal, after surging around 7% on March 23 with banks and other financials in the lead, buoyed by the prospect of more free money, hundreds of billions for the taking, and plenty more where that came from.

If It Works, A Win-Win for the Money Trust

Here's how economist Jeffrey Sachs explains it:

Geithner's plan will have the Fed and FDIC "subsidize investors to buy toxic assets from the banks at inflated prices." If done, it will be another in a series of massive wealth transfers in the hundreds of billions of dollars "to bank shareholders from taxpayers." If investors incur losses, the Fed and FDIC will absorb them, meaning heads or tails they win.

"The investment funds will have the following balance sheet. For every $1 of toxic assets (bought), the FDIC will lend up to 85.7 cents, and the Treasury and private investors (only) 7.15 cents in equity to cover the remaining balance. FDIC loans will be non-recourse, meaning that if the toxic assets (bought) fall in value below the amount of FDIC loans, the investment funds will default on the loans and the FDIC will end up holding the toxic assets...."

In other words, "The FDIC is giving a 'heads you win, tails the taxpayer loses' offer to private investors.' " Economist Paul Krugman agrees calling it a one-way bet, "a disguised way to subsidize purchases of bad assets."

Economist James Galbraith calls it another massive "ineffective" giveaway to banks with taxpayers getting hosed from a repackaged trash removal scheme that's been around since last fall when Geithner, as New York Fed president, planned it with Wall Street CEOs. They see it as a temporary liquidity problem (which it's not) so the idea is to clean up the system and get banks lending again. But here's the rub:

"If Geithner's plan to fix the banks would also fix the economy," maybe the idea makes sense. "But no smart economist we know thinks that it will." It's a giant swindle, but that aside, Geithner has "five fundamental misconceptions:"

(1) The trouble with the economy is that banks aren't lending, he says.

In fact, it's because businesses and mainly households are way over-extended and "are now collapsing under the weight of it. As consumers retrench (of necessity), companies that sell to them (must also), thus exacerbating the problem. The banks, meanwhile, are lending," just not as much as they used to.

"Also, the shadow banking system (securitization markets), which actually provided more funding to the economy than the banks, has collapsed."

(2) The banks aren't lending because their balance sheets are loaded with 'bad assets.'

In fact, "banks aren't lending (enough) because they have decided to stop making loans to people and companies who can't pay them back" or don't want more loans in the first place. They're also scared that new debt will cause more write-offs, greater losses, and the threat they'll be wiped out entirely. So their strategy is hunker down and wait for a better time to do business.

(3) Bad assets are "bad" because the market doesn't understand how much they're really worth.

In fact, they're bad because "they are worth (lots) less than banks say they are." A major factor is the near-30% drop in house prices wiping out over $5 trillion in valuations. Lenders want households to take losses because if they do it themselves they'll be wiped out. So PPIP arranges it for them.

(4) Once "bad assets" are off balance sheets, banks will start lending again.

In fact, banks will stay cautious until the housing market and economy improve. So far, that's nowhere in sight.

(5) Once banks start lending, the economy will recover.

In fact, house prices are falling, savings have been wiped out, huge job losses are continuing, and "consumers will have debt coming out of their ears" that will take years to work off.

Geithner's plan just shifts debt from lenders to taxpayers "where it will sit until the government finally admits that a major portion will never be paid back." Galbraith's conclusion: Geithner's plan is "extremely dangerous" besides being a scam to cheat the public. Why does Wall Street love it? Because it wrote it in the first place, so the whole scheme is arranged for its benefit - if it works.

It's a big "if" as investors want the lowest possible prices and banks the highest. The question is will they compromise and for what - the better quality junk investors want or the most toxic stuff banks want to offload for whatever they can get.

Even a Wall Street Journal editorial raised doubts about "Geithner's Asset Play. At least it's an attempt to clean up bank balance sheets," it said, but hold the cheers. "The best news (is that Geithner has) a strategy. The uncertainty was almost as toxic as those securities. Now all (he) has to do is find private investors willing to 'partner' with the feds to bid for those rotten assets, coax the banks to sell them at a loss, and hope the economy doesn't keep falling...."

"Other than that, general, how (did) the siege of Moscow" go?

In a front of the paper article, a trio of Journal writers said "visions of vilification of Wall Street executives on Capitol Hill remain fresh in the minds of potential (bad asset) buyers....numerous (ones) express(ing) concern that they, too, might be hauled before Congress for a grilling, or be subjected to new taxes if they profit from partnerships with the federal government."

They quoted Washington lobbyist, Lendall Porterfield, whose clients include hedge funds and banks, saying: "There are still some very serious reservations about doing business with the government, because you don't know what the rules may be tomorrow, next week or next month."

Economist Nouriel Roubini wants two firmly in place:

-- force banks to sell toxic assets at true value and take the losses; and

-- shut down the insolvent ones.

For his part, Financial Times writer Martin Wolf expressed deep concerns about PPIP in his March 25 column headlined: "Successful bank rescue still far away." He's "ever more worried" and says why:

-- he expected a "popular new president to be decisive;"

-- he fears a "Congress indulging in a populist frenzy" and an administration "hoping for the best;"

-- instead of letting businesses succeed or fail on their own, "bailouts have poured staggering sums into the failed institutions that brought the economy down;"

-- PPIP is a "vulture (investor) relief scheme," cash for trash, with Washington putting up most of the money, bearing nearly all the risk, while private parties get all the gain - if the plan works;

-- PPIP masks a "more fundamental problem" of "chronic under-capitalization of US finance" and it may make achieving it harder - given growing public anger, a "timid" president, Congress on the "warpath," and being less likely to put up the kind of money needed to do it;

-- enriching vulture investors may "convince ordinary Americans that their government is a racket run for the benefit of Wall Street;" and

-- when all is said and done, PPIP may not work.

As a result, "Nobody can be confident that the US yet has a workable solution to its banking disaster....If this is not frightening, I do not know what is."

Economist Jack Rasmus calls PPIP a "win they win vs. lose they win proposition -- i.e. free money with which to leverage to make even more money" with government taking nearly all the risk. It's "an offer that no capitalist speculator could ever refuse" with nothing for the public except the bill.

It's why Dean Baker, co-director of the Center for Economic and Policy Research, called it "another Rube Goldberg contraption intended to funnel taxpayer dollars to bankrupt banks...." However, the process plays out, "much of the toxic waste (will) stay on the banks' books (since it's) likely that the gap between the asking price and the offer (won't) be closed for a large portion of these assets, even with the government subsidy."

So what's next? "The Obama administration will be forced to go to Congress with yet another bailout proposal. (It's) hard to understand this plan as anything other than a last ditch effort to save Wall Street banks. (Obama) seems prepared to risk his presidency on their behalf" and odds are he'll lose.

Whatever happens going forward, the uncertainties and dangers are enormous:

-- Eurointelligence refers to "Geithner's trillion dollar gamble" despite the positive market reaction;

-- will taxpayers stand for it, how long, and at what cost;

-- will enough buyers settle for the best deals they can get, and/or will banks compromise enough to matter; put another way - will government "grease" attract enough buyers willing to invest at valuations banks will accept; so far, they've stubbornly refused to take losses, preferring instead to keep junk on their books at fictitious values hoping eventually they'll be real or close enough; another disincentive is talk that the Financial Accounting Standards Board (FASB) will ease mark-to-market accounting rules to legitimize fake values;

-- whatever they do, can banks offload enough to matter or are they so over-indebted that nothing can work;

-- how much in the way of deficits, money printing and dollar debasing can the nation stand, and how long will sovereign and private debt buyers put up with it;

-- going forward, how many banks are too weak to survive no matter what's done to save them - that is, ones big enough to matter (like Citigroup), not others targeted to be bought up or closed down - and globally that's what's behind this scheme in the first place;

-- what about the CEOs that caused the global crisis and left their banks insolvent; issues of fraud and bailouts aside, why weren't they fired long ago; why are they still in charge drawing big salaries and bonuses; why wasn't the main demand to fire these guys and replace them with responsible managers; and

-- skeptics call Geithner's plan much like Paulson's, except for some differences in details.

On March 24, Dan Roberts in the London Guardian headlined: "US follows UK - on the wrong road." Geithner's plan "aims to achieve roughly the same as the British government's (bad loans) insurance for the Royal Bank of Scotland and Lloyds. So how do the two schemes compare?"

Details aside, they "work on the same principle: that banks will (behave) normally again and (benefit) the economy (once) they're protected from past mistakes. But these responses underestimate the scale of the crisis." Geithner's plan covers not just toxic assets but many ordinary bank loans as well.

"Similarly, the assets put forward by Lloyds in the UK insurance scheme include every buy-to-let mortgage issued by HBOS, not just the ones already in default. Judge the banks on their actions (not just their words), and you would conclude this crisis has some way to go. Yet both governments assume banks (suffer) from a crisis of confidence (simply cured) by removing (toxic debt) uncertainty. What neither seems willing to acknowledge is the likelihood that much of their lending has gone for good; that this is not a liquidity crisis, but a solvency (one)." Britain's plan didn't work and neither will Washington's.

No comment from the Journal except to say: "Whatever the Geithner plan's pitfalls, we sincerely hope it works. The feds so thoroughly botched the TARP and (other) bailouts that Treasury has few options left."

Indeed so. No accounting magic can erase losses, inspire investors, and turn a sick economy around. Especially since all Washington schemes make it sicker, and now Geithner's thrown more fuel on the fire. Problem one is reducing the huge debt overhang and helping beleaguered households. His solutions:

-- help Wall Street, not people and

-- pile on more debt but hope bank "operating" results improve enough to create an illusion of recovery.

It won't work, and at the same time, the latest Fed Flow of Funds data show trillions in vanished household wealth - $12.9 trillion from real estate, savings, investments, and other personal losses. So while insolvent banks are partying, the crisis is deepening. It's far from being resolved, at best has a long way to run, so Bank of America's Richard Bernstein advised clients to sell bank stocks after their rally because PPIP won't stop their profits from falling.

Worse still, according to financial expert and investor safety advocate Martin Weiss, Washington greatly underestimates the "magnitude of the debt crisis." He cites the following:

-- the current FDIC "Problem List" includes 252 banks with $159 billion in assets;

-- from his analysis, he lists 1568 troubled banks and thrifts by name with $2.32 trillion "at risk of failure" - because of "weak capital, asset quality, earnings, and other factors;"

Last year when TARP was announced, Treasury officials thought it would stabilize the economy and improve the health of recipients like Citigroup. However, it quickly learned that Citi and other major banks needed emergency capital to keep from collapsing - for their credit default swap (CDS) problems alone.

AIG's $2 trillion CDS portfolio triggered a government takeover, but it's not alone. Citi has $2.9 trillion, JP Morgan Chase $9.2 trillion, and the Bank of International Settlements reports a global $57 trillion burden, much of it toxic and plenty to sink holders of enough of it.

The problem in America is so great that "the money available to the government is too small for a crisis of these dimensions." Forced mergers, buyouts and handouts have done "little more than shift toxic assets like DDT up the food chain." Further, Washington's "promises to buy up the toxic paper have done little more than encourage banks to hold on, piling up even bigger losses."

Another CDS is also worrisome, one no one talks about but should, on US sovereign debt - Treasury bills, notes and bonds. "A small but growing number of investors are not only thinking the unthinkable, they're actually spending money on it, bidding up the premiums on Treasury bond (CDSs) to 14 times their 2007 level" because they're worried about the Treasury's credibility and borrowing power.

Their message is clear and important - "there's no free lunch; the government (can't) bail out every failing giant with no consequences; and contrary to popular belief, even Uncle Sam must face his day of reckoning with creditors."

Also, "the public knows intuitively that (too much debt) got us into trouble. Yet the solution being offered is to encourage banks to lend more and people to (save less and) borrow (and spend) more." The only way forward is to change course because there's "no other choice....We have to bite the bullet, pay the penalty for our past mistakes," and make hard sacrifices for a sound recovery.

That includes shuttering insolvent banks and other companies (even big ones), not bail them out. Even Kansas City Fed president Thomas Hoenig recommends that:

"public authorities....declare any financial institution insolvent whenever its capital level falls too low to support its ongoing operations and claims against it, or whenever the market loses confidence in the firm and refuses to provide funding and capital."

The wrong choices are trillions more in handouts, reckless money creation, dollar debasing, and an eventual inflation destroying the purchasing power for millions. So far, that's where Congress and Obama's money managers are heading us, and already the bill for their actions is past due.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday - Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

http://www.globalresearch.ca/index.php?context=va&aid=12852

Stephen Lendman is a frequent contributor to Global Research. Global Research Articles by Stephen Lendman
http://globalresearch.ca/index.php?context=va&aid=12923

Financial Crime in America Why Hasn't Obama Targeted The Ongoing White Collar Crime Wave? by Danny Schechter

Financial Crime in America Why Hasn't Obama Targeted The Ongoing White Collar Crime Wave?
by Danny Schechter

Another day. Another ponzi scheme

This time it's the Millenium Bank in the Eastern Caribbean accused of a mere $65 million dollar rip off. (Ponzi king Bernard Maddoff allegedly took in $65 billion.) Regulators say there is a "ponzimonium" underway with scores of newly opened investigations. We are talking about pervasive institutional crime, not just individual theft.

The role of shady, largely unreported, "off shore" institutions is slowly emerging as a component of a larger criminal scheme. There is a report that "a class action lawsuit has been filed against several offshore entities and individuals on behalf of investors in four hedge funds who allegedly lost over $3 billion in the Bernard Madoff fraud."

On shore, in New York, Attorney General Andrew Cuomo has issued new subpoenas to AIG. Former Governor Eliot Spitzer is saying the problem there is not just with bonuses by billions from government bailouts going to "counterparties"---companies that did business with the infamous insurer which just changed its name.

Reports the Wall Street Journal: "CDS contracts were at the heart of AIG's meltdown," Cuomo said in a statement. "The question is whether the contracts are being wound down properly and efficiently or whether they have become a vehicle for funneling billions in taxpayers dollars to capitalize banks all over the world."

The Obama people must be worried about the capacity of white collar crooks to undercut their own programs because they are setting up their own investigation of those who took bailout monies.

Reports a Memphis newspaper: "Eil M. Barofsky, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), recently announced the creation of a broad, multi-agency task force designed to deter, detect and investigate instances of fraud in the soon-to-be-launched Term Asset-Backed Securities Loan Facility (TALF) program."

They know who they are dealing with. It's always been easier to rob banks with fountain pens and electronic transfers than guns and stickups.

In North Carolina, a judge sentenced Lance Paulson, the former CEO of National Century Financial Enterprises, to 30 years for security frauds. Said the Judge, "Poulsen was the architect of a fraud of such magnitude that it would have made financial experts shudder."

Judges may be shuddering but our media is still downplaying the extent of the crimes behind the collapse of our economy. This issue does not seem to have a high priority with the Obama Administration either. The President had denounced "reckless speculation" but is preoccupied with pumping more money into banks rather than tracking down the fraudsters that Franklin Roosevelt called "banksters."

Recall that this crisis started with the collapse of the housing bubble. The FBI has called mortgage fraud an "epidemic" and says "the thousands of financial fraud investigations now underway are putting a strain on the bureau's ability to fight other crimes. An explosion of mortgage fraud cases has stretched the FBI so thin it's having a hard time investigating other white collar crime."

They have 250 agents investigating these crimes as compared to more than l000 who handled the S&L crisis in the 1980s. Many of their corporate crime experts were reassigned to combating terrorism. The Tri-State Defender in Memphis reports:

"The Federal Bureau of Investigation said it received 46,717 suspicious activity reports related to mortgage fraud last year – compared with 45,617 in 2006 and 6,936 in 2003. By the end of fiscal year 2007, the Bureau was handling just over 1,200 mortgage fraud investigations – a 47 percent rise from 2006. That figure has reached 1600 for the current fiscal year.

FBI Deputy Director Pistole told a Senate Judiciary Committee last month that the agency is investigating 530 open corporate fraud investigations, including 38 directly related to the current financial crisis. Pistole said the fraud investigations were putting a strain on the staffs.

"The increasing mortgage, corporate fraud and financial institution failure case inventory is straining the FBI's limited white-collar crimes resources," he said."

FBI Director Mueller told the Senators the Justice Department and the bureau were working on "what we call fast track prosecutions in a number of areas, and….we're prioritizing our cases to hit the most egregious early and put those persons away."

The Financial Crimes Enforcement Network (FinCEN) released a new report that shows subjects reported for suspected mortgage loan fraud may also be involved in other financial crimes such as check fraud, money laundering, stock manipulation, structuring to avoid currency transaction reporting requirements and others. From depository institution Suspicious Activity Reports (SARs), FinCEN identified approximately 156,000 mortgage fraud subjects, and found that 2,360 were reported for suspicious activity in 3,680 of the other SAR types.

"This study analyzes the possible interrelationship of illicit activity occurring across different financial sectors. Criminal actors may attempt to exploit any vulnerability to commit fraud and launder money through a range of financial institutions," said FinCEN Director James H. Freis, Jr. "The interconnected nature of suspicious activity across multiple financial sectors covered by FinCEN's Bank Secrecy Act regulations underscores the immense value of combining insights from the different sectors for the purpose of detecting and thwarting criminal activity."

This whole crime by crime approach is incremental at best and misses the deeper problem. We might look back at an earlier crisis and learn what was done then to combat what John Kenneth Galbraith denounced as widespread "corporate larcency."

Galbraith cited the Pecora Commission which in 1932 investigated the causes of the 1929 crash. It uncovered a wide range of abusive practices on the part of banks and bank affiliates.

A Wikipedia entry explains: "These included a variety of conflicts of interest such as the underwriting of unsound securities in order to pay off bad bank loans as well as "pool operations" to support the price of bank stocks. There was outrage then when banker JP Morgan admitted he had paid no taxes for two years. The commission's Chief Counsel Ferdinand Pecora said; 'Legal chicanery and pitch darkness were the banker's stoutest allies."

Somehow those lessons were lost. Amnesia about the past contributed to denial about the present. We need a new Pecora Commission with subpoena power to investigate the causes of this crisis—and it's too bad that a man with the stature of John Kenneth Gailbraith is not alive to chair it.

Senator Bernie Sanders is calling for just such a commission complete with an investigative staff and subpoena powers. Why don't all progressive groups, media, unions, and concerned organizations endorse this call. We need professionals like Eliot Spitzer who had denounced predatory lending practices involved. You need people who have been on Wall St to see through the tricks on Wall Street.

We need to look into the $5 billion these firms have spent to rewrite laws and deregulate. We need to know which politicians took their payoffs and do their bidding. We need a jailout, not just a bailout.

We need to remember Balzac's insight: "Behind every great fortune lies a great crime." But he was not the only great thinker with insight. "In a closed society where everybody's guilty, the only crime is getting caught," wrote Hunter S. Thompson, " In a world of thieves, the only final sin is stupidity." And that does not just apply to the perpetrators.

News Dissector Danny Schechter is making a film based on his book PLUNDER: Investigating Our Economic Calamity (Cosimo Books at Amazon.com. Comments to dissector@mediachannel.org




http://globalresearch.ca/index.php?context=va&aid=12926

The U.S. has 'no moral standing' to criticize Iran: Zunes

The U.S. has 'no moral standing' to criticize Iran: Zunes

An exclusive Foreign Policy Journal interview with Professor Stephen Zunes

March 28, 2009

by Kourosh Ziabari

Stephen Zunes discusses Iran, Israel, and U.S. foreign policy in the Middle East in an exclusive interview with Foreign Policy Journal.

http://www.foreignpolicyjournal.com/articles/2009/03/28/ziabari_stephen-zunes-interview.html

Despite Obama's Promises, Combat Forces will Remain in Iraq The Big Con on Iraq By GARETH PORTER

Despite Obama's Promises, Combat Forces will Remain in Iraq
The Big Con on Iraq

By GARETH PORTER

Despite President Barack Obama’s statement at Camp LeJeune, North Carolina Feb. 27 that he had "chosen a timeline that will remove our combat brigades over the next 18 months," a number of Brigade Combat Teams (BCTs), which have been the basic U.S. Army combat unit in Iraq for six years, will remain in Iraq after that date under a new non-combat label.

A spokesman for Defence Secretary Robert M. Gates, Lt. Col. Patrick S. Ryder, told IPS Tuesday that "several advisory and assistance brigades" would be part of a U.S. command in Iraq that will be "re-designated" as a "transition force headquarters" after August 2010.

But the "advisory and assistance brigades" to remain in Iraq after that date will in fact be the same as BCTs, except for the addition of a few dozen officers who would carry out the advice and assistance missions, according to military officials involved in the planning process.

Gates has hinted that the withdrawal of combat brigades will be accomplished through an administrative sleight of hand rather than by actually withdrawing all the combat brigade teams. Appearing on Meet the Press Mar. 1, Gates said the "transition force" would have "a very different kind of mission", and that the units remaining in Iraq "will be characterised differently".

"They will be called advisory and assistance brigades," said Gates. "They won't be called combat brigades."

Obama’s decision to go along with the military proposal for a "transition force" of 35,000 to 50,000 troops thus represents a complete abandonment of his own original policy of combat troop withdrawal and an acceptance of what the military wanted all along - the continued presence of several combat brigades in Iraq well beyond mid-2010.

National Security Council officials declined to comment on the question of whether combat brigades were actually going to be left in Iraq beyond August 2020 under the policy announced by Obama Feb. 27.

The term that has been used internally within the Army to designate the units that will form a large part of the "transition force" is not "Advisory and Assistance Brigades" but "Brigades Enhanced for Stability Operations" (BESO).

Lt. Col. Gary Tallman, a spokesman for the Joint Staff, confirmed Monday that BESO will be the Army unit deployed to Iraq for the purpose of the transition force. Tallman said the decision-making process now underway involving CENTCOM and the Army is to determine "the exact composition of the BESO".

But the U.S. Army has already been developing the outlines of the BESO for the past few months. The only change to the existing BCT structure that is being planned is the addition of advisory and assistance skills rather than any reduction in its combat power. The BCT is organised around two or three battalions of motorized infantry but also includes all the support elements, including its own artillery support, needed to sustain the full spectrum of military operations.

Those are permanent features of all variants of the BCT, which will not be altered in the new version to be deployed under a "transition force", according to specialists on the BCT.

They say the only issue on which the Army is still engaged in discussions with field commanders is what standard augmentation a BCT will need for its new mission.

Maj. Larry Burns of the Army Combined Arms Centre at Ft. Leavenworth, Kansas, told IPS that Army Chief of Staff Gen. George W. Casey directed the Combined Arms Centre, which specialises in Army mission and doctrine, to work on giving the BCTs the capability to carry out a training and advisory assistance mission.

The essence of the BESO variant of the BCTs, according to Burns, is that the Military Transition Teams working directly with Iraqi military units will no longer operate independently but will be integrated into the BCTs.

That development would continue a trend already begun in Iraq in which the BCTs have gradually acquired operational control over the previously independent Military Transition Teams, according to Maj. Robert Thornton of the Joint Centre for International and Security Force Assistance at Fort Leavenworth.

Gen. Martin Dempsey, the commander of Army Training and Doctrine Command, has issued Planning Guidance calling for further refinement of the BESO. After further work on the additional personnel requirements, Casey was briefed on the proposed enhancement of the BCT for the second time in a month at a conference of four-star generals on Feb. 18, according to Burns.

Other names for the new variant that were used in recent months but eventually dropped made it explicitly clear that it is simply a slightly augmented BCT. Those names, according to Burns, included "Brigade Combat Team-Security Force Assistance" and "Brigade Combat Team for Stability Operations".

The plan to deploy several augmented BCTs represents the culmination of the strategy of "relabeling" or "remissioning" of BCTs in Iraq that was developed by U.S. military leaders in the wake of the surge of candidate Barack Obama to near-certain victory in the presidential election last year.

Late last year, Gen. David Petraeus, the CENTCOM chief, and Gen. Ray Odierno, the top commander in Iraq, were unhappy with Obama’s pledge to withdraw all U.S. combat brigades within 16 months. But military planners quickly hit on the relabeling scheme as a way of avoiding the complete withdrawal of BCTs in an Obama administration.

The New York Times revealed Dec. 4 that Pentagon planners were talking about "relabeling" of U.S. combat units as "training and support" units in a Dec. 4 story, but provided no details. Pentagon planners were projecting that as many as 70,000 U.S. troops would be maintained in Iraq "for a substantial time even beyond 2011".

That report suggested that the strategy envisioned keeping the bulk of the existing BCTs in Iraq as under a new label indicating an advisory and support mission.

Secretary Gates and Chairman of the Joint Chiefs of Staff Adm. Mike Mullen discussed a plan to re-designate U.S. combat troops as support troops at a meeting with Obama in Chicago on Dec. 15, according a report in the Times three days later.

Gates and Mullen reportedly speculated at the meeting on whether Iraqis would permit such "re-labeled" combat forces to remain in Iraqi cities and towns after next June, despite the fact that the U.S.-Iraq withdrawal agreement signed in November 2008 called for all U.S. combat forces to be withdrawn from populated areas by the end of June 2010.

That report suggests that Obama was well aware that giving the Petraeus and Odierno a free hand to determine the composition of a "transition force" of 35,000 to 50,000 troops meant that most combat brigades would remain in Iraq rather than being withdrawn, as he ostensibly promised the U.S. public on Feb. 27.

Gareth Porter is an investigative historian and journalist with Inter-Press Service specialising in U.S. national security policy. The paperback edition of his latest book, "Perils of Dominance: Imbalance of Power and the Road to War in Vietnam", was published in 2006.
http://www.counterpunch.org/porter03262009.html

The Poverty of Monetarism Too Big to Fail? By ARNO J. MAYER

The Poverty of Monetarism
Too Big to Fail?

By ARNO J. MAYER

Blaming the U.S. subprime mortgage meltdown for the global financial and economic blowout of 2008 is like blaming the assassination of Archduke Franz Ferdinand for World War I. In each case, a discrete event sparked a wider conflagration—but the tinder was already there.

In the early dawn of the 21st century, American capitalism continues to predominate and set the pace. But ever-more-frequent disturbances in the world economy undermine the pretended apoliticism of the econometrists who presume to legitimate and fine-tune capitalism in normal times. Acute convulsions invariably force a return to classical political economy rooted in moral philosophy and ethics, as practiced by Adam Smith, David Ricardo, Karl Marx, John Maynard Keynes, and Friedrich von Hayek. Although today’s reigning economists, finance ministers, and central bankers are adept at manipulating interest rates and the money supply, by themselves such monetarist nostrums are of little use: the present disarray demands concerted political intervention.

In the midst of the First World War, French Prime Minister Georges Clemenceau exclaimed that war was too serious a matter to be left to the generals. Similarly, today’s great economic recession is too grave to be entrusted to the likes of Robert Rubin and Henry Paulson, Alan Greenspan and Ben Bernanke, Lawrence Summers and Timothy Geithner. Not that politicians are any less out of their depth. But it is their responsibility to take matters in hand, with mathematical economists and financial wizards on tap, not on top. As they do so, they enlist the hallowed titans and champions of the Wall Street-Washington consensus to stabilize the shaken financial and corporate Establishment, as if to make certain that the foxes should continue to guard the henhouse.

Of course, in the U.S., both Democrats and Republicans retain their unshaken faith in the benign power of the unchained “invisible hand,” though few choose to remember Adam Smith’s constant concern about social and economic inequalities. As sworn free marketeers, they insist that the current crisis is not structural but contingent, and that its roots lie in the failure of the regulatory system—which America’s two major parties, beholden to powerful special interests and lobbies, conspired to dismantle for decades. Predictably, rather than call for the prosecution of wildcat CEOs and negligent governors of the equities markets, the power elite lambastes the evil geniuses of boundless greed: the speculators, gamblers, cheats, and sharks. Like Jesus chasing the moneylenders from the Temple of God, they propose to run today’s transgressors out of Wall Street, the temple of world capitalism. They raise the specter of the Great Depression of 1929 in order to blunt popular social movements of both left and right. And they oppose “Wall Street” to “Main Street” to avoid discussing the vast gulf between the upper ten thousand on the one hand and the salaried middle classes, wage-earning blue collars, and working poor on the other. With the richest 5% of Americans earning more than a third of all personal income and the long-stagnant minimum wage often ignored, it is astounding that political discourse should fixate on the suffering of middle-class families. Even John J. Sweeney, president of the AFL-CIO, stresses the need to “counterbalance corporate power and reverse the decline of the middle class.” And Gordon Brown, Britain’s New Labour Prime Minister, urges Washington and London to “seize the moment” to bring about “the biggest expansion of middle-class incomes and jobs the world has ever seen.” Perish the thought that anyone should mention the working and lower-middle classes, let alone the poor: for the moment, in America, the streets are quiet, picket lines thin, sit-ins rare, and town hall meetings calm.

Pace Bernanke and his mentor Milton Friedman, the causes of the crash that brought about the Great Depression bear little resemblance to those that quickened the downturn of 2008. Following World War I and the Russian Revolution, European societies entered a prolonged crisis marked by economic turmoil, political upheaval, and cultural defiance in which the very foundations of capitalism seemed to fall apart. Remarkably, in the face of the gathering storm, John Maynard Keynes, who in 1929-30 was still intensely preoccupied with interest rates, abruptly returned to political economy, which had informed his prophetic The Economic Consequences of the Peace (1919). In The General Theory of Employment, Interest, and Money, published in 1936, he took account of the organic crisis, involving soaring unemployment, labor unrest, ideological discord, and political struggle. Keynes also kept a keen eye on the emerging collective and planned economy in Soviet Russia, the antithesis of the capitalist system he looked to revitalize and preserve.

Indeed, the idea of economic planning gained traction in the West, though it was harnessed to different ends: the advanced countries resorted to it to restabilize their economies, while the beleaguered Soviets embraced it to force Russia’s headlong industrialization and military buildup. Planning was adopted by right-populist regimes as well: in response to the Kremlin’s first two Five-Year Plans, Nazi Germany launched a Four-Year Plan of its own to spur the Third Reich’s economic recovery and preparation for war. In general, however, the concept of planning became a rallying cry of the left’s drive for a progressive-reformist way out of the crisis: the New Deal in the U.S. and the Popular Fronts across Europe. One and all accepted Keynes’ premise that severe and acute capitalist downturns, not being “self-correcting” except at unacceptable costs, compel government and central-bank intervention.

Obviously, the U. S. at present is not undergoing a crisis remotely as deep and broad as that of the 1930s, which was at once economic, political, social, cultural, and ideological. But that does not mean the orthodox academic monetarists are any better equipped to repair the shaky system. Just as their theory and computer models failed to grasp the non-economic dimensions of the Great Depression, they cannot explain the upheavals of a capitalism radically different from that of the inter- and post-war years. Having survived the somber thirties, World War II, and the postwar chaos of 1945-55, capitalism grew ever more concentrated, multinational, and global. And the expanding U. S. empire became its linchpin and powerhouse.

This imperial factor determines America’s present strengths and frailties. Having crested but not yet approaching collapse, the U. S. empire is bound to become economically less profitable and politically less consensual. The cost of maintaining an overstretched imperium at a time of rising great-power rivalries is steep. Besides the gargantuan regular military budget, Washington must fund recurrent wars as well as countless foreign-aid, intelligence, and soft-power missions. These burdens exacerbate budget deficits largely financed by private and public foreign lenders, including sovereign wealth funds, thereby unsteadying the dollar.

The subprime fiasco and cumulative transnational credit crunch would simply constitute a classic burst bubble were they not intrinsic to America’s imperial enterprise and crusade. Whereas the classes reap the benefits of empire, the masses shoulder a disproportionate share of its costs. With wages and employment fragile in a de-industrializing economy, only deceptively cheap and opaque forms of credit—mortgages, home equity loans, charge cards—have kept the lower strata from calling into question the vast sums poured into America’s mission civilisatrice.

Marxist theorists once confidently predicted that capitalism’s accelerating swings of boom and bust signaled its imminent collapse. Today the power elite adapts that prediction to serve its own purpose: CEOs, bankers, economists, politicians, and talking heads warn that unless governments step in forcefully, globalizing capitalism will founder. These alarums are misleading not least because even under capitalism, polity and economy have been intertwined since the beginning. The ostensible separation of these spheres is a myth that shatters whenever the business cycle goes into a tailspin.

As early as 1910 the Social Democratic theorist Rudolf Hilferding published his treatise on the intensifying gyrations of capitalism with the then arresting title: Finance Capital: A Study of the Latest Phase of Capitalist Development. He was not the first Marxist thinker to counterpose unbridled free-market capitalism to its more advanced form, marked by galloping financial, industrial, and commercial concentration—but he may have been the most prescient. Many Socialists and Marxists, including Jean Jaur├Ęs, Lenin, and Rosa Luxemburg, postulated that Europe’s ruling classes, challenged by an increasingly militant working class, would press their governments to step up imperialist drives, partly to channel domestic distempers into the international system. Presently much of the European left uneasily hoped that imperialist rivalries would lead to a catastrophic European war fraught with revolutionary uprisings. Without minimizing the likelihood of such a turn, Hilferding emphasized the resilience of the established order, despite infighting in the ruling and governing classes. In his reading, capitalism and its supporting state seemed likely to emerge strengthened from periodic crisis-induced political interventions in the economy. Like Keynes after the Very Great War, he grudgingly conceded the dogged persistence of capitalism, with all its many and recurrent failings. And in fact, both more than weathered not just the Depression but the Thirty Years War of the 20th century, the Cold War, the shock of decolonization, and the rebellion of the wretched of the earth. Especially once Western and Central Europe were restored thanks to America’s pumping in Marshall Aid and brandishing the threat of Communism, capitalism reached unprecedented heights and spread all over the planet. It not only held Communism at bay and finally prevailed over it but also all but engulfed Social Democracy, whose legacy, in the form of the welfare state, is under assault in several European countries.

On one central point Marxists of all denominations have been dead-on: that as long as capitalism survived, consolidation and concentration would gain ground in key sectors of the advanced economies, including the epicentral financial one. As that process continued, business grew more intertwined with the state, reinforced by embattled governments during recurrent downturns. These slumps constituted milestones on the way to various types of state capitalism, including eventually those curious forms in post-Soviet Russia and post-Mao China. The state may not own or control most of the means of production and finance. But even in self-proclaimed laissez-faire America, the military-industrial-congressional complex is merely one arm of a huge octopus of mega-corporate-cum-state interests that reach into the four corners of the empire.

The magnitude of the crisis that struck capitalism in the 1930s is virtually unimaginable even in the midst of the sharpest contraction since then. During the Great Crash of 1929 shares on the New York Stock Exchange fell at amazing speed. At its nadir in 1932 the Dow Jones industrial average had sunk some 75%. By 1933, when Congress passed the Glass-Steagall Act mandating the separation of commercial and investment banks, some 4,000 banks had failed, a quarter of the U.S. work force was jobless, and national income had dropped by 50%.

The tidal wave from the U.S. soon smashed into Europe. At the time of the Wall Street Crash of October 1929, Weimar Germany already counted 1,500,000 unemployed. When Glass-Steagall was adopted that number had risen to over 6 million, or about a quarter of the working population; the National Socialists and Communists had scored respectively 13,400,000 and 3,700,000 votes in a presidential election, and Adolf Hitler was Chancellor. Other European countries were storm-swept as well, though to a lesser degree in most cases. Even assuming the U. S. had rapidly staged a recovery, it is doubtful that its benefits could have raced across the Atlantic in time to steady a Europe buffeted by Fascism and Communism and caught diplomatically between Berlin and Moscow. Nor could they have reached across the Pacific to help calm the waters in Japan and head off the invasion of Manchuria.

Today, the high-income world—the U.S., European Union, and Japan—is free of major ideological conflict, partly because capitalism holds sway over the entire world. Formerly communist nations such as China and Russia, long proto-socialist ones such as India, and even the Islamic nations have all taken the route to state or political capitalism. Globalization has raced ahead, reflected in the growth of multinational corporations, cross-border financial transactions, and high-speed telecommunications. In the advanced economies, the service and knowledge sectors are gaining on manufacture and industry, radically shrinking the number of unionized blue-collar wage-earners, their place taken by salaried white-collar employees in the private sector, struggling to organize. Wages and salaries are depressed by the fast-expanding labor pool in the emerging-market countries, and by migrant labor from these nations all over the world. Indeed, wanton globalization accelerates the emasculation of labor’s countervailing power throughout the so-called developed world.

And yet, despite the sea changes in capitalism, the powers that be insist on drawing close parallels between the Crash of 2008 and the Crash of 1929. Ironically, Federal Reserve Chairman Ben Bernanke is validated by his scholarly research on the Great Depression. He proposes to do all in his power to avoid the missteps that had led from Black Friday to the precipitous economic collapse. Hence his resolve to lose no time bailing out financial institutions that are vastly more sizable, concentrated, and international than they were 80 years ago—in the process making them even more so. In keeping with a socio-economic Darwinism driven by what Joseph Schumpeter called a “gale of creative destruction,” the big are getting bigger and stronger at the expense of the smaller and weaker, most notably in the financial sector in which a handful of large banks rule the roost. Thanks to state-supported natural selection, Citigroup, Goldman Sachs, Bank of America, J. P. Morgan Chase, and Wells Fargo—which hold over 40% of the nation’s bank assets—win the day. So does American International Group (A.I.G.), the mammoth insurance corporation, which by way of Goldman Sachs is entwined with the entire Western banking system and operates in more than 100 countries. In the industrial sector, as a first step Washington is throwing a lifeline to General Motors and Chrysler. The radical streamlining entailed in such measures, including massive job losses and wage cuts, is treated as a secondary issue. Citigroup is laying off 52,000 of its 300,000 employees worldwide, and job cuts at General Motors are of the same order of magnitude. Meanwhile gigantic mergers continue throughout the economy, driven by cost savings.

Clearly, what America exalts as democratic capitalism is itself becoming more concentrated and statist as it competes with the rising state-supported and -guided economies of the non-Western world, especially China, India, and resurgent Russia. In the early 1920s, when launching the New Economic Policy privatizing several sectors of the Soviet Union’s embryonic planned collectivist economy, Lenin insisted that its “commanding heights” (heavy industry, banking, foreign trade, and railroads) would continue to be owned and operated by the state. Nowadays ever-fewer gargantuan corporations, most of them with global dimensions, occupy the commanding heights of the U. S. economy. Governments pressed by well-funded and cleverly staffed lobbies further their interests and are primed to bail them out at the eleventh hour.

Nearly the entire political class proposes to contain the global financial crisis by re-regulating allegedly runaway markets and transactions. No one questions the rationale of American-style capitalism, driven by the pursuit of unrestricted profit and creative destruction. During his 18 years as chairman of the Federal Reserve, Alan Greenspan took for granted not only the ultimate self-regulation of the profit motive and of risk-taking markets but also the “evident acceleration of the process of creative destruction which has accompanied these expanding innovations and which has been reflected in the shifting of capital from failing technologies into those technologies at the cutting edge.” Even today the cream of academic economists and their patrons would not dream of questioning the iron imperative of profit- and efficiency-driven capitalist globalization whose end-purpose is to make the world safe for credit-card consumerism.

In the wake of September 11, 2001, President George W. Bush, as he declared war on world terror, bid Americans “go shopping” and “go down to Disney World in Florida.” On March 8, 2009, in the thick of the great recession, President Obama exhorted them not to “suddenly stuff money into their mattresses and pull back completely from spending.” Four days earlier Premier Wen Jiabao, addressing the yearly session of China’s Parliament, encouraged the Chinese to be less frugal and spend more on goods and services so as to boost domestic demand conjointly with a new stimulus package.

Aside from rescuing those mega-corporations fortunate enough to be “too big to fail,” the West has few ideas other than bailouts, tax adjustments, fiscal incentives, public spending, modulated protectionism, regulation of financial markets, and clampdowns on tax havens—all of it, according to President Obama, “entirely consistent with free-market principles.” Tighter regultory scrutiny hardly seems a fail-safe prescription to repair the present unhingement and prevent future crises. The frequency and magnitude of capitalism’s convulsions are likely to keep growing along with its irreversible globalization, as foreseen by Marx. While it will be fiendishly difficult to police American bankers, traders, hedgers, and insurers, it will be all but impossible to design and enforce a global system of financial regulation for 192 sovereign states at different stages of development, with conflicting economic interests, social priorities, and political agendas.

Nevertheless, the political classes, economists, central bankers, and public intellectuals of virtually all nations cry out for a global response to the worldwide financial and economic breakdown. President Bush hosted a preliminary summit of the leaders of the G-20, or the world’s 20 largest economies, on November 15, 2008, just 10 days after America’s presidential election. Some European leaders grandiloquently called for a fundamental recasting or renewal of capitalism. But behind closed doors the officials focused on questions of control and transparency. For the gallery and the media they took turns excoriating the creatively destructive banking and corporate tycoons whose salaries, bonuses, and golden parachutes they mean to cap, cautiously. In other words, the power elite portrays the efficient causes of capitalism’s spasms to be random, personal, and moral rather than systemic, socio-economic, and political. Hence the call not for fundamental reform but for purification, exorcism, and rehabilitation by means of a mix of hard national and soft transnational financial and market regulations. Since Adam and Eve were driven from Eden, such efforts to purge the world of avarice and corruption have amounted to catching the wind in a net.

Globalizing free-market finance capitalism is inherently and increasingly crisis-prone. But given the absence of a coherent and credible model of an alternative economy, polity, and society, the world seems not to be careening toward a historical crossroads, predictions to that effect notwithstanding. Precious few sober political parties or thinkers articulate a systematic critique of contemporary capitalism or propose a program of broad-based reform. It is preposterous for the pro-business French President Nicolas Sarkozy to claim that since the idea that the “markets are always right” is “crazy, . . . a certain idea of globalization is drawing to a close with the end of a financial capitalism that imposed its logic on the whole economy.” Washington’s prodigious financial, economic, military, cultural, and ideological power is not about to decline overnight in favor of Europe, Japan, China, and Russia, which blame American rampancy for the pandemic. Despite economic rivalries and diplomatic discords, the ruling classes of most “developed” nations fundamentally see eye to eye with their American counterparts. They do not long for a sudden twilight of U. S. power and demise of the dollar as the global reserve currency. Nor does Beijing, given its dire economic interdependence with America, despite its launching the idea of a “super-sovereign reserve currency.” To the rest of the world, the U.S. itself is too big to fail.

To the extent that the Crash of 2008 marks a turning point for capitalism, it lies in the shift from nationally framed microeconomic interventions to broadly coordinated multinational and macroeconomic ones. For the moment the stress is on cross-border policies not just to re-stabilize the world’s principal financial markets and economies but to revive the sputtering economies of lower- and middle-income countries—of the Baltic, Eastern Europe, and the “developing” world. Ideology is being tossed to the breeze: while the leaders of the European Union, even more than their trans-Atlantic colleagues, readily fustigate authoritarian rule in China, the Gulf States, and Russia, they have few compunctions about pressing them to help bail out democratic capitalism. Before the Washington summit, Gordon Brown and Sarkozy urged autocratic capitalist economies to inject some of their vast hoards of hard currency into international credit arteries. Tellingly, when she stopped in China on her first whirlwind imperial tour, Secretary of State Hillary Clinton urged Beijing to keep buying U. S. Treasury bonds not only because they are a “good investment” but also because “we are in the same boat . . . we are truly going to rise or fall together.” Thanks to its trade surplus, China has a reserve of close to $2 trillion—nearly six times the reserve of the International Monetary Fund—while Russia and the Gulf states have amassed zillions in hard currencies, though these are for the time being cut in half. But if and when they do lend a hand, besides looking for a solid financial return they will exact a political price—above all a greater voice in the inner councils of the post-Bretton Woods global economic-financial order.

As for the U.S., if the crux of the crisis were purely fiscal and economic, it could be defused with relatively little difficulty and pain. Washington piled up a $455 billion budget deficit for the year ending in September 2008. It is expected to hit at least $700 billion in the next fiscal year, aggravated by huge trade deficits and interest payments on a multitrillion-dollar national debt. This overdraft on the future, which drains funds for public health care, education, and social welfare, could be reduced by slashing America’s enormous military expenditures, which continue to nearly equal those of all the other countries of the planet combined. In addition to the Defense Department’s base budget of $440 billion for fiscal 2007-08, the cost of the wars in Iraq and Afghanistan runs to at least $12 billion monthly. Scores of billions are spent on overseas military and economic assistance as well as undercover operations.

It is worth recalling that although in 1929 America was already a creditor nation, its military budget was negligible, and, with no empire to speak of, it faced none of the ancillary expenses either. Even so, it took the planned economy of the Second World War as well as postwar euphoria and imperial thrust for prosperity to kick in. Today the empire is still close to its zenith but beginning its bumpy downward course. Needless to say, though the presidential election of 2008 unfolded in the midst of two costly wars and grave economic hardships, neither of the candidates mentioned the exorbitant expense of imperial overreach. To the contrary: John McCain and Barack Obama squabbled over who would be more unflinching in pursuit of America’s imperial interest, which both invariably referred to as the national interest. The differences between the parties and their supporters are largely tactical and stylistic. Early in his first term Obama declared that America “will maintain its military dominance” by doing “whatever it takes to sustain [the] technological advantage . . . of the strongest armed forces in the history of the world” so as to be able “to defeat and deter” both “conventional” and “unconventional” enemies.

Clearly the U. S. empire is not about to be sacrificed on the altar of fiscal responsibility. Instead, the balanced budget will be sacrificed to the empire, especially since, like all such imperial exertions, the empire serves many purposes. Besides being profitable for basic sectors of the economy, it fosters America’s prestige, social cohesion, and cultural clout. Of course, the empire takes a heavy civil toll which cannot be reckoned in dollars: the deepening corruption of the political process by big money, particularly by powerful and lavishly bankrolled lobbies. When reflecting on this scourge it pays to dip into Machiavelli’s Discourse on Livy and Montesquieu’s Considerations on the Causes of the Greatness of the Romans and Their Decline.

Though the American empire has passed its peak, it remains a hyperpower with enormous military capabilities to compensate for its frayed but still formidable soft or smart power. Empires do not decline, let alone fall, all at once, as Gibbon observed. After completing his magisterial Decline and Fall of the Roman Empire in 1788, he mused that perhaps instead of inquiring why Rome “was destroyed we should rather be surprised that it had subsisted for so long.”

Finally there is the question of whether the American empire, like Rome’s, will suffer rebellions among what Arnold Toynbee called the “internal” and “external” proletariat. Whereas in the U. S., Greater Europe, and Japan such rebellions could well be set off by the frustration of rising expectations, in the “developing” world they more likely will be fired by despair in the face of raw poverty and destitution spiked by a demographic boom, especially in times of galloping unemployment, declining wages, and volatile food prices. Some 20% of the world’s 6.5 billion people live on $1 a day, 50% on less than $2, most of them in “developing” countries. This material misery along with ecological blowback, rather than religious or ethnic discords, are the main triggers of popular and regime-threatening violence. .” In March 2009, on the eve of the G-20 meeting in London, Robert Zoellick, the American president of the World Bank, forewarned that faced with the first major shrinkage of the world economy and world trade since 1945, the emerging-market nations of the Third World “need investments in safety nets, infrastructures, and small and medium-size companies to create jobs and to avoid social and political unrest.” Or in the more pointed words of the open letter to the Washington summit by Ban Ki-moon, the confounded U.N. Secretary-General: “If hundreds of millions of people lose their livelihoods, and their hopes for the future are dashed because of a crisis for which they have absolutely no responsibility, the human crisis will not remain just economic.”

Arno J Mayer is emeritus professor of history at Princeton University. He is the author of The Furies: Violence and Terror in the French and Russian Revolutions.and Plowshares Into Swords: From Zionism to Israel (Verso).

http://www.counterpunch.org/mayer03272009.html

The Free Market, Financial Style How the Scam Works By MICHAEL HUDSON

The Free Market, Financial Style

How the Scam Works

By MICHAEL HUDSON

Here’s the rip-off as I see it. For an outlay of $750,000, the bank rids its books of a mortgage worth $2 million, for which it receives $4,250,000. It gets twice as much as the junk is worth. Continue http://informationclearinghouse.info/article22306.htm

Friday, March 27, 2009

Enduring Freedom by: William Rivers Pitt, t r u t h o u t | Columnist

Enduring Freedom

Friday 27 March 2009

by: William Rivers Pitt, t r u t h o u t | Columnist

A Pakistani girl from the Bajur tribal region.
A Pakistani girl from the Bajur tribal region in line for bread. (Photo: AP)

In Afghanistan, this is the problem, because everybody holds a piece of that mirror, and they all look at it and claim that they hold the entire truth.

- Mohsen Makhmalbaf

There was the battle of Mazari Sharif, and the battle of Qala-i-Jangi, and the battle of Tora Bora, and the massacre at Dasht-i-Leili, and the Tamak Farm incident and the slaughter of a wedding party in Uruzgan Province.

There was the Damadola airstrike in Pakistan made by US forces, and there was the Battle of Lashkagar, and the battle of Panjwaii and the Shinwar massacre. There was the battle of Chora, and the Baghlan sugar factory bombing and the battle of Musa Qala.

There was the Kabul Serena Hotel attack, the Kandahar bombing, the Gora Prai airstrike, the Sarposa Prison attack and the bombing of the Indian embassy. There was the battle of Wanat, and the Uzbin Valley ambush, and the Azizabad airstrike and the Angoor Ada raid into Pakistan again.

There was Operation Anaconda and there was Operation Red Wing. There was Operation Mountain Thrust, and Operation Medusa and Operation Mountain Fury. There was Operation Achilles and there was Operation Eagle's Summit.

All of this was, and remains, Operation Enduring Freedom. All of this was, and remains, America's war in Afghanistan.

Our war in Afghanistan began almost 3,000 days ago, on October 7, 2001. Our war in Afghanistan has lasted longer than World War I, World War II, the Civil War, the Korean War, the first Gulf War in Iraq and the second Gulf War in Iraq. If we are still fighting in Afghanistan a year from now, the war will have lasted longer than the American Revolution. Children who were born on the day the war began are now halfway through grammar school.

All the bad economic news and the turmoil in the financial and housing markets have America looking inward these days. We rarely hear anything about Iraq anymore, and even less about Afghanistan. For the record, and to bring everyone up to speed, the following events have taken place in Afghanistan during the last 72 hours.

Taliban fighters killed nine police officers. Three Australian soldiers were wounded. Pakistan's intelligence service was accused of aiding and abetting the Taliban in southern Afghanistan. Two Afghani farmers were killed by NATO troops. A bomb killed ten civilians in eastern Afghanistan. A Canadian woman held captive by the Taliban was made to plead for her life. Two separate bombings in southern Afghanistan killed 11 people.

All told, it's been a quiet week over there. That is about to change.

President Obama will soon be announcing his administration's plans for the future of our conflict in Afghanistan. Reportedly, this announcement will include the deployment of 17,000 more US soldiers Obama promised during the campaign, and will also reportedly include the deployment of an additional 4,000 troops, as well. "President Obama will deploy as many as 4,000 additional U.S. troops to Afghanistan, beyond the 17,000 he authorized last month, as trainers and advisers to the Afghan Army, according to a senior Pentagon official who has seen the new Afghanistan-Pakistan strategy Obama will unveil Friday," wrote The Washington Post.

"Since the United States invaded Iraq six years ago," reported the Christian Science Monitor on Thursday, "its attention, effort, and military know-how has tilted toward the Gulf. Perhaps as soon as Friday, President Obama is expected to shift that focus, announcing a new strategy for Afghanistan and the neighbor with which it is entwined, Pakistan. Yet the challenges presented by Afghanistan are an order of magnitude greater than they were in Iraq - involving a state with virtually no rule of law, a government rife with opium-fueled corruption, and an insurgency spanning two nations and entrenched in some of the world's most inhospitable terrain."

"President Barack Obama insisted on Sunday that military force alone would not end the war in Afghanistan," reported Reuters on Sunday, "and suggested a U.S. 'exit strategy' could be part of a new comprehensive policy he is expected to unveil soon. Obama, in an interview on CBS's '60 Minutes' program, previewed in broad terms his administration's review of Afghanistan-Pakistan strategy based on recommendations from senior U.S. officials and consultations with allies."

For the last seven years, the war in Afghanistan has been a collective effort shared among the United States and several other countries by way of NATO. That also appears to be changing soon. "After years of often testy cooperation with NATO and resentment over unequal burden-sharing," reported the Washington Post on Thursday, "the United States is taking unabashed ownership of the Afghan war. Even as the U.S. military expands its control over the battlefield, the number of American civilian officials will also grow by at least 50 percent - to more than 900 - under the new Afghanistan-Pakistan strategy Obama will announce as early as tomorrow, according to administration officials. American diplomats and development experts plan to spread into relatively peaceful western and northern regions of Afghanistan that until now were left to other NATO governments. New U.S. resources and leadership also will be brought to bear over critical issues such as counter-narcotics efforts and strengthening local government institutions."

"The Americanization of the war is visible in the turbulent south," continued the Post's report, "where the regional NATO command, led by a Dutch general, with Dutch, British, Danish and U.S. troops, faces the primary Taliban threat. Most of the additional U.S. troops will deploy there, and dozens of C-130 transport aircraft land at the Kandahar airfield every day with pallets of supplies. In a dusty parking lot not far from the main runway, more than 200 Mine Resistant Ambush Protected vehicles, or MRAPs, await the supplementary U.S. troops. When they arrive, there will be more American personnel at the Kandahar base than at the current largest U.S. facility - at Bagram, north of Kabul, the capital. 'This will become an American headquarters,' one non-U.S. military officer in southern Afghanistan said of Kandahar. 'They're going to have almost three times as many troops as any other NATO member here. And that's going to mean they'll be in charge.'"

Is the Obama administration simply working with the hand it was dealt by George W. Bush, or are the same Bush administration mistakes about to be committed all over again? Norman Solomon, writing for Truthout on Tuesday, noted, "We desperately need a substantive national debate on US military intervention in Afghanistan and Pakistan. While the Obama administration says that the problems of the region cannot be solved by military means, the basic approach is reliance on heightened military means. And so, with chillingly familiar echoes, goes the perverse logic of escalating the war in Afghanistan. 'Strategic patience' - more and more war - will be necessary so that those who must die will not have died in vain."

However this all shakes out, one thing is certain: Both the United States and Afghanistan are likely going to be Enduring Freedom for a long time to come.

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William Rivers Pitt is a New York Times and internationally bestselling author of two books: "War on Iraq: What Team Bush Doesn't Want You to Know" and "The Greatest Sedition Is Silence." His newest book, "House of Ill Repute: Reflections on War, Lies, and America's Ravaged Reputation," is now available from PoliPointPress.

The Fierce Urgency of Peace By ROGER COHEN

March 26, 2009
Op-Ed Columnist
The Fierce Urgency of Peace
By ROGER COHEN

Pressure on President Obama to recast the failed American approach to Israel-Palestine is building from former senior officials whose counsel he respects.

Following up on a letter dated Nov. 6, 2008, that was handed to Obama late last year by Paul Volcker, now a senior economic adviser to the president, these foreign policy mandarins have concluded a “Bipartisan Statement on U.S. Middle East Peacemaking” that should become an essential template.

Deploring “seven years of absenteeism” under the Bush administration, they call for intense American mediation in pursuit of a two-state solution, “a more pragmatic approach toward Hamas,” and eventual U.S. leadership of a multinational force to police transitional security between Israel and Palestine.

The 10 signatories — of both the four-page letter and the report — include Volcker himself, former national security advisers Brent Scowcroft and Zbigniew Brzezinski, former Senator Chuck Hagel, former World Bank President James Wolfensohn, former U.S. Trade Representative Carla Hills, former Congressman Lee Hamilton and former U.S. ambassador to the United Nations Thomas Pickering.

My understanding is their thinking coincides in significant degree with that of both George Mitchell, Obama’s Middle East envoy, and Gen. James Jones, Obama’s national security adviser who worked on security issues with Israelis and Palestinians in the last year of the Bush administration, an often frustrating experience.

This overlap gives the report particular significance.

Of Hamas, the target of Israel’s futile pounding of Gaza, the eminent Group of 10 writes that, “Shutting out the movement and isolating Gaza has only made it stronger and Fatah weaker.”

They urge a fundamental change: “Shift the U.S. objective from ousting Hamas to modifying its behavior, offer it inducements that will enable its more moderate elements to prevail, and cease discouraging third parties from engaging with Hamas in ways that might clarify the movement’s view and test its behavior.”

Although this falls short of my own recommendation that the United States itself — rather than European allies — engage with moderate elements of Hamas, such a shift is critical.

Without Hamas’s involvement, there can be no Middle East peace. Mahmoud Abbas, the Fatah leader and president of the Palestinian Authority, is a beleaguered figure.

The report goes further: “Cease discouraging Palestinian national reconciliation and make clear that a government that agrees to a cease-fire with Israel, accepts President Mahmoud Abbas as the chief negotiator and commits to abiding by the results of a national referendum on a future peace agreement would not be boycotted or sanctioned.”

In other words, stop being hung up on prior Hamas recognition of Israel and watch what it does rather than what it says. If Hamas is part of, and remains part of, a Palestinian unity government that makes a peace deal with Israel, that’s workable.

Henry Siegman, the president of the U.S./Middle East Project, whose chairman is Scowcroft and board includes all 10 signatories, told me that he met recently with Khaled Meshal, the political director of Hamas in Damascus.

Meshal told him, and put in writing, that although Hamas would not recognize Israel, it would remain in a Palestinian national unity government that reached a referendum-endorsed peace settlement with Israel.

De facto, rather than de jure, recognition can be a basis for a constructive relationship, as Israel knows from the mutual benefits of its shah-era dealings with Iran.

Israeli governments have negotiated a two-state solution although they included religious parties that do not recognize Palestinians’ right to statehood.

“But,” Siegman said, “if moderates within Hamas are to prevail, a payoff is needed for their moderation. And until the U.S. provides one, there will be no Palestinian unity government.”

The need for that incentive is reflected in the four core proposals of what the authors call “a last chance for a two-state Israel-Palestine agreement.” Taken together, they constitute the start of an essential rebalancing of America’s Bush-era Israel-can-do-no-wrong policy.

The first is clear U.S. endorsement of a two-state solution based on the lines of June 4, 1967, with minor, reciprocal, agreed land swaps where necessary. That means removing all West Bank settlements except in some heavily populated areas abutting Jerusalem — and, of course, halting the unacceptable ongoing construction of new ones.

The second is establishing Jerusalem as home to the Israeli and Palestinian capitals. Jewish neighborhoods would be under Israeli sovereignty and Arab neighborhoods under Palestinian sovereignty, with special arrangements for the Old City providing unimpeded access to holy sites for all communities.

The third is major financial compensation and resettlement assistance in a Palestinian state for refugees, coupled with some formal Israeli acknowledgment of responsibility for the problem, but no generalized right of return.

The fourth is the creation of an American-led, U.N.-mandated multinational force for a transitional period of up to 15 years leading to full Palestinian control of their security.

Obama has told Volcker that he would, in time, meet with the signatories of the letter. He should do so once an Israeli government is in place. And then he should incorporate their ideas in laying out the new realism of American commitment to Palestine and the new price of American commitment to Israel.


Copyright 2009 The New York Times Company

White Paper of the Interagency Policy Group's Report on U.S. Policy toward Afghanistan and Pakistan

http://www.whitehouse.gov/assets/documents/Afghanistan-Pakistan_White_Paper.pdf

White Paper of the Interagency Policy Group's Report on
U.S. Policy toward Afghanistan and Pakistan

INTRODUCTION

The United States has a vital national security interest in addressing the current and potential security threats posed by extremists in Afghanistan and Pakistan. In Pakistan, al Qaeda and other groups of jihadist terrorists are planning new terror attacks. Their targets remain the U.S. homeland, Pakistan, Afghanistan, India, Europe, Australia, our allies in the Middle East, and other targets of opportunity. The growing size of the space in which they are operating is a direct result of the terrorist/insurgent activities of the Taliban and related organizations. At the same time, this group seeks to reestablish their old sanctuaries in Afghanistan.

Therefore, the core goal of the U.S. must be to disrupt, dismantle, and defeat al Qaeda and its safe havens in Pakistan, and to prevent their return to Pakistan or Afghanistan.

The ability of extremists in Pakistan to undermine Afghanistan is proven, while insurgency in Afghanistan feeds instability in Pakistan. The threat that al Qaeda poses to the United States and our allies in Pakistan - including the possibility of extremists obtaining fissile material - is all too real. Without more effective action against these groups in Pakistan, Afghanistan will face continuing instability.

Objectives

Achieving our core goal is vital to U.S. national security. It requires, first of all, realistic and achievable objectives. These include:

• Disrupting terrorist networks in Afghanistan and especially Pakistan to degrade any ability they have to plan and launch international terrorist attacks.

• Promoting a more capable, accountable, and effective government in Afghanistan that serves the Afghan people and can eventually function, especially regarding internal security, with limited international support.

• Developing increasingly self-reliant Afghan security forces that can lead the counterinsurgency and counterterrorism fight with reduced U.S. assistance.

• Assisting efforts to enhance civilian control and stable constitutional government in Pakistan and a vibrant economy that provides opportunity for the people of Pakistan.

• Involving the international community to actively assist in addressing these objectives for Afghanistan and Pakistan, with an important leadership role for the UN.

A New Way Forward

These are daunting tasks. They require a new way of thinking about the challenges, a wide ranging diplomatic strategy to build support for our efforts, enhanced engagement with the publics in the region and at home, and a realization that all elements of international power -- diplomatic, informational, military and economic -- must be brought to bear. They will also require a significant change in the management, resources, and focus of our foreign assistance.

Our diplomatic effort should be based on building a clear consensus behind the common core goal and supporting objectives. To this end, we will explore creating new diplomatic mechanisms, including establishing a “Contact Group” and a regional security and economic cooperation forum. The trilateral U.S.-Pakistan-Afghanistan effort of February 24-26, 2009 will be continued and broadened, into the next meeting planned for early May, in Washington.

The United States must overcome the 'trust deficit' it faces in Afghanistan and Pakistan, where many believe that we are not a reliable long-term partner. We must engage the Afghan people in ways that demonstrate our commitment to promoting a legitimate and capable Afghan government with economic progress. We must engage the Pakistani people based on our long-term commitment to helping them build a stable economy, a stronger democracy, and a vibrant civil society.

A strategic communications program must be created, made more effective, and resourced. This new strategy will have no chance of success without better civil-military coordination by U.S. agencies, a significant increase of civilian resources, and a new model of how we allocate and use these resources. For too long, U.S. and international assistance efforts in Afghanistan and Pakistan have suffered from being ill-organized and significantly under-resourced in some areas. A large portion of development assistance ends up being spent on international consultants and overhead, and virtually no impact assessments have yet been done on our assistance programs.

We must ensure that our assistance to both Afghanistan and Pakistan is aligned with our core goals and objectives. This will involve assistance that is geared to strengthening government capacity and the message that assistance will be limited without the achievement of results.

Additional assistance to Afghanistan must be accompanied by concrete mechanisms to ensure greater government accountability. In a country that is 70 percent rural, and where the Taliban recruiting base is primarily among under-employed youths, a complete overhaul of our civilian assistance strategy is necessary; agricultural sector job creation is an essential first step to undercutting the appeal of al Qaeda and its allies. Increased assistance to Pakistan will be limited without a greater willingness to cooperate with us to eliminate the sanctuary enjoyed by al Qaeda and other extremist groups, as well as a greater commitment to economic reforms that will raise the living standard of ordinary Pakistanis, including in the border regions of the Federally Administered Tribal Areas, the North West Frontier Province, and Baluchistan.

SUMMARY OF RECOMMENDATIONS FOR AFGHANISTAN AND PAKISTAN

The following steps must be done in concert to produce the desired end state: the removal of al-Qaeda's sanctuary, effective democratic government control in Pakistan, and a self-reliant Afghanistan that will enable a withdrawal of combat forces while sustaining our commitment to political and economic development.

• Executing and resourcing an integrated civilian-military counterinsurgency strategy in Afghanistan.

Our military forces in Afghanistan, including those recently approved by the President, should be utilized for two priority missions: 1) securing Afghanistan's south and east against a return of al Qaeda and its allies, to provide a space for the Afghani government to establish effective government control and 2) providing the Afghan security forces with the mentoring needed to expand rapidly, take the lead in effective counterinsurgency operations, and allow us and our partners to wind down our combat operations.

Our counter-insurgency strategy must integrate population security with building effective local governance and economic development. We will establish the security needed to provide space and time for stabilization and reconstruction activities.

To prevent future attacks on the U.S. and its allies - including the local populace - the development of a strategic communications strategy to counter the terror information campaign is urgent. This has proved successful in Iraq (where the U.S. military has made a significant effort in this area) and should be developed in Afghanistan as a top priority to improve the image of the United States and its allies. The strategic communications plan -- including electronic media, telecom, and radio -- shall include options on how best to counter the propaganda that is key to the enemy's terror campaign.

• Resourcing and prioritizing civilian assistance in Afghanistan

By increasing civilian capacity we will strengthen the relationship between the Afghan people and their government. A dramatic increase in Afghan civilian expertise is needed to facilitate the development of systems and institutions particularly at the provincial and local levels, provide basic infrastructure, and create economic alternatives to the insurgency at all levels of Afghan society, particularly in agriculture. The United States should play an important part in providing that expertise, but responding effectively to Afghanistan's needs will require that allies, partners, the UN and other international organizations, and non-governmental organizations significantly increase their involvement in Afghanistan.

• Expanding the Afghan National Security Forces: Army and Police

To be capable of assuming the security mission from U.S. forces in Afghanistan's south and east, the Afghan National Security Forces must substantially increase its size and capability. Initially this will require a more rapid build-up of the Afghan Army and police up to 134,000 and 82,000 over the next two years, with additional enlargements as circumstances and resources warrant.

The international community must assume responsibility for funding this significantly enhanced Afghan security force for an extended period. We will also have to provide support for other Afghan security forces such as the Afghan Public Protection Force. Salaries paid to Afghan National Army and Afghan National Police must become more competitive with those paid by the insurgents.

Over time, as security conditions change, we should continue to reassess Afghan National Security Forces size, as it will be affected by such factors as: the overall security situation, the capabilities of the Afghan National Security Forces, and the rate at which we can grow local security forces and integrate them into the overall ANSF structure.

• Engaging the Afghan government and bolstering its legitimacy

International support for the election will be necessary for a successful outcome. We should do everything necessary to ensure the security and legitimacy of voter registration, elections, and vote counting. The international military presence should help the Afghan security forces provide security before, during and after the election. International monitoring will also be required to ensure legitimacy and oversee Afghanistan's polling sites.

The overall legitimacy of the Afghan government is also undermined by rampant corruption and a failure to provide basic services to much of the population over the past 7 years. Where Afghan systems and institutions have benefited from high quality technical assistance and mentoring, they have made great progress. Making such support more consistent with qualified mentors to advise and monitor officials, pushing such efforts to the provincial and district levels, and channeling more assistance through Afghan institutions benefiting from this high quality support will help restore and maintain the legitimacy of the Afghan government.

• Encouraging Afghan government efforts to integrate reconcilable insurgents

While Mullah Omar and the Taliban's hard core that have aligned themselves with al Qaeda are not reconcilable and we cannot make a deal that includes them, the war in Afghanistan cannot be won without convincing non-ideologically committed insurgents to lay down their arms, reject al Qaeda, and accept the Afghan Constitution.

Practical integration must not become a mechanism for instituting medieval social policies that give up the quest for gender equality and human rights. We can help this process along by exploiting differences among the insurgents to divide the Taliban's true believers from less committed fighters.

Integration must be Afghan-led. An office should be created in every province and we should support efforts by the Independent Directorate of Local Governance to develop a reconciliation effort targeting mid-to-low level insurgents to be led by provincial governors. We should also explore ways to rehabilitate captured insurgents drawing on lessons learned from similar programs in Iraq and other countries.

• Including provincial and local governments in our capacity building efforts

We need to work with the Afghan government to refocus civilian assistance and capacity-building programs on building up competent provincial and local governments where they can more directly serve the people and connect them to their government.

• Breaking the link between narcotics and the insurgency

Besides the global consequences of the drug trade, the Afghan narcotics problem causes great concern due to its ties to the insurgency, the fact that it is the major driver of corruption in Afghanistan, and distorts the legal economy. The NATO/International Security Assistance Forces and U.S. forces should use their authorities to directly support Afghan counternarcotics units during the interdiction of narco-traffickers. The new authorities permit the destruction of labs, drug storage facilities, drug processing equipment, and drug caches and should contribute to breaking the drug-insurgency funding nexus and the corruption associated with the opium/heroin trade. Crop substitution and alternative livelihood programs that are a key pillar of effectively countering narcotics have been disastrously underdeveloped and under-resourced, however, and the narcotics trade will persist until such programs allow Afghans to reclaim their land for licit agriculture. Targeting those who grow the poppy will continue, but the focus will shift to higher level drug lords.

• Mobilizing greater international political support of our objectives in Afghanistan

We need to do more to build a shared understanding of what is at stake in Afghanistan, while engaging other actors and offering them the opportunity to advance our mutual interests by cooperating with us.

• Bolstering Afghanistan-Pakistan cooperation

We need to institutionalize stronger mechanisms for bilateral and trilateral cooperation. During the process of this review, inter-agency teams from Afghanistan and Pakistan came to Washington, DC for trilateral meetings. This new forum should continue and serve as the basis for enhanced bilateral and trilateral cooperation.

• Engaging and focusing Islamabad on the common threat

Successfully shutting down the Pakistani safe haven for extremists will also require consistent and intensive strategic engagement with Pakistani leadership in both the civilian and military spheres. The engagement must be conducted in a way that respects, and indeed enhances, democratic civilian authority.

• Assisting Pakistan's capability to fight extremists

It is vital to strengthen our efforts to both develop and operationally enable Pakistani security forces so they are capable of succeeding in sustained counterterrorism and counterinsurgency operations. In part this will include increased U.S. military assistance for helicopters to provide air mobility, night vision equipment, and training and equipment specifically for Pakistani Special Operation Forces and their Frontier Corps.

• Increasing and broadening assistance in Pakistan

Increasing economic assistance to Pakistan - to include direct budget support, development assistance, infrastructure investment, and technical advice on making sound economic policy adjustments - and strengthening trade relations will maximize support for our policy aims;

it should also help to provide longer-term economic stability. Our assistance should focus on long-term capacity building, on agricultural sector job creation, education and training, and on infrastructure requirements. Assistance should also support Pakistani efforts to 'hold and build' in western Pakistan as a part of its counterinsurgency efforts.

• Exploring other areas of economic cooperation with Pakistan

We need to enhance bilateral and regional trade possibilities, in part through implementing Reconstruction Opportunity Zones (which were recently re-introduced in Congress) and encouraging foreign investment in key sectors, such as energy. In addition, assisting Islamabad with developing a concrete strategy for utilizing donor aid would increase Islamabad's chances for garnering additional support from the international community.

• Strengthening Pakistani government capacity

Strengthening the civilian, democratic government must be a centerpiece of our overall effort. Key efforts should include fostering the reform of provincial and local governance in the Federally Administered Tribal Areas and the North West Frontier Province. We need to help Islamabad enhance the services and support in areas cleared of insurgents so that they have a real chance in preventing insurgents from returning to those areas.

With international partners, we should also promote the development of regional organizations that focus on economic and security cooperation, as well as fostering productive political dialogue.

• Asking for assistance from allies for Afghanistan and Pakistan

Our efforts are a struggle against forces that pose a direct threat to the entire international community. While reaching out to allies and partners for their political support, we should also ask them to provide the necessary resources to accomplish our shared objectives. They have the same interest in denying terrorists and extremists sanctuaries in Pakistan and Afghanistan that we do. In approaching allies we should emphasize that our new approach is integrated between civilian and military elements and in looking at Afghanistan and Pakistan as one theater for diplomacy.

For the mission in Afghanistan, we should continue to seek contributions for combat forces, trainers and mentors, strategic lift, and equipment from our friends and allies. The U.S. will also pursue major international funding and experts for civilian reconstruction and Afghan government capacity building at the national and especially the provincial and local levels.

The United Nations Assistance Mission in Afghanistan should take the lead in exploring ways that donors could systematically share the burden of building Afghan capacity and providing civilian expertise. As part of its coordination role for civilian assistance, the UN should consolidate requests and identify gaps.

In Pakistan, the U.S. will urge allies to work closely with us both bilaterally and through the 'Friends of Democratic Pakistan' to coordinate economic and development assistance, including additional direct budget support, development assistance, infrastructure investment and technical advice on making sound economic policy adjustments. Similarly, we should ask them to provide technical advice and assistance in strengthening government capacity, such as improving Pakistani institutions.

Conclusion

There are no quick fixes to achieve U.S. national security interests in Afghanistan and Pakistan. The danger of failure is real and the implications are grave. In 2009-2010 the Taliban's momentum must be reversed in Afghanistan and the international community must work with Pakistan to disrupt the threats to security along Pakistan's western border.

This new strategy of focusing on our core goal - to disrupt, dismantle, and eventually destroy extremists and their safe havens within both nations, although with different tactics - will require immediate action, sustained commitment, and substantial resources. The United States is committed to working with our partners in the region and the international community to address this challenging but essential security goal.

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