Archive for the ‘bush’ Category

As noted here time and again, Iran has nothing to lose by waiting out the end of George Bush’s term.

Iranian Foreign Minister Manouchehr Mottaki said May 29 that Iran thinks U.S. voters want to change the foreign policies of President George W. Bush, and he said that the present U.S. presidential campaigns make that clear, The Associated Press reported. Mottaki, who would not endorse a candidate, said that foreign policy would play an important part in the election of the next U.S. president.

Iran could not have had a better March-May. A rumored Israeli Gaza offensive, against Iran’s proxy Hamas, failed to materialize. Hezbollah, staked by Iran, was forced to go all-in in Lebanon, won, and has returned to a defensive crouch.

Mottaki’s announcement is a signal to Ahmadinejad’s domestic foes that Iraq is worth waiting for for a little while longer. He happens to be right.

US econo-political analysis is divided into two camps. The “mainstream” camp sees US growth figures as credible, and takes at face value the idea that the US, by sheer economic vitality, has avoided a recession. This school views US inflation as temporary. It views 10/90 “right track/wrong track” numbers as merely a dubious poll, a product of stampeding pessimism, spawned by the media’s sensationalizing of US malaise. This group has faith in government and banking institutions, and little faith in consumers’ ability to assess or predict their own behavior. Curiously, this group is also disproportionately Republican and “free-market.” It does not see much potential for an economic- or inflation-driven political upheaval in November 2008.

The “cynics,” e.g., Bill Gross, Mish Shedlock, and John Williams, trust consumers’ perceptions over the government’s. Cynics argue that consumers are telling the truth when they say how pessimistic they are, and trace the dissonance between official and consumer perceptions to vagaries of BLS unemployment and inflation accounting–a story flogged to death here, and much more persuasively on other sites.

The cynics see much higher potential for political upheaval in November 2008.

Apparently, so does Iran.

Bush Administration policy vis-a-vis Iran/Iraq usually means dialing up tensions over Iranian nukes and weapons supplies into Iraq, bringing up aircraft carriers, launching large operations against Iran’s Mehdi Army Iraqi proxy, slapping sanctions on Iranian banks, using its own militias to incinerate strategic people inside Iran, etc.

After Hezbollah routed the US alliance in Lebanon (followed by an abrupt end to the US/Iraqi crackdown on Sadr in Baghdad) one would assume that the Bush Administration policy of “we’d like to talk, but we’re happy to pull the trigger too” attitude has lost credibility. Iran is quietly leveraging its gains by edging the US out of Iraq:

May 29, 2008 1419 GMT
Senior Iraqi official Sa’ad Javad Qandil told Alalam television May 29 that a draft of an agreement to extend U.S. troops in Iraq beyond 2008 was problematic, especially any condition that would allow the U.S. to establish a military base there.

Predictably, Qandil is a member of the Islamic Supreme Council of Iraq, Teheran’s “mainstream” Iraq proxy (the Mehdi Army is, most of the time, its militant proxy). Hezbollah’s unanswered victory in Lebanon has ramifications across the entire region, not so much in the eyes of Americans as in the eyes of Arabs who were reminded, once again, that the personal bonds between Ahmadinejad and militia leaders can result in very quick and decisive action when Teheran’s interest are threatened.

Anyway, Iran hasn’t been deterred by US tough talk in the past, and there’s less reason than ever to think that louder tough talk will change Iran’s behavior at all. Lebanon has changed the game.

I would repeat my “sh*t or get off the pot” mantra about the US and Iran, but the US has backed down one too many times. I’m beginning to believe we should throw the Saudis the keys as soon as possible, to hedge against a probably adverse US election outcome while it’s still possible.

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The Times of London is known to be the sieve of choice for neoconservative news leaks. Given all the concentration of firepower in the Persian Gulf recently, as well as the crackdowns on al-Sadr, and the fact that Bush wants to scare Iran off to some extent before he leaves office, some kind of surgical airstrike on Iran would make sense.

May 4, 2008

United States is drawing up plans to strike on Iranian insurgency camp

President George W Bush is known to be determined that he should not hand over what he sees as “the Iran problem” to his successor. A limited attack on a training camp may give an impression of tough action, while at the same time being something that both Gates and the US commander in Iraq, General David Petraeus, could accept.

The US military is drawing up plans for a “surgical strike” against an insurgent training camp inside Iran if Republican Guards continue with attempts to destabilise Iraq, western intelligence sources said last week. One source said the Americans were growing increasingly angry at the involvement of the Guards’ special-operations Quds force inside Iraq, training Shi’ite militias and smuggling weapons into the country.

Despite a belligerent stance by Vice-President Dick Cheney, the administration has put plans for an attack on Iran’s nuclear facilities on the back burner since Robert Gates replaced Donald Rumsfeld as defence secretary in 2006, the sources said.

However, US commanders are increasingly concerned by Iranian interference in Iraq and are determined that recent successes by joint Iraqi and US forces in the southern port city of Basra should not be reversed by the Quds Force.

“If the situation in Basra goes back to what it was like before, America is likely to blame Iran and carry out a surgical strike on a militant training camp across the border in Khuzestan,” said one source, referring to a frontier province.

They acknowledged Iran was unlikely to cease involvement in Iraq and that, however limited a US attack might be, the fighting could escalate.

Although American defence chiefs are firmly opposed to any attack on Iranian nuclear facilities, they believe a raid on one of the camps training Shi’ite militiamen would deliver a powerful message to Tehran.

British officials believe the US military tends to overestimate the effect of the Iranian involvement in Iraq.

But they say there is little doubt that the Revolutionary Guard exercises significant influence over splinter groups of the radical cleric Moqtada al-Sadr’s Mahdi Army, who were the main targets of recent operations in Basra.

The CBS television network reported last week that plans were being drawn up for an attack on Iran, citing an officer who blamed the “increasingly hostile role” Iran was playing in Iraq.

The American news reports were unclear about the precise target of such an action and referred to Iran’s nuclear facilities as the likely objective.

According to the intelligence sources there will not be an attack on Iran’s nuclear capacity. “The Pentagon is not keen on that at all. If an attack happens it will be on a training camp to send a clear message to Iran not to interfere.”

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Today marks the first mass explosion in an Iranian metropolitan area in over a year:

At least eight people have been killed and more than 50 wounded in an explosion in the southern Iranian city of Shiraz, Iranian media reports say.

The blast occurred in a mosque in the city either during or after evening prayers, the reports said.

Iran’s Fars news agency was quoted as saying that the explosion was caused by a bomb. It said at least three of the wounded were seriously hurt.

There was no immediate claim of responsibility for the blast

Fars said the death toll was expected to climb.

Where have we seen this before?

(AP) Police and insurgents clashed after a bombing in southeastern Iran late Friday near the site where an explosion killed 11 members of the elite Revolutionary Guards this week, Iranian news agencies reported. “Minutes ago, the sound of a bomb explosion was heard in one of Zahedan’s streets,” the state-run news agency IRNA said, without giving more details. The semiofficial Fars news agency said clashes broke out between Iranian police and armed insurgents after the explosion.

Fars quoted the governor of Zahedan, Hasan Ali Nouri, as saying the blast was a “sound bomb explosion”_ a device that creates a loud boom but that usually does not cause casualties.

Nouri said there was gunfire heard but that it was late at night and that police had cordoned off the area.

On Wednesday, a car bomb blew up a bus carrying Revolutionary Guards, killing 11, in Zahedan, capital of Sistan-Baluchestan province, which sits on the border with Pakistan.

A Sunni Muslim militant group called Jundallah, or God’s Brigade, which has been blamed for past attacks on Iranian troops, has claimed responsibility for the Wednesday bombing.

Iran has accused the United States of backing militants to destabilize the country. Tensions between Tehran and Washington are growing over allegations of Iranian involvement in attacks on U.S. troops in Iraq, and over Iran’s nuclear activities.

Fars said the Friday explosion was at a school in Zahedan.

“The insurgents began shooting at people after the explosion. Clashes are continuing between police and the armed insurgents. Police have cordoned off the area,” the Fars agency said.

IRNA quoted an unnamed “responsible official” late Friday as saying that one of those arrested on charges of involvement in Wednesday’s bombing, identified as Nasrollah Shanbe Zehi, has confessed that the attacks were part of alleged U.S. plans to provoke ethnic and religious violence in Iran.

The confessions by Zehi helped police detain an unspecified number of Jundallah members and confiscate weapons and documents from the group in a raid Thursday in Zahedan, IRNA also said.

A majority of Iran’s population are Shiite Muslims but minority Sunnis live in southeastern Iran.

Friday’s blast came just hours after the funeral of the 11 Revolutionary Guardsmen in the capital.

Iran’s state-run television showed footage of Zahedan residents marching in the streets with the coffins of the killed Guardsmen. The crowd chanted, “death to hypocrites,” in a reference to the insurgents.

The blasts are a sharp flare-up of violence, but the remote southeast corner of Iran, near Pakistan and Afghanistan, has long been plagued by lawlessness. The area is a key crossing point for opium from Afghanistan and often sees clashes between police and drug gangs.

Jundallah, which is believed by some to have links to al-Qaida, has waged a low-level insurgency in the area and is led by Abdulmalak Rigi, a member of Iran’s ethnic Baluchi minority, a community that is Sunni Muslim and also can be found in Pakistan and Afghanistan. Rigi has said his group is fighting for the rights of impoverished Sunnis under Iran’s Shiite government.

Fars said that Rigi appeared on a station run by an opposition group known as the People’s Mujahedeen, which is based in Iraq, minutes before Friday’s explosion. The People’s Mujahedeen has long sought to overthrow the Iranian government by force.

Iranian officials have often raised concerns that Washington could incite members of Iran’s many ethnic and religious minorities against the Shiite-led government in Tehran.

Iran has faced several ethnic and religious insurgencies that have carried out occasionally deadly attacks in recent years _ though none have amounted to a serious threat to the government.

In December, Jundallah claimed responsibility for kidnapping seven Iranian soldiers in the Zahedan region, threatening to kll them unless group members were freed from Iranian prisons. The seven were released a month later, apparently after negotiations through tribal mediators.

In March 2006, gunmen dressed as security forces killed 21 people on a highway outside Zahedan in an attack authorities blamed on “rebels,” though Jundallah was never specifically named.


US funds terror groups to sow chaos in Iran

By William Lowther in Washington DC and Colin Freeman, Sunday Telegraph

Last Updated: 12:30am GMT 25/02/2007

America is secretly funding militant ethnic separatist groups in Iran in an attempt to pile pressure on the Islamic regime to give up its nuclear programme.

In a move that reflects Washington’s growing concern with the failure of diplomatic initiatives, CIA officials are understood to be helping opposition militias among the numerous ethnic minority groups clustered in Iran’s border regions.

The operations are controversial because they involve dealing with movements that resort to terrorist methods in pursuit of their grievances against the Iranian regime.

In the past year there has been a wave of unrest in ethnic minority border areas of Iran, with bombing and assassination campaigns against soldiers and government officials.

Such incidents have been carried out by the Kurds in the west, the Azeris in the north-west, the Ahwazi Arabs in the south-west, and the Baluchis in the south-east. Non-Persians make up nearly 40 per cent of Iran’s 69 million population, with around 16 million Azeris, seven million Kurds, five million Ahwazis and one million Baluchis. Most Baluchis live over the border in Pakistan. …

What else was going on in Iraq/Iran in February of 2007?

Iran rejects claims of equipping Iraqi Shiite extremists

Updated 2/12/2007 10:54 AM ET

BAGHDAD — Iranian officials today rejected claims they were arming Shiite extremists in Iraq with armor-piercing roadside bombs, a day after the U.S. military said those bombs have killed 170 American and coalition troops in Iraq.

LATEST: Dozens killed in Baghdad blasts on anniversary of Shiite mosque attack

U.S. military officials, who declined requests to be identified, said Sunday that shipments of weapons and ammunition to Iraq’s Shiite militias were being directed at the highest levels of the Iranian government.

Iran on Monday rejected the accusations. “Such accusations cannot be relied upon or be presented as evidence. The United States has a long history in fabricating evidence. Such charges are unacceptable,” Foreign Ministry spokesman Mohammad Ali Hosseini told reporters.

In a briefing, U.S. officials showed reporters part of a device they described as a sophisticated roadside bomb, along with mortar shells and rocket-propelled grenades they said were made in Iran. Later, one of the officials, an intelligence analyst, said it would be impossible to find a “smoking gun” conclusively proving Iranian government involvement.

FROM THE U.S. MILITARY: Pictures, descriptions of Iranian support to insurgents (PDF)

Sunday’s briefing by the three military officials was the most detailed attempt to show that Iran supports militants in Iraq. It followed similar remarks Friday by U.S. Defense Secretary Robert Gates.

Gates said serial numbers and markings found on explosives provide “pretty good” evidence that Iran is supplying either weapons or expertise to extremists in Iraq.

U.S. and coalition forces have not captured any Iranian agents in possession of the armor-piercing roadside bombs. The U.S. officials at the briefing said Iraqis are usually used to transport the explosives from Iran.

The Mahdi Army militia is among the Shiite extremist groups that have obtained the powerful bombs. The Mahdi Army is aligned with anti-American cleric Muqtada al-Sadr, whose political organization is part of Prime Minister Nouri al-Maliki’s government. …

February 2007 also marked the beginning of a secular shift upwards in oil prices, from a 2004-06 average of about $58/barrel, to a peak of $86 per barrel (using December 2007 dollars) by November of 2007, when the publication of the National Intelligence Estimate blunted what the oil market perceived was an inexorable march to US-Iranian war.

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Right on cue …. via the Financial Times:

US aids Iraq security forces with air strikes

By By Steve Negus, Iraq correspondent, and Demetri Sevastopulo in Washington

Published: March 28 2008 18:20 | Last updated: March 28 2008 18:20

President George W. Bush on Friday called the Iraqi government offensive in Basra a “defining moment” as violence continued to spread across the country and US troops were forced to send reinforcements to help Iraqi security forces.

“I would say this is a defining moment in the history of a free Iraq,” Mr Bush said. “This happens to be one of the provinces where the Iraqis are in the lead…and this is a good test for them.”

Nouri al-Maliki, the Iraqi prime minister, has stressed that the operation is primarily targeting ”lawless gangs” in the southern port city of Basra, but fighting has spread to other cities, with members of the Madhi Army, a group of Shia militants loyal to the cleric Moqtada al-Sadr, staging solidarity attacks.

Militias on Friday appeared to have seized control of the centre of the southern provincial capital of Nasiriya, while heavy fighting has also been reported in the towns of Kut, Amara, Diwaniya, and Hilla and in the Baghdad suburb of Sadr City. Militants in Baghdad have also kept up a heavy barrage of rockets and mortars at the heavily fortified Green Zone.

Iraqi security forces admitted on Friday that they were having difficulties subduing radical Shia militants. The death toll in the four days of fighting since Mr Maliki launched operation “Sawlat al-Fursan”, or Charge of the Knights, is unclear, but appears to have risen at least above 200.

While Mr Bush said the Iraqis were taking the lead in the operation, coalition forces were required to provide reinforcements on Friday, including air strikes at militants in Basra and Baghdad.

”We supposed that this operation would be a normal operation, but we were surprised by this resistance and have been obliged to change our plans and our tactics,” Abd al-Qader Jassim, the Iraqi defence minister, was quoted as saying by Reuters.

Stephen Biddle, an Iraq expert and former adviser to General David Petraeus, the US commander in Iraq, said the situation in Basra was “very serious”. He said the US was not clear whether Mr Maliki was targeting rogue elements of the Madhi army or taking on the mainstream faction of the umbrella group loyal to Moqtada al-Sadr, the radical Shia cleric.

Mr Biddle said another possibility was that Mr Maliki was taking the opportunity to crack down on political opponents ahead of provincial elections later this year. That would be the most dangerous scenario, he added, since it could jeopardise the ceasefires by the Madhi army loyal to Moqtada al-Sadr, the radical Shia cleric, and also by Sunni “local concerned citizens”.

Mr Maliki’s office on Friday said Basra residents had until April 8 to hand over heavy arms in return for cash bounties. The deadline is separate from an earlier ultimatum announced on Wednesday which gave gunmen 72 hours to surrender their weapons.

Iraq experts expressed concern that Mr Maliki had not co-ordinated the operation closely with the coalition, which some said could jeopardise its success. Mr Bush said he was unaware what trigged the timing of the offensive.

“I haven’t spoken to the prime minister since he’s made his decision, but I suspect that he would say, ”Look, the citizens down there just got sick and tired of this kind of behaviour,” said Mr Bush.

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This is State’s “diplomatic surge,” I guess. The Iranians hate Petraeus, because Petraeus doesn’t want to give them Iraq on a silver platter. So, we should pack him off to the bureaucratic backwater that is NATO? WTF?

Pentagon weighs top Iraq general as Nato chief

By Michael R. Gordon and Eric Schmitt

The Pentagon is considering General David H. Petraeus for the top NATO command later this year, a move that would give the general, the top American commander in Iraq, a high-level post during the next administration but that has raised concerns about the practice of rotating war commanders.

A senior Pentagon official said that it was weighing “a next assignment for Petraeus” and that the NATO post was a possibility. “He deserves one and that has also always been a highly prestigious position,” the official said. “So he is a candidate for that job, but there have been no final decisions and nothing on the timing.”

The question of General Petraeus’s future comes as the Pentagon is looking at changing several top-level assignments this year. President Bush has been an enthusiastic supporter of General Petraeus, whom he has credited with overseeing a troop increase and counterinsurgency plan credited with reducing the sectarian violence in Iraq, and some officials say the president would want to keep General Petraeus in Iraq as long as possible.

In one approach under discussion, General Petraeus would be nominated and confirmed for the NATO post before the end of September, when Congress is expected to break for the presidential election. He might stay in Iraq for some time after that before moving to the alliance’s headquarters in Brussels, but would take his post before a new president takes office.

If General Petraeus is shifted from the post as top Iraq commander, two leading candidates to replace him are Lt. Gen. Stanley A. McChrystal, who is running the classified Special Operations activities in Iraq, and Lt. Gen. Peter W. Chiarelli, a former second-ranking commander in Iraq and Defense Secretary Robert M. Gates’s senior military assistant.

By this fall, General Petraeus would have served 19 months in command in Iraq and would have accumulated more than 47 months of service in Iraq in three tours there since 2003. In the NATO job, General Petraeus would play a major role in shaping the cold-war-era alliance’s identity, in coping with an increasingly assertive Russia and in overseeing the allied-led mission in Afghanistan.

General Petraeus, 55, has been criticized by Democratic lawmakers opposed to Mr. Bush’s decision to send additional combat forces to Iraq. A NATO post would give him additional command experience in an important but less politically contentious region, potentially positioning him as a strong candidate in a few years to serve as chairman of the Joint Chiefs of Staff, several military officials said. They and some others who discussed the potential appointment declined to be identified because they were speaking about an internal personnel matter.

Some experts, however, say General Petraeus’s departure would jeopardize American efforts in Iraq, especially since the No. 2 officer in Iraq, Lt. Gen. Raymond T. Odierno, is scheduled to complete his tour and leave Iraq in mid-February.

General Petraeus “should stay at least through this year,” said Anthony Cordesman, a military specialist at the Center for Strategic and International Studies. “We really need military continuity in command during this period in which we can find out whether we can transition from tactical victory to some form of political accommodation.

“We have in Petraeus and Crocker the first effective civil-military partners we have had in this war,” Mr. Cordesman added, referring to Ryan C. Crocker, the United States ambassador in Baghdad. Gen. George W. Casey Jr., General Petraeus’s predecessor, served nearly three years in the top Iraq job before becoming Army chief of staff.

There has been speculation that General Petraeus’s next post might be as head of the Central Command, which has responsibility for the Middle East region. That would enable him to continue to influence events in Iraq while overseeing the military operation in Afghanistan and developing a strategy to deal with Iran. The Central Command post is currently held by Adm. William J. Fallon. Admiral Fallon, through a spokesman, denied that he intended to retire from the military in the next several months.

General Petraeus, through a spokesman, declined to comment on a possible NATO assignment. Geoff Morrell, the senior Defense Department spokesman, said no decision had been made.

“Trying to guess General Petraeus’s next assignment is the most popular parlor game in the Pentagon these days,” Mr. Morrell said. “Where and when the general goes next is up to Secretary Gates and President Bush, and they have not yet decided those matters. However, they very much appreciate his outstanding leadership in Iraq and believe he has much more to contribute to our nation’s defense whenever his current assignment comes to an end.”

General Petraeus’s last post in Europe was as a senior officer for the NATO force in Bosnia, where he served a tour in 2001 and 2002. “He did a great job for me as a one-star in Bosnia,” said Gen. Joseph W. Ralston, who served as NATO commander at the time and has since retired. “He would have the credibility to keep Afghanistan focused for NATO.”

This is ridiculous. There is no reason to kick out the first successful general on the basis of bureaucratic procedure. Something else is up.

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As the usual suspects chorus with irresponsibly politicized Republicans and intellectually invincible academics on the urgent consensus in favor of monetary stimulus — the Fed Funds market probabilities for the Fed’s January 30 decision stand as follows:

Probability of 50bp cut in the Fed funds rate: 42 percent

Probability of 75bp cut in the Fed funds rate: 40 percent

Probability of 100bp cut in the funds rate: 17 percent

(Probability of 25bp cut in the funds rate: 1 percent)

On Friday afternoon, there was a truly nightmarish rumor ricocheting around: that Ambac was securing some kind of government bailout of the bond insurance industry. After Ambac’s 52 percent Thursday plunge, it was up 20 percent throughout most of Friday, but at the end, it nosedived, presumably smothering the bailout rumor.

If the government will step in and bail the financial sector out–ok, I take that back because it already has thrown hundreds of billions at the mortgage brokers and the banks off-balance-sheet, at the expense of the US dollar–then the monoline sector is the obvious weak link in the dam. Buffett has already started his own monoline, Berkshire Assurance, but he will not make any big moves until at least one of the monolines actually files for bankruptcy and unleashes the final round of (credit-deflationary) chaos onto the financial system. That will mean tens of billions more writedowns for institutions all over the country (especially if Buffett waits until MBIA blows up, as well as Ambac).

At that point the game theory for the financial elites gets very interesting. Once Ambac dies, will MBIA be able to secure heavy hedge-fund or SWF financing at the height of the panic? Will it die and subsequently trigger a massive government intervention? Or will Bernanke et al. just let MBIA die and let capitalism solve its own problem? Buffett wants to dive in at the height of panic, but if the federal government gets too panicky and pre-empts him, he loses. The current crowd has been choking the credit markets with new paper for the past six months, and has exhibited pure panic.

At the same time Buffett knows that there are very few people alive with his combination of knowledge of the monoline sector, his real AAA credit rating, and his pile of ready cash. So a lot of potentially flush speculators would be extremely leery of jumping into the business before Buffett does. The previous iteration of bulls who rode into Citigroup and the monolines in November are bankrupt or horribly burned.

If we did not have so much panic-driven bureaucratic power to deal with — the Treasury, the Fed, Congress, and the White House, in that order — the markets would be operating much more efficiently. There would be no chance of a government bailout, so the monolines would have thrown in the towel in November. Banks’ credit portfolios wouldn’t have the Fed’s paper crutch to lean on, so they would have fire-sold their credit portfolios to the Buffetts and Citadels who had waited out the most frenzied chapter of the bull market for the opportunity.

Instead of focusing on actual economic activity, we must parse every grammatical construct of our born-again-inflationist high priests to see how and if they will continue to thwart market efficiency, by printing more forms of paper to “erase” old debts and subsidize bad habits.

Undergirding all this policy machinery is a pernicious “establishment consensus” that deflation is some kind of terror that must be stopped at all costs.

Sure, “deflation is bad,” in a vacuum. But what are the alternatives to deflation? Deflation means a massive slowdown in consumer spending. Which, in a vacuum, “is bad.” But we’re not in a vacuum. American borrowing has reached absolutely unprecedented levels. Deflation is the market’s cure for a low aggregate savings rate. It forces debts to be fire-sold in the near term, and in the longer term, it brings down formerly inflated asset prices into the reach of more people. Deflation is a price phenomenon as well as a debt and wage phenomenon, remember…

More inflationist decisions by institutional elites now mean more deflation later.

It is one thing for the government to intervene in financial markets to offset an exogenous shock, such as 9/11. There is no rationale for the government’s intervening against an endogenous financial shock.

Deflation is a short-term consumption killer, but a long-term shot in the arm for the savings rate. It’s not “evil.” Saying “Inflation is bad” is like saying, “Vomiting is bad.” Vomiting is unpleasant, but if you have had too much to drink, vomiting is very good for you.

Unfortunately, commanding-height institutions have a way of never admitting they’re wrong. If history is any guide, the “credit crunches” will continue, with sporadic Fed helicopter-scrambling to temporarily “calm credit fears,” until the dreaded wage-price spiral kicks in to overcompensate for five years’ soaring energy, food, healthcare, and education prices which the Fed has willfully ignored.

Why is anyone surprised that Americans don’t save, when government’s pain-averse, inflationistic ideology is what it is?

Right now, we have credit deflation occurring alongside consumer price and commodity inflation. The Fed is entirely focused on the former, but popular inflation expectations are moored to the latter. The Fed has “greater” priorities than price stability or dollar credibility.

Market manipulations can work if they’re very short-lived. I have seen just a few with my own eyes. But long-run attempts at market manipulation always fail.

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The financial information spectrum, from the utterly uninformed (Yahoo! financial ‘news’) to the well informed (i-banking institutional research and premium financial consultancies) are all lasering in on the nature of the Bush-Bernanke “stimulus package.” Bush, as usual, threw out the biggest number ($140 billion) because, well, when it comes to the federal budget Bush really likes big numbers. Or something.

Bush outlines $140bn stimulus package

By Krishna Guha and Jeremy Grant in Washington

Published: January 18 2008 18:24 | Last updated: January 18 2008 19:01

President George W. Bush on Friday outlined a $140bn fiscal stimulus plan involving temporary tax relief for both consumers and companies in a bid to keep the US economy out of recession.

The administration said his plan would create or safeguard half a million jobs at risk from the economic downturn.

Mr Bush’s comments cap a week of growing bipartisan calls for the government to step in to boost demand amid fears that the brutal housing slump is starting to take its toll on jobs and consumer spending.

It comes at the end for a dismal week for Wall Street, which saw huge writedowns announced by Citigroup, Merrill Lynch and JPMorgan Chase. The S&P 500 index was down 5.3 per cent on the week in midday trading, heading for its worst week for more than five years.

Mr Bush said: “I believe there is enough broad consensus that we can come up with a package that can be approved with bipartisan support” and implemented quickly.

He said that a fiscal stimulus would “provide a shot in the arm to keep a fundamentally strong economy healthy”.

The president said that the package must be “big enough to make a difference in an economy as large and dynamic as ours – which means it should be about one per cent of gross domestic product”.

He said it should be “built on broad-based tax relief” and “not the kind of spending projects that would have little immediate impact on our economy”. Mr Bush insisted that it should include “tax incentives for American businesses” as well as “direct and rapid income tax relief for the American people”.

Members of Congress said the Bush administration had been floating the idea of tax rebates worth $800 for individuals and $1,600 for families. However, the president did not offer any detail on Friday.

Hank Paulson, Treasury secretary, said “the president intentionally put out guidelines, broad principles, because we are looking to be collaborative, working with Congress.”

Mr Paulson – who spent much of the past fortnight consulting members of Congress – said there were “broad areas of agreement” on a fiscal package.

Whatever the final number is, it will probably be a smorgasbord of pork-barrel garbage, combined with temporary “rebates” which will effectively offload a minuscule slice of American consumer debt onto Uncle Sam’s balance sheet. (One-off rebates such as the 2001 Bush tax-cut rebates tend to have negligible impact on consumer spending; more often the rebates are used to pay off older debts.)

It almost certainly will not include any kind of capital-gains tax cut, or rendering permanent of the 2003 dividend/capital gains cut. You would think that Ben Bernanke, our nation’s highest-ranking born-again asset price inflationist, would be driving the bandwagon of tax-code tweaks to keep asset prices inflated. Unfortunately, Bernanke is a (poor) politician; he knows the Democrats don’t want to hear more tax cut endorsements, so he won’t give them one. He has already stated “no preference” between a paleo-Keynesian spending orgy or a neo-Keynesian tax-cut orgy.

It all adds up to the same thing: inflation.

The nominal federal deficit will probably clock in under $200 billion for FY2008. Of course, that doesn’t include the $380 billion in outstanding discount notes from the FHLB — a large percentage of which have almost certainly curdled — or the printing-press-backed debt issuance from the Federal Reserve’s TAF, which I believe stands at $60 billion.

After today’s crapped-out rally, I think it would be safest to wait until the monoline dead sharks (MBIA, Ambac, FGIC et al) float up to the surface before wading back into equities. Should be in the next two weeks, according to RBS (h/t FT Alphaville):

From a rating perspective, in the absence of a bail-out, we see the agencies as more likely to downgrade than not, and once the first downgrade has gone through (likely Fitch with respect to SCA next week), it will become much easier for the other agencies to follow suit with other monolines. We now expect the future for the monolines to play out as follows. Fitch will likely downgrade SCA next week, and FGIC and Ambac the following week – assuming it sticks to its own six week deadline. Moody’s will follow in due course with downgrades to Ambac, MBIA, FGIC and SCA, and S&P will downgrade FGIC. The damage the downgrades of other agencies will do to these monolines is likely to prompt the others to downgrade as well. In theory, these downgrades will be to the double-A category, based on the comments of the agencies so far.

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Bush Nears Stimulus Plan With $1,600 Tax Rebates, People Say
By Matthew Benjamin

Jan. 17 (Bloomberg) — The Bush administration is close to completing an economic-stimulus proposal that will include $800 rebates for individuals and $1,600 for households as well as tax breaks for businesses, people familiar with the plan said.

The proposal is subject to revision as administration officials consult today with Republican and Democratic congressional leaders in Washington, the people said.

President George W. Bush will lay out the “principles” of the economic package tomorrow, though it’s “too early” to unveil a final proposal, his spokesman said. He declined to provide details. Congressional leaders say the package may be as much as $150 billion.

Bush, who returned last night from a trip to the Middle East, has decided the U.S. needs a short-term economic assist from the government to avert an election-year recession, White House officials said earlier today.

“The president does believe that over the short term, to deal with this softening of the economy, that some boost is necessary,” Deputy Press Secretary Tony Fratto told reporters at a briefing.

White House and Treasury officials have been working since late November on the outlines of a plan to stave off a recession or ameliorate the effects if one occurs.

The plan the administration is close to proposing includes a temporary elimination of the bottom tax rate, which is now 10 percent, and a consequent lump-sum rebate to all taxpayers, according to the people.

Break for Businesses

Businesses would get a tax break under the plan that would allow them to deduct 50 percent of the price of new equipment they purchase this year. Small businesses would be able to deduct as much as $200,000 in new equipment purchases, up from the current $112,000 limit.

Asked about the details, a Treasury spokeswoman declined to comment, as did the White House.

House Republican leader John Boehner told reporters in Washington that a package of $100 billion to $150 billion is being discussed by administration officials and lawmakers.

Democrats in Congress are working on their own stimulus plan, which is also expected to include a tax rebate, as well as public spending and additional aid for the poor through food stamps and other programs.

The deteriorating economy has brought both parties to the conclusion that stimulus legislation must be passed and implemented quickly if it is to have any effect. The jobless rate rose to 5 percent in December from 4.7 percent a month earlier, and economists at Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley say the U.S. is probably sliding into a recession.

Federal Reserve Chairman Ben S. Bernanke told the House Budget Committee in Washington today that fiscal stimulus of as much as $150 billion would help revive economic growth.

A package of $100 billion “would certainly be measurable, it would not be window dressing,” said Bernanke.

Recommendation: long printing presses.

See how bullish I can be?

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Hezbollah has an enormous presence in Bahrain, a majority-Shiite, Sunni-ruled oil sheikdom in the Persian Gulf. Pressuring the Bahrainian government via an ‘accidental’ car bomb or three is not hard for Teheran to do.

Which makes this story all the more intriguing:

MANAMA, Jan 16 (Reuters) – Bahrain’s Ahli United Bank, the kingdom’s largest lender by market value, has suspended business with Iran, two sources familiar with the matter said.

A member of the Bahrain parliament’s finance and economic committee, Jasim Ali, said this week the government was putting pressure on Ahli United to freeze the Iranian operations of its Future Bank affiliate.

Ahli United established Future Bank in 2004 as a joint venture with Bank Saderat Iran and Bank Melli Iran.

Two sources with familiar with Ahli United’s policy said banking activity with Iran had been “frozen”.

The United States, which counts Bahrain as an ally and has a naval base on the island, is putting pressure on Gulf governments to isolate Iran, which it says is trying to make nuclear weapons. Iran denies the charge. (Reporting by Mohammed Abbas; Editing by Paul Bolding)

I have to wonder if Bahrain is trying to throw a bone to Israel. It’s just not congruent that Bahrain, which is under Hezbollah’s thumb, is now freezing out Iran, whose survival and resurgence are now seen as a fait accompli by China, Saudi Arabia, and other regional players.

In other news, Bush basically disavowed the NIE in Olmert’s presence, confessing that he has no control over what the US intelligence community wants to say.

In public, President Bush has been careful to reassure Israel and other allies that he still sees Iran as a threat, while not disavowing his administration’s recent National Intelligence Estimate. That NIE, made public Dec. 3, embarrassed the administration by concluding that Tehran had halted its weapons program in 2003, which seemed to undermine years of bellicose rhetoric from Bush and other senior officials about Iran’s nuclear ambitions. But in private conversations with Israeli Prime Minister Ehud Olmert last week, the president all but disowned the document, said a senior administration official who accompanied Bush on his six-nation trip to the Mideast. “He told the Israelis that he can’t control what the intelligence community says, but that [the NIE’s] conclusions don’t reflect his own views” about Iran’s nuclear-weapons program, said the official, who would discuss intelligence matters only on the condition of anonymity.

Bush’s behind-the-scenes assurances may help to quiet a rising chorus of voices inside Israel’s defense community that are calling for unilateral military action against Iran. Olmert, asked by NEWSWEEK after Bush’s departure on Friday whether he felt reassured, replied: “I am very happy.” A source close to the Israeli leader said Bush first briefed Olmert about the intelligence estimate a week before it was published, during talks in Washington that preceded the Annapolis peace conference in November. According to the source, who also refused to be named discussing the issue, Bush told Olmert he was uncomfortable with the findings and seemed almost apologetic.

Israeli and other foreign officials asked Bush to explain the NIE, which concluded with “high confidence” that Iran halted what the document describes as its “nuclear weapons program.” The NIE arrived at this finding even though Tehran continues to operate uranium-enrichment centrifuges that many experts believe are intended to develop material for a bomb, and despite the CIA’s assertion that it had, for the first time, concrete evidence of such a weaponization program. Most confusing of all, the document seemed to directly contradict a 2005 NIE that concluded—also with “high confidence”—that Iran did have such a weapons program. Bush’s national-security adviser, Stephen Hadley, told reporters in Jerusalem that Bush had only said to Olmert privately what he’s already said publicly, which is that he believes Iran remains “a threat” no matter what the NIE says. But the president may be trying to tell his allies something more: that he thinks the document is a dead letter.

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My favorite part about pseudonymous blogging is that I can say whatever I want. Even if I lose readership by postulating really “out there” explanations for global events, I won’t be professionally exposed as a loudmouthed conspiracy nut.

In that cheerful vein, I was struck by the sniping between various interests over whether the recent election in Georgia (the former Russian state) was legitimate or fraudulent.

The more I watch international events, the more I am convinced that world events revolve around two factions of the American empire — the CIA-Soros-State Department-NGO “soft power” axis, and the Israel-Pentagon-Texas-Saudi “hard power” axis — which hate each other not quite so much as they desire economic power and geopolitical hegemony. The Soros crowd has worked Venezuela, Burma and the CIS, while the hard power axis has worked the Middle East.

There have been interesting conflations of brands in the meantime. Putin apparently remains a friend of Bush, but he detests “the United States” and ensures that Russian media reflect his broadly anti-American perspective.

Putin was the first world leader to telephone Bush on 9/11, and he eagerly offered Russian intelligence, logistical and materiel support to the Americans during 2002, anticipating that he would finally have free rein to liquidate Chechen resistance without America undermining his legitimacy. Although it’s possible that Bush was being a complete dupe in Bush’s several lengthy meetings with Putin (“saw into his soul” etc), I have a hard time buying it. Bush, let alone his icily calculating inner circle, never struck me as gullible or dumb. Particularly in his first term, Bush outmaneuvered the entire political opposition every step of the way. You do not outmaneuver Soros by being an idiot.

There is no reason for Putin to remain on warm, or even cordial public terms with Bush, considering how globally unpopular Bush is and the apparent inevitability of icy relations between the United States and Russia in the longer term. I believe very strongly that American interests separate from Bush — namely State, CIA, and/or Soros — began sabotaging US relations with Russia by 2003, around which time Putin turned rabidly against the United States. Putin knew that American money was making its way into CIS civil society for the express purpose of “soft regime change.” In early 2004, Georgia overthrew a pro-Moscow regime and replaced it with a pro-American one in the much-celebrated “Rose revolution.” In 2005, the governments of Ukraine, Georgia, and Kyrgyzstan also fell to soon-floundering democratic “revolutions,” per the Albert Einstein Institution template of color revolution, From Dictatorship to Democracy. (Note the foreign languages in which the book has been published: Kyrgyz, Ukrainian, Belorussian, Serbian, four different Burmese languages, Russian, … all color-revolution victims or targets.)

By late 2005, Putin had cracked the code, and in early 2006, he expelled nearly all “election observer” NGOs from Russia, declaring that they were “foreign puppets.” It sounded propagandistic and hysterical to me at the time, but it makes a lot more sense now. He probably ascertained that Soros money, along with that of Boris “I am plotting a new Russian revolution” Berezovsky and other exiled oligarchs, was making its way into NGOs to attempt to effect a color uprising for the Russian Duma elections. Putin thus strangled the NGOs in red tape, and was not disturbed in the December 2007 Duma elections, which he won easily.

So what does this all have to do with the Tbilisi-based Saakashvili regime in Georgia?

Georgia is an interesting case of cooperation between the NGO arm of American policy and George W. Bush. Nowadays, Mikhail Saakashvili is regarded as a Soros puppet, but he had the initial enthusiastic support of Bush. Initially, back in 2004, he was the most successful color revolutionary, and his revolution was probably by far the most authentic one. Naturally, of course, he was very thankful — but to the United States generally, and George W. Bush in particular, not Soros or any of Soros’s “soft imperialism” disciples. Saakashvili even renamed Tbilisi’s main thoroughfare “George W. Bush Avenue.”

However, Saakashvili’s wild initial popularity crumbled, and especially among the Georgian opposition he is seen as a “Soros puppet” (although they aren’t the only ones who have noticed.) Saakashvili himself is a big fan, although (shockingly) he poo-poohed the perceived extent of Soros’s involvement in Georgian politics.

QUESTION: Two questions for Mr. Saakashvili. First, what did you get out of your American education and how will you use that to implement your Presidential duties? And, my second question is: what do you think about George Soros turning (inaudible), and do you think it interferes with Georgia’s integrity (inaudible)?

PRESIDENT-ELECT SAAKASHVILI: Well we’ve got the whole bunch of very enthusiastic and motivated Georgian young people who have been educated in U.S., thanks to U.S. Congress programs. You know I come from a middle class family, which at that moment when it all happened, didn’t have any means to send me anywhere. All my education was covered by the U.S. Congress. Certainly, it causes some suspicions in other countries who are kind of jealous about this thing, but that is how it is and we’ve got a number of other people, and I think that has contributed tremendously to Georgia’s development.

Now regarding George Soros’s contribution, this is primarily UNDP Fund: United Nations Development Program Fund to fund capacity building for Georgian government, and George Soros will not be the only contributor. We said we expect, as we already have pledges from a number of other contributions. We only have at this moment, two million dollars contributed by UNDP and Soros, but we have some other pledges, we need at least eight million dollars already this year and we will need some more for the next year. So basically, this is an international fund. We are inviting other donors as well, to contribute and it will serve good purpose, whoever does it. And I think Soros played good role in bolstering democratic processes in Georgia. He was very instrumental for many NGO’s in their development and I think there is nothing bad about that, wrong about that. We will welcome this kind of positive participation of any foreign organization, and we are talking about open societies or any others in democratic processes in Georgia.

By the advent of Georgia’s latest election, Saakashvili’s popularity had collapsed, and imho it’s highly suspect that Soros’s man in Tbilisi “won” the latest election with 52.8% of the vote. Georgia’s opposition is denouncing international election observers for ratifying the Saakashvili victory, and from everything I have read in the past months, their claims seem pretty credible. Saakashvili has behaved more and more like a conventional “post”-Soviet thug.

As for Soros and Georgia, I will leave you with a final long, but fascinating column.

Wednesday, 14 November 2007

Georgia: The Strange Silence of George Soros

by Mark AlmondTime was when no street protest happened anywhere across the old Soviet Union without billionaire philanthropist George Soros popping up all over the media to express his support for those struggling for an “open society” against police armed with every weapon in the crowd-control arsenal. When thousands of Georgians protesting in front of the country’s parliament were dispersed on 7th November, 2007, by baton-wielding robo-cop-style policemen using the latest low-frequency “non-lethal” technology to disperse the crowd and low-tech clubs to smash up television and camera equipment which had given the wrong impression of the event, it seemed the ideal place and occasion for George Soros to grandstand his commitment to democracy, civil society and non-violence.

After all less than four years earlier, Mr Soros had taken a lot of credit for the establishment of the new regime in Georgia led by his protégé, Mikheil Saakashvili following the “Rose Revolution” in November, 2003. Mr Soros and his house-guest, Mark Malloch Brown then of the UNDP, arrived in Tbilisi shortly after the fall of Eduard Shevardnadze and the election of Saakashvili with 97% of the vote as President of Georgia to announce that Mr Soros and the UN would donate generous funds to boost the salary of the President and other public officials to combat the endemic corruption which had afflicted the country under the old regime.[1]

On 22nd March, 2004, Saakashvili’s long-term aide, Kote Kublashvili, the administrator of the secret fund, told the Georgian Times, that the new fund’s “main attention will be focused on the employees of the law-enforcement agencies.”[2] In the last reference I can find to the Georgian fund by Mr Soros on the BBC Radio 4 “Today” programme on 31st December, 2005, Mr Soros still explicitly included the Georgian police among the recipients of his money.

Without millions of dollars from Mr Soros, Malloch Brown’s UNDP and the mysterious Cyprus-based “Golden Fleece Fund” from Georgia’s new commander-in-chief down to the lowliest billy-club wielding Georgian policeman the standard of living of the men who proclaimed the shining light of anti-corruption campaigners in the Caucasus would have been as poor as that of the policemen who stood aside rather than defend the Shevardnadze regime in November, 2007. As the Russian journalist and Saakashvili admirer, Pavel Felgenhauer pointed out just before the Georgian special forces gave the protestors a taste of the “black aspirin” on 7th November, Georgian officers now get up to US$1,000 a month.[3] That makes obeying orders very profitable if a little costly to the Western taxpayers and Mr Soros who have picked up so much of the tab.

Maybe it was just naiveté on the part of George Soros and Mark Malloch Brown that led them to think that upping the pay of Georgian security officers would make them less self-seeking and more supportive of civil society. Poverty may encourage corruption, but were the executives of Enron driven to steal hundreds of millions of dollars because they were poorly-remunerated? Isn’t often the case that if people can get away with corruption despite higher salaries they will steal as much as they can – especially if as head of government or police officers they face no superior who can restrain or indict them? Surely Mr Soros’s own well-advertised success at acquiring wealth beyond the dreams of avarice and his continuing to play the markets well after his first few billion was in the bank suggests that he understands that greed has no natural limit.

I have looked anxiously everyday at the news wires in case the philanthropist was ill and had lost the power of speech and writing, even of signing off on grants to the myriad off-shoots of his Open Society Foundation. They too seemed paralysed by the silence at Open Society HQ. No-one has stepped into the open to state what Saakashvili’s sponsor thinks now about the regime which he did so much to bring to power.

But the silence is only about Saakashvili’s onslaught on the Georgian public and media. Mr Soros has been repeatedly in public expressing his views about the decline of the dollar – and even his billions of greenbacks may buy him less influence abroad than his wealth once did.

In the past, books, articles, interviews have poured forth from the self-styled “philosophical speculator”. No-one would accuse George Soros of reticence about expressing his opinions about how to put the world to rights. Quite often he even put his money where his mouth was. Nowhere more so than in post-Soviet Georgia. Yet suddenly silence. Even as the tear gas drenched Tbilisi’s Rustaveli Avenue and the Imedi TV studios were smashed up by special forces, the prophet of the Open Society held his tongue.

Of course, despite his claims to promote openness and transparency, Mr Soros has behaved in the past in a secretive way to restrict public debate.

For his talk of his ideal of an Open Society, closing media access has been one by-product of the success of what George Orwell might also have called “The Open Society.” For instance, in the early years of Yeltsin’s reign as Russian President Soros played a key role in the April, 1993 referendum on privatisation. It was a surreptitious intervention. According to the Washington Post’s David Hofman: “Chubais… deployed a secret weapon to help Yeltsin win the April referendum. Chubais privately met with George Soros, the Hungarian-born superfinancier and philanthropist, who was in Moscow to launch a program to help scientists. Soros agreed to bankroll the pro-Yeltsin referendum campaign, the first but not the last time he would come to the rescue of the reformers.” The champion of openness agreed to a roundabout offshore financial facility which was invisible to Russia’s voters and almost certainly illegal. Hoffman reports, “A Chubais representative, a Westerner, went to Switzerland and made the financial arrangements for a $1 million transfer from Soros to offshore [emphasis added] accounts that Chubais could draw on for the campaign. The money helped the Yeltsin forces buy advertising to drown out the voices of the opposition.”[4] Chubais enthused, “Soros backed then really played a positive role” helping the oligarchs to get a stranglehold on Russia’s resources. So the prophet of the Open Society and the sponsor of Transparency International put his money behind the stifling of debate and closed off avenues to alternative opinion.

Maybe Soros hopes that the fuss about police brutality in Georgia will die away if he stays silent. But can he really hope that the subjects of what he joked was no longer the Soviet Union but “the Soros Empire” will not notice his silence?[5]

Maybe his un-characteristic silence is a product of shame at having backed another failed hero, who turned from clean reformer to corrupt autocrat without in reality in changing his way of operating at all. Back in Ukraine, for instance, Soros backed Leonid Kuchma before dropping him in favour of Viktor Yushchenko, who has since been dropped in favour of Julia Timoshenko… It would be easy to play a cruel game of no prizes for guessing who backed Kuchma for president in 1994 saying, “Kuchma is made of a different fibre. The manager of an important enterprise in the military-industrial complex, he is orientated toward problem solving,”[6] before urging “”The West must take a clear position denouncing Mr. Kuchma’s behavior and actions. There is no way for the international community to continue to do business with Mr. Kuchma.”[7] A similar litany of praise by Soros for Shevardnadze followed by condemnation could be easily drafted.

In the past, Soros has had no problem ditching politicians whom he had backed when they disappointed him or stepped out of line in some way. Is his silence today about Saakashvili’s clampdown a sign of shame or indifference to the regime’s resort to force to stay in power?

It is a maxim of English law that silence implies consent. If George Soros doesn’t open his mouth soon, then Georgians and people around the world may well conclude that George Soros is still backing Saakashvili. If Soros is still putting his money behind the swagger sticks thrashing Saakashvili’s opponents then what he means by an “Open Society” will be clear to all. The Soros Empire will have become the Silenced Society.


[1] The programme was announced at the World Economic Forum in Davos on 22nd January, 2004.See “OSI and UNDP Announce New Programme to Support Governance Reform in Georgia” (23rd January, 2004): http://www.soros.org/initiatives/cep/news/georgia_20040123.

[2] See “UNDP, Soros Fund Salaries for Georgian Officials” in The Georgian Times (22nd March, 2004).

[3] See Pavel Felgenhauer, “Saakashvili: Defiant, Ready for Action” [!] in Eurasia Daily Monitor (7th November, 2007): http://jamestown.org/edm/article.php?article_id=2372568.

[4] See David E. Hoffman, The Oligarchs. Wealth and Power in the New Russia (Public Affairs: Oxford, 2002), 202 and 510 note 52.

[5] As early as 1993, Soros quipped, “Just write that the former Soviet Empire is now called the Soros Empire.” See Robert Slater, Soros. The Unauthorized Biography (McGraw-Hill: New York, 1996), 135.

[6] See Soros on Soros. Staying Ahead of the Curve with Byron Wien & Krisztina Koenen (John Wiley: New York & Chichester, 1995) 167.

[7] See The Financial Times (2nd March, 2001).

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to Iowa Democrats, who probably freed the national Democratic Party from slavery to the Clintons tonight.

The NH primaries take place on Tuesday. Independents can vote. They will disproportionately help Obama.

Obama is significantly to Hillary’s left, in my opinion. I am very far right, but I still think an Obama presidency will be much healthier for the country than another Clinton presidency. The Clintons’ entire career has been a running mockery of legal institutions (and by that I don’t mean Monica, I mean the frequent “suicides” of people uncomfortably close to them). The Clintons have been the worst thing to happen to the Democratic Party since Jimmy Carter blew the Teheran hostage rescue in 1980 and sent Reagan into the White House on a whirlwind that cost the Democrats 13 Senate seats. The Clintons’ continued dominance of the Democratic Party after 1994, 2002, and 2004 speaks volumes about the craven weakness which infects the Democratic establishment. Nobody will stand up and point out the Clintons’ legacy of disastrous failure.

If Clinton loses NH, she’s done, I think. Obama will sweep the South (the black vote has shifted heavily in his favor), and his Midwestern base. That should be enough.

The Republican Party, for its part, won’t have Hillary to kick around anymore. That implies a disastrous defeat in 2008, but a disaster is what has to happen for the GOP to purge its current elite.

The outcome, I think, will be two much healthier and more intellectually honest parties.

But in the shorter term, an Obama presidency will not be good for the dollar.

Also remember — Obama is George Soros’s man. Soros’s network gave Obama the financial firepower to torpedo the Clinton dreadnought. Soros will expect to be repaid.

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According to the BBC,

More than 30 people have been killed and scores injured in suicide bombings in northern Iraq.

A car bomber killed more than 20 people when he was stopped by police and local militias in Baiji, about 250km (155 miles) north of Baghdad.

Later, a suicide bomber killed 10 people in Baquba, at the funeral of a father and son who were part of a Sunni group allied to US forces.

A number of Sunni tribal militias have turned against al-Qaeda.

They are credited with pushing back al-Qaeda in areas where they had been operating with relative freedom.

US officials say this has helped reduce attacks in Iraq by 60% since June.

But neighbourhood patrols have increasingly come under attack from Sunni radicals.

In Baiji, the bomb hit people queuing to buy gas cylinders in a residential area. Women and children were reported to be among those killed.

Witnesses said the attack there targeted a security checkpoint on a road leading to a residential compound housing employees of the Northern Oil Company.

Calm shattered

Baiji, a mostly Sunni area in Salahuddin province, has been relatively quiet in the past two years and the presence of the militias could explain why it is being targeted once more by suicide bombers, says the BBC’s Jo Floto in Baghdad.

At least 19 people were killed and dozens wounded in two car bomb attacks there in October.

The suicide blasts targeted the town’s police chief and a tribal leader, Thamer Ibrahim Atallah, a senior member of the Salahuddin Awakening Council.

In Tuesday’s attack at the funeral in Baquba, the capital of the restive Diyala province 60km (35 miles) north of Baghdad, the bomber, wearing a vest packed with explosives, also wounded 21 members of the local militia, police said.

Police said the father and son who were being buried had mistakenly been killed by US troops.

The US military has only said its troops killed two “armed individuals”.

I think the Shiites did it, with Iran’s encouragement. Iran knows the NIE for what it is–unconditional surrender–and they are going to make the most of it. Iraqi Sunnis have been mercilessly liquidating al Qaeda in Iraq more effectively than the Americans ever could, because they are now confident of American support and patronage. Of course, it’s possible that al Qaeda finally wormed its way through the discerning eyes of anti-AQ Sunnis thoroughly enough to pull off two spectacular bombings far apart, but I doubt it. Instead, I think Iranian-backed Shia militias are flexing their muscles, courtesy of the NIE’s signal of weakness from the US policy establishment.

The CIA has either 1) done nothing but undermine the rest of the executive branch for the past five years; or much more flatteringly 2) with or without the Soros nonprofits constellation, it has fomented massive unrest throughout the CIS, Serbia, Venezuela, and Burma, exactly along the lines of the template of Gene Sharp’s “bible of the color revolutions” From Dictatorship to Democracy. In the process it has turned Putin from a mildly liberal and pro-American, if Machiavellian neutral, into America’s number-one enemy. The CIA has done more damage to US foreign policy than any other single agency in the United States government–especially if, as I strongly suspect, Hayden was the official who treasonously leaked the details of the SWIFT program to the New York Times. (He was confirmed to head the CIA one month before the SWIFT leaked, and the program was privy to top secret security clearances only.)

The color revolution movement has proven itself an abject failure, and after the Burmese experiment I doubt that template will ever be used again; but the Dictatorship to Democracy “soft power” adherents still run the CIA, and as the NIE hijacking showed, they place their ideology ahead of loyalty to the government, not to mention policy execution by every other branch of the US government.

In any case I am shockedshocked! — to see Iran taking advantage (probably) of the obvious “soft civil war” within the US policy establishment.

Update: Right on cue, the CIA is once again “blaming” the Bush Administration for torturing certified al-Qaeda terrorist Abu Zubaydah. You can’t make this stuff up. The one known incidence in the past four years, in which the CIA measurably aided national security, happened only because Cheney or Addington probably stuck smoldering needles under the CIA’s fingernails. Naturally, the CIA itself had nothing to do with it:

CIA chief to drag White House into torture cover-up storm

THE CIA chief who ordered the destruction of secret videotapes recording the harsh interrogation of two top Al-Qaeda suspects has indicated he may seek immunity from prosecution in exchange for testifying before the House intelligence committee.

Jose Rodriguez, former head of the CIA’s clandestine service, is determined not to become the fall guy in the controversy over the CIA’s use of torture, according to intelligence sources.

It has emerged that at least four White House staff were approached for advice about the tapes, including David Addington, a senior aide to Dick Cheney, the vice-president, but none has admitted to recommending their destruction.

Vincent Cannistraro, former head of counterterrorism at the CIA, said it was impossible for Rodriguez to have acted on his own: “If everybody was against the decision, why in the world would Jose Rodriguez – one of the most cautious men I have ever met – have gone ahead and destroyed them?”

The tapes recorded the interrogations of Abu Zubaydah and Abd al-Rahim al-Nashiri, two suspected Al-Qaeda leaders, over hundreds of hours while they were held in secret “ghost” prisons. According to testimony from a former CIA officer, Zubaydah was subjected to waterboarding, a form of torture that simulates drowning, and “broke” after 35 seconds. He is believed to have been interrogated in Thailand. The tapes were destroyed in 2005. Both men are now held in Guantanamo Bay.

The House intelligence committee has subpoenaed Rodriguez to appear for a hearing on January 16. Last week the CIA began opening its files to congressional investigators. Silvestre Reyes, a Democrat who is chairing the committee, has said he was “not looking for scapegoats” – a hint to Rodriguez that he would like him to talk.

Reyes is not looking for Democratic scapegoats, nor CIA scapegoats.

The Republican Party is certifiably stupid enough to deserve it, though. They are getting so gamed. They just have no clue what’s going on.

It’s just another reason why working for the current GOP elite is self-evidently a waste of any productive, honorable man’s time.

You wonder what the tipping point will be before a powerful pro-Bush security specialist organization such as Greystone finds success in quietly encouraging Langley officials to commit suicide. A government as integral to global affairs as America’s cannot long “function” like this, and there are too many organizations with far too much to lose for the CIA to be reincarnated as a 60’s-era version of J. Edgar Hoover’s FBI, always spying and manipulating the political process to its own political ends, undercutting the entire rest of the executive branch.

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I hope this Robert Novak article puts the final nail in the coffin of Stratfor’s “the NIE was all part of a Bush geopolitical master plan” theory. (Another discussion thread, of varying degrees of quality, can be found here.)

If Friedman doesn’t change his line on the NIE pretty soon, we will have to start marking him down as either too stubborn to admit a mistake, or too politicized to be reliable.

Subverting Bush at Langley

By Robert Novak
Outrage over the CIA’s destruction of interrogation tapes is but one element of the distress about the agency by Republican intelligence watchdogs in Congress. “It is acting as though it is autonomous, not accountable to anyone,” Rep. Peter Hoekstra, ranking Republican on the House Intelligence Committee, told me. That is his mildest language about the CIA. In carefully selected adjectives, Hoekstra calls it “incompetent, arrogant and political.

Chairman Silvestre Reyes and other Intelligence Committee Democrats join Hoekstra in demanding investigation of the tape destruction in the face of the administration’s resistance, but the Republicans stand alone in protesting the CIA’s defiant undermining of President Bush. In its clean bill of health for Iran on nuclear weapons development, the agency acted as an independent policymaker rather than an adviser. It has withheld from nearly all members of Congress information on the Israeli bombing of Syria. The U.S. intelligence community decides on its own what information the public shall learn.

The CIA’s contempt for the president was demonstrated during his 2004 re-election campaign when a senior intelligence officer, Paul R. Pillar, made off-the-record speeches around the country criticizing the invasion of Iraq. On Sept. 24, 2004, three days before my column exposed Pillar’s activity, former Rep. Porter Goss arrived at Langley as Bush’s hand-picked CIA. Goss had resigned from Congress to accept Bush’s mandate to clean up the CIA. But Bush buckled under fire from the old boys at Langley and their Democratic supporters in Congress, and Goss was sacked in May 2006.

Goss’ successor, Gen. Michael V. Hayden, restored the status quo at the CIA and nurtured relations with congressional Democrats in preparation for their coming majority status.

There is no partisan divide on congressional outrage over the CIA’s destruction of tapes showing interrogation of terrorism detainees. Hoekstra agrees with Reyes that the Bush administration has made a big mistake refusing to let officials testify in the impending investigation.

Republicans also complain that the National Intelligence Estimate concluding that Iran has shut down its nuclear weapons program was a case of the CIA flying solo, not part of the administration team. Donald M. Kerr, principal deputy director of national intelligence, on Dec. 3 “took responsibility for what portions of the NIE Key Judgments were to be declassified.” In a Dec. 10 article for the Wall Street Journal, Hoekstra and Democratic Rep. Jane Harman (a senior Intelligence Committee member) wrote that the new NIE “does not explain why the 2005 NIE came to the opposite conclusion or what factors could drive Iran to ‘restart’ its nuclear-weapons program.” (Six days later on “Fox News Sunday,” Harman called the NIE “the best work product they’ve produced.”)

Hoekstra is also at odds with Hayden over CIA refusal to reveal what it knows about the Sept. 6 Israeli bombing of Syria’s nuclear complex. Only chairmen and ranking minority members of the intelligence committees, plus members of the congressional leadership, have been briefed. Other members of Congress, including Intelligence Committee members, were excluded. The intelligence authorization bill, passed by the House and awaiting final action in the Senate, blocks most of the CIA’s funding “until each member of the congressional intelligence committees has been fully informed with respect to intelligence” about the Syria bombing.

In a June 21 address to the Society for Historians of American Foreign Relations, Hayden unveiled “CIA’s social contract with the American people.” Hoekstra’s explanation: “The CIA is rejecting accountability to the administration or Congress, saying it can go straight to the people.”

My only question is why it was such “a big mistake” for Bush to refuse to allow the torture testimony. That whole issue has been total smoke and mirrors, and its timing was extremely, suspiciously coincident with CIA incompetence being at the top of the national discourse. The Bush Administration is probably just squashing the issue so that the CIA can’t continue using it to divert and manipulate the public eye. At the very least, the Bush Adminstration knows l’affaire Kiriakou is a total non-story.

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Frequent commenter and self-described USMC junior officer Jay recently pointed to an influential anti-neocon policy piece, which painstakingly details some of the errors of neoconservative misjudgments with regards to Iraq. As a civilian I am obviously not qualified to debate on Jay’s level of first-hand knowledge about the article’s (Col. Patrick Lang’s ‘Drinking the Kool-Aid’) accuracy. However, I do have some comments pertaining to that article which I hope will enrich the Iraq discourse.

The first is that the article’s mocking of the neocon/Likudnik clique’s infatuation with Ahmad Chalabi is dead-on. If anything, however, Chalabi was an Iranian mole, and he became a major Iranian client (as well as the only effective technocrat in the initial Iraqi government) after his already-weak US establishment credibility collapsed.

The second is that, while a number of these professional Likudniks loudly played up their influence in the White House, there is little indication, to me, that they were ever a key driver in any government bureaucracy, whether it was the Pentagon, the intelligence agencies, or anywhere else. In other words, I don’t think the Likudniks’ naivete was systemic, so I believe Lang’s attribution of virtually every on-the-ground failure in Iraq is exemplary of the Platonic fallacy, of grasping to link disparate events to one underlying “form”/ preconceived notion.

US failures in Iraq were rooted in fundamental misperceptions which extended far beyond the Likudniks. Also, Wolfowitz’s recommendation to attack Iraq in retaliation for Sept. 11 turned out to be ludicrously wrong, but at the time (2 days after 9/11) that Wolfowitz made that recommendation, the two likeliest perpetrators by far were Saddam Hussein and Osama bin Laden, and Hussein at the time had much clearer motives and means than bin Laden did. After several more days of intensive research by the entire federal governmental machinery, it became much clearer that bin Laden was by far the likelier perpetrator, but Wolfowitz’s recommendation was not out of bounds at all. Iraq had been blockaded and bombed ever since the “end” of the first Gulf War.

Thirdly, Afghanistan’s location and terrain prohibited the complete utilization of military assets. The conventional armored fist of the American army, the heavy-footprint armored and infantry divisions, never would have gone into Afghanistan. Afghanistan was a “success” because the Americans used special forces and long-range air power to blast conventional Taliban strongholds, which Northern Alliance forces then overran. Afghanistan’s eventual re-factionalization was a certainty, even before accounting for the US government’s dogmatic war on drugs. (The Taliban’s revival was entirely funded by angry opium farmers.) The Army could never have been used effectively in Afghanistan. The Russian experience should have made that obvious. The argument that Iraq hamstrung efforts in Afghanistan is extremely disingenuous. The drug war, not Iraq, botched Afghanistan, to the extent that it was botched. Unfortunately, segments of American security services seem to have an extremely strong interest in maintaining the drug war (yeah, I read about that rendition plane that crashed in Yucatan with 4 tons of cocaine, too).

The US conventional army was a huge asset that was largely uninvolved in the war on terrorism. It was sitting around, doing nothing, waiting to be utilized, with no realistic conventional threat on the horizon which would justify keeping it out of the Mideast. I might add that there still isn’t one. (The Rise Of Russia has not really carried over to their military forces to the extent a lot of people think, and especially not to their clinker conventional units. I’d guess their special forces are vastly improved, and they have a lot more unconventional influence all over the world, but that is way beyond the US Army’s bailiwick).

Fourthly, in the beginning, nearly every single geopolitically interested American policy agent–the Pentagon, the intel services, the oil industry, both parties of congress, the Likudniks, humanitarianist liberals, and so on–agreed for some reason that the invasion of Iraq was a good idea, for their own reasons. WMD was the ‘marketing consensus’ for the war–not the actual casus belli.

The strategist crowd believed that the United States had zero leverage over the Saudis and the other oil sheiks, who were paying huge amounts of money to al-Qaeda while they publicly affected revulsion at terrorism. Even the reasonable possibility of long-term American control in Iraq would be enough to scare the Saudis into rolling the dice by liquidating domestic al Qaeda-Saudi Arabia. And that’s exactly what the Saudis decided to do. In 2003, AQSA was one of the strongest of all the al Qaeda nodes. Today, it barely exists, and the Saudi royal family will be fighting them until one or the other is completely dead. That is an outcome of the invasion of Iraq. Ditto for the Libyan volte-face.

The critiques we hear today are very reminiscent of the charge that LBJ’s Vietnam escalation to over 500,000 troops was a ‘total failure.’ That action was a failure itself, but it provided a huge encouragement for Indonesian military forces to massacre Indonesia’s powerful Communist element, which from our perspective was a great outcome. Would they have liquidated the Indonesian communist party without the prior American “all-in” in neighboring Vietnam? Who knows. But after the American Vietnam escalation, the Indonesian officer corps did not have to worry about Indonesian communists gaining support from sympathetic foreign governments. The distribution of outcomes from a preemptive massacre was substantially improved.

Fifth, Lang disingenuously attributes Bush’s support for the war to blind religiosity, which strongly suggests that his expertise does not carry over into knowledge of the motives of all the various players. Karl Rove may have weaved a nice, convenient narrative of Bush The Coked Out Fratboy staring at the mirror one morning with puke all over himself and resolutely turning to JC, but aside from politically-tactical rhetoric, there is scant evidence that Bush was ever a seriously religious man.

I have never met Bush myself, but I know more than one person who has, and religion was simply never part of any conversation between Bush and anyone I know. The closest religion ever got to Bush was Michael Gerson, a pretentious Catholic speechwriter who quit in early 2007. Weaving some Baptist symbolism into political speeches is a long way from being a religious nutjob. Political rhetoric aside, the evidence suggests that Bush is far less religious than some of the religious tribes which support him–if he’s religious at all. It’s hilariously inconsistent how the usual suspects charge that Bush is some kind of religious nut, and then attribute Bush to being the slave or agent of icily calculating atheists like Cheney, Rumsfeld and Rove.

I think Bush does have a “Judeo-Christian” Clash of Civilizations consciousness, but Bush shares that conviction with millions of utterly secular people, from me to Sarkozy.

Not a single member of Bush’s inner circle is remotely devout, so far as we can tell. I don’t think Bush is either, even though it is politically convenient for Bush to act as such, just as it is convenient–but disingenuous–for Bush’s detractors (e.g. Patrick Lang) to paint him as such.

Finally, I have a hard time trusting anybody who defends the intelligence agencies, period. Let’s assume that the intelligence agencies, in concert with George Soros’s constellation of “nonprofit” NGOs, were crucial in instigating the Color Revolutions across the CIS in 2005, as well as Venezuela and Burma. (Burma was not designated a color revolution, but it was straight out of the same playbook, and Chinese media chatter blames Soros for being involved (and they don’t habitually blame Soros for every single bad thing that ever happened).) Let’s say the American intel establishment is just that crafty, and let’s assume that there is some substantiation underlying the ‘If you knew what the intel agencies had actually accomplished, they wouldn’t be doing their job’ tripe. So how has that been going?

The color revolutions are all flops or flops in progress. Serbia is reverting to the Milosevic status quo. (Vojislav Kostunica’s overthrow of Milosevic was seen as the original Soros/Color dry run). The “Orange” coalition in the Ukraine is a joke. Venezuela was a total flop the first time, although the recent referendum’s outcome was more promising. Georgia is a complete mess. Kyrgyzstan (sic?) is similarly dysfunctional. Burma was a blood-soaked fiasco.

So, even if we take a leap of faith and assume the American intel establishment actually has honestly tried to further some American foreign policy objectives over the past several years, they have still failed. I don’t see how that generous interpretation of their track record gives them or their apologists the stature to criticize failures in Iraq. The intel establishment was on board for its own reasons, and while the marketing veneer for the war (WMD) has failed, the more legitimate reasons are still very much there, even if public opinion won’t synthesize them for years. Meanwhile, the intelligence agencies are just sticking Bush with the bill.

I will probably update this post frequently as I think about the issues more. Or maybe they’re just too big for any one post. I dunno. I would especially appreciate comments on this one, especially from those who have served in the military or intelligence.

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The following is a political rant.


Fred Thompson’s campaign [sic] symbolizes how dysfunctional, incompetent, and willfully clueless the Republican Party’s governing institutions have become.

The Politico is a very biased politics news outlet, but even after cutting through the oozing contempt to the actual facts in the Politico’s article, the sheer laziness and incompetence of the Thompson campaign is jaw-dropping.

WAVERLY, Iowa — When is retail politics not retail politics? When candidates refuse to get off their big buses and go do it.

Fred Thompson rolled into this small town on the Cedar River in north-central Iowa on a giant brown bus Tuesday. He also had a van, an entourage of guys with earpieces and a press aide.

Thompson’s public schedule said: “Fred Thompson Tours Downtown Waverly and Drops by Waverly Democrat.” …

Anelia Dimitrova, the executive regional editor, greeted us in warmly and invited us to have a seat, chat and use the bathroom. She offered Mark a high-speed Internet line so he could upload some video to his website and I sat down with her for a brief interview.

She said Thompson was the first candidate to come into the paper. The paper does not endorse candidates, and maybe that is why the others have skipped it. “He’s got a lot of catching up to do,” Dimitrova said. “I think it’s a sign he is behind. I don’t think he necessarily wants to run. Bluntly, I don’t know why he is running.”

… after exchanging a few pleasantries, Thompson headed in to his meeting with Dimitrova in a conference room.

Dimitrova invited Mark and me into the interview with Thompson but the Thompson press aide refused. Dimitrova said she had no problem with us being there, but the press aide refused again.

It was no big deal. We waited for Thompson outside the conference room and after a few minutes he emerged, left the newspaper office and headed straight onto his large, brown bus.

But what happened to the “tour of downtown Waverly” that was on his schedule?

Canceled. Not going to happen. He was not going to walk the streets of Waverly in search of voters.

Instead, Thompson rode four blocks to the local fire station. Local fire stations always have captive audiences (unless there is a fire).

Inside, Thompson shook a few hands — there were only about 15 people there — and then Chief Dan McKenzie handed Thompson the chief’s fire hat so Thompson could put it on.

Thompson looked at it with a sour expression on his face.

“I’ve got a silly hat rule,” Thompson said.

In point of fact, the “silly” hat was the one Chief McKenzie wore to fires and I am guessing none of the firefighters in attendance considered it particularly silly, but Thompson was not going to put it on. He just stood there holding it and staring at it.

To save the moment, Jeri Thompson took the hat from her husband’s hands and put it on her head.

“You look cute,” Thompson said to her. She did.

Jeri took off the hat and McKenzie led the Thompsons over to a fire truck.

The chief invited Thompson to climb up behind the wheel, but Thompson said, “Naw, this is fine.” And he stood there looking at the fire truck.

Jeri once again saved the moment by engaging the chief in some actual conversation.

“How many people do you serve?” she asked.

“About 10,000,” Chief McKenzie said.

Thompson walked away from the fire truck, posed for a picture or two and the event was over. He and his entourage got on his bus and roared out of town.

Later, his press aide sent Mark and me an e-mail of explanation, though we had not asked for one.

Thompson had skipped going up and down Bremer Avenue after the newspaper meeting because, the press aide explained, “We can’t control where the newspapers are. Had it been a more ‘main-street’ type town, it would have been different.”

But Waverly is a “main-street” type town, and the newspaper office was right there on the main street of town surrounded by businesses.

The press aide also claimed that “ice and snow on the streets presented a safety issue,” but Halperin and I had no problem walking on the mostly well-shoveled avenue, both before Thompson arrived and after he left. (In fact, we went into a local store on Bremer Avenue, where there were a number of shoppers Thompson easily could have greeted.)

Later in the day, I sent an e-mail to Anelia Dimitrova, asking her about the private meeting she had with Thompson at the newspaper office.

She e-mailed me back that Thompson “was so vague that I would be hard-pressed to write a story. Simply put, there is no news peg other than he came to the newsroom with his model wife and a beehive of staffers. When I asked him specifically what he would do as prez for farmers in Bremer County, he resorted to glittering generalities.”

So the sum total of Thompson’s day in Waverly was meeting with a newspaper editor and saying nothing and then meeting about 15 people in a warm firehouse and saying nothing.

When he was supposed to go out and find voters in shops and diners, talk to them and answer their questions, he decided to skip it and get back on his luxury bus instead. …

This horse race stuff, again, is pretty much always meaningless.

However, the fact that a majority of GOP powerbrokers piled onto the Thompson bandwagon, invested their credibility in him, and apparently don’t really care that their investment has been a complete disaster/ that they look like total idiots, is all totally emblematic of the entitled laziness within the Southern echelon of the party.

At the beginning of the Thompson “surge” in, oh, April/May or so, when all the insidery types looked at each other and said “WTF?”, a favored conspiracy theory among conservative circles was that Thompson was a pure head fake to corral conservative support, before endorsing McCain at the end. Judging by Thompson’s subsequent “performance,” you can’t help but wonder. Thompson could have gotten the vast majority of Huckabee’s current (soft) support if he’d tried at all.

Over the years I used to spill a lot of ink in support for conservative principles and Republican politics, but those who care about the future of conservatism should vote for Ron Paul until the current GOP elite is destroyed. For that to happen, a second electoral bloodletting (worse than 2006) is not a probability, but a necessity.

It’s not a Bush thing, either. Anybody who has objectively watched what is actually going on in the Mideast (i.e. reads more informed sources than the New York Times, which is literally 12-18 months behind the curve when it isn’t actively undermining the war effort) knows that Bush is playing an infinitely more sophisticated, and dare I say occasionally artful, chess game in the Mideast than the mainstream morons will ever credit him for. Unfortunately, Bush’s foreign preoccupation has prevented him from minding the domestic corruption spiral which has hijacked the Republican professional elite.

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Iran: Wielding its Regained Nuclear Leverage
December 18, 2007 17 25 GMT


While the United States tries to downplay Russia’s Dec. 17 announcement that nuclear fuel had been delivered to Iran’s Bushehr nuclear facility, Iran is brimming with confidence and making announcements about domestic uranium enrichment activity and the construction of a second nuclear power plant. Tehran has regained — and is keeping a firm grip on — its nuclear bargaining chip to use in negotiations with Washington, but the Bush administration’s patience could be wearing thin.

Washington is doing everything in its power to downplay this latest development in Iran’s nuclear saga, saying that since Russia has provided fuel (with appropriate International Atomic Energy Agency safeguards), Tehran has no reason to continue enrichment for civilian nuclear power. But the Iranians are milking the Bushehr fuel delivery for all it is worth, and in a flurry of statements Tehran is dramatically inflating the threat of its nuclear program for its own political gain.

Immediately following the Bushehr fuel delivery announcement, Atomic Energy Organization of Iran chief and Iranian Vice President Gholamreza Aghazadeh announced on state television that the Bushehr development would not stop Iran’s uranium enrichment process, and that enrichment would continue at the Natanz plant in central Iran to provide enough nuclear fuel for local power plants. He went on to say that the 3,000 centrifuges allegedly operating at Natanz would be increased to 50,000.

Aghazadeh also announced Dec. 17 that Iran was building a 360-megawatt nuclear power plant in Darkhovein, south of the city of Ahvaz in the southwestern province of Khuzestan. …


With the nuclear card back in its hand, Iran can afford to push the nuclear envelope with the United States to bolster its position in the Iraq negotiations. It comes as no surprise, then, that the Iranians seem to be dragging their feet in the talks and were likely the main impetus behind postponement of a meeting with U.S. officials in Baghdad that was scheduled to take place Dec. 18. While U.S. President George W. Bush’s administration is exercising patience in dealing with Iran’s nuclear stunts, that patience could soon wear thin, spelling trouble for a future settlement on Iraq.

The definition of a nuclear weapons program is highly subjective, as illustrated by the divergence in views between Israel and the United States over whether the production of fissile material represents a weapons program. The United States could easily manipulate the subjectivity of this nuclear debate for political purposes if Washington wanted to revitalize the threat of military action against the Islamic republic. …

I have flip-flopped too many times to have any remaining credibility on the NIE/Iran/nukes issue. It’s still completely unclear whether Bush

1) planned the NIE about-face for some time, as part of a bigger chess match;

2) was totally blindsided by a CIA-led bureaucratic policy coup, but has capitulated to the new reality;

3) threw the ‘Cheney faction’ hawks under the bus, after months of infighting among his advisers; or

4) is playing some completely different game.

I never agreed with the Stratfor argument, that the NIE was a diplomatic carrot Washington has extended to Iran. It would be one thing if all the DC bureaucratic and media power players were in agreement that Iran should be severely punished if Iran reneged on the supposed behind-the-scenes deal.

But there is obviously no such agreement. There is a very large DC faction that does not think a war with Iran would be worth the cost under any circumstances, even if that meant a significant retreat in Iraq.

When elites publicly disagree on an issue, their collective power to influence public opinion drops very quickly from “very high” to “near zero.” If Bush decided that Iran were reneging and that they should be punished — or, at least, that Bush should credibly threaten them with war again — Bush would be drowned out by elite disagreement, and so public opinion wouldn’t move, even temporarily, in the direction Bush would need, to support an attack.

Therefore, 1) Bush’s move is not reversible; and 2) another Bush NIE flip-flop is not a credible deterrent. Another Bush about-face would strip him of every remaining scintilla of credibility, and if he went to war on the basis of zero credibility, there’d be a reasonable possibility of his impeachment.

Therefore, an NIE about-face as per ~2 weeks ago did not fit the distribution of rational strategic moves which Bush could make, unless Bush has completely discarded out his old strategy. Teheran apparently sees itself as completely off the hook, and unless Bush truly jeopardizes his political survival by launching what will be an extremely unpopular war, I believe Teheran is right. A conventional escalation through bombing was the only real leverage the Bush Administration has over Teheran.

I predict that after publicly slapping the United States around with nuclear enrichment, attacks on US troops in Iraq will escalate in late spring, as Iran once again flaunts its newfound upper hand through incremental violence. By the middle of 2008, Bush will not even be able to order a war on Iran. The bureaucracies will be looking forward to a changing of the guard. Any general or admiral who acquiesces to attacking Iran would almost certainly be destroyed by the next Administration, so if Bush ordered an attack, he would probably be met with a string of resignations and a general officers’ revolt.

Furthermore, assuming the incoming president is a Democrat, there is no chance of overt military escalation. So Iran can go for broke and bleed the Army dry in Iraq without fear of devastating consequences.

Everything really depends on the loyalties and sentiment of the Air Force officer corps. If they aren’t willing to risk a Democratic purge, then massive Israeli bombing of Iran will constitute the only remaining US deterrent.

See also:

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The Bush cut-and-run

The Bush brilliant strategic pivot/ unconditional surrender signing ceremony:

US President George W. Bush said on Monday he supported Russian shipments of nuclear fuel to Iran for civilian power, saying they proved that Teheran has no need to enrich uranium.

“If the Russians are willing to do that, which I support, then the Iranians do not need to learn how to enrich. If the Iranians accept that uranium for a civilian nuclear power plant, then there’s no need for them to learn how to enrich,” Bush said

Iran received the first shipment of nuclear fuel from Russia on Monday for its Bushehr reactor, the official Iranian news agency IRNA reported.

Russia has been assisting the Iranians in the construction of the nuclear power plant.

The 2005 agreement under which Russia agreed to supply nuclear fuel for Bushehr included a clause that requires Iran to return the spent fuel to prevent any possibility Teheran would extract plutonium from it to make atomic bombs.

“All fuel that will be delivered will be under the control and guarantees of the International Atomic Energy Agency for the whole time it stays on Iranian territory,” the Russian Foreign Ministry said in a statement Monday. “Moreover, the Iranian side gave additional written guarantees that the fuel will be used only for the Bushehr nuclear power plant.”

Iran contends the reactor operation in the southern Iranian town of Bushehr is strictly for civilian purposes, but some critics suspect Teheran intends to use the plant as part of an alleged effort to develop nuclear weapons.

Construction at Bushehr had been frequently delayed. Officials said the delays were due to payment disputes, but many observers suggested Russia was also unhappy with Iran’s obstinate resistance to international pressure to make its nuclear program more open and to assure the international community that it was not developing nuclear arms.

Russia announced last week that its construction disputes with Iran had been resolved and said fuel deliveries would begin about a half year before Bushehr was expected to go into service.

An Iranian official said the Bushehr plant was 95 percent complete and would begin operations “next year.” He indicated the reactor needed 80 tons of nuclear fuel during the initial phase of operation, but did not provide further details.

Bush reiterated his belief that Iran was a danger as long as it continued to enrich uranium, and pointed to the recent US National Intelligence Estimate which determined that Iran had been running a covert nuclear weapons program until 2003.

“If somebody had a weapons program, what’s to say they couldn’t start it up tomorrow? Since they tried to hide their program before, how would we know?” he said.

Bush said that Iran was heading down a path of isolation, adding that a new round of UN resolutions was approaching. “If they [suspend their enrichment programs], there is a way forward for them that is different from the path they’re headed down now,” he stated.

Either Bush effectively surrendered Iraq, or American Mideast policy is returning to its Cold War roots, with Saudi Arabia and Iran as the twin pivots of our regional power structure.

Or maybe the Iranians will decide for themselves which one it will be, whenever they feel like deciding. And in the meantime Bush can pretend he’s a diplomatic genius.

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I have been hearing and reading buzz about how Mike Huckabee, the simpleton Arkansas governor who probably still doesn’t know what the NIE is, is the biggest threat to the GOP power-broking elite since Pat Buchanan.

That’s bogus. Huckabee just represents all the votes Fred Thompson could have gotten, had Thompson ever learned how to work at anything in his life. Huckabee still has zero money. After he said that he stood by a 1992 comment to “quarantine” AIDS carriers from the general population, the press has begun slicing him apart, calorie for calorie.

(Remember Drudge’s headline attacking Huckabee for that comment, saying that it could be a “game changer in the GOP race?” Drudge, of all people, knows what the sexual orientation and priorities of the Beltway press corps is. What matters to them are not what Huckabee knows about foreign policy, whether he’d consult the Bible every day before making choices, how thoroughly he’s thought the issues through, or what kind of a president he’d make — but rather, something Huckabee said about AIDS fifteen years ago.

A crafty one, Drudge.)

No, Huckabee has peaked. He will be a horribly disfiguring addition to a Giuliani ticket, is my guess.

Ron Paul, however, hasn’t peaked. He’s on track to raise about $20 million for the quarter, which is probably going to be at least 40 percent more than what anybody else in the GOP field will raise, and possibly up to twice as much. That’s simply stupefying when you think about it. A, what, 78-year-old “kook” who wants to bring back the gold standard, abolish the Federal Reserve and the IRS, legalize drugs, close the border and get out of Iraq — he is beating the living hell out of Giuliani and Romney in the paper chase.

That is profound.

Most of this horse-race stuff is utterly irrelevant, as far as the markets are concerned. But Ron Paul might be indicative of something which could, just maybe, disturb the toxic media/bureaucratic duopoly over American policy.

And guess what? Ron Paul is most definitely going to be running a third party ticket once he racks up a jarring total for the nomination.

Meanwhile, the NRCC is bankrupt. On the rare occasion that a reporter will give John Boehner a gasp of air, Boehner crybabies about how nobody wants to give him money.

Bush’s approval ratings have actually rebounded, and the latest polls put Bush in the 37 percent range. Republican apparatchiks talk as if Bush is some kind of GOP albatross. I think it’s the opposite. Bush has credibility insofar as his actions are concerned. He will say he will do something, and he will probably definitely sound like an idiot explaining why, but he will do it, and there’s usually some vague principle buried under the ####pile of mangled syntax.

With the congressional Republicans, though, the odds are they’ll just steal your money. Their credibility is just that abysmal.

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Way to go, Fingar et alia.

Published: Saturday, December 15, 2007 | 11:17 AM ET

JERUSALEM – In Israel’s harshest criticism yet of a U.S. intelligence report that Iran is no longer developing nuclear arms, a senior minister warned Saturday that the assessment could lead to a regional war that would threaten the Jewish state.

Public Security Minister Avi Dichter also suggested that Israel could no longer trust American intelligence, saying that its agencies could also issue false information about Palestinian security forces’ crackdown on militant groups. The Palestinian action is required as part of a U.S.-backed renewal of peace talks with Israel this month.

Dichter cautioned that a refusal to recognize Iran’s intentions to build weapons of mass destruction could lead to a regional war. He compared the possibility of such fighting to a surprise attack on Israel in 1973 by its Arab neighbours, which came to be known in Israel for the Yom Kippur Jewish holy day on which it began.

The American misconception concerning Iran’s nuclear weapons is liable to lead to a regional Yom Kippur where Israel will be among the countries that are threatened,” Dichter said in a speech in a suburb south of Tel Aviv, according to his spokesman, Mati Gil. “Something went wrong in the American blueprint for analyzing the severity of the Iranian nuclear threat.

Israeli Prime Minister Ehud Olmert had refuted the U.S. intelligence assessment that came earlier this month, saying that Iran continues its activities to attain components necessary to produce nuclear weapons. Tehran still poses a major threat to the West and the world must stop it, Olmert said.

Israel has for years been warning that Iran is working on nuclear weapons and backed the United States in its international efforts to exert pressure on Iran to stop the program. Israel considers Iran a significant threat because of its nuclear ambitions, its long-range missile program and repeated calls by its president, Mahmoud Ahmadinejad, to wipe Israel off the map.

Iran says its nuclear program is for peaceful purposes.

At least this will get the NIE (and the incompetence of US intelligence) back at the top of the news cycle. John Keriakou’s “Hey guys, in 2005 we destroyed some tapes about torture that were made in 2003, and I feel so bad that I’m going to talk to ABC News about it” shtick ‘threw off’ the mainstream press with ridiculous, disturbing ease.

Hopefully the national dialogue will return to issues of actual importance facing the country. Not an intel PR stunt over something that happened 4 years ago.

Maybe Israeli buying could explain oil’s incredible 5.4% jump on Thursday.

Note also that OPEC stated today–24 hours after the Israeli speech–that they will increase production quotas in February.

See also:

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Today’s blistering inflation numbers were a cold shower for expected future commodities prices and a classic demonstration of market-wide “buy the rumor [of inflation], sell the fact.” They had the unintended consequence of mocking yesterday’s frenzied fanfare over the “global assault on the credit crunch.” The Financial Times’ misplaced jubilation was a case in point of the triumph of aimless optimism over reality. From all the military metaphors, emotional vicissitudes and ultimate triumphalism, you’d think you were reading about the battle of Waterloo.

Unfortunately, paper-printing is no substitute for blood and iron.

Wednesday marks a turning point in the story of the credit squeeze. The world’s major central banks have united – the Federal Reserve providing dollars to the European Central Bank; the Bank of England abandoning its hardline stance – to take unconventional action in the money markets. The battle may not yet be won, but the cavalry has arrived.

When financial markets break down completely a central bank has no choice but to take their place. The situation is not as extreme as that of Japan in 2001, when the central bank provided almost unlimited sums to the banking system in an effort to increase lending, but it is time to take a step in that direction. The credit squeeze has lasted for four months and shown signs of getting worse. That it will affect the real economy is no longer in doubt.

Like the commanders of a disorderly retreat, central banks have to date staged a piecemeal response to the credit squeeze, to little effect. Their discount windows, which lend to solvent institutions at a penalty rate, have been idle. No bank wants to use them for fear of sending a signal to the market that it, like Northern Rock, is in distress.

The new Fed auctions are a promising attempt to solve that problem. A wide range of institutions will be able to borrow against a wide range of collateral, but more importantly, the minimum rate in the auctions will carry no penalty. The identity of successful bidders will not be disclosed and no one bank will be able to bid for more than 10 per cent of the amount on offer, so there should be no stigma attached to banks that borrow in this way.

Rather than the immediate effects, what matters about Wednesday’s action is that the world’s central banks have recognised the problem, united and taken action. They cannot magically erase a decade of excess from the credit markets. But their resolve alone will do much to restore confidence.

Today’s market believes that November’s frightening inflation statistics have grounded the Bernanke helicopters for the foreseeable future. That seems like an extremely dubious call to me. Bernanke has staked his professional credibility on maintaining an asset price bubble. It’s going to take more than one epically bad month’s inflation numbers to ground Bernanke’s Apaches for good.

Meanwhile, the “cavalry” have not improved circumstances at all. The spreads between Libor and most bond classes of bonds has not narrowed. For the “cavalry” to “win the day,” they will have to cut to such an extent that they will leave no doubts about higher long-term inflation by proving to the market that the highest monthly inflation in 34 years isn’t fazing them a bit.

Unfortunately, if any two people are “brilliant” enough to believe such stupidity can succeed where genius has failed, Mishkin and Bernanke are.

I have to admit some schizophrenia here. What bothers me is not the action of the Fed so much as the Fed’s apparent rationale. Its responses seem to be Pavlovian reactions to the TED spread and in the general decibel level of panic in financial media, stemming from paleo-Keynesian 1970’s “establishment consensus” ideology which favors “maintaining demand.” All global imbalances will only worsen until China revalues and floats the yuan. Chinese political unrest stemming from inflation — courtesy of a Fed weak-dollar policy –, and subsequent explosion of Chinese liabilities relative to dollar assets after the yuan floats, will hasten the violent Chinese adjustment.

I believe that will be good and necessary in the long run. Unfortunately, it’s clearly nowhere on Bernanke’s agenda. He probably wants to sustain inflated Chinese asset prices, and believes his cuts are accomplishing as much.

Beyond my petulant, and ultimately insignificant grievances, though, the Mishkin Fed has betrayed a more profoundly, objectively disturbing consistency.

While Bernanke et al. punctuate every speech with calls for “increased transparency,” their actions betray consistent disrespect for any one set of rules for the game. Fed policy has consistently veered towards “surprising the market,” “getting back at the bears,” and utilizing “constructive ambiguity.

Bernanke’s choice to slash the Fed discount rate by 50 basis points at the end of August, mere hours before the expiry of August options, sadistically, calculatedly devastated traders who had taken reasonably-bearish positions on August options.

Bernanke’s bungling attempts to strong-arm private actors into the “Paulson SuperSiv,” an ostensibly private effort, reflected a total lack of respect for pricing in structured finance markets. After the SuperSiv flopped due to a complete lack of interest from the private sector, Bernanke apparently retaliated by launching a SuperSiv directly sponsored by the FRB and Treasury, now called a “discount auction facility.” It will permanently coagulate securitized debt markets, and destroy individuals and funds whose bearish positions are driving the asset-backed indices towards genuine market prices. This is eerily reminiscent of the Rockefeller family’s pouring money into the 1929 DJIA to prop up grotesquely inflated stock prices.

And instead of transparently and methodically slashing the Fed funds rate, Bernanke has chosen to introduce enormous uncertainty via new, previously unfamiliar policy instruments (auction facilities, discount rates instead of funds rates, overnight index swaps) which amount to end-runs around the Fed funds rate. Not to mention constipating the securitized-debt market for the foreseeable future by setting an absurdly generous price floor.

His bait-and-switch this week, with a disappointingly low cut in the Fed funds rate followed by a very bullish liquidity injection the next day, was also gratuitously “surprising” to every trader who respected “the rules.” It also mocked the FRB’s public pieties of “increasing transparency” in FOMC deliberations and actions.

The inconsistencies between the Fed’s words and deeds, combined with the gratuitous recent complexity of Fed policy, strongly suggest that “the public trust” is at best not a Fed priority, and at worst runs completely contrary to the Federal Reserve’s true policy objectives.

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