Sunday, February 17, 2008

U.S. retail sales show increase because necessities cost more

U.S. retail sales show increase because necessities cost more

By Floyd Norris

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U.S. consumers are being forced to scale back their purchases, but high prices of necessities are keeping their overall purchases rising at a reasonably strong rate.

The retail sales report for January showing that overall retail sales were stronger than many had expected was well received by the stock market Wednesday, the day it was released. In total, retail sales are running more than 4 percent over the level of a year ago, an increase that is above the overall inflation rate and much stronger than when the last recession began in early 2001.

But the overall change is misleading. One reason for its strength is that prices of necessities are up sharply over the past year, meaning that those items consume more and more of the household budget.

Overall, Americans are spending about 13 percent more on food and energy now than a year ago. The figures, as are all the figures shown in the charts accompanying this article, are based on three-month moving averages of seasonally adjusted figures and compare this year with last year.

The biggest cause of that increase is gasoline, of course, whose cost rose dramatically in 2007. Americans are spending 22 percent more now at gasoline stations than they did a year ago. Food costs are up nearly 6 percent - still a drain on budgets.

As can be seen in the charts, when the economy was entering recession in early 2001, total retail sales were growing at a much slower rate than they are now. But the prices of food and energy were growing at a much slower rate, and that rate was falling rapidly. Those declines in prices helped to offset the impact of the downturn on consumers.

But the situation is less bright now than in 2001 for many categories of retailers. One chart shows the combined sales of general merchandise stores, like department stores and discounters like K-mart, and clothing stores. The figures include shoes and jewelry and show that total sales now are up less than 4 percent over the past year, a lower rate than in early 2001.

Although not shown separately in the charts, department store sales are now declining at an annual rate of almost 3 percent, but other general merchandise stores are doing better, perhaps reflecting decisions by some consumers to save money by shopping at discounters.

Among clothing retailers, both shoe stores and men's clothing stores have seen sales decline from a year ago, and the 1.1 percent gain for women's clothing stores is the smallest in several years. Stores dedicated to women's clothing now take in about four times as much as stores dedicated to men's clothing, a proportion that has been rising gradually in recent years.

The final chart shows an annual decline in sales of furniture and appliances, including electronic equipment. That is no surprise, given the fall in home sales, but it may come as a surprise that sales from computer stores are now falling at an annual rate of almost 5 percent.

Dollar Sales by Japanese Investors Reach Record High

Dollar Sales by Japanese Investors Reach Record High

By Kosuke Goto

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Dollar sales by Japanese individual investors on the Tokyo Financial Exchange Inc. rose to a record high on speculation the U.S. economy will suffer a recession.

Housewives, pensioners and businessmen accelerated sales of the U.S. currency this week, taking advantage of its rally to a one-month high against the yen. The exchanges share of so-called margin trading, borrowing money to buy and sell currencies, was 8.6 percent in 2007 based on figures from the Financial Futures Association of Japan.

``They do not seem to believe in the U.S. economic recovery later this year at all,'' said Yuji Kameoka, a senior economist and currency analyst at Daiwa Institute of Research, a unit of Japan's second-largest brokerage. ``They are expecting the dollar will head south.''

The U.S. currency traded at 107.84 yen as of 2 p.m. in Tokyo from 107.87 yen in New York yesterday. It rose to 108.60 yen on Feb. 14, the highest since Jan. 14. The currency has fallen 13 percent since June 22, when it reached a 4 1/2-year high of 124.13 yen.

Short positions held by individual investors on the dollar against the yen, wagers the U.S. currency will fall, reached 20,589 contracts on Feb. 13, the most since July 2006 when Japan's largest financial futures market started collecting data. The contracts are denominated in 10,000 units of the foreign currency.

Japanese investors have 1,536 trillion yen ($14.2 trillion) in financial assets, according to figures from the Bank of Japan released on Dec. 17.

Yield Premium

The dollar headed for the biggest weekly loss since December against the euro after U.S. Federal Reserve Chairman Ben S. Bernanke signaled the bank may cut interest rates further to avert a recession.

``Japanese individuals probably believe U.S. interest rates will go down amid a slowing economy, eroding the yield premium against the yen,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, the second- biggest U.S. bank. ``They are waiting for dollar appreciation to sell.''

The U.S. currency may rise to 113 yen by June 30, Fujii forecast.

The difference in yield between benchmark two-year U.S. and Japanese bonds, among the securities most sensitive to interest rate changes, was 1.28 percentage points today, the smallest since October 2003.

The popularity of currency investment among Japanese individuals has soared in Tokyo. Trading of currencies in Japan using borrowed funds rose 162 percent in the third quarter to 185 trillion yen from the same period in 2006, data from the Financial Futures Association of Japan showed.

Bernanke's State of the Economy Speech:

Bernanke's State of the Economy Speech:

"You are all Dead Ducks"

By Mike Whitney

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Even veteran Fed-watchers were caught off-guard by Chairman Bernanke's performance before the Senate Banking Committee on Thursday. Bernanke was expected to make routine comments on the state of the economy but, instead, delivered a 45 minute sermon detailing the afflictions of the foundering financial system. The Senate chamber was stone-silent throughout. The gravity of the situation is finally beginning to sink in.

For the most part, the pedantic Bernanke looked uneasy; alternately biting his lower lip or staring ahead blankly like a man who just watched his poodle get run over by a Mack truck. As it turns out, Bernanke has plenty to worry about, too. Consumer confidence has dropped to levels not seen since the 1970s recession, real estate has gone off a cliff, credit-brushfires are breaking out everywhere, and the stock market continues to gyrate erratically. No wonder the Fed-chief looked more like a deck-hand on the Lusitania than the monetary-czar of the most powerful country on earth.

Bernanke's prepared remarks were delivered with the solemnity of a priest performing Vespers. But he was clear, unlike his predecessor, Greenspan, who loved speaking in hieroglyphics.

Bernanke: "As you know, financial markets in the United States and in a number of other industrialized countries have been under considerable strain since late last summer. Heightened investor concerns about the credit quality of mortgages, especially subprime mortgages with adjustable interest rates, triggered the financial turmoil. However, other factors, including a broader retrenchment in the willingness of investors to bear risk, difficulties in valuing complex or illiquid financial products, uncertainties about the exposures of major financial institutions to credit losses, and concerns about the weaker outlook for the economy, have also roiled the financial markets in recent months.”

Yes, of course. The banks are ailing from their subprime investments while Europe is sinking fast from $500 billion in unsellable asset-backed garbage. The whole system is clogged with crappy paper and deteriorating collateral. Now there are problems popping up in auction rate sales and the normally-safe municipal bonds. The whole financial Tower of Babel is cracking at the foundation.

Bernanke continues: "Money center banks and other large financial institutions have come under significant pressure to take onto their own balance sheets the assets of some of the off-balance-sheet investment vehicles that they had sponsored. Bank balance sheets have swollen further as a consequence of the sharp reduction in investor willingness to buy securitized credits, which has forced banks to retain a substantially higher share of previously committed and new loans in their own portfolios. Banks have also reported large losses, reflecting marked declines in the market prices of mortgages and other assets that they hold. Recently, deterioration in the financial condition of some bond insurers has led some commercial and investment banks to take further markdowns and has added to strains in the financial markets."

Bernanke sounds more like an Old Testament prophet reading passages from the Book of Revelations than a Central Banker. But what he says is true; even without the hair-shirt. The humongous losses at the investment banks have forced them to go trolling for capital in Asia and the Middle East just to stay afloat. And, when they succeed, they're forced to pay excessively high rates of interest. The true cost of capital is skyrocketing. That's why the banks are protecting their liquidity and cutting back on new loans. Most of the banks have also tightened lending standards which is slowing down the issuance of credit and threatens to push the economy into a deep recession. When banks cramp-up; the overall economy shrinks. It's just that simple; no credit, no growth. Credit is the lubricant that keeps the capitalist locomotive chugging-along. When it dwindles, the system screeches to a halt.


Bernanke again: "In part as the result of the developments in financial markets, the outlook for the economy has worsened in recent months, and the downside risks to growth have increased. To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so. The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already-elevated inventory of unsold homes. Further cuts in homebuilding and in related activities are likely.....Conditions in the labor market have also softened. Payroll employment, after increasing about 95,000 per month on average in the fourth quarter, declined by an estimated 17,000 jobs in January. Employment in the construction and manufacturing sectors has continued to fall, while the pace of job gains in the services industries has slowed. The softer labor market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term."

So, let's summarize. The banks are battered by their massive subprime liabilities. Housing is in the tank. Manufacturing is down. Food and energy are up. Unemployment is rising. And consumer spending has shriveled to the size of an acorn. All that's missing is a trumpet blast and the arrival of the Four Horseman.

How is it that Bernanke's economic post-mortem never made its way into the major media? Is there some reason the real state of the economy is being concealed from 'we the people'?

Bernanke continues: "On the inflation front, a key development over the past year has been the steep run-up in the price of oil. Last year, food prices also increased exceptionally rapidly by recent standards, and the foreign exchange value of the dollar weakened. ...(If) inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future."

Right. So, if the Fed's rate-cutting strategy doesn't work and the economic troubles persist (and prices continue to go through the roof) then we're S.O.L. (sh** out of luck) because the Fed has no more arrows in its quiver. It's rate cuts or death. Great. So, we can expect Bernanke to hack away at rates until they're down to 1% or lower (duplicating the downturn in Japan) hoping that the economy shows some sign of life before it takes two full wheelbarrows of greenbacks to buy a quart of milk and a few seed-potatoes.

Sounds like a plan!

We don't blame Bernanke. He's been remarkably straightforward from the very beginning and deserves credit. He's simply left with the thankless task of mopping up the ocean of red ink left behind by Greenspan. It's not his fault. He should be applauded for dispelling the decades-long illusion that a nation can borrow its way to prosperity or that chronic indebtedness is the same as real wealth. It's not; and the bill has finally come due.

Of course, now that the low-interest speculative orgy is over; there's bound to be a painful unwind of hyper-inflated assets, falling home prices, tumbling stock markets, increased unemployment, and a generalized credit-contraction throughout the real economy. Ouch. Who said it was going to be easy?

Bernanke's summation:

"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt....It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further."

(Editor's translation) "Discount everything I've said here today if the economy blows up---as I fully-expect it will---from decades of regulatory neglect and the myriad multi-trillion dollar Ponzi-schemes which have put the entire financial system at risk of a major heart attack".

Bernanke's candor is admirable, but it is little relief for the people who will have to soldier-on through the hard times ahead. Perhaps, next time he could spare us all the lengthly oratory and just forward a brief cablegram to Congress saying something like this:

"We are deeply sorry, but we have totally fu**ed up your economy with our monetary hanky-panky. You are all in very deep Doo-doo. Prepare for the worst."

our sincerest regrets,

the Fed

The Terrorists Still at Ground Zero 7 World Trade Center, Lower Manhattan

The Terrorists Still at Ground Zero

7 World Trade Center, Lower Manhattan

By Alexander Cockburn

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Terrorism flourishes brazenly at Ground Zero, in the new 7 World Trade Center building. Here can be found a secretive entity of fabulous wealth and power. Kingdom and corporations alike tremble at its shadow and make haste to pay it tribute. I refer to Moodys Investor Services, wholly owned subsidiary of Moody's Corporation, which reported $2 billion in revenues in 2006.

On January 10 Moody's, in concert with the other main bond rating firm, Standard and Poor's, gave the United States its top AAA credit rating. The terrorist blackmail threat came in the form of a demand by Moody's that the U.S. government "reform" Social Security and Medicare: "In the very long term, the rating could come under pressure if reform of Medicare and Social Security is not carried out as these two programs are the largest threats to the long-term financial health of the United States and to the government's Aaa rating."

Steven Hess, Moody's top analyst for the US economy spelled it out even more explicitly to the London Financial Times: "If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A creditThe US rating is the anchor of the world's financial system. If you have a downgrade, you have a problem."

US interrogators torture men in secret prisons seeking to catch those members of Al Quaeda still at large, starting with Osama bin Laden and Aiman al-Zwahiri. Yet here's Moody's man calmly threatening to destroy the US government's credit ranking unless it follows his agenda, and he strolls around Lower Manhattan unmolested, even if his threats could add up to the financial equvalent of a thermonuclear device planted under the Statue of Liberty.

Moody's runs a protection game. It issue credit ratings, (in 2007 no less than 39 percent of the global credit rating market by revenue, according to Bloomberg) based on public data and private information made available by those clients that have "voluntarily" retained their services. The price of not volunteering can be high. As vividly described by Alec Klein in his excellent 2004 series in the Washington Post on the credit-rating giants, the giant German insurance corporation Hannover declined repeated Moody's offers to rate its credit, at a time when the latter was trying to extend its reach in the European Community. Moody's promptly issued an unsolicited and adverse rating, then--just like a small time mobster after hurling a brick through the window of a liquor store--went back to Hannover and reissued its invitation to offer protection-by-rating. Hannover's top man said he wouldn't surrender to blackmail and so between 2001 and 2003 Moody's steadily reduced Hannover rating all the way down to Junk. This cost Hannover a great deal of money in paying the higher risk premiums on money it borrowed.

By contrast Enron handled relations with Moody's with ermine gloves. All the way through 2000 until a few days before Enron filed for Chapter 11, Moody's, like S&P, declined to lower the boom by demoting bonds issued by Enron company to below-investment grade. Banks with huge sums at stake allegedly pressured Moody's to keep quiet, even though Moody's had privileged access to Enron's internal financial operations.

Today, the world's credit system is strained to bursting point by such financial scams as CDOs (collateralized debt obligations) which are bundles of debt instruments, ranging from junk bonds through subprime mortgages. Moody's and the other rating agencies have played a crucial role in putting the CDOs together in the first place.

Of course the terrorists in lower Manhattan want Wall Street to get its mitts on the pools of money held in the Social Security trust funds. But if Moody's is going to present itself as a major political player, presuming to dictate national policy down the barrel of a financial gun, its executives and analysts should be hauled into the Star Chamber. Let's have a war on terror and a rendition of Moody's executives to explain, before a special investigative committee of congress with full subpoena power, their own role in causing the financial upheavals afflicting the planet right now, due to the collapse of the housing bubble and its impact on the home mortgage market.

As Prof. Robert Pollin of U Mass/Amherst remarked last week to me, "We could say the Bubble and crisis occurred because people like Moody's rating agency always misread the build up of bubbles. They assume the rise in asset prices represents something fundamentally different about the economy, and then open the floodgates for financial speculation. Based on this, we should rather be talking about the stability of U.S. and global financial markets coming under immediate pressure due to the fact that market analysts, like Moody's, don't have a clue as to what they are talking about."

Right now the US deficit is around $200 billion, 1.5 percent of GDP, not large and presenting no danger in itself to U.S. financial soundness. But as Pollin adds, if Moody's analysts want to discuss causes of fiscal laxity, "why not look at the Iraq war? The Defense budget for 2006 was $617 billion. That is 4.8 percent of a $13 trillion GDP. Before the Iraq war, the defense budget was about 3.0 percent of GDP. So Iraq alone is costing between $150 - 200 billion annually, about 1.5 percent of GDP.. And what has that war achieved? Social security and medicare combined were about $900 billion in 2006. Why assume we first have to attack our minimal welfare state, and leave the imperial budget intact? "

In fact it's almost entirely Medicare, not Social Security, that accounts for the projected rising costs in our shrivelled welfare state. The culprit here is not the swelling ranks of older people but the insurance and drug companies' grip on our health system. Conversion to single-payer would mean huge savings. The U.S. pays around 14 per cent of its gross domestic product for health care, twice what other advanced industrial countries pay. Shift to single payer and quit shoving money--4.8 per cent of GDP--down the imperial sink-hole and there's no fiscal crisis of any sort, short or long term for Moody's or anyone else to fret about. And in the even shorter term, if Moody's sees fiscal crisis looming, why don't its overpaid executives for once put the national interest first and call for a tax hike on the rich? Bob Pollin tells me that just going back to Clinton, as opposed to Bush-2, on taxes for those making over $200,000 a year, would generate $60 billion a year. Do this and end the war in Iraq and you wipe out the deficit at a stroke.

Let a real war on terror commence!

Amid its blackmailing threats to launch a terrorist onslaught on the credit rating of the United States, Moody's has its moments of honesty about the capitalist rackets in which it is a major player. Witness its extraordinarily forthright recent background document, "Archaeology of the Crisis", part of its series, "Moody's Global Financial Risk Perspectives" "In the financial industry, in contrast with other businesses, there is a point beyond which increased competition is not stability-enhancing, but rather potentially destabilizing past a certain point--difficult to identify--more competition means more, and perhaps socially undesirable risk-taking."

With bracing frankness Moody's archeologist of capitalism concedes " it is also possible that the welfare benefits of some financial innovations may be lower than expected Accepting the existence of crisis is the Faustian pact that policymakers have made with the financial industry. However, the pact is an implicit one, as policymakers are reluctant to concede that they will have to intervene in extreme situations--that is when almost no capital cushions
could be large enough to absorb truly exceptional problems."

In other words, says Moody's man, capitalism is impelled by competitive pressures that are often profoundly anti-social in consequence and lurches from lurches from crisis to crisis, -- on average roughly 7.5 years apart since the late 1800s, as the late Charles Kindleberger once demonstrated -- that in the end require the intervention of the state, which has to save the system from the consequences of the market's excesses--which is why we have the scant protections we do, such as Medicare and Social Security.

Finally, why did Moody's man suddenly flourish the supposed threat to national security of the Social Security and Medicare programs? Chances are he was reading Niall Ferguson´s Colossus where the Wall Street Journal's favored historian uses some transparently bogus calculations to argue that "Imposing democracy on all the world´s rogue states would not push the U.S. defense budget much above 5 percent of GDP" whereas Medicare and Social Security are a far greater drain on the pubic purse, and should be pruned back. The fellow at Moody's probably gulped down this exciting dram and duly issued his terrorist demands.

Soros, Brzezinski, Rohjatyn, & Rudman Running Obama

Barak Obama Fronts Wall Street's Infrastructure

Swindle - What Change Really Mean

By Bruce Marshal

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Do not be fooled! Barak Obama's call for National Infrastructure Reinvestment Bank (NIRB) does not signal the return of the Democratic Party to the values of FDR and a revival of the Constitutional prerogative to 'promote the general welfare', but would rather provide more welfare for Wall Street and worse. Obama's plan is nothing more than the direct means of instituting the Rohatyn-Rudman National Investment Corporation (NIC) plan called for in 2005, which in essence is a revival of Mussolini's methods of corporatist control of the state in a politically correct post modern fashion..

When Senator Obama states that his National Investment Reinvestment Bank will magically turn $60 billion into trillions of dollars as he did in his Feb 13th Jamesville, WI speech, one can easily realize that the only way that this can happen is through the perverse magic of Wall Street. What would happen is that bonds floated by the NIRB will be bought on the open market, to then be speculated upon, securitized as derivatives, traded and ultimately used as collateral on the newly built infrastructure. What we will see is the emergence of an infrastructure bubble to replace the mortgage bubble, propped up by initial government expenditures towards infrastructure. This is just the start as Obama will fund the feel good 'carbon credit' swap to be the next blast of hot air to make Wall Street giddy. This is a key insight to a true understanding of what is going on. Bailout the financial powers with a clever plan that will raise money to then buy up hard assets, in other words the remaining wealth of our nation, as the meltdown crisis of over a quadrillion in derivatives losses grows and grows..

Besides artificially propping up the markets, Obama's NIRB, as an initiation of the Rohatyn/Rudman infrastructure investment model, opens the door to the privatization of public assets. International predators and asset-strippers want to buy up public highways and impose cutthroat tolls, as they are already doing in many states. Then they run the turnpikes into the ground as cash cows while they mercilessly bilk the users. Privatization is a key goal of the Anglo-American financiers behind this scheme. Both the NIC and NIRB rely on the new darling of the markets, PPPs, known as public private partnerships. PPPs are the means by which market forces will dictate, and that is the word, the implementation of these projects. The argument is that the PPP will keep costs down, but in reality only because the private corporations, now controlling the public sector, will own the assets of what is being constructed. The PPP model is none other than the model implemented by Mussolini in his fascist corporate state. The creation of NIRB funds hark back to Hjalmar Schact's 'MEFO' bills that created the speculative bubble of money so that the National Socialists could rearm Germany and fight World War II..

Since 9/11 America has certainly turned into a top-down police state, but true post-modern fascism requires a popular movement to usher it into power. Bush has created a dictatorship out of the Presidency, now the next step towards fascism is being marketed to exploit the desire for change. The depressed national mood, due to the war and economic recession/depression has compromised sane reasoning and courageous opposition needed now more than ever. This has created the conditions for a newcomer to magically appear with a message of hope, using the mantra 'Change', wrapped in a swooning fever that has infected the young and left liberal excuse machines, such as 'Move On' who were never serious about stopping Bush/ Cheney and the war.

Since he passed his audition at the Democratic convention in 2004, Senator Obama has been taken over by George Soros and other hedge fund millionaires to launch a campaign out of nowhere, based on nothing but rhetoric and Wall Street millions. As darling of the rich elitist Kennedy/Kerry/Dean wing of the Democratic Party, Obama's pseudo-Camelot will deliver Wall Street and the Anglo-American financiers the goods while disguised in a patina of racial teflon and faux populism from the upper crust. For substance ask, where is the bill in the Senate by Kennedy/Kerry/Obama calling for a freeze on all foreclosures? Where's their filibuster against the war? Where is a real minimumn wage in the form of a living wage? Where is impeachment of Bush-Cheney? Why did Senator Obama move against raising heating oil assistance to the poor in the recent spending bill?

The answer to this last question, besides Rohatyn, is Obama's top economics controller, Austan Goolsbee, a sinister Skull & Bones, Friedmanite Chicago School free trade/free market economist who has delivered the real answer to the question of the difference between Senator Obama and Senator Clinton. Goolsbee stated on CNBC that Obama is more market friendly ­ more in the pocket of Wall Street. This is precisely the establishment's secret fear of Hillary Clinton that she might act as her heroine Eleanor Roosevelt, to implement a post modern New Deal that would oppose austerity measures against programs that help the poor. That she would fund essential public services, like hospitals and schools, and provide universal health care available to all. The greatest fear is that she might act like FDR to now start regulating the markets starting with a 1% Tobin tax which could eliminate the income tax burden for everyone earning less than $125,000 year with plenty of money to fund the basic social programs of a civilized and truly decent society.

Now Obama, with economic advisers such as David Cutler, who believes that rising health care prices are good for the economy, and Jeffrey Liebman, who wants to partially privatize social security, you see that Obama's MBAs will be quite good at implementing the vision of the Democratic godfather Felix Rohatyn (ex-Lazard Freres) and Republican Warren Rudman, an proponent of savage austerity and the wrecking of entitlements.. Their obsession with balanced budgets, privatization, and asset stripping will be given new cover as the United States is dissolved into one great corporatist PPP.

Yes, we do need infrastructure, but the reason we have an infrastructure crisis is because people like Rudman and Rohatyn have influenced thinking against infrastructure projects because it would get in the way of their balanced budget mania and plans to loot the economy. Now they have a new solution and salesman. Watch out!

Remember it was Rudman who was a key figure in the conservative revolution around Gingrich. The nefarious interest of Rohatyn is even more sinister considering that this is the fellow who was part of the international team supporting fascist dictator Augusto Pinochet, where Rohatyn's social security privatization scheme was first tried. Soon a limited revised version of social security privatization will be introduced by Obama when an alarm is pulled by Wall Street during a Obama Presidency. In the 1970's Rohatyn became the actual dictator of New York City under Big Mac (the 1975 Municipal Assistance Corporation), trumping the city government, as a financial czar who cared more about the city's bond rating than lives, cutting essential services, including many inner-city hospitals in a mad example of a PPP. Rohatyn, who is also recognized as the money bags behind the pro-Obama Democratic Leadership Council, is also a big proponent of military privatization which is another step towards feudal fascism. No wonder the Democrats have not stopped the war; it is good for their business arrangements too.

While Senator Obama says that he will stop the war and use that money to initially finance the NIRB and his green initiatives, this will do nothing to stop the speculative forces that are causing the present hyperinflationary bubble. Will Obama stand up to the speculators whose gambling is responsible for up to 40% of the price of every gallon of gasoline? Not likely.

Sure the NIRB will create some low-wage jobs, but the PPP arrangement will make certain that organized labor does not get assertive about living wages and benefits, all the while private companies welcome a work force of illegal immigrants who will do much of the work for virtual slave wages as is already the case.

So, what is to be done? First, we need a real debate towards electing a President and Congress who will confront the crisis, the real issues surrounding the present meltdown of the derivatives bubble and what that means for the entire economy. The sub-prime mortgage collapse is the tip of the iceberg. If Obama prevails, Americans will find that like the SS Titanic, the USA does not carry enough life boats that are not already owned by the bankers. Congress must come to reassert its constitutionally mandated sovereignty, by taking steps to federalize the Federal Reserve, regulate the markets, save the essential banking interests of the people, and then create the money with which to create honest investment into our nation's infrastructure to thus promote the general welfare of all.

Congress's Betrayal of the American Worker

Congress's Betrayal of the American Worker

By Richard Backus

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While claiming to be attempting to increase the number of well-paying jobs in the U.S. (having created laws in the past explicitly designed to do this), the Congress has really been following a completely different course. Almost all recently passed laws have done just the opposite.

The following Acts of congress were ostensible made in order to keep American workers fully employed and to create a healthy economy:
The Full Employment Bill of 1946 was designed for the federal government to promote "maximum employment, production, and purchasing power". Amendments removed a guarantee by the government to explicitly provide "full" employment, but certainly the intent of the bill was to provide this as indicated by it's title.
The Full Employment and Balanced Growth Act of 1978 was designed to attain full employment, growth in production, price stability, and balance of trade and budget. Goals were established including a maximum of 3% to 4% unemployment rate, an attempt to balance the federal budget, and the avoidance of trade deficits. If private business interests did not attain these goals the government was entitled to create a "reservoir of public employment." The Act explicitly prohibits discrimination on the basis of age as well.. .
There was no effort to carry out the intent of these Acts. They were passed to create an appearance that these goals were being pursued while congress passed laws which did just the opposite. "Gloabalization" was intended to allow American businessmen to replace American workers with low-priced foreign ones. Since American corporations own much of the foreign manufacturing businesses, a foreign worker is simply an employee of an American firm hired overseas to replace an American worker stateside. The congress threw in an added tax sweetener to further facilitate this giveaway.
NAFTA and CAFTA had the same intent. So much for "promoting" full employment for U.S. citizens. Immigration policy, legal and illegal as well, was designed to do the same. No real serious efforts were made to stop the border crossings. The proof of this is in the number of illegal immigrants who succeeded. Legal immigration in the high-tech sector was a fraud from the get-go. Businessmen simply wanted younger, less expensive, and more pliable employees. Those older native ones wanted to be fairly treated and paid appropriately for a highly-trained engineer. Again, it was the government that "legally" made this jobs giveaway possible. The age-discrimination laws were ignored and tons of young (inexperienced) but low-salaried foreigners came surging in.
The immigration laws themselves were violated from the very beginning, proof being that high-tech salary levels immediately took a big dip violating the law's requirement that immigrants were to be paid equal wages. When it was obvious that wages were falling, the congress did nothing.
The following is a excerpt of the law regarding age discrimination :
The Age Discrimination in Employment Act of 1967
SEC. 2.
(a) The Congress hereby finds and declares that:
(1) in the face of rising productivity and affluence, older workers find themselves disadvantaged in their efforts to retain employment, and especially to regain employment ....
(b) It is therefore the purpose of this Act to "promote" employment of older persons based on their ability rather than age; to prohibit arbitrary age discrimination in employment...
Section 4
(a) It shall be unlawful for an employer- (1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age; (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age.
Again the government claimed to be interested in "promoting" employment for this group when it was blatantly passing laws giving away the jobs of these older persons (younger ones as well). No effort was made to modify or reform these immigration laws even after it was obvious that American businessmen were violating them on a massive scale.
But the primary reason behind these giveaways was really not disclosed. The dollar's exchange rate has been manipulated over the last 30 years in order to suit the wishes of the rich causing American worker's wages to become progressively less and less competitive. This ultimately resulted in American manufacturing wage levels , on average, of ten times those of foreign workers in those less-developed countries which had been perfecting their manufacturing capabilities. Only if an American wage earner agreed to work for $2-$3/hr. would he have been competitive.
In contrast to this policy of overpricing American workers, Japan has built the world's third largest economy by consistently doing just the opposite. Every time the yen's exchange rate appreciated, causing a potential loss in production (and employment), the Japanese reserve bank acted to lower its exchange rate (simultaneously increasing the dollar's exchange rate). Thailand has recently attempted to do the same when the appreciation of it's currency caused a possible overpricing of the Thai worker's wage levels. Investors reacted negatively but Thai worker's jobs may ultimately prove to have been saved. The U.S. government, by doing just the opposite, has not only caused U.S. jobs to surge to overseas locations, but has resulted in the massive trade deficits which may ultimately threaten a catastrophic fall in the value of the dollar.
This exchange rate manipulation resulted in the failure of one of the major goals of the aforementioned Full Employment and Balanced Growth Act of 1978 , a balanced trade. The other goals of that Act, concerning the unemployment level and "balanced budget", have failed as well. Needless to say, an effort to establish a "reservoir of public employment" went nowhere.
The public's inability or unwillingness to face up these betrayals will result in the destruction of the working class in the U.S. If the public does not protest, they will continue to get a government that no one deserves.
Richard Backus, author of this article, is a free-lance journalist specializing in political economy and politics. He resides in Miami Beach, Florida and his personal website is

FDA ties pneumonia deaths to infant vaccine

FDA ties pneumonia deaths to infant vaccine

Agency panel considering approval of oral medicine for diarrhea virus

WASHINGTON - GlaxoSmithKline Plc's rotavirus vaccine is associated with increased pneumonia-related deaths and other adverse reactions, U.S. regulatory staff said in documents posted on Friday.

The review comes ahead of a Food and Drug Administration advisory meeting next Wednesday to consider approval of the oral vaccine to prevent the most common cause of severe diarrhea and dehydration among infants and young children in the world.

FDA staff said its analysis of 11 studies revealed that in the largest trial, there was a statistically significant increase in deaths related to pneumonia compared with placebo, documents posted on the FDA's Web site said.

That study, which enrolled about 63,000 children, also found an increase in convulsions in children given the drug, named Rotarix. Another study found an increased rate of bronchitis, compared with placebo.

In a conclusion section, the FDA documents noted the pneumonia-related deaths and convulsions, but did not appear to make a recommendation to the advisory panel.

That expert panel will weigh the staff review, but makes its own recommendation, which is typically followed by the FDA.

GM crop trial locations may be hidden from publicGovernment plans clampdown on vandalism after lobbying from biotech firms

GM crop trial locations may be hidden from public

Government plans clampdown on vandalism after lobbying from biotech firms

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Genetically modified crops may be grown in hidden locations in Britain amid fears that anti-GM campaigners are winning the battle over the controversial technology, the Guardian has learned.

Officials at the Department for Environment, Food and Rural Affairs (Defra) confirmed they are looking at a range of options to clamp down on vandalism to GM crop trials, after intense lobbying by big crop biotech companies. The firms have warned that trials of GM crops are becoming too expensive to conduct in Britain because of the additional costs of protecting fields from activists.

This week, a report from the GM industry claimed that worldwide agricultural use of genetically modified crops had increased 70-fold in the last 10 years to 114m hectares in 2007.

But fears of vandalism have forced many companies to shift their crop trials abroad. Last year, only one trial went ahead in Britain, a blight-resistant GM potato developed by the German company BASF. Two activists were arrested for damage to the trial site, which was later almost completely destroyed in a night raid.

BASF plans to repeat the trial this year, at the National Institute of Agricultural Botany in Cambridgeshire. Another trial is planned by scientists at Leeds University.

A group representing the major biotech companies has asked the government to oversee specific changes to the GM trial process that would make fields of crops harder for activists to locate. Under existing laws, full details of every GM crop trial must be disclosed in advance on a government website, with a six-figure grid reference identifying the precise location of the field.

The group has asked Defra to keep details of locations on a register, which would only be shared with people who apply and who can prove they have good reason to know. Another option is to release only a four-figure reference for the trial site.

"These trials are legal, so why give carte blanche to anyone who wants to destroy them? In most countries, there is nothing like the sort of specific information that has to be given in Britain," said Julian Little of the industry group, the Agricultural Biotechnology Council. The need to give the location of a GM crop is contained in a European directive, but it is interpreted differently across member states.

The GM companies are also keen to see stiffer penalties for activists caught damaging crop trials.

"We have to sort out the framework under which we're allowed to do trials. If Britain is to benefit from GM technology, we have to have crop trials in Britain. There's no use second-guessing how a crop will fare here from what has been done elsewhere," Little said. "We have to start looking at how to produce a large amount of food on a small amount of land with a minimal environmental footprint and for that you need new technology."

Some GM companies fear future crop trials are in greater danger because of what they claim is a "broadening out" of anti-GM activists to include anti-globalisation and possibly animal rights campaigners. British anti-GM activists have also developed links with European groups that hold training camps to share tactics, such as crossing police lines and gaining access to fields. In France and Germany, crop trashings have increased substantially as farmers have taken to growing GM crops.

Defra officials said making it harder to identify trial sites was not a straightforward process.

Only one GM crop is approved for cultivation in Europe, an insect-resistant maize, which is grown on about 110,000 hectares in member states. It is not grown in Britain because the corn pest it protects against is not found in this country. A second crop, a potato, is in the final stages of approval in Brussels, but it would only be used to produce starch for the paper industry and would probably be grown in Germany and the Czech Republic.

British, US team propose moon mission to fire missiles into the moon's surface

British, US team propose moon mission

British and U.S. scientists said Friday they were exploring plans for a joint lunar mission that would use an orbiter to fire missile-like penetrators into the moon's surface.

The Moon Lightweight Interior and Telecoms Experiment, or MoonLITE, would put a satellite into orbit around the moon. Three or four projectiles packed with scientific instruments would then be fired and embed just below the lunar surface, the British National Space Center and NASA said in a statement.

The scientists said MoonLITE could deliver important information about the moon's structure, such as the size of the lunar core and the source of lunar seismic activity.

The mission would also provide an opportunity to test the space communications network needed for future robotic or human explorers.

NASA and the British space center said more study and a definitive cost estimate were needed before making a decision on whether to proceed with the proposed mission.

The statement came a day after the government's space minister, Ian Pearson, said officials were reconsidering a 1986 decision for Britain not to pursue its own manned space flights.

Britain doesn't want to be left out of an "international wave of new space exploration in the next 10 to 20 years," Pearson said while announcing plans for a new space research center to be built near Oxford.

He said a review of manned spaceflight options would come out either this year or next, and in the meantime Britain would likely remain focused on robotic space exploration.

China concerned by U.S. satellite missile plan

China concerned by U.S. satellite missile plan

BEIJING (Reuters) - China is concerned by U.S. plans to shoot down an ailing spy satellite and is considering what "preventative measures" to take, the Foreign Ministry said on Sunday.

"The Chinese government is paying close attention to how the situation develops and demands the U.S. side fulfill its international obligations and avoids causing damage to security in outer space and of other countries," spokesman Liu Jianchao said.

President George W. Bush has decided to have the Navy shoot the 5,000-pound (2,270 kg) satellite with a modified tactical missile after security advisers suggested its re-entry could lead to a loss of life, U.S. officials said on Thursday.

"Relevant departments in China are closely watching the situation and studying preventive measures," Liu said in a brief statement posted on the Foreign Ministry's Web site (

On Saturday, Russia's Defense Ministry said the U.S. plan could be used as a cover to test a new space weapon.

It will be the first time the United States has conducted an anti-satellite operation since the 1980s. Russia also has not conducted anti-satellite activities in 20 years.

China launched a ground-based missile into an obsolete weather satellite in January 2007, drawing international criticism and worries inside the Pentagon that Beijing has the ability to target critical military assets in space.

Iran launches oil products bourse with petrochemical deal

Iran launches oil products bourse with petrochemical deal

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TEHRAN, Iran: Iran established its first oil products bourse Sunday in a free trade zone on the Persian Gulf Island of Kish, the country's oil ministry said.

A statement posted on the ministry's Web site said 100 tons of polyethylene consignment was traded at the market's opening on the island, which houses the offices of about 100 Iranian and foreign oil companies.

Oil and petrochemical products will be traded in Iranian Rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said.

"The bourse provides an economic opportunity for Iranians, other countries and foreign customers," Nozari was quoted as saying.

Iran produces more than 20 million tons of petrochemical products per year.

Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic's economy.

A bourse official, Mahdi Karbasian, told the IRNA official news agency that such an oil market would begin operating within the next year.

While most oil markets are traded in U.S. dollars, Iran first floated the idea of trading oil in Euros in the early 2000s during the tenure of reformist president Mohammad Khatami. It gained new life after the nationalist Mahmoud Ahmadinejad was elected in 2005.

As the fourth largest oil producer in the world, Iran has a measure of influence over international oil markets. The country ranks second for output among OPEC Countries, and controls about 5 percent of the global oil supply.

Tehran also partially controls the Persian Gulf's Strait of Hormuz, through which much of the world's oil supply must pass.

Iran has sought to wield its oil resources as a bargaining tool in its ongoing standoff with the West over its nuclear program.

The U.N. Security Council is considering imposing a third set of sanctions on Iran for defying a request to halt uranium enrichment. But Tehran has expressed doubt that the world body would impose sanctions on the country's oil sector, because such a move would likely drive global oil prices higher.

Doubts on Fairness and Security as Pakistani Vote Nears

Doubts on Fairness and Security as Pakistani Vote Nears

By Carlotta Gall and Jane Perlez

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Islamabad - Pakistanis vote for a new government in parliamentary elections Monday, two months after the assassination of the opposition leader Benazir Bhutto, amid fears of turmoil and manipulation of the results by the government.

Pakistan is poised at a critical moment, with a growing Taliban and Qaeda insurgency and a population bitter and angry with its leaders over rising prices, escalating violence and accumulated frustrations from eight years of military rule.

The vote is seen by many as a referendum on the rule of President Pervez Musharraf. No matter which party prevails, Musharraf, Washington's partner in the campaign against terrorism for the past seven years, is almost certain to emerge in the post-election skirmishing as a diminished figure.

He is already much weakened after resigning from the position of army chief in November, and a popularly elected prime minister with the backing of Parliament will emerge as a new force.

Musharraf, who was re-elected last fall, technically remains above the fray in the parliamentary contest, but it is likely to be seen as a barometer of his standing. The political party that has supported him for the past five years, the Pakistan Muslim League-Q, is expected to fare considerably worse than it did in the last election, and the party of Bhutto, the Pakistan People's Party, which is riding a wave of sympathy after her death, may emerge as the largest party in Parliament, analysts say.

The insurgency remains at the top of the Bush administration's agenda, and U.S. officials have started to prepare for Musharraf's eventual exit. In a series of high-level visits in the past month on how to stem the militants' efforts to destabilize Pakistan, Washington officials have focused on the new army chief, General Ashfaq Parvez Kayani.

Opposition politicians and analysts in Pakistan argue that Musharraf has lost the support of the people and cannot fight extremism effectively without it. The two main opposition parties - Bhutto's, now led by her widower, Asif Ali Zardari, and the party of former Prime Minister Nawaz Sharif, Pakistan Muslim League-N - are both moderate parties opposed to terrorism. They argue that only a popularly elected government can bring the population together to oppose militancy.

The Bush administration has appeared determined to validate the election as a satisfactory exercise in democracy. Assistant Secretary of State Richard Boucher recently told a congressional committee that he was looking for "as fair an election as possible."

International observers, including several U.S. senators who arrived in the country Sunday, have already warned of serious flaws in the pre-election process. They have said that at best the election would be deemed "credible," rather than free and fair.

The biggest question will be to what extent the government apparatus will try to manipulate the results in favor of the pro-Musharraf party. If the elections are skewed too far in its favor, the government risks massive protests and violence.

Zardari and Sharif have threatened street protests if they deem the election to be unfair. But Zardari has also called for a government of national consensus after the election and has not ruled out working with Musharraf.

At least four candidates, including Bhutto, and nearly 100 members of the public have been killed during the campaign. There have also been kidnappings and arrests of candidates and attempts to intimidate candidates' families, according to Sheila Fruman, director of the National Democratic Institute in Pakistan, who cited accounts from political parties.

She described a litany of complaints, mostly from opposition parties, of bribery and the use of state resources for campaigns. The manufacturing of counterfeit identity cards was uncovered in the town of Quetta when a package of 3,000 fake cards split open, she said. Millions of names were found to have been missing from voter rolls, including, in one case, an entire village where support was strong for the Pakistan People's Party, she said.

"We cannot verify them, but in many cases the same complaints have come from different parties," Fruman said. The irregularities were consistent with the trends described in the institute's pre-election mission report, she said. Any one such incident, she said, "would be enough to stop elections in the West."

Musharraf has promised free and fair elections and has warned parties not to protest if they lose. "I assure you that the elections will be fair, free and transparent and peaceful," he said at a seminar in Islamabad last week, the state-run Associated Press of Pakistan reported.

"Let there be no doubt that anyone will be allowed to resort to lawlessness in the garb of allegations about rigging in the elections," he was quoted as saying.

Yet even the attorney general, Malik Qayyum, seemed to acknowledge government interference in a telephone conversation with an acquaintance, which was recorded by a journalist in November. "They will massively rig to get their own people to win," Qayyum said, apparently referring to the government.

Qayyum has since denied that the conversation occurred, but a transcript was released by Human Rights Watch, the New York-based organization. Qayyum had taken the call from his acquaintance while still on the line with the journalist, who had been interviewing him.

In a first for Pakistan, an estimated 20,000 volunteers have fanned out across the country to monitor voting at polling stations, as well as the critical counting process, which will be conducted by election officials at district courthouses after the polls close.

The small army of volunteers is organized by the Free and Fair Election Network, which is funded in part by the United States Agency for International Development. Many of the monitors are men and women, in their 20s and 30s, eager to help make the election process fairer. They will be conducting a parallel vote count Monday night in 264 of the 272 parliamentary constituencies.

A report by the Free and Fair Election Network released Feb. 5 said that mayors had been supporting certain candidates by urging voters to vote for them, attending their rallies and allowing them to use resources such as official cars and premises. "Most support is reported to have been in favor of the Pakistan Muslim League-Q," the report said.

The most sensitive hours of the election, according to experts, will be the counting of the ballots. The 272 returning officers who will do the counting are lower-court judges seconded to the national election commission, and many are in the thrall of high-court judges appointed by the Musharraf government.

The International Foundation for Election Systems, a nonpartisan group, had advised the Pakistanis to change the counting system to make it less vulnerable to fraud, Western diplomats said. The changes, which would have involved requiring the returning officers to announce the constituency results polling station by polling station, had been rebuffed, they said.

Ideology Makes for Bad Policy

Ideology Makes for Bad Policy

By Dr. Wilmer J. Leon III

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Ideology is a closely held belief system that guides an individual, social movement or institution. It is a comprehensive view that society can be made better, and projects the vision of an individual or group's ideal concept of how to live in the world. When the abstractions of ideology are combined with practical and realistic applications, very positive things can happen. The Colonists believed in liberty, freedom and self-rule. They combined those ideologies and created an organized resistance to defeat the better armed and better financed British. It was people's commitment to freedom, equality and civil rights that gave them the strength to challenge the status quo and create the civil rights movement. The combination of an ideology and its realistic application defeated Jim Crow segregation and improved the quality of life for many people of color in America. Belief in a particular ideology is the glue that holds a group together.

The problem with ideologies is that by themselves they are not rational. They tend to focus on and confuse the imagery of the "should be" and "ought to be" with the practical "is." Without people who are able to inject pragmatism and tie logic and reason to an ideology, it can take an institution, group or country down some very perilous roads. This is why ideologues (people who profess ideologies) make terrible politicians and ideology can make for very bad public policy. Ideologues are so focused on the "should be" they fail to take into account the practical applications of the "how."

For the past seven years, fascist Republican ideologues have hijacked American politics and policy. The so-called Reagan Republicans or neo-conservatives have co-opted American domestic and foreign policy. At the same time, Christian social conservatives have controlled the parties' social agenda in an attempt to redefine American values.

Fascism can be defined as an authoritarian political ideology that considers the individual subordinate to the interests of the state. Some of the characteristics of fascism are nationalism, militarism, totalitarianism, corporatism, autocracy and religiosity. The following are a few practical examples of fascist tactics that have been implemented by the Bush administration and allowed to continue by the Democrats.

The fact oil/energy companies have had unchecked influence over American energy policy, while pharmaceutical and insurance companies are writing health care policy, is an example of corporatism. President Bush and Vice President Cheney's attempt to consolidate power within the executive branch through the implementation of the unitary executive theory is a clear example of autocracy. The invasion of sovereign nonthreatening nations and the use of unilateral foreign policy are good examples of militarism. This administration's ignoring the protections guaranteed by the Constitution through their attacks on civil rights and civil liberties, the suspension of habeas corpus, warrantless wiretapping, ignoring the FISA court, extraordinary renditions and torture are examples of totalitarianism.

After seven years of ideological babble such as "compassionate conservatism," "American internationalism," "ownership society" and "war on terror," Americans are beginning to focus on real issues such as home foreclosures, affordable health care, outsourcing American jobs, global warming and sky-rocketing energy costs.

The Christian social conservatives have been able to distract the public's attention away from real problems and focus their attention on politically irrelevant and divisive issues. Wedge issues such as gay marriage and abortion pale in comparison when you've lost your home, lost your job, can't afford to take your sick child to the hospital and can't afford to put gas in your car to get them there.

Paul Weyrich, head of the Free Congress Foundation, was quoted in the Christian Science Monitor as saying, "... Republicans traditionally stood for limited government, free enterprise, and a strong national defense. We added a fourth leg to that stool, which was traditional American values." What are these so-called "traditional American values" and who made people such as Weyrich, Pat Robertson, James Dobson, or any other self-proclaimed Christians the arbiter of such values?

When seeking clarity on American values and ideals, Americans should look to the documents upon which the country was founded. In the Declaration of Independence, ideology was combined with pragmatic application. The true ideological basis of the country is articulated as follows: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." The pragmatic manner to implement the ideology is stated as, "That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed ... "

We can also look to the preamble of the Constitution of the United States: "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America." The Declaration of Independence and the Constitution of the United States are where the real traditional ideals of America are articulated.

Currently, the Republican Party finds itself engaged in an internal battle. Does it stick to the divisive ideology and wedge politics of its so-called Christian base as articulated by individuals named above? Do the Republicans hide behind the guise of Christianity while practicing the mean-spirited and heavy-handed brand of politics implemented by individuals such as former House Speaker Tom DeLay and current House Minority Leader John Boehner or move back towards the center, more in line with mainstream America?

While seeking the Republican presidential nomination in 2000 and trying to amplify his support among independents and moderates, Arizona Senator and current Republican presidential hopeful John McCain said evangelists like Pat Robertson and Jerry Falwell were "corrupting influences on religion and politics," and said parts of the religious right were divisive and even un-American. Senator McCain also showed support for gay marriage by saying, "... I think that gay marriage should be allowed if there's a ceremony kind of thing, if you wanna call it that? I don't have any problem with that... " He also supported Roe v. Wade. In 1999, McCain told the San Francisco Chronicle, "I would not support repeal of Roe v. Wade, which would then force X number of women in America to [undergo] illegal and dangerous operations."

Now that he has come under attack by the socially conservative, evangelical wing of his party for not being conservative enough, Senator McCain is trying to mend fences and "heal the party" by flip-flopping on these clearly articulated positions. In 2006, he "kissed Falwell's ring" and delivered the commencement address at Liberty University. McCain now also supports the overturning of Roe v. Wade. Sounds like the "maverick straight talker" fell off of the "straight talk express" and is being forced to support positions that are out of step with the independents and moderates that have supported him for so many years.

This has nothing to do with Sen. John McCain. He is certainly not the only politician that has flip-flopped under the pressure of ideologues. Senator McCain is just the most recent example of the impact ideologues are having on the American political landscape.

The future of American politics and American policy is at stake. America is at a political crossroads. Are Americans going to continue to allow the politics and policies of this country to be hijacked by fascist neo-conservatives and right-wing evangelical ideologues, or will we choose to put this vocal, well financed, but relatively small group of ideological thugs in their rightful place?

Dr. Wilmer Leon is the producer/host of the nationally broadcast call-in talk radio program "On With Leon," producer/host of the television program "Inside The Issues With Wilmer Leon," a regular guest on CNN's Lou Dobb's Tonight, and a teaching associate in the Department of Political Science at Howard University in Washington, DC. Go to or email:

CIA's Ambitious Spy Plan Falters

CIA's Ambitious Spy Plan Falters

By Greg Miller

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After 9/11, the agency spent millions setting up front companies overseas to snag terrorists. Officials now say the bogus firms were ill-conceived and not close enough to Muslim enclaves.

Washington - The CIA set up a network of front companies in Europe and elsewhere after the Sept. 11 attacks as part of a constellation of "black stations" for a new generation of spies, according to current and former agency officials.

But after spending hundreds of millions of dollars setting up as many as 12 of the companies, the agency shut down all but two after concluding they were ill-conceived and poorly positioned for gathering intelligence on the CIA's principal targets: terrorist groups and unconventional weapons proliferation networks.

The closures were a blow to two of the CIA's most pressing priorities after Sept. 11 - expanding its overseas presence and changing the way it deploys spies.

The companies were the centerpiece of an ambitious plan to increase the number of case officers sent overseas under what is known as "nonofficial cover," meaning they would pose as employees of investment banks, consulting firms or other fictitious enterprises with no apparent ties to the U.S. government.

But the plan became the source of significant dispute within the agency and was plagued with problems, officials said. The bogus companies were located far from Muslim enclaves in Europe and other targets. Their size raised concerns that one mistake would blow the cover of many agents. And because business travelers don't ordinarily come into contact with Al Qaeda or other high-priority adversaries, officials said, the cover didn't work.

Summing up what many considered the fatal flaw of the program, one former high-ranking CIA official said, "They were built on the theory of the 'Field of Dreams': Build them and the targets will come."

Officials said the experience reflected an ongoing struggle at the CIA to adapt to a new environment in espionage. The agency has sought to regroup by designing covers that would provide pretexts for spies to get close to radical Muslim groups, nuclear equipment manufacturers and other high-priority targets.

But current and former officials say progress has been painfully slow, and that the agency's efforts to alter its use of personal and corporate disguises have yet to produce a significant penetration of a terrorist or weapons proliferation network.

"I don't believe the intelligence community has made the fundamental shift in how it operates to adapt to the different targets that are out there," said Rep. Peter Hoekstra of Michigan, the top Republican on the House Intelligence Committee.

The cover arrangements most commonly employed by the CIA "don't get you near radical Islam," Hoekstra said, adding that six years after the Sept. 11 attacks, "We don't have nearly the kind of penetrations I would have expected against hard targets."

Trying to Get Close

Whatever their cover, the CIA's spies are unlikely to single-handedly penetrate terrorist or proliferation groups, officials said. Instead, the agency stalks informants around the edges of such quarry - moderate Muslims troubled by the radical message at their mosques; mercenary shipping companies that might accept illicit nuclear components as cargo; chemists whose colleagues have suspicious contacts with extremist groups.

Agency officials declined to respond to questions about the front companies and the decision to close them.

"Cover is designed to protect the officers and operations that protect America," CIA spokesman Paul Gimigliano said. "The CIA does not, for that very compelling reason, publicly discuss cover in detail."

But senior CIA officials have publicly acknowledged that the agency has devoted considerable energy to creating new ways for its case officers - the CIA's term for its overseas spies - to operate under false identities.

"In terms of the collection of intelligence, there has been a great deal of emphasis for us to use nontraditional methods," CIA Director Michael V. Hayden said in November 2006 radio interview shortly after taking the helm at the agency. "For us that means nontraditional platforms - what folks call 'out of embassy' platforms - and we're progressing along those lines."

The vast majority of the CIA's spies traditionally have operated under what is known as official cover, meaning they pose as U.S. diplomats or employees of another government agency.

The approach has advantages, including diplomatic immunity, which means that an operative under official cover might get kicked out of a country if he is caught spying, but won't be imprisoned or executed.

Official cover is also cheaper and easier. Front companies can take a year or more to set up. They require renting office space, having staff to answer phones and paying for cars and other props. They also involve creating fictitious client lists and resumes that can withstand sustained scrutiny.

One of the CIA's commercial cover platforms was exposed in 2003 when undercover officer Valerie Plame was outed in a newspaper column by Robert Novak. Public records quickly led to the unraveling of the company that served as her cover during overseas trips, a fictitious CIA firm called Brewster Jennings & Associates.

Official cover worked well for the duration of the Cold War, when holding a job at a U.S. Embassy enabled American spies to make contact with Soviet officials and other communist targets.

But many intelligence officials are convinced that embassy posts aren't useful against a new breed of adversaries. "Terrorists and weapons proliferators aren't going to be on the diplomatic cocktail circuit," said one government official familiar with the CIA's cover operations.

Under Intense Pressure

After the terrorist strikes, the Bush administration ordered the agency to expand its overseas operation by 50%. The agency came under intense pressure from Congress to alter its approach to designing cover and got a major boost in funding to expand the nonofficial cover program, which is commonly referred to by the acronym NOC, pronounced "knock."

Although the agency has used nonofficial cover throughout its history, the newer front companies were designed to operate on a different scale. Rather than setting up one- or two-person consulting firms, the plan called for the creation of a companies that would employ between six and nine case officers apiece, plus support staff.

The NOC program typically had functioned as an elite entity, made up of a small number of carefully selected case officers, some of whom would spend years in training and a decade or more overseas with only intermittent contact with headquarters. But the new plan called for the front companies to serve as way stations even for relatively inexperienced officers, who would be rotated in and out much the way they would in standard embassy assignments.

"The idea was that these were going to be almost like black stations," said a former CIA official involved in the plan to form the companies. "We were trying to build something that had a life span, that had durability."

In the process, the agency hoped to break a logjam in getting post-Sept. 11 recruits overseas. Thousands of applicants had rushed to join the CIA after the attacks, and many were sent to Afghanistan and Iraq. But outside of those war zones, open slots were scarce.

"The embassies were full," said a former CIA official involved in deployment decisions. "We were losing officers by the dozens because we didn't have slots for them overseas."

In separate interviews, two former CIA case officers who joined the agency after the attacks said that 15% to 20% of their classmates had quit within a few years. Among them, they said, was one who had earned his master's in business administration from Harvard University and was fluent in Chinese and another who had left a high-paying job at the investment firm Goldman Sachs.

The front companies were created between 2002 and 2004, officials said, and most were set up to look like consulting firms or other businesses designed to be deliberately bland enough to escape attention.

About half were set up in Europe, officials said - in part to put the agency in better position to track radical Muslim groups there, but also because of the ease of travel and comfortable living conditions. That consideration vexed some CIA veterans.

"How do you let someone have a white-collar lifestyle and be part of the blue-collar terrorist infrastructure?" said one high-ranking official who was critical of the program.

But the plan was to use the companies solely as bases. Case officers were forbidden from conducting operations in the country where their company was located. Instead, they were expected to adopt second and sometimes third aliases before traveling to their targets. The companies, known as platforms, would then remain intact to serve as vessels for the next crop of case officers who would have different targets.

'A Very Bitter Right'

The concept triggered fierce debate within the agency, officials said.

"This was a very bitter fight," said a CIA official who was a proponent of the plan because it insulated the fictitious firms from the actual work of espionage.

"When you link the cover to the operation, the minute the operation starts getting dicey, you run across the screen of the local police, the local [intelligence service] or even the senior people in the mosque," the official said. "I saw this kill these platforms repeatedly. The CIA invests millions of dollars and then something goes wrong and it's gone."

But critics called the arrangement convoluted, and argued that whatever energy the agency was devoting to the creation of covers should be focused on platforms that could get U.S. spies close to their most important targets.

"How does a businessman contact a terrorist?" said a former CIA official involved in the decision to shut the companies down. "If you're out there selling widgets, why are you walking around a mosque in Hamburg?"

Rather than random businesses, these officials said, the agency should be creating student aid organizations that work with Muslim students, or financial firms that associate with Arab investors.

Besides broad concerns about the approach, officials said there were other problems with the companies. Some questioned where they were located. One, for example, was set up in Portugal, even though its principal targets were in North Africa.

The issue became so divisive that the agency's then-director, Porter J. Goss, tapped the official then in charge of the CIA's European division, Rolf Mowatt-Larssen, to lead an in-house review of the NOC strategy.

Mowatt-Larssen sided with critics of the approach and began pulling the plug on the companies before he left the agency to take a senior intelligence post at the Department of Energy, officials said. Mowatt-Larssen declined to comment.

The agency is in the midst of rolling out a series of new platforms that are more narrowly targeted, officials said. The External Operations and Cover Division has been placed under Eric Pound, a veteran foreign officer who was CIA station chief in Athens during the 2004 Olympics.

But the agency is still struggling to overcome obstacles, including resistance from many of the agency's station chiefs overseas, most of whom rose through the ranks under traditional cover assignments and regard the NOC program with suspicion and distrust.

In one recent case, officials said, the CIA's station chief in Saudi Arabia vetoed a plan to send a NOC officer who had spent years developing credentials in the nuclear field to an energy conference in Riyadh.

The NOC "had been invited to the conference, had seen a list of invitees and saw a target he had been trying to get to," said a former CIA official familiar with the matter. "The boss said, 'No, that's why we have case officers here.' "