Thursday, April 2, 2009

Out West, a New Kind of Water War

Out West, a new kind of water war

Nestle wants to tap an aquifer in Colorado for bottled water. Some residents are angered by the project. 'They're taking and not giving,' one critic says.

By DeeDee Correll

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In rural Chaffee County, Colo., one of the world's largest beverage companies has discovered water it deems fit for a bottle: clean and crisp, with the mountain spring flavor people are willing to pay for.

Nestle Waters North America wants to tap an aquifer feeding a pair of springs near Salida, southwest of Colorado Springs, and draw 65 million gallons of water per year to bottle and sell under its Arrowhead brand.

But many mountain residents say Nestle should go bottle someone else's water.

"I'm afraid they will pump and pump until they suck it dry," said Michele Riggio, a Salida physical therapist who has led the opposition.

The conflict is the latest skirmish in an ongoing battle against the bottled water industry, which has enjoyed strong growth over the last decade thanks to the beverage's popularity among consumers who eschew tap water and soft drinks.

As companies like Nestle, which operates 50 spring sites around the country, seek to acquire new water sources, communities have increasingly resisted, said Noah Hall, a law professor at Wayne State University in Detroit and an expert in water law.

"By the nature of its business -- taking water out of the ground and putting it in a bottle and selling it -- Nestle is a lightning rod for opposition wherever they go," Hall said, citing conflicts in Florida, Maine, New Hampshire, Washington and California.

Such conflicts seem to have more to do with larger social concerns than the specific projects, said Bruce Lauerman, a natural resources manager for Nestle, a division of the Switzerland-based company.

"It's more a debate about corporations, who owns the water, and what is the best and highest use of water," he said.

Because a good supply of spring water isn't easy to come by, Nestle and other companies are reluctant to let one go without a fight, Hall said. Such conflicts usually wind up in court, where he said judges rarely denied water companies the right to at least some water.

"The opponents don't usually come away satisfied. They want to run them out of town, and that almost never happens," Hall said.

In Chaffee County, with a population of about 17,000, Nestle's research led it several years ago to the Ruby Mountain and Bighorn springs, Lauerman said.

The company wanted a local source for water it sells in the western U.S. -- a product that Nestle has been trucking from California to other states.

Nestle's plan in Colorado is to extract water from the aquifer, pipe it several miles to a truck stop, then send it to a bottling facility in Denver. Because it will be taking water that otherwise would flow into the Arkansas River, Nestle intends to replenish the river with water purchased from the Denver-area city of Aurora.

The plan, Nestle officials say, leaves more than enough water. Nestle will extract less than 10% of the average spring flows, and snowmelt and precipitation will recharge the aquifer, Lauerman said.

The company also intends to restore the land around the springs, including an old fishery, to its natural habitat and preserve 100 acres of land, a plan praised by state wildlife officials.

Nestle also touts the economic benefits to Chaffee County, saying it would provide short-term construction jobs and about $80,000 in annual taxes, as well as donations to charities.

But many residents regard Nestle's assurances with skepticism. And what happens, they ask, if there's a drought?

"They're taking and not giving," said Riggio, who learned of Nestle's plan soon after viewing the documentary "Flow," which examines the world's dwindling fresh water supply. The film reinforced her conviction that water should not be wasted on "the very unsustainable practice of putting water in bottles and trucking it all over the place."

"I think tap water is just fine," said Riggio, 45.

She and other residents, who have packed county meetings to protest the project, also question whether the county will realize much economic benefit and worry that Nestle's trucks, making 25 round trips per day, will snarl traffic on mountain passes.

Frank McMurry, a rancher who sold Nestle the Bighorn springs property in 2007 for $860,000, and other supporters of the project said it could spur businesses to invest in the area. They dismiss worries that it could deplete water supplies or worsen traffic.

McMurry, a longtime resident, noted that some of the biggest opponents of the project were newcomers.

"They got their spot in heaven and don't want any change," said McMurry, 70. "The old-timers -- and there's not many of us left -- you never see them protesting. But by God, the longhairs and the ponytails come out of the woodwork just to protest something."

Chaffee County commissioners will consider the proposal this month. County development director Don Reimer said one topic of interest will be the possible effect on the aquifer.

And as always seems to happen with water in the West, there are varied opinions. Several reports have drawn different conclusions on the potential effects on the watershed.

The Crisis of College Affordability

The Crisis of College Affordability

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Just this week, on the front page of my hometown paper was the less-than-shocking news that, in our new economically wounded world, if your parents can pay the staggering tuition demanded by our top private colleges in full, you have a major leg up in the race to the college of your choice. New York Times reporter Kate Zernike quotes Robert A. Sevier, an "enrollment consultant to colleges," saying, "If you are a student of means or ability, or both, there has never been a better year." And as fans of my beloved Brooklyn Dodgers used to say in my childhood, "Wait till next year!"

In the meantime, college and university endowments are plummeting, non-tenured professors and teaching assistants are being dropped, and classes cut back on campuses nationwide. Going to college was, of course, something only a thin slice of the American elite once did. If it turns out that we are indeed in a twenty-first century version of the Great Depression, who knows what a college campus will look like, or who will be walking its paths to class, a decade from now?

As the latest entry in TomDispatch's ongoing series on the fallout in the U.S. from the global economic meltdown, Andy Kroll, who last wrote on the ways in which new Secretary of Education Arne Duncan militarizedTom Chicago's school system, explores higher education in the financial doldrums. Still a college student himself, in a state that's been clobbered by bad times and the collapse of the American auto industry, Kroll considers an American world in which the door to college could be slammed shut on so many.

Shut Out

How the Cost of Higher Education Is Dividing Our Country
By Andy Kroll

A few months ago, Bobby Stapleton, a 21-year-old student at the University of Michigan, received a phone call from his younger brother. The good news came first: a senior in high school, he, too, had been accepted by the university, the fourth sibling in his family to have the opportunity to make the move to Ann Arbor from rural Hemlock, Michigan.

Then came the bad news: his brother had no intention of telling their parents, because as Bobby put it, "he knew the money just wasn't there anymore, and that it wasn't realistic." The financial crisis had plunged the Stapleton family into severe debt. At this point, paying Michigan's modest (by college standards) $11,000 tuition for another child appeared unlikely. As his younger brother told their younger sister, Bobby recalled, "Things were just going to have to be different for the two of them."

Since that moment, Bobby and his older sisters have tirelessly searched for a way to change that fate. He has sought advice from older relatives who attended the university, met with members of its financial aid office, and explained his brother's situation to officials at the Michigan Education Trust, a statewide tuition payment program; all this in addition to a full class schedule and a dormitory dining-hall job that often keeps him at work until one or two in the morning. Still, Bobby wasn't about to give up. "I can truly say that being part of this university is one of the best things that's ever happened to me." He was, he swore, going to do everything he could to make sure that his brother and sister had that same opportunity.

Engines of Inequality

Welcome to the other crisis spreading quietly across the country: the crisis of college affordability. Talk to enough students and families on a college campus like the University of Michigan, where I'm a student, and you'll hear plenty of stories like Bobby Stapleton's -- of families scraping by in increasingly tough times as tuition bills rise, of students working second and third jobs, of newly minted graduates staggering into an ever more jobless world under the weight of tens of thousands of dollars in student-loan debt.

This crisis has been a long time coming, but bad times have brought it into clearer focus. In the past several decades, the cost of higher education has climbed at an astounding pace -- faster than the Consumer Price Index, faster even than the cost of medical care. Over the past 30 years, the average cost of college tuition, fees, and room and board has increased nearly 100%, from $7,857 in 1977-1978 to $15,665 in 2007-2008 (in constant 2006-2007 dollars). Median household income, on the other hand, has risen a mere 18% over that same period, from about $42,500 to just over $50,000. College costs, in other words, have gone up at more than five times the rate of incomes.

Simply to ensure that a child attends a four-year public university, a family in the country's lowest-income bracket now has to pay, on average, 55% of total income (up from 39% in 2000); for a middle-income family, the average is 25% (up from 18% in 2000); and for an upper-income family, 9% (up from 7%), according to "Measuring Up 2008: The National Report Card on Higher Education" by the National Center for Public Policy and Higher Education. Similar figures hold for four-year private schools: In Missouri and Texas, almost 70% of family income is needed to pay college expenses for a four-year private school, after financial aid is included; in New York and Pennsylvania, it's nearly 90%.

Over the same decades, colleges and universities have stepped up competition for affluent students. As a result, many institutions have actually increased the amount of aid they pay out to higher-income students, and done so at a far faster rate than for lower-income students who obviously need it more.

"Engines of Inequality," a 2006 report by The Education Trust, a national education advocacy and policy organization, found that state flagship universities and a group of other major research universities spent $257 million in 2003 on financial aid for students from families earning more than $100,000 a year. Those same universities spent only $171 million on aid to students from families who made less than $20,000 a year. Similarly, between 1995 and 2003, according to the report, grant aid from the same public universities to students from families making $80,000 or more increased 533%, while grant aid to families making less than $40,000 increased only 120%.

"Indeed, the highest achieving students from high-income families -- those who earned top grades, completed the full battery of college prep courses, and took AP courses as well -- are nearly four times more likely than low-income students with exactly the same level of academic accomplishment to end up in a highly selective university," the report concluded.

The current financial meltdown, of course, only exacerbates this crisis in college affordability. With the national unemployment rate now at 8.1 percent and climbing -- 12% in hard-hit Michigan -- those still holding onto jobs often face scaled-back hours. Meanwhile, states weigh ever more severe cuts to education funding, universities watch as donations drop, and the largest university endowments record losses in the billions. Officials at Harvard University, with its higher-education-leading endowment valued at $36.9 billion, reported in December that they anticipate losses of 30%, or over $11 billion, this fiscal year.

Here at the University of Michigan, the financial crisis and its educational twin, the crisis of college affordability, are palpable. On a recent Saturday, I shared a couch at the campus union with Rachel Long, a sophomore and first-generation college student from Romeo, Michigan. The description she offered me of her "school" life was typical these days.

Long constantly juggles studying for her environmental studies program and helping her parents pay for her education. She already works spare hours at a local ice cream parlor and is considering teaching at a test prep center as well. Whatever it takes, she told me, to help her mom, a hairdresser, and dad, an electrician, pay for her future. "It weighs on my mind when I'm at work, or studying," she said. "I just see the numbers in my bank account decreasing and tuition prices increasing."

The longer this crisis continues, the more our four-year public and private colleges are likely to be transformed into "gated communities of higher education" (in the phrase of Richard Vedder, director of the Center for College Affordability and Productivity) and engines of inequality. Meanwhile, for those priced out of the four-year college market, the job of education will be left to public community colleges with fast growing student bodies, the least funding, and the fewest class offerings, as well as overcrowded classrooms and faculties stretched to the breaking point.

How did college, once seen as an increasingly democratic path to advancement, become so expensive?

A Squeeze Play in Higher Education

At the heart of the modern American Dream has been access to affordable higher education. The G.I. Bill, passed in 1944, helped instill this belief by giving returning World War II veterans unprecedented amounts of financial aid for college and spurring one of the most prosperous eras in the past century.

In 1972, the federal government broke new educational ground by creating the non-repayable Pell Grant, awarded solely on the basis of a student's income and the amount of money his or her family could contribute to college costs. The Pell Grant advanced what the G.I. Bill had begun, greatly expanding access to colleges and universities for low-income individuals and families who otherwise couldn't afford it. From the later 1970s on, however, the access promised by the G.I. Bill and the Pell Grant has slowly slipped away.

Published in 2008 before the full force of the economic meltdown had hit, the "Measuring Up 2008" report graded states on the affordability of their colleges and universities based on the percentage of family income needed to pay for college, strategies available to increase affordability, and how much loan debt students take on. The result? It gave failing grades to a whopping 49 of the 50 states. With a "C-," California was the sole exception.

Colleges and universities have also undergone a dramatic shift in the kinds of financial aid they give out. Grants have been largely replaced by student loans issued by governments and private lenders. In the decade between the 1997-1998 and 2007-2008 academic years, student loans more than doubled -- from $41 billion to $85 billion -- and the number of students taking out those loans soared from 4,100,000 to 6,111,000, according to "Measuring Up 2008."

Between the 1992-1993 and 2003-2004 academic years, student borrowing rose by 89%, from an average of $3,884 to $7,336 per year. Meanwhile, grant aid lagged, increasing only 57% from $3,545 per year to $5,565, while the Pell Grant lost much of its purchasing power: In 1979, it paid for 75% of the cost of attending a four-year public college or university; today, only about 30%.

As with the Michigan Alternative Student Loan Program, state governments, facing budget deficits in the hundreds of millions of dollars, have only deepened the affordability crisis by slashing or suspending lending programs. At the same time, hard-pressed public and private colleges are raising tuition costs.

Not surprisingly, hardest hit by the crisis are those who can least afford college to begin with, low-income families for whom the financial burden of education has increased fastest. According to "Measuring Up 2008," the lower-middle class and lowest income groups have seen the largest increases in percentages of income needed to pay college costs -- more than three to four times the increases experienced by higher income groups.

Even as access to college is dwindling, opinion polls indicate that more Americans believe a college education is essential to a successful, productive life, and that those without a degree will be left behind. Recent unemployment figures reflect that. Only 4.1% of those with a bachelor's degree or higher are, according to the latest data from the Bureau of Labor Statistics, unemployed at the moment.

An August 2008 poll by the National Center for Public Policy and Higher Education found that the percentage of Americans who believe that "a college education is necessary for a person to be successful in today's work world" increased from 31% in 2000 to 50% in 2007. More than 60% of those polled believe, however, that "many people who are qualified don't have the opportunity to go to college," and that college expenses are increasing at an equal or faster rate than health care in this country. This is especially true among black and Hispanic parents, the poll found.

Between hopes and grim realities, students and families find themselves caught, as the poll's authors put it, in a higher education "squeeze play."

Leveling the Playing Field

How, then, to make college affordable again? With the education funding in the Obama administration's stimulus package and the proposed fiscal 2010 budget now before Congress, the Obama administration has made addressing the cost of higher education a national issue -- at the very moment when it also threatens to become a national scandal. Included in the two pieces of legislation are increases in the maximum value of Pell Grants and tuition tax credits, as well as programs to make aid more available to more colleges, and to create a $2.5 billion program to increase support for access to, and completion of, college (with a needed focus on low-income students).

The crisis of college affordability is too severe, however, for reinvestment at the federal level alone to make the difference. Need-based financial aid programs -- for instance, the University of Michigan's community college transfer program, which focuses on increasing access for high achieving, lower-income students at community colleges -- are no less crucial. Indeed, as more students enroll in less expensive, open admissions two-year colleges, hoping later to transfer to a four-year college, investing in this educational pipeline will increase affordability and accessibility for lower-income students.

What higher education leaders could also try, says Don Heller, director of the Center for the Study of Higher Education at Penn State University, is more convincingly selling their message for increased education funding to state and federal lawmakers. "We need to try to sell the message that investments in post-secondary education don't just reap private returns for individuals but also social returns, or societal benefits," Heller said. "We need to do more to get that message out about societal returns. We need to reach the key people."

Speaking of reaching key people, when next I ran into Bobby Stapleton at a campus coffee shop, he was far more confident that his younger brother would make it to Ann Arbor. In the previous month, his parents' financial situation had improved, making it more likely that they could contribute toward tuition costs, and the state had finally agreed to come up with some financial assistance as well.

So his younger brother might just slip through the "squeeze" and into college. If, however, a serious, comprehensive effort isn't soon launched to address the mounting cost of higher education, Americans might emerge from economic disaster with their college and university system looking unrecognizably different and staggering numbers of potential students shut out of an education -- and a dream.

US property prices down 29% and still falling fast

US property prices down 29pc and still falling fast

US house prices have fallen 29pc from their peak and are still tumbling at the fastest rate on record, according the closely watched Case-Shiller index.

By Ambrose Evans-Pritchard

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The latest figures dash hopes that emergency action by the US Federal Reserve over the winter would at least slow the pace of decline.

Prices dropped 19pc in the 20 largest cities in the year to January, with an accelerating downward lurch during the first weeks of 2009.

There was a flicker of life last week when the National Association of Realtors reported a 5.1pc rise in sales of existing homes in February, a sign that overhang of foreclosed houses is slowly starting to clear – especially on the West Coast.

Anecdotal reports hint at a burst of sales in March, helped by an $8,000 tax credit for first-time buyers.

Chris Whalen, from Institutional Risk Analytics, said the crisis is spreading from bubble zones such as Arizona and Florida into rock-solid neighbourhoods in the East. It is also climbing up the credit ladder.

"Sub-prime has peaked in terms of loss rates but the problem now is prime property, and commercial real estate is falling off the table," he said.

There is concern that delayed time bombs on Alt-A (one notch above sub-prime) and Option-ARM "teaser" mortgages offered in the final phase of the boom have yet to detonate. The upward resets are heavily clustered in 2009 to 2010, although Fed policy should cushion the blow.

The Fed began buying mortgage securities in November to force down borrowing costs. Rates on the standard 30-year home loan have dropped from 6.5pc to 4.93pc, helped further by the Fed's mass purchase of Treasury bonds – considered the "nuclear" option in the central bank arsenal.

While this has led to a wave of refinancing at lower rates – potentially worth an extra $100bn (£70bn) in stimulus – the benefits have yet to reach those likely to default or face a distress sale because any homeowner nearing negative equity cannot refinance.

SMR Research says 22.4pc of all US homeowners with mortgages are underwater, in part because they extracted home equity to pay for cars and college fees during the bubble. California alone has 1.9m borrowers in negative equity.

The Obama administration is pushing through a $75bn plan to slow foreclosures but is in a race against time as lay-offs accelerate.

The OECD said on Tuesday that US unemployment would reach 10.5pc by the end of next year.

The worst price falls over the past year have been in Phoenix (-34pc), Las Vegas (-33pc) and San Francisco (-31pc). Surprisingly, prices fell just 4.3pc in Detroit, the heart of America's blighted car industry. Phoenix prices have dropped 49pc since peaking in June 2006.

US Companies cut an estimated 742,000 workers in March

ADP Says U.S. Companies Reduced Payrolls by 742,000

By Bob Willis

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Companies in the U.S. cut an estimated 742,000 workers in March, pointing to no relief in sight for the labor market amid the longest recession in seven decades, a private report based on payroll data showed today.

The drop in the ADP Employer Services gauge was larger than economists forecast and the most since records began in 2001. February’s reading was revised to show cut of 706,000 workers, up from a previous estimate of 697,000.

Companies are slashing staff as tight credit conditions and shrinking household wealth cause sales to shrink. The Labor Department may report in two days that employers cut payrolls in March for a 15th consecutive month, putting jobs losses in the current downturn at more than 5 million, according to a Bloomberg survey.

“The weakness is distributed across all components of the economy,” Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, said in a conference call. “We are going to see several more months of serious bleeding before we see lesser job losses.”

The ADP report was forecast to show a decline of 663,000 jobs, according to the median estimate of 30 economists in a Bloomberg News survey. Projections were for decreases ranging from 525,000 to 750,000.

A government report April 3 may show payrolls at companies and government agencies shrank by 658,000 in March and unemployment rose to a 25-year high of 8.5 percent, according to a Bloomberg survey of economists.

Private Employment

The ADP figures comprise only private employment and do not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

Another report today also reflected a weak labor market. Job cuts announced by U.S. employers nearly tripled in March from a year earlier, led by planned cutbacks at government agencies, pharmaceutical and aerospace and defense firms, Chicago-based placement firm Challenger, Gray & Christmas Inc. said.

Firing announcements rose by 181 percent from March 2008, to 150,411. Compared with the prior month, announcements fell for a second consecutive time, the first two-month decrease in job cuts since February-March 2007.

Today’s ADP report showed a reduction of 327,000 workers in goods-producing industries including manufacturers and construction companies. Employment in manufacturing dropped by 206,000. Service providers cut 415,000 workers.

Broad-based Drop

Companies employing more than 499 workers shrank their workforces by 128,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 330,000 jobs and small companies decreased payrolls by 284,000.

Industries cutting jobs ranged from automakers and high- tech companies to materials makers and service companies.

International Business Machines Corp., the world’s biggest computer-services provider, reduced as many as 5,000 jobs last week, according to a person familiar with the matter. That added to 4,000 cuts already made since the beginning of the year.

“I don’t believe this is the end,” said Lee Conrad, coordinator for an employees’ group pushing for union recognition. “We’re losing jobs at a record rate inside IBM.”

Tyson Foods Inc., the largest U.S-based meat producer, said March 27 it will close a processed meats plant in Oklahoma and cut 580 jobs to move production to other locations.

The ADP report is based on data from 400,000 businesses with about 24 million workers on payrolls.

ADP began keeping records in January 2001 and started publishing its numbers in 2006.

Alarming News: Bank Losses Spreading!

Alarming News: Bank Losses Spreading!

For the first time in history, U.S. banks have suffered large, ominous losses in a giant sector that, until now, they thought was solid: bets on interest rates.

In a moment, I’ll explain what this means for your savings and your stocks.

But first, here’s the alarming news: According to the fourth quarter report1 just released this past Friday by the Comptroller of the Currency (OCC), commercial banks lost a record $3.4 billion in interest rate derivatives, or more than seven times their worst previous quarterly loss in that category.

And here’s why the losses are so ominous:

Until the third quarter of last year, the banks’ losses in derivatives were almost entirely confined to credit default swaps — bets on failing companies and sinking investments.

Next major risk area: Interest Rate Derivatives

But credit default swaps are actually a much smaller sector, representing only 7.8 percent of the total derivatives market.

Now, with these new losses in interest rate derivatives, the disease has begun to infect a sector that encompasses a whopping 82 percent of the derivatives market.2

Thus, considering their far larger volume, any threat to interest rate derivatives could be far more serious than anything we’ve seen so far.

Meanwhile, time bombs continue to explode in the credit default swaps as well, delivering another massive loss of nearly $9 billion in the fourth quarter.

And remember: These represent the aggregate total for the entireafter netting out the results of banks with profitable trading. banking industry,

Why This Crisis Could Be Nearly as
Bad as the Banking Crisis of 1929-31

Yes, I know the standard argument: In 1929, bank regulation and depositor protection was primarily run by state governments. Now, with the FDIC, the OCC, and more direct Federal Reserve intervention, it’s far more centralized.

But offsetting that strength are serious weaknesses in the banking system that did not exist in the 1930s:

• In 1929, there were fewer giant banks. They controlled a smaller share of the total market. And they were generally stronger than the thousands of community banks around the country. Today, by contrast, the nation’s high-roller megabanks dominate the market.

• In 1929, derivatives were virtually nonexistent. Not today! U.S. banks alone control $200.4 trillion; and it’s precisely in this dangerous sector that the megabanks dominate the most.

According to the OCC’s Q4 2008 report, America’s top five commercial banks control 96 percent of the industry’s total derivatives, while the top 25 control 99.78 percent. In other words, for every $100 dollar of derivatives, the big banks have $99.78 … while the rest of the nation’s 7,000-plus banking institutions control a meager 22 cents!3

This is a massively dangerous concentration of risk.

The large banks are exposed to the danger that buyers will vanish, markets will suddenly become illiquid, and they’ll be unable to unload their positions without accepting wipe-out losses. Has this ever happened? Unfortunately, yes. In fact, it’s the primary reason they lost a record $3.4 billion in the last three months of 2008.

The large banks are exposed to the danger that, with exploding federal deficits and new fears of inflation, interest rates will suddenly surge, delivering a whole new round of even bigger losses in the months ahead.

Worst of all, the five biggest banks are exposed to breathtaking default risk — the danger that their trading partners could fail to make good on their gambling debts, transforming even the best winning trades into some of the worst losers.

Here’s our chart on these risks, updated to reflect the new data just released on Friday:

Major U.S. Banks Overexposed to Default Risk

Specifically, at year-end 2008,

  • Bank of America’s total credit exposure to derivatives was 179 percent of its risk-based capital;
  • Citibank’s was 278 percent;
  • JPMorgan Chase’s, 382 percent; and
  • HSBC America’s, 550 percent.4

What’s excessive? The banking regulators won’t tell us. But as a rule, exposure of more than 25 percent in any one major risk area is too much, in my view.

And if you think these four banks are overexposed, wait till you see the super-high roller that the OCC has just added to its quarterly reports: Goldman Sachs.

According to the OCC, Goldman Sachs’ total credit exposure at year-end was 1,056 percent, or over ten times more than its capital.

The folks at Goldman think they’re smart, and they are. They say they can handle large risks, and usually they can. But not in a sinking global economy! And not when the exposure reaches such stratospheric extremes!

Major Impact on the Stock Market

In the 1930s, the banking crisis helped drive the economy into depression and the stock market into its worst decline of the century.

The same is happening today. Whether the nation’s big banks are bailed out by the federal government or not, the fact remains that they’re jacking up credit standards, squeezing off credit lines, and even shutting down major segments of their lending operations.

And regardless of how much lawmakers try to arm-twist banks to lend more, it’s rarely happening. With scant exceptions, bank capital has been reduced, sometimes decimated. The risk of lending has gone through the roof. And many of the more prudent borrowers don’t even want bank loans to begin with.

Those credit shortages, both acute and chronic, have a big impact on the economy and the stock market. Moreover, unlike the 1930s, banks themselves are publicly traded companies whose shares make up a substantial portion of the S&P 500.

The big lesson to be learned: Don’t pooh-pooh comparisons between today’s bear market and the deep bear market of 1929-32.

From its peak in 1929, the Dow Jones Industrials Average fell 89 percent. Compared to the Dow’s peak in 2007, that would be tantamount to a plunge of more than 12,600 points — to a low of approximately 1500, or an additional 81 percent decline from the Friday’s 7776.

Even a decline of half that magnitude would still leave the Dow well below the 5000 level, which remains our current target.

Does this preclude sharp rallies? Absolutely not! From its recent March 6 bottom to last week’s peak, the Dow has already jumped a resounding 21 percent in just 20 short days. And the rally may still not be over.

But this is nothing unusual. In the 1929-32 period, the Dow enjoyed even sharper rallies, and those rallies did nothing to end the great bear market. My father, who made a fortune shorting stocks in that period, explains it this way:

“In the 1930s, at each step down the slippery slope of the market’s decline, Washington would periodically announce some new initiative to turn things around. “President Hoover would give a new pep talk promising ‘prosperity around the corner.’ And often, the Dow staged dramatic rallies — up 30 percent on the first round, 48 percent on the second, 23 percent on the third, and more. “Each time, I sought to use the rallies as selling opportunities. I persuaded more of my clients to get rid of their stocks and pile up cash. I even told them to take their money out of shaky banks.”

Your approach today should be similar. Specifically,

Step 1. Keep as much as 90 percent of your money SAFE, as follows:

  • For your banking needs, seek to use only institutions with a Financial Strength Rating of B+ or better. For a list, click here. Then, in the index, scroll down to item 13, “Strongest Banks and Thrifts in the U.S.”
  • Make sure your deposits remain comfortably under the old FDIC insurance coverage limits of $100,000. The new $250,000 per account limit is temporary and, in my view, not something to rely on long term.
  • Move the bulk of your money to Treasury bills or equivalent. You can buy them (a) directly from the U.S. Treasury Department by opening an account at TreasuryDirect, (b) through your broker, or (c) via a Treasury-only money market fund. For further instructions, click here and review sections 1 through 3 — “How to Buy Treasury Bills or Equivalent,” “How to Use Your Treasury-Only Money Fund as a Bank,” and “How to Set Up a Single, Safe Account for Nearly All Your Savings and Checking.”
Important: You may have seen some commentary from experts that “Treasuries are not safe.” But when you review their comments more carefully, you’ll probably see they’re not referring to Treasury bills, which have virtually zero price risk. They’re talking strictly about Treasury notes or bonds, which can — and probably will — suffer serious declines in their market value.

Step 2. If you missed the opportunity to greatly reduce your exposure to the stock market in 2007 or 2008, you now have another chance. And the more the market rises from here, the more you should sell.

Step 3. If you are still exposed to stock market declines, seriously consider inverse ETFs, ideal for helping you hedge against that risk. (For more background information, see my 2007 report, How to Protect Your Stock Portfolio From the Spreading Credit Crunch.)

Step 4. If you have funds you can afford to risk, seriously consider two major profit opportunities in the months ahead:

  • To profit handsomely from the market’s next decline. The best time to start: When Wall Street pundits begin declaring “the bear is dead.” They’ll be wrong. But their enthusiasm can be one of the telltale signs that the latest rally is probably ending.
  • To profit even more when the market hits rock bottom and you can buy some of the nation’s best companies for pennies on the dollar. The ideal time to buy: When Wall Street is convinced the world is virtually “coming to an end.” They will be wrong, again. But that kind of extreme pessimism could be one of your signals that a real recovery is about to begin.

Triple Canopy: Obama's Blackwater

Obama's Blackwater? Chicago Mercenary Firm Gets Millions for Private "Security" in Israel and Iraq

By Jeremy Scahill

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On the campaign trail, Barack Obama's advisers said he "can't rule out [and] won't rule out" using mercenary forces, like Blackwater. Now, it appears that the Obama administration has decided on its hired guns of choice: Triple Canopy, a Chicago company now based in Virginia. It may not have Blackwater's thuggish reputation, but Triple Canopy has its own bloody history in Iraq and a record of hiring mercenaries from countries with atrocious human rights records. What's more, Obama is not just using the company in Iraq, but also as a U.S.-government funded private security force in Israel/Palestine, operating out of Jerusalem.

Beginning May 7th, Triple Canopy will officially take over Xe/Blackwater's mega-contract with the U.S. State Department for guarding occupation officials in Iraq. It's sure to be a lucrative deal: Obama's Iraq plan will inevitably rely on an increased use of private contractors, including an army of mercenaries to protect his surge of diplomats operating out of the monstrous U.S. embassy in Baghdad.

The Iraq contract may come as no surprise. But according to federal contract records obtained by AlterNet, the Obama administration has also paid Triple Canopy millions of dollars to provide "security services" in Israel. In February and March, the Obama administration awarded a "delivery order" to Triple Canopy worth $5.5 million under State Department contract SAQMPD05F5528, which is labeled "PROTECTIVE SERVICES--ISRAEL." According to one government document, the contract is scheduled to run until September 2012. (Another document says September 2009.) The contract is classified as "SECURITY GUARDS AND PATROL SERVICES" in Israel. The total value of the contract was listed at $41,556,969.72. According to a January 2009 State Department document obtained by AlterNet labeled "Sensitive But Unclassified," the Triple Canopy contract is based out of Jerusalem.

According to federal records, the original arrangement with Triple Canopy in Israel appears to date back to at least September 2005 and has been renewed every year since. The company is operating under the State Department's Worldwide Personal Protection Program (WPPS), which provides for private security/military companies to operate on the U.S. government payroll in countries such as Afghanistan, Bosnia, Iraq, and Israel. Triple Canopy, according to an internal State Department report, also worked under the program in Haiti, though that task order is now listed as "closed." In State Department documents the WPPS program is described as a government initiative to protect U.S. officials as well as "certain foreign government high level officials whenever the need arises." The State Department spent some $2 billion on the WPPS program from 2005-2008.

Triple Canopy's Growing Footprint in Iraq

Triple Canopy is hardly new to the Iraq occupation. Founded in Chicago in 2003 by "U.S. Army Special Forces veterans," the company won its first Iraq contract in 2004. In 2005, with its business expanding, Triple Canopy relocated its corporate headquarters from Obama's home state to Herndon, Virginia, placing it much closer to the center of U.S. war contracting. (On several U.S. government contracts, however, including the Israel security contracts, its Lincolnshire, Illinois address is still used.)

Along with Blackwater and DynCorp, Triple Canopy has had armed operatives deployed in Iraq on a major U.S. government contract since the early stages of the occupation. At one point during this arrangement, Blackwater was responsible for Baghdad (the largest share of the work), DynCorp covered northern Iraq and Triple Canopy southern Iraq. Triple Canopy also worked for KBR and other corporations. As of 2007, Triple Canopy had about 2,000 operatives in Iraq, but only 257 on the State Department contract. However, its new contract, which takes effect May 7, will greatly expand Triple Canopy's government presence in Iraq. (Meanwhile, Blackwater is scheduled to continue to work in Iraq under Obama through its aviation division and in Afghanistan, where it has security and counter-narcotics contracts. It also holds millions of dollars in other U.S. government contracts around the world and in the U.S. In February alone, the Obama administration paid Blackwater nearly $70 million in security contracts.) The Obama administration may have traded Blackwater for Triple Canopy in Iraq, but it is likely that some of Blackwater's operatives, too, will simply jump over to Triple Canopy to keep working as armed security guards for occupation officials.

Like Blackwater, Triple Canopy has had its share of bloody incidents, among them allegations that operatives have gone on missions where they shot at civilian vehicles, including one after a briefing where a team leader cocked his M-4 and said to his men, "I want to kill somebody today. ... Because I'm going on vacation tomorrow." (The man in question denied any wrongdoing). While Triple Canopy fired some employees for not reporting shooting incidents in Iraq, none have been criminally prosecuted in Iraq or the U.S. (For a full report on this and other incidents involving Triple Canopy, check out the great work of Washington Post foreign correspondent Steve Fainaru, author of Big Boy Rules.)

Also like Blackwater, Triple Canopy has hired mercenaries from countries with atrocious human rights records and histories of violent counter-insurgencies. Among them: Peru, Chile, Colombia and El Salvador. In fact, in Iraq, Triple Canopy hired far more "Third Country Nationals" than Blackwater and DynCorp and has used more TCNs than US citizens or Iraqis. As I reported in my book, Triple Canopy used the same Chilean recruiter (who served in Augusto Pinochet's military) Blackwater used when it hired Chilean forces, including some "seasoned veterans" of the Pinochet era. In El Salvador, the company reportedly used "a U.S.-trained former paratrooper and officer of the Salvadoran special forces during the country's civil war" where the U.S. backed a brutal right wing dictatorship in a war that took the lives of some 75,000 Salvadorans. A Triple Canopy spokesperson reportedly said of the Salvadorans, "They've got the right background for the type of work we are doing." A Triple Canopy subsidiary in Latin America has also reportedly used a former CIA base in Lepaterique, Honduras as a training center. In the 1980s, the facility was used by the CIA and Argentinian military intelligence in training Contra death squads to attack Nicaragua. The base also served as the headquarters for the notorious Battalion 316, a CIA-trained Honduran military unit responsible for torture and disappearances.

There is also cause for concern about Triple Canopy's attitude towards accountability for its forces in Iraq, particularly in light of new rules which, on paper, give Iraqi courts jurisdiction over contractor crimes. Blackwater has, at times, conspired with the U.S. State Department to whisk its forces out of Iraq when they are facing potential prosecution for alleged crimes committed in the country, as in the case of a drunken Blackwater operative who was alleged to have shot and killed a bodyguard to Iraqi Vice President Adel Abdel-Mahdi on Christmas Eve 2006.

According to one Triple Canopy operative, "We were always told, from the very beginning, if for some reason something happened and the Iraqis were trying to prosecute us, they would put you in the back of a car and sneak you out of the country in the middle of the night." Another Triple Canopy operative said U.S. contractors had their own motto: "What happens here today, stays here today."

The use of mercenaries by Hillary Clinton's State Department stands in stark contrast to her co-sponsorship as a Senator of a bill last year that sought to ban the use of such companies in U.S. war zones, specifically Iraq. Last February Clinton said, "The time to show these contractors the door is long past due." Now, Clinton will be relying on these hired guns for protecting her and her staff in various countries.

It's hardly a surprise that Obama is continuing the use of mercenaries in Iraq and beyond (Triple Canopy itself maintains offices in Abu Dhabi, Nigeria, Peru, Jordan and Uganda); nevertheless, members of Congress -- whose actions when Bush deployed these private armies were too little, too late -- have a responsibility to investigate his use of companies whose profits are intimately linked to a continuation of war. Moreover, Obama's choice of this particular company should be investigated, both by the House and Senate, before May 7th when Obama's mercenaries become the official paramilitary force in Iraq. As for Triple Canopy's role in Israel, Obama's administration should explain exactly what these forces are doing on the U.S. government payroll.

Tasers Are the New Killers: Watch Their Popularity Surge!

Tasers Are the New Killers: Watch Their Popularity Surge!

By Liliana Segura

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As protesters descend upon London's financial district to demonstrate the G-20 summit this week, they are being met by thousands of Metropolitan police officers carrying out what has repeatedly been described as the biggest police operation ever undertaken in the capital. Pre-emptive arrests were made earlier this week and despite the mainly nonviolent protests -- overshadowed by media reports of a "seige" on the Bank of England -- by Wednesday night, more than 60 people had been arrested and one man was dead.

Police in London have been gearing up for these clashes for months, attracting press attention for the “unprecedented” security deployment and the various tools at their disposal. Among them are so-called "non-lethal weapons" of the sort that have become biquitous crowd control devices. "Scotland Yard is to deploy officers armed with 50,000-volt Taser stun guns to deal with violent demonstrators," the Times Online reported earlier this week, noting that police were gearing up for any "anarchist elements" "likely to stir up trouble."

Months after the Republican National Convention in the U.S., such sweeping security measures may seem to be par for the course. But in the UK -- where police forces have traditionally not carried guns -- it was not that long ago that Tasers were new to the streets. Since their arrival in the spring of 2003, however, their popularity has skyrocketed; last fall, Home Secretary Jacqui Smith unveiled a plan to spend £8 million on Tasers and Taser training for 30,000 police officers, providing some 10,000 new Tasers to police across England and Wales. "I am proud that we have one of the few police services around the world that do not regularly carry firearms," Smith said, "and I want to keep it that way." But an arms expert at Amnesty International UK called the move "a dangerous step in British policing," citing "numerous" taser deaths in North America as a cautionary example.

Meanwhile in the U.S., such fatalities continue. Last month, a Michigan teenager died after police tasered him, one day short of his 16th birthday.

It would be preposterous at this point for anyone with access to the news media to claim that Tasers are the safe policing tools they are marketed as. Yet Taser International, the corporation that makes them, continues to market this dangerous -- and lucrative -- myth. On March 31, the company's latest Taser model -- called the Shockwave -- hit the market; according to Taser International website, it "allows for both increased safety and stand-off capability during hostile situations, minimizing risk with a stand-off distance of up to 100 meters." But as Dalia Hashad, director of Amnesty International’s USA Program focusing on domestic human rights, wrote about the product last fall, the Shockwave "belongs in my 'You've Got to Be Kidding' file along with Taser International's leopard-print MP3 player that doubles as a taser and their employment of Playboy Bunnies for promotion." The company's literature shows it to be a powerful crowd-control weapon:

"With the push of a button at a stand-off distance of up to 100 meters, the Shockwave unit deploys multiple standard TASER® cartridges that are oriented across an area arc. Full area coverage is provided to instantaneously incapacitate multiple personnel within that region."

"Development of weapons that allow police to tase en mass is not good news," says Hashad. " ... Would you be willing to go to a protest knowing that police on the scene were armed with Taser Shockwave? I wouldn't bring my daughter, which means that I might have to stay home. Maybe that's the point."

It is not clear what model of Taser London police are using at the G20 summit. But with the UK embracing Taser technology, it is only a matter of time before the kinds of fatalities seen regularly in North America start showing up across the Atlantic. The company doesn’t seem concerned, though. The British version of Taser International's website, www.taser.co.uk, boasts: "0% long term injury. 94% success rate."

Taser use is down in Canada

One place where the Taser trend actually appears to be changing is Canada, where high-profile taser deaths, along with a recent study on the dangers of Tasers, are leading to a serious rethinking of the weapon. Four months after a Canadian report found that the type of Taser model most often used by police officers can significantly raise the risk of cardiac arrest -- prompting Canadian officials to say they were pulling the model from its police ranks -- Taser use in Canada has decreased dramatically. Last week Reuters reported that the "use of Taser stun guns by the Royal Canadian Mounted Police (RCMP) dropped by almost a third last year, possibly because of a high-profile controversy about the weapon's safety and accusations the gun was being over-used."

The official who released the numbers, who heads the Commission for Public Complaints Against the RCMP, told reporters in a press conference that Canadian authorities are showing more "self-restraint" when it comes to deploying tasers -- while also suggesting that suspects are less likely to resist police officers for fear of being tasered to death. "People now recognize that the Taser is painful and that Taser -- maybe they're thinking -- may kill me, and they're co-operating too," said Paul Kennedy of the RCMP, a government agency that, according to Reuters, "is expected to issue a more comprehensive report on Taser use" in coming days.

This is pretty unsatisfying for people who would like to see a ban on Tasers -- or at least a moratorium until their safety can be guaranteed (a dubious prospect). More importantly, in the meantime, allowing Tasers to occupy a gray area -- not lethal except when they are -- will make it that much harder for police to be held accountable for excessive force and homicide. Cops already get away with shooting suspects dead with little to no consequences. Arming them with Tasers under the pretense that they are safe will only perpetuate this trend as inevitable deaths occur.

Like "pre-emptive" arrests, the 50,000-volt Tasers that London police are carrying as they stand off with G20 protesters this week may be seen as a necessary precaution. But the past several years have shown the slippery slope governments create in the name of security. Any Taser deaths in London this week will be treated as a tragic accident, to be sure. But they should not be treated as a surprise.

Terror as a Tool of Empire

Terror as a Tool of Empire

By Chris Floyd

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Here's a purely hypothetical scenario. Let's say you were a dedicated imperial militarist who believed that your country's security, prestige and financial interests could best be served by war and the ever-present threat of war. Let's say you had some really hot and juicy operations going on, endless deadly conflicts that were pouring hundreds of billions of dollars into your war machine and entrenching national policy even more deeply in the militarist philosophy – the machtpolitik – that you believe in.

But there's a problem. The general public – the cow-like herd out there that doesn't understand grand strategy the way you and your fellow elites do – is growing weary, and wary, of your Long War. The national treasury is bankrupt, the national infrastructure is rotting, the nation's communities are dying; millions of people are out of work, losing their homes, losing their dreams, spiraling down into want, privation and despair. Yet you have big plans to escalate the war, expand your war machine, and maintain the global dominance that you believe is the right and natural role for your special nation – and its elites. What to do? How to galvanize the truculent, self-absorbed herd into enthusiastically supporting your vital agenda once more?

Well, here's one purely hypothetical approach you might try. You goad and provoke violent extremist groups into retaliating against your attacks, your civilian-slaughtering invasions and incursions into their territory. Being unable to confront directly your war machine – the largest, most advanced military force in the history of the world, sustained by a tsunami of public money that each year surpasses the military spending of the rest of the world – they naturally respond with "asymmetrical" operations. At first, these are directed at nearby targets: your supply lines, the forces of your local proxies and allies, and other chaos-inducing depredations in the groups' own regions, designed to foul the lines of your control and drive you out. Just as naturally, you use these attacks to justify an even greater military presence in their regions. The cycle inevitably, inexorably ratchets upwards and outwards, until at last the extremists strike at your homeland – either with your connivance, or your covert acquiescence, or, in any event, with your foreknowledge that such an attack was sure to come. This is the moment you have waited for; this is exactly what you wanted. Now you can whip the herd back into a martial frenzy, keep the Long War going, and push aside the rabble's petty, small-minded desires for a peaceful, prosperous life at home, minding their own business.

One never knows exactly what goes on behind the imperial drapery in the Potomac palaces, of course; ordinary American citizens were long ago turned into Kremlinologists of their own government, trying to discern -- through ceremonial signs, backstairs gossip, and slight deviations in ritualized rhetoric -- just what their masters are really up to. But some cynics darkly suspect that scenarios something like the one sketched out above have already been enacted; for instance, in the "new Pearl Harbor" that struck America on September 11, 2001 – one year after a group channeling the views of future Bush Administration bigwigs (including Dick Cheney, Donald Rumsfeld, Scooter Libby and many others) had openly pined for a "new Pear Harbor" to "catalyze" the American people into supporting their militarist agenda, which included an invasion of Iraq – whether Saddam Hussein was in power or not.

But leaving aside for now the ever-thorny matter of divining the varying proportion of connivance, acquiescence, foreknowledge, exploitation, incompetence and fate involved in 9/11, we can say this as an established fact: It is the policy of the United States government to provoke violent extremist groups into action. Once they are in play, their responses can then be used in whatever way the government that provoked them sees fit. And we also know that these provocations are being used, as a matter of deliberate policy, to rouse violent groups on the "Af-Pak" front to launch terrorist attacks.

In other words, just as I first wrote in the Moscow Times more than six years ago (and followed up three years later), the United States is deliberately fomenting terrorist attacks in order to pursue its political and military agendas.

[For more on how these policies and similar uses of terrorism and death squads have been realized in Iraq and elsewhere, see "A Furnace Seal'd: The Wondrous Death Squads of the American Elite," "Ulster on the Euphrates: The Anglo-American Dirty War in Iraq," and "Willing Executioners: America's Bipartisan Atrocity Deepens in Somalia."]

Eagle-eyed Jason Ditz at Antiwar.com draws the connection between this policy and the most recent "asymmetrical" strike by a "tickled" terrorist group in Pakistan: the deadly attack on a police center in Lahore by the Tehreek-e Taliban Pakistan (TTP). The group, led by Baitullah Mehsud, said the attack was in retaliation for the American campaign of drone strikes in Pakistan's frontier regions – strikes which have killed many civilians along with usually unidentified "militants." As Ditz notes, one goal of the campaign – which has been intensified by Barack Obama – is precisely the aforementioned fomenting of terrorist activity:

The Obama Administration has launched an ever growing number of attacks in the FATA, generally aimed at Mehsud’s training facilities in North and South Waziristan. In September, then-CIA Director Michael Hayden said the attacks were an attempt to “provoke a reaction” from the militant groups led by Mehsud. It appears that now, six months later, they have finally done so. [Hayden described this bloodsoaked strategy as "tickling" terrorists into a response.]


What's more, Mehsud has now vowed to carry the fight back to American soil. As The Times notes (via Antiwar.com):

“Soon we will launch an attack in Washington that will amaze everyone in the world," [Mehsud declared.] "The maximum they can do is martyr me. But we will exact our revenge on them from inside America."


Whether or not the rag-tag TTP could actually carry out such a threat is another matter, as Juan Cole notes. But that is not really the point. The point is that once again, a violent group has been knowingly prodded into murderous action. Even better, it has now set itself up as a "deadly terrorist threat" to the sacred Homeland itself: yet another made-to-order supervillain from central casting.

And remarkably, this new, open threat to bring terror to the American heartland comes just days after Barack Obama announced his vaunted surge in the Af-Pak War, citing – what else? – the need to protect the United States from terrorists based in Afghanistan and Pakistan as his chief reason for escalating and expanding the conflict. Yet another astonishing coincidence to justify the militarist agenda, which needs a constant supply of PR-plausible villains and hyped-up, nation-rattling threats like a junkie needs smack. And once again, we are left to puzzle out the varying proportion of connivance, acquiescence, exploitation, luck, etc., involved in this serendipitous pairing of declarations from Obama and Mehsud.

II.
It is worth looking again at the implications of this policy of terrorist-tickling. As we noted recently, such things are not just counters on the Great Gameboard: they are deadly realities that kill, maim and despoil multitudes of innocent people around the world. So let's go back to the first glimmers of this strategy in its Terror War context. This is from the Moscow Times article in November 2001:

In [a Los Angeles Times] article by military analyst William Arkin... [comes] the revelation of Rumsfeld's plan to create "a super-Intelligence Support Activity" that will "bring together CIA and military covert action, information warfare, intelligence, and cover and deception." According to a classified document prepared for [Donald] Rumsfeld by his Defense Science Board, the new organization – the "Proactive, Preemptive Operations Group (P2OG)" – will carry out secret missions designed to "stimulate reactions" among terrorist groups, provoking them into committing violent acts which would then expose them to "counterattack" by U.S. forces.

In other words – and let's say this plainly, clearly and soberly, so that no one can mistake the intention of Rumsfeld's plan – the United States government is planning to use "cover and deception" and secret military operations to provoke murderous terrorist attacks on innocent people. Let's say it again: Donald Rumsfeld, Dick Cheney, George W. Bush and the other members of the unelected regime in Washington plan to deliberately foment the murder of innocent people – your family, your friends, your lovers, you – in order to further their geopolitical ambitions.

For P2OG is not designed solely to flush out terrorists and bring them to justice – a laudable goal in itself, although the Rumsfeld way of combating terrorism by causing it is pure moral lunacy... No, it seems the Pee-Twos have bigger fish to fry. Once they have sparked terrorists into action – by killing their family members? luring them with loot? fueling them with drugs? plying them with jihad propaganda? messing with their mamas? or with agents provocateurs, perhaps, who infiltrate groups then plan and direct the attacks themselves? – they can then take measures against the "states/sub-state actors accountable" for "harboring" the Rumsfeld-roused gangs. What kind of measures exactly? Well, the classified Pentagon program puts it this way: "Their sovereignty will be at risk."

The Pee-Twos will thus come in handy whenever the Regime hankers to add a little oil-laden real estate or a new military base to the Empire's burgeoning portfolio. Just find a nest of violent malcontents, stir 'em with a stick, and presto: instant "justification" for whatever level of intervention/conquest/rapine you might desire.

When the Obama Administration speaks of "continuity" in American foreign policy, this is an integral part of what they are talking about. So look to see much more on TTP and the demon de jure, Baitullah Mehsud, as the bipartisan Long War grinds on and on, with its ever-present need for "catalyzing" – and terrorizing – the American people into support for the militarist project.

Military Escalation and Obama's "War on Terrorism"

Military Escalation and Obama's "War on Terrorism"

US Officials "Rediscover" ISI-Taliban Nexus

by Tom Burghardt

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Long considered the realm of "conspiracy buffs" The New York Times, citing anonymous "American government officials," have belatedly "discovered" that Pakistan's Inter Services Intelligence agency (ISI) is aiding the Taliban and al-Qaeda.

That ISI operatives were reportedly involved in planning the 9/11 attacks, the ostensible reason for the 2001 U.S. invasion and occupation of Afghanistan remains as they say, "off the table." Yet, as The History Commons reports, Operation Diamondback uncovered a 2001 plot jointly-run by ISI operatives and organized crime figures to illegally purchase weapons, including Stinger missiles and nuclear components, for the Taliban and al-Qaeda. According to The History Commons, citing The Washington Post and MSNBC:

Informant Randy Glass plays a key role in the sting, and has thirteen felony fraud charges against him reduced as a result, serving only seven months in prison. Federal agents involved in the case later express puzzlement that Washington higher-ups did not make the case a higher priority, pointing out that bin Laden could have gotten a nuclear bomb if the deal was for real. Agents on the case complain that the FBI did not make the case a counterterrorism matter, which would have improved bureaucratic backing and opened access to FBI information and US intelligence from around the world. ("Sting Operation Exposes Al-Qaeda, ISI, and Drug Connections: Investigators Face Obstacles to Learn More," The History Commons, no date)

In 1999, ISI operative Rajaa Gulum Abbas is recorded telling Glass as he gestures towards the World Trade Center in New York during an earlier phase of Operation Diamondback, "those towers are coming down." Yet authorities fail to stop the plot and two years later, 3,000 people are murdered by terrorists in New York and Washington.

The appearance of these reports in the corporate media arrive as the United States prepares a "surge" of some 17,000 American troops into Afghanistan and as the Obama administration escalates CIA drone attacks inside Pakistan. On March 18, The New York Times reported that the Pentagon is contemplating "broadening the target area" to include "a major insurgent sanctuary in and around the city of Quetta."

Extending military operations into the Pakistani province of Baluchistan, with the potential for "surging" CIA paramilitary officers and Special Operations troops to "kill or capture" senior Taliban and al-Qaeda operatives represents a significant escalation of the conflict.

In a March 27 announcement outlining America's new regional strategy in the "Afpak theatre," President Obama vowed to send an additional 4,000 troops under cover of "training" recruits for the Afghan National Army. The Pentagon plans to raise the total strength of the Afghan army to 134,000 by 2011.

Echoing Bush administration pronouncements, Obama told diplomats and soldiers headed to Afghanistan, "I want the American people to understand that we have a clear and focused goal: to disrupt, dismantle and defeat al-Qaeda in Pakistan and Afghanistan." Employing rhetoric designed to sell the war to a sceptical public, Obama went on to say: "Multiple intelligence estimates have warned that al-Qaeda is actively planning attacks on the US homeland from its safe havens in Pakistan."

As I reported March 7, with a recently concluded agreement amongst Pakistani Taliban fighters and their Afghan counterparts, the prospects for a bloody spring offensive are a nettlesome reminder that U.S. regional plans are so many illusions soon to be cast to the four winds.

Orchestrated by Afghan Taliban chieftain Mullah Mohammed Omar in coordination with Baitullah Mehsud's Tehrik-e-Taliban Pakistan (TTP), North Waziristan commander Hafiz Gul Bahadur and South Waziristan "emir" Maulvi Nazeer--grouped under the banner of the Shura Ittihad-ul-Mujahideen (Council of United Holy Warriors, SIM)--the United States and their NATO allies face the prospect of ferocious multi-front attacks.

According to the Times, ISI support "consists of money, military supplies and strategic planning guidance to Taliban commanders." Despite billions of dollars in military assistance to the corrupt Musharraf regime and the equally venal Zardari administration, Pakistan's search for "strategic depth" against their geopolitical rival India has only resulted in a furtherance of ISI/Army connivance with the Islamist far-right. The Times avers:

"Support for the Taliban, as well as other militant groups, is coordinated by operatives inside the shadowy S Wing of Pakistan's spy service, the Directorate for Inter-Services Intelligence, the officials said. There is even evidence that ISI operatives meet regularly with Taliban commanders to discuss whether to intensify or scale back violence before the Afghan elections. (Mark Mazzetti and Eric Schmitt, "Afghan Strikes by Taliban Get Pakistan Help, U.S. Aides Say," The New York Times, March 26, 2009)

Citing "electronic surveillance and trusted informants," anonymous Pakistani officials have denied these ties "were strengthening the insurgency." While publicly denying state links to Islamist insurgents, the Army and ISI have historical ties--as does the CIA--to organizations such as the Taliban and the Afghan-Arab database of disposable Western intelligence assets known as al-Qaeda.

As readers of Antifascist Calling and websites such as Global Research and the World Socialist Web Site are well aware, for three decades the United States has pursued a ruthless policy in pursuit of its own narrow interests. Far from being concerned with the economic and social well-being of the people of Central- and South Asia, America's imperialist project is designed solely for regional military domination and resource extraction vis-à-vis their geopolitical rivals Russia and China.

Indeed, since the fall of Kabul's socialist government, the United States has singlemindedly pursued policies to control the vast petrochemical resources of Eurasia.

As researcher and analyst Michel Chossudovsky pointed out, anticipating the current political demonization of the Pakistani people as a selling-point to secure the giant oil and natural gas reserves of Central Asia for American corporations,

"Demonization serves geopolitical and economic objectives. Likewise, the campaign against "Islamic terrorism" (which is supported covertly by US intelligence) supports the conquest of oil wealth. The term "Islamo-fascism," serves to degrade the policies, institutions, values and social fabric of Muslim countries, while also upholding the tenets of "Western democracy" and the "free market" as the only alternative for these countries.

The US led war in the broader Middle East-Central Asian region consists in gaining control over more than sixty percent of the world's reserves of oil and natural gas. The Anglo-American oil giants also seek to gain control over oil and gas pipeline routes out of the region. ...

The ultimate objective, combining military action, covert intelligence operations and war propaganda, is to break down the national fabric and transform sovereign countries into open economic territories, where natural resources can be plundered and confiscated under "free market" supervision. This control also extends to strategic oil and gas pipeline corridors (e.g. Afghanistan)." ("The 'Demonization' of Muslims and the Battle for Oil," Global Research, January 4, 2007)

All of the features described above are in play today. That media outlets such as The New York Times and The Wall Street Journal have discovered ISI-Taliban-al-Qaeda "connections"--while glossing over and suppressing--America's operational links to these same terrorist and narcotrafficking networks, is indicative of the dire straits faced by an economically depleted and politically bankrupt empire.

Drawing (false) distinctions amongst the welter of jihadist groups that American and Pakistan have cultivated since the 1980s, Obama's Director of National Intelligence, retired admiral Dennis Blair, told Congress that the CIA's counterparts in crime, the ISI, believe there are some that "have to be hit and that we should cooperate on hitting, and there are others they think don't constitute as much of a threat to them and that they think are best left alone."

While pursuing Mehsud and others who threaten the state's writ, the Army has been loathe to run to ground proxies such as Jalaluddin Haqqani and Gulbuddin Hekmatyar, veteran narcotrafficking jihadists' who were key Pakistani-linked commanders during the anti-Soviet jihad. Considered "strategic assets" by ISI, Haqqani and Hekmatyar's networks direct fire inside Afghanistan and are therefore considered candidates "best left alone" in Blair's laconic phrase.

However, according to anonymous officials it was none other than the Haqqani network, in collusion with ISI operatives who helped plan last summer's Indian Embassy bombing in Kabul that killed 54 and wounded dozens of others.

While American and European officials are hell-bent on finding (or manufacturing) "good Taliban" with whom they can negotiate a climb down, Pentagon analysts are far-less sanguine of the prospects.

A March 1, 2009 presentation for deploying troops prepared by the U.S. Army Training and Doctrine Command (TRADOC) G-2 and the TRADOC Intelligence Support Activity (TRISA), posted by the intelligence and security website Cryptome, lays out the formidable problems posed by the insurgency--and the extent of Pakistani involvement. Under the heading, "Insurgent Syndicate Characteristics," TRISA analysts aver:

The nature of the enemy in AF HAS NOT CHANGED:

* This enemy is primarily Pashtun in nature and Sunni Muslim (Wahhabi and Deobandi).

* This enemy is funded by the drug economy and Gulf Arab money (for religious reasons).

* This enemy is trained and assisted by ISID or ISID affiliated elements (Kashmiris/HuJI/LeT/HuM, with some Uzbeks.

* They are assisted by AQ [al-Qaeda] in terms of funding, foreign fighters, and other assistance.

* Logistics is the Achilles heel of ISAF operations in AF. Pak control of FATA and the Torkhum Gate. ("HB 9 Paramilitary Terrorist Insurgent Groups: Afghanistan," U.S. Army Training and Doctrine Command, March 1, 2009, p. 5)

As if to drive home the point that "logistics is the Achilles heel" of U.S. and NATO operations in Afghanistan, Dawn reported March 29 that "hundreds of suspected Taliban armed with rockets and Kalashnikovs entered the Farhad terminal at about 2am and set on fire four vehicles, three cranes, a mini-truck and six power generators." The Al-Faisal terminal near Peshawar is a major jump-off point supplying NATO troops in Afghanistan.

TRISA's "Threat Lay Down" (p. 7) estimates that some 60,000 insurgent fighters are currently arrayed against U.S. and NATO forces. Estimating Afghan Taliban strength at 30,000 fighters, fully half of the estimated number of insurgents are Pakistani. These include: TTP, 15,000; TNSM, 5,000; Lashkar-e-Toiba, 3,000; Lashkar-e-Jhangvi, 2,000.

With 2,000 Al-Qaeda commandos (Brigade 055) and smaller contingents drawn from the former Islamic Movement of Uzbekistan (IMU) and other Central Asian and Middle Eastern factions, it becomes clear that Pakistan's intelligence services, given continued support to "moderates" such as Gulbuddin Hekmatyar as well as to terrorist outfits such as LET and LEJ are a major source of support behind the insurgency.

This is all the more remarkable considering that LET commandos, operating in close coordination with ISI and Dawood Ibrahim's organized crime-linked D Company carried out last November's attacks in Mumbai, whilst LEJ was reportedly behind the assault on Sri Lanka's national cricket team in Lahore earlier this month.

Significantly, TRISA analysts claim that amongst the "Warlord Militias" (p. 10) currently backing Hamid Karzai's government, their operations unsurprisingly, are also financed through "crime, narco-trafficking, smuggling, illegal taxation, including illegal road checkpoints for taxation." One might reasonably infer that U.S. operations amount to little more, despite the role of the narcotics trade on both sides of the "Afpak" divide, than a battle for control over lucrative drug manufacturing and smuggling routes.

Ironically enough, despite the grave threat to Pakistani citizens in Swat Valley, indeed throughout the entire country, the Zardari administration cut a deal last month with local TTP commander Maulana Fazlullah.

The sociopathic son-in-law of Tehrik Nifaz Shariat-i-Muhammadi (Movement for the Enforcement of Islamic Law, TNSM) leader Maulana Sufi Mohammed, a close ally of Mullah Omar, Fazlullah's criminal network has instituted a reign of terror in Swat under the banner of "Sharia law." Despite the truce, TTP militants continue to murder Swat residents and enhance the reach of various criminal enterprises, ranging from extortion, kidnapping and illegal logging through heroin processing for export.

Pakistani workers and farmers continue to pay a heavy price for the state's move to mollify the jihadist Frankenstein. For decades, having proven themselves politically useful when it comes to murdering leftists, trade union activists or uppity women and cultural workers, reactionary forces such as the TTP or the ever-pliant Lashkar-e-Toiba and Jaish-e-Mohammed are a shadowy "third force" that can be counted on by "Military Inc." to "keep the rabble in line."

In this context, "holy warriors" linked to the TTP carried out a horrific suicide bombing inside a mosque packed with worshipers in the Khyber region on Friday, killing 50 people and wounding 158 others.

Dawn reported that the two-storey structure collapsed onto the heads of worshipers after a suicide bomber "jumped into the Friday congregation and blew himself up just when the prayers were about to begin."

Eyewitnesses told Dawn they believe the casualty figures are being under-reported by authorities and that upwards of 70 people may have been killed by the blast and the subsequent collapse of the mosque's ceiling.

The News reported Saturday that upwards of 76 people had been killed in the vicious blast, including the prayer leader, his brother, as well as truck drivers carrying goods to neighboring Afghanistan.

There were tragic scenes at the site of the explosion. Many of the dead were mutilated beyond recognition. Rescuers and grief-stricken relatives of the missing and the dead were collecting pieces of bodies in the hope of locating their near and dear ones. A goat killed by the blast was also lying near the destroyed mosque. ...

Meanwhile, some residents and injured belonging to the villages of Rekalay and Kufar Tangi said they saw aircraft flying above the area since Friday morning. They feared the blast at the mosque could have been caused by a missile fired by a US drone. (Daud Khattak & Nasrullah Afridi, "76 killed in Jamrud mosque bombing," The News, March 28, 2009)

While eyewitness accounts describe a suicide bomber as the party responsible for the horrendous attack, part and parcel of SIM's campaign to cut NATO supply lines into Afghanistan, America's escalating robot drone wars are a reminder of growing anti-American sentiment amongst Pakistanis who are the overwhelming victims of the CIA's death-from-above air campaign.

If the Swat truce is an indication of what Pakistani citizens will now face at the hands of Mehsud's TTP and their minions, the prospects for a "normal" life--short of smashing the medievalists' and their ISI handlers--are grim.

Even as CIA and Pakistani intelligence officials "are drawing up a fresh list of terrorist targets for Predator drone strikes along the Pakistan-Afghanistan border," The Wall Street Journal reports that ISI officials are "directly supporting the Taliban and other militants in Afghanistan, even as the U.S. targets those groups."

Indeed, as the Times avers, "when the Haqqani fighters need to stay a step ahead of American forces stalking them on the ground and in the air, they rely on moles within the spy agency to tip them off to allied missions planned against them."

An unspoken subtext to the Times and Journal reportage is the continued utilization of these terrorist networks--by the CIA and U.S. Special Operations Command--for covert war against Iran--even as the Obama administration seeks Tehran's assistance in battling the Taliban and al-Qaeda. As investigative journalist Seymour Hersh reported last July in The New Yorker the Pentagon funded the narcotrafficker Baluchi-based Jundullah organization to attack security personnel inside Iran.

While an open secret in Washington, Obama's new product roll-out in the form of an ill-conceived plan to "disrupt, dismantle and defeat" al-Qaeda and the Taliban has everything to do with the construction of the $7.6 billion dollar "Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline that would cross western Afghanistan east of Herat and advance south through Taliban-controlled territory towards Pakistani Balochistan province," according to Asia Times. As the World Socialist Web Site points out,

Afghanistan and Pakistan stand at a nexus of pipeline and trade routes between the Middle East, Russia, China and the Indian subcontinent, and US domination of the countries would give it decisive influence over developments in trade and strategic relations between many of Eurasia's largest and fastest-growing economies. In particular, it would cement the US' ability to mount a blockade of oil supplies for China and India in the Indian Ocean. (Alex Lantier, "Obama announces escalation of war in Afghanistan, Pakistan," World Socialist Web Site, March 28, 2009)

And with the imperialist military project going off the rails in Afghanistan as the Taliban's spring offensive looms ever-larger on the horizon, the prospects for a deadly confrontation between nuclear-armed world powers over control of oil and gas will inevitably increase.