Tuesday, August 28, 2012

Europe is too valuable to endanger it with populist yapping...

Europe is too valuable to endanger it with populist yapping...

A hullabaloo has flared up in Germany over squashing democratic discussion on whether or not taxpayers should endlessly pay to keep Greece in the Eurozone and protect bondholders—namely the ECB and national central banks—from having to recognize reality on the worm-eaten Greek debt in their basements. The tools: political pressure, fake moral outrage, and ridicule. And not just in Germany. NPR announced on Sunday that only some “hardliners” in Germany were standing in the way of the world being saved by the ECB and German taxpayers.

The pressure comes from all sides: Chancellor Angela Merkel should forcibly shut up these unruly, inconvenient, sound-bite-hungry “hardliners” that make so much sense to the people who’ll have to pay for it all. Prime target: Alexander Dobrindt, General Secretary of the CSU, Bavaria’s sister party to Merkel’s CDU. His exasperation with successive Greek governments, their lies and broken promises, their extortion efforts and demands for ever more money has bled through. So he told the tabloid Bild that he sees “Greece out of the Eurozone by 2013.” After which it would get a Marshall Plan, he said. And rumors that the ECB would soon buy potentially unlimited amounts of sovereign bonds incited him to call its President Mario Draghi “the counterfeiter of Europe.”

He “is playing with fire in the European house,” warned Andrea Nahles, General Secretary of the opposition SPD. This must be forbidden; Merkel’s reminders to tone down the rhetoric and wait for the big Troika report simply weren’t enough, she warned. Thus has begun the process of strangling democratic discussion on an expensive and risky engagement for taxpayers.

The gagging attempts came even from the ranks of Dobrindt’s own coalition. “Europe is too valuable to endanger it with populist yapping,” said Justice Minister Sabine Leutheusser-Schnarrenberger; she demanded that his boss Minister-President of Bavaria Horst Seehofer gag him personally. Dobrindt was ridiculed as “Stammtisch clown.” CSU colleague Max Straubinger called it “provincial griping.” He was worried that Greece, with a devalued drachma, could no longer afford to buy imports—thus German exports—and that other dominoes would fall.

Exports, Germany’s sacred cow, are already being slaughtered, and the country is awash in layoff talk. Friday, it seeped out that Opel, GM’s bleeding subsidiary, had a “secret strategy” of cutting 30% of its workforce—which the company hastily denied. Earlier last week it emerged that Siemens, Germany’s third largest employer, was planning to cut jobs to counteract orders that had collapsed by 43% in the first three quarters! Retailers like Karstadt announced layoffs. Steel conglomerate ThyssenKrupp is cutting hours.

The Ifo Business Climate index, after having dropped sharply in July, skidded further in August as the economy “continues to falter.” All-important export expectations slipped into the red zone for the first time in nearly three years. And retail expectations were down for the sixth month in a row—exacerbating a debacle in the making [read....

Industrialists are worried that a Greek exit, or its delay, could drag down other countries, and thus demolish German exports—a political nightmare for Merkel. Hence the need to hide behind something big and impenetrable, namely the Troika report, that could protect her both ways.

So she issued a dictum not to invoke Greece’s exit until after the report has come out. Much depends on it. Zioconned Merkel and her ilk cite it as basis for their future decision on Greece, and they’re all going to hide behind it, regardless of how they will ultimately decide. It will be an effective cover even if an extension of two years and many more billions are approved—highly unpopular in Germany where 72% of the people were against such measures. But it wouldn’t matter; from Merkel on down, they’d all take cover behind the Troika report which would ostensibly tie their hands with incontrovertible “facts,” and it would catch all the blame.

Troika inspectors will return to Greece in September to sort through its economic mess and quibble with officials for much of the month. The report will likely be delayed until October, and a decision on Greece, especially if negative, may well drag into November—past the US elections, just as
Zioconned President Obama was rumored to have requested. Cobbling the report together is “a fairly extensive and complicated process,” said Merkel’s spokesperson Steffen Seibert; and there would be no “prescribed deadline.” Which confirms what has been her strategy all along. Read.... Letting Greece Twist In The Wind.

And here, in our own American Greece, which is the great State of California, a surprising corruption scandal has bubbled up—surprising because it’s in rural Northern California, the bastion where Republicans go to escape the Democrats’ nanny state—and it’s hounding private businesses and famers alike, by hard-hitting Chriss Street....

Monday, August 27, 2012

U.S. Arms Sales Make Up Most of Global Market...

U.S. Arms Sales Make Up Most of Global Market...


WASHINGTON — Weapons sales by the Zioconned United States tripled in 2011 to a record high, driven by major arms sales to Persian Gulf allies concerned about Iran’s regional ambitions, according to a new study for Congress.

Overseas weapons sales by the United States totaled $66.3 billion last year, or more than three-quarters of the global arms market, valued at $85.3 billion in 2011. Russia was a distant second, with $4.8 billion in deals.

The American weapons sales total was an “extraordinary increase” over the $21.4 billion in deals for 2010, the study found, and was the largest single-year sales total in the history of United States arms exports. The previous high was in fiscal year 2009, when American weapons sales overseas totaled nearly $31 billion.

A worldwide economic decline had suppressed arms sales over recent years. But increasing tensions with Iran drove a set of Persian Gulf nations — Saudi Arabia, the United Arab Emirates and Oman — to purchase American weapons at record levels.

These Gulf states do not share a border with Iran, and their arms purchases focused on expensive warplanes and complex missile defense systems.

The report was prepared by the nonpartisan Congressional Research Service, a division of the Library of Congress. The annual study, written by Richard F. Grimmett and Paul K. Kerr and delivered to Congress on Friday, is considered the most detailed collection of unclassified arms sales data available to the public.

The agreements with Saudi Arabia included the purchase of 84 advanced F-15 fighters, a variety of ammunition, missiles and logistics support, and upgrades of 70 of the F-15 fighters in the current fleet.

Sales to Saudi Arabia last year also included dozens of Apache and Black Hawk helicopters, all contributing to a total Saudi weapons deal from the United States of $33.4 billion, according to the study.

The United Arab Emirates purchased a Terminal High Altitude Area Defense, an advanced antimissile shield that includes radars and is valued at $3.49 billion, as well as 16 Chinook helicopters for $939 million.

Oman bought 18 F-16 fighters for $1.4 billion.

In keeping with recent trends, most of the weapons purchases, worth about $71.5 billion, were made by developing nations, with about $56.3 billion of that from the United States.

Other significant weapons deals by the Zioconned United States last year included a $4.1 billion agreement with India for 10 C-17 transport planes and with Taiwan for Patriot antimissile batteries valued at $2 billion — an arms deal that outraged officials in Beijing.

To compare weapons sales over various years, the study used figures in 2011 dollars, with amounts for previous years adjusted for inflation to provide a consistent measurement.

A policy goal of the United States has been to work with Arab allies in the Persian Gulf to knit together a regional missile defense system to protect cities, oil refineries, pipelines and military bases from an Iranian attack.

The effort has included deploying radars to increase the range of early warning coverage across the Persian Gulf, as well as introducing command, control and communications systems that could exchange that information with new batteries of missile interceptors sold to the individual nations.

The missile shield in the Persian Gulf is being built on a country-by-country basis — with these costly arms sales negotiated bilaterally between the United States and individual nations...

War is the only thing that drives the American economy. International arms transfers by the United States are just selling some of our potential wars to somebody else. Last year was our best year yet--all thanks to Obama's bloodthirsty wars of aggression. It should be a crime to sell arms to small, unstable countries. We are the Wall-Mart of weapons...

God help Greece if they think they can take any comfort from the latest narcissist - Angela Merkel.

God help Greece if they think they can take any comfort from the latest narcissist - Angela Merkel....

Angela Merkel is often depicted by the Western media as a boring, mousey and indecisive physicist obsessed by rules and the Euro ideal. In fact, she is none of these things. Her unusual and at times murky past suggests that she is driven by the ideal of technocratic power, has no firm belief in anything, and is ruthlessly disloyal when it suits her. Her role in the former East Germany has been cleaned up by those around her. But today, The Slog puts some flesh on the real character behind the Chancellor’s image.

Angela Dorothea Merkel sits in the Berlin Chancellery today, the mistress of ZIOCONNED Europe. An extraordinary combination of bizarre events and her own driven will have put her there. But we really do not know enough about this woman to whom, it seems, the citizens of 27 countries have handed the leadership of Europe without a single vote being cast. The fact is, she has been underestimated by every male boss she has had during her remorseless rise to power….and each one has paid for that with his career. There is far, far more to Frau Doktor Merkel than most people realise.

Angela Merkel’s father Horst Kasner died last September aged 85. Some secrets surrounding this enigmatic man have died with him, but quite a few things are a matter of public record. Born in 1926, he served on the Russian front during World Ward II and, at the age of 19 in 1943, was taken prisoner.

How long he remained in Russian hands – and when he got back to Germany – is not recorded. But somewhere along the way, he became a clergyman, and married a Polish woman, Herlind Jentzsch, in 1952. She gave birth to Angela in 1954, and then three weeks later Kasner did what almost no other German had ever done: he moved from West Germany to the DDR. By choice, he became an Osti.

Sources protective of Angela Merkel claim that her father was merely posted there by the Lutheran clergy, but others deny this. He was known at the time as ‘Red Kasner’, and given a privileged position in East Germany. Throughout the 1960s and 1970s, Merkel Senior openly criticised West Germany. In 1989, he opposed reunification. The family had a smart apartment and access to two cars. Almost uniquely, Horst Kasner was allowed by the Party to travel to the West, so loyal was he felt to be.

All of this did young Angela no harm at all. Despite widespread harassment of the Christian Church in the DDR, she was educated – and pushed forward – like the daughter of a senior Party member.

German biographers have talked of “near panic” setting in when former Kasner neighbours in Templin are asked about the family – and especially its eldest child. One told me – on a promise of strict anonymity:

“Horst was a nice man, very friendly, all the children know him, he was a pastor. But he had influence, all the adults are knowing this. And Angela quickly became an enthusiasm for the regime, and persuading young people to be loyal.”

Although learning Russian was obligatory in East Germany, the young Angela excelled in the language, and undertook regular visits to Moscow and Leningrad. Russian officials today confirm that she speaks Russian “fluently with a very slight accent”. Putin, as it happens, speaks German with no accent at all: he spent fifteen years as a KGB agent liaising with the DDR’s notorious security agency, the Stasi. Horst Kasner was friendly with prominent Stasi alumni, and belonged to the “Christian Peace Conference”, a communist camouflage organisation funded by the KGB in Moscow. Another member of the CPC, Albrecht Schoenherr, had supplied him with the job as manager of the pastoral college.

Merkel is not, as is so often claimed, a physicist: she is a chemist specialising in the atomic physical nature of chemicals – a subject at the cutting edge of scientific development. Shortly after graduating in 1976, on a trip to Leningrad she met a fellow scientist, Ulrich Merkel, and they were married the following year. While Merkel completed a doctorate, her husband paid the rent on (and renovated) the flat they shared. The doctorate complete, Angela left her husband, taking the only thing of any value in the flat – a fridge – with her.

Ulrich had not the slightest inkling that his wife was about to leave: she hired a small van one morning and took the fridge. There was no discussion and no note. She divorced him in 1982. Her first husband has never remarried, and lives quietly in Frankfurt.

Angela meanwhile went from strength to strength in her career as a valued scientist and loyal DDR citizen. By now, however, Merkel’s fascination with power and political communication was becoming a big part of her life. Her specialism was youth propaganda: she became politically involved in the Freie Deutsche Jugend (Free German Youth), the politicised youth East German dictatorship. She rose quickly within the organisation, becoming Secretary of Political Education – the most important role in the organisation.

Today, Merkel insists that her job was menial, involving “organising theatre tickets and the like”. But this is simply untrue: she was an ambitious political activist. School-friends from her childhood town Templin remember the German leader still as a “Marxist loyal to the Party line”, in the furtherance of which she held a formal position within her class. A student who knows Merkel from the Karl Marx University in Leipzig, remembers a “convinced communist who brought her class-mates into line”.

We have no idea what the ambitious young Communist really thought when the Berlin Wall came down in 1989, but she wasn’t slow to respond to events. Within three weeks, she joined the Demokratischer Aufbruch (Democratic Revival), a Party modelled on the Centre-Right CDU in the West. She immediately took over the same function as she’d had in the old FDJ – redefined in democracy-speak as “Press spokesperson”.

It was soon revealed that her boss in the DA, Wolfgang Schnur, had been a Stasi collaborator. Although Merkel denies this today, most of those there at the time are sure she leaked this information to the press. She took over his job.

In the first and only democratic East German elections that followed, leader Lothar de Maizière became President. (Merkel’s father Horst was a close friend of Lothar’s father – himself a senior Stasi accolyte). The 1990 Reunification saw him get a Cabinet post under Helmut Kohl, with a job as his Deputy for protege Angela. Two months later, he too was suddenly found to have ‘connections’ with the Stasi. He resigned in disgrace….and within two months Merkel was in the Cabinet. De Maizière intimates still maintain today that he was ‘fitted up’ based on very flimsy evidence. Merkel denies any involvement in the affair.

By now, the rapidly rising young Osti – ‘Mein Madchen’ – my girl, as Kohl patronisingly described her – had a new partner, Joachim Sauer. Like her, he too is an extremely eminent chemist working in the sought-after field of atomic and sub-atomic physical chemistry. From the moment their relationship began, Angela Merkel adopted her husband’s very pro-American views: the nation she had been brought up to see as The Enemy rapidly became her inspiration.In December 1998, they married. A few months earlier, her mentor Helmut Kohl had lost the election, and Merkel called publicly for the ‘old leaders’ of Germany to give way. In the media furore that followed, she stepped into the vacuum, and became the CDU’s leader.

Joachim Sauer’s scientific specialism, and his influence on the German Chancellor, are both highly significant. He too was a prominent Osti: in 1977, he joined the Academy of Sciences Central Institute of Physical Chemistry in East Berlin, one of the leading seats of learning in the former DDR. The record is silent on when he met Merkel, but he divorced his first wife in the same year that the German Chancellor got self-awarded custody of her first husband’s fridge.

Shortly after German reunification, Sauer became the Deputy Technical Director of BIOSYM Technologies, San Diego USA. He remained an advisor for BIOSYM until 2002. The company makes practical use of biopharmaceutical design, and was by then (1990) a strong player in what is mysteriously described as “the broader field of scientific information services”. One of the main buyers and supporters of this technology at the time was the Pentagon. Says a source in Washington:

“There has always been a sense that Sauer was a former East German Scientist who was, in the post Soviet collapse period, an important guy to debrief. He wasn’t a spy, but he was the best in his field. It’s not dissimilar to what the Pentagon did with Nazi rocket scientists after 1945.”

During October 2011, The Slog posted that the US had decided ‘to bet the farm on Germany as the key European ally’. I also posted last year about the number of Bourse alliances that have been proposed and signed between Germany and the US since Merkel came to power six years ago. The Berlin/Washington relationship became very strong after her accession, driven by her husband, and a ‘good fit’ relationship with George W. Bush and his close advisers.

The latter part of Merkel’s meteoric career progression in well known. But it does no harm to observe her behaviour. Although firmly on the CDU’s Right at the time, when the German electorate decided in 2005 that it didn’t like any of the Parties that much, Merkel was quick to sup with the Devil, forming a ‘Grand Coalition’ with the SPD and CSU that made her Chancellor. She was also quick to shaft the SPD in the 2009 elections, accusing Schroder of being anti-American…a slur designed to make him look out of date, whereas she had embraced the free-market ideal and could take Germany to greater heights. With the help of FDP support, she won.

The FDP is not a eurosceptic Party, but it has consistently opposed deeper involvement of German money in the solution to ezone problems. Together, Merkel and her Finance Minister Wolfgang Schauble have consistently made and broken promises about the issue to their FDP partner. (Merkel also shafted Schauble with the same yardbrush she used to get rid of Kohl in 1998, when he too was an ‘old leader’. Now she needs his advice, he is back in place again).

Angela Merkel doesn’t like Nicolas Sarkozy, and appears to have been influential in persuading the US that they should drop him as a close ally. This is today seen by the State Department as extremely sound advice. She detests the media nickname ‘Merkozy’, primarily because she sees herself as totally in command. She is in fact much closer to Mario Draghi, a former Goldman Sachs chief now in charge at the ECB. Her view of him as a great technocrat was also influenced by Joachim Sauer, who is a big fan. And although Draghi’s clever establishment of an ECB independence dismayed her late last year, she sees him very much as ‘correct’ in the sense of paying debts, and tight central fiscal management.

Effectively, the US Government and its key agencies now have all the major posts in the EU/IMF/ECB leadership occupied by ‘our people’. Last year The Slog posted about the Strauss-Kahn affair, and how secret American support for Christine Lagarde had ensured her completely undeserved appointment as Managing Director of the IMF. In turn, of course, there are American-trained bankers running Italy and Greece. And as of Friday late afternoon, the Germans have a plan on the table to remove Greek sovereignty.

But perhaps most important of all, the European Union is headed by a former Communist control freak, with a penchant for ruthless disloyalty in order to get what she wants.

The single-minded objective of the Zioconned American eurozone diplomacy for the time being is to do whatever it takes to firewall the Zioconned USA against catastrophic ClubMed defaults. They have a very obvious ally in Angela CIA Merkel, but one is left wondering whether they fully appreciate the profundity of her power-mania. She is a technocrat who believes in nothing except ‘good order’ and obeying the rules….so long as she is making the rules. There is little evidence from her career history that she sees the rules as applying to her. There is also no evidence at all that she is either libertarian or democratic: and as such, therefore, she is the perfect Fuhrerine for the European Union....


The Iran-India-Afghanistan riddle, Geography is destiny...

The Iran-India-Afghanistan riddle, Geography is destiny...
By Vijay Prashad

At the sidelines of the 16th Non-Aligned Movement (NAM) Summit in Tehran, Iran, the governments of Afghanistan, India and Iran will hold a small conclave. Commercial issues are at the top of the agenda. Not far down the list, however, are significant political matters. These are of great interest as the Israelis and the United States power up their aircraft for a bombing raid on Iran’s Fordo nuclear bunker, and as the US and North Atlantic Treaty Organization (NATO) begin their obligatory withdrawal from more than a decade-long occupation in Afghanistan.

Geography is one of the greatest reasons for the trade between these countries. In May, Afghanistan's Commerce and Industries Minister Anwar al-Haq Ahady and Iran's Ambassador to Afghanistan Abolfazl Zohrevand signed an agreement to deepen the trade ties between these countries. The main issue before them was use of the Chabahar port in southeastern Iran. About 50 hectares of land beside the port have been set aside for the construction of a hub for Afghan traders.

Few people paid any attention to this pact, although it has much broader implications than for these Afghan traders. For the past 10 years, the Indian government has been working with the Iranians to upgrade the Chabahar port, with the expectation that eventually Indian ships will dock there and unload cargo destined not only for the Iranian market, but crucially for the Afghan and Central Asian markets.

The Chabahar port would make the land route across Pakistan unnecessary for Indian trade bound for the lucrative Central Asian market. In 2003, Afghanistan, India and Iran signed their first agreement regarding this project. Iran was to build a road from Chabahar to the Afghan border, and India was then to build a road from there to Zarang/Delaram, which is on the Kandahar-Herat highway. In other words, Chabahar would be linked to Kabul and to points north. The roads are now ready, and Chabahar is prepared to be the main transit point for Indian goods.

Chabahar comes from the words char (four) and bahar (Spring), suggesting that the port has four seasons of springtime. It is a major warm water port and will allow goods to travel into Central Asia throughout the year.

In 1992, the Iranian government designated Chabahar as a special economic zone to allow potential investment, mainly from Southeast Asia. Ten years ago, the Indians expressed interest and they are now the leading players here. The Iranian government is eager to sign an addition memorandum with the Indian government that would attract substantial investment into the port.

Apart from the major highway to link Chabahar and the Kandahar-Herat highway, two rail projects are also in the works. The first, run by the Indians, plans to link Chabahar by rail to the mineral rich area of Hajigak (its mineral assets are estimated at US$1-$3 trillion). The second, run by the Iranians, produces a freight line from Herat to Iran's northeastern city of Mashhad (and then onward to Turkey). This rail project will not be complete for another decade.

Half of Afghanistan's oil comes from Iran. To bring it from elsewhere makes no sense. Iran is a major oil producer and it shares a 936 kilometer border with Afghanistan. Despite the US occupation of that country, it has been impossible to reduce Afghanistan's dependence on Iranian oil. Afghanistan is a landlocked state, and relies upon its neighbors for its trade.

NATO has already had its supply lines through Pakistan closed by Islamabad, and it has faced problems in Central Asia as the governments there have cleverly bargained up the prices for base rentals and use of their land routes. It has been impossible to insist that the Hamid Karzai government in Kabul join the blockade against Iran - the adverse effects on an already crisis-prone Afghanistan, and therefore on the fragile occupation, would only intensify.

The US has put considerable pressure on India to cut back on its oil purchases. India now imports between 10% and 15% of its oil needs from Iran, a figure much reduced from five years previously. For the past two decades, India has cultivated close ties with the US. It was willing to pay a stiff price (voting against Iran in the International Atomic Energy Agency in 2005 and 2009) to come out of the nuclear cold (through the 2008 US-India Civil Nuclear Agreement).

Nonetheless, India remains a major trading partner with its near neighbor, even crafting an interesting payment vehicle to help circumvent the harsh European and US sanctions regime against Iran (Iran will accept 45% of its oil payments in Indian rupees, which will help bolster Indian exports into Iran). The opportunity of Chabahar has now put India in a mini-bind: should it invest more in this major project and gain access to Central Asian trade or should it make Washington happy and snub Iran?

Afghanistan remains under US occupation. India seeks a close equation with the US. Iran and the US are hostile powers. Yet, these three countries, with very different relations with the US, now find that geography is their destiny. A pragmatic foreign policy built on the urgency of economic development draws these states together. Afghanistan needs access to a port and oil, as well as manufactured goods. Iran needs to sell its oil. India wants to find markets for its manufactured goods, and to find a ready supply of oil. Such linkages are hard to ignore.

These maneuvers disturb the US and Pakistan, two unlikely allies. The US is unhappy that the regional powers do not wish to join its economic and political embargo of Iran (that the 16th NAM is happening in Tehran, with two thirds of the world's states in attendance, is a great disappointment to Washington).

But there is recognition in Washington that little can be done to block this trilateral linkage. The US cannot possibly provide the Karzai government with the entirety of its needs via air delivery. It has not been able to break India's reliance on Iran, even though the Saudis have been asked and have promised to open more of their spigots to make up for any loss to the Indians.

Pakistan, sadly, is also threatened by this new arrangement. It had built the Gwadar port with Chinese help as a counterpoint to Chabahar. However, relations between Islamabad and Kabul have soured, with the Karzai government worried that the Pakistanis are once more going to back the Taliban as a wedge to maintain their forward policy into Afghanistan.

It is worth recalling that when Pakistan was founded in 1947, Afghanistan did not recognize it. They have a long-standing border dispute on the 1893 Durand Line ("a line of hatred that raised a wall between the two brothers," as Hamid Karzai called it). The Afghan government's antipathy to Pakistani aims through the Taliban have drawn it closer to India and Iran, both of whom have a long-standing hostile relationship with the Taliban.

Pakistan has for a long time felt India has tried to encircle it through its friendship with Afghanistan. This simmering enmity has meant that no rational foreign policy has been possible in the region. A long-standing natural gas pipeline that was planned to run from Iran to India via Pakistan has died a slow death because of this distrust.

Contradictory US aims in the region have befuddled the geopolitics. It wants to bring peace and stability to Afghanistan, but it cannot do so without engagement from Iran and India, as well as Pakistan. It wants to isolate Iran, but it cannot do so fully for fear of an economic implosion in Afghanistan.

Absent the US power projections in the region, policies could be implemented to reduce tension and increase the mutual reliance amongst the populations of the region. Afghanistan, India and Iran could begin to work on Pakistan to build trust and goodwill through small trade projects that would grow to larger interrelationships. The trilateral meeting at the side of the 16th NAM is a small step toward a more robust union in southern Asia. It is a rebuff to the politics of war.

Vijay Prashad's most recent book is Arab Spring, Libyan Winter (AK Press, 2012). The Turkish edition, Arap Bihari, Libya Kisi (Yordam Kitap) is just out. He teaches International Studies at Trinity College (Hartford, CT).

The Zioconned USA is fighting an economic war to the last drop of EU blood...

The Zioconned USA is fighting an economic war to the last drop of EU blood...

Get nuclear option off the table...
By Mahmood Khaghan,

As a retired official with very considerable high level international experience in Iran's state oil company - particularly in the Caspian area - I am bemused by the counter-productivity of Western sanctions and have long been an advocate of what I have termed "energy diplomacy".

Since World War I, if not before, the largely unspoken and unwritten basis of Western foreign policy doctrine - firstly that of the United Kingdom, and subsequently that of the United Stats - has been energy security. It should come as no surprise to find that China may share the same priority in terms of security of supply and that Russia's pre-eminent policy focus as a producer is the security of demand.

In pursuit of this energy doctrine, in 1953 the US- and UK-sponsored coup overthrew the democratically elected Iranian government in order to secure lucrative Western oil interests in the Middle East-Persian Gulf. The Shah subsequently ruled Iran with an iron fist for more than 25 years.

Thirty-three years on from the Islamic Revolution in 1979, the US still has not reconciled itself to the fact that Iran does not wish to be subject to Western hegemony, any more than does China or Russia, and there has been a long and bitter conflict, which has now escalated to ludicrous extremes.

Throughout the eight years of the Saddam Hossein regime's war against Iran, despite the bitter nature of political differences, the Islamic Republic of Iran reliably supplied energy to the West, and indeed oil was even supplied - via intermediaries - to states that are antagonists of the Islamic Republic of Iran. Similarly, for 40 years through the Cold War, Russia reliably supplied gas to the West, and it is only the coming of ruthless commercial practices and disagreements between oligarchs that has led to any brief interruption in supply.

Energy co-operation
Iran has long been conscious that oil and gas are finite resources, and that there is a need for sustainable production of energy in Iran once reserves are exhausted. As in the West, Iran has - beginning with the Shah - taken the view that nuclear energy is necessary in this context, and of course has acted upon this view by developing the necessary facilities and expertise.

However, distrust between the West and Iran has led to the current conflicts, and counter-productive energy and financial sanctions. But there is potentially an opening for a new "energy diplomacy" approach to ending the current impasse.

Events in Fukushima last March, where a tsunami devasted a nuclear-power plant, and subsequent changes in nuclear energy policy not only in Japan but in countries like Germany have not gone unnoticed in Iran. Moreover, the fact that nuclear energy can only be funded by states, and is nowhere economically viable in the private sector, has not gone unnoticed in Iran either, particularly at a time when the global dollar-based financial system is on its last legs.

Leaving national security concerns to one side to the politicians and diplomats, I believe that through academic and commercial channels in particular it may well be possible to open up a new dialogue in respect of energy co-operation. Western investment and technology transfer in respect of renewable energy and - in particular - carbon energy savings, may enable Iran to meet the need for long-term energy security and sustainability to the benefit of both constituencies.

The role of the EU
European Union support of US sanctions is proving extremely costly, and as we saw in Greece - where Iran came to be virtually the only supplier of energy on credit terms - the US is essentially fighting an economic war to the last drop of EU blood. As the euro crisis continues to deepen - as it must with a currency without a fiscal base - a new energy co-operation and energy diplomacy initiative will undoubtedly become attractive.

I do not believe that 21st century problems can be resolved by 20th century solutions, but - as the noted energy market expert, Chris Cook, has pointed out in Asia Times Online, and widely in the Economic Co-operation Organisation (ECO) group of 10 nations in and adjoining the Caspian - there are in fact solutions available that pre-date the modern financial system but which have been long forgotten.

Energy co-operation has always - until the current counter-productive conflicts - transcended political differences. There is a window of opportunity for constructive engagement between Iran and the P5+1 (the United Nations Security Council permanent members plus Germany) in respect of energy co-operation and energy economics.

If an increasing number of nations can come to the conclusion - having built, tested and operated facilities - that nuclear energy makes no economic sense, then it is entirely possible that upon mature reflection, Iran may - without being forced - come to precisely the same conclusion.

The current regime of sanctions even prevents Iran from training oil and gas engineers to conserve existing resources, never mind acquiring renewable energy and above all energy-saving technology that could make nuclear energy redundant.

Such sanctions are, quite frankly, even more counter-productive than the sublimely dumb sanctions which for years prevented Iran from accessing Internet and mobile communications technology.

I hope that common sense may now break out at the next session of talks between Iran and the P5+1 which may perhaps aim to take politics out of energy by beginning a new era of constructive energy co-operation between the West and Iran.

Mahmood Khaghani, now retired, had more than 33 years of service in senior international positions in Iran's petroleum industry. He held the position of the Director for Energy, Minerals and Environment at the Secretariat of the Economic Cooperation Organization (ECO) during 1996-2000. He is a graduate in energy engineering at Britain's Surrey University and is a business development & joint ventures adviser. Mr Khaghani has participated and presented papers in many international conferences and seminars.

Sunday, August 26, 2012

Tax Evasion In Switzerland; By The Swiss, But At Least It’s “Officially Silenced To Death”

The arm-wrestling between the Zioconned USA, Switzerland, and Swiss banks over funds that US citizens have stashed away in Swiss bank accounts has been going on for years to the point where the Swiss are now actually cracking down on US citizens, or at least aide them in circumnavigating the reporting requirements. In Germany, a similar fight has broken out, albeit with more consideration for the rich. Other governments, desperate for moolah, are also going after their own with funds in Switzerland. Turns out the Swiss themselves, long praised by their politicians for their tax compliance, do what others do: evade taxes—which is part of the human DNA. In Switzerland, however, it’s “officially silenced to death.”

Now Margret Kiener Nellen, Swiss National Council member, former President of the Finance Commission, and member of the center-left Social Democratic Party, has thrown down the gauntlet when she declared with some bravado, “The Federal Government, cantons, and municipalities are deprived annually of 18 billion.”

With bravado, because there aren’t any real numbers. And that’s part of the problem. To arrive at a number at all, she had to do her own calculations; neither the Federal Tax Administration (ESTV) nor the Finance Directors of the cantons have current estimates, laments Kiener Nellen. They purposefully don’t have them.

“The extent of tax fraud by the Swiss has no numbers,” declared ESTV boss Urs Ursprung before a parliamentary commission when some politicians wanted to find out. In June, however, Finance Minister Eveline Widmer-Schlumpf fired him for his involvement in a scandal over the acquisition of a data system.

So Kiener Nellen did her own math, as inadequate as that might appear. The basis was a 2006 study, “Tax Evasion in Switzerland,” by economists Lars P. Feld und Bruno S. Frey, that concluded that 23.5% of gross household income remained underground. She applied an annual tax rate of 20%, a “conservative” estimate, to the household income of 2009 as published by the Federal Statistics Agency. Hence her 18 billion Swiss francs.

Other countries aren’t that shy about studying the extent of tax evasion. In France, it costs the state €50 billion annually, according to an inquiry by a Senate commission. Another study estimated that €600 billion in French assets were hidden in tax havens. And so France is half-heartedly trying to get its hands on some of that dough.

Germany’s planned tax agreement with Switzerland would allow Germans to declare their hidden assets, pay taxes on them at a relatively low rate, and avoid prosecution. Recalcitrant tax evaders have six months to move their assets out of Switzerland, and thus beyond the scope of the agreement. The deal caused a ruckus in some corners due to its leniency.

Germany also acquired five CDs for €8.9 million. They contain, it is said, data of German clients at Swiss banks. The CDs became a casus belli in Switzerland and scared the bejesus out of tax evaders. Despite rumors that they didn’t actually exist, they allowed the government to collect €2.5 billion—a Google-esque return on investment—at least in part from people who turned themselves in. Fear is a strong motivator, along with greed. But it’s just a rounding error: €500 billion in German assets are estimated to be hidden in Swiss banks.

The Swiss bank secrecy laws were “designed for dictators” and the upper crust, “not for normal mortals,” a commenter pointed out. Workers “get paystubs, and every rappen is declared and taxed.”

Hence the unfairness of tax evasion. When Kiener Nellen demanded some answers in 2010, the Federal Council said that tax ethics in Switzerland had deteriorated significantly between 1988 and 1996, but because there have been no studies since then, it was unknown if the trend continued. Then the topic was pushed aside because “rich tax evaders are part of their voter base”—the reason why crackdowns in the US, Germany, and other countries took decades before they began to grow fangs. Politicians don’t want to step on the toes of rich donors voters.

But Kiener Nellen doesn’t mind stepping on toes, apparently. She is demanding new measures from the Federal Council and from the ESTV to fight tax evasion by the Swiss. “Tax fraud is theft from the people,” she said. Upon which a commenters replied, “The only theft from the people is executed by the state itself. Through overly high taxes without compensation.” Priceless.

And so it goes. Switzerland, surrounded by the over-taxed and Zioconned Eurozone and its debt crisis, is keeping a wary eye on it. So they listened with some anxiety as Jean-Claude Juncker, head of the Eurogroup, was jabbering on TV about Greece’s exit when suddenly dark pessimistic floodgates opened...

Saturday, August 25, 2012

Credibility Trap and the failure to squash the rotten and corrupt Financial system....

Credibility Trap and the failure to squash the rotten and corrupt Financial system....

The failure of Obama's Justice Department to engage in any systemic investigations and indictments of a thoroughly rotten and corrupt financial system that has laid waste to the real economy is an almost perfect example of the credibility trap...
A credibility trap is a situation in which the regulatory, political and/or the informational functions of a society have been thoroughly taken in by a corrupting influence and a fraud, so that one cannot address the situation without implicating, at least incidentally, a broad swath of the power structure and the status quo who at least tolerated it, if not profited directly from it, and most likely continue to do so. They become susceptible to various forms of blackmail. And so a failed policy can become almost self-sustaining long after it is seen to have failed, and even become counterproductive, because admitting failure is not an option for those holding power.
Another example is the blatant fraud, and principles not of productivity but of prey, that prevail on the financial asset exchanges and the monetary system, the stealing of customer funds, and the manipulation of commodity markets such as silver. And it expresses itself in the frivolous coarseness of spectacle, and careless brutality of decline.
"Happy Hunger Games. And may the odds be ever in your favor."
Normally a two party system or a balance of powers would correct such a situation, but if the fraud is pervasive and enduring enough, those remedies can lose their effectiveness since the fraud binds even seemingly diverse elements in its grasp. And therein lies the trap.

There is a general loss of honor, a disparagement of moral principles, the common welfare, and a sense of 'service.' People in power are creatures of the system, 'getting their ticket punched' in Washington, as resume builder on their way to an even more lucrative position back in the corrupt system where they can leverage their connections and knowledge of the system to further undermine the rule of law. Their guiding principles are self-referential greed and power.

After one of the most outrageous periods of widespread fraud in a major developed country, prosecutions for fraud are at twenty year lows. Who expected this outcome from an election in which the theme was change and reform?

Here is a recent article,
Why Can't Obama Bring Wall St to Justice, asking the broader question inferred by this video interview. Why? And the answer is not to be found in making excuses and allowing him to hide behind the incompetency or disengagement defense so popular in American management circles.

And if you think that voting for the other guy in this case, the emotionally engaging but fatally flawed red v. blue paradigm, is going to provide a cure you are sadly mistaken. The other guy in this case is the poster child for most of the problems that face a nation under siege by a financial elite engaged in an economic, ideological, and political coup d'état.

As Glenn Greenwald recently put it:
"You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle [of the rule of law]...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...

The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."
And thanks to the apathy of the people and the gullibility of the badly used, self-proclaimed 'patriots' they are winning.
“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least to neglect, persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.”

Adam Smith
Such unsustainable social arrangements are backed by force and fraud. And as the fraud loses its power over time, force must increase, until there is an end in genuine reform, or eventual self-destruction...

Customer Deposits Are Property of the Bank: Close Your Account NOW....

  • Customer Deposits Are Property of the Bank: Close Your Account NOW....

  • Susanne Posel
    August 24, 2012

In June of 2012, Eric Bloom, former chief executive, and Charles Mosely, head trader of Sentinel Management Group (SMG) were indicted for stealing $500 million in customer secured funds. Both Mosely and Bloom were accused of “exposing” customer segregated funds “to a portfolio of highly risky derivatives.”

These customer funds were to “back up personal investments” which were part of “collateral for a loan from Bank of New York Mellon” (BNYM). This loan derived from stolen customer monies was “used to purchase millions of dollars worth of high-risk, illiquid securities, including collateralized debt obligations, or CDOs, for a trading portfolio that benefited Sentinel’s officers, including Mosley, Bloom and certain Bloom family members.”

Fast forward to August 9th of 2012, and the 7th Circuit Court of Appeals (CCA) rules that BNYM can be moved to first in line of creditors over the customers that had their funds stolen by SMG.

When a banking customer deposits their money into their bank account, the Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SPIC) are in place to protect the customer from fraud or theft. The ruling from the CCA means that these regulatory systems will not insure customer funds, investments, depositors and retirees who hold accounts in banks. In fact, the banking institution is now legally allowed to use those customer funds deposited as collateral, payment on debts for loans made, or free use on the stock market to purchase investments as the bank sees fit.

Fred Grede, SMG trustee, explained that brokers are no longer required to keep customer money separate from their own. “It does not bode well for the protection of customer funds.”

Since the ruling gives banks the right to co-mingle customer funds with their own, no crime can be committed for the use of customer deposited monies.
According to Walker Todd , former lawyer for the Federal Reserve Bank of New York and Cleveland: “Basically, there is a new 7th Circuit opinion saying that there is no reason to impose a constructive trust on a lender’s takings of customers’ funds from client commodity firms that were used (inappropriately) to secure the firms’ borrowings, as long as the lender can say that it did not know WITH CERTAINTY that customers’ funds were being repledged. Negligence and misappropriation (vs. knowing criminal intent) are now a sufficient excuse for letting the lender keep the money and go to the head of the line for distributions in bankruptcies of the client commodity firms.”

When a customer deposits money into a bank, the bank essentially issues a promise to have those funds available when the customer returns to withdraw the deposited amount. When the same customer withdraws funds from their account (whether checking or savings) the customer assumes that the bank has enough funds to cover their withdrawal; including the presumption that their monies are separate from the bank’s assets.

Now, those funds are up for grabs by the bank at their discretion without explanation to the customer – nor is the bank obligated to recoup the customer should they “lose” those funds due to bad loans, bankruptcy or stock market loss.

In Texas, Pamela Cobb, manager of Bank of America (BoA), stole an estimated $2 million from customer funds for personal use. Cobb had been taking customer segregated funds since 2002.

Customers have complained of fraudulent charges placed on their accounts that BoA cannot explain. When the customer brings these charges to the in-house fraud department, they are given the run-around until they acquiesce.

Other customers have had their private possessions stolen right out of their safety deposit box held at BoA. The safety deposit box was drilled into and the contents shipped to the BoA corporate holding center in South Carolina.

In 1992 to 2003, Citibank called their theft of customer funds “account sweeping” wherein they stole more than $14 million from customers nationally. Using computerized credit card processes to remove positive and negative balances from customers, the scheme included double payments or funds paid out on returned purchases that were then attributed back to the customer.

At Chase bank, an anonymous employee opened an account under a customer name (targeting an Alzheimer’s sufferer), complete with a personal debit card. An estimated $300 per day was withdrawn on the fraudulent account. When family representing the victim alerted Chase, they brushed them off with an internal investigation claim – even as the family sought legal action.

Banking fraud against the elderly has risen of late, since banks realize they can steal massive amounts of cash from their aging customers with little to no repercussions.

The recent ruling on SMG has given the banking industry the legal backing they have been lacking when stealing from their customers.

Our financial institutions have been planning for a financial collapse wherein the US government will not offer assistance. The resolution plans required by the Federal Reserve Bank, described schemes to have the major domestic banks remain afloat by selling off assets, finding alternative sources of funding, reducing risky measures that make a quick buck. These strategies were to be perfected with “no assumption of extraordinary support from the public sector.”

The mega-banks, through Wall Street, are also acquiring firearms, ammunition and control over private mercenary corporations like DynCorp and ‘Blackwater” as authorized by the Department of Defense (DoD) directive 3025.18 .

DynCorp is a military-based private mercenary contractor that provides (among other services) intelligence training and support, international security, contingency plans and operations. Ninety-six percent of their funding is based on annual revenues from the US federal government. The international branch of DynCorp has operated as a “police force” even assisting local law enforcement during Hurricane Katrina.

Named as investors for the amassing of gun and ammunition manufacturers are Citibank, BoA, Barclays and Deutsche Bank who are pouring money into Cerebus and Veritas Equity who have taken over private corporations involved in the controlling riot situations.

The Federal Reserve Bank, one of the heads of banking cartels, has their own police force which operates as a protective security for the Fed against the American public. As part of the Federal Reserve Act signed in 1913, the designation of a Federal Law Enforcement – special police officers that are exclusively regulated by authority of the Fed (whether in uniform or plain clothes. These specialized police officers (who train with Special Response Teams) can work in tandem with local law enforcement or US federal agencies. These officers are heavily armed with semi-automatic pistols, sub machine guns and assault rifles as well as body armor.

Of recent, when withdrawing cash from an ATM, the daily allotted amount has decreased with some banks, thereby forcing the customer to go into the branch and extract the difference with a teller. At this point, according to anonymous informants, the customer is taken into a backroom to be questioned as to why they want the cash, what they are purchasing with the cash, why they are not choosing to use a debit card or another form of digital trade to make the purchase. These questions are not only intrusive, they are illegal.

Some anonymous sources have said that banking representatives who conduct the integrations are directed to keep a record of customer responses on an online application that will be sent to the FBI in conjunction with Patriot Act mandates on tracking banking activity.

Customer funds are no longer secure, no longer backed by the FDIC or other insurance corporations, and banks are legally allowed to co-mingled customer money with other funds of the bank. The only safe place for your money is with you.

Now is the time to close your bank account....

Friday, August 24, 2012

America’s Descent into Poverty...

America’s Descent into Poverty...
Paul Craig Roberts;

The United States has collapsed economically, socially, politically, legally, constitutionally, and environmentally. The country that exists today is not even a shell of the country into which I was born. In this article I will deal with America’s economic collapse. In subsequent articles, i will deal with other aspects of American collapse.

Economically, America has descended into poverty. As Peter Edelman says, “Low-wage work is pandemic.” Today in “freedom and democracy” America, “the world’s only superpower,” one fourth of the work force is employed in jobs that pay less than $22,000, the poverty line for a family of four. Some of these lowly-paid persons are young college graduates, burdened by education loans, who share housing with three or four others in the same desperate situation. Other of these persons are single parents only one medical problem or lost job away from homelessness.

Others might be Ph.D.s teaching at universities as adjunct professors for $10,000 per year or less. Education is still touted as the way out of poverty, but increasingly is a path into poverty or into enlistments into the military services.

Edelman, who studies these issues, reports that 20.5 million Americans have incomes less than $9,500 per year, which is half of the poverty definition for a family of three.

There are six million Americans whose only income is food stamps. That means that there are six million Americans who live on the streets or under bridges or in the homes of relatives or friends. Hard-hearted Republicans continue to rail at welfare, but Edelman says, “basically welfare is gone.”

In my opinion as an economist, the official poverty line is long out of date. The prospect of three people living on $19,000 per year is farfetched. Considering the prices of rent, electricity, water, bread and fast food, one person cannot live in the US on $6,333.33 per year. In Thailand, perhaps, until the dollar collapses, it might be done, but not in the US.

As Dan Ariely (Duke University) and Mike Norton (Harvard University) have shown empirically, 40% of the US population, the 40% less well off, own 0.3%, that is, three-tenths of one percent, of America’s personal wealth. Who owns the other 99.7%? The top 20% have 84% of the country’s wealth. Those Americans in the third and fourth quintiles–essentially America’s middle class–have only 15.7% of the nation’s wealth. Such an unequal distribution of income is unprecedented in the economically developed world.

In my day, confronted with such disparity in the distribution of income and wealth, a disparity that obviously poses a dramatic problem for economic policy, political stability, and the macro management of the economy, Democrats would have demanded corrections, and Republicans would have reluctantly agreed.

But not today. Both political parties whore for money.

The Republicans believe that the suffering of poor Americans is not helping the rich enough. Paul Ryan and Mitt Romney are committed to abolishing every program that addresses needs of what Republicans deride as “useless eaters.”

The “useless eaters” are the working poor and the former middle class whose jobs were offshored so that corporate executives could receive multi-millions of dollars in performance pay compensation and their shareholders could make millions of dollars on capital gains. While a handful of executives enjoy yachts and Playboy playmates, tens of millions of Americans barely get by.

In political propaganda, the “useless eaters” are not merely a burden on society and the rich. They are leeches who force honest taxpayers to pay for their many hours of comfortable leisure enjoying life, watching sports events, and fishing in trout streams, while they push around their belongings in grocery baskets or sell their bodies for the next MacDonald burger.

The concentration of wealth and power in the US today is far beyond anything my graduate economic professors could image in the 1960s. At four of the world’s best universities that I attended, the opinion was that competition in the free market would prevent great disparities in the distribution of income and wealth. As I was to learn, this belief was based on an ideology, not on reality.

Congress, acting on this erroneous belief in free market perfection, deregulated the US economy in order to create a free market. The immediate consequence was resort to every previous illegal action to monopolize, to commit financial and other fraud, to destroy the productive basis of American consumer incomes, and to redirect income and wealth to the one percent.

The “democratic” Clinton administration, like the Bush and Obama administrations, was suborned by free market ideology. The Clinton sell-outs to Big Money essentially abolished Aid to Families with Dependent Children. But this sell-out of struggling Americans was not enough to satisfy the Republican Party. Mitt Romney and Paul Ryan want to cut or abolish every program that cushions poverty-stricken Americans from starvation and homelessness.

Republicans claim that the only reason Americans are in need is because the government uses taxpayers’ money to subsidize Americans who are unwilling to work. As Republicans see it, while we hard-workers sacrifice our leisure and time with our families, the welfare rabble enjoy the leisure that our tax dollars provide them.

This cock-eyed belief, on top of corporate CEOs maximizing their incomes by off-shoring the middle class jobs of millions of Americans, has left Americans in poverty and cities, counties, states, and the federal government without a tax base, resulting in bankruptcies at the state and local level and massive budget deficits at the federal level that threaten the value of the dollar and its role as reserve currency.

The economic destruction of America benefited the mega-rich with multi-billions of dollars with which to enjoy life and its high-priced accompaniments wherever the mega-rich wish. Meanwhile, away from the French Rivera, Homeland Security is collecting sufficient ammunition to keep dispossessed Americans under control....

Thursday, August 23, 2012

To go further down the rabbit hole ....

To go further down the rabbit hole ....

"Alice laughed: "There's no use trying," she said; "one can't believe impossible things."

"I daresay you haven't had much practice," said the Queen. "When I was younger, I always did it for half an hour a day. Why, sometimes I've believed as many as six impossible things before breakfast."

Alice in Wonderland.

And so goes the Zioconned and utterly criminal and corrupt Western Foreign and Economic/Financial Policies for decades....

Wednesday, August 22, 2012

It's the Economy Stupid, always the Economy...

It's the Economy Stupid, always the Economy...

ZIO-Euro optimism is once again gushing through the system on the hope that the debt crisis could be wished away with a nod by German Chancellor Angela Merkel or with a wink by the Bundesbank at the ZIO-European Central Bank, which is dying to print unlimited amounts of moolah to buy sovereign bonds—and old bicycles, if it has to—in order to force yields down for debt-sinner countries like the Zioconned and utterly corrupt and criminal USA, Spain, France and Italy. But in Greece there has been an incident, a huge Tax revolt is shaping up...and more wild riots are in the offing!

Nouriel Roubini is suggesting that 2013 could make the year 2008 pale by contrast.

On July 7, 2012, he made the following points:

· "By 2013, the ability of policy makers to kick the can down the road is going to run out of steam.
· "In the Euro-zone the slow-motion train-wreck could become a faster-motion train wreck.
· "The U.S. looks close to stall-speed and a recession, given the latest economic data. The landing of China is becoming harder rather than softer.
· "The other emerging markets are all sharply slowing down in terms of growth--the BRICs, China, Russia, India, Brazil, and also Mexico, Turkey. Partly it's because there's a recession in the Eurozone and U.K., partly it's because they're not doing their reforms.
· "And finally there is the time bomb of a potential war between Israel and the U.S. and Iran. Negotiations have failed. The sanctions will fail. Obama doesn't want a war before the election, but after the election, regardless of whether it is Obama elected or Romney, chances are the U.S. is going to decide to go and attack Iran and then you'll have a doubling in global oil prices overnight.
· "So, it's the perfect storm! You could have a collapse of the Eurozone, a U.S. double-dip, hard-landing of China, hard-landing of emerging markets, and a war in the Middle East. Next year could be a global perfect storm."Well, it's much worse, because like 2008 you have an economic and financial crisis, but unlike 2008, you're running out of policy bullets. In 2008, you could cut rates from 5%-6% down to zero, do QE1, QE2, QE3, you could do fiscal stimulus up to 10% of GDP, you could backstop a guarantee bailout of banks and everybody else. Today, more QEs are becoming less and less effective because the problems are of insolvency not illiquidity. Fiscal deficits are already so large that everybody has to cut them, not increase them. And you cannot bail out the banks because (1) there is political opposition to it, and (2) governments are near insolvent and they cannot bail out themselves, let alone bail out the banking system.
· "So the problem is that we are running out of policy bullets. We're running out of policy rabbits to pull out of the policy hats compared to 2008. So if a free-fall of markets and economy does occur, you don't have any more of a safety net of enough policy bullets to try to absorb the shocks, because we've been spending the last 4 years using 95% of those bullets. So we are running out of bullets."

Oil's toxic partner: ZIO-Guns and crooked policies...

Oil's toxic partner: ZIO-Guns and crooked policies...
By Hossein Askari

Needless to say, military expenditure takes financial, economic and human resources away from productive uses, are used in armed conflicts and wars and these, in turn, exact an even heavier toll on human and economic development.

Oil is intimately connected to military expenditure and armed conflicts and wars in a number of ways.There is evidence that oil revenues and military expenditure are somewhat correlated, providing a seemingly painless means of financing the most sophisticated weaponry available; the acquisition of sophisticated military hardware, in turn, encourages armed conflict and causes significant human and physical loss; and armed conflict, in part because of arms depletion, encourages further military expenditures.

Conflicts have developed over oil and gas ownership. Foreigners have meddled and have a military presence in the region largely because of its oil and gas resources.

Military expenditures became significant in the Persian Gulf after the first dramatic rise in oil prices in 1973-1974 and have remained large by any standard. Military expenditures took a further jump with the Iran-Iraq War, especially in Iraq, Saudi Arabia, and the United Arab Emirates. Over the past 30 or so years, the Persian Gulf could be classified on a number of dimensions as the most militarized region in the world.

Although the broader Middle East and North Africa region accounted for only 4.7% of the word’s population, it was responsible for 7.1% of global military expenditures in 2007; and over the period 1988-2005 the region’s average annual military expenditure as percentage of its GDP stood at 6.1% while the global figure averaged at 3.0%. In 2007, Iran and Saudi Arabia were among the top 15 military spenders in the world.

Average annual per capita military expenditures (in constant 2005 US dollars) over the period 1988-2005 were highest in Kuwait ($2,729), followed by the UAE ($1,300), Saudi Arabia ($934), Bahrain ($527) and Iran ($66).

As percentage of gross domestic product, Kuwait again averaged the highest (9.8%), followed by Saudi Arabia (7.4%), the UAE (4.5%), Bahrain (3.1%) and Iran (2.9%).

Moreover, during the period of 1988-2005, annual Persian Gulf arms imports per capita averaged $36 per year, ranging from an annual average of $9 per capita for Iran to $222 for the UAE. For the UAE this indicator would increase by four- to fivefold (to about $1,000 per capita) if only the nationals of the UAE are included, as 80% of the UAE's population are immigrant workers.

While some claim a positive economic effect from military expenditure, on balance, the negative effects on economic performance are overwhelming. These negative effects include:
i. lower investment in the civilian sector,
ii. lower expenditures on health and education,
iii. higher civilian unemployment,
iv. allocative inefficiencies,
v. lower civilian research and development,
vi. higher budget deficit,
vii. higher public debt,
viii. higher inflation rate,
ix. lower growth rate,
x. more corruption,
xi. increased chance of armed conflict, and thus
xii. higher rate of destruction of human life and physical capital.

Military expenditures in the form of military imports, a high component of military expenditures in the Persian Gulf, have additional negative effects through the balance of payments.

What have been the fallouts of the three recent wars in the Persian Gulf?

The estimated cost of the Iran-Iraq War was $637 billion to Iran, $376 billion to Iraq, and $326 to other Persian Gulf countries and the rest of the world, all in constant 1988 US dollars. The global cost of the Iran-Iraq War, based on our conservative assumptions and methodology (while omitting a number of significant costs due to the lack of data), is almost $1.4 trillion in 1988 dollars.

The total cost of the war to Iran was equivalent to almost 19 years of Iran's oil export revenues. For Iraq, its burden represented 13 years of its pre-war oil revenues. Iran's cumulative GDP between 1980 and 1988 was $739 billion in constant 1988 US dollars. Thus, the total damage to Iran's economy during the war was equal to about 77% of Iran's cumulative economic output during the war years.

Iraq's aggregate output between 1980 and 1988 was $363 billion in constant 1988 dollars and its total war-related cost was equal to about 136% of its cumulative economic output during the same period.

These are staggering costs.

In contrast to the Iran-Iraq War, the First Gulf War did not have a profound long-term impact on oil prices. However, inevitable exclusion of the environmental costs of the war from our calculation makes our cost estimation an underestimate of the burden on Persian Gulf countries. The cost of this war to Iraq was $269 billion, $533 billion to the allies and $34 billion for the rest of the world.

The global cost, based on our conservative assumptions and calculation, is at least $783 billion in constant 1991 dollars, far above the initial estimations and highly significant, by any standard, for a 210-day military conflict.

Iraq would have needed almost 18 years of its pre-war oil revenues to pay for the total damage inflicted on its economy. On the other side of the conflict, Kuwait suffered at least $130 billion in budgetary and macroeconomic losses during the invasion and occupation by Iraq. Kuwait also needed 13 years of its pre-war oil revenues to cover the budgetary and macroeconomic damage to its economy.

When president George W Bush made his famous "Mission Accomplished" speech on May 1, 2003, aboard a US aircraft carrier, he probably never imagined that US combat and support operations expenses alone in Iraq would exceed $1 trillion by 2015.

In our calculations, we did not include some key budgetary and macroeconomic costs of the war such as costs to Iraq associated with the loss of life, injuries, and displaced people, environmental costs to Iraq and its neighbors, and various types of budgetary and macroeconomic costs to other allies.

In spite of omissions that lead to an underestimate, our final figures are still staggering. The total cost inflicted on the direct belligerents, neighbors, and the rest of the world is estimated at $2,509 billion, $140 billion, and $531 billion, respectively. These bring the global cost of the Iraq War, after adjustments to avoid double counting, to almost $3.2 trillion in 2011 dollars.

The Iraq War inflicted severe budgetary pain on the United States, perhaps for the first time since the Vietnam War that a conflict has brought such hurt. More than half of the total estimate for the global cost of the war was and will be incurred by the United States - a figure exceeding $1.7 trillion. Moreover, the human cost for the United States has been unmatched since the Vietnam War.

The deficit spending, coupled with the spending on the wars in Iraq and Afghanistan, has raised the ratio of debt to GDP by about 10%. At the same time, the human cost of the war for Iraq from fatalities, injuries, and displaced population has already exceeded hundreds of billions of dollars according to very rough and conservative estimates.

Apart from the total losses to the direct belligerents, the most profound effect of the three wars on the region may be in the composition of government expenditures towards higher military expenditures.

In all of the countries - except in Iran, where the quality of data, especially for military spending, is highly disputable - the share of military expenditure in total government expenditures is either higher than or equal to the share of public education and health care combined during the 1990s and 2000s.

Also, military expenditures are the only expenditure category where all Persian Gulf countries "outclass" other developing countries, OECD countries, and the global average. Add to these facts and figures:
  • The recent $60 billion arms sales contract announced between Saudi Arabia and the United States;
  • The UAE's $7.1 billion contract to purchase 80 of the most advanced F-16 fighters in the last decade;
  • The recent $35-$40 billion contract with the United States to purchase and upgrade the UAE's anti-missile defense systems;
  • Oman's $12 billion and
  • Kuwait's $7 billion contracts with the United States to buy new warplanes;
  • Washington's reported agreement to sell bunker-busting bombs to the UAE and even
  • New arms and upgrading of F-16s for Bahrain (a country caught in internal turmoil).

    These are breathtaking set of numbers.

    These are staggering costs that all Middle Easterners must be made aware of, costs that are a testament to the folly of their leaders and the duplicity of the powerful nations.The question that must be answered is simple. Would these wars have occurred if leaders and countries knew the global price of their aggressive actions and believed that they would have to pay for them in full - that is, full reparations for victim countries and leaders and their cronies forfeiting their ill-gotten wealth, being subject to arrest and trial by the International Criminal Court?

    In short, the region needs a long period of peace to develop institutions and implement policies to achieve political reform and sustained economic prosperity.

    NEXT: Islamic management of oil reserves and revenues

    Previous articles in this series are:
    Part 1: Riddle of the sands
    Part 2: The sweet and sour of oil
    Part 3: The driver of oil prices
    Part 4: OPEC in the driving seat
    Part 5: The OPEC bogeyman
    Part 6: OPEC and the sanctions highway
    Part 7: Oil-price shocks lie in wait
    Part 8: Whose oil is it anyway?
    Part 9: The dark side of oil

    Part 10: Institutions matter
    Part 11: Oil-rich rulers blind to the future

    Part 12: 'Arab Spring' without a bloom
    Part 13: Reform - or be kicked out

    Hossein Askari is Professor of Business and International Affairs at the George Washington University.