Geopolitical thread

[Philip]

Well put,the world no longer "dances" to western,Atlanticist tunes!

News of chess games in the Czech Republic,site for a new NATO ABM radar condemned by Russia as part of a new "encircle Russia" strategy of the US/NATO and Estonia,where an alleged Russian mole was caught.

http://www.axisglobe.com/article.asp?article=1662

Czech spying accusations against Russia spark political storm
Recent Czech intelligence reports have sounded the alarm over intensified intelligence activity by Russian and other foreign agencies focused on a planned US missile-defense radar to be built near Prague and on strategic assets set to be privatized by the Czech government.
In its annual report issued on September 25, the Czech counterintelligence service BIS said that Russian agents had been working to stir up public opinion against the radar. "Russian espionage activities in the Czech Republic are currently reaching a particularly high level of intensity," the BIS said, adding that over the last year Russian spies had sought "to contact, infiltrate, and influence people and organizations that have influence on public

US radar site, Brdy
opinion."
In a separate annual report issued on September 29, the Czech military intelligence agency (VZ) backed up the BIS findings, stating it had observed "concrete interest" from "foreign services" in the planned US radar system, which Russia strongly opposes.
The reports have also raised political tensions in Prague, with the center-left opposition accusing the pro-American government of politicizing intelligence ahead of a key parliamentary vote on the radar system later this fall and Senate and local elections this month.
Petr Uhl, a former anticommunist dissident who supports the opposition, says of the intelligence reports is only a political issue before the elections. Others say it's obvious that Russian and other services-- possibly Iranian - would be interested in the radar and more in the Czech Republic. Russia's overall aim in the Czech Republic, the BIS report suggested, may be to weaken NATO and the European Union and achieve at least a partial restoration of Moscow's former "security perimeter" in Central Europe.
The report, which offered few details, also warned about Prague's overreliance on Russian energy supplies and pipelines, and cited Russian efforts to influence the future of electric power generation in the country -- an apparent reference to CEZ, the electricity monopoly due to be sold off sometime next year.
The BIS report said Russian intelligence, often under diplomatic cover, tried to influence Czech politicians and media in order to increase public opposition to the radar. The report said Russian spies also sought to infiltrate unidentified civic groups in the Czech Republic, where opinion polls consistently have shown a strong majority opposed to the radar. The main Czech opposition group to the radar, "No To The Bases," has denied any Russian link.
But Andor Sandor, a former VZ director, who has consulted for the ruling center-right Civic Democratic Party, told RFE/RL that the methods used by Russian intelligence to influence public opinion were well-known. He says, for example, that they have helped publicize information wrongly claiming that the radar would harm the environment, create health problems for local residents, and even cause air-traffic accidents.
Media reports have also cited the possibility that Russian spies are buying up land near the Brdy military zone 90 kilometers southwest of Prague, where the radar is expected to be built. Czech Deputy Defense Minister Martin Bartak has said that the BIS and VZ are actively preventing land around Brdy from falling into the wrong hands.
While the military intelligence report did not name any specific spy agency, it stated that "foreign services" had shown interest in the radar - a point Sandor says likely refers to Iranian operatives. "I would be really surprised if the Iranians did not work here," he says. "When you openly state that the radar station is here to stop the Iranian threat of the nuclear and ballistic-missile program, then it's just quite understandable that the Iranians would like to know what's going on."
In recent years, Czech intelligence has warned increasingly about foreign spy services stepping up their activities in the country. But Uhl says the latest reports strike him as a return to the past, when Czechs who had contact with foreigners were accused of conspiring against the communist government. "I wouldn't like that these times come back," he says.
In a sign of the political storm brewing over the radar issue, the Defense Committee of the lower house of the Czech parliament canceled a hearing it was set to hold on October 1 to discuss the intelligence reports. Czech political sources say the hearing will not take place until after the elections on October 17.

Weekly newspaper analyses the real cost of high-ranking Estonian official’s betrayal

There’s nothing redeemable about selling state secrets to a nation’s long-term oppressor, especially when residual skepticism of Russia has existed in the Baltic states since their independence in the early 1990s, The Baltic Times writes, commenting on recent Herman Simm’s treason scandal.
Even more alarming, a British former civil servant has informed The Baltic Times that this might not be a one-off case, but part of a wider breach of national security. The source, who worked for the civil service throughout the 1990s, claims that Russia exerts great pressure on Estonian government officials to sell secrets. He realized this while handling a senior official of the Estonian police who sought UK asylum to escape the demands of the Russian secret service in Estonia. A senior government source told The Baltic Times he was not surprised when the Simm case came out and the government knew there had been a leak for some time.
There is a genuine feeling that Estonia has, through Simm’s treason, weakened NATO’s position with Russia, particularly as Simm may have betrayed secrets concerning other member states. The other side of the argument suggests that Estonia’s detection and efficient handling of Simm’s treason proves to NATO that it can be considered a responsible and trustworthy member state. “I can say that the legal protection has acted very professionally. Therefore I cannot agree that Herman Simm’s case would have damaged

Herman Simm
Estonia’s reputation — rather the opposite. Eliminating defense risk so professionally definitely raises Estonia’s reputation,” parliament member Marko Mihkelson said.
NATO, on the other hand, has seemed somewhat blase about the whole affair, offering nothing more than an abrupt “no comment” when questioned by the Estonian press.
Speaking at Tartu University last week, former NATO Secretary General Lord Robertson told audiences that Russia was not a threat to NATO or the Baltics, apparently continuing to toe the line after leaving the organization in 2004. Despite talking on the subject of international security, Simm’s recent treason conviction apparently didn’t warrant a mention. If Robertson’s perspective is any indication, it would seem that NATO is more concerned with relieving Baltic anxieties than actually addressing the serious consequences of Simm’s treason, The Baltic Times concludes. A less contentious issue that has arisen from the case is the Estonian penal code’s light punishment for treason, a meager three to 15 years’ imprisonment, the paper notes. Given the potentially severe consequences of betraying national security, the punishment hardly seems to fit the crime.
Around the globe treason is considered among the most damnable of offenses, and punishment is categorically firmer than that found in Estonia. This begs the question of why Estonia is so light in its sentencing, especially when its national sovereignty may realistically come under threat from such actions. At the very least, a stiffer penalty might act as a crude deterrent for those tempted to repeat Simm’s treachery.

[Philip]

Blast from the past! Will we se at some future date,the true architects/conspirators of the Georgian invasion of S.Ossetia?

http://www.telegraph.co.uk/news/worldne ... -show.html

Sir Anthony Eden's cabinet discussed concealing Suez 'collusion', records show
Sir Anthony Eden's cabinet openly discussed how to mislead the public and international community over a secret pact with France and Israel to seize the Suez canal, documents released after more than 50 years show.

By John Bingham
Last Updated: 12:17AM BST 03 Oct 2008

British Prime Minister Sir Anthony Eden [left] welcoming French Head of Government Guy Mollet to London in 1956 Photo: AFP/GETTY
Detailed notes of discussions during the Suez crisis of 1956 taken by the Cabinet Secretary Sir Norman Brook show the extent to which the British Government sought to cover up its "collusion" with Israel as a pretext for invasion of Egyptian territory after Nasser's nationalisation of the strategically important waterway.

Previous documents have confirmed that Eden held secret talks with French officials in October 1956 to formulate a plan in which Israel was to attack Egypt allowing France and Britain to step in, supposedly as peace keepers, to seize the canal.

Following Israel's invasion on October 29, Britain and France made a joint move on Port Said in Egypt on the night of November 5 to 6. But the adventure ended in humiliation for the two countries when they were forced to withdraw under pressure from the United States as well as the UN and Soviet Union.

The secret Anglo-French plan was concealed from the public at the time and Prime Minister Eden actively denied any knowledge of Israeli action to the House of Commons.

But Sir Norman's notes of the cabinet discussions show the extent to which the cabinet was aware of the plan, first fretting over indications that Israel was considering backing out of the invasion and then following its progress closely once it had begun.

Details of discussions covering the entire period of the crisis are contained in Sir Norman's official diary, which has been released to the National Archives for the first time.

On October 23 Eden told the cabinet that Israel was having second thoughts about attacking, warning ministers that Britain would not be able to hold up its military preparations by more than a week.

Then on November 20 1956, at a time when the increasingly ill Eden had left the country suffering nervous exhaustion, ministers openly discussed how to counter suspicions of the Government's active co-operation with Israel.

Writing in his own shorthand, Sir Norman recorded: "DE (Viscount David Eccles, the minister of works): What line do we take on 'collusion'?"

Iain Macleod, the minister of labour and national service, took the view that there was little in the public domain to back up suspicions of collusion between Britain, France and Israel.

"The 'evidence' is pretty shoddy," he is recorded as having said.

"Could we not say: of course we knew of Israel's intentions and took precautions accordingly. But no prior agreement, no promises of territorial changes, no incitement to Israel to attack."

The diaries show repeated blithe assumptions that America would support British military action.

There is also a further reference to the French prime minister Guy Mollet's extraordinary suggestion at the height of the crisis that the two countries consider a form of merger, with France even joining the Commonwealth.

The suggestion, which prompted amazement on both sides of the channel was first disclosed in documents released last year relating to talks in September 1956.

[RajeshA]

Rising powers: Stratfor

Three completely disconnected events occurred this week that will weave together the tapestry of the next decade – not including the $700 billion Wall Street bailout or the US vice presidential candidate debate.

First, Brazil on October 1 made its short list of finalists to supply it with modern jet fighters as part of a large defense modernization program. The final list included the French Dassault Rafale, the Swedish Saab Gripen NG and the American Boeing F/A-18E/F Super Hornet. By any measure, Brazil is a rapidly rising power, and this has nothing to do with the fact that it has discovered an obscene amount of oil in its offshore regions in the past year. Brazil’s traditional competitors – Argentina and Venezuela – are in the process of mismanaged economic collapse, leaving Brazil with no competitors in its neighbourhood.

Of course, it takes more than incompetent neighbours to make one a regional hegemon. And in many ways – with its ridiculous labour laws, horrible corruption, runaway crime and rampant poverty – Brazil is its own most-limiting factor.
But one of the ways in which Brazil can start acting like a real country – and thus a regional hegemon – is to develop a military with real power projection capabilities. Setting aside a few billion dollars for the purchase and integration of jet fighters is an excellent way to turn potential into reality. The Brazilian moment has not yet arrived, but it may finally be on the horizon.

More notable than what designs made Brazil’s final cut is the design that failed to: Russia’s Sukhoi Su-35.

Brazil is emerging on the world stage. The decisions it makes now will shape its policy – and thus that of the rest of the world – for decades to come. Brazil deliberately chose to go with a Western system for its airpower.

Of the potential options, the Sukhoi was the only system that would have given Brazil the option of challenging US military primacy (which is not to say that there are not solid technical and military reasons why Brazil did not choose the Russian system). The provider of a system can always choose to halt parts, supplies and support should the buyer adopt policies hostile to the supplier (ask the Venezuelans – they’ve got F-16s). American relations with France and Sweden do not need to be love-filled – and right now they are at their warmest in decades – for Washington to be able to pressure them into not supplying offensive products to a rival in it’s own backyard.

Put simply, rising Brazil has either made a conscious decision to pursue a modernisation program that will put it at American mercy or made a conscious decision to not adopt a hostile attitude toward the United States. That does not necessarily mean an alliance is inevitable or even probable, but it does mean that a potential clash of interests has moved from the possible to the rather unlikely.

The second major event occurred in Washington, where the US Senate gave final approval to a US-Indian agreement allowing full nuclear trade between the two states. Until now, India had languished under nuclear sanctions explicitly designed to retard New Delhi’s nuclear weapons and electricity programs.

India too is an emerging power, and, like Brazil, it has been its own worst enemy for decades: over-population and perhaps the world’s best government at stifling innovation and development combined with a particularly vibrant streak of anti-Americanism that, 20 years ago, stopped generating Soviet subsidies for New Delhi. The United States has always viewed India as a potential ally: it is a large market, is democratic, is a rival of China and is sufficiently hedged in by geography to never really be a long-term threat to American interests.

But there has always been the Pakistani problem. During the Cold War, the United States needed Pakistan as a means of securing China in de facto alliance against the Soviet Union. In the jihadist era, the United States needed Pakistan to help fight the Afghan war. No matter how much Washington may have wanted India as an ally for the long haul, it needed Pakistan in the short run.

Well, not anymore. Evolutions in the Afghan war are leading the United States toward considering Pakistan a lost cause – and perhaps even a state hostile to American interests. As that feeling slowly coalesces into policy, India is the natural – even greatly desired – alternative. The nuclear deal does more than simply allow for US industry to help the Indians out with their nuclear program – it is the start of a broad, deep strategic alliance based on concerns about China and Islam.

The third event happened in St. Petersburg, Russia: Germany and Russia held their bi-annual bilateral government summit.

Germany is the closest thing that Russia has to a friend in Europe these days. And considering that Chancellor Angela Merkel is openly distrustful and critical of the Russian government, that is truly saying something. Merkel certainly wants to stand up to Russia – she is from the former East Germany after all and knows full well what it means to live under Russian “influence” – but she has found herself trapped by geography and history. Her country is economically dependent on Russian energy supplies. Even if Berlin could muster the political will to challenge Moscow, and suffer through the energy dislocation and economic weakness that would come from a massive defense build-up, the thought of the Germans rearming to fend off Russian expansionism is something that sows more than a little terror among Germany’s neighbours.

It could be far easier for the Germans to cut a deal with the Russians to share influence in the regions that lie between them. This has happened before – and has been known to lead to a world war. The winds of history are blowing through Merkel’s window, and it would be truly odd for her to not have felt a bitter chill.

And, with that, the broad lines of the next decade have already been sketched. Brazil and India are both emerging as major powers, and doing so in a way that will not challenge – and may well dovetail with – American power. Germany faces a truly agonizing choice: a confrontation that will make it suffer greatly, or a conciliation that will make its neighbours suffer even more.

[svinayak]

Russia is being made a target by smaller nieghbours.

This is similar to the India position where all the smaller nations are being made to join together with TSP taking the lead.



http://www.csmonitor.com/2008/1003/p99s01-duts.html

Putin: Ukraine gave military aid to Georgia in war with Russia
The Russian prime minister called Ukraine's involvement a 'crime,' but still agrees to a gas contract with Kiev.
By Arthur Bright

from the October 4, 2008 edition
Russian Prime Minister Vladimir Putin charged Ukraine with supplying arms and manpower to Georgia during its recent war with Russia, and said if Ukraine's involvement was proven, it would be a "crime."

Russian news and information agency RIA Novosti reports that Mr. Putin made the accusation Thursday during a meeting with Ukrainian Prime Minister Yulia Tymoshenko to sign a new contract on Russian natural gas exports to Ukraine.

"I don't think there is a graver crime than supplying arms to a conflict zone," Putin told his Ukrainian counterpart, Yulia Tymoshenko, during their meeting at the Russian premier's residence near Moscow.

He also said that he regretted "that Ukraine thought it acceptable to supply weapons to the conflict zone."

Putin also said Moscow had evidence proving that Ukrainian military experts were present in the conflict zone during the five-day war that began when Georgian forces attacked breakaway South Ossetia.

The BBC writes that Ms. Tymoshenko said she was confident that Ukraine's involvement in the war in Georgia would not be confirmed. The BBC adds that Putin's accusation "amounted to an attack on [Tymoshenko's] political rival, [Ukrainian] President Viktor Yushchenko," who sets Ukraine's defense policy.

Reuters reports that despite Putin's accusation, he and Tymoshenko agreed to a new deal to gradually increase Ukraine's payments for Russian gas over the next three years. Kiev, which has been paying Russia roughly $180 per 1,000 cubic meters of gas, had been concerned that Russia would require it to immediately start paying market prices, which are more than $500 per 1,000 cubic meters.

The Times of London reports that the Kiev-Moscow talks come amid a power struggle in Ukraine between Tymoshenko and Mr. Yuschenko. The two came to power during Ukraine's 2004 "Orange Revolution," but the government, a coalition of their two parties, has been wracked by infighting ever since. The Times writes that just before the talks, Tymoshenko accused Yuschenko of commandeering her plane to stymie her negotiations with Putin, highlighting one of the key disputes between the two: Ukraine's relationship with Russia.

[sanjaykumar]

The United States has always viewed India as a potential ally: it is a large market, is democratic, is a rival of China and is sufficiently hedged in by geography to never really be a long-term threat to American interests.


Interesting phraseology.

India has virtual bases in Madagascar, soon Seychelles and Central Asia. It has potential base facilities in Fiji, Guyana, Mauritius, Vietnam. It can bear intolerable pressure on Pakistan and Tibet/China-two key areas of American interest over the next 10 years.

With long-range missiles and space-based weapons as well as hypersonic delivery systems, the whole world is one's backyard. As foreign currency accumulates, India will be back in a big way in Africa and the Gulf-Oman, perhaps Yemen.

[ramana]

First need to get control of the Arabian Sea and clean out those pirates as a first step before all these space weapons.

[sanjaykumar]

Pirates? There is more lost to insurance fraud every month, on the high seas.

[ramana]

Pursuing pirates you establish your suzerianity over the seas. it was the loss of the Arabian sea that lead to colonization.

[Philip]

Ramanna is absolutely right,it was the advent of superior European naval power that saw 500 years of colonisation of Asia,primarly India and the subjugation of China through the opium trade.India cannot afford to be the second best IOR naval power.Leaving the USN with its massive nuclear base at Diego Garcia apart,the huge Chinese naval expansion especially its sub forces and the rise and growth of smaller Asian powers of ASEAN like Malaysia,Singpaore,Thailand and the US ally Australia,has complicated the equation.If you add the huge Japanese "maritime sef defene force" and the S.Korean navay,which has started producing German subs like sausages,the IOR is going to get acutely busy.The IN must get a alrger share of the budget or at least a vastly increased sum that will enable it to acquire more capital ships and subs and set up the infrastructure required to maintain a new modernised IN to meet the growing challenges of the 21st century.

[sanjaykumar]

India cannot afford to be the second best IOR naval power.

Indeed one would establish suzerainity by challenging the dominant navy in the IOR not by chasing pirates.

[vsudhir]

India cannot afford to be the second best IOR naval power.

Indeed one would establish suzerainity by challenging the dominant navy in the IOR not by chasing pirates.

Good point. Also, there are many ways to crumble a cookie. Don't go overboard suicidal in 'challenging dominat powers' etc. And definitely crush any two-bit pirates who directly challenge your navy. Else, the perception battle is lost before it begins.

IDeally we would build capability enough to first hold your own in a worst case scenario first. That calls for a few ATVs and ACs - building and not just operating capability. JMTPs etc.

[renukb]

Naval power - Things of the colonial past.... Best suitable for strategicians of 20'th century, not for the 21'st century and beyond. Not very relevant to current world scenerio at least for India, however as long as we can be masters in Arabian sea, Indian Ocean and Bay of Bengal... That suffices our needs in the long run... Put 100 a/c in these 3 seas. Emphasis need to be in protecting our coast line and control region around us.

Future - Air dominance and space is going to be where you need to be dominating if you have to be a dominant force in the world. Anything that floats on water can be destroyed by sheer air dominance and space / missile technology.

[renukb]

Putin Stresses Importance of Partnership Between Russia, Europe
http://www.istockanalyst.com/article/vi ... 79289.html

(Source: Daily News Bulletin; Moscow - English)MOSCOW. Oct 3 (Interfax) - Russia attaches great importance to its relations with Europe, said Prime Minister Vladimir Putin.
"I am very pleased to note that there is a great interest in developing the Russian-European relationship, to which we, too, are attaching great importance," Putin said at a meeting with leader of the European Parliament's Party of European Socialists Martin Schulz at the House of Government on Friday.

In particular, Russia and Europe are very significant economic partners, Putin said. Russia is the third largest partner in terms of export and the fourth largest partner in terms of import in the EU countries, he said.

"I am not even talking about the area that everyone is talking about such as energy. And certainly, as far as politics is concerned we cannot ignore each other, we have to study each other and help each other," the prime minister said.

A conventional understanding of the principles of democracy, striving for peace without parliamentary participation and cooperation are simply not possible, Putin said.

For his part, Schulz said that this meeting is a great honor for him and his colleagues.

"I am saying it on my behalf, on behalf of 218 members of our faction. I would like to note that we do have a great interest in relations with you," said the European socialist leader.

(c) 2008 Daily News Bulletin; Moscow - English. Provided by ProQuest LLC. All rights Reserved.

[renukb]

A Rational Russia Policy?
http://www.washingtonpost.com/wp-dyn/co ... 02951.html

[satya]

America and the New Financial World

Soon enough, America's financial crisis will wind down -- maybe in a month, maybe in a year. Yet regardless of when, this crisis marks the beginning of a new era for the U.S. For more than six decades, from the end of World War II in 1945 until now, the U.S. was the hub of global capital and capitalism. In the years to come, it will remain a vital center, but not the center.
In 1945, after an exhausting three decades of exertion against Germany, the United Kingdom emerged militarily victorious only to see itself economically exhausted. A year later, it was bankrupt, unable to find capital and on the verge of collapse. It had nowhere to turn but the U.S., which then dictated terms that amounted to a withdrawal of Great Britain from the world stage. The U.S. is not yet in the position of Great Britain, and our creditors in China are not yet as we were then. But absent a more humble and realistic attitude toward capital in Washington, that is the path we're headed down.

What is happening to finance today is similar to what happened to manufacturing beginning in the 1970s. Until then, U.S. manufacturing accounted for as much as half of all global output. By the 1970s, Germany and Japan began to exert themselves as manufacturing titans. So did Taiwan, Singapore, Korea and others that had benefited from American aid. The globalization of manufacturing continued, and was accelerated by the information technology revolution of the 1990s. While the U.S. today continues to produce a decent share of global manufactured goods, it is one among many and employs only 13 million people (10% of the workforce) in a sector that in the middle of the 20th century accounted for a third of all jobs. The same thing is now happening with finance.

In the past five years, there has been a transfer of wealth from the U.S. and Europe to Asia, the Middle East and Russia of trillions of dollars for oil and raw materials as well as inexpensive manufactured goods. Whether or not that transfer has been positive or negative for the U.S. economy writ large -- and there is considerable debate on that subject -- the outflow of wealth is a fact.

You can argue that the transfer of dollars to goods-producing countries, China above all, has provided American consumers with products that might otherwise be unaffordable but has had a negative effect on the U.S. labor force. The transfer of wealth to oil-producing states and countries rich in base metals has been an economic drain, especially as the price has spiked and the cost has risen.

That wealth transfer occurred just as the U.S. financial system began to expand its exposure to the housing market. The movement of capital away from the U.S. was one reason hungry banks turned to more absurd forms of leverage. That disguised the erosion of real capital.

Even as that was happening, however, American financial institutions still wore the mantle of global leadership. As China, the Gulf region, India, Brazil and other parts of the world have increased in affluence, they relied on the expertise, acumen and advice of Wall Street. Go to any region of the world and you will find central banks and investment banks staffed by people educated at U.S. business schools and graced with resumes that include time at the formerly premier institutions of Wall Street. Few major deals were brokered without involvement from a U.S. bank or access to Wall Street financing. That is now at an end.

It is at an end for two reasons. One is structural. There are now vibrant economies that don't depend on the U.S., are not heavily levered, and have a burgeoning, confident and ambitious middle class. But it is also at an end because those newly affluent regions of the world do not find the U.S. a welcoming home for capital.

There is no small irony in the fact that state-driven capitalism, which is the norm in the Persian Gulf and China, finds the U.S. too restrictive. Sovereign wealth funds, with enough cash on hand to bail out Wall Street and the U.S. housing market many times over, invested billions a year ago but are now saying no.

Uncertain growth for the United States is one reason. But the nature of the American regulatory regime is also to blame. Sarbanes-Oxley and the Patriot Act -- whose anti-money-laundering provisions had the unintended consequence of repelling legitimate investors -- combined with a tax code that places a heavy burden on corporations doing business in the U.S. has meant that, as the wealth transfer has happened, there is less and less inclination for global institutions to place that capital in the U.S.

This is a fact regardless of whether you believe that a high corporate tax rate is morally and fiscally correct. In truth, because of the differentials between high U.S. corporate taxes and the rates in Europe (lower) and Asia (in places nonexistent), even U.S.-listed companies that operate globally keep their profits outside the U.S., and thereby avoid those high taxes altogether.

In addition, the regulatory requirements of listing a company in the U.S. have led many companies to look to other markets and other exchanges for financing, hence the boom of financial centers such as Hong Kong, Dubai and even London.

This should not be a partisan argument. It is perfectly fair to argue that wealthy corporations should pay a greater share of the tax base than struggling middle-class Americans. Fair, but not realistic. The U.S. government can no longer dictate to global capital. Once, when the U.S. was the engine of global growth, when the world needed Wall Street for funding, capital could be taxed and controlled by the fiat of the U.S. government. No longer. The U.S. may have the will; it does not have the power.

The current debate in Washington gives no indication that this reality is understood. Both sides of the aisle are susceptible to a false sense of American economic sovereignty. Companies and countries flush with cash increasingly view U.S. laws, regulations and attitudes as undue burdens. As consumer activity accelerates outside the U.S. and Europe, and as financial centers spring up elsewhere, there is increasingly less inclination and less need for the world to go either to Wall Street or to Main Street.

For now, even with the breakdown of Wall Street, the U.S. remains vital to the global economy. It is the largest market, with a dynamic consumer culture, innovative companies, and is deeply enmeshed in the international system. But it is not the alpha and the omega; it is not the center; and the crisis hitting Wall Street is leading the rest of the world to form bonds that bypass the U.S.

Not all of this need be an absolute negative. In a truly interconnected world, more affluence and activity globally can be a universal benefit. U.S. companies operating outside the United States and Europe have already been reaping the rewards. But failure to accept the new reality will lead to the worst of all worlds.

As the U.S. government plunges into the markets, we must understand that this is the end of an era, and that attempts to unilaterally force capital to stay here will only lead to its continued flight. We are now one market among many, a huge and affluent one to be sure, but a wise nation recognizes both its strengths and its limitations. A more secure domestic capital base depends on the U.S. being seen as a desirable place for investment, and not as King Lear raging against the storm, alone, deluded and abandoned.

[Philip]

China cuts military ties with the US
http://www.telegraph.co.uk/news/worldne ... he-US.html

"SARS a biological warfare project of the mainland"

China has abruptly cancelled several military agreements with the United States in protest at a decision by the US to sell $6.5 billion (£3.7 billion) of arms to Taiwan.

By Malcolm Moore in Shanghai
Last Updated: 12:42PM BST 07 Oct 2008

Beijing has told the Pentagon and the US Defence department that it will not allow a series of senior military visits to go ahead. The trips included one visit to the US by a senior Chinese general.

US naval ships will also be banned from docking in Chinese ports and meetings to stop the spread of weapons of mass destruction will be postponed "indefinitely".

"The Chinese reaction is unfortunate and results in missed opportunities," said Major Stewart Upton, a Defence department spokesman in a statement.

"The bilateral events affected involved senior level visits and humanitarian assistance-disaster relief exchanges that were scheduled to occur between now and the end of November."

However, China will continue to work with the US on nuclear disarmament in North Korea and Iran. The Chinese government declined to comment on the move.

Beijing is thought to be furious at the surprise decision by America to sell Taiwan a package of Patriot guided missiles and Apache Longbow helicopters.

The package is worth the equivalent of one-third of all the arms sales between the two countries in the last 60 years.

China insists that Taiwan is part of its sovereign territory and is building its own enormous cache of weapons on its side of the Taiwan strait.

"The Chinese government and the Chinese people strongly oppose and object to the U.S. government's actions, which harm Chinese interests and Sino-U.S. relations," said the Chinese Foreign ministry, adding that US representatives in Beijing had been summoned to hear the government's wrath.

Relations between Taiwan and China have improved since the election of the pro-Beijing Ma Yingjeou in March. Non-stop flights have recently started between the island and the mainland.

However, Taiwanese politicians attempted to wind up their Chinese counterparts today by donning surgical masks and claiming that the SARS epidemic of 2002 was a biological warfare plot by the mainland.

Banners displaying skulls and crossbones crowded the floor of Taiwan's parliament building after the island's security chief, Tsai Chaoming, told a legislative committee that sources in China suspected SARS had been a weapon.

Mr Tsai, the director-general of the National Security Bureau, added that conclusive evidence had not surfaced, but that the bureau would continue to monitor the situation.

India has also announced it is ready to sign military contracts worth billions of dollars, including a deal to buy 126 fighter jets. Boeing, Lockheed Martin, MiG, Saab and Dassault are vying for the world's richest fighter jet deal in 15 year

PS:I've said before that China has not been truthful about the origin of SARS,bird flu.It appears that the truth is now outing!

[renukb]

Russia to test fire cruise missiles for first time since 1984
http://www.timesonline.co.uk/tol/news/w ... 891656.ece

Russian Bear bombers will be involved in the live firing exercise

Tony Halpin in Moscow

Russia began the most ambitious test of its strategic bomber fleet in almost a quarter of a century today.

Up to 20 bombers are being sent into the air with full combat payloads to carry out live firing exercises of their cruise missiles. It is the largest display of Russian air power since the collapse of the Soviet Union.

Officials said that the bomber runs would test Russia's readiness to deploy its nuclear deterrent. The week-long drill, part of a broader military exercise codenamed Stability-2008, takes place against the background of heightened tensions with the West after Russia's war with Georgia in August.

"During these exercises, for the first time in many years, the crews of Tu-160 Blackjack and Tu-95MS Bear-H strategic bombers will fly missions carrying the maximum combat payload and fire all the cruise missiles on board," Air Force spokesman Lieutenant Colonel Vladimir Drik told RIA-Novosti news agency.

The flights involve more than a third of Russia's combined fleet of Bear bombers and Blackjack supersonic aircraft. The Air Force is stepping up its combat training regime, scheduling 350 live-firing drills for the second half of this year.

Lieutenant Colonel Drik said that the latest exercises in Russia's northern regions were unprecedented in scope and would also involve Tu-22M3 Backfire strategic bombers, fighter jets, and interceptor aircraft.

A former Air Force commander, General of the Army Pyotr Deynekin, said that Bear bombers had carried out live-firing tests of their entire cruise missile capabilities only once before, in 1984, at the height of the Cold War. Blackjack bombers had never previously conducted such tests because it was too expensive, he said.

The bombers will fire their missiles at targets located on a training range, Lieutenant Colonel Drik said. The goal was to "exercise the strategic nuclear deterrence during the exercises".

The Stability-2008 manoeuvres, conducted jointly with neighbouring Belarus, are being watched closely by Western military analysts as Russia flexes its muscles across the globe. Nato fighter jets have repeatedly scrambled to shadow Bear bombers flying close to European and US airspace in the past year after Vladimir Putin ordered round-the-clock patrols to resume for the first time in 15 years.

In a move that threatens a re-run of the 1962 missile crisis, Russia's military has recently talked up the prospect of opening a base in Cuba for its strategic nuclear bombers as a response to the setting up of America's anti-missile shield in eastern Europe. Two Blackjack aircraft landed in Venezuela last month for the first time in what its anti-American president Hugo Chavez called a "warning" to the US.

The Kremlin has also ordered its nuclear-powered warship Peter the Great and a submarine destroyer, Admiral Chabanenko, to take part in war games in the Caribbean with Venezuela, Russia's first naval mission to Latin America since the Cold War ended.

In a calculated show of defiance to Nato, the vessels passed through the Strait of Gibraltar at the weekend in only the second Russian naval deployment in the waterway since the Cold War. They were en route to Libya and Syria, both traditional ports of call for Soviet warships.

Russian marines practised landings under fire at the weekend in exercises on the country's Far East coast as part of Stability-2008. Ships and submarines from the Russian Pacific Fleet, backed by air support, also took part in the engagement.

Russia says that the month-long large-scale military exercises, which continue until October 21, are intended to rehearse strategic deployment of its armed forces, including the "nuclear triad" of air, sea and ground missiles.

[renukb]

China cuts military ties with the US
http://www.telegraph.co.uk/news/worldne ... he-US.html

"SARS a biological warfare project of the mainland"

Chinese have a plan to get Taiwan by 2015, with or with out going to war even if it means a war with USA. This could be a prelude to that.

One has to admire Chinese strategists.

May be the political maps will change again around 2015, big time if Russia times it with China to gain the lost land back and tries to get back most of the land it lost after the collapse of USSR (China and Russiaa could co-operate here) and in the ME region. The same could happen in the Indian sub continent, as TSP might break.

[renukb]

RUSSIA AND GERMANY RESTART THEIR SPECIAL PARTNERSHIP
By Pavel K. Baev

Monday, October 6, 2008
The two-headed Russian leadership is seeking to demonstrate that the “issues” in their relations with key European countries caused by the Georgian “episode” have come to an end in less than a month. Precisely that was achieved in the Russian-German summit in St. Petersburg last week where Russian President Dmitry Medvedev and German Chancellor Angela Merkel presided over several wide-ranging meetings of key ministers and business leaders (Rossiiskaya gazeta, RBC Daily, October 3). The leaders felt obliged to discuss the post-war settlement and confirmed that “differences on this issue have not all been settled yet,” and Merkel insisted that “Georgia’s territorial integrity is not open to discussion.” Medvedev also saw no point in such discussions and was ready to leave those to other forums, such as the Council of Europe, where parliamentarians had a two-day-long shouting match last week resulting, predictably, in a hollow resolution (Kommersant, October 3).

Merkel knew perfectly well that with the German economy sliding into recession, business interests had to have precedence above everything else, so she uttered one phrase that removed most political obstacles to trade and investment—the “time was not ripe” for granting Georgia and Ukraine Membership Action Plans (MAP) for joining NATO. The confirmation that at the December NATO Ministerial meeting Germany would remain opposed to approving the two MAPs was duly issued, and a whole range of business deals made great progress. The central agreement involved the German energy giant E.ON, which after four years of negotiations acquired a 25 percent share in the Yuzhno-Russkoye gas field. The deal is quite profitable for Gazprom, which has bought back 1.44 percent of its shares (currently worth some $ 2.5 billion, down by half from three months ago), but it would perhaps have preferred to receive some assets in Europe (Vedomosti, October 3). The recent arrangement in Italy giving Gazprom direct access to Italian consumers fits better into its strategy of expanding control over European distribution networks (Kommersant, September 29).

For Medvedev and Putin (who was noticeably absent from the St. Petersburg bonding), achieving a breakthrough on the European front was imperative, since they are concerned that the wave of “patriotic” mobilization triggered by the five-day war could carry them too far toward a confrontation with the West (Vedomosti, September 24). Fostering a pre-emptive détente in this quasi-Cold War, Medvedev is recycling his initiative on a new pan-European security pact; but neither Merkel nor Spanish Prime Minister Jose Luis Zapatero, who also paid a visit to St. Petersburg, showed any interest. The lull in security cooperation affects many business interests, and the Moscow stock market has experienced a near-catastrophic “correction.” Putin’s $50 billion rescue package has failed to check this trend, and last Friday the key indices recorded a new 7 percent fall (www.gazeta.ru, Kommersant, October 3). Seeking to encourage a return of European investors, Medvedev resumed his trademark campaign against corruption and held a meeting with Viktor Vekselberg, the oligarch who initiated a bitter conflict in the TNK-BP oil company, in order to announce the end of this high-profile quarrel.

More carefully orchestrated good news could be in the making, including Gazprom’s possible acquisition of a 20 percent stake in the Spanish oil company Repsol, but the topic that Medvedev tries to exploit to the maximum effect is Russia’s financial solvency (www.gazeta.ru, October 3). He emphasizes again and again that the point of origin of the devastating crisis was not the now-proverbial sub-prime mortgages but the disarray in the U.S. budget, and he points out that Russia has free reserves to shore up its partners in need. Illuminating this proposition, some Russian experts argue that Sberbank should have made a bid for Lehman Brothers before that respectable bank collapsed but that new opportunities will certainly emerge (Expert, September 29). What follows logically is the conclusion that the EU and Russia should take more responsibility for managing global finances underpinned by Russian contributions to financial institutions in select European states. Germany remains opposed to setting a common EU fund for rescuing troubled banks, as Merkel told French President Sarkozy who held an emergency summit in Paris over the weekend; and that is fine with Russia, which prefers to deal with its key European allies and not with the EU bureaucracy.

The Europeans are aware that the source of Russia’s wealth is their payments for energy resources, which are still rising as Gazprom’s export price for gas reached an astonishing $500 per 1,000 cubic meters (Kommersant, October 2). By mid-2009 it is certain to drop to $350 followed by a lag in the trajectory of oil prices, but the crucial moment is now; and for the EU there is no alternative to grasping every business opportunity in Russia. There is nevertheless much unease in Europe about a partnership with Putin’s Russia, since Medvedev’s “business-friendly” policy has retrogressed until it is barely discernible. The country’s political development over the last 15 years, from the tanks in the streets of Moscow in October 1993 to the tanks on the outskirts of Tbilisi in August 2008, shows a consistent propensity for relying on military force as the ultimate political argument.

The unwelcome political reality of deepening European dependency upon Russia is somewhat similar to the American asymmetric and unbalanced economic relations with China, which is the main holder of U.S. state debt, although mutual trust is very weak and political compatibility nonexistent. In both Moscow and Beijing the current analyses of the political options available to the West in mitigating the unfolding economic disaster actually encourages their self-assertive and resolutely anti-democratic behavior. The multi-polar world that Medvedev is propagating with the approving nods of Chinese comrades could, however, turn out to be far more brutally competitive and violent than Russia is able to handle (Nezavisimaya gazeta, September 16). The easy victory over Georgia has propelled Russia toward a dangerous trap of self-aggrandizement, and the renewed dialogues with the Europeans create an impression that the price for revisionism is symbolic. Medvedev would perhaps prefer the next step to be a business takeover, but tanks still hold sway.

http://jamestown.org/edm/article.php?article_id=2373424

[svinayak]

Financial Tsunami: The End of the World as we Knew it

By F. William Engdahl

The US Congress’ passage of a slightly modified form of the Bush Administration’s financial bailout plan on the week of October 3 has opened up the spectre for the first time of a 1931-style domino wave of worldwide bank failures. That process is already underway across the US banking sector with the failure, nationalization or forced liquidation in the past weeks of Fannie Mae and Freddie Mac, of the giant Washington Mutual mortgage lender, and the rapid collapse of the nation’s fourth largest deposit bank, Wachovia. That was on top of a wave of smaller bank failures that began with IndyMac in the spring.

The new act has been described as the financial equivalent of the US Patriot Act, the law that gave the Bush Administration powers in violation of Constitutional safeguards under the climate of the September 11, 2001 attacks.

The treasury will have almost unlimited discretionary powers to price and buy distressed mortgage securities, or any other type of securities - including even car loans and student loans - which it considers important. Treasury can buy from any institution of its choice, through a process of its own design, which is as yet unknown and at a pace which the treasury deems appropriate. Moreover, the Paulson Treasury will ‘outsource’ most of the management of the $700 billion purchases to the very financial institutions responsible for creating the crisis. The treasury is reportedly planning to use up to 10 private asset managers to manage the assets purchased under the plan. Big players like PIMCO, Black Rock and Legg Mason are reported likely to be chosen for what will be some of the world's biggest asset management accounts. Heavy private sector involvement from the same community of investment bankers who are perceived to be the villains in this crisis, will make political management of the plan all the more difficult.

Former US Treasury Secretary Paul O’Neill in an interview has called the Paulson plan ‘crazy.’ O’Neill points out as this author and many other economists have, that the new plan does nothing to assure an end to the banking crisis. It merely rewards many of Paulson’s friends on Wall Street at US taxpayer expense. Were the moral backbone of the Democratic Congress at all strong, there would be calls for indictment of Paulson and others in the Bush Administration for criminal misconduct in the most brazen financial swindle in the scandal-ridden American finance history.

As the details of the present crisis reveal, there are huge ideological fault lines making for chaos and a potential meltdown of the Laissez Faire financial system. That present system, which was built on the back of Wall Street financial and banking deregulation since 1987 when Alan Greenspan, a devout follower and close friend of radical individualist Ayn Rand, became Wall Street’s man at the Federal Reserve for almost 19 years, is over now with the failure of the Henry Paulson $700 billion bailout scheme. Governments worldwide now face no alternative but to begin the painful process of putting the financial genie back in the bottle and re-regulating an out-of-control financial system. The failure of the UK Government and the US Government to address that fundamental issue is behind the present crisis of confidence.

A brief look at history

The Great Depression in Germany in 1931 began with a seemingly minor event—the collapse of a bank in Vienna, Creditanstalt, that May. For readers interested in more on the remarkable parallels between that crisis and that of today, I recommend the treatment in my earlier volume, Stoljece Rata.

That Vienna bank collapse in turn was triggered by a political decision in Paris to sabotage an emerging German-Austrian economic cooperation agreement by pulling down the weakest link of the post-Versailles system, the Vienna Creditanstalt. In the process, Paris triggered a series of tragic events that led to the failure of the German banking system over a period of several weeks. The post-1919 Versailles System, much like the post-1999 US Securitization System, was built on a house of cards with no foundation. When one card was removed, the entire international financial edifice crumbled.

Then, in 1931, there was an inept Brüning government in Germany, which believed severe austerity was the only solution, merely feeding unemployment lines to pay the Young Plan German reparations to the new Bank for International Settlements in Basle.

Then, in 1931 George Harrison, a Germano-phobe, was the inexperienced Governor of the powerful New York Federal Reserve. Harrison was a member of the anglophile Skull & Bones, the elite Yale University secret society which also included George H.W. Bush and George W. Bush as initiates. Harrison, who went on to coordinate the secret Manhattan Project on the development of the Atomic bomb under fellow Skull & Bones member, War Secretary Henry Stimson, believed the crisis had started not from abroad but with German bankers trying to make a profit at the expense of others.

Within weeks of rumor and jitters, the New York Bankers Trust, ironically today a part of Deutsche Bank, announced it would be forced to cut the credit line to Deutsche Bank and by July 1931 began to pull its deposits from all big Berlin banks. Harrison insisted the Reichsbank dramatically raise interest rates to stabilize things, only turning bad into worse as a credit crisis across the German economy ensued.

The Bank of England Governor, Montagu Norman, while somewhat more supportive of Luther argued that his friend Hjalmar Schacht was better suited to manage the crisis. On July 13, 1931, a major German bank, Darmstädter-und Nationalbank (Danat) failed. That triggered a general a depositors’ run on all German banks. The Brüning government merged the Danat with a weakly capitalized Dresdner Bank, and made large state guarantees in an effort to calm matters. It didn’t.

New York Fed governor, Harrison, who was personally convinced it was a ‘German’ problem, barked orders to Reichsbank chief Hans Luther on how to manage the crisis according to archival accounts. A foreign drain on Reichsbank gold reserves ensued.

The rest is history, the tragic history of the greatest most destructive war of the 20th Century, with all the suffering that ensued. At that time in history, the American banking elite saw itself, despite a stock market crash and Great Depression in America, as standing at the dawn of a new American Century.

The decline of the American Century

Today, in 2008, some 77 years later, a German Finance Minister stands before the Bundestag announcing the end of that American Century. Today the German government encourages a fusion of Dresdner with Commerzbank. Today Deutsche Bank, which some years ago acquired Bankers Trust in New York in a merger wave, appears to be in a stronger position than its American counterparts as Wall Street investment banks, some more than 150 years old as the venerable Lehman Bros., simply vanish in a matter of days. The American financial Superpower crumbles before our eyes.

In March 2008 there were five giant Wall Street investment banks, banks which underwrote Mortgage-Backed Securities (MBS), corporate bonds, corporate stock issues. They were not deposit banks like Citibank or Bank of America; they were known as investment banks—Morgan Stanley, Merrill Lynch, Goldman Sachs, Lehman Brothers, Bear Stearns.

The business of taking deposits and lending by banks had been split during the Great Depression from the business of underwriting and selling stocks and bonds—investment banking—by an act of Congress, the Glass-Steagall Act of 1933. The law was passed amid the collapse of the banking system in the United States following the bursting of the Wall Street stock market bubble in October 1929.

That Glass-Steagall act was a prudent attempt by Congress to end the uncontrolled speculative excesses of the Roaring Twenties by New York finance. It established the Federal Deposit Insurance Corporation to guarantee personal bank deposits to a fixed sum that restored consumer confidence and ended the panic runs on bank deposits.

In November 1999, after millions spent lobbying Congress, the New York banks and Wall Street investment banks and insurance companies won a staggering victory. The US Congress voted to repeal that 1933 Glass-Steagall Act. President Bill Clinton proudly signed the repeal act with Sandford Weill, the chairman of Citigroup.

The man whose name is on that repeal bill was Texas Senator Phil Gramm, a devout advocate of ideological free market finance, finance free from any Government fetters. The major US banks had been seeking the repeal of Glass-Steagall since the 1980s. In 1987 the Congressional Research Service prepared a report which argued the case for preserving Glass-Steagall. The new Federal Reserve chairman, Alan Greenspan, just fresh from J.P. Morgan bank on Wall Street, in one of his first speeches to Congress in 1987 argued for repeal of Glass-Steagall.

The repeal allowed commercial banks such as Citigroup, then the largest US bank, to underwrite and trade new financial instruments such as Mortgage-Backed Securities (MBS) and Collateralized Debt Obligations (CDOs) and establish so-called structured investment vehicles, or SIVs, that bought those securities. Repeal of Glass-Steagall after 1999, in short, enabled the Securitization revolution so openly praised by Greenspan as the “revolution in finance.” That revolution is today devouring its young.

That securitization process is at the heart of the present Financial Tsunami that is destroying the American credit structure. Citigroup played a major part in the repeal of Glass–Steagall in 1999. Citicorp had merged with Travelers Insurance company the year before, using a loophole in Glass-Steagall that allowed for temporary exemption. Alan Greenspan gave his personal blessing to the Citibank merger.

Phil Gramm, the original sponsor of the Glass-Steagall repeal bill that bears his name, went on to become the chief economic adviser to John McCain. Gramm also went on to become Vice Chairman of a sizeable Swiss bank, UBS Investment Bank, in the USA, a bank which has had no small share of troubles in the current Tsunami crisis.

Gramm as Senator in 2000 was one of five co-sponsors of the Commodity Futures Modernization Act of 2000. A provision of the bill was referred to as the ‘Enron loophole’ because the it was later applied to Enron to allow them unregulated speculation in energy futures, a key factor in the Enron scandal and collapse. The Commodity Futures Modernization Act, as I described in my earlier piece in May, Perhaps 60% of Today’s Oil Price is Pure Speculation, allowed investment bank Goldman Sachs (coincidentally the former bank of Treasury Secretary Paulson), to make a literal killing in manipulating oil futures prices up to $147 a barrel this summer.

Paulson’s impressive interest conflicts

The actions of Treasury Secretary Paulson since the first outbreak of the Financial Tsunami in August of 2007 have been directed with one apparent guiding aim—to save the obscene gains of his Wall Street and banking cronies. In the process he has taken steps which suggest more than a mild possible conflict of interest. Paulson, who had been chairman of Goldman Sachs from the time of the 1999 Glass-Steagall repeal to his appointment in 2006 as Treasury head, had been one of the most involved Wall Street players in the new securitization revolution of Greenspan.

Under Paulson, according to City of London financial sources familiar with it, Goldman Sachs drove the securitization revolution with an endless rollout of new products. As one London banker put it in an off-record remark to this author, “Paulson’s really the guilty one in this securitization mess but no one brings it up because of the extraordinary influence Goldmans seems to have, a bit like the Knights Templar order of old.’ Naming Goldman chairman Henry Paulson to head the Government agency now responsible for cleaning up the mess left by Wall Street greed and stupidity was tantamount to putting the wolf in charge of guarding the hen house as some see it.

Paulson showed where his interests lay. He is by law is the chairman of something called the President's Working Group on Financial Markets, the Government’s financial crisis management group that also includes Fed Chairman Bernanke, the Securities & Exchange Commission head, and the head of the Commodity Futures Exchange Commission (CFTC). That is the reason Paulson, the ex-Wall Street Goldman Sachs banker, is always the person announcing new emergency decisions since last August.

Two weeks ago, for example, Paulson announced the Government would make an unprecedented $85 billion nationalization rescue of an insurance group, AIG. True AIG is the world’s largest insurer and has a huge global involvement in financial markets.

AIG’s former Chairman, Hank Greenberg—a close friend of Henry Kissinger, a former Director of the New York Fed, former Vice Chairman of the elite New York Council on Foreign Relations and of David Rockefeller’s select Trilateral Commission, Trustee Emeritus of Rockefeller University—was for more than forty years Chairman of AIG. His AIG career ended in March 2005 when AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism and legal action for cooking the books, in a prosecution brought by Eliot Spitzer, then Attorney General of New York State.[1]

In mid September, in between other dramatic failures including Lehman Bros., and the bailout of Fannie Mae and Freddie Mac, Paulson announced that the US Treasury, as agent for the United States Government, was to bailout the troubled AIG with a staggering $85 billion. The announcement came a day after Paulson announced the Government would let the 150-year old investment bank, Lehman Brothers, fail without Government aid. Why AIG and not Lehman?

What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.

Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. [2] Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact to put it mildly if true.

That is a tiny glimpse into the man who crafted the largest bailout in US or world financial history some days ago.

As respected economist, Nouriel Roubini pointed out, in almost every case of recent banking crises in which emergency action was needed to save the financial system, the most economical (to taxpayers) method was to have the Government, as in Sweden or Finland in the early 1990’s, nationalize the troubled banks, take over their management and assets, and inject public capital to recapitalize the banks to allow them to continue doing business, lending to normal clients. In the Swedish case, the Government held the assets, mostly real estate, for several years until the economy again improved at which point they could sell them onto the market and the banks could gradually buy the state ownership shares back into private hands. In the Swedish case the end cost to taxpayers was estimated to have been almost nil. The state never did as Paulson proposed, to buy the toxic waste of the banks, leaving them to get off free from their follies of securitization and speculation abuses.[3]

Paulson’s plan, the one essentially rejected on September 29 by the House of Representatives, would have done nothing to recapitalize the troubled banks. That recapitalization could cost an added hundreds of billions on top of the $700 billion toxic waste disposal.

Serious bankers I know who went through the Scandinavian crisis of the 1990’s are scratching their head trying to imagine how crass the Paulson TARP scheme is. That politically obvious bailout of Wall Street by the taxpayers, what some refer to as ‘Bankers’ Socialism—socialize the costs of failure onto the public, and privatize the profits to the bankers—is a major factor behind the defeat of the TARP compromise version. Under Paulson’s scheme, which seems likely to get very little alteration by Congress in coming days, the Treasury Secretary, initially Paulson, would have sole discretion, with minimal oversight, to use a $700 billion check book, courtesy of taxpayer generosity, to buy various Asset Backed Securities held not only by Federal Reserve regulated banks like JP Morgan Chase or Citicorp, or Goldman Sachs, but also by hedge funds, by insurance companies and whomever he decides needs a boost.

‘The Paulson plan is unworkable,’ noted Stephen Lewis, chief economist with the London-based Monument Securities. ‘No one has an idea how to set a price on these toxic securities held by the banks, and in the present market a lot of them likely would be marked to zero.’ Lewis like many others who have examined the example of the temporary Swedish bank nationalization, called Securum, during their real estate collapse in the early 1990’s, stresses that ultimately only a similar solution would be able to resolve the crisis with a minimum of taxpayer cost. ‘The US authorities know very well the Swedish model, but it seems in the US nationalization is a dirty word.’

But there is an added element. John McCain decided to boost his flagging Presidential campaign by trying to profile himself as a ‘political Maverick’ one who opposes the powerful Washington vested interests. He flew into Washington days before the Paulson Plan was to be approved by a panicked Congress and conspired with a handful of influential Republican Senate friends, including Banking Committee ranking member, Senator Shelby, to oppose the Paulson plan. What emerged, with McCain’s backing, was a political power play that may well have brought the United States financial system to its knees, and McCain’s Presidential hopes with it.

Power and greed are the only visible juice driving the decision-makers in Washington today. Acting in the long-range US national interest seems to have gotten lost in the scramble. As I wrote last November in my Financial Tsunami five part series on the background to today’s crisis, all this could be foreseen. It is what happens when elected Governments abandon their public trust or responsibility to a cabal of private financial interests. It will be interesting to see if anyone in Washington realizes that lesson.

Whatever next comes out of Washington, however, one thing is clear, as reflected in what German Finance Minister Peer Steinbrück told the Bundestag. This is the end of the world as we knew it. The American financial Superpower is gone. The only important question will be what and how will the alternative be.

[1] Associated Press, Two charges against ...

[renukb]

Russia Gives Israel No Firm Word on Arms Sales

http://www.nytimes.com/2008/10/08/world ... ?ref=world

MOSCOW (Reuters) — Prime Minister Ehud Olmert of Israel apparently failed to win a firm pledge on Tuesday that Moscow would halt advanced weapons sales to Israel’s enemies.

Wrapping up a two-day visit here, Mr. Olmert said only that he had succeeded in getting President Dmitri A. Medvedev of Russia to understand his fears that Russian-made missiles and other technology could fall into the hands of anti-Israeli guerrillas in the Middle East.

“My feeling is the Russian government understands well the Israeli position and is aware the possible influence such supplying could have on stability in the region,” Mr. Olmert told reporters traveling with him.

But he gave no direct response when asked if Russia had agreed not to sell an air defense system to Iran, which Israel sees as a threat. “We discussed issues of weapons sales and the possibility of weapons sales,” Mr. Olmert said.

The two sides did agree to open a permanent line of dialogue on defense issues and to set up a team to continue discussing weapons sales.

“Russia’s policy will continue to be that it would not hurt Israeli security under any circumstances,” Mr. Olmert said Mr. Medvedev had told him.

Israeli defense officials have said Iran is seeking to buy a Russian antiaircraft system to help fend off airstrikes against its nuclear facilities.

[renukb]

Rabbi: Russia better than Israel religiously
http://www.jta.org/cgi-bin/iowa/breaking/110699.html

Growing religious freedom makes Russia a better place to be Jewish than Israel, a Russian chief rabbi said.

The head Chabad rabbi in Russia, Berel Lazar, says he advises Jews to stay in Russia and not to immigrate to Israel.

In an interview with the European publication Naaseh V'Nishma, he cited growing religious freedom under Vladimir Putin as a disincentive for Russians considering a move to Israel. Lazar said it is becoming more difficult for Jews to uphold their traditions in Israel, while Russia is increasingly open to religious practice.

Chabad in Russia has cultivated close ties with the Kremlin, and Lazar lavished praise on Putin for his outreach to the Jewish community in Russia while serving as the country's president. Putin is now the prime minister.

"Since the collapse of the Soviet Union, the attitude toward Jews here has changed for the better,” Lazar said. “These changes occurred alongside the rise of power of Vladimir Putin."

Lazar cited negative attitudes in Israel toward Russian speakers as the main reason for his recommendation that Russian-speaking Jews stay close to home.

Lazar’s comments come as immigration to Israel from the former Soviet Union continues at an anemic rate and organizations such as the Jewish Agency for Israel refocus their efforts on increasing immigration.

"Just recently I spoke with people who had doubts about whether to repatriate,” Lazar said in the interview. “I told him that it was important to maintain themselves as Jews than go to a physical place of residence. I advised him to consider this, and he remained in Russia."

[renukb]

Time to scrap G-7, says World Bank chief
Zoellick: Flexible new group should include China, Russia, India, others

http://www.marketwatch.com/news/story/t ... dist=msr_2

[archan]

China snaps diplomatic and military contacts with US (google cache)
WHA???
So...what does this mean for the yindoos, cashmere, et. al?

Enraged by the USD 6.5 billion American arms sales package to Taiwan, China today cancelled its planned military and diplomatic contacts with the United States, accusing the Bush administration of "poisoning" the atmosphere which led to the latest stand-off.

[Philip]

It's a snub.Losing face means more to the Chinese than human casualties.See how they ticked off Brits for their poor "trailer" of the London Olympics 2012,when the red double-decker bus was "invaded" by the performers.The "British have no manners",was the Chinese media reaction,saying that they should've queued up.

Interesting news about Russian air strategic bomber exercises,using Blackjacks and Bears.The fact thatey are still using their Bears should be an eyeopener for those in the IN who want to pension off our Bears.Their range-to S.Africa and back without refuelling,is amazing.

[Philip]

Fall of the American Empire!

http://www.telegraph.co.uk/finance/comm ... nning.html

Remember 1929 – what seemed to be the end was only the beginning
The dismemberment of Dick Fuld, Lehman Brothers’ former chief executive, before a Congressional committee on Monday was a compelling, albeit brutal, event.

By Jeff Randall
Last Updated: 11:33AM BST 08 Oct 2008

Comments 76 | Comment on this article

Dick Fuld, former Lehman Brothers' chief executive Photo: AP His televised humiliation was orchestrated by a veteran Democrat, Henry Waxman, whose simple question about Fuld’s alleged $480m of earnings – Is that fair? – hit the banker like a haymaker, rendering him speechless.

As the cameras focused on Fuld’s haunted stare, there was a sense of action replay. Hadn’t we seen this freak show, or at least something remarkably like it, long before Lehman went under – a display of furious inquisitors wiping the floor with Wall Street’s loftiest reputations?

Yes, history was repeating itself: “As the ghosts of numerous tyrants, from Julius Caesar to Benito Mussolini will testify, people are very hard on those who, having had power, lose it or are destroyed. Then anger at past arrogance is joined with contempt for present weakness.

“The victim or his corpse is made to suffer all available indignities. Such was the fate of the bankers. They were fair game for Congressional committees, courts, the press and comedians.”

These are the observations of economist J K Galbraith in The Great Crash, 1929. First published in 1954, his analysis of the greed and self-delusion that led to the unravelling of America’s stock market and the subsequent Depression is undimmed by time.

Replace 1929 with 2008 and the story, I’m afraid, is eerily familiar: a speculative orgy, crescendo, climax and crash. As this plays out, important people – business and political leaders – rely on “the power of incantation” to keep the rest of us calm. Their efforts are doomed to fail.

“Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble,” wrote Galbraith.

As now, too few understood this. Many who foresaw disaster kept quiet. There was a conspiracy of silence. “The foolish thus [had] the field to themselves.”

In the 1920s, says Galbraith, America’s economy had been weakened by “bad distribution of income... bad corporate structure... bad banking structure... dubious state of the foreign balance... and poor state of economic intelligence”. Who can say with certainty that today it is different? Who now wants to defend the promoters of a one-way bet on property? Any takers?

For those hoping that the stock market’s recent “correction” will be followed by a swift recovery, Galbraith puts a wealth warning on suckers’ rallies. “The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximise the suffering.”

It’s worth remembering that a full recovery in the stock market took more than 20 years. During that time, in July 1932 the Dow Jones index was 89pc below its top. In Britain, the reaction was less severe: the market merely halved.

Amid the carnage, there were buy-backs of stock by investment trusts, desperate to shore up their share prices. This resulted in a massive outflow of cash, just when liquidity was at its most precious. “They bought their own worthless stock,” wrote Galbraith. “Men have been swindled by other men on many occasions. The autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.”

Sadly, it was not the last. In 2006, Royal Bank of Scotland spent £1bn buying 54.3m of its own shares at an average price of £18.37. As late as December that year, it paid £141m for 7.1m shares (average price: £19.79). Yesterday, RBS shares fell by 39pc to just 90p.

RBS was not alone. Even after the credit crunch hit the headlines in September last year, when Northern Rock crumbled, Halifax-Bank of Scotland was busy buying its own shares at fancy prices. In 2006-07, HBOS spent £1.5bn (average share price: £10.01). Yesterday, it joined the infamous “Ninety Per Cent Club” of losers, after the bank’s shares dropped 37pc to 94p.

What drove HBOS to carry on with its madcap scheme? Galbraith’s musing on the short journey from hubris to nemesis helps provide an answer: “If one has been a financial genius, faith in one’s genius does not dissolve at once... The cash went out and the stock came in, and prices were not perceptibly affected or not for long. What six months before had been a brilliant financial manoeuvre was now a form of fiscal self-immolation.”

That was certainly true for Lehman’s Dick Fuld. In the end, he was sucking up his own exhaust. He took his last year-end bonus, about $40m, entirely in shares. They went down the drain with the rest of his bank. Before this mayhem subsides, much treasure and many more egos will follow. The comedians await.

PS:
Iceland: dancing on the brink of bankruptcy
http://www.independent.co.uk/news/busin ... 54587.html

For years, Iceland had enjoyed an economic climate more favourable than its weather. But the country was leaving itself bitterly exposed, reports Michael Savage in Reykjavik

Wednesday, 8 October 2008

[renukb]

Germany on Russia: Forgive and Forget
The two economies are too closely intertwined to be endangered over something like Georgia

FRANKFURT, Germany—German Chancellor Angela Merkel isn't known as a great fan of Russia's government, but her tone was remarkably mild when she met President Dmitry Medvedev in St. Petersburg on Oct. 2. She called Russia's incursion into Georgia in August "not appropriate," but otherwise avoided the subject and even enjoyed a lengthy dinner with Medvedev aboard a restaurant ship on the Neva River.

The swift return to cordial relations was recognition of just how intertwined the German and Russian economies have become. Manufacturing everything from luxury autos to machinery to food, some 4,600 German companies are active in Russia and 70,000 German jobs depend on business with the country. Germany is also Russia's largest trading partner, with $45 billion in two-way trade during the first six months of this year. Little wonder that the 25 German businesspeople who joined Merkel in St. Petersburg seemed anxious to forgive the events in Georgia and get back to doing deals with Russian partners. The biggest deal: an agreement allowing energy supplier E.ON (EONGn.DE) to acquire 25% of a huge Siberian natural gas field owned by state-controlled Gazprom (GAZP.RTS). The Düsseldorf-based utility traded control of a 3% stake in Gazprom valued at $5.4 billion, ending years of stalemated negotiations.

Strong German Business Lobby
Merkel's rhetoric on Russia is generally harsher than that of her Social Democratic predecessor, Gerhard Schröder, a pal of Prime Minister Vladimir Putin who now works for Gazprom. But Germany's business lobby makes sure that Merkel never forgets how much their companies depend on the former Soviet state. "Whatever we can do to advise our government, we are doing," says Klaus Mangold, a former Daimler (DAI) executive who leads the East European committee of the German Federation of Industries. In fact, Merkel rarely says anything that would damage German-Russian economic ties. "The economic cooperation is advantageous for both sides," she told an audience that included Medvedev in St. Petersburg. Russia is also a crucial energy supplier: Germany buys 36% of its gas and 32% of its oil from the country.

As trade with Europe and the U.S. has flattened, exploding Russian demand has helped insulate Germany from global economic turmoil. Russian trade is particularly important for sectors such as the German machinery industry, which has boosted exports to Russia fivefold since 2000, to $8.8 billion last year. In the first seven months of 2008, machinery sales to Russia hit $6.4 billion, a 29% increase vs. the same period a year earlier. By contrast, machinery exports to the U.S.—which has a much larger economy than Russia—were stagnant at $9.9 billion in the first seven months. "Russia has more than made up for the U.S.," says Ralph Wiechers, chief economist for the German Engineering Federation.

A Change in Pace
So far, German businesspeople say, growth in business from Russia seems to be cooling but remains high. "It isn't yet exhausted, but it won't continue at the same pace," says Andreas Hartleif, CEO of VEKA, a German maker of plastic window and sliding door frames that has factories in Moscow and Novosibirsk. Not all German exporters are so laid back. Russia is important for German carmakers trying to make up for slower U.S. sales, which the weak dollar has hammered. Not only are Russia's nouveau riche keen to get behind the wheel of a Mercedes or a Porsche (PSHG_p.DE), but they are willing to pay for costly options. Daimler cited Russia as one reason its Mercedes car division eked out a 1% increase in operating profit in the second quarter. Says BMW (BMWG.DE) brand chief Friedrich Eichiner: "We sell 10 times as many cars in the U.S., but Russia is very profitable."

Even though Russia accounts for only about 3% of German exports, for many companies it is one of the few growth markets left. Says Gerd Hassel, economist at BHF-Bank in Frankfurt: "An economic slowdown in Russia would be very decisive for the German economy."

Ewing is BusinessWeek's European regional editor.

http://www.businessweek.com/magazine/co ... 670377.htm

[renukb]

NATO split over Baltic defense
http://www.atimes.com/atimes/Central_Asia/JJ09Ag01.html

Facing a Financial Crisis, European Nations Put Self-Interest First
http://www.nytimes.com/2008/10/08/world ... ty.html?em

BERLIN — The global financial crisis has tested more than lending institutions, stock markets and the nerves of investors everywhere. It has put the bold notion of European unity under the microscope again, where critics say it once more has been found wanting.

Half a century ago, the European Union was born on the ideal of close cooperation between countries torn by war. Since the formal adoption of a common currency, the euro, European leaders have pledged tight coordination of financial policies and promoted new steps toward political integration as well.

Speaking on Saturday of how to manage the financial storm, the French president, Nicolas Sarkozy, declared, “What is of the essence is that Europe should exist and respond with one voice.”

But over the past week as the crisis has radiated around the globe, some of the 27 nations that make up the European Union have broken ranks, opting in ugly disarray for self-interested policies to protect their own citizens and banks first.

At a time when the scale of events would seem to call for concerted action, critics say, the stock and credit market upheavals have elicited raw emotions and reflexive, unilateral actions. After a week of squabbling and rushed meetings, finance ministers agreed Tuesday to take a few modest steps to shore up markets. But they did little to dispel growing doubts that the European Union could grapple collectively with a common crisis.

“This is unprecedented,” said Simon Tilford, chief economist of the Center for European Reform, a research organization in London. “It has exposed the limits of European integration and coordination when presented with a crisis of this magnitude.”

Defenders of the European Union were quick to point out that its system, which lacks a central finance ministry comparable to the Treasury Department in the United States, was not designed for this kind of crisis.

And quietly, they point out that the Treasury Department did not prevent the United States from creating the mortgage mess; nor did Congress, speaking a single language on behalf of a single nation, have such an easy time finding consensus on a response.

“Political will is always in short supply when there’s no risk,” said Jan Techau, director of the Europe program at the German Council on Foreign Relations, who said he was often skeptical of the European Union, but understanding of its present struggles. “You can either say, see how long it took them, look at how impotent they are, or you can say, when push comes to shove, they can really act. You can look at it positively or negatively.”

The meeting of member countries’ finance ministers on Tuesday illustrated the virtues and the flaws of the union. The ministers managed to more than double the minimum level of guarantees for bank deposits in member countries, to around $67,500, but that was less than half what some member states had asked for.

“They haven’t drawn the line in the sand yet,” said Irwin Collier, professor of economics at the Free University in Berlin. He added: “They established a minimum, and you can hear the sound of one hand clapping for that measure. It’s very modest.”

The disarray has raised painful memories of Ireland’s single-handed rejection of the European Union’s Lisbon Treaty in June, dealing a serious blow to the bloc’s efforts to streamline decision making and increase its political clout. It also comes five years after the start of the United States-led war in Iraq in 2003, which exposed deep fissures among European countries. Two months ago, Russia’s invasion of Georgia showed that many of those same differences, particularly between countries like Germany and the more recent member states of Eastern Europe, still remained.

European countries struggled to agree to a joint response to the Georgia crisis, although agree they ultimately did. “The E.U. was utterly divided over Russia,” said Mark Leonard, executive director of the European Council on Foreign Relations and author of “Why Europe Will Run the 21st Century.” “But given that, it did better than anyone expected.”

Beating low expectations is not the same as living up to its purpose. “The divisions mean that the E.U. is definitely punching below its weight,” Mr. Leonard said, pointing to its much larger population, higher combined military spending and an economy that dwarfs Russia’s.

In the caldron of the global financial crisis, Ireland was the first to break ranks, acting unilaterally on Sept. 30 to guarantee the deposits and debts of its six largest financial institutions, a go-it-alone approach that was denounced by its neighbors and regulators in Brussels. They feared that savers across the Continent might flee their domestic banks in a destabilizing rush for the government-backed safety of Irish banks.

Even before a weekend emergency meeting in Paris of the union’s four biggest economies — Germany, France, Italy and Britain — German officials had rejected a proposal floated by the French for a common European bailout fund along the lines of the United States plan devised by Treasury Secretary Henry M. Paulson Jr.

In Berlin, where the financial crisis has emboldened criticism of the no-holds-barred, Anglo-Saxon capitalist model, officials argued that Germany, traditionally the European Union’s largest financial contributor, should not pay for a problem that began elsewhere.

Then on Sunday, Germany unilaterally promised to guarantee all retail deposits in its own banking system to calm the country’s skittish savers. “Trust, the most important currency for financial markets, has been lost,” Chancellor Angela Merkel said Tuesday.

In Brussels, the atmosphere is fraught over the national disarray on the financial crisis, but also with a sense that the criticism is unfair. Without a unionwide banking regulatory system or fiscal policy, any reaction to the crisis was inevitably going to be national in character.

And that, proponents say, only underlines the need for greater integration and regulation and the creation of some kind of pan-European fiscal architecture.

“I believe events have shown that no country is immune from this crisis,” said José Manuel Barroso, president of the European Commission, on Tuesday. “I hope that persuades the most skeptical people of the benefits of joint E.U. action."

Nicholas Kulish reported from Berlin, and Graham Bowley from New York. Carter Dougherty contributed reporting from Luxembourg, and Stephen Castle from Brussels.

[renukb]

Report Warns U.S. Could Lose Space-Spy Dominance
http://blog.wired.com/defense/2008/10/i ... rt-us.html

America has become so lousy at building spy satellites that "the United States is losing its preeminence in space," a Congressional intelligence report declares. What's worse, this decline comes as "emerging space powers such as Russia, India and China" are getting better and better at snooping from above.

The gloomy report, approved last Friday by the House's technical and tactical intelligence subcommittee, was originally obtained by CQ scoopster Tim Starks. "A once robust partnership between the U.S. Government and the American space industry has been weakened by years of demanding space programs, the exponential complexity of technology, and an inattention to acquisition discipline," the document states.

NASA's woes get most of the headlines — especially since the U.S. civilian space program may be forced to depend on Russia to get into orbit. But the American military space effort has been a wreck for quite some time, too. Misty, a super-secret satellite program had to be canceled last year. Since 1999, the military has spent nearly $10 billion to produce a set of so-called "Future Imagery Architecture" eyes in orbit. When they finally managed to launch one in 2006, it died instantly — and then had to be shot down, before it plummeted to Earth. Earlier this year, the once-secretive, once-proud Pentagon agency that oversees spy satellites, the National Reconnaissance Agency, had some of its authority stripped away. More recently, a high-level military commission recommended shuttering the office entirely.

Part of the problem is that the United States has "no comprehensive space architecture or strategic plan [for] current and future national security priorities," the report states. Part of the problem is that the country's military and intelligence agencies have overlapping, confusing lines of authority. Part of the problem is regulatory — export restrictions often get in the way of satellite-building efforts.

But the main issue, the panel concluded, is cash. "Research and development (R&D) receives inconsistent funding despite the link between many failed acquisition programs and insufficient upfront R&D investment. Research investment must be treated like a national priority," the panelists write. "Fixing the issues that exist will not take a monumental effort like the 'Manhattan Project,' but it will take a paradigm shift."

Which may be easier said that done, given how tight government budgets are likely to be in the years ahead.

[renukb]

From Russia with love . . . here's €4bn
http://www.independent.ie/business/euro ... 93072.html

For Russian Prime Minister Vladimir Putin, the financial crisis that is costing his government $200bn (€146m) may also provide an unexpected opportunity to expand his country's influence.

Rejected by its Western allies, Iceland said earlier this week it was in talks to borrow €4bn from Russia to shore up its financial system.

It would be the first time Russia has extended financial assistance to a NATO country.

"This is a case of using foreign aid to pursue geopolitical objectives," said Chris Weafer, chief strategist at UralSib Financial in Moscow. "This is good economics because it shows Russia's in a strong financial position: it can afford to lend €4bn to someone else."

Even with the rouble near an 18-month low and the stock market suffering its worst rout since the 1998 default, Russia has weathered the global credit crunch with $563bn in currency reserves, the world's third-largest. That financial muscle is giving Mr Putin a weapon to challenge the US, which is grappling with its worst financial crisis since the Great Depression.

Iceland sought the loan after taking control of two of the country's largest banks and lending €500m to a third. The request comes as the country's financial system is near collapse.

"If it goes through, this will be a very, very big help for us," said Iceland's central bank chief David Oddsson, who complained that other European nations had failed to rescue Iceland.

"We haven't got so much help from our very good friends in the Western hemisphere; this decision by the Russian government to take up negotiations is very much welcome," said Mr Oddson. Ordinary Icelanders, whose country for decades hosted a US airbase, seemed grateful, too.

Russia's ability to dip into its reserves -- it has pledged almost $200bn to boost liquidity and reduce borrowing costs -- is in stark contrast to the situation it faced nine years ago when reserves stood at just $12.5bn.

When Mr Putin took over as president on December 31, 1999 he inherited a government that had defaulted on $40bn of debt and devalued the rouble in August 1998, wiping out the savings of millions of people and pushing Russia to the edge of bankruptcy.

Since then, the economy has grown by an average of almost 7pc a year, fuelled by high oil prices. Now, the prospects for Russia are clouding as crude prices fall on concern of a global economic slowdown. Oil futures have declined by about 40pc from the record $147.27 reached July 11. Russia depends on oil and gas for more than two-thirds of its export earnings. Russia halted trading yesterday on its stock markets after the rouble-denominated Micex Index slumped 14pc in the first 35 minutes of trading and the dollar-denominated RTS Index plunged 11pc in the first half hour. On Wednesday, Russian President Dmitry Medvedev announced $36bn of loans for banks on top of a $150bn support package pledged in September for companies and lenders.

If Russia can support its stock market and preserve growth, the current financial crisis represents a chance to demonstrate "influence in the world economy and the diminishing influence of the US," said Sergei Markov, an adviser to the Kremlin who is a lawmaker in the ruling United Russia party.

Both Mr Putin (56) and Mr Medvedev (43) have criticised the US for spreading financial contagion around the world.

The US "irresponsibility" led to the global credit squeeze, which may reduce Russian growth to as little as 5.7pc this year, according to the finance ministry, Mr Putin told a cabinet meeting.

A day later, Mr Medvedev said at a forum in St Petersburg that the financial crisis showed that the time when one economy and one currency dominated the world economy was "over".

Former US Treasury Secretary Larry Summers said the talks on a loan between Iceland and Russia highlighted a weakening role for the US.

"It's obvious that economic egoism is the consequence of a unipolar world" led by the US, Mr Medvedev told an international conference hosted by French President Nicolas Sarkozy in Evian, France.

Russia, which belongs to the Group of Eight club of industrialised countries, has argued for the group to expand. Russia hosted a summit of the so-called BRIC countries -- along with Brazil, Russia, India and China -- in May as part of an effort to develop them as an economic and political counterweight to the US and Western Europe.

"The world is changing to Russia's benefit,'' said Mr Markov, who also heads the Institute of Political Studies in Moscow. (© Bloomberg)

[Philip]

No other thread appropriate,but this is the real world,where as the report says,the tentacles of organised crime,in this case the infamous "Camorra" of Naples,earns $200+ Billion per year,including interests in the Milan fashion industry,the project to replace the World Trade Centre,etc.! We have our own desi "camorra",the equally infamous "D-Company",the prosecution of which Mr.Zardari could hasten and prove the truth of his credentials!

http://entertainment.timesonline.co.uk/ ... 907972.ece

Gomorrah, shot in the name of the godfathers
Their web of violence and corruption makes them the bosses of Naples. Now a stunning film exposes the dark world of the Camorra. Our correspondent meets its director, Matteo Garrone

James Mottram
It’s not often that a film director takes his life in his own hands. But that’s what happened when Matteo Garrone shot his chilling crime saga Gomorrah, which took the Grand Jury Prize in Cannes this year. Telling five separate stories of characters at various levels in the chain of command, it’s a bleak tale of the Camorra families of Naples, a highly-connected organised crime clan that makes the Sicilian Mafia look like the Lavender Hill mob.

While directors of Hollywood gangster films have often consulted former mobsters for the sake of authenticity, there was no such possibility for Garrone on what is the sixth feature of his career, though the first to break out internationally. Gomorrah is based on the bestselling 2006 book by journalist Roberto Saviano, a man now living under round-the-clock police protection after he received veiled threats from various “godfathers” of the Camorra, whose profits are estimated to be some $233 billion per year.

It is a situation compared by the novelist Umberto Eco to the Islamic fatwa against Salman Rushdie, and Garrone has seen it first-hand. “When we started to write the screenplay, Saviano used to come to my house, where we wrote, with police in tow,” the 39-year-old director recalls. Their collaboration began almost immediately after Saviano had recklessly named a series of Camorra bosses at a public meeting conducted by the Ministry of Justice in his home in Casal di Principe, a tough suburb of Naples and “a very, very dangerous place”, according to Garrone.

Now that the film has been released on more than 400 screens in Italy, the situation for Saviano has become even worse, Garrone says. “Now he’s become a real symbol of the fight against Camorra,” he says. Given that the Camorra has its claws into everything, from the haute couture fashion industries of Milan to the rebuilding of the World Trade Centre in New York, it would seem a near-impossible fight. “It depends on how the politicians solve the problem,” the director argues. “A symbol is not enough.”

Gomorrah
Born and based in Rome, Garrone spent six months living in Naples to understand the world of the Camorra. “If you really want to solve it you have to start from inside. You need to address problems of education, unemployment, the relations between people and institutions. Nobody trusts an institution. The Government, it’s completely absent. The people that are from the Camorra live there, so they are close to people. They talk the same language.”

Even so, was he not frightened for his own safety during the shoot? “No, no. First of all, my girlfriend is from that area,” he jokes, hinting that this offered some form of protection. They met during production and now have a son.

“He’s like a son of Gomorrah,” Garrone says. If this sounds a little blasé, Garrone argues that “most of the problems for Saviano come from what he did as a person rather than a writer. He attacked them personally. In my case, it was different”.

Certainly, fictionalising characters was always going to count in his favour. But, more importantly, so was getting the locals on his side. “They understood that the movie was not a movie against the Camorra but was a movie about the Camorra,” he stresses. “It was very important for me that they helped. They live in that situation, that war. When I was shooting the movie, I always had 40 or 50 people behind the monitor watching the film. For me, they were the first audience of the movie.”

Less interested in showing sharp-suited bosses than the clan’s beleaguered foot soldiers — characters include an ageing Mob accountant and a tailor in the employment of a Camorra-funded fashion business — Gomorrah sets out to demythologise its gangsters. Set in the rundown suburbs of Scampia and Secondigliano, in a series of dingy bars and disused buildings, it’s the very antithesis of the glamour-fuelled worlds of The Godfather and Goodfellas.

“It was very interesting to show that the reality of where and how they live is different from the movies that they like,” Garrone notes. How does he feel about these classic Hollywood gangster movies? “I like very much The Godfather. I like very much the Scorsese movies. I like very much also the Tarantino movies. But I think in reading Saviano’s book, I discovered there was the possibility to change in some way the conception of the Mafia movie. It was very interesting to go in the opposite way of that model.”

Inevitably, Hollywood has been sniffing around the possibility of a remake. “There have been offers,” the film’s producer, Domenico Procacci says. “Even before the Cannes Film Festival I had calls.” While neither he nor Garrone will confirm who is interested, the director admits that he is unconcerned about the prospect of American studios glamorising his downbeat work.

“I have done my movie so it doesn’t matter,” he says, adding that he wants to do something different for his next film. Such as what? “I don’t know yet — but something more fun.”

[renukb]

Moscow calls for anti-US alliance

Adrian Blomfield in Moscow
October 10, 2008

THE President of Russia has called on Europe's leaders to create a new world order that would minimise the role of the United States.

Confident that a row with Europe prompted by Russia's invasion of Georgia in August was over, Dmitry Medvedev arrived in the French spa town of Evian on Wednesday determined to woo his fellow leaders into creating an anti-US front.

Gone was the kind of wartime rhetoric that saw Mr Medvedev lash out at the West and describe his Georgian counterpart, Mikheil Saakashvili, as a "lunatic". Instead Mr Medvedev spoke of a Russia that was "absolutely not interested in confrontation", and outlined plans for a new security pact to ban the use of force in Europe.

Yet there was little doubt that Mr Medvedev was playing the divide-and-rule tactics of Vladimir Putin, his predecessor and now Prime Minister, by seeking to pit the US against its European allies.

In a speech delivered to European leaders at a conference hosted by the French President, Nicolas Sarkozy, to discuss the international financial crisis, Mr Medvedev sought to show that the US was at the root of all the world's problems. He blamed Washington's "economic egotism" for the world's financial woes and then accused the Bush Administration of taking Europe to the brink of a new cold war by pursuing a deliberately divisive foreign policy.

He also maintained that the US was once again trying to return to a policy of containing Russia.

"After toppling the Taliban regime in Afghanistan, the United States started a series of unilateral actions," Mr Medvedev said.

"As a result, a trend appeared in international relations towards creating dividing lines. This was in fact the revival of a policy popular in the past and known as containment."

While he called for a cooling of the noxious rhetoric that had blighted East-West relations over the past two years, Mr Medvedev clearly laid the blame for the deterioration on the US, which he said was again viewing Russia through the prism of the Cold War. "Sovietology, like paranoia, is a very dangerous disease, and it is a pity that part of the US Administration still suffers from it," he said.

In order to end the "unipolar" model in which the world depended on the US, he proposed creating new financial systems to challenge the dominance of the International Monetary Fund and the World Trade Organisation, both of which had fallen under Washington's spell.

Attacking the enlargement of NATO, which he said had advanced provocatively towards Russia, he proposed a new European security treaty.

The new European pact would include "a clear affirmation of the inadmissibility of the use of force - or the threat of force - in international relations" and would be built on the principle of the territorial integrity of independent nations.

While Russia has insisted it was not intending to supplant NATO, Mr Medvedev made it clear that the US-dominated alliance was partly responsible for the war in the Caucasus by its failure to rein in Georgian "aggression".

The Russian President won praise from Mr Sarkozy after he announced that all Russian troops had been withdrawn from buffer zones around Georgia's rebel enclaves of South Ossetia and Abkhazia before today's deadline.

Describing his guest as a man who had "kept his word", Mr Sarkozy immediately declared that talks on an EU-Russia partnership deal, suspended as punishment for Russia's military operation in Georgia, could resume.

[renukb]

Going by the recent happenings around US and Russia, I tend to believe that US will engage India until they achieve their strategic objectives vis-vis Russia and/or China and they will dump India just like they are dumping TSP now. India needs to squeeze unkle without being in their court and by not severing our relations with Russia and also by not provoking China to another war (I am not saying that we provoked them in '61). That's the challenge ahead of Indian leadership, which can also mean a more stable India and also the world.

[svinayak]

http://biz.yahoo.com/rb/081010/business ... -budgeting

Reuters
Bush calls for calm amid global stock market panic
Friday October 10, 12:40 pm ET

By Jeremy Pelofsky and Daniel Trotta

WASHINGTON/NEW YORK (Reuters) - Warning that "anxiety can feed anxiety," U.S. President George W. Bush implored Americans to remain confident on Friday and promised to restore stability in the face of a global stock market panic.

Bush spoke ahead of a gathering of leaders of the world's major economies in Washington where they will confront the frozen credit markets and recessionary signals underlying the worst financial crisis since the Great Depression.

"This uncertainty has led to anxiety among our people. And that is understandable, that anxiety can feed anxiety, and that can make it hard to see all that is being done to solve the problem," Bush said in a televised address.

"We know what the problems are. We have the tools to fix them. And we're working swiftly to do so," Bush said in a national address after Wall Street opened with an 8 percent slide, soon pared its losses but extended the damage from a seven-session losing streak.

Finance ministers and central bankers from the Group of Seven faced mounting pressure to repair the system after joint interest-rate cuts, individual liquidity injections, a $700 billion U.S. bailout and government plans to take equity stakes in banks failed to restore investor confidence.

French President Nicolas Sarkozy may launch a new European Union plan to try to deal with the crisis, a French government official said.

The Dow Jones Industrial Average lost nearly 700 points and fell more than 8 percent in the opening minutes of trading, then turned positive half an hour after the opening bell before resuming its slide.

Like the S&P 500 and the Nasdaq, the Dow was down more than 2 percent after Bush spoke.

That drop came after the Dow fell 679 points, or 7.3 percent, on Thursday, extending its losses over six trading sessions to 20 percent.

The fall was part of a global evisceration of wealth that has affected investment bankers and retirees alike. Going into the trading day, stocks on the benchmark MSCI main worldwide index had lost $14.3 trillion of value since October 31, 2007, leaving the global equity benchmark worth less than $20 trillion for the first time in four years.

The MSCI has lost nearly $4.6 trillion in value in the previous seven days alone.

Underlying the stock market sell-off were the paralyzed credit markets. International Monetary Fund chief Dominic Strauss-Kahn called for a temporary guarantee of all interbank deposits.

Japan's Nikkei sank 9.6 percent, while in Europe major indexes traded down more than 6 percent.

Bourses in Iceland, Russia, Austria, Indonesia, Romania and Ukraine all closed as a result of the share price falls.

"There's no confidence -- there's an atom or two of confidence returning," said market strategist Steve Goldman at Weeden & Co in Greenwich, Connecticut.

Many investors have been looking for global leadership, but Bush is a lame duck ahead of the November 4 presidential election with the two men competing to succeed him, Republican John McCain and Democrat Barack Obama, arguing over how to resurrect the economy.

One strategist said he feared a political vacuum with weak governments in Europe and North America.

"Sarkozy has been the EU president and is doing what people regard as a good job, but his wife is more popular than he is. That leaves Italy then as a bastion of political stability," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

"It scares me that there's a vacuum of strong political leaders right now. It's not like we have a Franklin Roosevelt and a Churchill," he said.

The larger Group of 20, which includes 19 of the world's largest economies plus the European Union, the International Monetary Fund and the World Bank also were due for weekend meetings amid the thirst for leadership.

Morgan Stanley entered the spotlight after investors appeared unconvinced about its deal with Japan's Mitsubishi UFJ Financial Group Inc. Morgan Stanley shares have lost nearly half their value in the last three days on worries Mitsubishi UFJ might back out of a deal to inject much-needed capital.

The stock was down 35 percent.

In a bid to unfreeze bank lending, the U.S. government is weighing guaranteeing billions of dollars of bank debt and temporarily insuring all U.S. bank deposits, The Wall Street Journal reported on Friday.

The U.S. Treasury plans to start injecting capital into U.S. banks as soon as this month, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.

U.S. policy had focused on a plan to buy banks' distressed assets under the $700 billion rescue plan. Many analysts say a move to shore up banks' capital would be a more direct way to break a logjam in credit markets that has closed off new borrowing for consumers and businesses.

British Prime Minister Gordon Brown said other governments should follow Britain in putting money into struggling banks and offering guarantees worth hundreds of billions to persuade banks to start lending to each other.

The International Monetary Fund said on Thursday it was ready to lend to countries hit by the credit crunch and activated an emergency financing mechanism first used in the 1990s Asian crisis.

(Additional reporting by Reuters bureaus around the world; Editing by Brian Moss and Steve Orlofsky)

[ramana]

Driving to work and hearing Bush I was thinking that there is a big political vacuum and could lead to chaos and military strikes.

The Lehman Bros and Merril Lynch going down was the 911 for Wall street. As the US wants a gloablized world it can dominate it needs to introspect whether it has the responsibility that comed with power. They cant allow financial mess like Great Depression and the current one and still want ledership.

[Paul]

As acharya said, this is more and more like the 1920s- 1930s. We need to be in the right camp or pull it off in such a way that we do not get into a conflict for the next 20-30 years.

Our approach should be like Turkey which is on the major strategic cross points of the world and still managed to stay out of WWII.

Japan's pre-WWII policies should be studied to ensure India does not suffer it's fate.

[vsudhir]

I too fear conflict precipitated on any number of invokable grounds between major powers as a distraction/ sideshow/ comic relief from the mundanely tightening grip of economic trauma about to engulf the ever burgeoning population of retirees and near-retirees in the western world.

There's malso precedent from mediviel history - of the state (kings) attcking and looting the properties of their creditors (church, jewry and templar type orgs, IMO). So much easier to fight the creditors than to have to repay them, IMO.

[Prem]

Driving to work and hearing Bush I was thinking that there is a big political vacuum and could lead to chaos and military strikes.

The Lehman Bros and Merril Lynch going down was the 911 for Wall street. As the US wants a gloablized world it can dominate it needs to introspect whether it has the responsibility that comed with power. They cant allow financial mess like Great Depression and the current one and still want ledership.

Saudi finnace minister is in DC . The $$ stacked up by OICs will be used as well Saudi will help keeping oil supply steady and managing inflation. They extract their price having big say In Afghanistan,Iran,Iraq and Palestine to further consolidate their claim on Ummah leadership.

[renukb]

Russia stunned by “secret” UN-NATO deal
http://www.mnweekly.ru/national/20081010/55350554.html

BISHKEK (RIA Novosti) - Foreign Minister Sergei Lavrov said Thursday that Russia was shocked that the UN and NATO had secretly signed a cooperation agreement without all UN member states reading the draft.

"Before such agreements are signed, their drafts should be submitted to member states for reading. But in this case this did not happen, and the agreement between the secretariats was signed secretly," Sergei Lavrov told journalists after a CIS foreign ministers' meeting in Bishkek.

The Russian diplomat said he had asked UN Secretary General Ban Ki-moon while at the UN General Assembly last month why such secrecy was needed but "received no comprehensible explanation."

He also said it was surprising that although the document implied cooperation between the two secretariats, its text contained provisions related to immediate prerogatives of member states, including the intention to cooperate in maintaining international security on the basis of the UN Charter and certain international directives.

"We asked both secretariats what this could mean and we are waiting for a reply, but we warned the UN leadership in the strictest fashion that things of this kind must be done without keeping secrets from member states and on the basis of powers and authority held by the secretariats," Lavrov said.

He added that cooperation between the UN and regional organizations was in general a normal and necessary thing but said such ties must be transparent and arouse no questions.

According to the Associated Press news agency, a NATO spokesman has denied the accusation. He said Russia was fully briefed on the cooperation declaration signed last month and that there were no surprises.

Russia's envoy to NATO Dmitry Rogozin said late Wednesday that Ban Ki-moon and NATO Secretary General Jaap de Hoop Scheffer signed the declaration of cooperation between the secretariats on September 23 during the UN General Assembly in New York.

Rogozin accused Ban Ki-moon of acting beyond his powers and pointed to a discrepancy between the preface and the body of the document, saying Moscow could not consider the document legitimate and would view it as reflecting the UN chief's personal opinion.

Rogozin said he hoped the issue would be raised in the UN Security Council and the secretariat, as well as at NATO because the document related to Afghanistan.

[Philip]

"Bunkum" Moon is nothing but a lackey and agent of Uncle Sam.This is absolutely scandalous,something that has never ever happened before a "secret agreement" that all members haven't been shown.!t just shows how low the UN's reputation has sunk and has become a cheap bordello for the powerful nations to screw the rest of the world.

Tragic death of the far right leader in Austria,where the far right are on the upswing.With Haidar's tragic demise,we may be in for a far more extremist leader to replace him.

http://www.telegraph.co.uk/news/worldne ... crash.html

Austrian far-right leader Joerg Haider killed in car crash
Joerg Haider, the veteran leader of Austria's far right, was killed in a car crash today, police said.

By Colin Freeman
Last Updated: 8:50AM BST 11 Oct 2008

The accident occurred near Klagenfurt, capital of the province of Carinthia, where 58-year-old Haider was governor around 2 am Photo: REUTERS

Austrian far-right leader Joerg Haider has died in a road accident
Mr Haider, 58, who earned worldwide notoriety for making statements sympathetic to Hitler's Nazi regime, suffered fatal head and chest injuries after the car he was driving plunged down an embankment near his home town of Klagenfurt.

Detectives are still investigating the cause of the crash, but said he was driving alone at the time in a government-owned vehicle.

The death of Mr Haider, who was governor of Carinthia province in southern Austria, comes less than a fortnight after a major resurgence in the far right's political support in the country, riding on a wave of anti-immigrant and anti-European Union sentiment.

At parliamentary elections last month, Mr Haider's Alliance for the Future of Austria polled 11 per cent of the vote, while the similarly-aligned Freedom Party, which Mr Haider founded but then split from, polled 18 per cent. The results meant nearly one in three Austrians had voiced support for far-right movements, dismaying the country's liberal politicians.

Mr Haider's death may prompt concerns that political support will pass from him to the current Freedom Party leader, Heinz-Christian Strache, who is seen as a much more hardline figure. Mr Haider was originally Mr Strache's political mentor, but the two fell out as Mr Haider chose to pursue more moderate policies in recent years.

Mr Haider's spokesman, Stefan Petzner, said that he had been heading to a town near Klagenfurt for a gathering of his family to mark his mother's 90th birthday.

"This is for us like the end of the world," he added.

Born in Upper Austria, Mr Haider's father was a former member of Hitler's brown-shirted storm troopers, while his mother was a teacher who had been a Hitler Youth leader. Involved in politics since his teenage years, he caused an international outcry with a series of remarks where he appeared to imply an admiration for the Nazi era.

He once compared the employment policies of Austria's government with the "proper labour policies" of Adolf Hitler's Nazi Germany, and on another occasion he referred to Nazi concentration camps as "penal camps" rather than death camps.

Visits to see despots such as Saddam Hussein in Iraq and Colonel Gaddafi in Libya heightened his image as a pariah politician.

Such was the opprobrium he earned among fellow European statesmen that when the Freedom Party entered into a coalition government with the conservative People's Party in 2000, it triggered temporary European Union sanctions against Austria.

The coalition deal then fell apart, leading to an early election in 2002 in which the Freedom Party lost heavily, followed by a remake of the coalition.

Mr Haider then formed the breakaway Alliance for the Future of Austria in 2005, courting greater public acceptance by pursuing more moderate policies, but in a national election in 2006, the Alliance only just scraped past the 4 percent threshold to enter parliament.

Mr Haider is survived by his wife and two daughters.