Why the dollar is dying

Update: June 24, 2009
A new world is being born, one without the US dollar greasing the wheels of commerce
BRIC & SCO summits: Reinventing the wheel

Updates: June 18, 2009
Fed Buying Treasuries; China Selling Treasuries

Russia, China to Promote Ruble, Yuan Use in Trade


Probably the most important meeting in the world is going on right now in Russia: but, only a few people will notice the article below. Yet, it details the most critical change occurring currently creating a new world order and eradicating the United States financial and military hegemonic plans. And the change will be soooo quiet. Not really quiet; it's just that people's attentions are being focussed elsewhere. The information is here for all who are interested in it.

As the dollar enters its death cycle, Americans are focussed on GM and Sarah Palin's new blooper. The fall of the dollar will be a big surprise for many....but don't worry, it will happen gradually (for the near future).

I highly recommend this long but lucid article on why the US Empire is being superceded by the power of Shanghai Cooperation Organisation SCO; and BRIC (Brazil, Russia, Inda and China). See When China awakes, it will shake the world. - Napoleon Bonaparte

If switching to another reserve currency or basket of currencies disables the American military stranglehold on earth, I say, Bring it on!

For those of you who prefer the Americanised version of news with its 'happy ending' see Dollar poses dilemma for Bric countries , the BBC version of the SCO summit.

De-Dollarization: Dismantling America’s
Financial-Military Empire
The Yekaterinburg Turning Point

by Michael Hudson
Global Research, June 13, 2009
Source
The city of Yakaterinburg, Russia’s largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.


Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush (“I’m a uniter, not a divider”) built on the Clinton administration’s legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.

What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.” What this means in plain English is: We have reached our limit in subsidizing the United States’ military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.

Members of Shanghai Cooperation Organisation

"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much. Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.

The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”

When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – and these loans have financed most of the US Government’s domestic budget deficits for over three decades now! Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The main political issue confronting the world’s central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?

For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4] Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine. The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.

In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself? The United States is now the world’s largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.

The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors. And at home, Congress blocked China’s CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.

In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups. To date, China’s attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations. They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout. Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.

Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve’s credit bubble drove interest rates down China’s sovereign wealth funds sought to diversify in late 2007. China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa’s Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis. But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.

Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

Click to enlarge image

On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China’s Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.’”6

At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings. It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America’s balance-of-payments deficit. Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.

Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China’s currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan. This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don’t mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring. When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China’s US investments therefore were safe and sound, he was greeted with derisive laughter.7

Anticipation of a rise in China’s exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency. So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?

To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner’s visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country’s central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8

An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.

Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.

US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.

Notes

1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,

Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”

2 Kremlin.ru, June 5, 2009, in Johnson’s Russia List, June 8, 2009, #8.

3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int’l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body. That means using the Chinese currency to settle international trade payments …”

4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.

5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.

6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009. http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia

7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.

8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.

Related:
BRICs May Buy Each Other’s Bonds in Shift From Dollar
Is the First World Being Turned into the Third World?

When China awakes, it will shake the world. - Napoleon Bonaparte

Update 19-6-09 China’s Got a New Currency…
and It Sure AIN’T the Dollar
Update on SCO and BRIC 17-6-09 De-Dollarization: Dismantling America’s Financial-Military Empire The Yekaterinburg Turning Point

This is a well written explanation of the beginning of the end for the dollar and why it is occurring. It may take a few years, but there is no doubting the lucidity here. Long but exceptional article.

Update on BRIC 12-6-09 Emerging BRIC powers and the new world order

China's ascendency bodes dark days
for the American economy.

There are actually quite a few Americans and Others who still think that US economic hegemony will save the world from collapse. And we will live happily ever after. They are still thinking this is a downturn in the business cycle and that the stock market rally proves things will go back to 'normal' in a year or two.

It seems like a psychotic break with reality when one reads the progress China is making with harmonious oil and gas contracts globally - and China isn't using bombs to seal the deal either. The alliance of the BRIC countries has surpassed the power of the US now, with all its military prowess.

Anyone who does not see the fall of the dollar coming must seriously be still reading the business cycle fairytale told by American media. Below are just a few of the current articles which are not presented as important in Western news - but which I suspect determine the future of international relations.

Iran Signs Major Gas Deal With China;
Is Europe Next?

By Bruce Pannier, RFE/RL
June 6, 2009
Source Iran has found its long-sought-after partner to help develop part of the world's largest natural-gas field, even as the possibility of linking it to a future pipeline to Europe seemed to rise.


China came out the big winner on June 3 when representatives from the China National Petroleum Corporation (CNPC) and the National Iranian Oil Company (NIOC) met in the Chinese capital and signed a $4.7 billion contract for developing Phase 11 of the South Pars gas field. South Pars, shared between Iran and Qatar, has estimated gas reserves of some 14 trillion cubic meters, enough to supply Europe's gas needs for about a quarter of a century.

The CNPC's gain is the French energy company Total's loss. In 2004, Total signed a memorandum of understanding with NIOC to develop Phase 11, one of 24 sections that make up the Iranian part of South Pars, and among those with the highest potential.

However, according to Iranian officials, the French company delayed signing the final agreements for too long, despite warnings from Tehran that time was running out. Total said just a few months ago it would not be ready to sign such a contract for some time yet. Total, in an official statement released on June 3, said it still wants to be part of the deal, but that does not appear to be an option.

However, the Iranian government is offering the French company an opportunity to participate in the development of other sections of South Pars and in the production of liquefied natural gas. NIOC managing director Seifollah Jashnsaz, who was in Beijing for the signing, told reporters he hoped daily production at the site would reach some 50 million cubic meters (some 18 billion cubic meters annually).

The deal is a boon for China because the country's continued economic growth hinges on access to energy resources. Iran profits not only from the Chinese investment but also from a high-profile agreement that demonstrates Tehran can attract partners to major projects, despite international sanctions. Read entire article

South Pars Gas Field

South Pars Gas field is the biggest independent gas reserve in the world which is shared by Iran ‎and Qatar

Geithner Goes Begging In China;
What It Means To You …

Money and Markets
June 05, 2009
text
So this is what it’s come to: Our Treasury Secretary, Timothy Geithner, has to jet off to Beijing to beg for mercy from our biggest global creditor. He has to sit by and be lectured in the ways of finance by Chinese officials. He has to endure the laughter of Chinese students at Peking University, who openly scoffed at his reassurances that “Chinese financial assets are very safe.”

And he has to abandon plans to pressure China on its currency.

The Obama administration had previously been arguing that the yuan was undervalued, artificially subsidizing Chinese manufacturers at the expense of U.S.-based firms. The bottom line? The balance of world financial power is shifting and not in a good way for America.

Worse, I see no evidence that we’re doing anything about it! Instead, we get a bunch of happy talk and spin, with little or no action.

Washington Happy Talk vs. Reality on the Ground in China

Before, during, and after Geithner’s China trip, the Washington spin machine was shifting into overdrive. I’ve already seen a few reports calling Geithner’s trip a success. Geithner himself has been making statements like the following: “I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy and I think a very sophisticated understanding … of the steps we’re taking and why they’re so important not just to the United States but to China and the rest of the world.”

Excuse me, but does anyone believe that for a second? I sure as heck don’t. And neither do the Chinese. The reality on the ground in China is much more skeptical and severe. For example, Bloomberg recounted a conversation in which Geithner was lectured about U.S. profligacy: Yu Yongding, a former central bank adviser who acted as the interviewer for The China Daily newspaper, told Geithner: “I worry about details. We will be watching you very carefully.” Read entire article

China influence to grow faster
than most expect: Soros

Sun Jun 7, 2009
By Edmund Klamann
Source
SHANGHAI (Reuters) - Financier George Soros said on Sunday that China's global influence is set to grow faster than most people expect, with its isolation from the global financial system and a heavy state role in banking aiding a relatively swift economic recovery.

He reiterated his cautious views regarding the surge in global stock markets, although he said it may have further to go given liquidity in the markets and that many investors are still sitting on the sidelines. "In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system," he told an audience at Shanghai's Fudan University.

China's extensive capital controls have helped to shield its financial institutions from the worst of the global financial crisis. "The influence of the state is also greater. So when the government says 'lend', banks lend," Soros added. "This puts China in a better position to recover from the recession and that is in fact what has happened."

New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy. POSITIVE FORCE "China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said. Read entire article

Russia, China should dump dollar in trade
- Medvedev

Fri Jun 5, 2009
Source
MOSCOW (Reuters) - Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia's president Dmitry Medvedev said in an interview with Kommersant daily published on Friday. China has already entered similar agreements with Brazil and Belarus.

The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase. "I think that we can think about such positions, for example the rouble against yuan," Medvedev was quoted by Kommersant as saying. Russia's own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

Russia to build large-scale gas pipelines to China

(AFP/Xinhua)

2006-03-21
Source
Russia will build two large-scale gas pipelines to China within five years, the head of Russian gas giant Gazprom said here Tuesday after signing a deal with China's biggest energy firm. Read entire article

The cautious seldom err. -Confucius

The hand has been dealt - Lucid comments

Now the Obama administration has to show its cards

on Russia, Pakistan, China and Iran.

By Mike Moran - GlobalPost Columnist
February 8, 2009 11:33 ET
Source
NEW YORK — In the early weeks of Barack Obama’s presidency, the players have been invited to the table and dealt their hands.

The president has made his choices for the cabinet and other top posts, subject to the approval of the U.S. Senate. It’s been a messy but necessary process that will continue for months. With the exception of the CIA director designate Leon Panetta, the Obama foreign policy team now sits firmly in place.

(In Munich Feb. 7, Vice President Joseph Biden pledged a departure from the Bush administration's foreign policy.)

Former Sen. George Mitchell has been appointed as special envoy in the Middle East and former U.N. Ambassador Richard Holbrooke has responsibility for Afghanistan and Pakistan. Both of these experienced players will now move to jump-start vital conversations that had fallen by the wayside in the Bush years. Similar moves could be afoot for the on-again, off-again North Korea nuclear talks, and the president’s oft-referenced intention to extend a hand to Iran.

Regardless of whether the president chooses to run policy on these other prickly topics with “special envoys” or through the State Department bureaucracy, these four crises — Israel-Palestine, Afghanistan-Pakistan, North Korea, and Iran — represent the four corners of the diplomatic box America finds itself trapped within.

As in no other moment in American history, progress in any of them leaves the United States heavily reliant on other countries. Multilateralism is no longer a policy choice: It’s a fact of life.

This turn of events has many smart people talking of “grand bargains,” and rightfully so. In each of these conflicts, an outside power now exercises as much or more influence over events than the United States.

Take the Israeli-Palestinian conflict. Gone are the days when a presidential envoy’s most urgent task was getting the Israelis and Palestinians to agree to compromise on territorial and political issues.

Those problems — the status of Jerusalem, the demand for Palestinian right of return, what to do with Jewish settlements — all still exist.

But unlike the 1990s, other players now have a seat at the table. The EU and the Russians form part of the “Quartet” that sponsors talks. Turkey, Israel’s closest Muslim ally, has of late actively tried to seal a deal that would return the Golan Heights to Syria in exchange for a genuine peace treaty with Israel.

But the real unpredictable player at the table here is Iran.

Invited or not, Iran, by virtue of its influence over Hezbollah and Hamas, its alliance with Syria, and its nascent nuclear capabilities, holds a de-facto veto over regional agreements. Add its ability to stir trouble in Iraq, and Iran looms as a pivotal factor in any Arab-Israeli peace
settlement.

Similarly, in any talks with Iran that may develop, the notion that lifting U.N. economic sanctions and opening full diplomatic relations with the Islamic Republic will necessarily entice Iran to foreswear nuclear weapons is slightly naïve. Iran launched a satellite into space last week in spite of years of economic sanctions, and for all the talk of “worried mullahs”
as low oil prices put additional pressure on the Iranian economy, it is important to understand that mullahs don’t think like us.

Indeed, the western consumerism that these “enticements” would bring could be more fearsome for the clerics than the economic benefits.

At the end of the day, the United States will be forced to rely on someone with leverage over Iran.

That country is Russia. Moscow has been part of the talks aimed at preventing Iran from going nuclear, but also has built the Iranians a nuclear reactor and would like to contract for more.

Russian firms do more business in Iran than those of any other nation, and each country has found the other an occasionally useful ally, if only as a way to force the Americans to understand the consequences of ignoring their interests. No deal that prevents Iran from fielding nuclear weapons can happen without Moscow. Period.

Russia made a similar point with regard to Afghanistan this week, essentially paying $2.1 billion to Kyrgyzstan in exchange for delivering an eviction notice to the United States, which had been using a Kyrgyz airbase to supply the war effort.

But in Afghanistan, Russia’s influence is literally on the margins. The Europeans' NATO forces play their part, too, and are indispensible to Obama’s current plan for a troop surge. But seven-and-a-half long years after 9/11, the key player here is the same it was on Sept. 11, 2001: Pakistan.

The relationship with the fractured, opaque Pakistani state has broken down profoundly. Its army tires of doing what it sees as “America’s bidding,” though the billions of dollars in economic and military largesse which has flowed in since 9/11 have helped modernize a military that had begun to fall hopelessly behind its traditional foe, India.

The civilian government is undermined by the airstrikes conducted inside Pakistani territory, and even if it privately has no love for the targets of those Hellfire missiles, it can’t help but be infuriated by the civilian casualties and the appearance of powerlessness they imply. And as
India’s foreign minister noted Thursday, Pakistan’s intelligence services continue to train and provide support to the Taliban and terrorists directed at India.

The dilemma is one Americans of a certain generation will remember: Just as South Vietnam could never be secured against the Viet Cong as long as Cambodia and Laos served as safe havens, neither can Afghanistan be secured without Pakistan gaining control over its territory. Pakistan, here, is the indispensable nation.

The situation is similar in the Far East. There, over the past decade, talks under the “Six Party” rubric have involved North Korea in negotiations with the United States, China, Russia, South Korea, and Japan.

No one is under any illusion that Russia, Japan, or even South Korea itself can do much to forge an agreement that would convince the North Koreans to dismantle their nuclear arsenal. For years, the Six Party structure was little more than a way for the U.S. and North Korea to talk without having diplomatic relations.

Now, however, the picture is vastly more complicated.

Since the testing of its own nuclear weapon in 2006, North Korea appears less impressed by carrots or sticks. In fact, in this conflict, China now calls the tune. Only China, which supplies most of North Korea’s energy and is the North’s only true commercial partner, has any leverage over North Korea.

Iran, Russia, Pakistan, China are the cards that are showing on the table. You, Mr. President, are the croupier. And it’s time for the House to play its hand.

What if the USA collapses?

I read the following article many moons ago, at a time when noone would even admit the USA was headed for recession, at a time no one was really paying much attention to the 'sub-prime' mess, at a time when the realities facing Americans and the world today were simply unimaginable. It was amusing soci0-economic sci-fi then.

Re-reading it today, the rich analysis of the author is simply an explanatory epitaph for the collapse of the USA lifestyle. Between the lines (and slides) are many of the home grown values and wisdom that modern consumer zombie-ism has forgotten - family, simple pleasures, neighbourly goodwill and inherent self-worth in people rather than what kind of 'stuff' they have.

These values slipped from USA culture quietly and no one seemed to take heed: now however, that which has been taken for granted may determine how well the population of the USA weathers the next three years of ghastly surprises. Those values that evaporated with decadent affluence, will now be key survival skills for the immediate future.

In this article, a native Russian compares the survival competencies of both the American and Russian culture...in slides also for those of you who like them. I believe there are points presented herein which will stick with every reader. I can see much of the Russian staple of cultural values in the Irish culture: Ireland is not far away from poverty.

The 'collapse gap' is rich with lessons for today for anyone who is listening.

What If US Collapses?
Soviet Collapse Lessons
Every American Needs To Know

by Dmitri Davydov
Sun, 2008-06-01

Good evening, ladies and gentlemen. I am not an expert or a scholar or an activist. I am more of an eye-witness. I watched the Soviet Union collapse, and I have tried to put my observations into a concise message. I will leave it up to you to decide just how urgent a message it is.

My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the "Collapse Gap" – to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War. More here...


I don't want to leave the reader without a good thought, or picture: the predator and prey united. A chimpanzee has adopted a white tiger cub.

Maybe there is hope for us. If not...shhhhh!

More here...

Things I read today - January 8, 2009

Two main topics today: the 'cut-off' of gas to Europe by Russia, and Internet surveillance. The other side of the headline. or, The blogs we post today may not be allowed tomorrow.

Russia Halts Gas Supplies To European Nations

Russia, Ukraine resume talks on gas dispute
MOSCOW, January 8 (RIA Novosti) - Russian energy giant Gazprom and Ukraine's national energy company Naftogaz resumed talks early on Thursday to resolve the current crisis around gas supplies to Europe via Ukraine, Gazprom's spokesman said.

Gazprom CEO arrives in Brussels for talks with EU officials
There is the other side of the story (as you might suspect). Ukraine won't pay Russia so Russia cuts off supplies. Because pipeline to Europe is through the Ukraine, Ukraine decides to steal from the pipeline. Russia cuts off pipeline to the Ukraine. A little bit different than mainstream interpretations, eh?

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More Evidence of Pentagon War Against the Internet
Further evidence has emerged revealing how the Pentagon is in the business of responding to blog posts critical of the U.S. government. Noah Shachtman, writing for Wired, posts an Air Force flowchart used for “counter-blogging” purposes. (See source for chart close-up)

Barack Obama's 'Black Widow' : The Super Spy Computer
'The NSA's colossal Cray supercomputer, code-named the 'Black Widow,' scans millions of domestic and international phone calls and e-mails every hour. . . . The Black Widow, performing hundreds of trillions of calculations per second, searches through and reassembles key words and patterns, across many languages.'

Vets Sue MK-ULTRA CIA Over Mind Control Tests
For two decades or more, the CIA and the military allegedly plied the unwitting with acid, weed, and dozens of psychoactive drugs, in a series of zany (and sometimes dangerous) mind-control experiments. Now, the Vietnam Veterans of America are suing the agency and the Pentagon for perceived abuses suffered under the so-called "MK-ULTRA" and other projects.

Things I read - December 15, 2008

NZ: Anti-Terror Squad Spies on Protest Groups
Even the land of the hobbits has problems.

ECUADOR DEFAULTS
It's about time someone tooks these contracts to task. Hope he wins.

Homelessness rising as economy slides

What the Russian papers say
Gates may not have the options he thinks he has.

Some Mexicans leaving US, planning never to return

A CLIENT DICTATOR TURNED ENEMY
And yet another perspective.

Stephen Hawking

Alter our DNA or robots will take over, warns Hawking
Yep, the Matrix could happen.

In Praise Of Muntather Al Zaidi

Things I read December 9, 2008

Former ISI Chief: Mumbai And 9/11 Both “Inside Jobs”
For years, people who have followed the money trail on 911 have said it leads back to the ISI. Here is the Ex ISI Chief suggesting the same. Must be another case of when 'is' isn't 'is'.

The Curse of Global Capitalism
Any parasite which draws more from its host than the host can sustain, will eventually kill it...Some cancers are too far spread to be removed at no cost. And yet to continue living with it is a guarantee of a slow and painful death, from which no recovery will be possible. Some very clear thinking here.

Blame the Takers, Not the Makers

Sponsor an Executive
Have a laugh.

US: Blackwater used grenades on unarmed Iraqis
Bastards...they ought to be flayed.

Men really are the weaker sex, say scientists
Maybe this is not a bad thing.

India, Russia sign 10 new energy agreements
Looks like the Empire has come up against a BRIC wall.

The panopticon economy
It's the new Big Brother house. But we wont be seeing inside it on television.

OBAMA REVITALIZES DISASTER CAPITALISM: THE SHOCK DOCTRINE RECEIVES A MAKE-OVER

Obama to send 'clear message' to Russia over neighbors
What nonsense! Especially after the whole world knows Georgia started the war at the behest of the USA.

Russia against U.S. missiles in any European anti-missile plans
And Russia's response.