Wednesday, July 16, 2008

Status Report on the Collapse of the U.S. Economy

Status Report on the Collapse of the U.S. Economy

By Richard C. Cook

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With the economic news of the week of July 14—the continuing crisis among mortgage lenders, the onset of bank failures, the announced downsizing of General Motors, the slide of the Dow-Jones below 11,000—we are seeing the ongoing collapse of the U.S. economy.

Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out.

What is really taking place, however, is that the producing economy of working men and women is being crushed by the overall debt burden on households, businesses, and governments that could reach $70 trillion by 2010. The financial system, including mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid.

This is because the producing economy of people who work for a living simply can no longer generate enough purchasing power for people either to pay their debts or allow them to purchase what is being sold in the marketplace. In turn it is the debt burden and the loss of societal purchasing power that are crashing the stock market. Thus the collapse of the financial economy has started to destroy the producing economy as well.

It’s a “perfect storm,” the result of a 200-year-old financial system where money is largely created by bank lending and where since 1980 our industry and jobs have been increasingly outsourced abroad to cheap labor markets. Thus domestic incomes have stagnated while the nation’s GDP has not been able to keep up with the exponential growth of debt.

While the mainstream media are blind, deaf, and dumb as to the causes, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, homes foreclosed on, and are being saddled with ever-increasing debt and forced to work under more and more stress due to rising burdens of taxation, gas and food price inflation, and bureaucratic rules and regulations. The only places a more-or-less normal life may still be possible will be the wealthiest imperial centers like Washington, New York, Houston, Chicago, or San Francisco.

All that the current bailouts being engineered by the Federal Reserve are doing is to create more debt to shore up failing financial institutions. No new wealth is being created. It’s band-aids on band-aids.

The problem politically is that control of the U.S. long ago was turned over to the bankers and the financiers of the Western world. It was called financial “deregulation,” accelerated under President Ronald Reagan, and has run amok since then. From a longer historical view, it’s the same phenomenon that first created and then ruined the British Empire , and it’s what created and is now ruining the American Empire today.

A side-effect of control by the bankers and financiers is that they are also Zionists, so we have the added multi-trillion dollar burden of trying to conquer the Middle East on behalf of the international oil interests and the state of Israel .

The situation has deteriorated sharply since the 1970s as U.S. affairs have been managed on behalf of the financial interests by what you might call the “Three Amigos”—Henry Kissinger, Paul Volcker, and Alan Greenspan. Kissinger, while Nixon’s secretary of state, made the U.S. dependent on the Middle East for oil, lavished billions on Israel ’s war machine, and created the petrodollar to support our trade and fiscal deficits. Volcker, while chairman of the Federal Reserve, crashed the U.S. producing economy in the recession of 1979-1983, leading to the rise of the “service economy.” Greenspan, during his own Federal Reserve chairmanship, presided over the bubble economy which was created through massive official fraud in home mortgage lending and is now sinking like the Titanic.

The politicians have enabled these financial crimes. Above all it’s been the Bush family which has served as a political Trojan Horse for the financiers for three generations, with affairs having become much worse since George H.W. Bush invaded Iraq for the first time in 1991. The enablers have included a majority of the members of the U.S. Congress. (See the conclusion of Patrick Buchanan’s new book, Churchill, Hitler, and the Unnecessary War for an account of how the U.S. since the Bush I presidency has replicated the catastrophic errors of failed British imperialism.)

The American people are not entirely innocent. We have been so lulled to sleep by the financier-owned media that we have allowed these disasters to take place and are now reaping the consequences. We have been the fodder for their wars and the signers of their loans. We have tried to carve out our own piece of the pie which is now crumbling.

What is taking place is not just the collapse of the U.S. , but more than likely the final crash of Western civilization, since we are the last of the world empires to go down the drain. World War I saw the end of the German, Austro-Hungarian, Russian, and Ottoman empires. World War II saw the disappearance of the French, British, Japanese, and Italian empires, along with Nazi Germany. The Soviet empire collapsed in 1991. The American is next. The danger is that we may lash out and start a nuclear World War III out of frustration and to appease the elitists of the world who see war and famine as their pathway to world control. Such a war would also mean a military takeover domestically to manage the pathetically weak nation that we are becoming.

The bankers and financiers do not care if nations and empires destroy themselves and each other, because they are internationalists. In fact, the more war and mass starvation there is the better off they feel. All they need is a base from which to operate. London has been their main base of operations since the Bank of England was founded in 1694, though they have a strong presence in other nations. They have been especially influential in northwest Europe , where elitism in the form of Freemasonry endeavored since the time of the French Revolution to destroy the authority of the Catholic Church.

In fact, World War I was a project of the Freemasons in dismembering Germany and the Austro-Hungarian Empire, both largely Catholic. This destruction allowed the masters of usury to flourish within the atheistic and materialistic culture that Freemasonry fostered across Europe . World War I also resulted in the virus of Communism, largely egged on by the internationalists and Freemasons, though it had such a tragic impact on Russia and Central Europe before spreading to China and East Asia .

It is theoretically possible that the US as a nation could still save itself through an internal revolution, while playing a much reduced role in the world. After all, England , France , and Italy still exist as shadows of their past greatness. But, realistically, all ordinary people can do today is try to survive, perhaps by working with friends and neighbors in planting food and living within the underground economy. At least people might not then have to starve to death, because hard as it is to believe that “it could happen here,” widespread famine in the U.S. seems a real possibility over the next several years. Nations take such risks when they allow capitalist agribusiness to destroy local agriculture.

On a national level, it is likely that as a response to the economic crisis some attempt will be made by desperate politicians to try to replicate the New Deal, but to do this effectively would require political control by a nationalistic reform party. Even then, additional reform measures such as control of credit as a public utility, a basic income guarantee, and a national dividend would be needed for real economic security to replace the current madness that could soon make the U.S. a relic of history.

Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites and in Eurasia Critic magazine. His book on monetary reform, entitled We Hold These Truths: The Hope of Monetary Reform, will be published soon by Tendril Press. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.” His website is at

Wall Street Socialism

Wall Street Socialism

Robert L. Borosage

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This weekend, Treasury Secretary Henry Paulson, former head of the Goldman Sachs investment house, provided us with a perfect demonstration of Wall Street socialism.

He announced that the Bush administration would seek congressional approval to bail out Fanny Mae and Freddy Mac, the government created, but privately owned, profit-making housing finance companies that hold or guarantee nearly half of the US mortgage market -- some $5 trillion in debt. Paulson seeks and will get an unlimited line of credit to guarantee their debt, as well as authority to purchase their shares to supplement their capital base. The Federal Reserve announced it was ready to provide lending while waiting for Congress to act. Paulson said the new subsidies were designed to sustain the two institutions in "their current form."

Perfect. The two institutions have always been more foul than fish. Created by the government in the 1930s to help lubricate the US mortgage market by buying mortgages from the banks so they would have the cash to make more mortgages, Fanny and Freddy were able to borrow money at a discount because of a widely shared assumption that the government would stand behind their debts if push came to shove. Their operations were regulated, limited by laws detailing what mortgages they could assume (They were essentially prohibited from diving directly into the subprime muck). But as they grew and profited, their executives pocketed lavish salaries and bonuses -- giving them an incentive to grow even more (and as we discovered earlier this decade, to cook the books). Last year, for example, the Chair of Freddie Mac took home a cool $18,289,575.
Fannie Mae CEO Daniel Mudd reaped a 7 percent rise in pay to $13.4 million in 2007 while the company lost $2/1 billion and its shared fell 33%. Nice work if you can get it.

Now with the bursting of the housing bubble, push surely has come to shove. Foreclosures are soaring, the two institutions have sustained billions in losses, their shares have plummeted, and, according to former St. Louis Federal Reserve President William Poole, one and possibly both would be bankrupt if their assets were marked down to their current market value.

So now the Bush administration proposes to make the federal guarantee explicit and even to offer taxpayer money to help recapitalize the two banks if needed. Everything has been nationalized -- except the profits and the pay scales of the bank's executives.

That's right. If the guarantees work, private speculators, having driven the stock down, will clean up on the upside. And the bank's CEO's will continue to pocket the multi-million dollar salaries that are de rigueur on Wall Street. Call it Wall Street socialism. Their losses are socialized; their profits are pocketed. You and I will pay for their failures. And if conservatives have their way, their families will pocket their successes, without even having to pay a tax for the transfer of the estates we've helped to create.

These enterprises are operating on our tab now -- completely. Why not just nationalize them, as even that font of economic convention, Sabastian Mallaby suggested yesterday in the Washington Post. Sure, we'd have to add the $5 trillion in debt to the federal balance sheet, but we could add the assets also. And after Paulson's announcement, global investors are already toting up their debts onto the federal balance sheet.

Why pay dividends to shareholders when they are essentially playing with our money? Why pay managers of public enterprises the bloated pay packages of Wall Street speculators? Why allow them to finance lobbyists to shield them from accountability? The fiction of their separate existence has been exploded; let's save the dough and run them efficiently.

Fannie Mae and Freddy Mac are only the most recent and extreme version of Wall Street socialism. The Bush administration has done essentially the same for private providers of college loans. The Federal Reserve has made taxpayers the guarantor not simply of the banks that it regulates, but the shadow banking system of hedge funds and investment houses that it doesn't regulate. After the bailout of Bear Sterns, they basically are gambling with our money. The Federal Reserve has now traded more than $500 billion in federal bonds for the toxic paper of private banks and investment houses, some $200 billion of it in mortgage backed securities, worth dimes on the dollar. This massive subsidy -- justified as necessary to keep the banking system afloat -- is not accompanied by limits on what gambles the speculators can make, how much debt they can take on, what rewards they can pocket. They are playing with house money -- not exactly an incentive for prudence.

Republicans seem ideologically committed to these kinds of arrangements. In Medicare for example, conservatives have demanded that the government subsidize private insurance companies to compete with public Medicare, even though Medicare provides healthcare much less expensively. When Bush and the DeLay Congress drove through the prescription drug bill, they included a provision that PROHIBITS Medicare from negotiating cheaper prices for drugs, effectively turning the bill from a benefit to Seniors to a multi-billion subsidy to private drug companies (not surprisingly, after Wall Street, the drug companies finance one of the most lavish and powerful lobbies in Washington).

Now it makes sense to me for the government to subsidize housing mortgages and college loans. Encouraging home ownership and higher education are central to sustaining the broad middle class that is America's triumph. But I can't imagine why we need to let bankers and investors pocket the upside, when they are playing with our money and we're covering their losses. Public enterprise may be staid and bureaucratic, but it's a lot cheaper and more efficient than the perils of Wall Street socialism.

Bernanke's Dour Message

Bernanke's Dour Message

The Fed chief says the economy should improve "gradually" over the next two years, but warns of "considerable uncertainty" about that outlook

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Amid a plunging stock market, rising inflation, and widespread jitters about the U.S. financial system, what better time for Federal Reserve Chairman Ben Bernanke to deliver to Congress his semiannual testimony on the U.S. economy? In his July 15 testimony to the Senate Banking Committee, the Fed chief noted that inflation risk to the U.S. economy has intensified, but also emphasized downside risks to growth.

He said officials expect the economy to improve "gradually" over the next two years, thanks to a "slow" housing recovery and gradual improvement in credit conditions. But he warned that "considerable uncertainty" surrounded that outlook. He said the U.S. economy faces "numerous difficulties," suggesting those risks remain his top priority. He noted an "unusually uncertain" inflation outlook, and said the Fed is watching for signs that higher commodity prices are becoming embedded in wages and expectations.

Bernanke noted that "accurately assessing and appropriately balancing the risks to the outlook for growth and inflation is a significant challenge for monetary policymakers."

Searching for Signals About Rates

"Overall, while there was no clear indication about when the [Federal Open Market Committee] might start to raise rates, given downside risks to growth and increased financial market turmoil, it doesn't look like there will be a rate hike anytime soon," wrote Standard & Poor's Senior Economist Beth Ann Bovino in a July 15 note.

"[T]he Fed continues to play down the risks of the pickup in inflation being sustained…and [to suggest] that the hurdle to a rate hike in the second half of the year is very high," wrote economist John Ryding of RDQ Economics in New York in a July 15 note. "In particular, Bernanke's testimony suggests that the Fed is now relying on subdued domestic wage increases to restrain core inflation."

"We're not as sanguine as the market that the Fed won't start taking back some of its accommodation by the end of this year, especially considering the upward revisions in the Fed's outlook on inflation down the road," wrote Action Economics analysts in a posting on the company's Web site.

In a Q&A session with lawmakers after the testimony, Bernanke said the central issue that Congress should tackle is the housing market. He said the continued uncertainty over housing prices and housing activity is largely behind the financial market stresses, as well as stress in the economy.

Bernanke on Banks

On other matters, Bernanke said he is still trying to assess the impact of the current fiscal stimulus package. Regarding gas prices and energy-market speculation, he said the Fed is looking at a whole range of issues regarding transparency. Bernanke cautioned lawmakers to move deliberately and cautiously with respect to trying to legislate against speculation. The Fed chief said he would not estimate that speculation or manipulation has been a "significant" part of the rise in oil prices. He warned against doing anything that would hinder or stop the futures markets from their legitimate functions of providing liquidity and serving as a means of hedging.

Bernanke said the failure of IndyMac Bank, which was seized by regulators July 11, was due to the poor asset quality of the bank, particularly weighted down by subprime and other exotic mortgages. He said that in general, banks came into the credit crunch "well capitalized." His concerns have turned more toward banks' ability to extend credit, and less on solvency issues.

On the government-sponsored enterprises Freddie Mac (FRE) and Fannie Mae (FNM), Bernanke said the Fed's goals are to protect the financial system, as well as taxpayers, and that a strong bank-like regulator for the GSEs is needed, one that can restore confidence in the system. Bernanke was to have an additional opportunity to weigh in on the Fannie/Freddie situation in joint testimony with Treasury Secretary Henry Paulson and Securities & Exchange Commission Chairman Christopher Cox later in the day.

Southern California depositors could lose $500 million in IndyMac bank failure

Southern California depositors could lose $500 million in IndyMac bank failure

By John Burton and Kim Saito

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Last Friday afternoon, Federal Deposit Insurance Corporation (FDIC) regulators abruptly shut the doors of Pasadena, California-based IndyMac Bank several hours before its normal closing time and seized $38 billion in assets, making IndyMac Bank the third-largest bank failure in American history, and the sixth this year.

When the 33 branches reopened Monday morning as IndyMac Federal Bank, they were greeted by thousands of retirees, workers and professional people, many having already stood in line for hours. The crowds waited in sweltering heat to withdraw whatever funds they could in scenes recalling the financial panic that gripped the country during the Great Depression.

Police were called to the Encino branch in the San Fernando Valley Tuesday to control a line of people, many of whom had been waiting since Monday to withdraw funds.

A spin-off of Countrywide Finance Corporation founded by Countrywide’s recently retired CEO Angelo Mozilo, IndyMac in the first years of the decade played a key role in the Southern California housing bubble by providing high-interest “Alt-A” home mortgages to purchasers with good credit ratings who were not asked to provide documentation of their income and assets. These so-called “liar loans” exemplified the speculative frenzy that created a vastly inflated housing boom which enabled mortgage lenders, banks and big investors to amass huge profits by buying and selling securities backed by such dubious assets.

While home prices were rising, sometimes at rates of more than 10 percent a year, purchasers refinanced their equity or “flipped” properties to make up deficits. With the collapse in home values, some 15 percent of IndyMac mortgages have gone into default or foreclosure, with many more losses on the way.

IndyMac holds directly about $15 billion in such highly toxic mortgages, and bundled another $185 billion into securities, which were sold to investors. Deposits in savings and checking accounts total $19 billion. Most of the depositors are ordinary people, who were encouraged to increase their deposits by means of IndyMac certificates of deposit paying 4.3 percent, higher than average for Southern California.

The FDIC insures individual deposits up to $100,000, a limit set in 1980, and $250,000 on certain retirement accounts. A 2001 effort to raise the limits was defeated largely due to opposition from former Federal Reserve Board Chairman Alan Greenspan.

FDIC officials are allowing IndyMac depositors to withdraw the federally insured portions of their accounts and fifty percent of any balance. Remaining funds will be repaid, if at all, out of any funds left after the liquidation of IndyMac’s assets.

About $1 billion of IndyMac’s deposits are beyond the FDIC insurance limits and therefore are not covered, meaning that depositors may lose as much as $500 million in savings.

Paying off the insured deposits is anticipated to cost the FDIC between $4 billion and $8 billion of its $52 billion insurance fund.

Senator Charles E. Schumer, the New York Democrat, has been accused of fueling the panic by sending a June 26 letter to the FDIC and other federal agencies warning of “IndyMac’s financial deterioration.” During the next two weeks, depositors withdrew $1.3 billion, leading to layoffs of 3,800 employees. Finally, the run on bank deposits forced the government takeover to slow down the financial hemorrhage.

The collapse came as no surprise to Wall Street insiders. IndyMac Bancorp share prices plummeted from a high of $31.50 per share in 2007 to less than a dollar by the date of Schumer’s letter. The stock is essentially worthless today.

The IndyBank collapse was followed Monday by the steepest single-day decline in banking shares in almost twenty years, with the Standard & Poor’s banking index falling almost 10 percent.

Other Southern California banks were particularly hard hit. Shares of Downey Financial Corp. (Downey Savings) and FirstFed Financial Corp. (First Federal Bank of California), large providers of subprime adjustable rate mortgages, lost 22 and 19 percent of their value, respectively. Stock in Washington Mutual Inc., the nation’s biggest savings and loan bank, lost one-third of its value Monday, sending depositors scurrying to withdraw uninsured funds.

Current estimates are that of the 7,500 FDIC insured banks, 100 to 200 will fail in the next 12 to 24 months, potentially unleashing a social catastrophe affecting millions.

* * *

The following is an on-the-spot report from the IndyMac branch in Tustin, California.

On Tuesday afternoon, sitting on folding chairs outside the IndyMac branch in Tustin, California, were some 20 people waiting in the hot sun for their “transactions” with bank officials. A few found shade under a tree. Yellow police tape was set up near the entrance. About half were retirees; some were middle-aged workers, a few were younger workers. They were Asian, white, and Hispanic.

Every so often, security guards offered free bottles of water. Some bank officials were stationed outside.

At about 5 PM, one elderly woman stood up and said in exasperation that she was going to have to come back the next day after waiting all day. “I just want my money,” she said.

After signing up on clipboards, people were asked to sit down and wait for their transaction. The conversations between people were often about which page they were on. Some said they were on the seventh page, others said they were on the ninth page.

One Hispanic woman, who came with her young daughter, asked a bank official if she could make her mortgage payment. As another Spanish-speaking couple helped translate, he told her, “You cannot go inside. Those kinds of transactions aren’t allowed today.” The woman explained that she needed to pay her mortgage in cash. He replied, “Oh, no. Cash is bad. Can you write a check?”

The World Socialist Web Site spoke to Maria Mitrovic, who had retired after working nine years as a custodian at Cal State University Long Beach. She originally came from Italy.

“I am worried,” she said. “My husband works as a technician for ATT. Both of our savings are here. I retired because of an injury to my wrist. And I worked hard for my money. I used to start work at 4 in the morning every day. I’d work by myself cleaning the rooms in a big building.

“Every day I don’t eat some food to keep saving some money for my old age. I have to wait three more years until I’m 62 before I get Social Security.

“Actually, I was here this morning, when there were about 200 people. I took out just one of my four CDs, but when I went home, both my husband and my brother said, ‘No, no, no! Go back and pull all of it out. Put it in Bank of America because it’s safer.’ So, that’s why I’m here.

“Some people are here after waiting yesterday. If I don’t make it in today, I’ll have to come back tomorrow.

“On the news the bank officials all say that our money is safe, and we can get our money. Of course, they have to say that. Otherwise, everybody would panic. What’s going to happen to America if this is happening at IndyMac?

“So many people are losing their jobs. It’s terrible. There aren’t going to be any good jobs anymore. But I try to think at least we have jobs, a home, a roof over our heads, and something to eat. There are many people who have far less.”

A retired electronics specialist from Vietnam said, “Everybody works and saves. And then one day something like this happens. If you have under $100,000, you don’t have to worry. But if you have more, that’s a problem.”

U.S. `Misery Index' Climbs to 15-Year High on Prices

U.S. ‘Misery Index' Climbs to 15-Year High on Prices

By Timothy R. Homan

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Misery hasn't had this much company in more than 15 years.

The jump in consumer prices reported today by the Labor Department means the so-called Misery Index, the sum of the unemployment and inflation rates, is the highest since President Bill Clinton took office in January 1993. The measure, created by Arthur Okun, an economics adviser to President Lyndon Johnson, rose to 10.5 in June from 9.7 in the prior month.

Surging costs and falling payrolls will cause consumers to slow spending growth to the weakest pace since 1991 by the fourth quarter, according to a monthly survey of economists by Bloomberg News. The figures underscore Federal Reserve Chairman Ben S. Bernanke's comment to lawmakers yesterday that U.S. households are under ‘‘tremendous pressure.''

‘‘You add that to what's going on with home prices and that's just a huge stress on consumers,'' said Robert Dye, senior economist at PNC Financial Services Group Inc. in Pittsburgh.

The year-over-year inflation rate accelerated to 5 percent, the fastest since May 1991, the Labor Department said. A separate report July 3 showed a 5.5 percent unemployment rate for June.

Today's consumer price index data also showed wages fell 2.4 percent over the last 12 months, after adjusting for inflation.

‘‘Both sides of stagflation are in greater evidence this week than they've ever been before,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York.

The June unemployment rate held at 5.5 percent after soaring the most in two decades in May from April's 5 percent.

The Misery Index peaked in June 1980, when the jobless rate reached 7.6 percent and consumer prices rose 14.4 percent.

U.S. Consumer Prices Climb Most Since 2005; Homebuilder Confidence Slumps

U.S. Economy: Consumer Prices Up 5%, 17-Year High

By Shobhana Chandra and Timothy R. Homan

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U.S. consumer prices surged 5 percent in the past year, the biggest jump since 1991, just as households struggled with falling home values and the credit crunch.

Spiraling expenses for food and fuel spurred the increase in June, the Labor Department said today in Washington. The cost of living rose 1.1 percent from May, more than forecast and the second-largest rise since 1982. Separate figures showed industrial production rose more than estimated because of the end of a strike at American Axle & Manufacturing Holdings Inc. and increased electricity output.

Price gains accelerated last month even after stripping out energy and food, underscoring the challenge for Federal Reserve Chairman Ben S. Bernanke as he attempts to steer the economy through the slowdown and credit crisis. Treasuries fell.

‘‘This is a problem for the economy; it's even worse for the Fed,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. ‘‘Inflation numbers are high enough that under different circumstances the Fed would be hiking rates.''

Excluding food and energy, so-called core costs climbed 0.3 percent in June from the previous month and 2.4 percent from a year before.

Yields Jump

Benchmark 10-year note yields rose to 3.93 percent at 4:20 p.m. in New York, from 3.82 percent late yesterday. The Standard & Poor's 500 IND' ))">Stock Index advanced 2.5 percent to close at 1,245.36, after earnings from Wells Fargo & Co. topped analysts' estimates.

Consumer prices were forecast to rise 0.7 percent, according to the median estimate of 79 economists in a Bloomberg News survey. Projections ranged from gains of 0.2 percent to 1.1 percent. Costs excluding food and energy were IND' ))">forecast to rise 0.2 percent, the survey showed.

Bernanke told lawmakers in semiannual testimony on the economy yesterday and today that inflation risks have ‘‘intensified.'' At the same time, he dropped his June assessment that risks to the economic expansion had diminished, indicating policy makers aren't ready to raise interest rates to contain expenses.

‘‘We don't think they're going to raise rates now -- until June next year now is our forecast -- until basically the economy starts to get some footing,'' Beth Ann Bovino, senior economist at Standard & Poor's in New York, said in an interview with Bloomberg Radio. ‘‘Right now the beast is what's going to happen with the economy.''

Exceeding Forecasts

Prices were forecast to climb 4.5 percent in June from a year earlier, according to the survey median.

A separate report today said confidence among U.S. homebuilders dropped to 16 this month, a record low. Readings for current sales, expected sales and buyer traffic in the National Association of Homebuilders/Wells Fargo sentiment index also were at all-time lows.

‘‘The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one,'' Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in a note to clients.

The Fed said today that production at factories, mines and utilities increased 0.5 percent last month after dropping 0.2 percent in May. IND' ))">Capacity utilization, which measures the proportion of plants in use, rose to 79.9 percent from 79.6 percent.

Strike's Resolution

The resolution of a three-month strike by General Motors Corp.'s largest axle supplier, American Axle, probably helped lift auto output. Excluding autos, factory output fell 0.1 percent for a second month.

Wholesale costs rose 1.8 percent in June, the most in seven months, the Labor Department reported yesterday. From a year ago, prices climbed 9.2 percent, the biggest surge since 1981.

Companies, unable to fully recover ballooning raw-material costs by raising prices, have cut staff and reduced equipment purchases as profits shrink.

Kimberly-Clark Corp., the maker of Huggies diapers and Scott paper towels, said earnings for this year will trail its previous forecast as expenses rise more than twice as fast as predicted,

‘‘Inflation has outpaced our ability to offset higher costs in the near term through price increases, cost reductions and other measures,'' Thomas Falk, the Dallas-based company's chief executive officer, said this week in a statement.

Price Increase

Procter & Gamble Co., the maker of Tide detergent and Head & Shoulders shampoo, last week said it'll raise prices as much as 16 percent due to higher costs for plastic, energy and paper. The increases start in September and are the Cincinnati-based company's steepest in at least 18 months.

Energy expenses jumped 6.6 percent, the biggest gain since November. IND' ))">Gasoline soared 10.1 percent and fuel oil jumped 10.4 percent.

The cost of fuel will continue stoking price pressures. Crude oil futures reached a record $147.27 a barrel on July 11 and have risen almost 90 percent in the past year. Regular gasoline, which topped $4 a gallon for the first time in June, kept rising this month, AAA figures show.

The consumer price index is Labor's broadest gauge of costs. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets.

Food Expenses

Food prices, which account for about a fifth of the CPI, increased 0.8 percent, driven by the biggest gain in the cost of vegetables in almost four years.

The report showed that food and fuel weren't the only items on the rise. Costs for airline fares jumped 4.5 percent, the most since 2001.

Rents which, make up almost 40 percent of the core CPI, also accelerated. A category designed to track rental prices rose 0.3 percent after a 0.1 percent gain in May.

Today's figures also showed wages decreased 0.9 percent in June after adjusting for inflation, the biggest drop since September 2005, and were down 2.4 percent over the last 12 months. The decline in buying power is one reason economists forecast consumer spending will slow.

Americans trimmed purchases of automobiles, furniture and restaurant meals last month as the cost of gasoline soared, a Commerce Department report showed yesterday. IND' ))">Retail sales rose 0.1 percent, less than forecast, a sign the boost from the tax rebate checks is already fading.

GM continues job slashing in effort to stave off bankruptcy

GM continues job slashing in effort to stave off bankruptcy

By Jerry White

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In what it termed a move to “bolster liquidity to protect against a prolonged US downturn,” General Motors announced plans Tuesday to slash jobs, wages and benefits of its salaried workforce. It will also further reduce production at light truck manufacturing plants, move to sell off assets, and suspend dividend payments to shareholders for the first time since 1922.

The measures—aimed at saving $15 billion—were announced just weeks after GM said it would shut four plants in the US, Canada and Mexico and lay off 8,000 workers. They are the latest in what appears to be a increasingly desperate attempt to quell Wall Street rumors that the world’s largest automaker is running out of cash and could soon file for bankruptcy.

Earlier this month Merrill Lynch auto analyst John Murphy—citing the fact that GM was “burning” up to $1.5 billion a month in cash reserves—said bankruptcy was “not impossible if the market continues to deteriorate and significant incremental capital is not raised.”

In Tuesday’s conference call with investors, CEO Richard Wagoner sought to assure Wall Street that the actions, along with existing financial reserves and credit lines, would give GM “ample liquidity through 2009” even if US auto sales fell to 14 million a year. Vehicle sales have averaged 16.8 million this decade.

Wagoner acknowledged that the turbulence produced by record high oil prices and tight credit markets and the nearly 20 percent decline in GM vehicle sales last month had caught upper management off guard. “Since the first of this year, our progress has been threatened as US economic conditions have become increasingly more difficult. We are having a tough time getting clarity in our crystal ball.”

The bulk of Tuesday’s announced cutbacks will fall on the company’s salaried workforce, which has already been cut from 44,000 to 32,000 since June 2000. Twenty percent of the company’s engineers, designers, accountants, managers and other white-collar workers—some 6,400 employees—will lose their jobs.

Those salaried workers who remain will see their pay frozen for the remainder of 2008 and 2009. In addition, GM will end health care coverage for retired white-collar workers over age 65 as of January 1, 2009, leaving thousands of former workers and their spouses with nothing but government-sponsored Medicare coverage.

The company also announced it would cut production of pickups and SUVs by 300,000 units by 2009, nearly doubling its initial target announced in early June. In addition to accelerating the previously announced plant closures and shift eliminations, the cutbacks will result in thousands more blue-collar layoffs at assembly and related component, stamping and Powertrain plants.

Over the last two years GM has eliminated the jobs of 53,000 unionized workers, reducing its blue-collar workforce to below 60,000. In 1979, at its peak, there were more than 600,000 United Auto Workers members employed at GM.

GM also announced it would defer until 2010 any payments into the newly established retiree health care fund, or VEBA, which will be controlled by the UAW. As part of the deal to relieve it of any future obligations to provide retiree medical coverage GM had been committed to pay $1.7 billion into the fund over the next two years.

In order to sell huge wage and benefit concessions to its members, the UAW claimed that getting control of the multibillion-dollar trust fund would guarantee decades of medical coverage, even if one or more of the automakers went bankrupt. The deferred payment—along with the plunging value of GM stocks, which funded much of the trust fund—now threatens to throw the whole scheme into insolvency, leaving tens of thousands of former workers and their dependents with few if any benefits.

In line with its pro-business policies, the UAW has issued no statement about GM’s action or the increasing talk that the Detroit automakers might reopen labor agreements and extract even further wage and benefit concessions from auto workers.

Neither presidential candidate offered any serious response to the ongoing destruction of auto workers’ jobs. After expressing his obligatory sympathy for those being affected, Barack Obama, the presumptive Democratic presidential nominee, said, “When a mainstay of the American economy is forced to make a restructuring decision like the one General Motors is announcing today, it is a sober reminder of the difficult economic times we’re facing and of why we need change and a new direction in Washington.”

Obama, whom the UAW is supporting, has met with GM Chairman Rick Wagoner and Ford Chief Executive Alan Mulally and pledged to be the auto industry’s greatest “partner” and aid it in its efforts to streamline and compete with European and Japanese rivals. This pro-company and nationalist outlook, which has long been peddled by the UAW, has produced nothing but disasters for auto workers.

Although Wagoner predicted further profit losses in the immediate future he made it clear the company was prepared to enact drastic measures to return to profitability, including selling off real estate, international subsidiaries and US brand names, as well as a portion of its 49 percent stake in GMAC financing.

GM will also press its suppliers for substantial price reductions—a move that will snowball the effect upon hundreds of thousands of workers in the steel and auto parts industry. Similar price-cutting demands have prompted American Axle, Delphi, Dana and other GM suppliers to slash workers’ wages by up to 50 percent.

In a token gesture of “equal sacrifice,” Wagoner—whose compensation rose 64 percent last year to $15.7 million, and who was flanked at the press conference by Chief Operating Officer Fritz Henderson ($9.3 million, up from $5.1 million the year before) and Vice Chairman Bob Lutz ($9 million)—announced that the company would cut executive bonuses.

Wall Street gave a lukewarm response to GM’s announcement, bidding up the company’s stock by 40 cents to $9.85 on Tuesday. Share values remain at a 50-year low, having fallen from $43 a share just a year ago. GM’s market capitalization has fallen to $5.31 billion, less than one 28th of the value of Internet company Google.

The possible collapse of GM is of historic significance. Once a symbol of US industrial supremacy, its demise is an expression of the long-term decline in the position of American capitalism in the world market.

In 1955, four out of every five cars in the world were made in the US, with half of them made by GM. The company’s main rival, Ford, was half its size, and as BBC News pointed out, in 1955 the largest foreign automaker—VW—was only slightly bigger than GM’s own German subsidiary, Opel. Toyota was not even in the running yet at this time, making only 23,000 cars in Japan, compared to 4 million manufactured by GM in the US.

In the 1950s the Detroit area had the highest median income, and highest rate of home ownership, of any major US city. Today, after decades of mass layoffs and downsizing, Detroit is the poorest big city in America with much of its neighborhoods filled with burnt-out and decrepit housing. The rate of home foreclosures is among the highest in the nation.

During the 1990s the Big Three US automakers grew dependent upon highly profitable pickups and SUVs. With oil at $10 a barrel, SUV sales jumped from one to four million, with 60 percent of the Big Three’s sales—and nearly all of their profits—coming from the light trucks.

With the American economy quickly transforming from manufacturing to the most parasitic forms of financial speculation, auto executives, driven by Wall Street investors and their own self-interests, sacrificed any long-term interests of their corporations to make the quickest and largest profits. Working people are now paying for this negligence with their jobs and livelihoods.

In addition to GM, Ford and Chrysler have announced reductions in output at truck-making plants in the US. Ford is eliminating 15 percent of its white-collar workforce by August 1. Since 2005 Ford has reduced its total number of North American workers from 135,700 to 88,600.

Wall Street analysts are now suggesting that Chrysler—which was taken over by private equity firm Cerberus Capital Management last year—is the most likely to declare bankruptcy. JPMorgan auto analyst Himanshu Patel said the company is in a far more perilous position than GM because it has limited assets to raise cash and is more heavily reliant on trucks and the North American market.

While declaring bankruptcy could make it more difficult to obtain financing, analysts said, it would have the benefit—from Wall Street’s perspective—of allowing the company to tear up its labor agreements and impose sweeping wage and benefit concessions.

Interview With Rep. Dennis Kucinich

Interview With Rep. Dennis Kucinich

Maya Schenwar

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Congressman Dennis Kucinich introduced a new article of impeachment against President Bush in the House last Thursday. In a single, pointed resolution, he charged the president with lying to Congress about the presence of weapons of mass destruction (WMDs) in Iraq, in order to obtain permission for a US attack.

In the hour before Kucinich brought his resolution to the floor, he sat down with Truthout for an interview.
We discussed the politics of justice, the quest for peace and the rationale for holding the administration accountable for its decisions on Iraq.

"The case for war was based on fraud," he said. "That's the core charge in this impeachment resolution. And it just takes one article to be able to force the administration and the president to the consequences of their deceit."

Part 1

Part 2

No one said impeachment would be an easy fight. House leadership has repeatedly stated its distaste for the idea, and even some progressive Congress members have shied away from taking such a forceful stand against the president, late in his last term. But Kucinich isn't big on easy fights: He is fond of quoting Spanish philosopher Miguel De Unamuno, who said, "Only he who attempts the absurd is capable of achieving the impossible."

Kucinich may be making some headway on the "impossible," this time around. The morning of our interview, House Speaker Nancy Pelosi, who had previously dismissed impeachment as "off the table," told reporters that Kucinich's resolution may well reach the Judiciary Committee for a hearing.

Even if impeachment is ultimately achieved, it's doubtful that the congressman will sit tight for long. Kucinich's pesky habit of dreaming big extends beyond impeachment. In our interview, he elaborated on one of his most broad-ranging dreams: the establishment of a federal Department of Peace, the scope of which would range from developing diplomatic solutions to tough international conflicts, to preventing domestic violence, to providing support for peer mediation in schools.

Envisioning a shift from fear and defensiveness to peaceful cooperation, Kucinich points to the US's historical ideals of liberty and democracy - as delineated by the Constitution - as models for moving into the future.

"9/11, as a metaphor, has plunged this country into a very fear-based approach to policy," he said. "But that's not really who we are ... The Department of Peace is aimed at reestablishing peace as a central theme in our society."

The congressman emphasizes that he is not deterred by the rampant, unceasing violence currently wracking our country and our world. Rather, he quotes Ralph Waldo Emerson, saying, "Every jet of chaos which threatens to exterminate us is convertible by intellect into a wholesome force."

Obama outlines policy of endless war

Obama outlines policy of endless war

By Bill Van Auken

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Any misconception that Barack Obama is running in the 2008 election as an “antiwar” candidate should have been cleared up Tuesday in what was billed by the Democratic presidential campaign as a “major speech” on national security and the US war in Iraq.

Speaking before a backdrop of massed American flags at the Reagan Building in Washington, Obama made it clear that he opposes the present US policy in Iraq not on the basis of any principled opposition to neo-colonialism or aggressive war, but rather on the grounds that the Iraq war is a mistaken deployment of power that fails to advance the global strategic interests of American imperialism.

What emerges from the speech by the junior senator from Illinois is that the November election will not provide the American people with the opportunity to vote for or against war, but merely to choose which of the two colonial-style wars that US forces are presently fighting should be escalated.

As in his op-ed piece published in the New York Times on Monday, his call on Tuesday for the withdrawal of US combat troops from Iraq was linked to the proposal to dispatch as many as 10,000 troops to Afghanistan to escalate the war there.

The thrust of Obama’s speech was a critique of the Bush administration’s incompetence in pursuing an imperialist strategy, combined with an implicit commitment to advance the same basic strategy in a more rational and effective manner once he enters the White House.

He summed up his policy as “a responsible redeployment of our combat troops that pushes Iraq’s leaders toward a political solution, rebuilds our military, and refocuses on Afghanistan and our broader security interests.”

Obama reiterated his campaign pledge to bring US “combat brigades” out of Iraq within 16 months of his inauguration. After this “redeployment,” however, a “residual force” would remain in Iraq carrying out counter-insurgency operations, protecting US facilities and training and supporting Iraqi puppet forces—tasks that would undoubtedly keep tens of thousands of American troops occupying the country indefinitely.

Obama stressed that he would make “tactical adjustments” to his plan based upon consultations with “commanders on the ground and the Iraqi government,” suggesting that even the partial withdrawal he proposes would unlikely unfold as quickly as promised.

The speech was scheduled in advance of a “fact-finding” tour that Obama is set to embark upon in the next week, visiting both Iraq and Afghanistan and conducting meetings with US military commanders in both countries.

Obama began his speech by invoking the legacy of US imperialism’s strategy in the aftermath of World War II, when it acted to “foster new international institutions like the United Nations, NATO and the World Bank” and rebuilt shattered European capitalism through the Marshall Plan. He contrasted that six-decade policy with what he presented as the squandered opportunity for Washington to again seize global leadership following the September 11, 2001 terrorist attacks.

“The world, too, was united against the perpetrators of this evil act, as old allies, new friends and even long-time adversaries stood by our side,” said Obama. “It was time—once again—for America’s might and moral suasion to be harnessed; it was time to once again shape a new security strategy for an ever-changing world.”

The starting point for seizing this golden opportunity, according to Obama, was to “have deployed the full force of American power to hunt down and destroy Osama bin Laden, Al Qaeda, the Taliban and all of the terrorists responsible for 9/11, while supporting real security in Afghanistan.”

Instead, he charged, the Bush administration diverted these military resources into the war against Iraq, “a country that had absolutely nothing to do with the 9/11 attacks.” He continued: “By any measure, our single-minded and open-ended focus on Iraq is not a sound strategy for keeping America safe.”

This presentation is a gross and deliberate distortion of the motives underlying both the war in Afghanistan and the one in Iraq. Neither of them was launched with the aim of “keeping America safe,” but rather to advance definite strategic interests of American imperialism.

The central aim of the war in Afghanistan—planned well before the attacks of 9/11—was to take advantage of the power vacuum in Central Asia created by the Soviet Union’s dissolution to assert US domination over a region containing the second largest proven reserves of petroleum and natural gas in the world.

As for the supposed targets of this operation—Osama bin Laden, Al Qaeda and the Taliban—all of them are, in the final analysis, the products of US imperialism’s own bloody history of intervention in the region, particularly in the 1980s, when Washington poured billions of dollars into funding the Mujahedin forces fighting the Soviet-backed government of Afghanistan and the Soviet army when it intervened there. Among these forces were bin Laden and those who went on to set up both Al Qaeda and the Taliban.

The legacy of this CIA-directed war was the devastation of Afghanistan and protracted political chaos, which Washington sought to curb by supporting the Taliban’s coming to power.

Now, nearly seven years after the US invaded Afghanistan, Obama proclaims, “As president, I will make the fight against Al Qaeda and the Taliban the top priority that it should be. This is a war that we have to win.”

To that end, Obama vowed to send “two additional combat brigades to Afghanistan” and to press Washington’s NATO allies to make “greater contributions—with fewer restrictions” in terms of deploying their own troops.

He continued by vowing to expand the intervention in Afghanistan into neighboring Pakistan.

“The greatest threat to that security lies in the tribal regions of Pakistan, where terrorists train and insurgents strike into Afghanistan,” he warned. “We cannot tolerate a terrorist sanctuary, and as president, I won’t. We need a stronger and sustained partnership between Afghanistan, Pakistan and NATO to secure the border, to take out terrorist camps and to crack down on cross-border insurgents. We need more troops, more helicopters, more satellites, more Predator drones in the Afghan border region. And we must make it clear that if Pakistan cannot or will not act, we will take out high-level terrorist targets like bin Laden if we have them in our sights.”

There is no evidence that US forces are fighting Al Qaeda in Afghanistan or that the bulk of those attacking American and NATO forces are following orders issued by the remnants of the Taliban. The Pentagon has not reported the capture of Al Qaeda operatives in the stepped-up fighting that has claimed the lives of 69 US and NATO soldiers in the months of May and June.

The reality is that the resistance to the US-led occupation has grown dramatically as a direct product of the escalating slaughter of civilians, as seen in the July 6 US air strike that killed 47 members of a wedding party, the vast majority of them women and children. Anger has also been generated by the arbitrary detention and frequent torture of those picked up by US units and Afghan puppet troops, as well as by the gross corruption of the US-backed regime of President Hamid Karzai.

In the attack on a US base last Sunday that claimed the lives of nine US soldiers, local villagers reportedly participated, providing direct support to the insurgents who carried out the assault.

With “more troops, more helicopters, more satellites, more Predator drones,” Obama is proposing to escalate this slaughter, which will generate greater resistance and an expanded war involving more US troops and, inevitably, their deployment across the border into Pakistan.

Obama vowed to beef up the US military for a war that threatens to prove far more intense than the one in Iraq. He called for an overall increase of American ground forces by 65,000 soldiers and 27,000 marines, and “investing in the capabilities we need to defeat conventional foes and meet the unconventional challenges of our time.”

Much of the media reaction to Obama’s speech centered on speculation over whether it was aimed at reassuring his Democratic base that he is still committed to effecting a withdrawal of US troops from Iraq, or if it indicated a further “move to the center” by stressing his willingness to use force as the US commander-in-chief.

In reality, the speech reflected what is becoming a consensus position within much of the American political establishment, Democratic and Republican alike. There is a growing conviction that the US can secure its strategic interests in Iraq with fewer troops and without expending the more than $10 billion a month that is compounding the deepening economic crisis of American capitalism.

To underscore this message, Obama was introduced Tuesday by former Democratic congressman Lee Hamilton, who, together with Republican ex-Secretary of State James Baker, chaired the Iraq Study Group, the bipartisan panel that called for a revamped US military and diplomatic policy aimed at salvaging the American intervention in Iraq.

Both Defense Secretary Robert Gates and the chairman of the Joint Chiefs of Staff, Admiral Michael Mullen, have expressed concern that there are insufficient troop levels in Afghanistan to secure US domination of the country. They have indicated that they would like to deploy another 10,000 there—the same number proposed by Obama.

Even Bush, in a White House press conference Tuesday morning, sounded this theme, claiming that Washington and its NATO allies were already initiating a “surge” in Afghanistan.

As for the speech signaling a shift to the right, the reality is that Obama has sounded the same themes repeatedly since initiating his run for the presidency. While in the Democratic primaries he stressed his opposition to the 2002 Senate vote to grant Bush authorization to launch the Iraq war—a resolution that was supported by his principal rivals Hillary Clinton and John Edwards—he always made it clear that he embraced the ideological framework of the “global war on terrorism” used to justify both the Iraq and Afghanistan invasions.

Given this position and his subsequent votes to fund the war once he entered the Senate in 2005, there is little reason to believe that he would not have joined his rivals in giving Bush a blank check for an Iraq invasion had he been a US senator at the time.

Writing in Foreign Affairs a year ago, Obama stressed that the lesson of the Iraq debacle was the necessity to prepare for new US wars. “We must use this moment both to rebuild our military and to prepare it for the missions of the future,” he stressed. “We must retain the capacity to swiftly defeat any conventional threat to our country and our vital interests. But we must also become better prepared to put boots on the ground in order to take on foes that fight asymmetrical and highly adaptive campaigns on a global scale.”

While Obama’s “left” apologists will no doubt excuse the blatant militarism and warmongering in the candidate’s speech as a mere political device aimed at winning over “centrist” voters, the reality is that the candidate is spelling out what can be expected from an incoming Democratic administration in 2009.

Its policies will be determined not by the hollow campaign rhetoric about “change” that has been Obama’s specialty, but rather by the deepening economic and social crisis of American capitalism and the determination of the American ruling elite to continue using military force as a means of offsetting its economic decline.

Bush claims executive privilege on CIA leak

Bush claims executive privilege on CIA leak


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President Bush has asserted executive privilege to protect information that a House panel has subpoenaed on the leak of CIA operative Valerie Plame's identity, the White House said Wednesday.

A House committee chairman, meanwhile, held off on a contempt citation of Attorney General Michael Mukasey, who sought the privilege claim, as a courtesy to lawmakers not present. Rep. Henry Waxman, chairman of the House Oversight Committee, rejected Mukasey's suggestion that Vice President Dick Cheney's FBI interview on the subject should be protected by the privilege claim.

"We'll act in the reasonable and appropriate period of time," Waxman, D-Calif., told the panel. But he made clear that he thinks Mukasey has earned a contempt citation and that he'd schedule a vote on the matter soon.

"This unfounded assertion of executive privilege does not protect a principle; it protects a person," Waxman said. "If the vice president did nothing wrong, what is there to hide?"

The assertion of the privilege is not about hiding anything but rather protecting the separation of powers as well as the integrity of future Justice Department investigations of the White House, Mukasey wrote to Bush in a letter dated Tuesday. Several of the subpoenaed reports, he wrote, summarize conversations between Bush and advisers — are direct presidential communications protected by the privilege.

"I am greatly concerned about the chilling effect that compliance with the committee's subpoena would have on future White House deliberations and White House cooperation with future Justice Department investigations," Mukasey wrote to Bush. "I believe it is legally permissible for you to assert executive privilege with respect to the subpoenaed documents, and I respectfully request that you do so."

White House spokesman Tony Fratto said Bush invoked the privilege on Tuesday.

Unrest Surfaces in Fallujah Again

Unrest Surfaces in Fallujah Again

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Security has collapsed again in Fallujah, despite U.S. military claims.

Local militias supported by U.S. forces claim to have "cleansed" the city, 70 km to the west of Baghdad, of all insurgency. But the sudden resignation of the city's chief of police, Colonel Fayssal al-Zoba'i, has appeared as one recent sign of growing unrest.

Authorities may have controlled the media better than the violence.

"Assassinations never stopped in Fallujah, but the media seems unwilling to cover the actual situation here," a human rights activist in Fallujah, speaking on terms of anonymity given the tense situation, told IPS. "The two bomb blasts that killed six policemen earlier this month and another two that killed three on the weekend seem to have terminated the silence."

People in Fallujah say they still suffer despite the relative improvement in the security situation. 'Relative' is the key word here, because the improvement is measured against two massive U.S. military operations in 2004 that killed thousands in the city, and displaced hundreds of thousands.

"Fallujah was slaughtered by the Americans when her people decided to fight, and then were suffocated when they decided to reduce the fighting against the occupiers," former intelligence officer Major Ahmed al-Alwani told IPS. "There was strong resistance against American occupation forces since May 2003, but it was the Americans who pointed their guns at the innocent civilians and their houses.

"When the American military plans failed, they decided to hire local tribal militias to do the job for them," Alwani said, referring to the 'Awakening Group' militia created by the U.S. military. "Those also failed, despite the executions and the crimes they committed against people."

Many people throughout Iraq complain of the brutality and unlawful behaviour of these Awakening Groups. Members of these groups are paid 300 dollars per month by the U.S. military.

IPS talked to Sheikh Wussam al-Hardan, known as the 'engineer' of the Awakening Forces of Anbar Province. He blamed the Islamic Party for abuses carried out against civilians in Fallujah.

"We had a very limited role in Fallujah, and the police force was in charge of all security operations there," Hardan said. "We know that all detentions and executions were committed in our name, but people of Fallujah now know that it was the Islamic Party that controlled the police force that was active since January 2007."

On Jun. 26, a suicide bomber attacked a city council meeting of local tribal sheikhs affiliated with Awakening Groups and military officials. Three Marines, two interpreters and 20 Iraqis died in the attack. Among the Iraqis killed were the mayor of nearby Karmah town and three leading sheikhs. The sons of two sheikhs and the brother of the third also died. All were members of the local Awakening Council, according to U.S. and Iraqi authorities.

"Security events take place all over Iraq and people get killed," Captain Jamal of the Fallujah police told IPS. "But we wonder why all this huge echo for two incidents in a city that exiled the U.S. marines with all their military machine."

According to a survey conducted in March for several news organisations by D3 Systems of Virginia in the U.S. and KA Research Ltd. of Istanbul, most Iraqis blame the U.S. military for the worsening security situation.

The majority of Iraqis surveyed disapproved of U.S.-backed Iraqi Prime Minister Nouri al-Maliki, most disapproved of the Iraqi government, and most felt that all occupation forces should leave Iraq immediately.

The police forces are particularly unpopular. "The police force mainly consists of young men from surrounding villages who are loyal to their tribal chiefs," Rammy al-Rawi, a university student who lives in Fallujah told IPS. "We believe it is a fight between the Islamic Party and the Awakening Groups of the tribes who are both collaborating with the Americans for money and power."

Maliki's 'Timetable' Shakes Iraq Debate

Maliki's 'Timetable' Shakes Iraq Debate

What I find nonetheless amazing is how they, and the pundits, have taken such little notice of the dramatic change in the political landscape occasioned by Iraqi Prime Minister Nouri al-Maliki’s bombshell on July 7 — his insistence on a “timetable” for withdrawal of U.S. troops before any accord is reached on their staying past the turn of the year.

Responding to a question at his press conference on Tuesday, President George W. Bush showed that he was vaguely aware that the timetable is, as Robert Dreyfuss says, a “big deal.” Bush even alluded haltingly to the possibility of extending the UN mandate still further.

But it is far from clear that Maliki, who is under great domestic pressure, would be able to sell that to the various factions upon which he depends for support, or to those which he must keep at bay.

As Dreyfuss points out, Maliki and his Shiite allies are also under considerable pressure from Iran, which remains the chief ally of the ruling alliance of Shiites. Most important, Maliki is by no means in control of the process.


Here’s where it gets sticky. No one who knows about third rails in U.S. politics would expect the candidates or the pundits to address how those now running Israel are likely to be looking at the implications of a large U.S. troop withdrawal from Iraq next year.

I am remembering how I was pilloried on June 16, 2005, immediately after Rep. John Conyers’s rump-Judiciary Committee hearing in the bowels of the Capitol, for a candid answer to a question from one of his colleagues; i. e., if the invasion of Iraq was not about WMD, and not about non-existent ties between Iraq and al-Qaeda, then why did we attack?

In answer, I used the acronym OIL. O for oil; I for Israel; and L for Logistics, meaning the military bases necessary to protect both. Neither the House members present nor the media people seemed to have any problem with oil and military bases as factors.

However, the suggestion that one main motive was an attempt to make that part of the Middle East safer for Israel (yes, folks, the neocons really thought that attacking Iraq would do that) — well, that was anathema.

As it is anathema today to suggest that this is still one of the main reasons, besides oil, why Elliott Abrams and other neocons – not to mention Dick Cheney and his team – insist we must stay, Maliki and his associates be damned.

Here in Washington, we can dissect and quibble over remarks by Maliki and other Iraqi leaders. The Israelis have to take such statements seriously. No agreement on U.S. forces staying into 2009 without a timetable for withdrawal? For Tel Aviv, this is getting very serious.

My guess is the Israeli leaders are apoplectic. The fiasco in Iraq clearly has made the region much more dangerous for Israel. There are actually real “terrorists” and “extremists” now in Iraq, and the prospect of U.S. troops leaving has got to be a cause of acute concern in Tel Aviv.

Keeping the US Entangled: Iran

This dramatic change — or even just the specter of it — greatly increases the incentive of the Israeli government to ensure the kind of U.S. involvement in the area that would have to endure for several years.

The Israelis need something to guarantee that Washington will stand by what Sen. Obama in his speech called “our ally” — never mind that there is no mutual U.S.-Israel defense treaty. They are painfully aware that they have only six more months of Bush and Cheney.

The legislation drafted by the American Israel Public Affairs Committee (AIPAC) being so zealously promoted in Congress calls for the equivalent of a blockade of Iran. That would be one way to entangle the United States; there are many others.

The point is that the growing danger that the Israelis perceive will probably prompt them to find a way to get the U.S. involved in hostilities with Iran. Cheney and Bush have pretty much given them that license, with the president pledging to defend “our ally” if Israel is attacked.

All Israel has to do is to arrange to be attacked. Not a problem.

There are endless possibilities among which Israel can choose to catalyze such a confrontation — with or without a wink and a nod from Cheney and Abrams. The so-called “amber light" said to have been given to the Israelis is, I believe, already seen as quite sufficient; they are not likely to wait until it turns officially green.

So far, the resistance of the U.S. senior military has been the only real obstacle to the madness of hostilities with Iran. (And one need only read Scott Ritter’s article on Truthdig this week to get a sense for why they would be chary.)

Joint Chiefs of Staff Chairman, Adm. Mike Mullen, has been described as warning the Israelis that a “Third Front” in the Middle East would be a disaster. I think, rather, he is trying more to warn anyone who might listen in Washington.

Even if the pundits are correct in suggesting that Mullen is joined by Defense Secretary Robert Gates in trying to resist the neocons and Cheney, Mullen’s tone at his press conference two weeks ago suggests he is fighting a rear-guard action — against the “crazies” in the White House.

And when is the last time the crazies lost a battle with such implications for Israel?

Seatbelts On Please…

From Tel Aviv it appears an increasingly threatening situation, with more urgent need to “embed” (so to speak) the U.S. even more deeply in the region — in a confrontation involving both countries with Iran.

A perfect storm is brewing:

-- Petraeus ex Machina, with a record of doing Vice President Cheney’s bidding, takes command of CENTCOM in September;

-- Sen. McCain’s numbers are likely to be in the toilet at that point (because of the economy as much as anything else);

-- McCain will be seen by the White House as the only candidate with something to gain by a wider war (just as by another “terrorist incident”);

-- The Bush/Cheney months will be down to three;

-- And Maliki will not be able to cave in to Washington on the timeline requirement he has set.

In sum, the Israelis are likely to be preparing a September/October surprise designed to keep the U.S. bogged down in Iraq and in the wider region by provoking hostilities with Iran.

The Israeli leaders may well plead for understanding and claim that with their night-goggles, they could not distinguish amber from green.

Would they hesitate? Please tell me who … just who is likely to turn on the siren, pull them over, and give them a ticket?