Bill Totten's Weblog

Sunday, August 31, 2008

Americans Organize to "Save Starbucks" as the Economy Slips into Recession

by Max Keiser, Huffington Post

AlterNet (July 21 2008)

Citizen groups around the country are mobilizing to save their Starbucks {1} after the company announced it will shut down 600 stores. These people don't realize that Starbucks will have to double or triple their prices as the dollar continues to crash and the reason Starbucks has to close stores is because Americans are too broke to buy "premium" merchandise now that their currency has become the laughing stock of Forex.

Incredibly, and Forex traders can't help but chuckle at this, these citizens are not mobilizing to restore habeas corpus, or to restore the rule of law as it applies to America's spying telephone companies, or restore the checks and balances of the Republic that would prevent the president from declaring himself sole judge and jury in any case against any American who can then be detained for any length of time for any reason - as is now the case with the recent ruling of the US Court of Appeals for the 4th Circuit (not to mention the workers themselves at Starbucks that nobody seems to care about after it was revealed that Starbucks management was stealing the barista's tips {2} ).

No, these citizens are mobilizing to keep the doors open at shops that charge them $4 (soon to be $12) for drinks made from agricultural products (coffee beans) that the company has no, true legal right to exploit without adequate compensation to the indigenous populations that have farmed these products for millennia.

I digress ... my point is that Americans can't afford stuff they used to be able to afford, and they are becoming increasingly alone in this - as compared to other citizens in other countries - due to the falling US dollar and the rise in the value of currencies we compete with.

As a few in the financial press in the US have said (the ones who manage money for a living, not the ones who just talk about money), Americans will be shocked by their loss of purchasing power - as the dollar collapses - versus their compatriots in other countries - whose currency is rising, but by then it will be too late to do anything about it.

We are seeing this play out with Starbucks and their impoverished fans who are trying to keep it open. The plain fact is, most Americans can no longer afford Starbucks. The ingredients used to make these products are beyond the reach of Americans now, just like gas and housing. And this is just the beginning. As current trends relating to the dollar's collapse continue - Starbucks will have to double and triple their prices and close hundreds more stores.

Americans can't see what is staring them in the face.

Tell me again ... I don't think I understand. Why is Starbucks closing 600 restaurants?

For several reasons, all connected to the same underlying problem of America losing its economic sovereignty and the viability of its currency.

The cost of Starbucks raw materials; sugar, coffee, milk, wheat, chocolate are all skyrocketing in price due primarily to the concomitant fall in the US dollar that has forced the price of these commodities, all priced in dollars, sky high.

Additionally, Starbucks, like all fast food franchises is also a real estate operator and the same problems we see in the nation's real estate market we see in Starbucks real estate portfolio as the US real estate market crashes due to a crashing dollar (the Fed keeps trying to bail out the un-bailable banks/mortgage/Fannie Mae crooks by printing more dollars that have the effect of killing the value of the ones in circulation).

Additionally, America's household budgets are getting squeezed at the gas pump. Oil, like other commodities, is also priced in dollars and is going up as the dollar crashes.

Amazingly, the fact that Americans are now being shut out from something they covet because of the irresponsible Fed policies that have wrecked the stock market, housing market and dollar never seems to cross anyone's mind.

It's as if 300 million Americans live in a sno-globe of deceit and raining down on them are trillions of fake snow flake dollars that are destroying their purchasing power, economy and sovereignty and their only thought is to make snow balls, 'have fun' and 'Save Our Starbucks'.

Starbucks is the first, but not the last example of how a falling dollar will make most items that Americans gorge on too expensive for Americans to buy with their crumbling currency.

In a few years time, it is quite possible that Americans, like the Chinese last decade, will be working to keep themselves alive manufacturing products that will be shipped overseas to China; products that they themselves will be unable to afford.




(c) 2008 Huffington Post All rights reserved.

Bill Totten

Identity Politics in Climate Change Hell

Do you want to save the biosphere or boost your own brand of politics? You can't do both.

by George Monbiot

Published on the Guardian's Comment is Free (August 22 2008)

If you want a glimpse of how the movement against climate change could crumble faster than a summer snowflake, read Ewa Jasiewicz's article, published yesterday on the Guardian's Comment is Free site {1}. It is a fine example of the identity politics that plagued direct action movements during the 1990s, and from which the new generation of activists has so far been mercifully free.

Ewa rightly celebrates the leaderless, autonomous model of organising that has made this movement so effective. The two climate camps I have attended - this year and last - were among the most inspiring events I've ever witnessed. I am awed by the people who organised them, who managed to create, under extraordinary pressure, safe, functioning, delightful spaces in which we could debate the issues and plan the actions which thrust Heathrow and Kingsnorth into the public eye. Climate camp is a tribute to the anarchist politics that Jasiewicz supports.

But in seeking to extrapolate from this experience to a wider social plan, she makes two grave errors. The first is to confuse ends and means. She claims to want to stop global warming, but she makes that task 100 times harder by rejecting all state and corporate solutions. It seems to me that what she really wants to do is to create an anarchist utopia, and use climate change as an excuse to engineer it.

Stopping runaway climate change must take precedence over every other aim. Everyone in this movement knows that there is very little time: the window of opportunity in which we can prevent two degrees of warming is closing fast. We have to use all the resources we can lay hands on, and these must include both governments and corporations. Or perhaps she intends to build the installations required to turn the energy economy around - wind farms, wave machines, solar thermal plants in the Sahara, new grid connections and public transport systems - herself?

Her article is a terryifying example of the ability some people have to put politics first and facts second when confronting the greatest challenge humanity now faces. The facts are as follows. Runaway climate change is bearing down on us fast. We require a massive political and economic response to prevent it. Governments and corporations, whether we like it or not, currently control both money and power. Unless we manage to mobilise them, we stand a snowball's chance in climate hell of stopping the collapse of the biosphere. Jasiewicz would ignore all these inconvenient truths because they conflict with her politics.

"Changing our sources of energy without changing our sources of economic and political power", she asserts, "will not make a difference. Neither coal nor nuclear are the 'solution', we need a revolution". So before we are allowed to begin cutting greenhouse gas emissions, we must first overthrow all political structures and replace them with autonomous communities of happy campers. All this must take place within a couple of months, as there is so little time in which we could prevent two degrees of warming. This is magical thinking of the most desperate kind. If I were an executive of E.On or Exxon, I would be delighted by this political posturing, as it provides a marvellous distraction from our real aims.

To support her argument, Jasiewicz misrepresents what I said at climate camp. She claims that I "confessed not knowing where to turn next to solve the issues of how to generate the changes necessary to shift our sources of energy, production and consumption". I confessed nothing of the kind. In my book Heat (2007) I spell out what is required to bring about a ninety per cent cut in emissions by 2030. Instead I confessed that I don't know how to solve the problem of capitalism without resorting to totalitarianism.

The issue is that capitalism involves lending money at interest. If you lend at five per cent, then one of two things must happen. Either the money supply must increase by five per cent or the velocity of circulation must increase by five per cent. In either case, if this growth is not met by a concomitant increase in the supply of goods and services, it becomes inflationary and the system collapses. But a perpetual increase in the supply of goods and services will eventually destroy the biosphere. So how do we stall this process? Even when usurers were put to death and condemned to perpetual damnation, the practice couldn't be stamped out. Only the communist states managed it, through the extreme use of the state control Ewa professes to hate. I don't yet have an answer to this conundrum. Does she?

Yes, let us fight both corporate power and the undemocratic tendencies of the state. Yes, let us try to crack the problem of capitalism and then fight for a different system. But let us not confuse this task with the immediate need to stop two degrees of warming, or allow it to interfere with the carbon cuts that have to begin now.

Ewa's second grave error is to imagine that society could be turned into a giant climate camp. Anarchism is a great means of organising a self-elected community of like-minded people. It is a disastrous means of organising a planet. Most anarchists envisage their system as the means by which the oppressed can free themselves from persecution. But if everyone is to be free from the coercive power of the state, this must apply to the oppressors as well as the oppressed. The richest and most powerful communities on earth - be they geographical communities or communities of interest - will be as unrestrained by external forces as the poorest and weakest. As a friend of mine put it, "when the anarchist utopia arrives, the first thing that will happen is that every Daily Mail reader in the country will pick up a gun and go and kill the nearest hippy".

This is why, though both sides furiously deny it, the outcome of both market fundamentalism and anarchism, if applied universally, is identical. The anarchists associate with the oppressed, the market fundamentalists with the oppressors. But by eliminating the state, both remove such restraints as prevent the strong from crushing the weak. Ours is not a choice between government and no government. It is a choice between government and the mafia.

Over the past year I have been working with groups of climate protesters who have changed my view of what could be achieved. Most of them are under thirty, and they bring to this issue a clear-headedness and pragmatism that I have never encountered in direct action movements before. They are prepared to take extraordinary risks to try to defend the biosphere from the corporations, governments and social trends which threaten to make it uninhabitable. They do so for one reason only: that they love the world and fear for its future. It would be a tragedy if, through the efforts of people like Ewa, they were to be diverted from this urgent task into the identity politics that have wrecked so many movements.


1. Ewa Jasiewicz, 21st August 2008. Time for a revolution. Comment is Free.

Copyright (c) 2006

Bill Totten

Saturday, August 30, 2008

No Different This Time

by John Michael Greer

The Archdruid Report (August 27 2008)

Druid perspectives on nature, culture, and the future of industrial society

The chorus of "Georgia On My Mind" that has flooded the Western media with broken-record persistence for the last few weeks, though it's accomplished little else, has at least provided a few delicious snippets for connoisseurs of historical irony. We've seen the same politicians who backed the invasion of Iraq and the partition of Serbia insist that nations should not invade other nations, and that the territorial integrity of even the most jerry-rigged of today's nation-states must be considered sacrosanct. Even by contemporary standards of moral posturing, this is breathtakingly ingenuous.

The Russians, for their part, are having none of it. The insistence of Western powers on treating Russia as a conquered province, rather than a proud nation with valid security concerns along its own borders, made an explosion inevitable; goad a bear often enough, and sooner or later it will turn on its tormentors. The war in Georgia, furthermore, is much more likely to be the beginning of a Russian response than the end. When the United States raised the stakes by signing an agreement to base missiles in Poland, the Russian government promptly replied by promising a military response. It seems unduly optimistic to hope that this response will consist of harmless gestures.

Amid the gunfire and oratory, though, a point with much broader application seems mostly to have been missed. Fifteen years ago, by most definitions of the term, Russia was a failed state, with a government coming apart at the seams, a military on the verge of mutiny, an economy being systematically looted by Western business interests and homegrown plutocrats alike, and an impoverished population struggling to survive in the face of food shortages, collapsing public health, and spreading pockets of local anarchy. All this followed one of the most dramatic discontinuities in modern history, the collapse of the Soviet Union.

That collapse has been used as a central piece of evidence for the claim that other industrial nations, especially the United States, could face similar discontinuities in the near future. Uncomfortable though this suggestion might be, it has quite a bit of merit, and several recent books - Dmitry Orlov's mordant Reinventing Collapse (2008) in particular - have made a solid case for the possibility. Still, that case needs to be put in a wider context. Two decades on, Russia is no longer the failed state it briefly became at the bottom of the arc of collapse. Resurgent, resentful, and by no means unwilling to use its substantial natural resource base as a geopolitical weapon, Russia is back, and its return to the international scene as a major player is just as relevant as its earlier collapse.

The Russian trajectory from superpower status through collapse, contraction, stabilization, and recovery makes an interesting contrast, in particular, with the more common imagery of collapse that circulates in the peak oil community and elsewhere these days. While the events of the Soviet collapse were dramatic enough, the things that did not happen during that collapse are in many ways as important as the things that did. Despite economic collapse, for example, urban populations did not turn into starving mobs roving the landscape. Instead, as existing supply chains broke down, local entrepreneurs jerry-rigged new ones, and the backyard gardens of the Soviet era went into overdrive to keep most Russians fed even in the darkest days of the collapse.

In the same way, while Russia's social order frayed to the breaking point and entire regions became battlegrounds for warring criminal gangs, this glimpse into the abyss of a Hobbesian war of all against all was not followed by the vertiginous plunge into anarchy that plays so large a part in today's imagery of collapse. Instead, the great majority of Russians responded by moving in the other direction, backing the reestablishment of state power in the late 1990s even at the cost of individual liberty. Given the way that the rhetoric of democracy had been used to justify the looting of Russia's economy and natural resources in the decade before then, after all, it's hardly surprising that a common bit of Russian humor these days twists demokratiya - the Russian word for "democracy" - into dermokratiya, which works out to "rule by excrement".

More generally, one of the crucial lessons of the Soviet Union's collapse is that it was a self-limiting process. As bad as it was - and as Orlov and others have documented, it was much worse than anything Americans have experienced in living memory - it did not keep on getting worse; it bottomed out, stabilized, and then gave way to recovery. While Orlov's own take on the prospects of American collapse is much more nuanced - and, at least to my mind, much more realistic - it's very common to see this side of collapse roundly ignored in discussions of the fate of industrial society in America and elsewhere.

In these essays, and in much more detail in my book The Long Descent (2008), I've suggested that this gap between the realities of collapse in history and the imagination of collapse in contemporary culture unfolds from the presence of cultural narratives that were originally borrowed from religious sources and repeatedly mapped onto secular history despite their consistent failure to anticipate the shape of any actual future. Recently, that claim has come in for some sustained criticism, ranging from suggestions that it misses the real points at issue to claims that it's simply a rhetorical straw man used to brush aside competing viewpoints.

It's not surprising that an attempt to contextualize today's peak oil debates in this way would come in for criticism. Still, it can be shown that talking about the wider context of those debates is neither an irrelevancy nor a rhetorical gimmick. Perhaps the clearest way to do this is to point to another example of the same phenomenon - one that, just now, shows the relationship of narrative to reality with unusual clarity.

Two or three years ago, it was quite common to hear people insist that investing in real estate was the opportunity of a lifetime, a can't-lose deal guaranteed to make the fortune of anyone canny enough to get on board. An impressive array of pundits, many of them equipped with Ivy League degrees, backed up these claims with books, articles, and seminars arguing that a new economic era had dawned and prosperity was within reach of all. The few critics who challenged these claims were denounced, often in heated terms, for failing to notice the huge and important differences that distinguished the real estate boom from failed speculative bubbles of the past.

Today, with housing prices in freefall and most of the industrial world's largest banks scrambling to stay solvent under a cascade of failed mortgage loans, it's clear that the pundits were wrong - totally, wildly, disastrously wrong - and their critics were right. What makes this relevant in the present context is that most of those critics did not make their case by examining the real estate bubble in fine detail. Instead, they recognized the real estate bubble shared a common cultural narrative with every other speculative bubble in modern history, from the Dutch tulip mania of the 17th century to the tech-stock bubble of the 1990s. They understood, as a result, that whenever anybody claims that a new economic era has arrived and some asset or other will increase steeply in value forever - no matter what the asset is, or what the circumstances happen to be - the proper response is to head for the exits as fast as possible.

This insight proved accurate because the arguments for a permanent real estate boom weren't simply the straightforward response to circumstances that most real estate speculators believed they were. The speculators, and the pundits who encouraged them, were projecting a cultural narrative onto the inkblot pattern of a temporary and, to start with, relatively modest rise in real estate values. That narrative isn't simply the generic conviction that real estate, or tech stocks, or tulips are destined to rise in price forever; it includes nearly all the rhetoric deployed in defense of that indefensible claim. (Read John Kenneth Galbraith's trenchant The Great Crash 1929 and then look through the overenthusiastic articles on real estate that peppered the popular press in 2004 and 2005, and you'll find any number of stock-jobbers' claims from the flapper era recycled, sometimes word for word, for the twenty-first century's first boom and bust.)

One of the essential claims made by the speculative bubble narrative, in turn, is precisely that "it's different this time", and the hard lessons of the past not only can but must be disregarded. Since any speculative bubble you care to name has some unique features - there had never before been a global real estate bubble, for example, and the ramshackle financial architecture tacked together to keep the bubble going was mostly brand new - it's always possible to defend, at least to the satisfaction of speculators, the claim that the bubble in question isn't a bubble and won't pop. Events refute that claim over and over again, but it remains unassailable in each instance until and unless the underlying narrative is seen for what it is.

My argument, basically, is that the narrative of total collapse is another example of the same kind. Since the late 19th century, when religious apocalyptic began to lose its grip on the Western imagination, a narrative as stereotyped and dysfunctional as the narrative that drives speculative bubbles has circulated in the industrial world. That narrative claims that the world faces collapse of a historically unprecedented kind: sudden, complete, and final. Like the bubble narrative, the collapse narrative brings its own rhetoric with it, and applies that rhetoric to currently favored catastrophes - peak oil, global warming, the Y2K crisis, nuclear war, race conflict, every major comet of the last century and a half, you name it - in the same way that the bubble narrative applies its rhetoric to the asset class du jour. Like the bubble narrative, in turn, the collapse narrative always insists that the failures of the past don't matter, because it's different this time.

The narrative of collapse shares another feature with the bubble narrative: it produces consistently inaccurate predictions about the future. Again, people have been predicting collapse in the terms of the narrative for around a century and a half, using arguments identical in form to the ones now being used to justify the same predictions today, and the results have not exactly been good. This isn't simply a function of the future's obscurity, for other approaches - based on other, more nuanced narratives - have yielded better results. Arnold Toynbee and Oswald Spengler both made predictions about the cultural evolution of the modern West, for example, that have proved quite prescient. For that matter, the central argument of The Limits to Growth (1962) - that unlimited economic expansion would bring industrial civilization up against hard planetary limits in the first half of the 21st century, leading to an age of crisis and contraction - seems far more plausible now than it did when first published.

This reasoning undergirds my suggestion that it's crucial to recognize the collapse narrative for what it is, and set it aside as a guide to the future, just as anyone hoping to make sense of economics in the real world would be well advised to start by setting aside the bubble narrative. Insisting that it's different this time, and a way of thinking about collapse that has consistently produced false predictions for a century and a half is going to turn out accurate this once, just doesn't seem plausible to me.

I suspect Dmitry Orlov is right that America is facing a collapse along the same lines as the Russian experience. If that happens, though, it's just as likely that twenty years on, something like the rest of the Russian experience will have replicated itself as well, and an approximation of today's United States will have undergone some degree of recovery from collapse. Equally, other regions of the world will likely be experiencing their own trajectories through the twilight of the petroleum age, and some of those trajectories will include sudden downward jolts of varying severity. Over the long term, as I've suggested, all those trajectories will trace out a broad pattern of decline, but history shows that the decline of a civilization is a complex thing, and there's no reason to think that it will be different this time.


´╗┐John Michael Greer has been active in the alternative spirituality movement for more than 25 years, and is the author of a dozen books, including The Druidry Handbook (2006) and The Long Descent (2008). He lives in Ashland, Oregon.

Bill Totten

Barack Obama and Afghanistan

More of the Same, Packaged as Change

by Marc Herold (August 06 2008)

When asked in Berlin by CNN's Candy Crowley whether he believed the United States needed to apologize for anything over the past seven and a half years in terms of foreign policy, candidate Obama responded, "No, I don't believe in the US apologizing. As I said I think the war in Iraq was a mistake ..."

So what does our contemporary "charmer of change", Barack Obama, propose regarding Afghanistan?

In mid-December 2006, a charter member of the US defense intellectual establishment and enthusiast of precision bombing, Anthony Cordesman, fellow at the Center for Strategic and International Studies, advanced a set of proposals which would allegedly allow the US to win the war in Afghanistan. The essence involves: far greater amounts of military and economic "aid'; the economic aid must be managed from the outside; the aid should focus upon projects like roads, water and to a lesser degree, schools and medical services; NATO allies especially slackers like France, Germany, Italy and Spain need to increase aid to Afghanistan; US military forces are too small "to do the job" because of competing demands from Iraq and, hence, again those same NATO allies must provide larger, stronger and better-equipped forces to engage in combat (without political constraints); and as in Iraq, emphasis needs to be upon proper training of Afghan army and police forces. Cordesman wants the US to furnish an additional $5.9 billion during the current fiscal year. In effect, Cordesman proposes nothing which has not long ago been suggested (even back in the days of Vietnam where the official clamor was for more "aid" and Vietnamizing the fighting).

Candidate Obama appears to have adopted wholesale what Cordesman was proposing about two year ago with one qualification: Obama recognizes that the US's traditional European NATO allies will not provide large numbers of additional fighting forces, hence Obama proposes rotating three divisions or about 10,000 US troops out of Iraq and into Afghanistan.

If we examine candidate Obama's most important prepared foreign policy speech to-date, that given on July 14 2008, we find the elements of what as president he might do in Afghanistan. He forthrightly casts his interest in Afghanistan purely in terms of "making America safer":

I will focus this strategy on five goals essential to making America safer: ending the war in Iraq responsibly; finishing the fight against Al Qaeda and the Taliban; securing all nuclear weapons and materials from terrorists and rogue states; achieving true energy security; and rebuilding our alliances to meet the challenges of the 21st century.

In other words, Obama is committed to "finishing the fight against Al Qaeda and the Taliban", translated as the fight against "Muslim extremism". Notwithstanding that this examplifies a worst case example of fallacious sunk-cost reasoning, George W Bush and candidate McCain would not disagree. He continues

Our troops and our NATO allies are performing heroically in Afghanistan, but I have argued for years that we lack the resources to finish the job because of our commitment to Iraq. That's what the Chairman of the Joint Chiefs of Staff said earlier this month. And that's why, as President, I will make the fight against Al Qaeda and the Taliban the top priority that it should be. This is a war that we have to win .... We need more troops, more helicopters, more satellites, and more Predator drones in the Afghan border region. And we must make it clear that if Pakistan cannot or will not act, we will take out high-level terrorist targets like bin Laden if we have them in our sights ... Make no mistake: we can't succeed in Afghanistan or secure our homeland unless we change our Pakistan policy. We must expect more of the Pakistani government, but we must offer more than a blank check to a General who has lost the confidence of his people.

Resources need to be focused upon Afghanistan because it "is the war we have to win". In July 2008, the International Herald Tribune called it "the war of necessity against Al Qaeda in Afghanistan". Why? Candidate Obama points to Taliban controlling parts of Afghanistan and Al Qaeda possessing an "expanding base in Pakistan". These are alleged to be spawning grounds of "another attack on our homeland". George W Bush and candidate McCain would concur in being in error.

Very solid reasons now exist why Al Qaeda is not interested in mounting Palestinian-style attacks in America. Any attack would have to be bigger than 9/11. As the ever-prescient Mike Scheuer writes,

Al-Qaeda does not want to fight the United States for any longer than is needed to drive it as far as possible out of the Middle East, and its doctrine for so doing has, in Osama bin Laden's formulation, three components: (a) bleed America to bankruptcy; (b) spread out US forces to the greatest extent possible; and (c) promote Vietnam-era-like domestic disunity. Based on this doctrine, al-Qaeda leaders have decided that attacks in the United States are only worthwhile if they have maximum and simultaneous impact in three areas: high and enduring economic costs, severe casualties, and lasting negative psychological impact.

In fact, all three of bin Laden's components have been realized - casualties, costs, and domestic disunity - all without a follow-up to the 9/11 attack.

And how will this victory over radical Islam be accomplished? Obama's recipe for success involves:

o Sending two to three combat brigades (each of 3-5,000 troops) to Afghanistan;
o Pressure NATO allies to follow suit;
o More use of drones, aircraft, et cetera ;
o Training Afghan "security" forces;
o Supporting an Afghan judiciary;
o Proposing an additional $1 billion in non-military assistance each year with safeguards to see no corruption and resources flowing to areas other than Kabul;
o Invest in alternative livelihoods to poppies;
o Pressure Pakistan to carry the fight into its tribal areas and reward it for so doing with military and non-military aid;
o Should Pakistan fail to act in the tribal areas, the United States under Obama would act unilaterally;

New? Change? President George W Bush and candidate McCain have long signed on to exactly these policies. Certainly both would also see Afghanistan primarily through the lens of "making America safer". George Bush Senior did just that during 1988-1990 when America was presumed safer once the Soviets were out of Afghanistan. Then, he cut and ran.

Candidate Obama adopts the Pentagon's military solution - defeating Al Qaeda and the Taliban - without paying much attention to either what gave rise to these groups or to the complexity of tribal society on the Afghan-Pakistan border. Even more importantly, he fails to acknowledge that the current bombing, night-time assaults upon villages, hooding and abducting suspects, kicking down doors and entering women's quarters, et cetera is forging an unlimited supply of recruits to the resistance. No, all we hear is "Our troops and our NATO allies are performing heroically in Afghanistan ..." The complete failure to improve life for those living in rural southern, eastern and northeastern Afghanistan alongside unbridled corruption, profligiate wealth and Afghanistan's current culture of official impunity further stokes the resistance. All we hear is a vague promise of $1 billion more aid per year.

As Patrick Buchanan points out candidate Obama has absolutely no exit strategy from Afghanistan, other than a presumed military victory. He utterly fails to understand the axoim of the guerrilla strategy: the guerrilla wins if he fails to lose. For the guerrilla it's not about winning pitched battles, it's about continuing the fight. The Taliban and associates have no difficulty with that: fighters from the Pashtun borderlands and monies from trhe Gulf States (and eslewhere).

Moreover, Buchanan continues

And, using the old ten-to-one ratio of regular troops needed to defeat guerrillas, if the Taliban can recruit 1,000 new fighters, they can see Obama's two-brigade bet, and raise him. Just as Uncle Ho raised LBJ again and again. What does President Obama do then? Send in 10,000 more?

The aim of shifting two to three US combat brigades to Afghanistan, greatly increasing the use of drones in order to unleash the fire power of Hellfire missiles or the "guided" bombs of B1-B's, letting US Special Forces and Navy Seals Teams loose to sow mayhem in the border regions on both sides of the Durand Line merely serves to continue the status-quo of death and destruction. Yet there are those like Ann Marlowe in the Wall Street Journal who believe that the military solution in Afghanistan is to employ special forces to deal with the "bad guys" infiltrating from Pakistan. For her, "defeating the enemy is best accomplished by highly trained fighters who travel light". Does Ms Marlowe who was thrice embedded with US occupation forces in Afghanistan recall the Green Berets in Vietnam or the Soviet Spetsnaz in Afghanistan?

For some four years, US Special Forces had free reign in the Afghan province of Kunar. With what effct? Kunar today is one of Afghanistan's most volatile provinces just as it was when the Soviets unleashed their elite Spetsnaz units there. Britain could not seal the border between the Irelands with 40,000 soldiers. The Soviets with 120,000 troops under a unified command structure and three times as many Afghan satrap soldiers could not quell the mujahideen resistance. Candidate Obama advocates a policy of escalation simply in order not to lose. In doing such, he follows in the footsteps of Gordon Brown's ambassador in Kabul who threatens "to stay for thirty years" in an endless campaign of despair from which withdrawal is perceived as politically impossible. Thirty years for what? A campaign to prop up an embattled, corrupt, unpopular puppet regime in Kabul, a task for which Britain and its NATO allies are terribly undermanned? No, but rather as Jenkins points out to keep NATO alive in Europe. NATO's agitated chief, Jaap de Hoop Scheffer, certainly appears as a man fighting for his job. He should be as most Europeans see the Afghan conflict as wrong, immoral, America's war, all about oil, and probably lost. For them NATO was created to deter the Soviet Union, not to supply foot soldiers to America's wars in the Muslim world.

Most alarmingly, candidate Obama and others before him (including George W Bush) crudely conflate the Taliban with Al Qaeda when in fact, the two groups share very little and do not regard each other with high esteem. The Taliban and Al Qaeda represent two very different entities. The former comprise an ethno-national phenomenon rooted in space, appealing then and now to a loosely aligned movement, largely of Pashtun Afghans. The Taliban have profound roots in parts of Afghanistan. They form only part of the disparate resistance to the US/NATO occupation (other parts being nationalists, those seeking revenge for injury to family, those involved in poppy cultivation who perceive the West as threatening their livelihoods, those frustrated with Karzai's and the West's failed promises, unemployed men, et cetera). Al Qaeda, on the other hand, is a de-territorialized, stateless organization formed to wage violent jihad anywhere in the world against those deemed to be Islam's enemies. From a group spatially located in Afghanistan during the Taliban era, Al Qaeda has transformed itself into a decentralized, floating coalition of militant groups united in jihad. But for candidate Obama a simple undefined enemy exists: a unified Al Qaeda and Taliban who will be crushed by a few more brigades of occupation soldiers, Global Hawks in the skies and a billion dollars annually. Obama's informal adviser, Afghan scholar Barnett Rubin, has long been arguing that "the problem really is in neighboring Pakistan, where Taliban and Al Qaeda commanders lurk".

Encouraging cross border air and ground attacks raises the ire of the fiercely independent Pashtun tribals in the borderlands and further isolates a weak, post-Musharef regime in Islamabad bent on its own independent course of action. Moreover, Pakistan has lost thousands of its troops in fighting in the tribal lands under Musharef. The recent killing of eleven Pakistani frontier soldiers by US Hellfire misslies promises to be a harbinger of the future. The elected political leaders of Pakistan's borderlands virulently oppose Obama's unilaterialism, for example, the wily governor of the North-West Province, Owais Ghani, spoke out forcefully against Obama's hinting at US incursions.

Pahstun nationalism is far cry from Al Qaeda's world jihad. Indeed, a quite convincing case can be made that the best antidote to a resurgent Al Qaeda would be support for the Taliban. But such fine-tuning escapes candidate Obama and his entourage of former Clinton foreign policy advisers (for example, Susan Rice, Anthony Lake, et cetera) and of others adocating "nation-building". Change? George W Bush, John McCain and Barack Obama are united in advocating policies which cement an alliance between Al Qaeda and the Taliban. They all priviledge a military approach over a civilian one of negotiating.

On the "winning hearts and minds" dimension, candiate Obama promises an extra $ 1 million annually to be spent mostly outside Kabul. The record of US monies budgeted for Afghanistan is clear (See Table at

But how will such U.S funds be brought to a countryside largely controlled by a hostile resistance? Many parts of Afghanistan most desirous of improving everyday living are simply off-limits to non-governmental organizations, let alone the US Government. The US/NATO strategy of relying upon an ink blot of "aid" radiating out from two to three dozen heavily fortified PRT bases and scores of US forward operating bases is at best very limited. So in order to "secure" the countryside which will then be lavished with candidate Obama's annual largesse of an extra billion dollars, the US/NATO needs to either bomb or take ground casualties, expel the resistance, and especially hold territory. Building another well or a school has little meaning in the Pashtun code of honor (Pashtunwali), but the killing of a family member demands revenge be taken against the perpetrator. Simon Jenkins has stressed that American, Canadian, British, Dutch and even Estonian troops (those brave "new Europeans" forming part of the "coalition" of the bribed ) simply snatch and hold towns for a while but are unable to command local loyalty. "They cannot hope to garrison every settlement". Musa Qala retaken by the British with much fanfare is a typical case, a success which is a failure.

In other words, candidate Obama promises nothing other than what already is: more prolonged low-intensity conflict with endless death and destruction. If the US military escalation of the past two years is any indication, a further escalation as he proposes will simply lead to more dead Afghan civilians, a countryiside and towns racked with the deadly explosions of IED's and suicide bombers followed by the destruction unleashed by equally deadly close air support (CAS) strikes. A strong correlation exists during 2004-2007 between levels of US occupation soldiers in Afghanistan, tonnage of bombs dropped and numbers of dead and injured Afghans. Will the monetary value of dead Afghan remain about one-tenth that of an Alaskan sea otter? Will yet more CAS air strikes continue killing ten times more Afghan civilians per ton dropped than the numbers killed in Serbia in 1999? Why should an Obama future be different?

The candidate of change in Afghanistan? History has clearly shown it's easy to invade and conquer Afghanistan but it's terribly difficult to govern and exit honorably. Obama is no Mikhail Gorbachev who took Russia out of the Afghan fiasco when he realized what many Russian leaders had been too scared to admit in public - that Russia could not win the war and the cost of maintaining such a vast force in Afghanistan was crippling Russia's already weak economy. The cost of America's wars in Iraq and Afghanistan was $171 billion in FY2007 and an estimated $195 billion in FY2008.

Candidate Obama, his Clinton era advisers, and sadly all too many others fail to recognize a web of inter-connected, persistent constraints, or of given realties. One might label them as the "five cannots": US/NATO cannot send 400,000 combat troops to garrison Afghanistan's towns, hamlets and countryside (which is a pre-condition for reconstruction to win hearts and minds ); the US/NATO cannot impose a powerful central government upon Afghanistan ; the US/NATO cannot neutralize the very effective least-cost weapons of choice of the Afghan resistance (IED's and suicide bombers); the US/NATO cannot seal the Afghan-Pakistan border and hence will not eliminate the vital sanctuary so necessary to a guerrilla movement); and lastly, the Pakistan government has never been able to dominate its vast tribal borderlands and there is no reason to believe such will change. Those who choose not to understand these "five cannots" advocate change in a vacuum. A military impasse begets a political solution.

The perceived poison of a foreign occupation, the rampant corruption, the all-too-frequent desecration of Islam by the occupiers, the sheer folly of the US/NATO seeking to extend the writ of a central government to the Pashtun tribal regions , the spiraling count of civilian deaths has shifted the Afghan struggle towards a war of national liberation. Anatol Lieven of King's College (London) puts it aptly. Afghanistan is

Becoming a sort of surreal hunting estate, in which the US and NATO breed the very terrorists they then track down.

Candidates Obama and McCain promise more of the same carnage packaged as change.


Marc Herold is an Associate Professor of Economic Development & Women's Studies at the University of New Hampshire. He can be reached at .


Robert Scheer, "Obama on the Brink", (July 22 2008) at

"Transcript of Interview on CNN" (July 25 2008) at

Anthony H Cordesman, "One War We Can Still Win", International Herald Tribune (December 13 2006) at

Speech is reproduced on The Huffington Post (July 29 2008) at

"Talking Sense on the Wars in Iraq and Afghanistan", International Herald Tribune (July 17 2008) at

Mike Scheuer, "Why Doesn't al-Qaeda Attack the US?" (May 29 2008) at

As pointed out by Tom Hayden, "Obama, Iraq and Afghanistan", The Nation (July 15 2008) at

Explored in Thomas H Johnson and M Chris Mason, "No Sign until the Burst of Fire. Understanding the Pakistan-Afghanistan Frontier", International Security 32, 4 (Spring 2008): 41-77

Patrick Buchanan, "Obama's War", (July 29 2008) at

Ann Marlowe, "Afghanistan Doesn't Need a Surge", Wall Street Journal (July 22 2008) at

Hayden (2008), op cit

Simon Jenkins, "A Bad Attack of Beau Geste Syndrome at Our Expense", The Guardian (July 05 2006) at

Eric Margolis, "Why Europeans are not Eager to Die in Afghanistan", (February 13 2008) at

Well argued in Mark Levine, "Obama and the Taliban", Huffington Post (July 25 2008) at

James Gordon Meek, "Afghanistan Experts Say John McCain and Barack Obama are Clueless", New York Daily News (July 19 2008)

Simon Jenkins, "Stop Killing the Talkiban - They Offer the Best Hope of Beating Al Qaeda", The Times (June 22 2008) at

As argued in Juan Cole, "Obama is Saying the Wrong Things About Afghanistan", (July 23 2008) at

An excellent discussion of Pashtunwali may be found in Hamida Ghafour, "Why NATO Misreads the Afghan Rulebook", Globe and Mail (May 05 2007)

Paul Gilfeather, "Coalition of the Bribed, Bullied & Blind", The Mirror (March 22 2003) at

Jenkins, op cit

Sean Rayment, "In Afghanistan even our Successes are Failures", The Telegraph (August 03 2008) at

Belasco (2008), op cit: 18

Occupation forces Commander McNeill has said himself that according to the current counterterrorism doctrine, it would take 400,000 troops to pacify Afghanistan in the long term (from Ulrich Fichtner, "Why NATO Troops Can't Deliver Peace in Afghanistan", Der Spiegel (May 29 2008) at,1518,druck-556304,00.html

The umbrella organization ACBAR (Agency Coordinating Body for Afghan Relief) reported 463 insurgent attacks during May and 569 in June 2008. Nineteen aid workers have been killed this year. The result has been greatly scaled back aid and relief efforts ("Record Afghan Unrest Hampering Aid NGOs", Agence France Presse (August 01 2008) at

See Johnson and Mason (2008), op cit

As Gerard Chaliand, veteran geo-strategist of so-called asymmetrical wars, put it recently, "victory is impossible in Afghanistan ... Today one must try to negotiate", because the Taliban control much of the local power in the south and east of the country (Immanuel Wallerstein, "Afghanistan: Shoals Ahead for President Obama", Middle East Online (August 01 2008)).

Johnson and Mason (2008), op cit: 54

Anatol Lieven, "The Dream of Afghan Democracy is Dead", The Financial Times (June 11 2008) at

Bill Totten

Friday, August 29, 2008

O'Biden: Nader Hits the "MasterCard VP" Choice

by John Nichols (August 23 2008)

Barack Obama's supporters are saying that that Joe Biden is the perfect pick for vice president.

John McCain's supporters are saying that Biden was right when he said Obama was not ready for the job.

Who to believe? How about Ralph Nader.

The veteran consumer activist and frequent presidential candidate - this year bidding as an independent - offers a frank assessment that notes Biden's strengths but also explains why the senator from Delaware does not exactly represent "change we can believe in".

Here is Nader's take:

In naming the MasterCard Senator and pro-war Joe Biden to be his Vice Presidential nominee, Senator Obama has chosen a running mate whose biting primary season criticisms of Obama will be used by McCain.

While Biden has shown backbone by supporting the Violence Against Women Act of 1994, habeas corpus for Guantanamo prisoners and voting for the McCain-Feingold overhaul of campaign finance, it is difficult to see what Biden brings to the Obama campaign other than the possibility of being a rhetorically populist attack man against the McCain campaign.

Biden will have a tough time when people find out that as MBNA's man in the Senate -MBNA has been his biggest financial backer, after contributing $214,000 over his career -he was the long-time champion and key architect of, in the words of Chair of the Senate Banking Committee, Senator Chris Dodd, "one of the worst bills ever", the anti-consumer bankruptcy law, which helped pave the way for the present foreclosure crisis by shifting the risk for engaging in predatory lending practices from predatory lenders to hapless borrowers.

I doubt that the millions of Americans being pushed out of their homes and squeezed on interest rate payments will want to vote for a ticket with Biden's name on it when he was the one who worked through two presidential administrations to ram this legislation through, first with President Clinton who had the good sense to veto it, and then President Bush who had the moral bankruptcy to sign it.

The chief knock on Obama, besides his numerous flip-flops on matters of civil liberties, the war and justice, has been his lack of experience. That Obama ultimately picked the one person who most bluntly criticized his experience and readiness for the Presidency suggests that one of the reasons the Illinois Senator picked Biden was for his foreign policy experience. Does that include his Iraq war support? Does that include his support for the militaristic repression of Palestinians and their homeland instead of supporting the Israeli and Palestinian peace movements for a majority backed two-state solution?

Biden is highly regressive on criminal justice issues. He was the architect of the modern drug war (that is, the Anti-Drug Abuse of 1986), including mandatory minimum sentencing that can be credited with the world record US prison population. On foreign policy, Biden is a hawk who supported the use of military force in Iraq and has voted for every funding bill, put forward by Bush-Cheney

By picking Biden, arguably the most powerful pro-war Democratic Senator, to fill his foreign policy experience vacuum, Obama has squandered his biggest perceived image distinction with McCain, and can no longer ride the coattails of the anti-war movement and the majority of Americans who oppose Bush and Cheney's illegal foreign wars.

Biden, who voted for reauthorizing the PATRIOT Act along with Obama, will not help much with the millions of independent voters who care about the Constitution. Hillary Clinton who after voting, like Biden, for this bill the first time in 2001, decided to vote against the reauthorization of the notoriously misnamed PATRIOT Act.

Coming from Delaware, Senator Biden knows full well the weak Delaware State chartering for large corporations that have, for 100 years, chosen Delaware as a most permissive jurisdiction for the concentrated powers of corporate officers and directors over all the corporate stakeholders, including shareholders and workers. We look forward to his broader responsibility as a vice presidential candidate to see whether it will include support for the long overdue federal chartering of large corporations endorsed by Presidents Teddy Roosevelt and William Taft.

Copyright (c) 2008 The Nation

Bill Totten

Big Business Is Making Sure It Wins the Presidency

by Matt Taibbi, (August 09 2008)

Remember the total, hideous, inexcusable absence of oversight that has been the great hallmark of George Bush's America for almost eight years now? Well, now we're getting to see that same regulatory malfeasance applied to yet another cornerstone of our political system. The Federal Election Commission - the body that supposedly enforces campaign-finance laws in this country - has been out of business for more than six months. That's because Congress was dragging its feet over confirmation hearings for new FEC commissioners, leaving the agency without a quorum. The commission just started work again for the first time on July 10th under its new chairman, Donald McGahn, a classic Republican Party yahoo whose chief qualifications include representing Tom DeLay, the corrupt ex-speaker of the House, in matters of campaign finance.

Apart from the obvious absurdity of not having a functioning election-policing mechanism in an election year in the world's richest democracy, the late start by the FEC makes it almost impossible for the agency to do its job. The commission has a long-standing reluctance to take action in the last months before a vote, a policy designed to help prevent federal regulators from influencing election outcomes. Normally, the FEC tries to root out infractions and loopholes - fining campaigns for incomplete reporting, or for taking shortcuts around spending limits - in the early months of a campaign season. But that ship sailed way too long ago to take the stink off the 2008 race.

"The time for setting the ground rules was earlier", says Craig Holman, a lobbyist with the watchdog group Public Citizen. "There isn't time to do much now".

That's especially true given the magnitude of what we're dealing with here: the biggest pile of political contributions in the history of free elections, nearly a billion dollars given to presidential candidates in this season alone. Because the FEC has been dead in the water for so long, it's likely that we'll still be in the dark about a large chunk of this record manure pile of campaign contributions when we go to vote in November.

But that doesn't mean that a little sifting through campaign records doesn't tell us quite a lot about who's backing whom in these races. The truth is that the campaigns of both Barack Obama and John McCain are being inundated with cash from more or less exactly the same gorgons of the corporate scene. From Wall Street to the Big Oil powerhouses to the military-industrial complex, America's fat-cat business leaders know that the Animal House-style party of the last eight years that made almost all of them rich with bonuses, government contracts and bubble profits is about to come to an end, and someone is going to have to pay to clean up the mess. They want that someone to be you, not them, and they've spared no expense to make sure both presidential candidates will be there to bail them out next year.

They're succeeding. Both would-be presidents have already sold us out. They've taken the money and run - completing the cyclical transformation of the American political narrative from one of monopolistic Republican iniquity to an even more depressing tale about the overweening power of corporate money and the essentially fictitious nature of our two-party system.

In layman's terms, we've gone from being screwed to being fucked. Who knows - maybe Barack Obama will surprise us if he wins the election. But if you look at the money, it doesn't look good.

Thanks in part to the dormant FEC, corporate America has had even easier access to the candidates than usual in its effort to buy off the next government before the crash. In fact, this election has seen some excellent new innovations in the area of campaign-fundraising atrocities. Chief among them is the rise of so-called "joint committees".

It used to be that campaigns could raise a maximum of $2,300 from each individual. Now, both candidates - but especially McCain, who far outstrips Obama in this area - routinely hold fundraisers in which individuals can give far more to a joint committee. Technically, the candidate still pockets only $2,300 in contributions. The bulk of the money raised - in McCain's case, a whopping $70,100, or thirty times the previous limit - goes to the state and national arms of the candidate's party, which can then spend the unprecedented haul on behalf of the candidate. "This allows CEOs to walk in the door and drop $70,100", says Holman. "It basically allows campaigns to exceed the spending limits".

McCain has raised more than $63 million via these joint committees, thanks to more than 1,000 "megadonors" who have each given at least $25,000 to his campaign effort. Obama, by contrast, has some 471 megadonors - and a close examination of their backgrounds underscores some of the differences in corporate America's attitudes toward the two candidates.

One of McCain's chief sources of corporate money is the private-equity firm Kohlberg Kravis Roberts, memorialized for its takeover of RJR Nabisco in the movie Barbarians at the Gate. Through the pretext of joint committees, ten KKR executives have given McCain $285,000, and it's not hard to figure out why. Two of McCain's key campaign proposals - lowering the corporate tax rate to 25 percent and making purchases of industrial equipment fully deductible - would save a single KKR subsidiary, Energy Future Holdings, $49 million.

"Just in his tax policies alone, McCain is saving corporate America $175 billion a year", says James Kvaal, who analyzed McCain's tax policy for the nonprofit Center for American Progress.

McCain has also raked in big contributions from two other giants of the buyout world: the Carlyle Group (famous for its close ties to the Bush administration) and the Blackstone Group (whose co-founder, Pete Peterson, wrote a $28,500 check to McCain after he took home almost $1.8 billion from a public offering last year). McCain has also received monstrous sums from hedge-fund managers, attracted by his pledge to keep the tax rate on their earnings at only fifteen percent. Executives and family members in a single hedge fund, Knott Partners, have contributed some $225,700 to McCain's campaign.

Then there's the predictable influx of cash from would-be military contractors. John Lehman, a former secretary of the Navy whose firm builds the Superferry transport vessel, not only donated $28,500 of his own money, but bundled at least $250,000 for McCain from other donors. Donald Bollinger, who is a contractor on the controversial Littoral Combat Ship, gave $27,300 and bundled a whopping $500,000. Anyone want to bet on a decrease in Naval appropriations in a McCain presidency?

McCain has also received big money from telecommunications magnates. The senator has always been a friend to the industry: Back in 2003, just four days after AT&T sent him a check for $10,500, he sponsored a bill to ban state and local taxes on Internet service. Since 2007, McCain has taken in some $1.3 million from the communications industry. Just four members of the McCaw family, which owns the telecommunications firm Eagle River, have kicked in $123,200. McCain's campaign manager, Rick Davis, was a former lobbyist for BellSouth, Verizon and SBC Communications. His deputy campaign manager, Christian Ferry, was a partner to Davis at Verizon. One of his chief advisers, Charlie Black, is the head of the lobbying firm BKSH and Associates, which represents AT&T. His Senate chief of staff, Mark Buse, worked for AT&T Wireless. All told, of 66 current and former lobbyists working for McCain, some 23 come from the telecommunications industry.

Given McCain's telecom backing, it's not surprising that the senator has had one of his characteristic changes of heart. As recently as last November, McCain was staunchly opposed to retroactive immunity for telecommunication companies that took part in Bush's illegal spying on American consumers, saying their actions "undermine our respect for the law". Now, jammed to the gills with telecom cash, McCain calls himself an "unqualified" supporter of immunity, praising the telecom industry's warrantless wiretapping as "constitutional and appropriate".

All the same, plenty of other evidence suggests that much of Wall Street is betting on an Obama win. In fact, some observers believe that KKR announced a multibillion-dollar public offering this summer because it expects McCain to lose. "They're doing the public offering now so that the compensation can be taxed at the lower rate while Bush is still in office", says a strategist for a major labor union. "They're betting Obama is going to win, and they're getting their money while they can".

Other companies are getting in on the ground floor with the new chief by stuffing money in his ears. Overall, Obama is flat-out kicking McCain's ass when it comes to Wall Street contributions, raking in nearly $9 million from securities and investment executives, compared to $6.2 million for McCain. Obama has received more contributions from Goldman Sachs than from any other employer - more than $627,000 at this writing - not to mention $398,021 from JP Morgan Chase, $353,922 from Lehman Brothers and $291,388 from Morgan Stanley. Even among hedge-fund executives, who have an unequivocal interest in electing McCain, Obama is whipping the Republican, collecting $500,000 more than McCain. All of which begs the question: Why would corporate giants like these throw so much weight behind a man who promises to strip them of billions in tax breaks?

Sadly, the answer to that question increasingly appears to be that Obama is, well, full of shit. He has made no bones about his plans to raise income by soaking the rich, promising to roll back the Bush tax cuts for people making over $250,000, increase the top tax rate on capital gains to 25 percent and raise the top rate on qualified dividends. He has also pledged to deliver a real stomach punch to hedge-fund managers, raising the tax rate on most of their income from fifteen percent to 35 percent.

These populist pledges sound good, but many business moguls appear to be betting that the tax policies, like Obama himself, are only that: something that sounds good. "I think we don't want to make too much of his promises on taxes", says Robert Pollin, professor of economics at the University of Massachusetts. "Not all of these things will happen". Noting the overwhelming amount of Wall Street money pouring into Obama's campaign, even elitist fuckwad David Brooks was recently moved to write, "Once the Republicans are vanquished, I wouldn't hold your breath waiting for that capital-gains tax hike".

Those worried that Obama might be all talk when it comes to needed reform had a real scare in July, when the senator failed to show up to vote for the Stop Excessive Speculation Act, a bill designed to curb rampant oil speculation. Oil speculators provide the perfect microcosm of what happened to the economy under Bush. Back in 2001, investment banks like Goldman Sachs and JP Morgan got together and created an online exchange called the ICE for trading energy commodities. The ICE ended up buying the British-regulated International Petroleum Exchange; it then opened trading windows in the US, allowing Wall Street investment banks to make oil-futures trades on American soil, on their very own commodities exchange, without any federal regulation whatsoever.

"In financial terms, they were playing blackjack at tables where they themselves were the dealers, in casinos they themselves owned", says Warren Gunnels, a senior policy adviser to Senator Bernie Sanders. "It was crazy". Trading on the ICE had a massive impact on US gasoline prices, and more than one legislator wondered if energy speculators were manipulating the market, as energy traders like Enron had been before. The speculation bill was designed to regulate the ICE and place limits on trades. But on the day before Obama returned from his eight-day, eight-country, megadazzling international photo op, Democrats failed by a vote of 50-43 to force a vote on the bill, as heavy lobbying by investment banks like Goldman Sachs torpedoed the effort.

Not only did Obama not show up to vote, he appeared at a public forum three days later flanked by Jon Corzine and Robert Rubin, two former Goldman executives, to discuss how to revive the economy. Here you have the basic formula of campaign contributions in a nutshell: Powerful investment bank gives big money to candidate, needed reform requires candidate to cross said investment bank, candidate pussies out and finds way to be gone at the moment of truth, candidate resurfaces later in arms of aforementioned investment bankers.

Obama's absence on oil speculation was eerily reminiscent of his previous decision to change his mind about giving retroactive immunity to telecom companies for spying on Americans. Obama withdrew his pledge to filibuster the immunity bill right around the time the Democrats announced that AT&T would be sponsoring the Democratic convention. So no filibuster on retroactive immunity from the top Democrat - but conventiongoers in Denver will get tote bags emblazoned with the AT&T logo. So that's something.

Look, we all knew this was coming. Once Obama vanquished Hillary Clinton, it was inevitable that his campaign would start roping in the Clinton moneymen for the fall confrontation with McCain. Among those snagged by Obama were Iranian millionaire and former Democratic Senatorial Campaign Committee chairman Hassan Nemazee, venture capitalist Alan Patricof and the touchingly plugged-in Wall Street power couple Maureen White (First Boston) and Steven Rattner (Morgan Stanley). Rattner and White, the former chief fundraiser for the DNC, are longtime friends of the Clintons; she quit the DNC in 2006 to build Hillary's war chest, while he backed Joe Lieberman against Ned Lamont and flirted with a Mike Bloomberg presidential run. Such are the people who are now whispering in Obama's ear.

Over the summer, the Obama camp has relentlessly pushed the notion that its record fundraising is mainly the result of small online donations. The first presidential candidate to raise so much money that he could afford to eschew the spending limits that would be imposed if he accepted federal matching funds, Obama claims that he opted out of public funding so that he could have a campaign "truly funded by the American people". And indeed, he has a record number of small donors, with some 45 percent of his campaign cash coming from contributions smaller than $200.

Which is a great percentage - but it's only eight points better than John Kerry in 2004 and only fourteen points better than George Bush that same year. In truth, Obama is still raising tons of money from big corporate donors. In June alone, as Obama was raking in more than $30 million from small donors, he also bagged $6 million in a single fundraiser at Ethel Kennedy's home in Virginia and another $5 million at an event in Hollywood. But time and time again, you see Obama aides boasting about how the day of the big-dollar donor is over. "More people are involved, and I think that necessarily dilutes the impact of any individual - which is probably a good thing", one prominent Obama supporter recently declared. This staunch champion of the small donor happened to be none other than James Rubin, son of former Goldman Sachs co-chairman Bob Rubin.

Obama's decision to embrace Clinton's moneymen coincided with his decision to attend a public forum on economic policy with an A list of Clinton-era economic advisors, including Rubin and Corzine. "The message is that he's going to be a friend to Wall Street, just as Bill Clinton was a friend to Wall Street", says Pollin. "Wall Street will want to be at the head of the table".

By now it should be clear what type of service Wall Street will demand. The financial disaster dumped on us by eight years of Bush's mismanagement has left America with the prospect of short-term solutions in the form of massive government bailouts, and long-term solutions in the form of reform and regulation. A big chunk of the $1 billion in cash that will be spent on the presidential race this year represents Wall Street's desire to make sure that both candidates can be counted on to make the short-term bailouts large and passionate, and the reforms gentle and halfhearted. "They want to make sure there's socialism when they need it - bailouts - and capitalism when they need that", says Pollin.

Both candidates are already falling all over themselves to signal their business-friendly approach to the economy. McCain entered this election with a reputation as a strict Goldwater conservative. "I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly", he declared. McCain also sounded off in the past about troubled quasi-governmental lenders Freddie Mac and Fannie Mae, pledging to "make them go away" and to strip them of their right to lobby.

But this year, McCain - perhaps emboldened by the $238,100 he got from seven JP Morgan Chase executives or the $500,000 bundled for him by Chase executive James Lee Jr - caved in and supported Chase's outrageous government-backed acquisition of Bear Stearns. He also backed the recent bailout of Freddie Mac and Fannie Mae - no surprise given that former Fannie Mae lobbyists are serving as his chief of staff and the head of his vice presidential vetting panel.

Obama also supported the Freddie Mac-Fannie Mae rescue, and that, too, is no surprise, given that he hired one former chairman of Fannie Mae to chair his vice presidential vetting panel and hired another former Fannie Mae chairman to serve as his consultant on housing issues. Most of us will never get within a hundred miles of a single Fannie Mae chairman, but Obama has already hired two - and he isn't even president yet.

This, folks, is the way of the world. Forget all the promises to make the rich pay their fair share. As the candidates get closer to office, the actual paying customers move to the front of the line.

Sadly, both candidates have an extensive history of being dependable pals of campaign contributors. Back in 2000, when Obama was a state senator in Illinois, an entrepreneur named Robert Blackwell Jr hired him to be his lawyer, paying him a monthly retainer of $8,000 - big money for a part-time legislator with an annual salary of just $58,000. A few months later, Obama sent a letter urging state tourism officials to give a grant to one of Blackwell's companies, the amusingly named Killerspin, to fund a table-tennis tournament. Killerspin received $320,000 in public funds; Obama pocketed $112,000 in fees from Blackwell.

So far this year, Blackwell has bundled more than $100,000 for Obama's campaign. Looks like there's going to be a shitload of table-tennis tournaments all across America next year.

McCain also likes to write letters for big contributors. In 1998, four months after BellSouth contributed $16,750 to the senator, he sent a letter to the FCC asking it to give "serious consideration" to the company's request to enter the long-distance market. He later wrote letters on behalf of Paxson Communications, which donated $20,000 and let him use their company jet, as well as Ameritech and SBC Communications, which raised $120,000 for McCain at a time when they were seeking permission to merge.

McCain's still sticking by that gang. Former Ameritech chairman Richard Notebaert bundled more than $100,000 for him this year, and two of McCain's key fundraisers, Peter Madigan and Tim McKone, hail from SBC. The point is that politicians are intensely loyal to the people who give them money - and not anywhere near as loyal to the promises they've made to suckers like us. No matter who's in the White House, the direction of the government has remained remarkably stable. Clinton's treasury secretary, Rubin, was a Goldman Sachs man; Henry Paulson, the current secretary under Bush, is also a Goldman Sachs man. It'll probably be a Goldman man again next year. Meet the new boss, same as the old boss. In sickness or in health, the faces may change, but the money remains. "It's not an accident that both administrations picked for leading economic advisers people from Goldman Sachs", says Pollin.

The really distressing thing about all of this is the signal it sends to Americans. Goldman Sachs posted a record profit of $11 billion last year, much of it from betting against the subprime mortgage market they themselves helped to fuck up. That little energy exchange Goldman set up, the ICE, made a profit of $240 million last year, as gas prices skyrocketed. It may suck to be you right now, but all that pain isn't so bad if you are a big oil speculator.

When you live in million-dollar Manhattan townhouses and make billions in profits betting on the pain of the ordinary foreclosed homeowner, you shouldn't get to run around on TV with the prospective president on your arm. You should be hung by your balls. But that's not the way it works, and despite what you might have heard about "change", it probably never will be.

For all the excitement that Barack Obama has garnered, and all the talk about a new day in Washington, it would be tragic if the real legacy of his election victory was to finally expose the essentially unchanging, oligarchic nature of our political system. It's the same old story: Money talks, and bullshit walks. And don't be surprised if we're the ones still walking after November.


Matt Taibbi is a writer for Rolling Stone.

(c) 2008 All rights reserved.

Bill Totten http://http//

Thursday, August 28, 2008

Foreclosure Phil

Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown.

by David Corn (May 28 2008)

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Senator Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Senator John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up eighty percent, but its staff grew only twenty percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited - at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms - setting off a wave of merger mania.

But Gramm's most cunning coup on behalf of his friends in the financial services industry - friends who gave him millions over his 24-year congressional career - came on December 15 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush vs Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (Republican of Indiana), the chairman of the agriculture committee, the measure had been considered dead - even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it", says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork - far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps - and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century".

It didn't quite work out that way. For starters, the legislation contained a provision - lobbied for by Enron, a generous contributor to Gramm - that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Wendy later joined the Houston-based company's board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill - which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers - a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark", says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing". Betting on the risk of any given transaction became more important - and more lucrative - than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages". Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets".

These unregulated swaps have been at "the heart of the subprime meltdown", says Greenberger. "I happen to think Gramm did not know what he was doing. I don't think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause". In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."

Now, belatedly, the feds are swooping in - but not to regulate the industry, only to bail it out, as they did in engineering the March takeover of investment banking giant Bear Stearns by JPMorgan Chase, fearing the firm's collapse could trigger a dominoes-like crash of the entire credit derivatives market.

No one in Washington apologizes for anything, so it's no surprise that Gramm has failed to issue any mea culpa. Post-Enron, says Greenberger, the senator even called him to say, "You're going around saying this was my fault - and it's not my fault. I didn't intend this."

Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. In 2003, he left the Senate to take a highly lucrative job at ubs, Switzerland's largest bank, which had been able to acquire investment house PaineWebber due to his banking deregulation bill. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. There was a moment of poetic justice when ubs became one of the subprime crisis' top losers, writing down $37 billion as of this spring - an amount equal to its previous four years of profits combined. In a report explaining how it had managed to mess up so grandly, ubs noted that two-thirds of its losses were the fault of collateralized debt obligations - securities backed largely by subprime instruments - and that credit default swaps had been "key to the growth" of its out-of-control cdo business. (Gramm declined to comment for this article.)

Gramm's record as a reckless deregulator has not affected his rating as a Republican economic expert. Senator John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm's flop of a presidential campaign. (Gramm spent $21 million and earned only ten delegates during the gop primaries.) In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he's hailed McCain's love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. "If McCain gets in", frets Lynn Turner, a former chief sec accountant, "we'll have more of the same deregulatory mess. I like John McCain, but given what I know about Phil Gramm, I wouldn't vote for McCain."

As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market. In John McCain, he has gained an important customer, so his stock has gone up in value. And there's no telling when the Gramm bubble will burst.


David Corn is Mother Jones' Washington, DC bureau chief.


Subprime 1-2-3

Don't understand credit default swaps? Don't worry - neither does Congress. Herewith, a step-by-step outline of the subprime risk betting game. - Casey Miner

Subprime borrower: Has a few overdue credit card bills; goes to a storefront lender owned by major bank; takes out a $100,000 home-equity loan at eleven percent interest

Lending bank: Assuming housing prices will only go up, and that investors will want to buy mortgage loan packages, makes as many subprime loans as it can

Investment bank: Packages subprime mortgages into bundles called collateralized debt obligations, or cdos, then sells those cdos to eager investors. Goes to insurer to get protection for those investors, thus passing the default risk to the insurer through a "credit default swap".

Insurer: Thinking that default risk is low, agrees to cover more money than it can pay out, in exchange for a premium

Rating agency: On basis of original quality of loans and insurance policy they are "wrapped" in, issues a rating signaling certain slices of the cdo are low risk (aaa), medium risk (bbb), or high risk (ccc)

Investor: Borrows more money from investment bank to load up on cdo slices; makes money from interest payments made to the "pool" of loans. No one loses - as long as no one tries to cash in on the insurance.


This article has been made possible by the Foundation for National Progress, the Investigative Fund of Mother Jones, and gifts from generous readers like you.

(c) 2008 The Foundation for National Progress

Bill Totten

How to Burn the Speculators

Why is the price of oil so high?

Because the Bush administration did to the commodities market what it did to housing.

by James K Galbraith (August 15 2008)

Whenever economies sour, politicians blame speculators. But on occasion, they are right to do so. Speculators did wreak havoc in 1630s Holland, 1720s France, and in the American stock market in 1929. That crash led to the Great Depression and sixty years of tight controls on speculation. Now, thanks to our thirty-year infatuation with free markets, the controls are off, and the mad gamblers are at it again. Yesterday's burst bubble was housing; today's expanding ones are energy and food. True, we have major long-term energy problems that cannot be laid at the feet of speculators. To avoid catastrophic global warming, we will be obliged to reengineer the country, from housing to transport to forests, and also to develop and export the technologies required for the rest of the world to do likewise. Eight years of George W Bush's policies have made this much harder, and during that time the world may have passed "peak oil" - that moment when half the recoverable reserves of conventional oil have been drained and burned - so that from now on short supplies will be endemic. Meanwhile, demand grows, notably from China and India, which account for nearly forty percent of the world's population.

But do supply and demand explain oil prices at $140 per barrel, with voices from Goldman Sachs projecting $200 for next year (a figure that would push gas prices above $5 per gallon) and Russia's Gazprom saying $250, despite a likely US recession? Do they explain the historic price hikes in rice, corn, and wheat, leading to hunger in the developing world? Do they explain the absolutely stratospheric price of copper? No they do not.

Yes, Virginia, speculators can affect the price - if they are large and relentless enough to dominate a market, and especially if they can store the commodity and keep it off the market as the price rises.

Futures markets exist to permit commercial interests to hedge their business risks. For a fee, a farmer (or oil producer) can put a floor under the price at which his product will sell. The forward price is normally a bit lower than the current price, but the contract protects the farmer from a catastrophic price slump - such as may occur in (for instance) bumper years. Speculators buy the futures on the chance that the market price will be substantially higher. They make a respectable profit on what is in effect an insurance function, and a killing in years of drought, flood, and war.

This system works reasonably well so long as speculators do not actually control or manipulate prices. For if they can drive prices way up, they can obviously cash in while the farmer (who has presold his crop) cannot. Strict regulation by the Commodity Futures Trading Commission (cftc) is supposed to prevent that.

But thanks to Phil "nation of whiners" Gramm - the former Texas senator who was until recently John McCain's top economic adviser {1} - futures market regulation went to hell. Under the "Enron loophole" pushed through by Gramm in 2000, energy futures were allowed to escape all federal and state regulation. Gramm embedded that loophole in a surprise 262-page rider, drafted at the behest of Wall Street and Enron, in an 11,000-page appropriations bill on a Friday evening two days after the Supreme Court handed down its Bush vs Gore ruling and as Congress was rushing home for Christmas. In a separate bit of absurdity, in January 2006, the Intercontinental Exchange (ice) of Atlanta, which trades benchmark US oil futures (West Texas Intermediate or wti), came to be treated by the cftc as a British market (the "London loophole") so that US regulators do not even track what is going on. (Even more surreal, the cftc was going to allow trades of US oil futures on terminals located in America to be "regulated" in Dubai; political pressure put an end to that idea in July.)

{1} See "´╗┐Foreclosure Phil" at

Worse still, Gramm's Commodity Futures Modernization Act of 2000 also opened the way for growth in deregulated "credit default swaps" - a way in which financial institutions "insured" that bad loans would not cause them losses. This, combined with other deregulatory moves by the cftc, broadened the "swaps loophole", an enormous backdoor into the commodities markets, basically permitting speculators making bets off the commodities exchanges to be treated as "commercial interests" - like say, farmers - and hence avoid the scrutiny (including limits on the size of their bets) normally applied to financial players. Thus today, when officials like Treasury Secretary Henry Paulson say that speculation is not a factor in the commodity markets, they're not counting hedge funds and investment banks as speculators - even though that's what they really are.

According to Senate testimony on June 3 by Michael Greenberger, who used to head the cftc's division of trading and markets, if swaps were properly labeled, about seventy percent of the oil futures now traded on the New York exchanges would be deemed speculative, not commercial, and subjected to a high degree of regulatory scrutiny.

Okay, let's think this through. First, vast sums of money are flowing through regulatory loopholes into the commodities markets, particularly for oil. Second, spot prices (those charged for immediate sale) in all commodity markets have been soaring. In particular, Americans now pay an average of $4 per gallon for gas. Is it possible that these two events are unconnected? Is it possible that Paulson - former ceo of Goldman Sachs - is right when he says that the price of oil is being driven mainly by supply and demand?

No, and Senate testimony in May by Michael W Masters, a hedge fund manager, illustrates why not. Masters points to the spectacular rise of "index speculation", in which pension funds and other investors invest in the commodities futures markets according to formulas created by, among others, (guess who?) Goldman Sachs. Index speculation investments have risen from $13 billion to more than $250 billion since 2003. Masters calculates that the speculative demand for Texas oil futures from this source is now five times the actual 2003 stockpile (the baseline he used); for corn and aluminum the figure is about nine times; for silver it's a phenomenal fourteen times. There is of course no way that the orders represented by all those futures contracts could be met.

So the futures price goes up. As it does, supplies actually disappear. For instance, copper expert Frank Veneroso believes that 800,000 tons of copper has been hidden away in China, waiting to emerge closer to the market top. For Saudi Arabia and perhaps Russia the matter is simpler: Oil stays in the ground, and the oil not sold boosts the price of the oil that is. As current prices soar, the index speculators obey their computer programs, which tell them to pour still more money into the commodity markets.

There may be a further element at play, according to an April speech by Attorney General Michael Mukasey: "International organized criminals control significant positions in the global energy and strategic-materials markets. They are expanding their holdings in these sectors, which corrupts the normal functioning of these markets and may have a destabilizing effect on US geopolitical interests." To whom exactly Mukasey is referring, he does not say. But that organized criminal interests have the motive, means, and opportunity - handed to them by Phil Gramm - to destabilize the world energy markets seems quite clear.

On these matters, there is a quick fix. Under pressure, the cftc is closing the London loophole. Early in the next administration, Congress must slam shut the Enron and swaps loopholes. Index speculation should be curtailed by making such strategies illegal for regulated pension funds and by imposing limits for all traders on how much they can buy or sell. Investment banks using credit default swaps to enter the commodities markets should be regulated to the standards that apply to speculators, not as if they were heating-oil vendors hedging against a warm winter. Investigations now under way at the Federal Trade Commission, the Federal Energy Regulatory Commission, and the Department of Justice should be intensified, and criminal manipulation of the markets, if detected, should be punished.

Finally, the federal government should burn the oil speculators by selling up to four million barrels a day from the Strategic Petroleum Reserve. And as economist Tom Palley has pointed out, consumers can help too. An awful lot of gas is stored in cars. If people stop topping off and make do with half a tank, they'll back up supply and lower demand. It's a brilliant suggestion and definitely worth a try.

And while this is being done, and especially if all this smoke leads to fire, someone should ask, "What did Henry Paulson know, and when did he know it?"


James K Galbraith is a contributing writer for Mother Jones.

This article has been made possible by the Foundation for National Progress, the Investigative Fund of Mother Jones, and gifts from generous readers like you.

(c) 2008 The Foundation for National Progress

Bill Totten