In the Mideast, bet on a strong horse

By: Daniel Pipes – The Jerusalem Post

The violence and cruelty of Arabs often perplexes Westerners. Not only does the leader of Hizbullah proclaim “We love death,” but so too does, for example, a 24-year-old man who last month yelled “We love death more than you love life” as he crashed his car on the Bronx-Whitestone Bridge in New York City. As parents in St. Louis honor-killed their teenage daughter with 13 stabs of a butcher’s knife, the Palestinian father shouted “Die! Die quickly! Die quickly! … Quiet, little one! Die, my daughter, die!” – and the local Arab community supported them against murder charges.

A prince from Abu Dhabi recently tortured a grain dealer whom he accused of fraud; despite a video of the atrocity appearing on television internationally, the prince was acquitted while his accusers were convicted.

On a larger scale, one accounting finds 15,000 terrorist attacks since 9/11. Governments throughout the Arabic-speaking countries rely more on brutality than on the rule of law. The drive to eliminate Israel still persists even as new insurrections take hold; the latest one has flared up in Yemen.

Several excellent attempts to explain the pathology of Arab politics exist; my personal favorites include studies by David Pryce-Jones and Philip Salzman. Now add to these The Strong Horse: Power, Politics, and the Clash of Arab Civilizations (Doubleday, $26), an entertaining yet deep and important analysis by Lee Smith, Middle East correspondent for the Weekly Standard.

Smith takes as his proof text Osama bin Laden’s comment in 2001, “When people see a strong horse and a weak horse, by nature, they will like the strong horse.” What Smith calls the strong-horse principle contains two banal elements: Seize power and then maintain it. This principle predominates because Arab public life has “no mechanism for peaceful transitions of authority or power sharing, and therefore [it] sees political conflict as a fight to the death between strong horses.” Violence, Smith observes, is “central to the politics, society, and culture of the Arabic-speaking Middle East.” It also, more subtly, implies keeping a wary eye on the next strong horse, triangulating and hedging bets.

Smith argues that the strong-horse principle, not Western imperialism or Zionism, “has determined the fundamental character of the Arabic-speaking Middle East.” The Islamic religion itself both fits into the ancient pattern of strong-horse assertiveness and then promulgates it. Muhammad, the Islamic prophet, was a strongman as well as a religious figure. Sunni Muslims have ruled over the centuries “by violence, repression, and coercion.”

Ibn Khaldun’s famous theory of history amounts to a cycle of violence in which strong horses replace weak ones. The humiliation of dhimmis daily reminds non-Muslims who rules.

Smith’s prism offers insights into modern Middle East history. He presents Pan-Arab nationalism as an effort to transform the mini-horses of the national states into a single super-horse and Islamism as an effort to make Muslims powerful again. Israel serves as “a proxy strong horse” for both the US and for the Saudi-Egyptian bloc in the latter’s cold-war rivalry with Iran’s bloc. In a strong-horse environment, militias appeal more than do elections. Lacking a strong horse, Arab liberals make little headway. The US being the most powerful non-Arab and non-Muslim state makes anti-Americanism both inevitable and endemic.

WHICH BRINGS us to policies by non-Arab actors: unless they are forceful and show true staying power, Smith stresses, they lose. Being nice – say, withdrawing unilaterally from southern Lebanon and Gaza – leads to inevitable failure. The Bush administration rightly initiated a democratization project, raising high hopes, but then betrayed Arab liberals by not carrying through. In Iraq, the administration ignored advice to install a democratically minded strongman.

More broadly, when the US government flinches, others (e.g., the Iranian leadership) have an opportunity to “force their own order on the region.” Walid Jumblatt, a Lebanese leader, has half-seriously suggested that Washington “send car bombs to Damascus” to get its message across and signal its understanding of Arab ways.

Smith’s simple and near-universal principle provides a tool to comprehend the Arabs’ cult of death, honor killings, terrorist attacks, despotism, warfare and much else. He acknowledges that the strong-horse principle may strike Westerners as ineffably crude, but he correctly insists on its being a cold reality that outsiders must recognize, take into account, and respond to.

Please note: These stories are located outside of Prophecy Today’s website. Prophecy Today is not responsible for their content and does not necessarily agree with the views expressed therein. These articles are provided for your information.

Obama’s Politically Correct Pentagon

By: Robert Maginnis – Human Events

America’s military is being destroyed by a readiness-busting political correctness (PC) because those wearing stars too often lack the courage to tell their civilian bosses “no.”  That lack of courage has led to a long string of cultural PC crises – including refusal to recognize internal threats from Islamists to sex-based absurdities and misguided rules of engagement.

Top brass should oppose PC-related corruption and remain focused on preparing for and prevailing in combat.  That mission requires a culture of principled and honest leadership that accepts contrary views.  But unchecked politics can corrode even the best military.

After 9/11, President George Bush said the U.S. isn’t at war with Muslims.  “Our goal is to help you build a more tolerant and hopeful society that honors people of all faiths,” Bush said.  But that view morphed into a PC issue for the Pentagon.

The Pentagon launched a Muslim outreach program that gave “legitimacy” to some Islamic organizations promoting an ideology that shares the same objectives as al Qaeda.   Soon officials such as then-Deputy Secretary of Defense Gordon England cavorted with leaders from organizations like the Islamic Society of North America, a group associated with a covert plan by the Muslim Brotherhood to subvert the U.S.

That outreach program created widespread military cultural fear of being vilified as “Islamaphobic” which explains why the brass ignored important warnings like that delivered by Stephen Coughlin, a military intelligence analyst. Coughlin was hired to “…set aside the feel-good assumptions about Islam … and take an unblinkered look at the facts.” He warned senior officers that there were dedicated jihadists wearing the U.S. uniform. In 2008, Coughlin was sacked as a result of a campaign undertaken by England’s Muslim aide because of Coughlin’s “Islamaphobic” views.

Hundreds of Army leaders were warned in 2008 at an Army-sponsored anti-terrorism conference that jihadism — Islamic holy war — was a serious threat to personnel in uniform and there were strategic deficiencies in the military’s comprehension of the threat. Patrick Poole, one of the conference speakers, warned that “…ignorance and inaction keeps our troops vulnerable.”

Poole illustrated that ignorance by citing a lecture on Islam given to troops at Fort Hood by Louay Safi. Poole said Safi was caught on FBI communications intercepts talking to a senior Palestinian Islamic jihad leader. “Amazingly,” Poole said, “a Fort Hood spokesman claimed that Safi had been fully vetted.”

Recently, Poole reviewed his 2008 warning by citing three jihadist cases that validate them. In 2003, Army Sgt. Hasan Karim Akbar, who opposed killing of Muslims in war, killed two officers and wounded 14 in an attack in Kuwait. Second, last June, Abdulhakim Mujahid Muhammad, allegedly killed a U.S. soldier and wounded another outside a recruiting center in Little Rock, Ark. Prosecutors say Muhammad targeted soldiers “…because of what they had done to Muslims in the past.” Third, in November, a Muslim soldier, Maj. Nidal Hasan, shot dead 12 soldiers and a civilian at Fort Hood after shouting the Muslim expression “Allahu Akbar.” Hasan frequently expressed radical Islamic views and associated with Anwar al-Awlaki, a Yemen-based radical cleric who promotes jihad against the U.S.

The Army’s PC view of the Islamic threat continued even after the Fort Hood massacre. General George Casey, Army Chief of Staff, never mentioned the Islamist factor but made statements expressing concern about “force protection” and the potential heightened “backlash against some of our Muslim soldiers” and the risk to Army “diversity.”

Casey likely took his “diversity” cue from President Obama who mentioned military diversity in his Saturday radio address after the massacre. Obama reinforced PC status for Muslims by making a goal of his presidency improving relations with the Islamic world.

Last month, the Pentagon’s official review of the Fort Hood massacre concluded the Army is ill-equipped to deal with “insider” threats. But when asked whether PC led to the Army’s security failures, the officials said the matter is secret.

Shortly after the review became public, six officers were formally disciplined for failing to take action against Maj. Hasan. The attorney for one of those officers said the military was blaming a handful of officers for “a broader institutional [read PC cultural] failing.”

The PC view of the Islamic threat continues in the Pentagon with the publication of the 2010 Quadrennial Defense Review. That 128-page report sets out the military’s future strategy and force structure and described the country’s terrorist threat without using the words “Islam,” “Islamic” or “Islamist” a single time.

Gender integration is a deeply rooted PC issue which seldom draws attention from top brass in spite of contradictory facts.

For decades the military’s PC culture accepted without complaint the readiness-busting problems associated with gender integration: lowering of standards, sexual activity, sexual tension and declining morale. The consequences are accepted and the military muddles along.

Top brass understand the importance of building cohesive forces. By now most have seen that mixing military men and women often defies the glowing political promises of equal opportunity. The problem is male/female relationships work differently than single-sex groups, which any parent of teenage sons and daughters understands.

Mix young men and women in close, 24/7 austere military settings and exclusive relationships rather than platonic, selfless situations emerge. The sexes begin to pair off and develop exclusiveness instead of cohering with the larger group, which hurts the type of trust and confidence military units need. The worst cases are often among leaders and their opposite sex subordinates because they can undermine trust in the chain of command.

But these facts are ignored by the PC Chief of Naval Operations Adm. Gary Roughead who feels “very comfortable” lifting the ban against women on submarines. Apparently, he’s following the lead of Adm. Mike Mullen, Chairman of the Joint Chiefs of Staff, who said he’s “…an advocate for improving the diversity [read PC] of our force, I believe we should continue to broaden opportunities for women.”

Such readiness-busting sex silliness blinds all but realists and the few who speak out risk the ire of the PC police.

Last December, Maj. Gen Anthony Cucolo III, the commander for the Third Infantry Division in northern Iraq, issued orders threatening to punish soldiers, married or single, who become pregnant while in the combat zone.

Cucolo imposed the rule because “I need every soldier I’ve got … Anyone who leaves the fight earlier than expected … creates a burden on their teammates.” Pregnant soldiers are immediately removed from the combat zone and not replaced.

The Pentagon’s PC police responsed to Cucolo’s problem of at-war pregnancies by forcing him to rescind the rule and then stocked war zone pharmacies with the morning-after pill, a birth control pill in super-high doses that leads to an early abortion. Pentagon officials claim the decision to stock the pill in Iraq was not prompted by the uproar over Cucolo’s pregnancy policy.

Homosexual sex could soon gain PC status if President Obama gets his way. Obama wants to repeal the military’s gay ban to repay the homosexual lobby for their political support. Unfortunately, Secretary of Defense Robert Gates and Adm. Mullen support that decision and Mullen abandoned all pretense of objectivity to say lifting the ban is “the right thing to do” but then admitted he doesn’t know the impact of that decision.

PC also infects rules of engagement when capturing terrorists as illustrated by the Navy’s court martial case against three SEALs. The criminal charge involves allegedly smacking a captured al Qaeda terrorist, who is accused of murdering four American security guards in Fallujah, Iraq in 2004. This is PC because the military is well aware that al Qaeda teaches captured terrorists to “…claim they were tortured and/or maltreated.”

Charging the SEALs on the basis of evidence given by a terrorist stifles special forces aggressiveness, injects PC into combat and ultimately makes the country less safe.

Our military brass has become dangerously PC. It’s past time they vigorously oppose readiness-wrecking PC-inspired social engineering and turn their full attention to honing hardened, fighting forces.

Please note: These stories are located outside of Prophecy Today’s website. Prophecy Today is not responsible for their content and does not necessarily agree with the views expressed therein. These articles are provided for your information.

02/17/10

* Russia: S-300 delivery delayed The Interfax news agency on Wednesday cited a top Russian defense official as saying that S-300 air defense missiles will be delivered to Iran once unspecified technical problems are resolved. 

* Barak: Syria shouldn’t test Israel Defense Minister Ehud Barak on Wednesday reiterated his view that Jerusalem must enter peace talks with Damascus in the near future. 

* Israel mulling a spring or summer war: Ahmadinejad Without specifying whom would be targeted, Ahmadinejad said: “According to information we have they (Israel) are seeking to start a war next spring or summer”. 

* Peres warns of dangers of nuclear Middle East If the world does not unite to stop Iran’s nuclear program, the upshot will be a nuclear Middle East, where ongoing conflicts will be accompanied by nuclear bombs. 

* Ayalon: Time for PA to live up to its commitments Deputy Foreign Minister Danny Ayalon on Wednesday said it was time for the Palestinian Authority to live up to its commitments. 

* In the Mideast, bet on a strong horse Lee Smith presents pan-Arab nationalism as an effort to transform mini-horses of national states into single super-horse. 

* Jewish Quarter: Arabic inscription found A 1,200-year-old inscription in Arabic was discovered in excavations in Jerusalem’s old Jewish Quarter. 

* Afghanistan Taliban ‘using human shields’ – general Taliban militants are increasingly using civilians as “human shields” as they battle against a joint Afghan-Nato offensive, an Afghan general has said.

* Taliban Arrest May Be Crucial for Pakistanis Pakistan’s arrest of the top Taliban military commander may be a tactical victory for the United States, but it is also potentially a strategic coup for Pakistan. 

* Top cleric urges Iraqis to turn out for March vote Iraq’s top Shiite cleric urged voters Wednesday to turn out for parliamentary elections set for March 7 but distanced himself from any particular coalition.

02/16/10

* Clinton warns of Mideast nuclear race US Secretary of State Hillary Rodham Clinton has told college students in Saudi Arabia that if Iran gets a nuclear weapon it could trigger a nuclear arms race in the Middle East.

* ‘If Iran gets nukes, so will Turkey’ Following his meeting with Russian President Dmitry Medvedev and local Jewish community leaders on Monday, Prime Minister Binyamin Netanyahu went out to eat with his wife Sara at a Moscow restaurant and coincidentally ran into Greek Prime Minister and Minister of Foreign Affairs George Papandreou.

* PM urges Iran fuel sanctions Prime Minister Binyamin Netanyahu and his delegation emerged from nearly four hours of talks with Russian President Dmitry Medvedev.

* Saudi Arabia preparing for oil demand to peak A top Saudi energy official expressed serious concern Monday that world oil demand could peak in the next decade.

* Taliban commander Mullah Baradar ‘seized in Pakistan’ A man described as the top Afghan Taliban military commander and named as Mullah Abdul Ghani Baradar has been captured in Pakistan.

* Iran says the world “will regret” sanctions Anyone placing sanctions on Iran would be “regretful”, President Mahmoud Ahmadinejad said.

* Sharansky: Jerusalem Bridges Time and Space Natan Sharansky, a former refusenik who now heads the Jewish Agency, moved the Jerusalem Conference audience to tears when he spoke of how Jerusalem changed his life.

* Gaddafi provokes EU visa row over troublemaker son The European Commission on Monday (15 February) deplored Libya’s “unilateral and disproportionate” decision to deny entry to the country to almost all EU citizens.

* Marines: Taliban resistance more disorganized U.S. and Afghan forces traded gunfire with insurgents shooting from haystacks in poppy fields Tuesday as NATO forces progressed against increasingly fitful resistance in the Taliban stronghold of Marjah.

* Vatican putting wartime archives on Internet The Vatican plans to make some of its World War II archives available on the Internet soon to calm down the controversy over Pope Pius XII’s actions during the Holocaust.

02/15/10

* Medvedev to PM: We have special relations with Israel Netanyahu meets with Russian president to discuss Iranian threat. At start of meeting, two discuss special relations between their countries. Medvedev: Victory over Nazis is joint victory.

* Clinton warns Iran ‘becoming a military dictatorship’ Iran is “becoming a military dictatorship”, US Secretary of State Hillary Clinton has said.

* Obama names new US envoy to global Islamic body US President Barack Obama has named a new special envoy to the Organisation of the Islamic Conference (OIC).

* THE GREAT CLIMATE CHANGE RETREAT THERE has been no global warming for 15 years, a key scientist admitted yesterday in a major U-turn.

* Russia Says ‘Nyet” to Israel on Missile Sale to Iran Russia gave Prime Minister Binyamin Netanyahu the cold shoulder before he even landed in Moscow and said it will proceed with its sale of advanced S-300 missiles to Iran.

* Lieberman: Palestinian Authority behind campaign to smear Israel Much of the global effort to de-legitimize Israel is supported and sponsored by the Palestinian Authority, Foreign Minister Avigdor Lieberman said.

* New Ukraine leader unveils pro-Russia policies Ukraine’s emerging new leader, Viktor Yanukovych, at the weekend began the process of rebuilding the country’s relations with Russia, despite an ongoing challenge to his recent election victory.

* U.S. begins Mideast push for ideas on Iranian solution The top U.S. military officer and the secretary of state kicked off a series of visits throughout the Middle East Sunday, reaching out to the Arab world as the Obama administration pushes for tougher sanctions against Iran and its nuclear ambitions.

* Iran Analysis: A red light on Iran strike? If the US gives Israel a firm red, the gov’t will have to approach the oncoming fateful intersection with extreme caution.

* Taliban ‘forced from strongholds’ A joint Nato and Afghan military operation is succeeding in pushing Taliban fighters from their strongholds in Helmand province, officials say.

02/13/10

* Major offensive on Afghan Taliban Nato-led forces say they are making good progress hours after launching the biggest offensive in Afghanistan since the overthrow of the Taliban in 2001.

* Clinton says Blair to ‘intensify’ work on Mideast peace Middle East envoy Tony Blair will “intensify” his work with US negotiator George Mitchell to broker peace talks between Israel and the Palestinians.

* ‘Population swap as part of peace’ Israel and a future Palestinian state should agree to land swaps which would make settlement blocks part of Israel proper and in return make certain Arab towns part of Palestine.

* Mullen to visit Jerusalem, TA In another sign of growing cooperation between Israel and the US ahead of a new round of sanctions on Iran, Chairman of the Joint Chiefs of Staff Adm. Michael Mullen will arrive in Israel on Sunday.

* Collapse of the euro is ‘inevitable’: Bailing out the Greek economy futile, says FRENCH banking chief The European single currency is facing an ‘inevitable break-up’ a leading French bank claimed yesterday.

* U.S. official: We want to boost ties with Syria The decision to appoint a new U.S. ambassador to Syria reflects a growing interest in strengthening bilateral ties with the country.

* Ultraconservative jihadists challenge Hamas rule in Gaza Jihadi Salafis preach global jihad, or holy war, adhere to an ultraconservative form of Islam and are becoming a headache even for Hamas.

* Tension among Haiti’s religions grows after quake Christian and Voodoo leaders put aside their differences for a moment Friday, joining hands under a canopy of tropical trees as some earthquake survivors on crutches and in wheelchairs mourned the more than 200,000 Haitians killed.

* Thousands flee Somalia fighting, says UN refugee agency Thousands of people have fled Somalia’s capital, Mogadishu, since Wednesday.

* Hamas: Next war with Israel will be regional conflict Hamas political leader Khaled Meshal warned on Friday that should another war erupt with Israel, the majority of battles would not be contained to the Gaza Strip.

02/12/10

* Mashaal: Next war will span entire Mideast Hamas politburo chief Khalad Mashaal warned that should another war with Israel erupt, the fighting will not be limited to the Gaza Strip. 

* Looming NATO offensive raises few Afghan spirits A NATO offensive is a hard sell to some Afghans, even if it breaks the Taliban’s iron grip on their lives and eventually delivers Western aid. 

* Quartet envoy Blair to work with Mitchell to renew Mideast talks Middle East envoy Tony Blair will “intensify” his work with U.S. negotiator George Mitchell to broker peace talks between Israel and the Palestinians. 

* EU sanctions against Iran ‘within days,’ says minister The European Union could announce “very strong sanctions” against Tehran within “days or weeks.” 

* Iraq election campaign under way amid candidacy row Campaigning for the election in Iraq is getting under way amid a continuing row over the ban on scores of candidates. 

* International broadcasters condemn Iran over ‘jamming’ Three major international broadcasters have strongly condemned Iran for its “deliberate electronic interference” in their broadcasts. 

* Airborne Laser Testbed Successful in Lethal Intercept Experiment The Missile Defense Agency demonstrated the potential use of directed energy to defend against ballistic missiles when the Airborne Laser Testbed (ALTB) successfully destroyed a boosting ballistic missile. 

* China Moves to Tighten Curbs on Lending For the second time in less than five weeks, China’s central bank has moved to limit lending to consumers and businesses by ordering big commercial banks to park a larger share of their deposits at the central bank. 

* Iran: We are now among world’s top 15 nuclear states Iran is among the top states in terms of its nuclear technology, the country’s atomic chief was quoted as saying Friday. 

* Iran supreme leader lauds state rally, warns West Iran’s supreme leader praised the mass turnout at the government-backed rally marking the 1979 Islamic Revolution and warned the West to stop putting obstacles in his country’s path.

Dramatic images of World Trade Centre collapse on 9/11 released for first time

By: Philip Delves Broughton – Associated Newspapers Ltd

We have seen the Twin Towers collapse hundreds of times on TV. The steel and glass skyscrapers exploding like a bag of flour, the dust and smoke pluming out across Manhattan. But never like this, from above.

Nine years after the defining moment of the 21st century, a stunning set of photographs taken by New York Police helicopters forces us to look afresh at a catastrophe we assumed we knew so well.

You know but cannot see the 2,752 men, women and children who died at the World Trade Centre on September 11, 2001. None is visible here.

All we see is the spectacular moment of collapse, what film directors call the wide shot, showing the towers in their urban setting, before, during and after their fall.

Even for those who were there, like me, running from the cloud and choking in the dust, it is hard to believe. But what is all too evident to everyone is that this event changed the world, with consequences that will haunt us for decades.

With the Twin Towers collapsed the world we thought we knew.

These dramatic images were taken by police photographers in helicopters and it is the first time they have been seen, having been released under a Freedom of Information request made by America’s ABC News.

Burning buildings can be seen crumpling in on themselves as plumes of smoke rise up over the New York skyline that terrible September morning.

The images show how the police helicopter first began taking images from afar before moving in to reveal the devastation taking place underneath.

They also reveal the horror faced by those trapped in the burning buildings and then the walls of smoke and debris that enveloped the surrounding area as the towers came crashing down.

Released more than eight years after the deaths of 2,752 people on that day, they are powerful reminders of the attack that led to wars in Afghanistan and Iraq.

The legacy of the New York attack continues today with as British forces joining with Afghan soldiers and Nato to launch the biggest attack on the Taliban – accused of harbouring Al Qaeda who organised the 9/11 attack – since the initial 2001 offensive.

Meanwhile, in New York, work is continuing to build on the rubble of what became known as Ground Zero.

Structural steel for the 1,776ft tower, which will be known as 1 World Trade Centre, has already reached 200ft above street level.

Workers are now installing 16 steel nodes on the 20th-floor of the tower which will serve as joints between the steel framing for the building’s podium and the steel for the rest of the tower. The 104-storey skyscraper is due to be completed in 2013 and will be one of the tallest buildings in the U.S.

Please note: These stories are located outside of Prophecy Today’s website. Prophecy Today is not responsible for their content and does not necessarily agree with the views expressed therein. These articles are provided for your information.

A Greek crisis is coming to America

By: Niall Ferguson – The Financial Times Ltd

It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.

There is of course a distinctive feature to the eurozone crisis. Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union, other member states or the European Central Bank (articles 123 and 125 of the Lisbon treaty). True, Article 122 may be invoked by the European Council to assist a member state that is “seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but at this point nobody wants to pretend that Greece’s yawning deficit was an act of God. Nor is there a way for Greece to devalue its currency, as it would have done in the pre-EMU days of the drachma. There is not even a mechanism for Greece to leave the eurozone.

That leaves just three possibilities: one of the most excruciating fiscal squeezes in modern European history – reducing the deficit from 13 per cent to 3 per cent of gross domestic product within just three years; outright default on all or part of the Greek government’s debt; or (most likely, as signalled by German officials on Wednesday) some kind of bail-out led by Berlin. Because none of these options is very appealing, and because any decision about Greece will have implications for Portugal, Spain and possibly others, it may take much horse-trading before one can be reached.

Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect

For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Even according to the White House’s new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.

Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.

But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $1,500bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months.

The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.

Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): “How long can the world’s biggest borrower remain the world’s biggest power?”

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.

Please note: These stories are located outside of Prophecy Today’s website. Prophecy Today is not responsible for their content and does not necessarily agree with the views expressed therein. These articles are provided for your information.

EU President’s secret bid for economic power

By: Sean O’Grady and Vanessa Mock – independent.co.uk

The new President of the European Council, Herman Van Rompuy, is using the financial crisis sweeping the eurozone to launch an audacious grab for power over national budgets
, leaked documents reveal.

The Independent has seen a secret annexe to the letter being sent by Mr Van Rompuy to European Union heads of government inviting them to the summit to be held tomorrow in Brussels. In an early and muscular assertion of authority over national governments and over the EU Commission, the Van Rompuy note states: “Members of the European Council are responsible for the economic strategy in their government. They should do the same at EU level. Whether it is called co-ordination of policies or economic government, only the European Council is capable of delivering and sustaining a common European strategy for more growth and more jobs.”

Mr Van Rompuy states that “the crisis has revealed our weaknesses”, adding: “Budgetary plans, structural reform programmes and climate change reporting should be presented simultaneously to the Commission [his italics]. This will provide a comprehensive overview.”

An EU source explained: “It has become clear to everyone that this economic crisis can’t be solved by individual member states, such as Germany helping out Greece. What we need is the same kind of mechanism that we have now imposed on Greece in order to monitor and survey eurozone countries. So the idea is to put all European economies
under surveillance. You can expect some important decisions to be taken this week.”

In a highly unusual move, the president of the European Central Bank, Jean-Claude Trichet, has broken off from a meeting of central bank governors in Sydney to return to Europe. Pressure on the euro eased, on hopes that the presence of the EU’s senior economic policymaker would appease the markets.

Rumours that the French and German governments are ready to bail out Greece have been rife. The Greek Prime Minister George Papandreou will meet French President Nicolas Sarkozy tomorrow.

Mr Papandreou’s centre-left government has announced a four-year austerity plan to tame its vast budget deficit. However, doubts remain about its chances. In a tragic-comic touch, Greece’s tax collectors went on strike last week. Today all flights to and from Greece will be grounded by air-traffic controllers and strikes will also hit hospitals and schools.

Although not directly affected, as sterling is outside the eurozone, Gordon Brown will be worried that any weakness in the European economy could endanger the UK’s recovery.

The concern being felt in the highest circles of the EU about the “contagion” sweeping through Greece, Spain and Portugal is also clearly displayed in Mr Van Rompuy’s confidential note: “The crisis has revealed our weaknesses. Our structural growth rate is too low to create new jobs and to sustain our social systems.”

Referring to the fact that the EU has no way to resolve a budgetary crisis that affects other members states, Mr Van Rompuy goes on: “Recent developments in the euro area highlight the urgent need to strengthen our economic governance. In our intertwined economies, our reforms must be co-ordinated to maximise their effect.”

The European Stability and Growth Pact and the Maastricht Treaty were designed to prevent the sort of fiscal crisis that the eurozone is currently experiencing. Bailouts were ruled out as the treaty made it illegal for any nation to assume the debts of another.

The Maastricht rules – limiting member states to an annual budget deficit of 3 per cent a year and an overall national debt to a GDP ratio of 60 per cent – were swept away during the financial crisis. Even during the boom years, nations routinely disregarded them. In the future, Mr Van Rompuy states, “we will focus on the impact of national policies on the rest of the EU with special regard to macroeconomic imbalances and divergences of competitiveness”.

The financial crisis comes as the EU’s three presidents jockey for position. Mr Van Rompuy is permanent President of the European Council (the job once thought tailor-made for Tony Blair), while the Spanish premier, José Zapatero, is the President of the Council of the European Union and José Manuel Barroso is President of the European Commission. President Barack Obama recently snubbed a proposed spring EU-US summit out of frustration at having to deal with the confusing troika.

The summit will be held away from the usual redoubts of the Euro bureaucracy, in Brussels’ Solvay library. “Van Rompuy wanted to create a far more intimate atmosphere without an army of advisers,” a source said. “There are a lot of tensions between member states right now, which he is why he decided to get them to talk in an open, friendly setting, starting with aperitifs. The idea is to have a proper brainstorming session and hear everyone’s thoughts.”

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