The Bailout Barracudas

The barracuda is a ray-finned fish with fearsome appearance and strong, fang-like teeth. It is dangerous to humans and extremely ruthless in its behavior – large barracudas have been known to eat small barracudas. They used to live only in the oceans but as they are quite attracted to glint and shine (jewelry), many of them are making a living on Wall Street. They cannot be caught by conventional angling methods and require specially scaled tackle.

I’ll start with Alan “Barracuda” Greenspan. In his recent testimony before Congress he conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.” In his 18-year tenure as chairman of the Federal Reserve, Greenspan placed too much faith in the self-correcting power of free markets. He repeatedly (with Congressional support) resisted calls for tighter regulation of subprime mortgages and other high-risk exotic mortgages which allowed people to borrow far more money than they could afford. His failure to anticipate the self-destructive power of such unjustifiable mortgage lending triggered the current financial crisis.

Greenspan’s successor, Ben “Barracuda” Bernanke, made the following remarks in November 2005 at his nomination hearing to head the Federal Reserve Board.

“Monetary policy at the Fed has been executed with both careful judgment and flexibility. To cite one prominent example, Chairman Greenspan's risk-management policy approach attempts to take into account the possible consequences of not only the most likely forecast outcomes but also of a range of lower-probability outcomes. . . . Under Chairman Greenspan, monetary policy has become increasingly transparent to the public. . . . Since its founding, the Federal Reserve has been given substantial responsibility for protecting the stability of the nation’s financial system . . . the Fed works closely with other regulators to ensure the safety and soundness of the U.S. banking system. . . . The Federal Reserve, along with other regulators, is also engaged in trying to ensure that consumers . . . are not subject to discriminatory or abusive lending practices.”

We know now that everything he uttered was simply false. In all likelihood, Bernanke was either very busy in his role as chairman of the Economics Department at Princeton, or he was trying to buy someone’s vote to get his nomination approved.

When the housing bubble burst, troubled financial institutions which incurred large losses tried to increase their capital by selling assets. This drove the price of assets down, reducing their capital even further. The logical thing to do would be to inject more capital into financial institutions in return for a share of the ownership.

Along came Henry “Barracuda” Paulson. Instead of implementing this idea suggested by Bernanke, Paulson rejected it, saying, “That’s what you do when you have failure.” What Paulson was more focused on was outright fiduciary control in the original bailout bill:

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

Thankfully, this passage was read on time and removed from the bill which eventually got passed.

When the British Government and Gordon “heckuva job” Brownie announced a plan for major equity injections into British Banks, a plan that was widely embraced by the European Union, Hank Paulson got egg on his face and had to basically propose the same thing, a couple of weeks too late to control the skid on Wall Street.

The U.S system of Government is supposed to have many checks and balances and ordinary citizens are left to wonder how such things are permitted to happen. What do their representatives in Congress do to protect their interests? The answer, you may be surprised, is very little. In fact, they have aided and abetted such practices by not performing their oversight role with due diligence.

Senator Chris “Barracuda” Dodd of Connecticut, in his acceptance speech as Chairman of the Senate Banking Committee, said in January 2007:

“I am deeply troubled by what has happened in our economy over the past several years. . . . Many have become victims of unscrupulous lending practices that have stripped them of their equity and sometimes their entire homes. . . . It is my intention to make their cause the work of this Committee.”

In that same speech, Chris Dodd heaped lavish praise on the former chairman, Senator Richard Shelby of Alabama. As the Joker said in The Dark Knight, “Let’s wind the clock back a few years.”

When the stock market began its crash in 2000, trillions of dollars didn’t simply disappear – they changed hands from long-term investors to hedge funds and short sellers. Much of this money was moved by hedge fund managers and their multi-millionaire clients into offshore tax havens in Bermuda and the Cayman Islands. The practice of short selling affects nearly everyone who has ever bought or sold stock or invested in mutual funds and it poses a direct threat to the economic well being of small businesses and the entire community.

It was Senator Richard “Barracuda” Shelby, as Chairman of the Senate Banking Committee, who did nothing to ensure that our markets were fair and honest. While company after company filed for bankruptcy and private investors lost millions, Congress (under Shelby and the Banking Committee) and the SEC did nothing to prevent it. Congress was still doing nothing before the meltdown, and states were being forced to deal with such issues. I suspect that many congressmen and senators are clients of these hedge fund managers and have their private portfolios in offshore accounts.

It should come as no shocker, therefore, why these hedge fund managers will be definitely getting their hefty bonus checks from the $700 billion bailout package.

Save the Fat Cats

This blog is by my cousin, P. Ranganath Nayak.

A propos Nicholas Kristof's comment about CEO salaries (October 2, NY Times) – there is a straight line connecting these three dots: outsize executive pay, George Bush's tax cuts for the wealthy, and the sub-prime catastrophe. Because of the first two, money got concentrated in a few hands to the point that they did not know where to put it. There are just so many yachts and houses and fine wines and paintings you can buy. What did they do? They took their money to investment bankers, private equity firms, and hedge funds, and said, "Get us a terrific return on this." The rocket scientists and MBAs on Wall Street invented sub-prime lending with Adjustable Rate Mortgages for that purpose. The SEC and the Fed were conveniently looking the other way. Voila! We had a housing bubble that was like a bomb ready to explode. All that was needed to light the fuse was the oil price shock. And here we are, with the whole world's economy at risk.

The best way forward is to massively tax huge salaries and wealth, and redistribute it by cutting taxes for everyone else, so that ordinary people can put food on the table, get medical insurance, drive to work, pay their mortgages, and send their kids to college. Let's start by increasing the taxes paid by Henry Paulson, George Bush, and John McCain.

It's time to get mad and get even.

G. M. Prabhu: Makes perfect sense. What does not make sense, however, is that the economic pundits are waxing and waning about why "some measures won't work," but no one has proposed concrete steps to correct the excesses. It seems like we have accepted the paradigm of "privatisation of profits and socialization of losses" (Prof. Roubini of NYU). You can e-mail comments to pr.nayak@verizon.net

Reference:Wall Street and the Making of the Subprime Disaster

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The Savvy American Media

A scene where American voters are engaged in a panel discussion with the savvy American Media on TV represented by Bill O’Reilly (host of the FoxNews Soap opera), Rush Limbaugh (President of Club Ditto-Heads), Wolf Blitzer (Ring Leader of CNN’s 24/7 Soap programming), and the moderator – Jon Stewart (host of the Daily Show and the only sane person in the I. I. A: Insane Infotainment Asylum).

Jon: Let’s start by asking a simple question: Are American voters going to be able to decide wisely in November?

Bill: What kind of a question is that? Of course they are. Many of our viewers can tell you right now who is ahead in the pig race. It’s Palin.

Rush: Same goes for my listeners. They are better educated and more knowledgeable about the main issues – Palinmania and Palintology.

Wolf: At CNN, we focus on giving Americans the facts repeatedly, over and over again, so that eventually they’ll be able to draw the right conclusions.

Jon: Really? How many of your young viewers can find Iraq or Afghanistan on a map?

Bill: A large number I suppose.

This is echoed by Rush and Wolf.

Jon: The facts are as follows, gentlemen. Six out of 10 young people (ages 18 to 29) could not find Iraq or Afghanistan on a map. And only two out of five Americans knew that we have three branches of government and could name them. So it doesn’t appear that young voters are smart today.

Bill: I don’t know where you are getting these numbers from. Young people are smart and pay a lot of attention to the news.

Jon: By reading newspapers?

Rush: Heck no. They get better quality news by listening to my talk show.

Wolf: No, I think they get all their news from my Situation Room.

Bill: C’mon guys. You know as well as I do that young people are smart because they get their news from Fox, and Facebook and the Internet.

Rush: Let me ask you, Jon. Do you know what Palintology is?

Jon: No. I don’t have a clue.

Rush: See, that’s what I meant. If you listened to my show you would know that Palintology is the advanced study of Sarah Palin and how she sees the world – especially Russia – she can see it from her back yard – in fact when she IMs Putin she says: “Can see u grilling Vlad, ur pork chop is burnt – lol.” Oh-Bama could never engage in such neighborly diplomacy.

Jon: Thanks Rush. Since you brought up the issue of pork, what’s going on about this Lipstick on a Pig issue?

Rush: This election is all about Lipstick. Senator Oh-Bama made it a central issue by calling Sarah Palin a pig.

Wolf: I don’t think he called her a pig. I think it was a remark made about McCain’s policies.

Bill: McCain who? He is no longer relevant to the Republican campaign.

Jon: But that’s a common phrase that has been used many times before. All it means is “making the unattractive superficially attractive” – by saying that this remark was made about her, are you admitting that Sarah Palin is unattractive? Let’s get some viewer input.

Call-in from a viewer: This is for the panel – Women have always applied lipstick to decorate their faces – starting with the ancient Indus Valley civilization. Isn’t that the main issue for female candidates?

Jon: Who wants to take that?

Wolf: The caller is absolutely right. In fact, that’s the reason CNN dissed Hillary Clinton during the primaries – because she never touted her lipstick. The reason the polls have shifted dramatically towards the Republicans is because of lipstick.

Call-in from another viewer: How crass is that analysis? The facts are as follows. Lipstick can also be applied by males – it’s called manstick. And a female pig is called a sow – to get the gender equality correct – the phrase should be “lipstick on a sow” or “manstick on a pig” – as it stands now, lipstick on a pig should not really be an issue.

Rush: I’m sure the caller is an intellectual, highfalutin liberal boar. Don’t you know that our listeners and viewers – even the educated ones – are not savvy enough to get into this level of analysis – they just listen to what we tell them – and if we repeat ourselves over and over again – well, then that becomes the central issue of the campaign.

Jon: We have to stop now. Thank you gentlemen. And thank you to our viewers, who have become guinea pigs of the infotainment industry.

The Biofuels Debate: What Would Bachchan Do?

In this blog I’ll give you some cricketing perspective of my childhood friend, “Lambu, mera bachpun ka dost Bachchan.” No, I am not talking about Amitabh Srivastav who “Bollywooded” himself into Amitabh Bachchan, but about Gulbir Singh Choudhury who transmogrified himself into Gulbir Bachchan.

Like the one-eyed Nawab of Pataudi who never took his eye off the ball (or off Rinku), Gulbir Bachchan never takes his eye off the ball on the cricket field. In fact, I do not recall Gulbir ever being bowled out or L.B.W. (leg before wicket); invariably he would attempt a square cut and be caught at third slip or gully.

And why do I bore you with this perspective? Because in today’s world, keeping one’s “eye on the ball” is extremely important as you read various reports on the biofuels debate, based largely on distorted facts.

One June 2, 2008, Secretary of Agriculture Edward Schafer said in a speech on food security at the U.N. Food and Agricultural Organization in Rome that biofuels contributed 2 to 3 percent of the overall increase in global food prices in the past year. These remarks were made because ethanol and biofuels are being criticized by foreign leaders (and members of Congress) as the main causes of skyrocketing food prices which threaten to spread malnutrition and hunger in the poorest nations.

Fact or fiction? It turns out that the Secretary’s statement contained a spinning googly which batsmen like Gulbir Bachchan would have easily spotted. Ten days later in testimony before the Senate Energy and Natural Resource Committee, Joseph Glauber, the chief economist of the USDA, said that biofuels contributed as much as 10 percent of the overall increase in global food prices.

Mr. Glauber had looked at the overall impact on food prices of corn-based ethanol and soybean-based biodiesel. Mr. Schafer looked at the impact of only corn ethanol and should have used the word “ethanol” instead of “biofuels” in his statement. Not only was this not an errant googly; Schafer used the word “biofuels” nine times in his statement.

The reason this makes a difference is because last year, the price of soybeans, one of America’s largest crops, has soared. Why? Because more of the beans were used for biodiesel and fewer acres of beans were planted to accommodate more acres of corn.

Why are things like this allowed to happen? The 2007 U.N. Intergovernmental Panel on Climate Change report states that because of global warming “by 2020 agricultural production, including access to food, in many African countries is projected to be severely compromised.” America’s first mandatory policy to reduce global warming emissions is its biofuels mandate. This mandate was based on the notion that agriculturally-based alternative fuels were purported to have lower global warming emissions than the petroleum-derived gasoline or diesel fuel they displace [1].

Thanks to the 2007 energy bill signed into law by President Bush, the U.S. is now required to mix 9 billion gallons of such fuels into the gasoline supply in 2008, up from less than 3 billion gallons in 2000. This mandate is mostly met by corn-based ethanol.

Before the mandate, corn was priced at $2 a bushel; today it is well above $5 a bushel. Wheat and soybean prices are also up, partly as a result of fewer acres being planted in favor of corn. Corn-related foods such as corn-fed meat and dairy have also increased in price [1].

The problem with the global warming policy is that it is more harmful than global warming itself! Clearly the policy is not based on sound science. David Pimentel, Professor of Ecology at Cornell University, published a paper in 2005 in which he states:

“In contrast to the USDA, numerous scientific studies have concluded that ethanol production does not provide a net energy balance, that ethanol is not a renewable energy source, is not an economical fuel, and its production and use contribute to air, water, and soil pollution and global warming” [2].

The Agriculture Department’s own longtime chief economist, Keith Collins, who retired in January, warned them that ethanol was the “foot on the accelerator” of corn demand, and that the mandates would build a “tremendous increase in demand that is going to feed into food prices.”

A Purdue University study [3] estimates the annual food cost increase for 2007 as $22 billion, of which $15 billion is related to the demand to use crops as fuel. In the U.S., this amounts to an additional $130 per household in 2007, and considerably higher in 2008 (an increase of 53 percent from 2007 in the first three months of 2008).

The reports from agri-businesses such as Archer Daniels Midland use the 2 to 3 percent figures cited by Schafer and state that the record demand for corn is being met with record supplies and that there is no shortage of corn. What they don’t tell you is that fewer acres of other crops such as soybeans and wheat are planted and that ethanol production using corn grain requires 29% more fossil energy than the ethanol fuel produced from it [2].

Notwithstanding all this data, the word from the National Corn Growers Association is that “lack of infrastructure, access to capital, and other issues are the more likely causes of hunger – not scarcity of food.” Their conclusions are based on measures like GDP (Gross Domestic Product) and PPP (Purchasing Power Parity).

Here’s where Gulbir Bachchan’s “eye on the ball” comes in handy. Big-picture statistics form the basis of almost every discussion about “the economy.” But is there such a thing as “the economy?”

The statistics report a blended average and that number is treated as if it applies to an entire population. There is a Blackberry economy and an iPhone economy that generate revenues of billions of dollars. But this is not the same economy that is seeing rampant foreclosures in the last 8 months. Similarly, the “global economy” may produce some data that one can measure, but it would be wrong to derive conclusions based on those measurements.

The projected increases in crop prices would have the most serious impact in poor countries. Both Thomas Friedman (The World is Flat) and Fareed Zakaria (Post-American World) describe how the middle classes in India and China are “rising” based on GDP and PPP.

But these metrics do not paint the complete picture. There are at least 1 billion people at risk for hunger and malnutrition who live on less than $1 a day. These people cannot be “averaged” out with the incomes of the wealthiest 400 individuals who have a net worth of over $1 trillion. For these poor people, even a small increase in the prices of grains and vegetable oils determines whether they get to eat once a day or once in two days.

This reality is what prompted India’s finance minister, Mr. Chidambaram, to remark, “When millions of people are going hungry, it’s a crime against humanity that food should be diverted to biofuels.”

A couple of months ago I caught up with Gulbir who now lives in Texas. He told me that he had recently become a millionaire. I congratulated him and asked him when he was going to take me out for dinner. In his drawly voice he replied, “Aaray Prabhu – kya hua na – I accidentally went into a room where Bill Gates was giving a talk – at that moment, the statistical average income of everybody in the room exceeded one million dollars. That’s my story, yaar.”

It looks like Gulbir Bachchan still has his eye on the ball.

References

[1] Ben Lieberman, “Ethanol and other Biofuels: A Global Warming Solution worse than the Problem,” The Heritage Foundation, May 2, 2008. http://www.cs.iastate.edu/~prabhu/gmonpolitics/Lieberman.pdf

[2] David Pimentel and Tad Patzek, “Ethanol Production Using Corn, Switchgrass, and Wood; Biodiesel Production Using Soybean and Sunflower,” Natural Resources Research, Vo. 14, No. 1, March 2005. http://www.cs.iastate.edu/~prabhu/gmonpolitics/Pimentel.pdf

[3] Corinne Alexander and Chris Hurt, “Biofuels and their Impact on Food Prices,” Purdue University Tech Report, Sept 2007, http://www.ces.purdue.edu/extmedia/ID/ID-346-W.pdf

Reasons for the Oil Hike: Supply-Demand Economics or Energy Index Funds or Individuals Like Moi?

The price of a gallon of gas crossed the $4 mark in Ames, Iowa this weekend. Many pundits are predicting higher prices as the price-per-barrel of oil is expected to reach $150 by the end of the summer. Each barrel produces 42 gallons of oil but there are taxes and surcharges added which raise the end-price per gallon for the consumer.

What is driving this exorbitant price of gas? I looked up some textbooks on economics and here is a brief summary of some of its basic principles. Equilibrium occurs at the intersection of a commodity’s market demand curve and market supply curve. Ceteris paribus, the equilibrium price and the equilibrium quantity tend to persist in time. An increase in demand causes an increase in both the equilibrium price and the equilibrium quantity. An increase in market supply causes a reduction in the equilibrium price but an increase in the equilibrium quantity. The opposite occurs for a decrease in demand or supply.

Let’s look at some data to which we can apply these principles. In 2006, the U.S consumed 20.7 million barrels of petroleum per day of which 9.3 million barrels per day went towards motor gasoline. In 2007, the average consumption of petroleum was 20.7 million barrels per day and in 2008 the numbers for January through May are not significantly different from the earlier years.

The total world consumption over the last three years has remained steady at about 86 million barrels of petroleum per day.

So the demand for oil has not changed significantly at all. And very surprisingly, the OPEC supply has in fact increased this year. Therefore, economic theory should predict a reduction in the equilibrium price. There has been no significant change in the oil market demand and supply over the last three years to warrant the skyrocketing prices in existence today.

Why then has the price of oil gone up so dramatically? The answer lies in the number of hedge funds in the energy markets over the last two years. Today, more money is flowing into commodities as a hedge against the falling value of the dollar and as an investment alternative to a volatile stock market. These funds are not traditional speculators but index speculators who have heavily influenced oil prices.

In simple terms what’s happening is the following. The OPEC countries are overcrowded with super tankers chartered by oil-producing governments to hold inventories of oil they have pumped but cannot sell. There are fewer buyers for this oil cargo at today’s prices, but there are plenty of buyers for pieces of paper linked to the price of oil next month and next year.

Sound familiar? This is exactly the bubble that burst in the home foreclosures that occurred earlier this year. Nobody wanted to buy sub-prime mortgage bonds, but there was plenty of demand for financial derivatives that allowed investors to bet on the future value of these bonds.

We are headed towards another financial meltdown in the coming months. There are now 634 energy hedge funds, out of which 210 are strictly energy commodity funds trading oil or oil futures, as opposed to the stocks of traditional energy companies like ExxonMobil. Large financial institutions like Goldman Sachs, Morgan Stanley, and Merrill Lynch have stepped up their participation in the energy markets.

The price of oil, therefore, is not being fueled by supply-demand economic factors, but by the value of the dollar and the interest rates in the oil markets. The investment in index funds has grown 20-fold from $13 billion to $260 billion during the last five years.

Upon further analysis, a new reality begins to emerge. I am as guilty in causing the hike in oil prices as anyone else. Why, you may ask? Because my pension fund and corporate and government pension funds and university endowments¹ are all managed by the large financial institutions, which are allowed unlimited speculation in these markets. The Commodity Futures Trading Commission has allowed loopholes in its regulations that exempt investment banks from reporting requirements that are required of other investors.

Do I like the high price of oil? NO (Politically correct answer).

Do I like a high return on my pension fund? YES (Personally correct answer).

Certainly it is in my self interest that my pension fund does well as I approach retirement.

Notes

1. The financial geniuses at Iowa State University see good economic sense in sending out their Parking Division SUVs into every lane of half-vacant parking lots to issue $15 tickets to about a dozen or so illegally parked vehicles per day while spending about $500 per day or more on gas and salaries. Unfortunately, such expenses come from the taxpayers instead of the university’s lucrative endowments.

Why it is Imperative to vote for a Democratic President

On the basis of polls conducted across various groups of voters, many columnists have expressed the view that Barack Obama can lose the Presidential election in November in a year in which the Democrats are heavily favored to win many seats in both houses of Congress. The most important factor in this loss is attributed to the Clinton voters that Obama may not be able to win over in uniting the Democratic party.

I offer a compelling reason as to why such voters should vote for a Democratic President.

The two most important legacies left by a President are the consequences of war and the appointments of justices to the Supreme Court. Congress has an important say in whether or not to authorize a war, thus providing “checks and balances” of the Founding Fathers so that “no one man can run the government the way he sees fit.” The fact that this was not fully adhered to in the Iraq War will be a matter for historians and constitutional scholars to debate in the future.

But the appointment of justices to the Supreme Court can have a long-standing effect on the rights of all citizens.

John McCain has said, “For decades now, some federal judges have taken it upon themselves to pronounce and rule on matters that were never intended to be heard in courts or decided by judges.”

President Bush has often expressed contempt for judges who “legislate from the bench.” But Bush expressed no contempt whatsoever against the Supreme Court justices who legislated from the bench and put him into office as President with a 5-4 margin in the 2000 elections. His contempt for activist judges occurred after that ruling.

John McCain has gone on record stating that John Roberts and Samuel Alito have “met my high standards” for a Supreme Court justice. Roberts and Alito join conservative justices Antonin Scalia and Clarence Thomas who in the last three years are moving the Supreme Court in a direction opposite to that of the Court’s history under Chief Justice Earl Warren.

Jeffrey Toobin writes in the May 26, 2008 issue of The New Yorker:

“. . . the Roberts court has crippled school desegregation efforts; limited the reach of job-discrimination laws; and made it more difficult to challenge the mixing of church and state.”

Justice Stephen Breyer’s assessment of his new colleagues is very disturbing to say the least: “It is not often in the law that so few have so quickly changed so much.”

The next President will most likely have one certain appointment when 88-year-old Justice Stevens retires and possibly another if 75-year-old Justice Ginsburg decides to retire. It is very clear in which direction McCain will take the Supreme Court.

Therefore it is imperative that ALL Democratic voters check their “emotional baggage” at the door and let their heads rule in November in voting for the Democratic Presidential nominee. Failure to do so will cause lasting damage to the progress that has been made in civil and individual rights over the last fifty years.

Diamonds Are a Guerrilla's Best Friend

The debate about how to combat poverty in the developing world has been fueled in the last couple of years by two New Yorkers. On one side of the argument is Professor Jeffrey Sachs of Columbia University and author of “The End of Poverty.” On the other is Professor William Easterly of New York University and author of “The White Man’s Burden.” Both are excellent, well-researched books that should be by your bedside.

Into this debate, there now enters another white man, Paul Collier of Oxford University and author of “The Bottom Billion.” If Sachs’s book appears too optimistic and Easterly’s too pessimistic, then Collier’s book does an excellent job of capturing the middle ground. Its analysis of the causes of poverty is compelling and the remedies it offers are more reasonable.

Collier argues that with the phenomenal growth in Asia, the world will soon consist of a top one-sixth (one billion) of rich people, a middle two-thirds (four billion) who are O.K., and another one-sixth (one billion) who will be poor. Collier refers to the bottom one billion as people living in “trapped countries, clearly heading toward what might be described as a black hole.”

He suggests that there are four traps into which really poor countries tend to fall: internal conflict or civil war, possession of natural resources, landlocked with bad neighbor, and bad governance.

It’s the second trap that provides the motivation for this article. Collier is the one who first came up with the phrase “diamonds are a guerrilla’s best friend.” A substantial part of his book concerns itself with this “resource curse.” As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that “resource rents make democracy malfunction”; they give rise to “a new law of the jungle . . . the survival of the fattest.”

In resource-rich countries there is little pressure for government accountability, and hence fewer checks and balances.

Looking back at the last eight years, it seems like the U.S has had fewer checks and balances and almost no government accountability. Halliburton and a few select owners of “resource diamonds” have become “fat” and while democracy is not malfunctioning I am not sure whether it has functioned the way the Founding Fathers intended it to.

Regardless of your views on the candidates running for the Democratic Presidential nomination and their fairly contentious campaigns, you should NOT make the mistake of continuing the present “guerrilla leadership” under John McCain. If you do so, then we may find ourselves headed toward the same poverty black hole like many other bottom billion nations.

Scatological Research

A DNA analysis of fossil feces found in a cave in Oregon indicates that humans lived in North America 14,340 years ago – “1,000 years before Clovis,” the previously known earliest inhabitants.

These “coprolites” yield valuable clues about diets that may have influenced the thinking and strategies of our nomadic ancestors.

Key officials in the current administration should immediately start “going in designated locations” to petrify their poop for posterity. Fifteen thousand years hence, this may provide the only clue to explain the thinking and strategies behind their delusive policies.

Parsing Paulson's Proposal

Treasury Secretary Henry Paulson has just released his blueprint for financial reform. Two things are very disturbing about this proposal. First, it gives the Feds increased authority to regulate a limited number of institutions that are already regulated but not the cause of today’s economic crisis. Secondly, all the proposals require the approval of Congress – a body that did not even read the Patriot Act before passing it into law is going to read and understand the economic mumbo-jumbo of the Feds?

Woe-begone to us when it’s Congress and the Feds watching the henhouse.

Might as well trust me with your money. Like all our presidential candidates, I, too, am a born-again political-cum-economic-cum-whatever change agent you want me to be. The tax rebate amount that you receive in May should be wired in full to the Swiss bank account of Dave Westfall, Esq. In return, Mr. Westfall and I promise you a WORRY-FREE and ECONOMICALLY-FRUGAL European vacation this summer.

By not even leaving your home and being hassled at the airport, you will automatically be worry free. By not spending twice as much on food in Europe, you will continue to remain economically frugal. Please e-mail me at once if you are interested and I will provide you with the details for the wire transfer. Although we are change agents, once we collect your payment, we cannot give you back any change. But we will send you a DVD on the intangible benefits of this brand new financially reformed vacation package – ABSOLUTELY FREE.

NOTE:

This offer is not affiliated with the NBA – Nigerian Banking Association. Participants must be over the age of 18 and sign waivers for forms OCC, OTS, CFTC, PFRA, CBRA, and LTCM, all in duplicate. Form SR (Scam Release) ought to be signed in triplicate. The vacation is completely tax-exempt and no details, especially Mr. Westfall’s, should ever be reported to the IRS.

Iraq War: 4,000 US deaths vs the Flip Side

Today marks the day that the number of US deaths in Iraq exceeds 4,000. But there is also a flip side to this tragedy on the Iraqi side as outlined in the article by Faruq Zaida, a former Iraqi ambassador. We do not hear this reportage from any of the US media outlets. Excerpts from Faruq’s article are reproduced below.

Saddam Hussein was a dictator, and Iraqis did want true democracy, a good life, and a change that would elevate and advance their country, which once had great wealth and thousands of highly-qualified professionals.

But the line that US soldiers are in Iraq to save the Iraqis from dictatorship, liberate the country, and propel it forward is a big lie. They are there to protect US greed for oil and for establishing strategic military bases. They are not there for the Iraqi people.

The real reason for the US invasion and occupation of Iraq, as cited by Alan Greenspan, former Federal Reserve chairman, was to secure and control Iraq's oil. The actions of the US government under the Bush administration have resulted in genocide; their greed to steal Iraq's oil has led to the country's destruction.

US actions and imposed sectarian policies have created the "killing fields of Iraq." More than 1.2 million non-combatant civilians have been killed, according to British polling agency ORB. In what the UN has called the biggest civilian displacement catastrophe in both the 20th and 21st centuries, 2.5 million Iraqi civilians, including the majority of the educated middle class, have sought refuge in Syria and Jordan, while two million have become refugees inside Iraq.

Prompted by a political process that was introduced and enforced by the Bush administration, Iraq has become a war-torn nation with a society that has been ripped apart by sectarian fighting.

Women's rights, which were the most protected among developing countries, have severely deteriorated to such an extent that most can no longer leave their houses. They are forced to wear a veil - even Christian women - and have stopped working in government offices or attending schools and colleges.

The Iraqi education system, which comprised advanced university and college levels, was among the best in developing countries. Now, it is one of the worst. Most teachers have fled the country; those who remain are constantly under the threat of student abuse, according to the UN. Many students do not attend for fear of kidnapping and they shun religious rituals which are now carried out on campus grounds during study hours.

The US embassy in Baghdad's report on corruption, issued last September, concluded that "currently, Iraq is not capable of even rudimentary enforcement of anticorruption laws." Compared to other developing countries, Iraq had one of the best and finest professional civil service staffs. These professionals were able to keep the country from collapsing during the 13 years of harsh economic sanctions imposed on Iraq. Most of these qualified people have now fled to neighbouring countries. Hundreds others have been assassinated.

The medical services sector is perhaps one of the most harmed by the invasion and occupation. Before the war, hospitals and doctors, though impeded by the imposed sanctions since 1991, provided a better health system than those of other developing countries. Now, the medical system is completely shattered. According to the Ministry of Health's 2007 official report, more than 18,000 doctors have fled the country since 2003.

When electricity, water and sanitation infrastructure were destroyed in the 1991 Gulf War, they were completely restored in less than one year. Today, after five years of war, the public services are nearly non–existent, although more than $140 Billion have entered the Iraqi government's coffers since 2003.

Most of the destruction was caused immediately after the fall of Baghdad in April 2003, when the US army allowed rioters to loot and burn government buildings.

Five years ago, Iraq was free from drugs. Iraq today is rampant with drugs and drug addicts.

As my cousin Ranganath pointed out, this begs the question:

“Where is the national and international outrage on this catastrophic humanitarian crisis? How can any religious person tolerate this?”

War on Economy

In the orchestrated prelude to the war in Iraq, here are some of the statements that were made as part of the misinformation campaign by the current Administration.

Dick Cheney, Aug 2002: “Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction. There is no doubt he is amassing them to use against our friends, against our allies, and against us.”

George Bush, Sept 2002: “The Iraqi regime possesses biological and chemical weapons, is rebuilding the facilities to make more and, according to the British government, could launch a biological or chemical attack in as little as 45 minutes after the order is given. . . . This regime is seeking a nuclear bomb, and with fissile material could build one within a year.”

George Bush, Jan 2003: “The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa.”

George Bush, May 2003 (in an interview given to Polish TV): “We found the weapons of mass destruction. We found biological laboratories.”

George Bush, March 2008: “Removing Saddam Hussein from power was the right decision–––and this is a fight America can and must win. Defeating this enemy in Iraq will make it less likely we will face this enemy here at home.”

A similar misinformation campaign has been started on the economy by viewing it through ideologically tinted glasses.

George Bush, Jan 2008: “There is a lot of uncertainty in the economy. I think actually the spending in the war might help with jobs . . . because we’re buying equipment, and people are working. I think this economy is down because we have built too many houses and the economy’s adjusting.”

George Bush, Feb 2008: “I don’t think we’re headed to a recession, but no question we’re in a slowdown. . . . I’m coming to you as an optimistic fellow,” Bush said as he joked his way through an address given to the country’s top bankers at the Economic Club of New York.

George Bush, March 2008: “One thing is for certain –– we’re in challenging times. But another thing is for certain –– that we’ve taken strong and decisive action. . . . Right now we’re dealing with a difficult situation.”

As the steady drumbeat of alarming economic news increases the possibility of global financial havoc, how much longer do we have to wait before the White House and its Panglossian Press Corps unleash the “War on Economy” on an unsuspecting public? At the very least, the President can claim that this war will “increase jobs and spending, and ensure that the markets are functioning efficiently and effectively.”

End of the Monarchy

With all the furor last week over Eliot Spitzer’s indiscretions and Geraldine Ferraro’s comments, another piece of news went largely unnoticed by the mainstream media. That was the comment made by Representative Steve King of Iowa who said that if Barack Obama was elected president, there would be “dancing in the streets of the Islamic world” because of his middle name, Hussein.

Would that all of us could be so prescient.

Rep. King should go back and read U.S. history. The country’s founders fought and bled to death to obtain freedom from the domination of European monarchies. The Representative’s last name is a stark reminder of these atrocities, and would encourage monarchist extremists to “dance in the streets all over the world.”

May I recommend asking Rep. King to change his last name, to Freeland perhaps? Other suggestions are welcome.

The Presidential Change Savants

One of Mahatma Gandhi’s oft-quoted sayings is:

You must be the change you wish to see in the world.

According to Gandhiji, truth was both relative and absolute. Relative truth, according to him, was not a rigid thing and could change as his perception of a problem changed. As the fable goes apropos the above quotation, a mother had brought her young son to see the Mahatma because the boy had become obsessed about eating sugar. Gandhiji told them to return the following week. At that time he told the lad, “You must stop eating sugar.” The mother was puzzled and asked Gandhiji why he had not said this the previous week. Bapu replied, “You see, last week I, too, was eating a lot of sugar. I had to change myself before I could ask someone else to change.”

This anecdote illustrates why Mahatma Gandhi was different from other leaders. He was able to seek truth and change his own thought process if needed. In doing so, he made mistakes but that did not deter him. He was an effective leader who earned the credibility and respect of the people because he was able to walk the talk.

In this year’s US Presidential elections we have seen and heard so much from “change savants” that it may even be causing great concern to our nearest large neighbor, the Andromeda Galaxy M31. I have culled some information from each of their positions for comparison with Gandhi’s ideals of leadership.

Change Agent: John Sidney McCain

John McCain needs your vote because he is a Change Agent in 2008. In fact, he is the Greatest Change Agent of the Republican Party. He recently changed his stance from liking the New York Times when they endorsed him, to it currently being “not my favorite newspaper.” Instead of admitting mistakes and changing his perception, McCranky exhibits temper tantrums and changes his story. He was angry with Elisabeth Bumiller (also of the New York Times) who caught him in a lie in 2004. In that year, McCain’s staff approached John Kerry about potentially filling the Vice President slot on the Democratic ticket (yes, the Democratic ticket). Elisabeth broke the story and now McCain doesn’t want to talk about it. Need I say more as to why John McCain is hated by Rush Limbaugh and the dittohead kingdom? Many people associate the $12 billion per month being spent in Iraq to the current economic crisis (this is the recent estimate by Professor Joseph Stiglitz, co-author of “The Three Trillion Dollar War”). If the Straight-Talk Express runs on less taxes and more war, its wheels will go squeaky well before November.

Agent of Change: Barack Hussein Obama

He is touted as the Agent of Change in what many have called “the political phenomenon of the century.” George Bush said in 2000, “Vote for me, I’m an agent of change,” and proceeded to change the economy for the worse. Obama’s supporters are urged to avoid talking about policy and instead tell how they are inspired by him. When pressed for details on his policies and plans, we are offered evasiveness and distortions. Central to his message of change is the claim that he is free of lobbyist influence, except when convenient. Instead of being humble enough to admit mistakes and learning to change direction, he will be a leader who is “right from day one.” Obama likes to play by the rules with respect to the delegates in Florida and Michigan, but Agent of Change Obama wants to change the rules with respect to whom the super delegates should cast their votes for. His mantra, Sí se puede (Yes, we can), is carefully orchestrated political rhetoric that is in the business of selling an image. He needs to quickly recruit retired mailman, Karl Malone, and start delivering substance.

Positive Change Agent: Hillary Rodham Clinton

At a speech in Ames, Iowa, in December 2007, Bill Clinton introduced Hillary as a Positive Change Agent. He described her as a work-a-day leader who would work on behalf of ordinary Americans. “Over the past 14 years I’ve learned that when you want big changes, you need to build a big consensus,” Hillary says, adding, “Even a president has to get 60 votes in the Senate to pass a law, and that is a painstaking, roll-up-your-sleeves process that involves a lot of preparation and just plain perspiration.” But given their prior history in the White House, the Clintons’ tactics are somewhat questionable. Pulitzer Prize winner Samantha Power of Harvard University described her as a “monster who would do anything to win.” Unlike John Edwards, Hillary has not admitted that her vote for the Iraq war was a mistake. On the one hand, Hillary can bill herself as a change agent, and on the other, to those who don’t like change, she can “hit the ground running on day one because I have been there before.” Talking through both sides of your mouth does not go over well with voters.¹

Can these agents change their “thought processes if needed”? Can these agents “walk the talk”? Can these agents “be the change they wish to see in the world”?

Sólo podemos esperar (We can only hope).

Notes

1. This is an evolutionary survival mechanism which I will leave to more illuminating minds like Richard Dawkins to answer, i.e., why is it that only politicians and administrators amongst our species develop the trait of talking through both sides of their mouths? Is this the goal of evolution? Is there hope for ordinary folks to achieve this goal in the present life?

Winning Big States Is Important

If you listened last night to the “best political team in the country” you may have obtained an incorrect picture of the presidential elections. The total number of delegates needed to win the Democratic nomination this year is 2,025. However, the manner in which one accomplishes such a majority will be crucial in November.

This is because, in the general election for President, the number of Electoral College votes for each state is apportioned on a “winner-take-all” system, and not based on the proportion of votes as is the case in many Democratic caucuses and primaries. Winning by a majority in big states that are electoral-college rich is important to reach the magic number of 270 Electoral College votes to secure the presidency.

The record so far of the two candidates in the race for the Democratic nomination is given below. This is based on state-wide victories and adding up the Electoral College votes assigned to each state.

Hillary Clinton: 263 Electoral College votes

Barack Obama: 196 Electoral College votes

Counting victories by states at this stage of the nomination and counting the number of delegates are good mathematical exercises that provide fodder for the political pundits. However, too much stock should not be placed in such numbers because if a candidate cannot carry the majority in enough large states in November, the spin meisters themselves may have their wickets taken down by Chinamen (a left-arm leg spinner’s googly in the game of cricket).

No Country for Old Men

Last May I found myself close to the grassy knoll at the Hyatt Regency in Dallas. I was a parent chaperone for a high school mock trial team which had made it to the national championship. A bunch of mock-trialers from Kentucky along with their coach were waiting with me to ride an elevator. When the elevator arrived, a young kid named Kevin stepped out and told his coach and team mates who were about to board the elevator, “I’ve left a little present for you. Enjoy.” The entire group scampered away, leaving me somewhat surprised and alone on the elevator going up. Nine floors later I realized that a pair of nose plugs would have been handy to deal with Kevin’s not-so-little present. Then it dawned on me that I needed a refresher course in the semantics of language.

There are many, including some of my good friends, who would argue that my education is sorely lacking. Not because I did not attend school or college, but because I ask the dumbest questions about some of the phrases in language that are widely disseminated by journalists (a.k.a. “infotainment-ists”) today. What others find crystal clear and easy to grasp, I find to be an assault on my senses (and sensibilities). I was chewed out a few years ago for not understanding that “wardrobe malfunction” actually meant “nipple exposé.” Although Kevin’s present is easy to handle with nose plugs, I am unable to find similar widgets to handle brain farts in print and broadcast media.

Take for example President Johnson’s “war on poverty.” Of course Johnson wanted to end the conditions that caused people to starve to death; but this is accomplished by giving to others, not fighting them. The very phrase runs counter to the idea of war.

President Nixon’s “war on drugs” created a significant rise in the number of African-American men in prison though white people were using the most drugs. It also provided the Reagan-Bush administration the military justification to fund and support the Contras in Nicaragua and the mujahideen in Afghanistan. The war on drugs is a war that is being waged against US citizens by funding covert operations in other countries and passively facilitating them in trafficking drugs destined for the US market.

The post-9/11 “war on terror” or “war on terrorism” are phrases with no well-defined meaning. The reality is that terrorist groups and illicit drug producers tend to emerge in any area where there is abject poverty. In their book, “Collateral Language: A User’s Guide to America’s New War,” John Collins and Ross Glover write:

The United States constantly disregards the demands of impoverished countries, enforces its will on people with less ability to fight, and brutalizes the impoverished both at home and abroad . . . . The war on poverty has been operationalized through the war on drugs and the newly articulated war on terror (ism).

Another area where brain farts are freely distributed by presidential hopefuls and inhaled by journalists and media outlets is education reform. Candidates want everybody to receive the best possible education. But I am not sure what their intent really is. Yes, they would like you to receive an education to be able to guarantee that once every four years you would be gullible enough to understand and believe their rhetoric. But no, they would not like you to be so well educated that you would be able to think for yourself, or question what they say, or challenge the infotainment-speak of the best political team in the country. Unlike Collins and Glover, they do not want you to stand up and say, “Language is a terrorist organization, and we stand united against terrorism.” They want you to stand “with them” in the “war on BLANK” which elicits the customary fulsome fawning from the media (Note to Press Corps: “war on clean water” will be quite apt for the 21^st century).

Unfortunately for me, my friends are right about my education. My parents could only give me the best education possible, not the best possible education. Which is why I do not fully comprehend the nuances of language.

Admittedly this is no country for old men like moi. I wait unwearyingly for Javier Bardem to take me out. I only hope the end occurs on the lower floors of an elevator in Dallas.

A Vote for Huckabee: Is it really scary?

On a cold January night in Iowa, Mike Huckabee surprised the pundits by handsomely winning the Republican caucuses. His victory was analyzed ad nauseam by the “best political team in the country” and the nugget of wisdom which emerged was that Huckabee had won on the strength of the “evangelical vote.” It didn’t scare anybody in the media, but it did scare many in higher education.

Those who work in institutions of higher learning believe that we are a country at war with ourselves in science education, notwithstanding the fact that scientific advances are what drive the economy. A majority of the evangelical population believes that evolution is not the process by which “we got to where we are” as a species and that creationism also ought to be taught in high schools and colleges. This group recites heavily from scripture and bases its beliefs on concepts that are unverifiable through scientific experiments. If these “scary Huckabee” voters have a say in how public universities and schools are funded, then that becomes a source of worry for many administrators.

It has been widely claimed that public perception of the value of science is terribly lacking, but after Carl Sagan no one has been able to fire up the public’s imagination on scientific endeavors. Is the public’s perception of science and technology really lacking? Have scientists and technologists carved an elitist niche for themselves and ignored the more practical problems of society, thereby fostering “evangelical” beliefs? Let’s take a closer look.

Our tax dollars are funneled through funding agencies for research in science and technology that is supposed to improve the quality of our lives. Over the last three decades there have been virtually no advances in fundamental physics, despite the fact that a lot of federally funded dollars have been poured into research (for more details, please read “The Trouble with Physics” by Prof. Lee Smolin). Smolin argues that string theory makes no new predictions because it comes in an infinite number of versions. Thus, no matter what an experimental result shows, string theory cannot be disproved. But no experiment will ever be able to prove that it is true.

The paradox is succinctly stated by Smolin: “Those string theories we know how to study are known to be wrong. Those we cannot study are thought to exist in such vast numbers that no conceivable experiment could ever disagree with all of them.”

And how did this effort go on for such a long time? A small group of “evangelical physicists,” who utter hymns about “theories of everything,” or “ten-dimensional worlds and worm holes” have succeeded in controlling the purse strings of the federal funding agencies to such an extent that string theorists have turned into a cult, and newcomers with ideas in other areas are forced to work in string theory and publish (or perish if they choose to do something else more valuable and practical for society). The research in this area, which is unverifiable by experiment, would make Galileo and Kepler turn in their graves.

So it is not only the “evangelical Huckabee-ites” who are scary; the “evangelical physicists” are equally scary, if not even more so.

We live in an age where technological advances and the ubiquitous Internet are supposed to “simplify our lives and make us more productive.” These so-called advances do anything but what they are supposed to do in simplifying our lives. I’ll give you just one example; there are several others out there.

Let’s say you purchase a brand new IBM ThinkPad Laptop computer which has built-in hardware to support Bluetooth technology. What is supposed to happen is that you get a Bluetooth compatible headset, pair the headset with the computer, and possibly do a “Restart” to make everything hunky-dory. I guarantee that you will upchuck twice on the way to hell and back before you get this to work successfully on your computer. Try calling the so-called “Customer-Relationship-Management” CRM support line for some help, and they will bob you like a yo-yo before transferring you to a friendly consultant who demands a hefty hourly charge to help you with problems that were not supposed to be there in the first place!

The “evangelical technologists” who design these gizmos and chant mantras like “plug-and-play,” or “interoperability,” or various utterances meant to make things sound simple and easy will have their own scary day in hell to reckon with when the time for redemption arrives.

So who really are the evangelicals that we ought to be scared of: the Huckabee-ites, or the scientists, or the technologists?

I’ll leave you to figure out your own answer. My sensei, the late Mr. Natarajan of IIT Kanpur, would have been no help at all – he would have just replied “Mu,” which basically meant – unask the question.

Reason for Invading Iraq: A Second Look

In Fall 2007 former Federal Reserve Chairman Alan Greenspan published his memoir titled “The Age of Turbulence: Adventures in a New World.” A single 20-word sentence in his book about the motive for the 2003 Iraq invasion proved to be the most controversial for the White House.

“I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.”

Greenspan believed that Saddam Hussein posed a threat to the security of oil supplies in the Middle East. But the US and Britain have always insisted that the war had nothing to do with oil. Bush said the aim was to disarm Iraq of weapons of mass destruction and end Saddam’s support for terrorism.

To counter this incendiary comment, the White House pressed the Washington Post to interview Greenspan in order to seek a “clarification.” Greenspan “spake” thus in his Post interview (Sept 17, 2007): “I was not saying that that’s the administration’s motive. I’m just saying that if somebody asked me, ‘Are we fortunate in taking out Saddam?’ I would say it was ESSENTIAL” (emphasis mine).

And to put more spin on the matter, the Administration sent out the Defense secretary to make the Sunday TV rounds instead of their usual attack-dog, Dick Cheney. Robert Gates said, “I have a lot of respect for Mr. Greenspan.” But he disagreed with Greenspan’s comment about oil being a leading motivating factor in the war. Gates added:

“I know the same allegation was made about the Gulf War in 1991, and I just don’t believe it’s true. I think that it’s really about stability in the Gulf. It’s about rogue regimes trying to develop weapons of mass destruction. It’s about aggressive dictators.”

Something doesn’t smell right about the allegation in writing by the perspicacious and taciturn Mr. Greenspan, who was the chairman of the Federal Reserve for over 18 years, and the Administration’s vehement desire to parse his sentence about the motive to invade Iraq. It is clear to anyone who is aware of the cost of the war (recent estimates put it at $720 million per day or $500,000 per minute), that it is not possible to recover this entire amount from oil revenues. There just isn’t that much oil in Iraq and Iraq isn’t our primary source of oil.

Why does the Administration then continue the war in Iraq? And why does it find enough votes in Congress to support the war? And why do people who have opposed the war from the very start suddenly start voting on continuing the funding for the war? Why does the Administration reject the recommendations of the Iraq Study Group chaired by James Baker and Lee Hamilton? Has this Administration gone “completely crazy” or is there some “method to the madness” portrayed by our representatives in the House and Senate?

I stumbled upon some reports and books that have encouraged me to take a second look at the reason for invading Iraq and I will share them with you. The Joint Resolution to Authorize the Use of United States Armed Forces Against Iraq states, in part, “Iraq both poses a continuing threat to the national security of the United States and international peace and security in the Persian Gulf region.” Whether we like it or not, Middle East oil is in the United States’ national security interest and if we take that away the world’s economy would grind to a halt.

William Clark, in his 2004 book titled “Petrodollar Warfare,” states that the war in Iraq is an oil currency war. His book was based on a report written by him in 2003 about the real reasons for invading Iraq [1]. Much of what Clark says has gone completely unreported by the U.S. media and the government. I will provide you some excerpts (and their sources) so that you can read for yourself and arrive at a conclusion.

Some historical background may be helpful, most of which I obtained from another recent book, “Thicker than Oil,” by Dr. Rachel Bronson, a scholar at the Council on Foreign Relations. Bronson (no relation to Tough-Boy Charlie) discusses the nature and future of the US–Saudi relationship which began in 1945 when President Franklin D. Roosevelt met with King Abdul Aziz ibn Saud aboard the USS Quincy in the Red Sea. The two leaders fell into easy, warm agreement on three main issues, “Oil, Gold, and Real estate.” On the economic front Saudi Arabia invested largely in the US, and both were true allies in fighting communism.

Turning the clock back nearly a half century, the signing of the Bretton Woods agreement in 1945 established the dollar as the reserve currency of the world [3]. This was possible because during World War II, the US had supplied its allies with goods and demanded gold as payment, thereby accumulating a large amount of the world’s gold. However, with the “guns-and-butter” policy [2] of the 1960s and the Vietnam War, a lot of dollars were handed over to foreign countries in exchange for economic goods. In 1971, when foreign countries demanded payment for dollars in gold, the US Government defaulted on its payment. The popular spin was that the US had “severed the link between the dollar and gold,” but in reality the denial to pay back in gold was tantamount to an act of bankruptcy [3].

This was a time when Saudi Arabia came to the rescue of the US. In 1972 an iron-clad agreement was reached between the two countries. The US would support the power of the House of Saud and in return Saudi Arabia would only accept US dollars for its oil.

The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had reason to hold dollars as payment for oil. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil. The economic essence of this arrangement was that the dollar was now backed by oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured [3].

In November 2000, Saddam Hussein sealed his fate by demanding Euros for his oil instead of US dollars. He converted $10 billion of his reserve fund at the UN into Euros (when a Euro was worth around 82 cents). Clark [1] outlines what would occur if OPEC were to make a sudden shift to the Euro:

The effect of an OPEC switch to the euro would be that oil-consuming nations would have to flush dollars out of their (central bank) reserve funds and replace these with euros. The dollar would crash anywhere from 20-40% in value and the consequences would be those one could expect from any currency collapse and massive inflation (think Argentina currency crisis, for example). You'd have foreign funds stream out of the U.S. stock markets and dollar denominated assets, there'd surely be a run on the banks much like the 1930s, the current account deficit would become unserviceable, the budget deficit would go into default, and so on. Your basic Third World economic crisis scenario.

The United States economy is intimately tied to the dollar's role as reserve currency. This doesn't mean that the U.S. couldn't function otherwise, but that the transition would have to be gradual to avoid such dislocations (and the ultimate result of this would probably be the U.S. and the E.U. switching roles in the global economy).

Big Picture Perspective: Everything else aside from the reserve currency and the Saudi/Iran oil issues (i.e., domestic political issues and international criticism) is peripheral and of marginal consequence to this administration. Further, the dollar-euro threat is powerful enough that they will rather risk much of the economic backlash in the short-term to stave off the long-term dollar crash of an OPEC transaction standard change from dollars to euros. All of this fits into the broader Great Game that encompasses Russia, India, China [1].

So the claim is that the Iraq war was not about Saddam’s WMD, nor about spreading democracy. It was about defending the dollar and setting an example for anyone else who demanded payment for oil in currencies other than US dollars. Two months after the US invasion, the Iraq Oil for Food program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was once again sold for US dollars.

The real reason for the Iraq war was this administration’s goal of preventing further OPEC momentum towards the Euro as an oil transaction currency standard, and to secure control of Iraq’s oil before the onset of Peak Oil (predicted to occur around 2010). A lot of Gulf money was being invested in Europe and Asia and the US had to convince the people who were making decisions to invest elsewhere that it was still profitable to invest in the US. However, in order to pre-empt OPEC, they needed to gain geo-strategic control of Iraq along with its second largest proven oil reserves [1, 3].

I am not sure whether all the sources I have cited are reliable, but this exercise has certainly piqued my interest and yours, too, I hope. Oftentimes political rhetoric leads us to believe that domestic economic security is antithetical to war which is a foreign policy issue, but we may be surprised to discover that the two are interwoven together in a complex web. There appear to be many factors at play in establishing global dollar supremacy – the oft-purported post-9/11 connection (by the current Administration) between Saddam and Al Qaeda, a deliberately manufactured case for war in Iraq, and the subsequent surge that went against all conventional wisdom including the recommendations of the Iraq Study Group. To some readers this may explain why Dubya paraded with swords and pleaded for less-than-$100-barrels of oil in his recent visit to the Kingdom.

The references I have provided have been largely ignored by the mainstream media, because they may be viewed as “conspiracy theories.” But when Greenspan also says that the Iraq war was about oil, the least we owe it is due diligence. Maybe Alan Greenspan still knows a thing or two! When Rachel Bronson publishes a scholarly treatise on the Saudi–US relation, it warrants a second look at the matter.

The invasion of Iraq may have been a necessary “economic” issue but its mismanagement after the first few months by the bumbling neocon nitwits, as described in “Imperial Life in the Emerald City” by Rajiv Chandrasekaran, "unstintingly depicts the stubborn cluelessness" of the current Administration. Given the present conditions, does anyone believe that our presidential hopefuls will get us out of Iraq before 2010?

I doubt that that will happen. We had the “surge” last year which was actually a troop escalation; some other metaphor will be invented to give us reasons to stay in Iraq well beyond 2010. Slogans like “ending the war,” or “supporting the troops,” or “victory in Iraq,” are all very good emotional sound bites, but the realities may be far more complex to deal with in what is an Economic World War in the global village that is home to six billion of us.

My background in economics is seriously lacking and discussion on this topic from more knowledgeable persons is strongly elicited. Thanks in advance to the cognoscenti for their comments.

My acknowledgments to Ashok Subramanian and Sree Nilakanta for pointing me to the reference by Petrov.

References

[1] Clark, William. 2003. The Real Reasons for the war with Iraq.

[2] Haynes, Anthony. 2004. On Guns and Butter.

[3] Petrov, Krassimir. 2006. The Proposed Iranian Oil Bourse.