REALISTICALLY REPAIRING AMERICA'S IMAGE ABROAD - THOMAS P.M. BARNETT (SCRIPPS

HOWARD NEWS SERVICE, JUNE 30): It's true that, since the Cold War's end,

Washington has significantly curtailed its "public diplomacy" efforts to win

hearts and minds overseas. But absent our efforts to make globalization less

dislocating in the short term and more equitable in the long run, there's

virtually no chance we'll get the world to like us better by explaining

ourselves better. With today's globe-spanning 24-hour news cable networks and

the Internet, nearly anyone can access any desired viewpoint.

http://www.scrippsnews.com/node/24803



BIN LADEN: REASONS AND POLICIES - MAMMON (FORM OF MONEY, JUNE 30): While

important voices in the United States claim the intent of U.S. policy is

misunderstood by Muslims, that Arabic television channels deliberately distort

the policy, and that better public diplomacy is the remedy, they are wrong.

America is hated and attacked because Muslims believe they know precisely what

the United States is doing in the Islamic world.

http://theformofmoney.blogharbor.com/blog/...30/3056282.html



U.S.: 'COMPLEX' CHALLENGE SEEN IN HOSTILITY CITED IN PEW SURVEY: A NEW POLL

OF PEOPLE IN 47 COUNTRIES SHOWS GROWING NEGATIVE FEELINGS ABOUT THE UNITED

STATES AROUND THE WORLD. AMONG THE FINDINGS IN THE SURVEY, RELEASED ON JUNE 27,

IS THAT MAJORITIES OR PLURALITIES IN ALL BUT SIX OF THE COUNTRIES VIEW THE

UNITED STATES UNFAVORABLY - BY ANDREW TULLY (RFE/RL, JUNE 29)

http://www.rferl.org/featuresarticle/2007/...67db167223.html





BUSH TURNS IRAQ INTO ISRAEL/PALESTINE: GAFFE ENDANGERS US TROOPS - JUAN COLE

(PACIFIC FREE PRESS, JUNE 30): Bush said in a speech on Thursday that he hopes

Iraq will be like Israel, a democracy that faces terrorist violence but manages

to retain its democratic character. Why would you associate American Iraq with

such an unpopular project, if you were trying to do public diplomacy in the

region?

http://www.pacificfreepress.com/content/view/1358/81/

SEE ALSO

http://pygalgia.blogspot.com/2007/06/bush-...till-idiot.html



THE ISRAEL ANALOGY ? MATTHEW IGLESIAS (ATLANTICONLINE, JUNE 29): It's easy

and, indeed, appropriate to mock Bush for the public diplomacy fiasco involved

in saying that his plan is to make Iraq more like Israel but this shouldn't

completely obscure the fact that Bush is making a sound analytic point.

http://matthewyglesias.theatlantic.com/arc...ael_analogy.php



IRAN HAS A MESSAGE. ARE WE LISTENING? - MICHAEL HIRSH (WASHINGTON POST, JULY

1): Bush's feeble $75 million effort to promote democracy in Iran is not gaining

traction. Indeed, the Bush program's most notable impact has been giving the

regime justification for a new crackdown on dissent.

http://www.washingtonpost.com/wp-dyn/conte...2902318_pf.html



A NEW STRATEGY FOR IRAN - MATTIE FEIN (WASHINGTON TIMES, JUNE 30): The

publicly appropriated $75 million for regime change proponents is

counterproductive. Publicizing the $75 million has unwittingly worked to silence

criticism of the mullahs among the Diaspora.

http://www.washingtontimes.com/apps/pbcs.d...mplate=printart

SEE ALSO

http://moldybluecheesecurds.blogspot.com/2...soft-power.html



ANTI-AMERICANISM AND EUROPE?S ANTI-ISRAEL BOYCOTT - GABRIEL SASSOON (EUROPE

PROJECT PAPER #6, JEWISH INSTITUTE FOR NATIONAL SECURITY AFFAIRS, JUNE 28):

Anti-Israel sentiment and anti-Semitism are closely related to anti-Americanism.

The problem, however, is manageable. It points in the first instance to a

failure of American and Israeli public diplomacy efforts, a challenge that can

be met with the proper will and funding.

http://www.jinsa.org/articles/articles.htm...9,947,3573,3839



AMERICAN POWER: STILL NO.1 -- WOUNDED, TETCHY AND LESS EFFECTIVE THAN IT

SHOULD BE, AMERICA IS STILL THE POWER THAT COUNTS - KEVIN KALLAUGHER (ECONOMIST,

JUNE 28): It is not an accident that anti-Americanism has fed off those

instances, such as Guantánamo Bay, where America has seemed most un-American.

This is the multiplier effect that Mr Bush missed: win the battle for hearts and

minds and you do not need as much hard power to get your way.

http://www.economist.com/opinion/PrinterFr...tory_id=9407806



AMERICA STILL CHERISHED AROUND AFRICA - EDWARD HARRIS, ASSOCIATED PRESS

(SFGATE.COM, JUNE 28): As first lady Laura Bush tours the world's poorest

continent, a new report charting global attitudes shows America's image sagging

around the globe -- but not in Africa, where the Stars and Stripes still

symbolize strength and wealth. In fact, America is more popular in several

African nations than even in America.

http://www.sfgate.com/cgi-bin/article.cgi?...;type=printable



OPPORTUNITY IN AFRICA - DAVID A. GROSS, COORDINATOR FOR INTERNATIONAL

COMMUNICATIONS AND INFORMATION POLICY AT THE STATE DEPARTMENT (LETTERS TO THE

EDITOR, NEW YORK TIMES, JULY 1): The successful introduction of new technologies

in Africa has not happened by accident. The United States government, industry

and many others have worked hard with our African colleagues to make a dramatic

difference in people's lives.

http://www.nytimes.com/2007/07/01/business...agewanted=print



OUR ROTTED PRESS CORPS, A DIVISION OF "CAMP VICTORY" - GLENN GREENWALD

(SALON, JUNE 30): So much of our press corps are slothful, stupid, and corrupt,

and their willingness, their eagerness, to have their "reporting" consist of

unexamined government claims makes so much of what they do worthless, except as

deceitful and truly destructive propaganda.

http://www.salon.com/opinion/greenwald/



AL-JAZEERA CHALLENGES: PASS THE SALT MARC LYNCH (ABU AARDVARK, JUNE 29):

Al-Jazeera always comes under attack during moments of regional crisis when

leading regimes would prefer to control the agenda and information about their

policies. Those are precisely the moments when al-Jazeera's audience tends to

skyrocket.

http://abuaardvark.typepad.com/abuaardvark...zeera-chal.html



PATIO DIPLOMACY: A TIME-HONORED TRADITION FOR BREAKING THE ICE: BUSH WILL

HOST RUSSIAN PRESIDENT VLADIMIR PUTIN IN KENNEBUNKPORT, MAINE, ON JULY 1 - PETER

GRIER (CHRISTIAN SCIENCE MONITOR, JUNE 30)

http://www.csmonitor.com/2007/0629/p01s01-usfp.htm



U.S./RUSSIA: HOPES HIGH, EXPECTATIONS LOW FOR BUSH-PUTIN SUMMIT - BY HEATHER

MAHER (RFE/RL, JUNE 29)

http://www.rferl.org/featuresarticle/2007/...a689f4f663.html



SUMMIT IN KENNEBUNKPORT: IF VLADIMIR PUTIN IS TREATED AS A VALUED PARTNER,

WILL HE STOP COMPARING AMERICA TO NAZI GERMANY? EDITORIAL (WASHINGTON POST,

JULY 1): Russians should understand that U.S. relations with Mr. Putin's

successor and Russia's continued membership in clubs such as the Group of Eight

will depend on whether the next president leads the country toward democracy and

the rule of law -- which means away from the autocracy and neo-imperialism of

Mr. Putin.

http://www.washingtonpost.com/wp-dyn/conte...7063000683.html



PUTIN'S SOUL - DAVID SATTER (WALL STREET JOURNAL, JUNE 29): The best

President Bush can do is speak frankly to Mr. Putin about the obstructive and

self-defeating character of his policies.

http://online.wsj.com/article_print/SB1183...1625852594.html

PAID SUBSCRIPTION



ESCAPING PUTIN'S ENERGY SQUEEZE - ADRIAN KARATNYCKY (WASHINGTON POST, JULY

1): Russia is increasing its strategic dominance over Europe's energy supplies

while U.S.-led efforts to promote energy diversity for Europe are faltering and

the European Union's energy policies are in disarray.

http://www.washingtonpost.com/wp-dyn/conte...2902165_pf.html



A PIPELINE INTO THE HEART OF EUROPE - M K BHADRAKUMAR (ASIA TIMES, JUNE 30):

Washington's strategy of bringing together the EU countries into a hostile mode

against Russia on the energy-security issues is not working.

http://atimes.com/atimes/Central_Asia/IF30Ag01.html



KICK-STARTING KENNEBUNKPORT EDITORIAL (WASHINGTON TIMES, JUNE 29): The

United States will find neither deep friendship nor shared values with Russia,

but it can and should fall back on mutual interests to start to correct the

degenerating relationship.

http://www.washingtontimes.com/apps/pbcs.d.../106290008/1013



MR. BUSH GETS ANOTHER LOOK INTO MR. PUTIN'S EYES - CARLA ANNE ROBBINS (NEW

YORK TIMES, JUNE 30): Six years later one has to wonder how things might have

turned out differently if, at that first meeting, Mr. Bush had really looked

into Mr. Putin's soul and decided that helping nurture Russia's fragile

democracy was more important than building a missile defense system.

http://www.nytimes.com/2007/06/30/opinion/...agewanted=print



CORLEONE DIPLOMACY - JIM HOAGLAND (WASHINGTON POST, JULY 1): The most

important outcome of this Bush-Putin weekend may be to underline the fact that

the foreign policy legacy of this administration will include a surprisingly

good relationship with communist-ruled China and a surprisingly bad one with

Russia Inc.

http://www.washingtonpost.com/wp-dyn/conte...2902168_pf.html



THE NEW AMERICAN COLD WAR - STEPHEN F. COHEN (NATION, JUNE 21): Unless US

policy-makers and opinion-makers recognize how bad the relationship has become,

we risk a prolonged cold war even more dangerous than was the last one.

http://www.thenation.com/doc/20060710/cohen



A REPORTER PAYS IRAQ'S FINAL PRICE - ANTHONY BORDEN (WASHINGTON POST, JUNE

30): Journalists are a cornerstone of democracy, we like to think, but so are

police officers, educators, health professionals, laborers; everyone is at risk

in Iraq today.

http://www.washingtonpost.com/wp-dyn/conte...7062901946.html



IRAQI YOUTH FACE LASTING SCARS OF WAR: CONFLICT'S PSYCHOLOGICAL IMPACT ON

CHILDREN IS IMMENSE, EXPERTS SAY - SUDARSAN RAGHAVAN (WASHINGTON POST FOREIGN

SERVICE, JUNE 26)

http://www.washingtonpost.com/wp-dyn/conte...ml?hpid=topnews



NARRATIVE DISCORD: CRITIQUES OF IRAQ WAR REVEAL RIFTS AMONG ARMY OFFICERS;

COLONEL'S ESSAY DRAWS REBUTTAL FROM GENERAL; CAPTAINS LOSING FAITH - GREG JAFFE

(WALL STREET JOURNAL, JUNE 29): Many young officers are frustrated and exhausted

by four years of war and don't understand why their small victories in the field

aren't adding up to a safer and more stable Iraq.

http://online.wsj.com/article/SB1183061914...mod=hps_us_page

PAID SUBSCRIPTION



BUSH: KEY TO EVALUATING IRAQ IS AT ITS LOCAL LEVEL: PRESIDENT DEPARTS FROM

PAST RHETORIC - THOMAS E. RICKS (WASHINGTON POST, JUNE 29): In his remarks, Bush

continued to describe political reconciliation in Iraq as a goal of U.S. policy,

in contrast to some top U.S. military officials in Iraq who have begun to stop

advocating "reconciliation" and now favor "accommodation" -- which they consider

a less ambitious, shorter-term objective.

http://www.washingtonpost.com/wp-dyn/conte...2802443_pf.html



IN IRAQ, OPERATION LAST CHANCE - JOE KLEIN (TIME, JUNE 28): The fact is,

most of the important decisions in Iraq are now beyond American control.

http://www.time.com/time/printout/0,8816,1638128,00.html



SURGING TOWARD DISASTER IN IRAQ: AS THE U.S. TAKES SIDES IN IRAQ'S

SPLINTERING CIVIL WAR, A TOP REPUBLICAN WARNS BUSH'S POLICY WILL FAIL - JUAN

COLE (SALON, JUNE 28)

http://www.salon.com/opinion/feature/2007/...urge/print.html



SAVING IRAQ - ROBERT DREYFUSS (NATION, JUNE 27): Why isn't Washington

backing the nationalists, despite its growing frustration with Maliki's

inability to meet the so-called "benchmarks" of political reconciliation that

the United States wants? Because what holds together the emerging nationalist

coalition, more than anything else, is militant opposition to the US occupation

of Iraq.

http://www.thenation.com/docprint.mhtml?i=...&s=dreyfuss



DOG PADDLING IN THE TIGRIS - THOMAS L. FRIEDMAN (NEW YORK TIMES, JULY 1): If

the surge fails to pave the way for a Sunni-Shiite power-sharing agreement in

Iraq, then we have to remove our troops from their areas and relocate them to

the border to contain their civil war. But we should also talk to the Kurds

about setting up a base in Kurdistan and buttressing its development.

http://select.nytimes.com/2007/07/01/opini...agewanted=print

PAID SUBSCRIPTION



A MODEL FOR RESPONSIBLE WITHDRAWAL: THE VIETNAM PLAN WORKED UNTIL AID WAS

CUT OFF - MELVIN R. LAIRD (WASHINGTON POST, JUNE 29): We have had too many

people in charge of planning in Iraq -- too many changes in the top leaders. The

secretary of defense must assert his leadership.

http://www.washingtonpost.com/wp-dyn/conte...2801790_pf.html



LUGAR'S LEAP - OLIVER NORTH (WASHINGTON TIMES, JULY 1): Instead of good news

from the war zone, the masters of our media have decided to feed us a steady

diet of bad news from a different battlefield: Washington.

http://www.washingtontimes.com/apps/pbcs.d...mplate=printart



RICHARD LUGAR, MEET DAVID KILCULLEN: THOUGHTFUL ANALYSIS OF THE WAR IS IN

SHORT SUPPLY IN WASHINGTON - WILLIAM KRISTOL (WEEKLY STANDARD, JULY 9): The

appropriate response of a serious and thoughtful political leadership in

Washington would be to give Petraeus, Odierno, and the troops at least a

fighting chance to implement the surge -- and to succeed.

http://www.weeklystandard.com/Content/Publ...13/817qwrec.asp



THE NEW STRATEGY IN IRAQ: GENERAL PETRAEUS LEARNS FROM PAST U.S. MISTAKES -

BY FREDERICK W. KAGAN & KIMBERLY KAGAN (NATIONAL REVIEW, JULY 9): The current

strategy is on track.

http://www.weeklystandard.com/Content/Publ...13/818pmqsq.asp



A FIRE WE CAN'T RUN FROM - DAVID IGNATIUS (WASHINGTON POST, JULY 1): This

nation is so angry about Iraq that we sometimes forget what would be obvious if

it was a four-alarm blaze in a nearby city. Some fires do have to burn, but

leaving the scene isn't an option.

http://www.washingtonpost.com/wp-dyn/conte...2902166_pf.html



ORDERLY HUMILIATION: MODERATES THINK THEY'VE FOUND A 'RESPONSIBLE' WAY OUT

OF IRAQ - TOM DONNELLY (NATIONAL REVIEW, JULY 9): When you're sure that the

"way out" is the only "responsible way forward," defeat is simply an

"unfortunate contingency."

http://www.weeklystandard.com/Content/Publ...13/822antdo.asp



BUSH: OF MOJO AND MACBETH - ARIANNA HUFFINGTON (HUFFINGTON POST, JUNE 30):

Bush's fatal deed was invading Iraq.

http://www.huffingtonpost.com/arianna-huff...eth_b_9640.html



COURAGE WITHOUT THE UNIFORM - TIMOTHY EGAN (NEW YORK TIMES, JUNE 30). As in

the film Blade Runner, in Iraq the cause has long since been forgotten, the

slogans are hollow, death lurks around every shadowy corner.

http://select.nytimes.com/2007/06/30/opini...agewanted=print



US-IRAN: TAKING TALKS TO THE NEXT LEVEL - KAVEH L AFRASIABI (ASIA TIMES,

JUNE 30): The US must do its part to make a strategic dialogue with Iran

possible, or risk the recycling of the history of half-steps and self-reversals

nullifying any incremental progress.

http://atimes.com/atimes/Middle_East/IF30Ak05.html



PALESTINE'S CROOKS AND KOOKS - AUSTIN BAY (WASHINGTON TIMES, JUNE 29). The

U.S., Europe and Israel are making the same bet: that the corrupt Fatah,

defeated in the latest flare-up of Palestinian civil war, understands the

benefits of cooperation far better than Hamas' firebrand ideologues. Will Fatah

seize the opportunity?

http://www.washingtontimes.com/apps/pbcs.d...mplate=printart



THE RISE AND RISE OF HAMAS - STEPHEN ZUNES (ASIA TIMES, JUNE 30): Robert

Malley, Middle East and North Africa program director for the International

Crisis Group and former and former National Security Council member and special

assistant for Arab-Israeli Affairs under president Bill Clinton, has noted how

"almost every decision the United States has made to interfere with Palestinian

politics has boomeranged.?

http://atimes.com/atimes/Middle_East/IF30Ak04.html



TURKS PONDER ATTACK ON KURDISH GUERILLAS IN IRAQ; IRAQI KURDS WORRIED -

BARRY NEWHOUSE/MARGARET BESHEER ISTANBUL/KANI MASI, IRAQ (VOA, JUNE 28): In a

recent opinion poll measuring what people in Turkey perceive as the country's

biggest threat, the United States was first and Iraqi Kurds were second.

http://www.voanews.com/english/2007-06-28-voa78.cfm

VIA

http://www.juancole.com/2007/06/20-decapit...urks-brand.html



KOSOVO CONUNDRUM - MICHAEL DJORDJEVICH (WASHINGTON TIMES, JUNE 29): Among

terrorists directly involved in the September 11 attack on America and on

terrorist attacks in Spain and the UK were jihadists who had come from the

Balkans. Hopefully, the United States will pragmatically consider and reassess

the impact of Kosovo independence on her long-term geostrategic interests.

http://www.washingtontimes.com/apps/pbcs.d...mplate=printart



TLC FOR CHAVEZ - JOHN R. THOMSON (WASHINGTON TIMES, JUNE 29): It seems about

to happen... evidently nothing can stop it: The United States is going to give

Hugo Chavez and his regime a huge dose of TLC -- tender loving care in the form

of the Democrat-controlled Congress failing to approve the negotiated free trade

treaty with Colombia.

http://www.washingtontimes.com/apps/pbcs.d...mplate=printart



IN SHIFT, JUSTICES AGREE TO REVIEW DETAINEES CASE - WILLIAM GLABERSON (NEW

YORK TIMES, JUNE 30): The United States Supreme Court reversed course yesterday

and agreed to hear claims of Guantánamo detainees that they had a right to

challenge their detention in American courts.

http://www.nytimes.com/2007/06/30/washingt...agewanted=print



WHY GUANTANAMO IS UNJUST EDITORIAL (BOSTON GLOBE, JUNE 28): Under pressure

from Defense Secretary Robert Gates, the administration is at least moving

closer to shuttering the detention center.

http://www.boston.com/news/globe/editorial..._unjust?mode=PF



WHY WINSTON WOULDN'T STAND FOR W: GEORGE W. BUSH ALWAYS WANTED TO BE LIKE A

WARTIME BRITISH PRIME MINISTERS. HE IS. BUT IT'S NOT THE ONE HE HAD IN MIND -

LYNNE OLSON (WASHINGTON POST, JULY 1): Unlike Bush and Chamberlain, Churchill

was never in favor of his country going it alone.

http://www.washingtonpost.com/wp-dyn/conte...7062902304.html



FROM CRADLE TO GRAVE, A DISHONEST SENTIMENTALITY PERVADES OUR LIVES - GORDON

LIVINGSTON (BALTIMORE SUN, JUNE 30): Look whom we chose to lead us through these

perilous times: someone who convinced us that we are wonderful people who are

being terrorized by fanatics who, for some reason, wish to destroy or enslave

us. That these evildoers rely for their moral guidance on a different ancient

text than we do clinches the argument.

http://www.baltimoresun.com/news/opinion/o...-oped-headlines



ALL HAIL AMERICA? [REVIEW OF ARE WE ROME? THE FALL OF AN EMPIRE AND THE FATE

OF AMERICA BY CULLEN MURPHY; THE IDEA THAT IS AMERICA KEEPING FAITH WITH OUR

VALUES IN A DANGEROUS WORLD BY ANNE-MARIE SLAUGHTER; AMERICANISM: THE FOURTH

GREAT WESTERN RELIGION BY DAVID GELERNTER] - JOSEPH S. NYE JR. (WASHINGTON POST,

JULY 1): Our greatest danger may not be from the barbarians, but from

discounting our values in our response to them.

http://www.washingtonpost.com/wp-dyn/conte...2901893_pf.html



ROMAN CANDLES: WRAPPED IN THE STAR-SPANGLED TOGA - ADAM GOODHEART (NEW YORK

TIMES, JULY 1): The generation that fought the Revolution was not simply

interested in creating a republic. From the beginning, many American patriots

were out to build an empire.

http://www.nytimes.com/2007/07/01/weekinre...agewanted=print



MADAME SECRETARY [REVIEW OF TWICE AS GOOD: CONDOLEEZZA RICE AND HER PATH TO

POWER BY MARCUS MABRY] - JONATHAN FREEDLAND (NEW YORK TIMES, JULY 1): While the

White House disdained those from what one official once notably called the

?reality-based community,' so Rice had learned in segregated Birmingham to

believe 'that what mattered was what you and your self-defined society believed,

because the world beyond was often wrong in its most critical judgments.'

http://www.nytimes.com/2007/07/01/books/re...agewanted=print









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Another Great Depression? The Fed's Role in the Bear Stearns Hedge Funds Meltdown
by Mike Whitney
Global Research, July 1, 2007


The Bank for International Settlements issued a warning this week that the Federal Reserve’s monetary policies have created an enormous equity bubble which could lead to another “Great Depression”. The UK Telegraph says that, “The BIS--the ultimate bank of central bankers--pointed to a confluence of worrying signs", citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.

The IMF and the UN have issued similar warnings, but they've all been shrugged off by the Bush administration. Neither Bush nor the Federal Reserve is interested in “course correction”. They plan to stick with the same harebrained policies until the end.

The “easy credit” which created the subprime crisis in mortgage lending has now spread to the hedge fund industry. The troubles at Bear Stearns prove that Secretary of the Treasury Henry Paulson’s assurance that the problem is “contained” is pure baloney. The contagion is swiftly moving through the entire system taking down home owners, mortgage lenders, banks, rating agencies, and hedge funds. We are just at the beginning of a system-wide breakdown.

The problem originated at the Federal Reserve when Fed-chief Alan Greenspan lowered the Feds Fund Rate to 1% in June 2003 and kept rates perilously low for more than 2 years. Trillions of dollars flowed into the economy through low interest loans creating a massive equity bubble in real estate which drove up housing prices and triggered a speculative frenzy.

The Feds’ “easy money” policy has disrupted the “debt-to-GDP” balance which maintains the integrity of the currency. By expanding circulation debt via low interest rates; Greenspan put the country on the path to hyperinflation and, very likely, the collapse of the monetary system.

The problems at Bear Stearns are the logical upshot of Greenspan’s policies. The over-leveraged hedge funds are a good example of what happens during a “credit boom”. Liquidity flows into the markets and raises the nominal value of all asset classes but, at the same time, GDP continues to shrink. That’s because the wages of working class people have stagnated and not kept pace with productivity. When workers have less discretionary income, consumer spending—which accounts for 70% of GDP—begins to decline. That’s why this quarters earnings reports have fallen short of expectations. The American consumer is "tapped out".

The current rise in stock prices does not indicate a healthy economy. It simply proves that the market is awash in cheap credit resulting from the Fed's increases in the money supply. Consumer spending is a better indicator of the real state of the economy than stocks. When consumer spending drops off; it is a sign of overcapacity, which is deflationary. That means that growth will continue to shrivel because maxed-out workers can no longer purchase the things they are making.

The underlying problem is not simply the Fed’s reckless increases to the money supply, but the growing “wealth gap” which is undermining solid economic growth. If wages don’t keep pace with productivity; the middle class loses its ability to buy consumer items and the economy slows.

The reason that hasn’t happened yet in the US is because of the extraordinary opportunities to expand personal debt. The Fed’s low interest rates have created a culture of borrowing which has convinced many people that debt equals wealth. It’s not; and the collapse in the housing market will prove how lethal that theory really is.

To large extent, the housing bubble has concealed the systematic destruction of America’s industrial and manufacturing base. Low interest rates have lulled the public to sleep while millions of high-paying jobs have been outsourced. The rise in housing prices has created the illusion of prosperity but, in truth, we are only selling houses to each other and are not making anything that the rest of the world wants. The $11 trillion dollars that was pumped into the real estate market is probably the greatest waste of capital investment in the nations’ history. It hasn't produced a single asset that will add to our collective wealth or industrial competitiveness. It’s been a total bust.

The Federal Reserve produces all the facts and figures related to the housing industry. They knew that trillions of dollars were being diverted into a speculative bubble, but they did nothing to stop it. Instead, they kept interest rates low and endorsed the lax lending standards which paved the way for millions of defaults. Now the effects of their "cheap money" policies have spread to the hedge fund industry where hundreds of billions of dollars in pensions and savings are in jeopardy.

Alan Greenspan played a major role in the housing boondoggle. On February 26, 2004, he said, “American consumers might benefit if lenders provide greater mortgage product alternatives to the traditional fixed rate mortgage. To the degree that households are driven by fears of payment shocks but willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”

Greenspan tacitly approved the whacky financing which produced all manner of untested loans—including ARMs, piggyback loans, “no doc” loans, “interest only” loans etc. These loans are a break from traditional financing and have contributed to the increase in bankruptcies.

Millions of people who were hoodwinked into buying homes with “interest-only”, “no down” loans will now either lose their homes or be shackled to an asset of decreasing value for the next 30 years. They've been tricked into a life of indentured servitude.

A recent article in the Wall Street Journal revealed the extent of Greenspan’s involvement in the housing fiasco. Here’s an excerpt from the article:

“Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.

"I would have liked the Fed to be a leader" in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.

"He was opposed to it, so I didn't really pursue it," says Mr.Still, Mr. Greenspan's views did color the regulatory environment, facilitating growing concentration in banking and a hands-off approach to derivatives and hedge funds. That approach, broadly shared by both the Clinton and Bush administrations, is coming under increased scrutiny”. (Wall Street Journal)

So, Greenspan had the chance to “crack down on predatory lending” and he refused. Now millions of low income people are saddled with payments they have no reasonable prospect of paying off. How much of the present carnage could have been avoided if he had Greenspan done the right thing?

The “Not So Great” Depression

An article appeared this week in the UK Telegraph by Ambrose Evans-Pritchard which supports the theory that Greenspan’s “loose monetary policy” fueled a huge credit bubble, which is pushing the global economy towards a “1930s-style slump.”

The article quotes from a statement made by The Bank for International Settlements:

"Virtually nobody foresaw the Great Depression of the 1930s, or the crises which affected Japan and Southeast Asia in the early and late 1990s. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a 'new era' had arrived".

But today we face “worrying signs” of another economic meltdown.

The BIS said that they were “starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be ‘cleaned up’ afterwards”. (Greenspan’s method) and that, “while cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and sowing the seeds for more serious problems further ahead.’"

“The bank said it was far from clear whether the US would be able to ignore the consequences of its latest imbalances, ($800 billion per year) citing a current account deficit running at 6.5% of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unprecedented drop in the savings rate. ‘The dollar clearly remains vulnerable to a sudden loss of private sector confidence.”’

The BIS referred to the toxic effect of the “$470 billion in collateralized debt obligations (CDO), and a further $524 billion in "synthetic" CDOs which have spread through hedge funds industry. These CDOs are the loans (many sub primes) which were bundled off to Wall Street and turned into securities which are highly leveraged in hedge funds for maximum profitability. As Bear Stearns is discovering, these CDOs are like roadside bombs; exploding without notice whenever the stock market suddenly dips.

The BIS also cautioned about the excess of “leveraged buy-outs (mergers) which touched $753bn, with an average debt/cash flow ratio hitting a record 5.4…. ‘Sooner or later the credit cycle will turn and default rates will begin to rise.’”

The central banks around the world are increasingly worried that the Bush administration’s profligate spending and irrational monetary policies will trigger a global depression. The recent volatility in the stock market suggests that the credit boom is just about over. Once the liquidity dries up---stocks will fall sharply.

The Housing Slump

Yesterday’s housing data, shows that sales are still weak while inventory continues to grow. Existing home sales dropped 3% while prices dropped another 2.1%. Falling prices mean that cash-strapped home owners will not be able to tap into their home’s equity for other expenses. Last year, mortgage equity withdrawals (MEWs) accounted for $600 billion of consumer spending. This year, the amount will be negligible at best.

The media and the Fed continue to mislead the public about the magnitude of the housing bubble. Fed chief Bernanke assures us that the sub prime calamity hasn’t “spread to other parts of the economy” (tell that to Bear Stearns) and the media keeps cheerily reiterating that a “turnaround” or “soft landing” is just ahead.

These claims are ridiculous. Apart from the 80 or more sub-prime lenders that have gone “belly-up” in the last few months, the rickety collateralized debt obligations (CDOs) and mortgage backed securities (MBSs) are steamrolling their way through the stock market bowling down everything their path. Bear Stearns is just the first on the casualties list. There’ll be many more before the storm is over.

Fed-chairman Bernanke knows what’s going on. He was given a full rundown by “John Burns Real Estate Consulting that the national sales information for both new and existing homes, is “misleading and covering up a deep plunge of the housing sector.” The housing market is freefalling. Existing-home sales are down 22% in May and mortgage applications have fallen a whopping 18%....In Florida home sales are down 34%, not 28% as NAR reported; Arizona sales are down 38%, not 28%; and California's down 37%, not 24% as NAR reports.”

Down 37% in California!?!

Gadzooks! It’s a landslide.

As the defaults continue to pile up; the hedge funds will take a bigger and bigger pounding. It can’t be avoided. That’s what happens when bankers abandon traditional lending standards and lend trillions of thousands of dollars to people who have bad credit and lie on their loan applications.

Thousands of these same shaky sub primes loans have been wrapped up like the Crown Jewels and sold off to Wall Street as CDOs. Now they are ripping through the hedge fund industry like a tornado in a trailer park. The media has tried to downplay the damage, but its not hard to see what is really going on.

According to Reuters:

“Banks doubled the amount of CDOs outstanding in the past two years to $2.6 trillion, including a record $769 billion sold last year, according to J.P. Morgan. These figures include funded and unfunded issuance. Pimco’s Bill Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS -- all of which he considers "toxic waste.”’

"$2.6 trillion"! That's enough to bring down the whole economy. And, as Bear Stearns proves, the whole mess is beginning to unwind pretty quickly.

“Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. ‘If investors start dumping them, oh boy, watch out for some massive credit widening," said Dan Fuss, Vice Chairman at Loomis Sayles. (Reuters)

If the hedge fund industry follows the downward slide of the housing bubble, foreign investors will run for the exits. In fact, this may already being happening.

China sold $5.8 billion in US Treasuries in May; the first time they have dumped USTs on the market. This may be the first sign of “capital flight”---foreign investment fleeing the US for more promising markets in Asia and Europe. The greenback’s survival now depends on the generosity of foreign bankers. If they refuse to recycle our $800 billion current account deficit by purchasing US bonds and securities, then the dollar will sink like a stone and lose its place as the world’s reserve currency.

More Housing Blowdown

Last Friday, the stock market took a 185-point nosedive on the news that Bear Stearns was trying to raise $3.2 billion to rescue its battered hedge fund. According to the New York Times, however, Bear was only able to came up with "$1.6 billion in secured loans to bail out one of the 2 hedge funds".

The funds are the latest victim of the sub-prime meltdown which Bernanke and Paulson assured us was “largely contained”. In fact, Paulson even said, "We have had a major housing correction in this country," and "I do believe we are at or near the bottom."

Anyone who believes Paulson should take a look the chart linked below: http://www.belowthecrowd.com/photos/ackman...ref=patrick.net It illustrates that how loan “resets” will continue to pound the housing market for at least another year and a half getting steadily worse as inventory grows.

The disaster is so bad that even the realtors are beginning to tell the truth. As one agent noted, “It’s a bloodbath.”

But the debacle in housing is only the first part of a much larger problem—a global liquidity crisis. Banks and mortgage lenders have already begun to tighten up their lending practices and many have abandoned sub prime loans altogether. (20% of the housing market in 2006 was sub prime) Now the focus has shifted to the stock market, where banks are beginning to see that “risk” has not been properly calculated. That means that if more hedge funds collapse, the banks may not be able to cover the losses.

The Bear Stearns fiasco has had a chilling affect on lending. In fact, the New York Times reported on 6-26-07 that “After years of supersize private equity deals…the buyout boom may be about to hit a bump…Rising interest rates and tougher terms from investors may signal that private equity players will soon be struggling to continue reaping the outsize returns that have made the buyout business so lucrative.” (Private Equity Investors Hint at Cool Down” NY Times)

Liquidity is drying up in the private equity business. The troubles at Bear Stearns has changed the credit-landscape overnight. Bankers are nervous, money is getting tighter, and liquidity is vanishing.

"We know that these holdings are not unique to Bear Stearns," said Professor Joseph R. Mason, co-author of a recent study warning of dangers in securities backed by home loans to high-risk borrowers. "It would be hard to find a Wall Street firm that hasn't created similar funds."

That’s right; the industry is waist-deep in these sub-prime time-bombs. Shaky loans and rising foreclosures threaten to knock the foundation blocks out from under the stock market and set off a wave of panic selling.

Could it have been avoided?

Perhaps, if there were better regulations on rating bonds and restricting leverage.

Consider this: one of Bear Stearns hedge funds took a $600 million investment and leveraged it 10 times its value to $7 billion. Their portfolio was chock-full of dicey CDOs and “illiquid assets” such as timber holdings in foreign countries and toll roads. These assets are difficult to price and nearly impossible to quickly auction off if the market suddenly takes a downturn.

It looked like Merrill Lynch & Co., was going to auction off $850 million of Bear Stearns CDOs this week, but backed off at the last minute. (They were reportedly only offered 30 cents on the dollar!) Once the hedge funds start selling these CDOs, then everyone will know how little they're worth. That could trigger a wave of selling that could bring down the stock market. Even if that scenario doesn’t play out, the Bear Stearns incident ensures that CDOs in other hedge funds will be face a substantial downgrading that could take a big chunk out of their bottom line.

And, there’s a bigger fear on Wall Street than the fact that 2 hedge funds are headed into bankruptcy, that is, that a sudden tightening of credit will send the over-leveraged stock market into a downward spiral.

The market is particularly sensitive to any rise in interest rates or tougher lending standards. It's become addicted to cheap credit and any break in the chain will cause equities to plummet.

Economist Henry C K Liu sums it up like this:

“The liquidity boom has been delivering strong growth through asset inflation without adding commensurate substantive expansion of the real economy. …. Unlike real physical assets, virtual financial mirages that arise out of thin air can evaporate again into thin air without warning. As inflation picks up, the liquidity boom and asset inflation will draw to a close, leaving a hollowed economy devoid of substance. …A global financial crisis is inevitable”. (Henry C K Liu “Liquidity boom and looming crisis” Asia Times)

In other words, the “virtual” wealth of Wall Street is a chimera which was created by the Fed's inexorable expansion of debt. It can vanish in a flash if the sources of liquidity are cut off.

Puru Saxena draws the same conclusion in his article “A Gradual Transition”:

“Thanks to the Federal Reserve’s expansionary monetary policies over the past 5 years, US asset-prices have risen considerably; also known as the “wealth effect”. At the end of last year, the market capitalization of the US stock market rose to a record-high of US$20.6 trillion, matching the value of household real-estate, which also rose to a record-high at the same time. On the surface, this may seem like brilliant news, however you must realize that this “wealth illusion” achieved by an ocean of money and record-high indebtedness is only a consequence of inflation."

Code Red: Subprime Chernobyl

We expect that the mounting losses in CDOs and the continuing defaults in the housing industry will precipitate a “severe credit crunch” which will end in a stock market crash. A report which appeared yesterday in the UK Telegraph appears to agree with this analysis. Lombard Street Research predicted that:

“Excess liquidity in the global system will be slashed. Banks Capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US ‘hard landing”’ (“Banks set to call in swathe of loans” UK Telegraph 6-26-07)

Three of the main hoses which provide liquidity for the market, have either been cut off or severely damaged. These are "securatized" subprime CDOs, corporate mega-mergers and hedge fund leveraging. Without these instruments for expanding debt; liquidity will dry up and stocks will fall. The period of "easy credit" will end in disaster.

We should now be able to see the straight line that connects the Fed's low interest rates to the impending stock market meltdown. The problems began at the central bank.

Presidential candidate Rep. Ron Paul (R-Texas) summed it up best when he said:

“From the Great Depression, to the stagflation of the seventies, to the burst of the dot.com bubble; every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and artificial “boom” followed by recession or depression when the Fed-created bubble bursts”.



Mike Whitney is a frequent contributor to Global Research. Global Research Articles by Mike Whitney

back As Clinton flip-flops, where does she stand?
First published: Friday, June 29, 2007 Democratic presidential candidate Hillary Clinton, D-N.Y., has great political skills, but her war-and-peace compass leaves something to be desired. Clinton has blown hot and cold on Middle East issues, including Iraq and the Palestinian-Israeli dispute. She is at best pragmatic. Principles? Well, that's another story.

Before and during her early years in the White House, she supported Palestinian statehood, but she apparently forgot this after successfully running for senator from New York as a Democrat.

The rest is history. She obviously had to cater to a new constituency, make the ritual trip to Israel and forget any sympathy she once had for the Palestinians. But is her 180-degree flip-flop on that festering issue a portent of her leadership if she attains the White House?

As for Iraq, she voted in October 2002 to authorize President Bush to do what was necessary to unseat Iraqi leader Saddam Hussein. Unlike former Sen. John Edwards, she has refused to say she made a mistake when she voted for the war.

She cannot claim she was misled. During the lead up to the war when she was briefed on the latest U.S. intelligence about Iraq, Bush was shouting from the housetops that he was going to attack Iraq.

Former Defense Secretary Donald Rumsfeld often strutted before reporters at the Pentagon two years before the invasion and bragged about the attack the U.S. would wage against Iraq.

Clinton is a member of the Senate Armed Services Committee, a post that will allow her to embellish her credentials as a possible future commander-in-chief to show she would not hesitate to make tough military decisions.

As a member of that committee, she visited Iraq in 2005 and said U.S. withdrawal from Iraq would be a mistake. But she also criticized the administration for making poor decisions about the war.

In 2007, she voted in favor of a war-spending bill that required Bush to begin withdrawing troops from Iraq within a certain deadline; the President vetoed the measure.

But Clinton then voted against a compromise war-spending bill that tied funding to progress by Iraq in meeting certain benchmarks.

It doesn't take her long to switch her stance on the war -- even in 24 hours. On June 19, Clinton told a union audience that she favored keeping some troops in Iraq "to protect our interests" there after a major pullout. But the following day, she told an activist anti-war gathering that she wants U.S. troops withdrawn from Iraq.

On that day, she dazzled the "Take Back America" conference by declaring: "We're going to end the war in Iraq and finally bring our troops home."

A woman has a right to change her mind. But we're talking about war and peace. After dealing with the conflict now in its fifth year, Clinton ought to know where she stands. She has piously stated that the U.S. had given the Iraqis a "chance for free and fair elections" by ousting Saddam Hussein and has provided the Iraqi government the opportunity to demonstrate that it would "make hard political decisions necessary to give the people of Iraq a better future."

And get this: "So," she added, "the American military has succeeded. It is the Iraqi government which has failed to make the tough decisions that are important for their own people."

What gall! The U.S. invades and occupies a country, destroys its infrastructure, tries to privatize its national oil industry, kills and wounds thousands of Iraqis and now tells the ungrateful Iraqis, "It's your problem."

Pretty soon she will echo Bush in saying we are in Iraq to bring them "democracy"!

It's great that a woman is being taken seriously as a candidate for the presidency for the first time in history -- and is even viewed as the front-runner.

She has suffered the rough and tumble of politics.

But Clinton should look to two California Democrats -- Rep. Barbara Lee and Speaker Nancy Pelosi -- both of whom had the courage to vote against the first resolution authorizing the President to go to war.

The question still lingers: What does Clinton stand for?

Helen Thomas' e-mail address hthomas@hearstdc.com.

Occupation? What Occupation?
by Uri Avnery There never was a darker Middle East summit meeting. The darkest there can be.

The four leaders at Sharm-el-Sheikh did not sit together at an intimate round table. Each one sat alone behind a huge table of his own. That ensured a striking separation between them. The four long tables hardly touched. Each one of the leaders, with his assistants behind him, sat like a solitary island in a vast sea.

All four – Hosni Mubarak, King Abdullah of Jordan, Ehud Olmert, and Mahmoud Abbas – bore a severe countenance. Throughout the official part of the conference, not a single smile could be seen.

One after the other, the four delivered their monologues. An exercise in shallow hypocrisy, in empty deceit. Not one of the four raised himself above the murky puddle of sanctimonious phrases.

A short monologue from Mubarak. A short monologue from Abdullah. A medium-length monologue from Abbas. An interminably long monologue from Olmert – a typical Israeli speech, overbearing, educating the whole world, sermonizing, and dripping with morality. Held, of course, in Hebrew, with the obvious aim of appealing to the home public.

The speech included all the required phrases – "Our soul longs for peace," "The vision of two states," "We do not want to rule over another people," "For the good of coming generations," blah, blah, blah. All in standard colonial style: Olmert even talked about "Judea and Samaria," using the official terminology of the occupation.

But in order to "strengthen" Abbas, Olmert addressed him as "president" and not as "chairman," which has been the de rigueur title used by all Israeli representatives since the establishment of the Palestinian Authority. (The wise men of Oslo circumvented this difficulty by referring – in all three languages – to the head of the Authority by the Arab title of ra'is, which can mean both president and chairman.)

And the word that did not appear throughout this long monologue? "Occupation."

Occupation? What occupation? Where occupation? Anybody seen any occupation?

The occupation was not on the agenda of this dark summit. Even in their wildest dreams, the Arab participants could not imagine anything more wonderful than "easing the restrictions." Making life a little bit less difficult for the suffering population. Giving back the Palestinian tax revenues. (That is to say, Israel may give back some of the money it has pocketed.) Moving some of the roadblocks that prevent people from going from one village to the next. (That has already been promised many times and will not happen this time either, because the army and the Shin Bet object. Olmert has already announced that it is impossible for "security reasons.")

With the air of a sultan throwing coins to the paupers in the street, Olmert announced his intention of releasing some Fatah prisoners. 250 coins, 250 prisoners. That was the "generous gift" that was to make the Palestinians jump for joy, "strengthen" Abbas and awaken to new life the dry bones of his organization.

If Olmert had not been sitting so far away from Abbas, he could just as well have spat in his face.

First at all, the number is ridiculous. There are now about 10,000 Palestinian "security" prisoners in Israeli prisons. Every night, about a dozen more are being taken from their homes. Since there is no more room in the prison facilities, the wardens will be pleased to get rid of some inmates. In previous gestures of this nature, the Israeli government has set free prisoners whose term was nearing the end anyhow, and car thieves.

Second, fraternization between Fatah and Hamas is well established in prison. The violent struggle in Gaza has not been projected into the prisons. The famous "prisoners' document," which laid the foundation for the (now defunct) unity government, was worked out jointly by Fatah and Hamas prisoners.

Olmert's announcement of his readiness to release Fatah – and only Fatah – prisoners is designed to sabotage this unity. It could stigmatize the Fatah people as collaborators and Abbas as a leader who is concerned only with the members of his own organization, not giving a damn for the others.

So what did come out of this summit conference? Some say zero plus, some say zero minus. No wonder that the Arab participants looked so somber.

What was it good for? Abbas was in need of strengthening after losing the Gaza Strip. Olmert promised the Americans to strengthen him. But after the conference, Olmert could have used the phrase customarily uttered by Israeli leaders visiting bereaved families: "I came to strengthen, but it is I who has been strengthened."

The sole winner was Olmert. The conference has proved that Mubarak's and Abdullah influence on Israel is nil, and Abbas' position is even worse.

To eliminate any doubt about this, Olmert sent the army at once into the kasbah of Nablus, the heart of Abbas' virtual kingdom, in order to "arrest" the leaders of the military arm of Fatah. They put up determined resistance, wounding several soldiers. A lieutenant lost a hand and a leg. In another incursion, this time into Gaza, 13 Palestinians were killed, including a boy of 9. According to the official version, the aim was to throw the militants off balance so that they would feel hunted.

If this is not occupation, what is it? But God forbid that anyone mention this word in diplomatic discourse – the 10 letters that have turned into an obscenity. A 10-letter word that has become taboo in polite society.

The disappearance of the occupation as a subject for discussion is the real message of the conference. All the arrangements and ceremonies were designed to create the false impression that Olmert and Abbas were the heads of two states conducting negotiations on the basis of equality – rather than the leader of an occupying power and a representative of the occupied population.

That is true for all the discourse about the Israeli-Palestinian conflict at this stage: the world has become so used to the occupation that its very existence has ceased to be a subject for discussion.

That is also evident in the daily reporting on the conflict in the Israeli and foreign media. They report on what's happening – the Gaza takeover by Hamas, the actions of the Israeli army, the problems of Abbas, the decisions of the Israeli government – without the context of the occupation. As if the occupation, with all its killing, destroying, depriving, and dispossessing, were a natural phenomenon like the light of the sun during the day or the twinkling of the stars at night.

There are many subjects that are being discussed, such as: whether to ease the situation of the Palestinians or to increase their misery, whether to allow Abbas' policemen to move freely with their weapons in the West Bank towns to try and eliminate the militias that fight against Israel, whether to enlarge the settlements or not. But all these discussions are based on the unquestioned assumption that the occupation is there forever.

All the talk about "strengthening" is conducted in this context: Abbas and his people are supposed to function as an administration under occupation. According to Olmert and Bush's perception, their job is to fulfill the orders of the occupation, in return for their own money and perhaps some small arms. Incidentally, that is very similar to the "autonomy" promised by Menachem Begin to the "Arab inhabitants of Judea, Samaria, and the Gaza District." Olmert is quite ready to talk about the "Two-State Solution" – much talk, with a lot of bloated words and pathos – while doing everything possible in practice to prevent this "vision" from being realized before the coming of the Messiah.

Into this reality Tony Blair is now stepping.

He is being sent by the Quartet – something that does not really exist, a diplomatic fiction of four that are one.

Europe does not exist as far as the Israeli-Palestinian conflict is concerned, except as a financial instrument of the White House. When the president of the USA wants it, Europe sends alms to the Palestinians (and arms to Israel). When the president of the USA wants to starve the Palestinians, Europe imposes a blockade on them.

The UN has long ago become an instrument of the U.S. Department of State, especially in the Middle East. When the American drill sergeant shouts, the UN jumps to attention or stands at ease.

Russia dreams of regaining the status of a Great Power. As in the days of the czars and Stalin, it thinks in terms of "spheres of influence." The Middle East is an American sphere of influence. Therefore, Russia will not interfere, except by mouthing high-sounding phrases.

The Quartet is simply an American front organization. And Tony Blair is sent to Palestine as a special envoy of President Bush. The master sends his poodle.

What for? If Bush really wanted to realize his "vision" of two states, he wouldn't need Blair. He could do it all alone in a matter of weeks. Even poor Condoleezza could do it, instead of babbling about preparing final-status plans and pigeonholing them, if only she were backed by the determined will of the president.

So what is Blair's appointment for? Is it only to give some status to a redundant international star? To give a consolation prize to somebody who loyally lied and cheated for Bush before and during the Iraq war?

Yes, of course. But his main task is to draw out developments and gain time, to postpone everything, to foster make-believe activity, to provide the Palestinians and the world media with an illusion of progress.

Blair will come, meet, make declarations, ooze charm from every pore, generate headlines, fly, come back, make more announcements, meet again with kings, presidents and prime ministers. A long tail of news-thirsty journalists will follow him everywhere, generate media noise, write, tape, and take pictures, as if he were a male Paris Hilton.

Meanwhile Palestinians and Israelis will keep dying, the wall will be finished, more land will be expropriated, settlements will be enlarged, targeted "terrorists" will be killed, the blockade on Gaza will be tightened, and all the hundred and one daily activities of the occupation will go on, the occupation that dares not speak its name.

The declared task of Blair, too, is to "strengthen Abbas." Woe to the task. Woe to Blair. Woe in particular to Abbas.

The Car Bomb Jihad: Is Britain seeing clearly?

By Walid Phares


With each revelation made in Britain and in the West about a foiled plot or after an actual attack, a shower of questions is raised within the mainstream media, some of which contradict the other. The June 29 British success in averting two (maybe more) car bombs in London has also been accompanied by an endless series of issues, revealing among other things how the counterterrorism culture within Western democracies is still lacking in terms of cohesiveness. By comparison with previous conflicts, the analytical behavior of the global war on terror deserves a serious review. Following are a few questions I suggest we consider:

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1. Let's begin with some British statements made after the announcement of car seizure in London: On the one hand Britain's new home secretary, Jaqui Smith, said after an emergency meeting of top officials: "we are currently facing the most serious and sustained threat to our security from international terrorism;" only to bump against British authorities claiming they "found no link" between the defused car bomb and any terrorist group. This sharp contradiction between stating it is "international" but at the same time not linked to any terrorist group, is indicative of the tough political background UK counterterrorism efforts are being faced with. Since the 7/7 attacks and the following conspiracies, one cannot but note the hesitations of government public statements in defining the enemy. England is among the many other countries where Jihadi political activism has been able to win several battles of ideas. For London's political establishment, at least the dominant one, (along with Brussels' European elite) is extremely precautious in manning the terms "war on terror," "conflict" and of course any terminology using a religious or ideological wording. Examined closely this attitude is the result of layers of "expertise" provided by academic "specialists" who advised not use sentences that would – in their arguments – exacerbate domestic tensions with a particular community, Muslims. Hence, not only the British Government and Bureaucracy have dropped preemptively all reference to the essence of the War aimed at the UK, i.e. Jihadism and its derivatives, but even the actual nature of the terror action: the very fact that it is global, systematic and ideological, in short a War.

2. A second series of questions accompanying the immediate debate about the plot centered on the link to al Qaeda. The ballet surrounding the media and official reporting went back and forth about the theory of Bin Laden responsibility in this affair, as if it would shape up the strategy to respond. Western, and in this case, British investigators must bypass the dead-ended guessing about al Qaeda's formal role and spend energies and time on the greater question of Jihadi penetration of British society. For Bin Laden and Zawahiri may or may not be the trigger factors in this specific operation; al Qaeda's central apparatus may or may not be in charge of the execution; and the perpetrators may or may not be professional terrorists. The issue at hand remains the "factory" that produced these persons: Who indoctrinated them, how did they form a cell and how many potential Jihadi cells are there across the islands. Bin Laden or not is a secondary question. For after his passing, and if the reduction of Jihadism is not successful in Britain, there will still be attempts, even though not signed by the mother organization.

3. The "homegrown" versus the "international" mind game came back with a dizzying back and forth argument: Are the perpetrators "domestic" or "overseas" generated? One argument causing a different political resonation than the other, both unwanted by the dominant analysis: If the terrorists are "homegrown" the next question will reopen the debate about the so-called "radicalization of the British Muslim community." Obviously officials want to avoid the matter. If the terrorists are said to be "international," then the notion of "global war" would resurface, crumbling the advancing doctrine arguing otherwise. Worse would occur if it is learned that British citizens – claiming Jihadism – have indeed been in contact with outside terror networks (which in most cases would be logical). Then the analysis will go back to square one, a spot that many commentators have tried to get rid of, unsuccessfully. For very simply, the followers of Jihadism have no boundaries: homegrown and international are all part of a boundless ideology.

4. The public inquiry is so traumatized intellectually that it produces sometimes strange statements. In the Police struggle against common criminals it is perfectly normal to proceed solely from the physical evidence in the crime scene for the simple reason that no previous context exist. But in a War, the context constitutes the framework in which the investigation of a war act is investigated. Scotland Yard is known among the most efficient police forces in the world. It has solved scores of enigmas from (literally) scratches. But during the London Blitz of 1940 it would have been odd for security authorities looking at bombs remains in the ruins to state that "bombs are connected because they are made with the same product"! In the London's last plot, the two Mercedes were declared as "linked" because they contained the same material! But what if the two car bombs were filled with different types of explosives? Would they have belonged to two different conflicts? Such a conclusion – remote from the logic of wars – is precisely odd because the standing doctrine is to distance the official analysis as much as possible form the concept of "War." Hence the Jihadists can strike at will in Britain – and in vast numbers – they will continue to be seen as dispersed, unlinked, and striking for their own particular causes, each one waging his or her private war, for private reasons.

5. Some involved in the commentary about the perpetrators spoke about a "population manhunt" of the terrorists based on the release of the films produced by London's many surveillance cameras. The UK pride itself for having installed more cameras in their capital than all other European cities combined. But when one wonders why the dense surveillance is so extended one realize that Britain had to develop an extreme system of monitoring because it was forbidden to be preemptive in the war. Over the years, authorities were pressured by lobbies not to engage the Jihadists "before" they become terrorists and before they strike. So resources were reverted to spy on the Jihadis (and other terrorists) "after" they attack but not before: Another result of the initial shortcoming in the perception of the "enemy." The U.S. is under similar pressure by its own internal critics to follow the same path: Do not monitor the Jihadists before but only after they have engaged in terror action.

6. And as expected, the debate is loaded with the classical argument of "anger mounting among Muslims in Britain." Since the 7/7 attacks, a so-called socioeconomic doctrine has been injected into the discussion by Jihadi apologists. They argue that the perpetrators are "reacting to the marginalization of the Muslim community on economic grounds," an analysis that was crumbled by European social scientists. The growth of Jihadism is not the result of socio-economic disparities, as it was proven, but of the expansion of Wahabism, Salafism and other forms of radical ideologies.

7. What does this London attempt and the Scotland attack mean in terms of the intention of the terrorists regarding the UK? Is it an ongoing thing? Will we see others in the future? The answer is self-evident: The Jihadists have declared war against the UK and many other countries. The operations will continue until the "factory" producing these ideologies is shut down.

8. Are British security services good at preventing? Is this a successful operation of counterterrorism? Certainly, yes: The various agencies on the Isles are dedicated, efficient and fast responding. But the matter is one of political orientation. Britain services are producing 100 percent results within the 50 percent margin allowed for them. And so is the case in most liberal democracies.

9. Should the US be worried about this development in London? Is there a potential link? Another question that seems logical when uttered but then again shows our general limitation in understanding the global threat. Our dominant political culture has been reducing the ability of the debate to grow intelligently with regards the Jihadi phenomenon. There is no question that Americans and British alike should be worried about a terror act anywhere on both sides of the Atlantic. For the Jihadi campaign targets both nations, and all other societies obstructing their goals. But on the other hand, terror operations taking place in one country do not have to replicate automatically in another country. Unless al Qaeda has coordinated an international spectacular campaign worldwide (which may not be impossible), uncovering car bombs in London don't have to mobilize police forces necessarily in US cities. We must be logical in perceiving the enemy's moves. Both extreme are unreasonable.

10. And back to this last car-bombs seizure in London, one cannot but contemplate the sanguinary intentions of the perpetrators: Targeting citizens in a Night Club on a "Ladies Night." A very revealing dimension of the limitless savagery of the terrorists: Not only civilians are "permissible" enemies but women are a prime target too. This shows again that, beyond their physical threat, the Jihadists most dangerous features are their brainwashed minds. The Mercedes Jihad in Britain is yet another example of how deep they have reached within the realm of their enemies, and how lacking behind is the perception of their victims.

11. Last but not least, the Glasgow Airport "SUV" attack on Saturday is now showing clearly the "campaign" nature of the Jihadi assaults in the UK. Fortunately, British officials are perhaps slowly coming to see clearer, as Dame Pauline Neville-Jones, former head of Britain's joint intelligence committee, told Sky News "One has to conclude ... these are linked," speaking of the London car seizure and of the Glasgow Airport operation. But the quest for a "reason" behind these attacks remains the first concerns in their analysis. "This is a very young government, and we may yet see further attacks" added Neville-Jones. Maybe it is true that the Jihadists are attempting to drag Mr Gordon Brown's cabinet into military and security responses, so that a greater "insurrection" takes place, but again, British understanding of the whole picture cannot complete itself unless a clear cut absorption of the fact that what the UK (and many other democracies) are facing now and in the future is a "War," not dispersed acts of violence that Mr Sherlock Holmes will have to link to each other.

12. So, are the bombings – failed or successful – aimed at achieving political targets at this point in time? Definitely: all Jihadi attacks in the UK or on the continent at anytime wants to weaken the European resolve in pursuing what the US calls a War on terror. There is a standing order by al Qaeda and fatwas by Salafi clerics (and Khomeinist as well, although in a different context) asking members, allies, local and international to "strike into the heart of infidels, including the British." And that can't be taken lightly, cannot be dismissed and forms the core of the War against democracies. But in addition to standing orders, strategic considerations are also in play. There is little doubt that the Jihadi War room dealing with the UK wishes to test if not drag the new cabinet of Prime Minister Gordon Brown into "engagement." The focused psychological war against the Tony Blair cabinet by the Jihadi-Trotskyte axis has ended with his resignation. Now the British-based "axis" wants to demonize Brown by forcing his cabinet to respond and to be responded to. The Salafi move is clear … but is Britain seeing clearly?

This article appears also in World Defense Magazine.

— Dr Walid Phares is a senior fellow with the Foundation for the Defense of Democracies (FDD) in Washington, D.C., and director of the Future Terrorism Project of the FDD. He is a visiting fellow with the European Foundation for Democracy in Brussels. His most recent books are Future Jihad: Terrorist Strategies against the West (2006) and The War of Ideas: Jihadism against Democracy (2007)

« Close It

July 1, 2007 10:36 PM Link

Europe skeptical on missile shield
By Peter Spiegel and Kim Murphy
Support is fading in the Czech Republic and Poland, where the U.S. system is
planned. And Congress is opposed.
http://email.latimes.com/cgi-bin1/DM/y/eBS...Io30G2B0Iinx0Ej

Brown warns of a 'long-term threat'
By Janet Stobart and Marjorie Miller
British premier, barely days at the helm, signals a tough line against
terrorists. Experts see attempt to destabilize new government.
http://email.latimes.com/cgi-bin1/DM/y/eBS...Io30G2B0IioE0Et

<h2 class="twt-hr-reverse-fp">Executive privilege carries a hefty political price </h2>By Jon Ward
President Bush may have strong legal grounds for refusing congressional subpoenas, but the political price for asserting his executive privilege will be high, say lawyers who have worked for both Republican and Democratic presidents.

UK Terror Plot Investigation - News Roundup - July 2 -- Morning

By Jeffrey Imm


Monday morning news roundup on the ongoing UK terror plot investigations:

-- Further Attacks Anticipated - Links to Al-Qaeda-related Groups Per Govt. The London Times is reporting that one of its sources with Scotland Yard's counterterrorism group is stating: "In our judgment it is very likely there will be further attacks." The International Herald Tribune reports the "British government called the work of terrorists linked to Al Qaeda".

-- New Arrests. BBC is reporting that UK police have arrested two "men aged 28 and 25...in the Paisley area west of Glasgow on Sunday night. They are not thought to be of British origin" - this brings the total arrested to 7 thus far. Prior to these arrests, news media indicated that UK police were hunting a sixth car-bombing suspect. It is not known if this "6th" suspect has been arrested yet.

-- Glasgow and London Bombing Activities Linked. The Daily Telegraph reports that the same two men may have been responsible for all three car bombs. CNN also is reporting this in story "Sources: Glasgow suspects planted London bombs".

-- British Jihadist terror suspects include two doctors. Sky News reported that two of those in custody are hospital doctors, and that a sixth suspect is still at large. Sky News reporter states: "These are professional people with highly paid jobs." AFP has reports that two of the terror suspects arrested are a Jordanian doctor (Mohammed Jamil Abdelkader Asha) and his wife. Daily Telegraph is also reporting this. AFP reported that Mohammed Asha was of Palestinian descent; International Herald Tribune confirmed his arrest and is reporting that he is of "Iranian-Kurdish" descent. Birmingham Post also confirms that a doctor's house was being searched in Staffordshire.

-- Tracing of Glasgow Bombers Before Attack. UK and US news media are reporting that UK police were trying to reach a Scottish rental agency prior to the Glasgow bombing, suggesting that UK police were already on the trail of such bombers on Saturday. BBC states: "it has emerged that police tried to contact a Paisley letting agency before the Glasgow attack. The agency, Let-It, said officers had traced it from phone records in London."

-- Glasgow Attack Pre-Intelligence. The Daily Telegraph is reporting that US warnings of the Glasgow airport attack were not distributed to local law enforcement, and US DHS is stating that it passed the information on to the UK authorities immediately after receiving it.

-- UK's New Cold War and Travel Restrictions. The Daily Telegraph is reporting UK PM Gordon Brown's position on "Terrorism fight is our Cold War". BBC reporting that "Travel security raised amid alert".

-- British Islamist says more London bombings on way. WorldNetDaily reported an interview with British Islamist Anjem Choudary, stating "There is no doubt whatsoever that there will continue to be attacks against the British government...and that "There are many in Britain who take their ideology from Osama bin Laden and al-Qaida and are ready to carry out many more attacks". Choudary led the banned groups Al Muhajiroun and Al Ghurabaa, and "currently presents himself as an Islamic lecturer and a leader of Britain's Shariah Islamic court".

-- Muslim Council of Britain: "Avoid Presumptions". Muslim Council of Britain stated stated on Saturday that it backed police efforts against terrorists and"Let's avoid presumptions…it can be the work of Muslims, Christians, Jews or Buddhists."

Read More »


Sources:

London Times: Hunt for terror cell
BBC: Two more held over bomb attacks
London Times: Two more arrests in hunt for terror cell
Sky News: 'Doctors Among Terror Suspects Held'
AFP: Suspect in Britain bomb plots 'a Jordanian doctor'
Daily Telegraph: Terror crackdown as doctors among arrests
Sky News: Car Bombing Suspects: Who Are They?
CNN: Sources: Glasgow suspects planted London bombs
Birmingham Post: Doctor's home searched by anti-terror police - in Staffordshire
Daily Telegraph: 'Intelligence warned of airport attacks'
Australia News: Police hunt sixth car-bombing suspect
International Herald Tribune: In intense hunt for bombers, Britain sees Qaeda link
Daily Telegraph: Terrorism fight is our Cold War, says Brown
BBC: Travel security raised amid alert
WorldNetDaily: More London bombings on way, warns Anjem Choudary - UK Islamist leader claims Brits ready to carry out 'many attacks'
Muslim Council of Britain: UK Muslims Back Police in Bomb Probe
Ynet News: Al-Qaeda's car bomb guide - London terror analysis: Online manual on car bombs instructs terrorists 'not to park illegally

Read below the extensive and alarming transcripts of governmental threats targeting an Egyptian Blogger and citizen journalist. Wael Abbas has recorded the threats he has received by telephone and has published them on his blog.

Let us also remind each other that on May 17th 2007, Egypt was elected to sit at the United Nation's Council for Human Rights. Severe criticism had followed the election for Egypt is well known for bashing Human Rights, practicing torture, daily intimidations, and Internet Control.

Internet, mobile phones, small cameras and Citizen Journalim have helped expose -- with tremendous success-- Egypt's well kept dirty secrets. Among the brave citizens and bloggers to be mentioned is Mr Wael Abbas, owner of an Egyptian Freedom Blog called "Egyptian Awareness". With number of fellow bloggers, Mr Abbas has posted several embarrassing videos to the Egyptian government, among which an infamous "Torture Video" that made the news world wide. For the first time in 50 years of silence, this 30 seconds video made a difference and triggered an international debate around Egypt's true nature.

Foreign press and politicians alike finally stopped buying the Egyptian pretty picture. The 79 year old Mubarak, now called a dictator by the entire world, is a tired a man, paving the way for his son Gamal, and has just achieved changing the constitution in favor of inheritance of power, through a "Democratic Referendum". The referendum was rigged and denounced by tens and tens of Citizen Journalism videos and articles.


The Egyptian Government not used to be being systematically exposed

The state of frustration of the government, of the corrupt Presidential entourage, the police and secret services vis-a-vis the bloggers (because they have too much foreign attention) is at its highest. Many of our fellow bloggers and citizen journalists have been sent to jail, and intimidated on a regular basis, for a few weeks, a few months, and sometimes 4 years.


The Transcripts of A New Scandal

Wael Abbas has recorded on June 30th the threats, intimidation attempts and horrendous insults he has received from secret services officials, by telephone. This amazing Audio Material will certainly remind you of Nazi, Stasi and KGB techniques, based on psychological intimidation that will soon lead to real physical violence in case the victim does not obey orders. Their message was clear : "stop publishing critiques of President Mubarak and his son Gamal Mubarak".


These Audio recordings have been translated to English and can be viewed by clicking here. This video contains no violent images, only text, but of course it does contain foul language (insults addressed to blogger Wael Abbas).

We are not afraid

These transcripts have been mixed to a joyful music to express that we, secular Egyptian bloggers, are not afraid.

Many thanks for your moral support and friendship,

Ahmad Sherif

The Middle East after Iraq will see more Islamist states
Gwynne Dyer
Article Last Updated: 06/29/2007 09:10:59 PM MDT

Israeli historian Benny Morris is famous in his country for reopening the forgotten history of the expulsion of the Palestinians during the 1948 "war of independence" and deconstructing the Israeli myth that they freely chose to abandon their homes. By five years ago, however, he had lost faith in a lasting peace between Israelis and Palestinians and was openly saying that everybody would have been better off in the long run if one side or the other had won a decisive victory in 1948.
If Israel had conquered all of Palestine and expelled all the Palestinians in 1948, Morris wrote, "today's Middle East would be a healthier, less violent place, with a Jewish state between Jordan and the Mediterranean and a Palestinian Arab state in Transjordan. Alternatively, Arab success in the 1948 war, with the Jews driven into the sea, would have obtained the same, historically calming result. Perhaps it was the very indecisiveness of the geographical and demographic outcome of 1948 that underlies the persisting tragedy of Palestine."
Well, of course, but most outcomes are indecisive. Like many knowledgeable people in the Middle East, Morris's mood was strikingly pessimistic even before the invasion of Iraq, but five years later the mood is darker still. Beyond forecasts of civil war in Iraq, however, there has been little effort to discern what the Middle East will actually look like after the troops go home.
There is already a civil war in Iraq, and it might even get worse for a time after American troops leave, but these things always sputter out in the end. There will still be an Iraqi state, plus or minus Kurdistan, and regardless of whether or not the central government in Baghdad exercises real control over the Sunni-majority areas between Baghdad, Mosul and the Syrian border.
The Sunni Arab parts of Iraq have been turned into a training ground for Islamist extremists from all parts of the Arab world by the American invasion. Once the American troops are gone, however, the action will soon move elsewhere, for the U.S. defeat in Iraq has dramatically raised the prestige of Islamist revolutionaries throughout the Arab world and beyond.
It's not possible to predict which Arab states will fall under Islamist control, and they certainly aren't all going to: The pipe-dream of a world-spanning Islamic empire remains precisely that. But it will be astonishing if one or more of the Arab regimes does not fall to an Islamist revolution in the next few years.
For the citizens of the country or countries in question, that could be quite a big problem, since it would probably mean not democracy and prosperity, but just more decades of poverty and a different kind of tyranny. For people living outside the Middle East, however, it would probably make little difference.
Islamist-ruled states are not the same as bands of freelance fanatics. If they have oil to export, then they will go on exporting it, because no major oil producer can do without the income that those exports provide; they need it to feed their people. And they would have little incentive to sponsor terrorism outside the region, for they would have fixed addresses and interests to protect.
For Israel, however, the situation has changed fundamentally. For the first 20 years of its existence, Israel was a state under siege. For the past 40 years, since the conquests of 1967, it has had the luxury of debating with itself how much of those conquered lands it should return to the Arabs in return for a permanent peace settlement. (The answer was always "all of them," but that was not an answer many Israelis would hear.)
Now the window is closing. Before long, some of the Arab states that Israel needs to make peace with are likely to fall to Islamist regimes that have an ideological commitment to its destruction. (Hamas's capture of the Gaza Strip is a foretaste.) Israelis trying to evade hard choices have long complained that they had "nobody to negotiate with." It is about to become true.
Israel faces another generation of confrontation and quite possibly of war, and the Palestinians face another generation of military occupation. Significant chunks of the Arab world face Islamist revolutions that would bring more poverty and a new kind of oppression. It is a mess, and it's too late to fix it.

---
* GWYNNE DYER is a London-based independent journalist.

TIME FOR A TIMEOUT
Iran Has a Message. Are We Listening?

By Michael Hirsh
Sunday, July 1, 2007; Page B01

TEHRAN I found the general at the end of a winding road in the Alborz Mountains 150 miles north of Tehran. He was sitting placidly at a table laden with cherries, nectarines and other fruits. A stream flowed nearby. It was a pleasant and pastoral place to discuss an uncomfortable matter: the tension between Iran and the United States, and the looming possibility of war.

The general, Mohsen Rezai, is secretary of Iran's powerful Expediency Council. He's also the former commander of the Revolutionary Guards. He rarely speaks to foreign reporters -- especially Americans. I was surprised when, during a recent visit to Iran, I learned from one of Rezai's aides that he would be willing to meet me at his vacation villa in the mountains.

Given Iran's complex, nearly impenetrable politics, it is difficult to say whether Rezai wanted to deliver a semi-official message, or was freelancing. But it seemed like the former, especially because the government also arranged rare interviews with other senior officials, including Ali Larijani, the main negotiator on Iran's nuclear program.

Rezai's intention was clear: No matter what question I asked, he somehow managed to bring the discussion back to Tehran's need to find its way out of its dangerous stalemate with Washington. President Bush "has started a cold war with Iran, and if it's not controlled, it could turn into a warm war," he said.

Rezai suggested that Iran is searching hard for a face-saving way to end the standoff over its ever-advancing uranium-enrichment program. He endorsed, in a more forthright way than I have heard from any other senior Iranian official, a "timeout" proposed by Mohamed ElBaradei, the director general of the International Atomic Energy Agency. "What it means is for Iran to stay at the [enrichment] level it has reached, with no further progress. By the same token, the U.N. Security Council will not issue another resolution," said Rezai, who indicated that the idea is gaining support inside the Iranian regime. "The Iranian nuclear issue has to be resolved through a new kind of solution like this."

Rezai also suggested that the talks recently begun in Baghdad between Ryan Crocker, the U.S. ambassador to Iraq, and his Iranian counterpart, Hassan Qomi, had taken the edge off the sense of threat felt in Tehran. The talks amounted to a long-overdue acknowledgment by Bush that he must deal with the regime, Rezai contended, sounding pleased.

In his late 60s, Rezai doesn't look as formidable as his résumé. A soft-spoken man of medium height, he commanded the elite Revolutionary Guards during most of the brutal Iran-Iraq war in the 1980s, and he helped lead the Iranian offensives that secured Iraqi territory by the end. ("Iran doesn't succumb," Rezai told me proudly when I asked what might happen if the United States ever attacked.) He was also one of five senior Iranian officials whom an Argentine judge named as suspects late last year in the 1994 bombing of a Jewish community center in Buenos Aires that killed 85 people. (Iran called the charges "baseless.")

Rezai's effort at outreach suggests that the policy of diplomatic coercion being pursued by the United States, Britain, France and Germany is working, at least to some degree. Iran has grown weary of its economic and political isolation, and senior officials in Tehran remain preoccupied with the possibility of a U.S. military strike. Now Iran is eager to satisfy ElBaradei's demands for further clarity on the illicit history of its program -- so much so that Larijani met twice with him last week.

What is not clear is whether the Bush administration will accept a "timeout," as opposed to a full suspension of Iran's enrichment activities. It also is not clear, despite Rezai's hopes, that Bush has given up on regime change; hence the "presidential finding" Bush recently signed that authorizes the CIA to conduct non-lethal operations to harass the Iranian regime. Having isolated Tehran diplomatically, the Bush administration seems content to simply wait until it "caves."

But my 10-day visit to Iran in late June, mostly spent in Tehran, convinced me that any hopes that Iran will just give up are badly misguided. Yes, the regime is under pressure, but it isn't close to having its back to the wall economically, despite its recent move to ration gasoline, which provoked violent protests. Stores are well stocked, the streets are thronged with shoppers, and flower stores and luxury goods abound, indicating that people in this oil-rich economy still have plenty of disposable income. The U.N. sanctions and the quiet pressure on international banks to cut off business with Iran inflict some pain, but they are generally nuisances and not deal-breakers. And the sanctions are shot full of holes: European businesses do vibrant trade with Iranian counterparts, and Iranians have just shifted their business dealings from dollars to Euros.

Bush's feeble $75 million effort to promote democracy in Iran also is not gaining traction. While much of the Western media in recent weeks have focused on the detention of four Iranian Americans who made the mistake of traveling back to their homeland at a time when the government is even more paranoid than usual about American plots, they scarcely make news in Tehran. Indeed, the Bush program's most notable impact has been giving the regime justification for a new crackdown on dissent.

Even so, the comments by Rezai and Larijani indicate that, with 18 months left in Bush's presidency, Iran may be offering his administration a last chance at a new relationship. At least twice before, the administration has slapped down such overtures. In late 2001, Iran provided invaluable assistance in stabilizing the post-Taliban government led by Hamid Karzai in Afghanistan, pledging $550 million worth of assistance (about the same amount promised by the United States) at a January 2002 donors' conference. A week later, Bush declared Iran part of the "axis of evil" during his second State of the Union address -- a stinging rebuff that Iranians still talk about bitterly. Then, in the spring of 2003, Iranian officials used their regular Swiss intermediary to fax a two-page proposal for comprehensive talks to the State Department, including discussions of a "two-state approach" to the Israeli-Palestinian issue. That, too, was ignored.

The Bush team is in danger of letting the current opening from Iran pass it by as well. The administration doesn't seem to recognize that diplomatic coercion by itself can't work -- not with a country that has turned its nuclear program into a national crusade. And one hears little acknowledgment from senior U.S. officials that the United States and Iran share some critical interests. Secretary of State Condoleezza Rice, in a June 8 roundtable with the Wall Street Journal editorial board, called the U.S.-Iranian relationship "overall rather zero-sum" and confessed that she couldn't figure Iran out. "I think it's a very opaque place, and it's a political system I don't understand very well," she said.

It is this impression of inevitably clashing interests that Rezai was trying hard to dispel. He pointed out that his is the only country that can help Washington control Shiite militias in Iraq, slow the Taliban resurgence in Afghanistan and tame Hezbollah's still-dangerous presence in Lebanon all at once. "If America pursues a different approach than confronting Iran, our dealings will change fundamentally," he said.

My conversations with hard-liners and reformers inside Tehran also suggested something deeper: that under the right circumstances, Iran may still be willing to stop short of building a bomb. "Iran would like to have the technology, and that is enough for deterrence," says S.M.H. Adeli, Iran's moderate, urbane former ambassador to London.

And what of other overlapping interests? Let's start with Iraq, the one area where Washington does seem to acknowledge it needs Tehran's help, even as the administration continues to accuse Iran of delivering sophisticated makeshift bombs to Iraqi militants. Iraqi Prime Minister Nouri al-Maliki's Shiite-dominated government "is of strategic importance to us," Rezai said. "We want this government to stay in power. Rival Sunni countries oppose Maliki. We haven't." It also stands to reason that in Afghanistan, Lebanon and the new "Hamastan" in Gaza -- all places where Tehran wields enormous influence -- an Iran that is encouraged to play a broader regional security role could become more cooperative.

Of course, the elephant in the room is Iran's toxic relationship with Israel, especially President Mahmoud Ahmadinejad's denial that the Holocaust happened and his threats toward a U.S. ally. But several Iranian officials hinted that Ahmadinejad crossed a red line in Iranian politics when he pushed his rhetoric beyond the official hope that Israel would one day disappear to suggest that Tehran might help that process along. A new Iranian president would rebalance that position, they indicated.

Still, the Iranians themselves recognize that a more dramatic shift in policy is unlikely to happen on Bush's watch. "Mr. Bush's government is stuck at a crossroads" between confrontation and engagement, "and it can't make a decision," Rezai said. "We have a saying in Farsi: When a child walks in darkness, he starts singing or making loud noises because he's afraid of the dark. The Americans are afraid to negotiate with Iran, and that's why they're making a lot of loud noises." Whether or not that's true, new noises are clearly coming from Tehran. Washington should listen.

mhirsh@newsweek.com

Michael Hirsh is a senior editor at Newsweek.

TIME FOR A TIMEOUT
Iran Has a Message. Are We Listening?

By Michael Hirsh
Sunday, July 1, 2007; Page B01

TEHRAN I found the general at the end of a winding road in the Alborz Mountains 150 miles north of Tehran. He was sitting placidly at a table laden with cherries, nectarines and other fruits. A stream flowed nearby. It was a pleasant and pastoral place to discuss an uncomfortable matter: the tension between Iran and the United States, and the looming possibility of war.

The general, Mohsen Rezai, is secretary of Iran's powerful Expediency Council. He's also the former commander of the Revolutionary Guards. He rarely speaks to foreign reporters -- especially Americans. I was surprised when, during a recent visit to Iran, I learned from one of Rezai's aides that he would be willing to meet me at his vacation villa in the mountains.

Given Iran's complex, nearly impenetrable politics, it is difficult to say whether Rezai wanted to deliver a semi-official message, or was freelancing. But it seemed like the former, especially because the government also arranged rare interviews with other senior officials, including Ali Larijani, the main negotiator on Iran's nuclear program.

Rezai's intention was clear: No matter what question I asked, he somehow managed to bring the discussion back to Tehran's need to find its way out of its dangerous stalemate with Washington. President Bush "has started a cold war with Iran, and if it's not controlled, it could turn into a warm war," he said.

Rezai suggested that Iran is searching hard for a face-saving way to end the standoff over its ever-advancing uranium-enrichment program. He endorsed, in a more forthright way than I have heard from any other senior Iranian official, a "timeout" proposed by Mohamed ElBaradei, the director general of the International Atomic Energy Agency. "What it means is for Iran to stay at the [enrichment] level it has reached, with no further progress. By the same token, the U.N. Security Council will not issue another resolution," said Rezai, who indicated that the idea is gaining support inside the Iranian regime. "The Iranian nuclear issue has to be resolved through a new kind of solution like this."

Rezai also suggested that the talks recently begun in Baghdad between Ryan Crocker, the U.S. ambassador to Iraq, and his Iranian counterpart, Hassan Qomi, had taken the edge off the sense of threat felt in Tehran. The talks amounted to a long-overdue acknowledgment by Bush that he must deal with the regime, Rezai contended, sounding pleased.

In his late 60s, Rezai doesn't look as formidable as his résumé. A soft-spoken man of medium height, he commanded the elite Revolutionary Guards during most of the brutal Iran-Iraq war in the 1980s, and he helped lead the Iranian offensives that secured Iraqi territory by the end. ("Iran doesn't succumb," Rezai told me proudly when I asked what might happen if the United States ever attacked.) He was also one of five senior Iranian officials whom an Argentine judge named as suspects late last year in the 1994 bombing of a Jewish community center in Buenos Aires that killed 85 people. (Iran called the charges "baseless.")

Rezai's effort at outreach suggests that the policy of diplomatic coercion being pursued by the United States, Britain, France and Germany is working, at least to some degree. Iran has grown weary of its economic and political isolation, and senior officials in Tehran remain preoccupied with the possibility of a U.S. military strike. Now Iran is eager to satisfy ElBaradei's demands for further clarity on the illicit history of its program -- so much so that Larijani met twice with him last week.

What is not clear is whether the Bush administration will accept a "timeout," as opposed to a full suspension of Iran's enrichment activities. It also is not clear, despite Rezai's hopes, that Bush has given up on regime change; hence the "presidential finding" Bush recently signed that authorizes the CIA to conduct non-lethal operations to harass the Iranian regime. Having isolated Tehran diplomatically, the Bush administration seems content to simply wait until it "caves."

But my 10-day visit to Iran in late June, mostly spent in Tehran, convinced me that any hopes that Iran will just give up are badly misguided. Yes, the regime is under pressure, but it isn't close to having its back to the wall economically, despite its recent move to ration gasoline, which provoked violent protests. Stores are well stocked, the streets are thronged with shoppers, and flower stores and luxury goods abound, indicating that people in this oil-rich economy still have plenty of disposable income. The U.N. sanctions and the quiet pressure on international banks to cut off business with Iran inflict some pain, but they are generally nuisances and not deal-breakers. And the sanctions are shot full of holes: European businesses do vibrant trade with Iranian counterparts, and Iranians have just shifted their business dealings from dollars to Euros.

Bush's feeble $75 million effort to promote democracy in Iran also is not gaining traction. While much of the Western media in recent weeks have focused on the detention of four Iranian Americans who made the mistake of traveling back to their homeland at a time when the government is even more paranoid than usual about American plots, they scarcely make news in Tehran. Indeed, the Bush program's most notable impact has been giving the regime justification for a new crackdown on dissent.

Even so, the comments by Rezai and Larijani indicate that, with 18 months left in Bush's presidency, Iran may be offering his administration a last chance at a new relationship. At least twice before, the administration has slapped down such overtures. In late 2001, Iran provided invaluable assistance in stabilizing the post-Taliban government led by Hamid Karzai in Afghanistan, pledging $550 million worth of assistance (about the same amount promised by the United States) at a January 2002 donors' conference. A week later, Bush declared Iran part of the "axis of evil" during his second State of the Union address -- a stinging rebuff that Iranians still talk about bitterly. Then, in the spring of 2003, Iranian officials used their regular Swiss intermediary to fax a two-page proposal for comprehensive talks to the State Department, including discussions of a "two-state approach" to the Israeli-Palestinian issue. That, too, was ignored.

The Bush team is in danger of letting the current opening from Iran pass it by as well. The administration doesn't seem to recognize that diplomatic coercion by itself can't work -- not with a country that has turned its nuclear program into a national crusade. And one hears little acknowledgment from senior U.S. officials that the United States and Iran share some critical interests. Secretary of State Condoleezza Rice, in a June 8 roundtable with the Wall Street Journal editorial board, called the U.S.-Iranian relationship "overall rather zero-sum" and confessed that she couldn't figure Iran out. "I think it's a very opaque place, and it's a political system I don't understand very well," she said.

It is this impression of inevitably clashing interests that Rezai was trying hard to dispel. He pointed out that his is the only country that can help Washington control Shiite militias in Iraq, slow the Taliban resurgence in Afghanistan and tame Hezbollah's still-dangerous presence in Lebanon all at once. "If America pursues a different approach than confronting Iran, our dealings will change fundamentally," he said.

My conversations with hard-liners and reformers inside Tehran also suggested something deeper: that under the right circumstances, Iran may still be willing to stop short of building a bomb. "Iran would like to have the technology, and that is enough for deterrence," says S.M.H. Adeli, Iran's moderate, urbane former ambassador to London.

And what of other overlapping interests? Let's start with Iraq, the one area where Washington does seem to acknowledge it needs Tehran's help, even as the administration continues to accuse Iran of delivering sophisticated makeshift bombs to Iraqi militants. Iraqi Prime Minister Nouri al-Maliki's Shiite-dominated government "is of strategic importance to us," Rezai said. "We want this government to stay in power. Rival Sunni countries oppose Maliki. We haven't." It also stands to reason that in Afghanistan, Lebanon and the new "Hamastan" in Gaza -- all places where Tehran wields enormous influence -- an Iran that is encouraged to play a broader regional security role could become more cooperative.

Of course, the elephant in the room is Iran's toxic relationship with Israel, especially President Mahmoud Ahmadinejad's denial that the Holocaust happened and his threats toward a U.S. ally. But several Iranian officials hinted that Ahmadinejad crossed a red line in Iranian politics when he pushed his rhetoric beyond the official hope that Israel would one day disappear to suggest that Tehran might help that process along. A new Iranian president would rebalance that position, they indicated.

Still, the Iranians themselves recognize that a more dramatic shift in policy is unlikely to happen on Bush's watch. "Mr. Bush's government is stuck at a crossroads" between confrontation and engagement, "and it can't make a decision," Rezai said. "We have a saying in Farsi: When a child walks in darkness, he starts singing or making loud noises because he's afraid of the dark. The Americans are afraid to negotiate with Iran, and that's why they're making a lot of loud noises." Whether or not that's true, new noises are clearly coming from Tehran. Washington should listen.

mhirsh@newsweek.com

Michael Hirsh is a senior editor at Newsweek.

Between SCOTUS And A Hard Place

Aziz Huq

July 02, 2007