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Friday, April 30, 2010

Papering the War Against Iran Philip Giraldi

Papering the War Against Iran
Philip Giraldi
Thu, 29 Apr 2010 10:41 EDT
Perhaps the presence of so many lawyers in government has made inevitable the tendency for the United States to attempt to justify a war on paper even before a single shot is fired. George W. Bush decided to invade Iraq virtually from the day that he entered office, but the Administration nevertheless dutifully worked its way through the United Nations, basing its case on a parcel of lies and half-truths, to obtain a legal justification in the form of a Security Council resolution to attack Saddam Hussein.

Currently, the search for a piece of paper that will seal the fate of Iran is underway, with considerable pressure from the White House to come up with a document that can be used to justify war. The battle is being fought out within the intelligence community, not unlike the lead-up to the invasion of Iraq, but this time the CIA analysts are pushing back. Intelligence analysts regularly prepare spot reports on individual issues but their most refined product is the so-called National Intelligence Estimate or NIE. The NIE is a consensus document reflecting the views of the entire intelligence community, consisting of sixteen different agencies, and is only issued after a line-by-line review by the National Intelligence Board. It can include dissenting views where there is particular disagreement on a certain issue. NIEs are normally requested by the intelligence consumers, generally the White House, but also to include Congress or the Department of Defense. After receiving a request, the National Intelligence Council weighs up the available resources and actually commissions the report.

The NIE reports themselves can deal with specific countries or they can focus on an issue like proliferation or drug trafficking that is transnational, but they are intended to address "key national security concerns." The most notorious NIE in recent history was the 2002 NIE on Iraq that essentially gave the green light for military action through its endorsement of the widespread belief that Saddam Hussein was aspiring to weapons of mass destruction and therefore posed a threat to his neighbors and also to the United States.

Though the process would appear to be somewhat transparent, it is actually highly political in terms of who or what will be the subject of an NIE. To have an NIE produced about one's country is in itself a suggestion that there is some kind of problem from the point of view of Washington. Early in the Obama Administration experienced diplomat Chas Freeman was selected to head the National Intelligence Council, which moderates the process that eventually produces the report. Freeman was torpedoed when AIPAC decided that his viewpoints were out of the mainstream because he had been critical of the Israeli government and its policies. For the same reason, there has never been an NIE on Israel both because it would be recognition that Israel presents a problem and because any serious inquiry into settlement policies and the country's nuclear arsenal would be politically unpalatable.

The most recent NIE on Iran was issued in December 2007. Its conclusions were released to the public in a heavily redacted nine page summary report "Iran: Nuclear Intentions and Capabilities." The key conclusion, one that attracted a great deal of criticism, was that Iran had abandoned its nuclear weapons program in 2003 and had not restarted it subsequently, "We judge with high confidence that in fall 2003, Tehran halted its nuclear weapons program; we also assess with moderate-to-high confidence that Tehran at a minimum is keeping open the option to develop nuclear weapons. We judge with high confidence that the halt, and Tehran's announcement of its decision to suspend its declared uranium enrichment program and sign an Additional Protocol to its Nuclear Non-Proliferation Treaty Safeguards Agreement, was directed primarily in response to increasing international scrutiny and pressure resulting from exposure of Iran's previously undeclared nuclear work."

Critics of the report responded with a form of analysis made famous by former Secretary of Defense Donald Rumsfeld, noting that the absence of evidence is not evidence of absence. They were, in other words, noting that the general lack of solid information on developments inside Iran might mean that a secret program could easily have been missed. The intelligence community conceded that that might be the case, but it also noted that it had definitive evidence, high confidence, that the weapons program had been halted and no evidence whatsoever that it had been started up again.

In subsequent testimony before Congress and to the media, the Director of National Intelligence Dennis Blair has essentially stood by the conclusions of the Iran NIE, confirming that Iran does not have a nuclear weapons program. In the February 2010 declassified version of the Annual Threat Assessment delivered to Congress by the office of the DNI, it was reported that "We continue to assess that Iran is keeping open the option to develop nuclear weapons in part by developing various nuclear capabilities that bring it closer to being able to produce such weapons, should it choose to do so. We do not know, however, if Iran will eventually decide to produce nuclear weapons." It is believed that the recent Iranian scientist defector Shahram Amiri has provided information that enabled Blair to declare with confidence that the weapons program continues to be suspended. A March 2010 Congressionally mandated annual DNI report in response to the Intelligence Authorization Act's requirement to monitor the acquisition of technology to develop weapons of mass destruction concluded that "We do not know whether Iran will eventually decide to produce nuclear weapons."

It is widely believed in intelligence circles in Washington that the office of the Director of National Intelligence has commissioned a new NIE on Iran. The supposition is that the new NIE "will get it right" and come down on the side of confirming that the Iranians intend to construct a nuclear weapon, thereby justifying the possible exercise of a military option by Washington to preempt that development. But the evidence is not supporting the case that the White House would like to see made. There have been reports that the new NIE, which had been expected in the fall of 2009, has already been postponed twice, once in December, and again in March. This is alleged to be due to the difficulty in establishing a consensus on various issues, but it is more likely reflective of analysts' resistance to pressure coming from the White House to come up with a report that has language that will permit the President to pursue a full range of options in dealing with Iran, options that would include going to war. There is understandable concern lest the estimate become something similar to the 2002 Iraq NIE, which greatly exaggerated the level of threat and led to a war that today even Republican Congressmen are describing as a "horrible mistake."

So why does a Washington Post editorial refer to "the likely eventuality that Iran will continue to pursue a nuclear weapon" when in fact the editorial page editor Fred Hiatt knows no such thing? Can it be because the neocons at the Post want war with Iran? The facts about Iran's nuclear program are well known and they all indicate that there is no weapons development underway. But a constant barrage from the media about evil Iran coupled with an NIE report providing wiggle room for a military option could come together to bring about another disaster in the Middle East. An NIE that emphasizes the negative rather than the positive, suggesting that Iran is likely intending to construct a weapon, could easily turn into another Saddam Hussein moment, with Hillary Clinton and Leon Panetta sternly addressing the UN Security Council and warning about mushroom clouds. As one senior intelligence analyst has concluded, all the evidence continues to indicate that Iran does not have a nuclear weapon and does not currently have a weapons program, but because the Iranian leadership could change direction at any time, without any debate, without any warning, it is a situation that can easily be exploited by those seeking war. It seems clear at this point that the friends of Israel in Congress and the media will seek to emphasize that possibility, not for the first time opening the door to conflict based on something that might happen, putting Iran in an impossible position where it has to prove a negative to avoid being attacked.

CEPR Press Release: What If We Took Economics Seriously? Dean Baker

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What if We Took Economics Seriously?
Dean Baker's new book strips away the ideology and applies the basics of economics to some of the most pressing issues of the day.

For Immediate Release: April 30, 2010
Contact: Alan Barber 202-293-5380 x115

Washington, D.C.- What would policy look like if we took basic principles of mainstream economics and applied them consistently? What if we looked past ideology and tried to find the policies that make the most sense and work towards an economy for everyone? These are the questions answered in Dean Baker's latest book, "Taking Economics Seriously."

Baker takes three issues - the free market, malpractice, and the big banks - and walks the reader through a fascinating Econ 101 that exposes the faulty arguments and misdirections that dominate economic policy, all the while demonstrating how shifting the terms of debate might benefit us all.

Elizabeth Warren, Chair of the Congressional Oversight panel and Leo Gottlieb Professor of law, Harvard Law School says, " A terrific book! Dean Baker deconstructs the myth that big corporations have any interest in the free market and deregulation."

Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, MIT Sloan School of Management, and former chief economist of the IMF writes, " Baker's analysis is always insightful and his proposals entirely reasonable. Read this book only if you are worried about where the United States is heading."

"Taking Economics Seriously" uses policy ideas and concepts that should be basics for any economist and applies them to make informed recommendations on some of the most discussed issues of our time. Baker does so in a manner that is easily accessible to everyone, whether a recent econ grad headed into the real world or just someone with a sincere concern about our nation's future. "Taking Economics Seriously" is published by MIT Press and is available online and at select bookstores.

Can the United States Do Grand Strategy? By Walter A. McDougall

Can the United States Do Grand Strategy?
April 2010

By Walter A. McDougall

Japan's Big Currency Bet

Japan's Big Currency Bet

Posted on Wednesday, March 24, 2010

by the Center for Geoeconomic Studies

Because foreign currency reserves are viewed as a form of insurance, the risks of excess reserves are often overlooked. Japan holds reserves equal to 20% of GDP, more than it could possibly need for insurance purposes. These holdings make up a foreign asset portfolio that is subject to exchange rate risk. However, this risk is hidden because Japan's reserves are primarily held in U.S. dollars and their value is reported in U.S. dollars. So as the local and global purchasing power of the dollar falls there is no change in the reported value of the reserves. As shown in the chart, Japan's reserves increased by over $100 billion since June 2007, but fell by nearly ¥20 trillion when measured in local currency terms – over 4% of GDP. The risk of large losses in national wealth is even greater for China, whose reserves make up 50% of GDP. This risk will become apparent as and when China allows the renminbi to appreciate, in line with market pressures.

CGS Chart Book: Foreign Exchange Reserves in the BRICs
Reuters: China Spreads Out FX Reserves Risk
Reuters: No Plan To Tap FX Reserves For Spending

Is the Israel-Palestine Conflict "ripe" for Obama's intervention?

Is the Israel-Palestine Conflict "ripe" for Obama's intervention?

Thursday, April 29, 2010

Mobilizing NATO for Afghanistan and Pakistan: An Assessment of the Extremist Threat

Mobilizing NATO for Afghanistan and Pakistan: An Assessment of the Extremist Threat

The Obama Administration's Security Policy - Washington Institute

The Obama Administration's Security Policy - Washington Institute

When Saudi Arabia goes nuclear By MICHAEL FREUND

When Saudi Arabia goes nuclear
29/04/2010 00:24



Although the U.S. Constitution assigned the power to declare war to Congress, the use of armed forces has often been initiated by the President without congressional authorization. The enactment of the War Powers Resolution in 1973 was an attempt by Congress to reassert its constitutional role and to regulate military action by the executive branch. For the most part, it failed to accomplish those goals.

"The main purpose of the Resolution was to establish procedures for both branches to share in decisions that might get the United States involved in war," a new report (pdf) from the Congressional Research Service (CRS) observes. "The drafters sought to circumscribe the President's authority to use armed forces abroad in hostilities or potential hostilities without a declaration of war or other congressional authorization, yet provide enough flexibility to permit him to respond to attack or other emergencies."

"But the record of the War Powers Resolution since its enactment has been mixed, and after 30 years it remains controversial," the CRS report said.

The new report documents that mixed record, listing all of the instances from 1973 to December 2009 in which Presidents submitted reports to Congress under the Resolution, as well as instances of the use of U.S. armed forces that were not reported. See "The War Powers Resolution: After Thirty-Six Years," April 22, 2010.

Monday, April 26, 2010

Secret agreement on construction in capital Ben Caspit, Maariv, April 26 2010

Secret agreement on construction in capital

Ben Caspit, Maariv, April 26 2010

Israel and the US have reached secret agreements about construction in Jerusalem. Both sides agreed to leave the agreements between themselves and not make them public, and if they should be leaked nevertheless, deny them vigorously. The purpose is in order not to create difficulties for Prime Minister Binyamin Netanyahu in the coalition, and particularly in the Likud party.

The agreements indicate that contrary to Israeli boasting, Netanyahu’s answer to Obama regarding Jerusalem was not “No.” It was something in the middle, a little closer to the far end (a freeze) than the close one (continued construction at full tilt). The most accurate translation for this agreement is “Yes, but.” It is possible that Netanyahu has learned something from the bad old days of Shimon Peres, during which he got the nickname “Yes and no.” Now it is Netanyahu’s turn.

The agreements were made in a very long series of meetings and discussions between the parties. Attorney Yitzhak Molcho worked for Netanyahu. Working on the American side was mostly Dan Shapiro, the director of the Middle East department at the National Security Council.

As far as anyone knows, the parties agreed that no construction freeze would be announced. On the contrary, Netanyahu may continue to announce that he did not agree to a freeze. But in reality, Netanyahu agreed to delay the Ramat Shlomo project by at least several years and not to issue any new construction tenders in Jerusalem.

He also promised “to do as much as the law allows and use his full authority as prime minister to prevent unnecessary Israeli activity in the Arab neighborhoods in East Jerusalem. These agreements do not include the procedures that are already being carried out, such as, for example, the Shepherd Hotel in East Jerusalem.

Another agreement between the parties is that if Netanyahu should encounter a particularly severe crisis or heavy pressure, or if these agreements should be leaked, there will be a tendency to let him approve a small number of symbolic construction projects in secret coordination with the Americans so that it will continue to look as though he did not give in.

In the end, the agreement is a good and effective one. The Americans are moving forward with it, and the members of the forum of seven are willing to accept it as well. It is saying no and acting yes. In the current situation, if there are no last-minute surprises, there will soon be an announcement of the resumption of the proximity talks between the parties. The Palestinians will go with it, and the Americans will finally be able to finish the job and check off the first item on their to-do list.

They made a big strategic mistake in their insistence on a construction freeze in Jerusalem from the first moment. They paid dearly for it. Now they will try to make up for it, but they will find fairly quickly that the worst of all is still ahead.

Netanyahu is not where they think he is. The reports that the prime minister has offered the Palestinians a state with temporary borders are premature. The plan has existed for a long time. It was created by Shimon Peres and Ehud Barak (and also, separately, by Shaul Mofaz). Just as he did then, Netanyahu has expressed his agreement in secret, but hopes that something will come along to blow up the whole matter, and not move it forward. Prepare for the next crisis.

Friday, April 23, 2010

America must face up to the dangers of derivatives George Soros, Financial Times, April 22, 2010

America must face up to the dangers of derivatives
George Soros, Financial Times, April 22, 2010
Credit default swaps can be used to mount bear raids; in addition to insurance they also provide a licence to kill, writes George Soros.

Thursday, April 22, 2010

Obama Needs a Reset Button on His Own Foreign-Policy Machine: The U.S. president may be a 21st-century leader, but his government is still stuck in the Cold War - Zachary Karabell, Foreign Policy

Obama Needs a Reset Button on His Own Foreign-Policy Machine: The U.S. president may be a 21st-century leader, but his government is still stuck in the Cold War - Zachary Karabell, Foreign Policy:

The Cold War was a struggle that called upon all of those resources, and at times, it was the least costly of those -- ideas -- that were the most effective. Today, with the old world of America, Europe, and Japan economically challenged, with the general contours of market capitalism nearly universally embraced, and with foreign aid a shell of what is was, U.S. foreign policy has essentially been reduced to one tool: guns. In short, the United States is conducting its affairs abroad with a 20th-century tool kit, an antiquated mindset, and poorly allocated resources. The most pressing issue for America's long-term security is the health and dynamism of its economy. And the way U.S. diplomats conduct foreign policy is almost devoid of tools to enhance that.

>A Global Tsunami from Nouriel Roubini's Global EconoMonitor by Nouriel Roubini, Camilla Webster and Shai Baite

A Global Tsunami from Nouriel Roubini's Global EconoMonitor by Nouriel Roubini, Camilla Webster and Shai Baite

An Israeli military strike in Iran would have an earthquake-like impact on today's fragile global economy, and the potential for conflict is not entirely remote.

"Israel cannot live with a reality of a nuclear Iran threat," says Israel's Vice Prime Minister Silvan Shalom. On the other hand, Israel doesn't refer explicitly to a possibility of attack. This ambiguity notwithstanding, Shalom states that Iran, which in his view continues its efforts to obtain nuclear capabilities, is "taking advantage of the weakness of the international community and of the ongoing struggle over hegemony in the Middle East between the United States [on one hand, and] Russia and China [on the other]."

Goldman's rendezvous with reality

Goldman's rendezvous with reality
Robert J. Samuelson, Washington Post, April 21, 2010
Why the SEC case against Goldman Sachs is a moral watershed.

Breaking Up the Banks Simon Johnson, Economix

Breaking Up the Banks
Simon Johnson, Economix, April 22, 2010
An economist argues that a new bill that would limit the size of banks may be the most promising way to overhaul the financial system.

Wednesday, April 21, 2010

FINANCIAL TIMES April 21 2010 Tokyo wobbles on the American alliance By David Pilling

April 21 2010
Tokyo wobbles on the American alliance
By David Pilling

When Japan's prime minister visited Washington this month, Japanese officials lobbied intensely to get him a one-on-one with Barack Obama. In the end, Yukio Hatoyama had to settle for just 10 minutes, and even that during a banquet when the US president was presumably more interested in the appetisers and wine. These things matter in Japan. One senior politician called the put-down – as it was inevitably viewed in Tokyo – "humiliating". He even noted that the Japanese prime minister was shunted to the edge of a group photo, the diplomatic equivalent of banishment to Siberia.

It would be wrong to read too much into these titbits of protocol (though it is always fun trying). But behind the snub lies something real. The US-Japan alliance, the cornerstone of security in east Asia since 1945, has not looked so rocky in years.

There is a proximate cause. Mr Hatoyama's new government has annoyed Washington by reopening negotiations over the relocation of a marine base on the Japanese island of Okinawa. But beyond the immediate is a nagging suspicion that something bigger is afoot. That is the possibility – remote, but real – that the base squabble is an early warning of a strategic realignment as Japan grapples with the fact of China's rise and an erosion of US influence in east Asia.

Ever since 1995, when rage boiled over in Okinawa after the rape by three US servicemen of a 12-year-old girl, the US and Japan have been seeking ways to reduce the island's heavy military burden. The solution worked out, with the then-Liberal Democratic government, was to close down Futenma, a base dangerously close to a big urban centre. In its place, a new runway would be built in a less populated part of the island. The Futenma transfer would trigger a series of moves that would lead to a big reduction of the US presence in Okinawa, culminating in the withdrawal to nearby Guam of 8,000 marines.

The election of Mr Hatoyama's government, whose Democratic Party of Japan ended 50 years of LDP dominance, has thrown the plan into confusion. The prime minister raised the hopes of put-upon Okinawans by suggesting there was no need to build a new base at all. Instead, Futenma could be shut and its functions shifted outside Okinawa or Japan altogether. The only problem was, Mr Hatoyama had no idea where. The US has already rejected all alternatives as virtual non-starters.

Mr Hatoyama, branded as "hapless and (in the opinion of some Obama administration officials) increasingly loopy" by Al Kamen, a Washington Post columnist, has boxed himself in further. This week, he repeated a pledge to resolve the Futenma issue by the end of May. Given the chasm between the US and Japan, that looks reckless. Even some allies have suggested that, should Mr Hatoyama fail, he should resign. Washington would probably not stand in his way. But electoral mathematics dictates that, whatever happens, the US will have to deal with a DPJ administration for several more years to come.

Worried Japanese backers of the alliance say the longer the issue goes unresolved, the more dangerous it becomes. They fear growing anti-base sentiment in Okinawa. That could erupt if, for example, there was a repeat of the 2004 accident in which a helicopter slammed into a university. In such an eventuality, they say, anti-base sentiment could spiral out of control, forcing rash decisions.

That is probably a little far-fetched. The alliance, a bedrock of Japanese prosperity and crucial to US security policy in the Pacific, has survived ructions before. Moreover, any unravelling of the alliance would have profound implications neither side could tolerate. Without the absolute protection of the US and its nuclear umbrella, Japan would either have to develop an independent nuclear capability or forge a new kind of partnership with China. The former is extremely unlikely given Japan's deep nuclear taboo. The latter is almost unthinkable so long as China remains a one-party Communist state and Japan continues to be uncertain of its military intentions. Japanese officials are almost unanimously jittery about China, particularly its development of a blue-water navy.

Even China has not pushed back against the US presence in the Pacific. This has served to keep old regional enmities in check, allowing Beijing to get on with the business of doubling and quadrupling its economy. But as China's power and capability increase, it may begin to rethink its attitude to the US military presence in its backyard.

The new DPJ administration, many of whose senior figures grew up in the anti-Vietnam war era, has openly flirted with the idea of forging a different kind of security arrangement. Ichiro Ozawa, considered the power behind the Hatoyama throne, has gone so far as to suggest the US does not need bases in Okinawa at all. It could make do with the Seventh Fleet alone.

Flirting with the idea of reduced US presence is a luxury of opposition, say alliance supporters. Now the DPJ is in power, it will have to forget such foolishness and drink from the fountain of realpolitik. In the short term, that is probably just what will happen. But look two decades ahead, and it would be a brave person to predict that the status quo can hold.

Copyright The Financial Times Limited 2010.

The Best Thing I Have Read on SEC-Goldman (So Far) from The Baseline Scenario by James Kwak

The Best Thing I Have Read on SEC-Goldman (So Far)
from The Baseline Scenario by James Kwak

Actually, two things, both by Steve Randy Waldman.

Part of Goldman’s defense is that it was in the nature of CDOs for there to be a long side and a short side, and the investors on the long side (the ones who bought the bonds issued by the CDO) must have known that there was a short side, and hence there was no need to disclose Paulson’s involvement. Waldman completely dismantles this argument, starting with a point so simple that most of us missed it: a CDO is just a way of repackaging other bonds (residential mortgage-backed securities, in this sense), so it doesn’t necessarily have a short investor any more than a simple corporate bond or a share of stock does. Since a synthetic CDO by construction mimics the characteristics of a non-synthetic CDO, the same thing holds. (While the credit default swaps that go into constructing the synthetic CDO have long and short sides, the CDO itself doesn’t have to.) Here’s the conclusion:

“Investors in Goldman’s deal reasonably thought that they were buying a portfolio that had been carefully selected by a reputable manager whose sole interest lay in optimizing the performance of the CDO. They no more thought they were trading ‘against’ short investors than investors in IBM or Treasury bonds do. In violation of these reasonable expectations, Goldman arranged that a party whose interests were diametrically opposed to those of investors would have significant influence over the selection of the portfolio. Goldman misrepresented that party’s role to the manager and failed to disclose the conflict of interest to investors.”

Waldman follows this up with an analysis of the premium that Goldman extracted from the buy-side investors and transferred to Paulson (in exchange for its own fee). The point here is that Goldman could have simply put Paulson and the buy-side investors together and had Paulson buy CDS on RMBS directly — but that would have affected the price of the deal, because Paulson wanted to take a big short position. So instead, they created the CDO (a new entity) and then drummed up buyers for it, in order to avoid moving the market against Paulson. The advantage of thinking about it this way is it shows what the function of a market maker is and how that differs from the role Goldman played in this transaction.

The posts are long, so sit back and enjoy.

The Making of American Foreign Policy It's all about domestic politics by Justin Raimondo, April 21, 2010

The Making of American Foreign Policy

It's all about domestic politics

by Justin Raimondo, April 21, 2010

El Al sued for racial profiling Jonathan Cook The Electronic Intifada

El Al sued for racial profiling
Jonathan Cook
The Electronic Intifada
Tuesday, April 20, 2010

The Great Housing Recession ContinuesThomas F. Cooley and Peter Rupert, Forbes, April 21, 2010

The Great Housing Recession ContinuesThomas F. Cooley and Peter Rupert, Forbes, April 21, 2010

Home prices, foreclosures and unemployment.

Monday, April 19, 2010

Terrorism: The Nuclear Summit's 'Straw Man' by Shibil Siddiqi

Terrorism: The Nuclear Summit's 'Straw Man' by Shibil Siddiqi

Gates Memo Seeks 'Military Options' Against Iran

Gates Memo Seeks 'Military Options' Against Iran

SPENGLER How radical Islam might defeat the West: A reprise

How radical Islam might defeat the West: A reprise
Iran has succeeded in horrifying the supine West into submission to its nuclear ambitions, as the specter of military confrontation is too terrible for the US and it allies to bear. This sort of paralysis is what radical Islam reckoned with from the outset. Don't say you haven't been warned. (Apr 19, '10)

China plays it cool on Kyrgyzstan

China plays it cool on Kyrgyzstan
Kyrgyzstan is a key component of Beijing's "go out" strategy towards Central Asia. Two border crossings connect the Xinjiang Uyghur Autonomous Region with Kyrgyzstan, which has replaced Kazakhstan as the number one export market for Xinjiang. Unlike the United States and Russia, though, China has adopted a stance of non-interference. - M K Bhadrakumar (Apr 19, '10)

Banking with piranhas

Banking with piranhas
Even knowledgeable commentators who came close to the details of the Goldman Sachs/John Paulson case appeared reluctant to believe them. Perhaps no one could quite believe that big houses like Goldman would actually treat their smaller customers like so many guppies to be eaten alive by so many piranhas. - Julian Delasantellis (Apr 19, '10)

CHAN AKYA Goldman: The charade of honesty

Goldman: The charade of honesty

The view that key middlemen involved with Goldman Sachs and other finance firms feathered their own nests to the tune of millions of dollars through deals likely to make others lose billions has now been confirmed. The notion that Goldman, JPMorgan, or any other bank, had superior insight into the financial crisis is belied, while the lawsuits to follow from the latest revelations will highlight the real risks of owning bank shares. (Apr 19, '10)

The Iranian Enigma by Patrick Seale

The Iranian Enigma by Patrick Seale
Barack Obama should know that confrontation will only strengthen the hardliners in Iran and weaken the democrats. Engagement would be the best way to dispel whatever danger Iran might pose.

License to Kill by David Cole (The Nation)

License to Kill by David Cole (The Nation)
After 9/11, it's less controversial to kill a suspect in cold blood than to hold him in preventive detention.

Obama’s Bold Nuclear Diplomacy by Patrick Seale

Obama’s Bold Nuclear Diplomacy by Patrick Seale
Whatever the immediate practical outcome, the nuclear summit in Washington last Monday and Tuesday has given an undoubted boost to the standing of the United States -- and of President Barack Obama himself.

Ahmadinejad says, Thank you America by Immanuel Wallerstein

Ahmadinejad says, Thank you America by Immanuel Wallerstein
Thirty years of U.S. foreign policy vis-à-vis Iran seem to have backfired terribly. (Or perhaps we should talk of almost 60 years.) Iran is today stronger than ever, in large part because of U.S. policies.

An American Middle East Peace Plan by Rami G. Khouri

An American Middle East Peace Plan by Rami G. Khouri
If the US government offers a blueprint for Arab-Israeli peace it should first review all the failed mediating efforts of the past 30 years, and chart a new strategy that avoids repeating all the mistakes of the past.

Difficult and More Likely to Succeed by Nadia Hijab

Difficult and More Likely to Succeed by Nadia Hijab
Obama would do well to keep his intentions tucked up his sleeve, go public on what America will not support, and put a brake on Israel’s fast creation of facts on the ground -- while remorselessly pushing the process to a conclusion.

The Lessons of Europe’s Crisis by Patrick Seale

The Lessons of Europe’s Crisis by Patrick Seale
A unified Europe of 500 million people has a greater effect on global affairs than a lone Germany of 80 million. This Chancellor Merkel must recognize in deliberating on aid to Greece. And this, too, is a lesson for the Arab world.

Saturday, April 17, 2010

Friday, April 16, 2010

Bad Faith in the Holy City How Israel's Jerusalem Policy Imperils the Peace Process

Bad Faith in the Holy City
How Israel's Jerusalem Policy Imperils the Peace Process
Rashid Khalidi
April 15, 2010

Summary: The expansion of Israeli settlements in East Jerusalem was a provocation aimed at the United States -- and only made the path toward long-term peace more difficult. If the Obama administration hopes to preserve its role as a broker of future Mideast peace talks, it must hold firm in applying international resolutions on the issue.

RASHID KHALIDI is Edward Said Professor of Arab Studies at Columbia University and the author of Sowing Crisis: The Cold War & American Dominance in the Middle East.

The Israeli government’s announcement in March that it would further expand East Jerusalem settlements was just the latest in a decades-old series of calculated slights to the United States.

Since 1967, virtually every time a U.S. envoy has arrived to discuss the fate of the West Bank or Gaza, the Israeli government of the day has bluntly shown who is really boss, usually with a carefully timed unilateral expansion of Israel’s presence in the occupied territories. Since the 1970s, Israel has illegally settled close to half a million of its citizens in the West Bank and East Jerusalem, not to mention building a barrier mainly inside the West Bank on Arab-owned land that is longer and taller than the Berlin Wall.

Given that for a year the Obama administration has sought a settlement freeze in the West Bank, including East Jerusalem, it is impossible to interpret the latest announcement of settlement expansion in the city as anything but a provocation. (The alternative explanation -- that Israeli Prime Minister Benjamin Netanyahu cannot control his own government -- cannot be taken seriously.) As if on cue, an obedient majority in Congress issued a letter demanding that there be no public discussion of U.S.-Israeli differences. This, however, has not ended the controversy.

Although this episode has revealed that some things never change, it has been unusual in the sense that U.S. administrations usually take great care to avoid offending the American Israel Public Affairs Committee (known as AIPAC). Yet, this year, senior officials suggested that unconditional U.S. support for Israel, far from serving U.S. national interests, may in fact jeopardize them. The Israeli paper Yediot Ahronot reported that Vice President Joe Biden said as much to Netanyahu in March; the message was reiterated in a statement by Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, and in the congressional testimony of the head of the United States Central Command, General David Petraeus, who argued that “Arab anger over the Palestinian question limits the strength and depth of U.S. partnerships with governments and peoples [in the region].”

This is nothing new. It has been true at least since the end of the Cold War and the beginning of the first Gulf War, when the last shred of strategic justification for extensive U.S. support for Israel disappeared. After 1991, as the U.S. military presence grew in the Middle East, Washington’s overt bias toward Israel became a growing liability for the United States.

The intense media coverage of the recent diplomatic crisis has largely obscured what is actually happening in East Jerusalem, where the controversy began. As usual, given the media’s obsession with U.S. and Israeli perspectives, there were few, if any, Palestinian voices to point out precisely what each new housing unit, each fresh expulsion of Arabs from their homes, and each new strategic colony in East Jerusalem means for the 200,000 Arabs who live in the city, for the future status of Jerusalem, and for the possibility of a resolution to this conflict.

One telling problem was the media’s widespread use of the Israeli terms “disputed” and “neighborhoods” to describe East Jerusalem's status and the illegal Jewish-only settlements proliferating there. There is nothing disputed about East Jerusalem’s status under international law as understood by every country besides Israel: it is universally considered occupied territory. Similarly, Israeli settlements in the parts of the city that lie across the Green Line are in clear contravention of the Fourth Geneva Convention, which forbids an occupying power from moving its own population into occupied territory.

Jerusalem is the slated location for the capital of an independent Palestinian state, and this is not a matter to be haggled over as far as the Palestinians and Arab and Islamic leaders are concerned. At least 40 generations of leading figures in Palestine’s and the Islamic world’s political, military, religious, and intellectual history -- ranging from generals in Saladin’s armies and Sufi saints to great scholars and distinguished judges -- are buried in the ancient Mamilla cemetery, located in present-day West Jerusalem. Part of this great historic landmark is now being excavated in order to pave way for a “Museum of Tolerance” to be built by the Los Angeles–based Simon Wiesenthal Center, despite the protests of the families of those buried there and of many leading Israeli academics and organizations. Its completion would erase not only part of Jerusalem’s Palestinian and Islamic heritage but also part of the heritage of all mankind that makes this city so important to the entire world.

Today, Jerusalem is the geographic center and communications hub of the West Bank. By walling the city off from its Arab hinterland and building fortresslike settlements in concentric rings around the city -- and, increasingly, within its remaining Arab neighborhoods -- Israel has succeeded in fragmenting and isolating Arab population centers within the city. These settlements also hinder the flow of north-south traffic through the West Bank, leaving Israel as the master of a terrain speckled with tiny Bantustan-esque islands of Palestinians.

One reason Israel continues to build settlements is that, according to the so-called Clinton parameters laid down in 2000, a final Israeli-Palestinian agreement would grant sovereignty over Jewish-occupied areas to Israel, and Palestinian-inhabited areas to the new Palestinian state. Indeed, well over a decade of failed negotiations have only led to an acceleration of Israel’s land grab in the Holy City. Israeli planners have spent this time pushing settlers into heavily Arab-inhabited areas of the city, such as Sheikh Jarrah, Silwan, and Abu Dis, in order to create fresh “facts on the ground” -- a tactic used by the Zionist movement for over a century in order to obtain control over more and more of Palestine.

The Obama administration’s more robust reiteration of longstanding U.S. positions on settlement, occupation, and East Jerusalem has made the current Israeli government extremely uncomfortable. Moreover, these days, groups that unconditionally support Netanyahu’s policies, such as AIPAC, no longer have the following that they like to claim they do. It is worth noting that in addition to the increasingly vocal segments of the U.S. Jewish community willing to question such Israeli policies, 78 percent of Jewish voters supported Barack Obama in 2008 despite establishment Jewish groups’ clear preference for Senator John McCain (R-Ariz.) and his wholesale support of the Likud Party’s agenda.

It is exceedingly important today that the U.S. government emphasize such bedrock principles as the inadmissibility of the acquisition of territory by force, the illegality of settlement in all occupied territories, and the legally invalid nature of “actions taken by Israel, the occupying power, which purport to alter the character and status of the Holy City of Jerusalem,” in the words of a June 1980 Security Council resolution. These are not simply elements of any just and lasting future resolution of the conflict; they are also pillars of a world order that rejects the law of the jungle and is not beholden to the distortions of a slick public relations machine. They are relevant whether or not the two sides are on the cusp of substantial final-status negotiations that address the issue of Jerusalem.

Many obstacles are keeping Israelis and Palestinians from reaching a final-status agreement. First among them is the U.S. government’s reluctance to allow Fatah and Hamas to establish a consensus political platform and produce a coalition government that can negotiate effectively. It is foolish to expect a weak and divided Palestinian polity to deliver a final settlement or stand by it. Ultimately, the Palestinians must resolve their own debilitating internal problems themselves, but the United States must cease placing diplomatic and legal obstacles in the way of such political reconciliation. Without it, there can be neither successful negotiations nor an agreement that has the slightest chance of obtaining legitimacy in the eyes of a majority of the Palestinian people.

When it comes to Jerusalem, a final-status negotiation that begins from the status quo -- the result of successive Israeli governments establishing settlements as faits accomplis -- will be unacceptable to any Palestinian leader. Even a return to the status quo ante of 2000 is insufficient, given Israel’s aggressive reshaping of Jerusalem’s surface and subterranean landscape since the 1980s. One need only walk through the streets of Jerusalem with a sense of what they once looked like to understand how takeovers of key buildings; strategically placed new housing developments, roads, and infrastructure; extensive archeological excavations; and the digging of a vast network of tunnels under and around the Old City were intended to fragment Arab East Jerusalem and permanently incorporate it into Israel.

In the end, only a negotiation in which all of Jerusalem is placed on the table will suffice. This is not only the right thing to do; such a posture is rooted in a solemn U.S. obligation made in the all but forgotten U.S. letter of assurances to the Palestinian delegation issued on October 18, 1991, at the outset of the Madrid-Washington-Oslo sequence of Palestinian-Israeli negotiations. In it, the U.S. government declared that nothing should be done by either side that would “be prejudicial . . . to the outcome of the negotiations,” notably “unilateral acts that would exacerbate local tensions or make negotiations more difficult or preempt their final outcome.” If these words meant anything, they meant that the United States would oppose any act seeking to unilaterally resolve issues slated for discussion during final-status negotiations.

The expansion of settlements in East Jerusalem (described in the 1991 letter as “an obstacle to peace”) and the separation of the city from its Arab hinterland fit this category. Once the United States issued the letter, the Palestinian delegations to the 1991-93 Madrid and Washington negotiations, to which I was an adviser, insisted that keeping with the letter’s spirit meant resolutely opposing such incendiary acts. We argued that there was no point to negotiations if unilateral and irreversible Israeli actions were deciding the fate of the very lands, buildings, and hilltops at issue. And what was a letter of assurances worth if the U.S. government would not or could not give it teeth?

Presidents George H.W. Bush, Bill Clinton, and George W. Bush failed to prevent settlement expansion and the closure and encirclement of East Jerusalem. In consequence, none of them resolved the issue of Jerusalem, and every one left the situation far more fraught than it had been when he entered office.

The biggest obstacle the Obama administration must now overcome is the legacy of these two decades of failed policies. If the president wants a successful outcome to any future negotiations, he should decisively reject the failed approach of his predecessors and resolutely stress the positions of every previous administration as laid down in Security Council resolutions and international law. Such a clean break from the past is not enough to ensure a rapid and successful resolution of the Jerusalem issue, but it is an essential step toward producing the lasting and equitable peace that the people of that city and the region deserve.

Thursday, April 15, 2010

Will America Buy a New Climate Policy?

Will America Buy a New Climate Policy?

By James K. Boyce, April 15, 2010
from Foreign Policy In Focus
Congress is deadlocked on the issue of climate change. But a new bill, with bipartisan support, has a good chance of breaking the deadlock and actually reducing U.S. carbon emissions.

Originally published in Triple Crisis

Without much fanfare, U.S. legislators last December unveiled a new climate bill that just might succeed in breaking the political gridlock that has blocked action on global climate change. The bill, co-sponsored by Senator Maria Cantwell (D-WA) and Susan Collins (R-ME), is a sharp departure from the cap-and-trade bill that passed the House of Representatives last June but subsequently died in the Senate.

The Carbon Limits and Energy for America's Renewal (CLEAR) Act proposed by Cantwell and Collins is a "100-75-25-0" policy:

* 100 percent of the permits to bring fossil carbon into the U.S. economy will be auctioned. Polluters won't get any permit giveaways, and there will be no scope for speculation and market manipulation by Wall Street traders.
* 75 percent of the auction revenue is recycled directly to the public as equal per-person dividends. The majority of households will receive more in these monthly dividends than they pay in higher energy costs.
* 25 percent of the auction revenue is dedicated to investments in energy efficiency, clean energy, adaptation to climate change, and assistance for sectors hurt by the transition away from the fossil-fueled economy.
* Zero offsets are allowed. In other words, polluters can't avoid curbing use of fossil fuels by paying someone else to clean up after them.

The bill's political prospects are uncertain. The coal and electric utility lobbies will fight for the permit giveaways of the moribund House bill. Wall Street and the financial sector — with about 130 lobbyists working the climate policy issue in Washington — want a carbon market as a new outlet for their creative talents. But the cap-and-dividend alternative has emerged from the political shadows as the leading candidate to replace cap-and-giveaway-and-trade.
International Implications

The design of national policies to curb fossil carbon emissions in many ways is distinct from the architecture of an international accord. National policies deal with how to cut emissions and allocate distributional impacts within countries. International accords deal with how to allocate emission rights across countries and raise funds for North-South financial transfers (aka climate debt service) for mitigation and adaptation. But the two policy arenas are not entirely disconnected.

Passage of the new bill could improve the prospects for an international deal in three ways.

First and foremost, CLEAR would remove a key impediment to an international agreement: the refusal of the U.S. government — in particular, the Senate — to act on climate change. CLEAR would not only establish the architecture for U.S. implementation of any international agreement on emission reductions, but also give the U.S. public an incentive to support more ambitious targets. A tighter cap would mean bigger dividends and hence bigger benefits to most families. Finally, CLEAR could inspire others to consider this approach. Studies of other countries, such as China and Hungary, show that a cap-and-dividend policy would benefit the majority of their people, too.

The bill doesn't address U.S. contributions to climate change mitigation and adaptation in other countries. Modest transfers could be financed from the bill's investment fund. But such transfers would not meet either the need for assistance or the commitments required for an international accord. Ultimately, however, international transfers shouldn't be financed from carbon permit revenue, which is a regressive tax in the absence of dividends, instead of general government revenue.
A Part of the Whole

CLEAR can be one element of a comprehensive U.S. climate policy. Like anything that keeps "oil in the soil" and "coal in the hole," it will make fossil fuels more costly. The resulting price signals will drive firms and consumers to invest in energy efficiency and renewables. By recycling most of the carbon revenue back to households as dividends, CLEAR can head off a backlash against higher energy prices and win durable public support at a time of general economic difficulty.

Other elements of smart climate policy include public investment — notably in R&D, retrofitting buildings, mass transit, and a "smart grid" for electricity — and regulatory standards that work where price signals can't reach.

If America clears the way for CLEAR, it will not be the last word. But it will be a big first step.

A version of this FPIF commentary will also appear on the Triple Crisis Blog, global perspectives on finance, development, and the environment.

Here's Obama's Secret Plan To Drastically Reduce The Deficit And Save The Economy

Here's Obama's Secret Plan To Drastically Reduce The Deficit And Save The Economy from Clusterstock by The Mad Hedge Fund Trader
(This guest post comes courtesy of the Mad Hedge Fund Trader)

Obama's Secret Plan for Economic Revival. Obama's strategy to extricate the US from its dire economic straights has been leaking out from Washington over the past few weeks. How does he wean the country off of massive stimulus programs, zero interest rates, and ballooning deficits?

The former community activist from Chicago intends to let the economy do the heavy lifting, bringing the budget deficit down from a suicidal 10.6% of GDP to 3% of GDP, which can then be sustained indefinitely with a 3% real economic growth rate. Some 60% of this incredible shrinkage will be achieved through tax hikes, and 40% via spending cuts, which together will generate the needed $938 billion in savings. Here is the breakdown:

$331 billion-"bank responsibility fees" designed to address "too big to fail"
$252 billion-expiring Bush tax cuts for couples earning over $250,000 a year
$250 billion-scaling back the wars in Iran and Afghanistan
$105 billion-already announced spending freezes

I have a few problems with this scenario. What if the economy doesn't grow at 3%? My own long term growth forecast is 2.5%. That creates a shortfall of $710 billion right there. What if interest rates go up? Double short term rates and the government's debt service leaps from $385 billion to $770 billion. That's a hole and a half. Are republicans going to cooperate on any of this? Only when Hell freezes over. If the Obama plan falls short of expectations, where will he go to raid the additional funds?

Put a national VAT tax, savings squeezed out of health care though a reduction of services, and cut backs in entitlements at the top of the list. If you think the noise coming out of Washington is unbearable now, you ain't seen nothin' yet. To me it all adds up to a collapse of the 30 year Treasury bond market (TBT). Funny, it seems that no matter where I focus my research, all roads lead to the TBT. Use this dip to re-establish longs, and set yourself up for your fourth round trip this year.

Get more market commentary from The Mad Hedge Fund Trader

Commentary from Middle East Roundtable Edition 9 Volume 8 - April 15, 2010 The Petraeus Statement
Middle East Roundtable

Edition 9 Volume 8 - April 15, 2010

The Petraeus Statement

• A taboo being challenged in Washington - Saad N. Jawad
Israel has become a burden and liability to America.

• We need to take this seriously - Daniel Kurtzer
The US gains substantial Arab support for its regional policies when the US is active in the peace process.

• Little Baghdad - Mark Perry
Unfortunately, the Petraeus controversy has failed to spark a useful debate about US-Israel relations.

• Israeli policy-makers, take note - Itamar Rabinovich
Barack Obama as candidate and as president endorsed this linkage.

A taboo being challenged in Washington
Saad N. Jawad

Although some have quibbled with what exactly he said, there is little doubt that General David Petraeus, the commander of the US Central Command who also served as commanding general of the multinational forces in Iraq from January 2007 to September 2008, was voicing broad US dissatisfaction with Israel and its policies vis-a-vis the Palestinians when he was recently quoted as saying that the Arab-Israel conflict is fomenting anti-US sentiments in the Arab world. Significantly, he went further to imply that this conflict is putting the lives of US soldiers in jeopardy, and that Israeli intransigence is harmful to US interests.

Petraeus' attitude is not new in American circles. It represents the realistic views and attitudes that have started to develop in the US since the publication in 2006 of two books, one by John Mearsheimer and Stephen Walt about the harm to US interests the pro-Israel lobby in the US does (Walt by the way was Gen. Petraeus' advisor when he did his PhD at Princeton in 1987), and one by former president Jimmy Carter, "Palestine: Peace not Apartheid".

It would appear that Petraeus, profiled in 2009 by Foreign Policy Magazine as eighth on its list of "Top 100 Global Thinkers" and a PhD holder in international relations, has also come to believe that the unconditional support the US is giving Israel is the real cause behind the antagonistic attitude the people of the Arab and Islamic regions hold toward the US. He is aware that the US, unlike Britain and France, had no colonial past in the Middle East until 2003 and the occupation of Iraq.

In 1956, most Arabs respected the position of US President Dwight Eisenhower during the war against Egypt. Arabs and Muslims held no grudge against the US until 1967, when America wholeheartedly and unreservedly supported the Israeli aggression and occupation of more Arab land. All terrorist and extremist movements in the area that have targeted the US were established because of and are nourished by the expulsion and dispossession of the Palestinian people, their continued killing, especially the unwarranted and excessive use of force in Gaza last year, the Israeli occupation of Arab land and the failure of the US to adopt a balanced position.

When he served in Iraq, Petraeus would have seen firsthand the catastrophic consequences of the war and subsequent occupation, and he will be aware of the role Israel played in promoting and pushing for that war. It is not a secret anymore that the Zionist lobby and pro-Israel neoconservatives in Washington pursued the occupation of Iraq to fulfill an Israeli agenda. Philip Zelikow, a former member of President George W. Bush's Foreign Intelligence Advisory Board and a counselor to Secretary of State Condoleezza Rice, even at the time said that, "the real threat from Iraq was not a threat to the US.... The unstated threat was the threat against Israel.... The American government does not want to lean too hard on it rhetorically because it is not a popular sell."

Petraeus has surely come across the Israel factor in and around Iraq during his service. Israel is one significant element keeping Iraq chaotic. And for any objective and balanced observer, what is happening in Iraq undermines the interests of the US though it serves Israeli interests. Israeli leaders and the influential lobby in Washington were pushing the US administration as far back as 1990 to attack Iraq and remove Saddam Hussein's regime, and managed to keep the country under draconian and inhuman sanctions until 2003 and the invasion. But US plans to create a stable base in Iraq were foiled by a series of unwarranted and unstudied decisions taken immediately after the occupation, decisions that were all produced by people loyal to Israel rather than the US.

As a military man, Petraeus must have realized that Israel is no longer a strategic ally or necessity for the US. It may have been an asset during the Cold War when the US needed to contain the Soviet Union's attempts to infiltrate the oil rich Middle East. Following the collapse of the Soviet Union, however, Israel has become a burden and liability to America. Because of Israel, the US has vetoed more than 32 resolutions in the Security Council, is paying $3 billion a year in cash support and is furnishing it with all its military machinery.

What is the payback? Israel embarrasses the US and Europe with its intransigence and defiance. The encirclement and bombing of Gaza and the assassination of a leading member of Hamas in the United Arab Emirates using European passports are just the latest examples.

For almost six decades, the subject of Israel's influence in US policy-making circles and the harmful effect it is having on American interests was a taboo subject in Washington. It is not anymore. Slowly but surely, a space is being opened up in the US for an open and honest discussion about the US-Israel alliance and the benefit of antagonizing a whole region for the sake of an ally that is no more than an economic burden, an ally that was ready to pass classified US material to the Soviet Union to get more exit visas for Jews to migrate to Israel, and an ally that was ready to provide China with sensitive military technology for its own interest.

Maybe one should not expect a major shift in Washington in the short term, but it is happening. The latest CIA report, that cast doubt over Israel's survival beyond the next 20 years, is another indication of this shift.- Published 15/4/2010 ©

Saad N. Jawad is a professor of political science at Baghdad University.

We need to take this seriously
Daniel Kurtzer

General David Petraeus denies saying that the persistence of the Arab-Israel conflict endangers American troops in the region. Vice President Joseph Biden also denies saying this. That part of the story should thus be laid to rest.

What Petraeus did say, however, is quite important. In written testimony to the Senate Armed Services Committee on March 16, Petraeus said:

The enduring hostilities between Israel and some of its neighbors present distinct challenges to our [CENTCOM] ability to advance our interests in the AOR [area of responsibility]. Israeli-Palestinian tensions often flare into violence and large-scale armed confrontations. The conflict foments anti-American sentiment, due to a perception of US favoritism for Israel. Arab anger over the Palestinian question limits the strength and depth of US partnerships with governments and peoples in the AOR and weakens the legitimacy of moderate regimes in the Arab world. Meanwhile, al-Qaeda and other militant groups exploit that anger to mobilize support. The conflict also gives Iran influence in the Arab world through its clients, Lebanese Hizballah and Hamas.

Petraeus' statement to the Senate is not surprising to those of us who have served and traveled in the Arab world. We may not like what we hear, and some of what is said is highly exaggerated; but these are! constant themes expressed by Arab interlocutors, including friends of the United States. We need to take this seriously.

US diplomacy in the Middle East has always involved a balancing act among competing interests that include: deep friendship with Israel; friendship with moderate Arabs; commitment to a peace settlement; preventing external aggression or internal destabilization; and ensuring the security of energy exports. American officials usually insist that each of these interests can and should be pursued in and of itself, unlinked to any other issue; but they realize that America's ability to secure these interests is inextricably intertwined with the Israel-Arab conflict in the minds of those in the region.

Recent history has shown that the US gains substantial Arab support for its regional policies when the US is active in the peace process--even if such activity does not lead to success. Arab officials I interviewed for a book project were unanimous in saying that their governments would extend themselves to help the US when they could demonstrate US activity in support of peace, and they cited the experience of the Clinton and Bush administrations. The opposite also holds true.

The implication of the Petraeus statement is thus two-fold: first, that Arab views of the US rise and decline on the basis of their views toward the Israel-Arab conflict; and second, that the US can influence those Arab views by adopting a strong policy in support of peace and a policy perceived as fair and balanced.

Petraeus' testimony appeared just as the recent US-Israel mini-crisis over settlements/Jerusalem heated up, and it was read--erroneously--as timed to influence US policy in the mini-crisis. Actually, the Petraeus testimony is a required annual exercise that normally doesn't get much coverage among the US-Israel policy community, since the testimony is a very lengthy assessment of CENTCOM activities and plans. The coincidence of its appearance at the time of US-Israel tensions, however, has given it wide distribution and added salience this year.

America's current top regional priorities are the scheduled withdrawal of American forces from Iraq and the effort to stop Iran's nuclear weapons program. For US policy-makers, it is imperative to clear the decks of any other issue that impedes their ability to secure these objectives. Thus when America's top regional general says that the persistence of the Arab-Israel conflict hurts his effort to achieve core US national interests, the president, Congress and the American public sit up and pay attention.

The issue is no less important and, in many ways, very similar for Israeli policy-makers and the Israeli public. The government of Israel has identified the Iranian nuclear issue as its number one priority, and the government surely understands that the effort to push back this program--short of military action--will depend on concerted international action, through diplomacy and/or sanctions. If the Arabs have identified as their top priority, or one of their top priorities, progress in the peace process and a more balanced and active US role, it would seem prudent for the Israeli government to agree--not only to serve the larger goal of containing Iran, but because peace is also clearly in Israel's interest. The intersection of these interests and warning signs can thus be transformed from a problem into an advantage: that is, activate a serious peace process with a serious American role and get in return the kind of Arab support Washington will need to curb Iran's aggress! ive intentions.

Some may argue that this is peace process doubletalk, that is, an argument to get Israel to move on the peace process based on faulty American assessments. Indeed, it is possible that Arabs are telling Americans what they believe the US needs to hear, rather than some objective reality. But since we know that Arabs have acted in the past based on these views and are likely to act again in the future according to these views, wouldn't it behoove both the US and Israel to take note?- Published 15/4/2010 ©

Daniel Kurtzer holds the Abraham Chair in Middle East Policy Studies at Princeton University's Woodrow Wilson School. He served previously as United States ambassador to Egypt and to Israel.

Little Baghdad
Mark Perry

When, at the end of World War II, George Marshall received word that Germany had surrendered, he put! on his best uniform and visited Harry Truman. "Mr. President," he said. "I am pleased to announce that we've defeated Germany." Truman smiled: "I'm happy to hear that, General," he responded, "because for a while there I thought we were fighting the British."

The British and Americans worked well together in World War II, but even the best alliance is not seamless: Marshall's protege General Joseph "Vinegar Joe" Stilwell referred to the British as "f-cking pigs", Douglas MacArthur refused to cooperate with them during the Pacific War ("they just want their colonies back"), and Eisenhower's friendship with Winston Churchill earned him the enmity of George Patton: "Ike's the best general the limeys have," he said.

Franklin Roosevelt was only marginally less critical. He had two goals in the war: to defeat the Axis powers--and to end the British Empire. Roosevelt blamed the British for the war, describing British colonialism as one of its primary causes. Churchill was uncomfortably aware of this, but he knew the facts: the UK needed America not only to defeat Germany, but to survive. So it was with a sense of relief that Churchill welcomed December 7, 1941: it meant that his country was saved. But he was careful: thousands of dead at Pearl Harbor were not cause for celebration.

Sadly, some of Israel's most ardent American friends have failed to follow Churchill's example. In the aftermath of 9/11, the New Republic's Martin Peretz ("Israel, The United States, and Evil") was nearly gleeful. Finally, America could "grasp Israel's human losses"; finally the Israeli-American alliance was "bonded in blood"; finally "we Americans no longer need any instructions in how it feels to be an Israeli." Put another way, 9/11 might have been bad for America, but it was good for Israel.

Really? The brain-dead view of our history holds that we defeat our enemies and come home with our views intact. The reality is quite different: we defeat our enemies (or not, as the case may be) and then we marry them. Or set them up in business. There's a neighborhood called "Little Saigon" blocks from where I live. Then too, fighting people is a subversive experience: we learn about them. Once upon a time it was acceptable to refer to people as "dirty Japs," or "filthy Huns" or "gooks"--or, more recently, "Hajis". Not anymore. They're now our neighbors.

It's useful to keep all of this in mind when reflecting on what General David Petraeus said about the Israeli-Palestinian conflict several weeks ago: that the conflict "foments anti-American sentiment, due to a US perception of favoritism toward Israel." Petraeus' public words went further: the problems caused by the Israeli-Palestinian conflict head the list of challenges faced by the US in the region.

The outpouring of rage among the pro-Israel advocates was interesting: that Petraeus never said what he said, that he said it but didn't mean it, or that he said it but it only showed his ignorance. This last view--repeated by columnist Andrew McCarthy in the National Review ("Petraeus' Israel Problem")--holds that "Petraeus is echoing the narrative peddled incessantly by leftists in the government he serves and by Islamists in the countries where he works." What Petraeus really needs, McCarthy says, is a better understanding of the "totalitarian, iniquitous, misogynistic, homophobic, virulently anti-western and anti-Semitic culture that dominates Muslim countries."

Those who believe Petraeus, meanwhile, are "leftists," "terrorist groupies" or "Hizballah flunkies".

My God, man, I don't even hear this tripe in Israel. Rarely, if ever, do you hear anyone articulate Petraeus' real message: that if the United States wants to win the war on terror we have to address the region's most fundamental issues.

Of course, my country's senior military officers aren't delusional; they know that resolving the Israeli-Palestinian conflict won't end the war on terror. But they're convinced that it will remove an arrow from the quiver of our enemies. And even if it doesn't, isn't it worth doing anyway? And there's another message. There's not only a deep strain of anti-colonialism in the American military, there's a strong sense that not only does America come first, no one comes second. We're willing to fight with our friends as a part of a coalition (in fact, that's our preference), but we'll only do so if we're the ones in charge. We're even willing to shed our blood with our allies, but only for our interests, not theirs. The message was clear for Churchill and it is just as clear for Binyamin Netanyahu: we don't need to prove that we're committed to Israel's security, they need to prove that they're committed to ours. Israelis can do that by working to resolve their conflict with th! e Palestinians. If they do, they'll remain a strategic asset and an ally. If they don't, they won't. It's just that simple.

Unfortunately, the Petraeus controversy has failed to spark a useful debate about US-Israel relations. The language surrounding the controversy has been divisive and polarizing. It'll only get worse, especially if Israel attacks Iran. If that happens, Americans will die. At which point, I'm quite sure, we'll hear Andrew McCarthy extol the virtues of killing Iranians: they're a bunch of "misogynistic", "homophobic" "anti-Semites" anyway so what the hell. And (I'm also quite sure) that even as the bodies of our dead arrive at Dover Air Force Base, we'll hear Martin Peretz tell us that while all those dead young men and women are bad for America, they're actually good for Israel. Because the lives lost will reinforce our "bond of blood" with our Israeli allies.

But don't try to peddle that garbage in the Pentagon.- Published 15/4/2010 ©

Mark Perry is the author of Partners in Command, George Marshall and Dwight Eisenhower in War and Peace. His most recent book is Talking To Terrorists (Basic Books, 2010)

Israeli policy-makers, take note
Itamar Rabinovich

What General David Petraeus said in his testimony before the Senate's Armed Services Committee on March 16, and the manner in which his statement was quoted, represented and interpreted, must be understood within the context of the charged atmosphere in Washington regarding US-Israel relations and the Israel-Arab peace process. The president of the United States and the prime minister of Israel are in open disagreement over these issues. Recently, a respected academic raised the question of dual loyalty in his blog. Aga! inst this backdrop, a statement by one of America's most prominent generals--head of the Central Command, who holds military responsibility and authority for most of the Middle East--that points to a negative linkage between America's support for Israel and the success and safety of its soldiers in Afghanistan and Iraq, is bound to become a controversial issue.

The controversy begins with the question of what General Petraeus actually said. Misquotation and misinterpretation by anti-Israel bloggers prompted a counter blog by the conservative author Max Boot. In his "Commentary" blog of March 18, Boot argued that Petraeus was both misquoted and quoted out of context and pointed to the discrepancy between the written text and the general's oral presentation.

Unlike Boot, I think that the written statement is important. But the paragraphs referring to Israel should indeed be put in context. In the first part of the written testimony, Petraeus speaks of "US interests and the most significant threats to them". He mentions and elaborates on a few such threats: "Instability in Afghanistan and Pakistan, Iran's destabilizing activities and policies, instability in Iraq and in Yemen". This list is then followed by a second category, "Non-military challenges to security and stability". He points to eleven such challenges, the first of which is "insufficient progress toward a comprehensive Middle East peace":

The enduring hostilities between Israel and some of its neighbors present distinct challenges to our ability to advance our interests in the AOR [area of responsibility]. Israeli-Palestinian tensions often flare into violence and large-scale armed confrontations. The conflict foments anti-American sentiment, due to a perception of US favoritism for Israel. Arab anger over the Palestinian question limits the strength and depth of US partnerships with governments and people in the AOR and weakens the legitimacy of moderate regimes in the Arab world. Meanwhile, al-Qaeda and other militant groups exploit that anger to mobilize support. The conflict also gives Iran influence in the Arab world through its clients, Lebanese Hizballah and Hamas.

While he did not quite say that Israel and its policies were jeopardizing the lives of US soldiers, the general or the staff member who actually authored the text adopted the first of two conflicting narratives.

The first narrative has its roots in the heyday of British imperial power in the Middle East. It was then argued by several policy-makers and analysts that there was a mutual bond between Britain and Arab nationalism, but Britain's support for "the Jewish National Home" in Palestine and its pro-Zionist policies (such as they were) poisoned Britain's relationship with the Arab world. When the US displaced and succeeded Britain as the principal western power in the Middle East, this narrative was transplanted into an American context. The US, so the argument went, had no imperial and colonial past in the Middle East and the sole reason for Arab support for the Soviet Union was America's support for the state of Israel.

The counter-narrative argues that this was at best a naive argument. Britain was hated because it colonized and dominated much of the Arab world and tried to hang on to its empire in the age of de-colonization. When America succeeded Britain, it did not acquire colonies in the Middle East, but created dependencies, exploited oil resources, built military bases, engineered coups d'etat and supported autocratic regimes. Support for Israel did not help with Arab and Muslim public opinion, but was not a prime reason for anti-US sentiments.

The debate between the two narratives was given a new twist by Henry Kissinger in the 1970s. He told Arab interlocutors that Washington was Israel's friend and protector but that precisely for this reason it was in their interest to come close to it. Washington and not Moscow could get Arab states the land they lost in 1967. Egyptian President Anwar Sadat was the first to accept this argumentation. His archenemy, Syrian President Hafez al-Assad, appeared to follow suit in 1991, but did not complete the transition. The Israeli-Palestinian signing ceremony in the White House in September 1993 seemed to be a culmination of this new process.

This was fine as long as the US was orchestrating a functioning Arab-Israel peace process. With the onset of a new decade and a new century, the situation was transformed by several developments: the collapse of the peace process and the exacerbation of the Israeli-Palestinian conflict, the terrorist attacks on the US mainland, the US invasion of Iraq and Afghanistan, the apparent conflict between George W. Bush's America and large parts of the Muslim world, and Iran's emergence as a major regional power and a leader of the "resistance camp", namely resistance to the US and Israel.

These developments revived the debate between the two narratives. The Hamilton-Baker commission of 2006 endorsed the notion of linkage and argued that for the US to emerge successfully from Iraq, it had to revive an Arab-Israel peace process. Barack Obama as candidate and as president endorsed this view.

Israeli policy-makers should take note of the fact that a prominent US general (or his staff) either adopted the same point of view or thought that it should be represented in his testimony in Congress. They should also take note that in the text of this testimony the Iranian nuclear issue does not receive the prominence that Israel would have expected it to have.- Published 15/4/2010 ©

Itamar Rabinovich, Israel's ambassador to the US in the mid-1990s, is the Ettinger Professor at Tel Aviv University. He is also affiliated with NYU and The Brookings Institution.

-------------------------------------------------------------------------- is an internet forum for an array of world perspectives on the Middle East and its specific concerns. It aspires to engender greater understanding about the Middle East region and open a new common space for world thinkers and political leaders to present their viewpoints and initiatives on the region. Editors Ghassan Khatib and Yossi Alpher can be reached at and, respectively.

U.S. Senate Hearing -- Iran Is 3 - 6 Years From A Deliverable Nuclear Weapon

U.S. Senate Hearing -- Iran Is 3 - 6 Years From A Deliverable Nuclear Weapon

Obama Administration Says Iran Still Three to Five Years From Usable Nuclear Weapon -- Defense Tech

A revealing exchange at today's Senate Armed Services Committee hearing on Iran's nuclear program that featured some of the Obama administration's defense policy heavy hitters. Things got interesting when director of military intelligence, Army Lt. Gen. Ronald Burgess, said Iran could produce enough highly enriched uranium for a nuclear bomb in one year.

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More News On Iran's Nuclear Program

Generals Assess Iran's Nuclear Powers -- New York Times

Iran could have nuclear weapon in 3-5 years: top US official -- AFP

U.S.: Iran Could Build Nuclear Weapon In A Year -- Radio Free Europe

U.S. Says Iran Capable of Building Weapon -- Wall Street Journal

Pentagon: Iran needs 3-5 years to build usable atom bomb -- Washington Post/Reuters

Iran not close to nuclear threat, says US -- Financial Times

Iran atomic bomb possible 'within six years' -- BBC

US officials: Usable Iran bomb not imminent -- AP;#entry1099175

Obama Insists US Making Progress In Afghanistan -- Yahoo News/AFP

SYDNEY (AFP) – President Barack Obama hit back at claims the United States had stalled in Afghanistan and vowed foreign forces would not be needed "in perpetuity", in a rare Australian TV interview aired on Thursday.

Obama, speaking to public broadcaster ABC's 7.30 Report in Washington, also backed President Hamid Karzai to lead Afghanistan into the 21st century, dismissing recent controversies.

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Obama Insists US Making Progress In Afghanistan -- Yahoo News/AFP

Obama: We Won't Be In Afghanistan 'In Perpetuity' -- USA Today

Obama: We Won't Be In Afghanistan 'In Perpetuity' -- USA Today

President Obama has re-affirmed his pledge to begin pulling out of Afghanistan in mid-2011, saying "we can't be there in perpetuity."

Obama also told the Australian Broadcasting Corp. he disputes the notion that the war in Afghanistan is getting worse.

"I do think that what we have seen is a blunting of the momentum of the Taliban, which had been building up in the year prior to me taking office," Obama said during the interview, designed in part to preview his visit to Australia in June.

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Gates Says U.S. Has Conventionally Armed ICBMs -- Defense Tech

Gates Says U.S. Has Conventionally Armed ICBMs -- Defense Tech

Yesterday, on NBC's Meet the Press, Defense Secretary Robert Gates may have revealed the existence of a new weapon in America's arsenal, a conventionally-armed ICBM. It was thought development and deployment of conventionally tipped ICBMs was still years away; a prototype is scheduled for a test flight next month.

Responding to a question from NBC's David Gregory on the ability to deter nuclear armed rogue states, Gates said: "We have, in addition to the nuclear deterrent today, a couple of things we didn't have in the Soviet days… And we have prompt global strike affording us some conventional alternatives on long-range missiles that we didn't have before."

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More News On Conventionally Armed ICBMs and Prompt Global Strike

Prompt Global Strike: World Military Superiority Without Nuclear Weapons -- OpEdNews

U.S. looks to nonnuclear weapons to use as deterrent -- Washington Post

Moscow alarmed over prospect of long-range missiles -- Sydney Morning Herald

The New START Treaty does not contain any constraints on current or planned U.S. conventional prompt global strike capability. -- U.S. Department of Defense
Conventional Prompt Global Strike
Bureau of Verification, Compliance, and Implementation
Fact Sheet

So Much For That Special U.S. - Israel Relationship Obama Speech Signals A U.S. Shift On Middle East -- New York Times

So Much For That Special U.S. - Israel Relationship
Obama Speech Signals A U.S. Shift On Middle East -- New York Times

WASHINGTON — It was just a phrase at the end of President Obama's news conference on Tuesday, but it was a stark reminder of a far-reaching shift in how the United States views the Israeli-Palestinian conflict, and how aggressively it might push for a peace agreement.

When Mr. Obama declared that resolving the long-running Middle East dispute was a "vital national security interest of the United States," he was highlighting a change that has resulted from a lengthy debate among his top officials over how best to balance support for Israel against other American interests.

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Defaults Rise in Loan Modification Program (New York Times)

Defaults Rise in Loan Modification Program (New York Times)

The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government's modification program nearly doubled in March, continuing a trend that could undermine the entire program.

U.S. foreclosure actions spike in Q1 despite aid

U.S. foreclosure actions spike in Q1 despite aid

Foreclosure activity jumped 19 percent to a monthly record in March, driving first-quarter actions up 7 percent from the prior quarter and 16 percent from a year ago to a record of more than 932,000 properties.

One in every 138 U.S. households got a foreclosure filing in the quarter such as a notice of default, auction or bank repossession.

Banks took back more than 257,000 properties in the quarter, a record high, putting repossessions on pace to shatter last year's record of more than 918,000 properties.;#entry1099140

George W. Bush's 2010 Tax Miracle

George W. Bush's 2010 Tax Miracle

Donald Luskin, Wall Street Journal, April 14, 2010

Mass conversions to Roth IRAs could produce a gusher of revenue, reducing our budget deficit by as much as half next year.

The Teacher Pension Nightmare Josh Barro, Forbes, April 14, 2010 - Why the trillion-dollar gap will become taxpayers' problem.

The Teacher Pension Nightmare Josh Barro, Forbes, April 14, 2010

Why the trillion-dollar gap will become taxpayers' problem.

Pension and retirement plans all over America have lost value. Plans covering public school teachers, by their own admission, are underfunded by $332 billion. However, the plans' real funding gap is far worse than their financial statements show, at nearly a trillion dollars--and you and I will bear the burden of covering their shortfall.

The story of how this happened is familiar: States expanded their promises to retirees when times were good. Then, the economy tanked, pension assets fell in value and states skirted their obligations to deposit cash in pension funds--all causing a funding gap. But because benefits are contractually guaranteed, the obligation to cover any funding shortfall lies with taxpayers.

Actuaries are telling states and localities to cough up far higher payments out of current budgets to shore up the plans. In the education sphere these obligations are putting new pressure on local taxes and competing with funding for classroom instruction.

Unfortunately, an often overlooked aspect of the pension gap story makes matters even worse: Governments use accounting methods that have consistently understated pension funding gaps in both good times and bad. Examined on a more realistic basis, the true gap in teacher pensions is nearly three times the official amount--and the taxpayers who will have to close it are in for three times the pain.

Recently, Stuart Buck and I authored a paper for the Manhattan Institute and the Foundation for Educational Choice called "Underfunded Teacher Pension Plans: It's Worse Than You Think." We reestimated the unfunded liabilities of major teacher pension plans by applying private-sector-style accounting and marking asset values to market. We found that all the plans are underfunded, and the aggregate funding gap is $933 billion.

t's time for state lawmakers to say that if 401(k) plans are good enough for everybody else, they're good enough for teachers and other public employees too. Then, states (and taxpayers) can set about filling in the $933 billion funding gap that exists for teachers alone.

Josh Barro is the Walter B. Wriston Fellow at the Manhattan Institute for Policy Research. The report can be found here.

Wednesday, April 14, 2010

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- Annual Inflation: 2.3% (CPI-U), 9.5% (SGS)
- "Strong" Retail Sales Should Prove Fleeting
- Trade Deficit Widened / Recession Is Not Over

Why Is Baltic Dry Index Falling if World Is Recovering? from

HWhy Is Baltic Dry Index Falling if World Is Recovering? from

Stephen Rosenman submits:
Why would the Baltic Dry Index (BDI) fall if the world's economy is really recovering? After all, growth should be accompanied by an increased demand for ships to transport iron, coal, fertilizer, and other commodities.

The answer is that the BDI is heavily weighted to the cost of leasing the large Cape ships, the ones that are too large to squeeze through the Panama Canal and, therefore, must go round the Cape. Traditionally, Capes carry huge iron loads. Capes have their own "index", the Baltic Cape Index (BCI), which tracks their spot rates. Both the BDI and BCI have performed poorly.

Complete Story

Who Is Right On When Iran Goes Nuclear. The U.S. Or Iran?

Who Is Right On When Iran Goes Nuclear. The U.S. Or Iran?

Confrontational ... Mahmoud Ahmadinejad has vowed to reject UN measures against Iran's nuclear program. Photo: Reuters

'Iran To Go Nuclear Within Month' -- Jerusalem Post

Iran will join the global nuclear club within one month, according to the deputy research chief of the Islamic republic's Atomic Energy of Iran (AEOI).

Fars on Tuesday quoted Behzad Soltani, who also serves as the secretary-general of the AEOI's Scientific Cooperation Council, as saying that "no country would ever think about attacking Iran" once the nuclear threshold has been crossed.

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Iran Not Nuclear Weapons Capable For "At Least A Year"-Gates -- Reuters

ABOARD A U.S. MILITARY AIRCRAFT, April 13 (Reuters) - Iran is not expected to be capable of producing nuclear weapons for at least a year, maybe more, U.S. Defense Secretary Robert Gates said on Tuesday.

Asked about reported comments that Iran might be able to join the nuclear club in months, Gates said: "I don't believe it."

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