Somali pirates, the unofficial coastguard of Somalia, captured a Ukrainian cargo ship with lots of weapons on board. b real has kept us informed about the story from with this item on downward. Next to many small arms, at least 33 relative modern battle tanks are on board of the ship, enough equipment for a full tank battalion.

The ship was supposed to unload in the Kenyan port Mombasa. Kenya says that the weapons are for its own army. Multiple other sources refute this and allege that the weapons are for the Sudan People’s Liberation Movement in Southern Sudan.

The LA Times, reporting on the issue today, asserts:

Cont. reading: The Southern Sudan Weapon Mystery

The worst of the current slump seems to be over for now. Markets in Britain and Germany are not in panic and I expect U.S. markets to level too later today.

Bush is supposed to speak this morning which is a bad idea. He is certainly not that person that can inject public trust. He and Paulson were the ones who screamed ‘fire’ within the full theater and initiated yesterdays panic.

The Paulson plan will likely be given another try in the House. It has now been re-labeled as ‘rescue plan’ instead of ‘bailout’. That comes a bit too late. Marketing can not revive a bad product after it failed.  The resistance within the U.S. population against a Wall Street bailout seems to be too big to be overcome by Congress and I’d suggest it will be even bigger against a second attempt.

It is wrong plan and Paulson, with obvious conflicts of interests, is the wrong person to execute any plan right now. Why, by the way, is he still in office?

The same question goes for Bernanke. Take a look at the Fed’s balance sheet. The Fed is now out of power.

Ian Welsh has a plan. Congress should give the Treasury some $150 billion for emergency measures and start drafting and hold hearings on a real rescue bill. I am not sure I agree with all the proposals he wants to put in there. There might be need for some more radical measures, like direct federal lending to main street.

There is a lot of hyperbole in the current media. The financial system will not be destroyed. It will change and morph into a different, hopefully more responsible, one. Hedge funds and ‘special investment vehicles’ may vanish. So what. Was there ever a justification for their existence other than greed?

HR-3997, the Paulson bailout, just failed to pass the House.

via CSPAN life stream

Dems – 140 Yea,  95 Nay
Reps –  65 Yea, 133 Nay, 1 Not Voting
Total – 205 Yea,  228 Nay, 1 Not Voting

Paulson, we have a problem …

adding on the fly:

Where does it go from here? I have no idea but would bet that everything financial will now go down hard – that includes oil and even gold – the system is deleveraging.

Roubini wrote shortly before the vote took place that the Paulson bill wouldn’t matter much anyway – the markets say the ‘Mother of All Bailouts’ is the wrong bill.

The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever

It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe …
…
The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates – as it may now – a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.

I don’t agree on the panic policy rate reduction – it would only reduce trust in the central banks’ abilities without having any meaningful economic relevance right now. Otherwise, Roubini is correct.

Last thought for now: 9/29 will be a marked day for historians – maybe even as big (bigger?) than 9/11. Osama Bin Laden’s goal to bankrupt the U.S. was achieved without him doing anything remarkable. The U.S. did it on its own.

An end of an era. As said in earlier comments, the end of the quarter tomorrow will be devastating for lots of financial entities. They will have to report real numbers instead of made up stuff because the Paulson bill, which gave the authority to fake balance sheets by ‘mark to fantasy’, was rejected. The Paulson bill could probably have helped to make the dive smoother.

Many hedge funds will be slaughtered as redemptions will come in at an unprecedented scale. All of the capital they have and which will now be redrawn is highly leveraged in risky bets on all kind of financial ‘products’. They will have to sell, sell and sell everything.

With those leveraged bets unwinding, the post WWII credit super cycle may end. The natural result would be deflation and a Greater Depression.

I am not sure that’s going to happen, but if it does, the experience will be quite extreme for all of us.

Der Spiegel is a German weekly magazine comparable to Time magazine but with a bit higher relative circulation and about three or four times as thick. The current title picture shows the Statue of Liberty with its flame blown out.

Seems to catch the general mood pretty well.

The bailout bill is still the same Paulson three pager but with a 100+ additional pages of window dressing.

I wonder who will vote for this at all. Anyone in the house who is up for reelection is in danger if her vote is yea. Most Republicans will certainly vote nay, so the bill, if it goes through at all, will not be bipartisan, but will get hung around the Democrat’s necks.

Some people like Brad DeLong and Larry Summers think that this bill will cost the taxpayer little or nothing. I doubt that very much. Giving Paulson a free hand over hundreds of billion dollar will not be free of cost, but might well end up as a very expensive endeavor. As serious economists point out, the bill does nothing to get at the root of the problems. In January, at the latest, another big bailout will be needed.

In between the Ponzi scheme that is the hedge fund industry will come down. Hedge funds will have to report quarterly results in a few days. Those will likely be a mess as many have made losses with the Lehman bankruptcy or depend on now restricted short selling. Many of them have rules that delay investors withdrawals for three month. By December these highly leveraged entities will have to sell many, many assets to be able to return at least a part their money to their investors.

The selling spree guarantees that all markets will fall further.

Today Germany rescued the commercial real estate investment bank HypoReal, Belgium and the Netherlands rescued Fortis and Britain nationalized the bad parts of Bradford & Bingley. In the U.S. Wachovia will be rescued soon or go bankrupt.

The contagion is now spreading fast, too fast.

The Treasury fought hard to regain freedom for Wall Street. It won! Rejoice! Your government will now become the proud owner of lots of weird papers.

Freedom seldom comes for free, but as the president will soon explain in a special TV address,  the Treasury’s fight for freedom of Wall Street will cost you only a zero. It may even gain you some real value.

During the next weeks, the president will announce, you will be asked to turn over all your cash to your local sheriff’s office. Don’t fear. You will get your money back immediately after a zero has been removed from each note greater than five dollars.

Homeland Security considers five dollar and one dollar notes to have the potential to finance terrorist activities. Each of these notes will therefore be replaced with two quarters or a dime respectively. You will gain some real, soon very precious, metal in exchange for a dangerous tools of terrorism.

Thanks to Wall Street and the financial industry the same process will be applied automatically to all your checking accounts, 401(k)s, money market funds and brokerage accounts. Unfortunately the Treasury is not able to remove any zero from taxes due. We apologize for that small inconvenience. 

The president ordered the experienced 3rd Infantry’s 1st BCT to help local authorities in visiting each home to make sure that every American will have an equal opportunity to take part in this operation.

Equal opportunity and freedom. Isn’t that what the U.S. is about?

It seems that the U.S. government finally understood that invading tribal areas in Pakistan will not help the situation there and in Afghanistan:

U.S. special operations forces have paused ground operations in Pakistan’s tribal areas, but military and civilian government officials differ over why the cross-border raids have been halted.

But this stay may only be a temporary:

“We are now working with the Pakistanis to make sure that those type of ground-type insertions do not happen, at least for a period of time to give them an opportunity to do what they claim they are desiring to do,” the Pentagon official said, adding that this did not apply to air strikes launched from unmanned aerial vehicles at targets inside the tribal areas.

…
[A] U.S. government official closely involved with policy in the Afghanistan-Pakistan region said the military had underestimated the Pakistani response and was reconsidering its options.

Really the military? It seems that someone who ordered the Joint Special Forces Command to do the raid has gone wild with these attacks and that there was no coordination with other forces in the area.

Jeff Huber points out that instead of unity of command there are at least four U.S. chains of fools that act independent of each other. ISAF/NATO is under the U.S. European command, the area logistics for Afghanistan and Pakistan fall under Central Command, the special forces that raided Pakistan are under Joint Special Forces Command and the drone flights that attempt targeted killing are a CIA operation with support from the U.S. Northern Command. There is also a split between the military and the State Department and a hodgepodge of uncoordinated aid agencies that trample on each other feet while ignoring the Afghan government.

This seems to be a somewhat intentional construct by the White House which wants real command power only for itself and thereby creates the typical mess:

Cont. reading: No More Ground Attacks on Pakistan?

Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.

As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.

The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.

Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.
Behind Insurer’s Crisis, a Blind Eye to a Web of Risk

It seems that Paulson invested $85 billion of taxpayer money into AIG to save Goldman from a $20 billion loss, or $200 billion – who knows? Still Paulson acted to save Goldman, not AIG. With what reasoning?

Why would anyone trust this criminal who asked Congress for unreviewable power to spend a Trillion, or two, to run the U.S. Treasury?

by Debs is dead
lifted from a comment

It’s kinda touching to see that some people take these prez debates
seriously. Consider that you can’t push a cigarette paper between
either major party candidate on any major issue. Both want to keep
killing people on the other side of the world for no real reason other
than "they are there", neither is prepared to undertake any major
structural change to amerikan society, a society that is failing as a
socially cohesive group, an efficient place to breed and live (Infant
Mortality 42nd not counting the much worse ‘colonies like Guam, P.
Rico, or American Samoa much less the newest Iraq).

Just across the
northern border in Canada the average life expectancy is nearly 10
years longer for both genders, you’d think that one fact would be
sufficient to motivate a change to decent health care but it hasn’t and
Obama won’t try much less succeed in getting any sort of meaningful
health coverage instituted for all amerikans.

Not least of all because it is too late. The asset base, skill sets
and community infrastructures had to be built up before the baby boomer
bulge over-strained the resource. But even if that weren’t so he
wouldn’t succeed because the fundamentals of amerikan society are too
askew. Peeps can be persuaded that idiotic issues like the spread of
communism, rise of islam or whatever are more important than the health
and well-being of their own family.

Not only do people accept that lunatic suggestion a substantial number
of amerikans will try and ram that stupidity down the throats of anyone
who attempts to disagree. The oppression has become self-service.
Amerikans race to institute more and more laws defining more and more
types of criminal act that can be committed by the poor while they
destroy any restraints on the criminal behaviour of the rich and
powerful. . . Willingly. Not because they were told to but because they
imagine it will be better that way. Better for who?

Grey nonentities struggling for the right to commute to servile labour
in order to scrape together the means to buy pre-packaged nutrition
free food?

Certainly not for the millions of amerikans who will spend their entire
lives in ‘the prison system’ fully 25% of people on this planet who are
in prison are incarcerated in amerika in the sadly misnamed ‘amerikan
justice system’. (Amerikans make up about 4.5% of the world population
and have 25% of the world’s prisoners yet they believe other countries
want their freedoms? It would be funny if it weren’t so sad.)

Neither candidate would have been prepared to substantively discuss
any of those issues during the great debate or any of the myriad other
major life effecting issues that amerikan society has slipped outta a
humane resolution of.

Instead they will have uttered platitudes about a meaningless court
case from last century Roe V Wade that amerikans have never really
grasped anyhow, or debate who was having the best ‘withdrawal’ from
Iraq when the withdrawal either would create isn’t a withdrawal, it is
a permanent occupation.

I suppose ‘energy independence’ has become the latest meaningless
distraction away from the real issues. That prolly got an arcane,
jargonistic but clichéd pounding during the debate.

And now they are competing with each other to give the tiny skerrick
of amerika’s wealth that hasn’t already been swallowed up with
murdering foreigners or supporting the mind-bogglingly complex
corporate welfare system that guarantees every rich amerikan will be
made richer – small sum set aside for public school education and basic
health care for the elderly is now going to be diverted to the mega
rich in a completely new way.

The reason for this plan appears to be that if amerikans don’t accede
to this extortion they will lose their right to commute to servile
labour in order to scrape together the means to buy pre-packaged
nutrition free food.

A decent leader would call the banks’ bluff. Of course McCain isn’t
going to do that he will give as much away as Obama but he wants to try
and shame Obama in in front of Obama’s ‘core constituency’.

How the rich must laugh at the sight of the two candidates for people’s
choice arguing over the degree of obeisance they have shown the rich.
Guffaw safe in the knowledge that the candidate who has promised less
to the rich and more to the voters will be rewarded with defeat.

The Democrats have been had, again, by the Republicans.

After Paulson delivered his scare show to Congress leaders last week, demanding a $700+ billion check without checks and balance, it were the Democrat leaders in Congress, Pelosi, Schumer, Frank, who immediately stepped forward and agreed in principal that such a lunatic plan was needed.

Blinded by Wall Street contributions to their campaigns, they publicly declared that ‘something must be done’ and followed the lead of the most despised president ever like the sheep they are.

They attached a bit of window dressing to the Paulson plan but left out any real issue progressives should care about like the mortgage modifications in bankruptcy courts.

Yesterday evening the Republicans pulled the rug and the deal is off.

These Republicans and McCain will now be able to tell their constituency that it was them who protected the taxpayer and that the Dems and Obama were indeed the people who wanted to throw money at Wall Street.

This was a huge ploy and the Dems fell for it.

Karl Rove must be laughing his ass off.

Added:

This is not a crisis over liquidity and providing liquidity, while
in some cases necessary, will not relieve the blocked interbank credit
markets. This is a solvency crisis where many financial entities are
suspected to be bankrupt. The people in bank A know how they fudge
their own balance sheets to hide the losses. They correctly suspect
that bank B does the same. That is the reason why A does not want to
lend to B and B does not want to lend to A. Those who have money prefer
to stay liquid instead of taking the risk to lend it to some bankrupt
entity.

Cont. reading: The Dems Have Been Had – Again

The thing scaring me is that there seem to be millions of people out there who really buy into this:

PALIN: Ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up the economy– Oh, it’s got to be about job creation too. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions and tax relief for Americans.
link

Then again, maybe a Dem like Reid or Pelosi would have formulated it better, but given who pays them the outcome would probably be the same.

No time today to write something up, so for now just links to three ‘atmosphere’ items on Afghanistan.

Via Ghost of Alexander the trailers to the movie At War.

At War is a documentary film shot and directed by Scott Kesterson, who spent a year embedded with US forces in Afghanistan.

With all the blind shooting going on it seems that the soldiers have no idea at all who or what they are fighting.

A WaPo reporter on growing anarchy in Kabul:

Cont. reading: Three Items On Afghanistan

It seems like Paulson and Bernanke together with their partners in crime Pelosi, Reid, Frank, Dodd and Schumer have successfully arranged the biggest single wealth transfer from the people of the U.S. to the very rich.

Obama and McCain stand by to laud that feat.

A few weeks ago the economic problems were ‘contained’, the banking system ‘sound’. Now the same folks who over the years produced the crisis suddenly scream "Depression!" and claim to have found the only solution: "Give me your money!!!"

This is by far not depression territory – yet. But Congress is following Bush in doing the best possible to get the U.S. there.

Most of the money that will go into the Paulson plan will be wasted to save some big bank shareholders. That money will be lacking when it will be needed for real programs that would make a difference.

From a guy who was right all along:

Cont. reading: The Paulson Crime And Other Thoughts

Henry Paulson wants the taxpayers to pay some $700+ billion for trash paper currently held by his old company Goldman Sachs and others. The deal will likely bring a 50% or bigger loss for the taxpayers.

At the same time Warren Buffet buys a $5 billion stake of Goldman Sachs that practically guarantees him a return of some 17-20% per year plus possible upsides in the stock price. This because Goldman will likely be the one profiting the most from the big bailout.

[Buffett] made it very clear that he would not have bought anything right now if he wasn’t confident Congress will do the "right thing" and approve the financial bailout proposal put forward by Treasury Secretary Henry Paulson.

As he himself admits, Buffett and the other Berkshire shareholders will make $500 to $1,000 million profit per year because the taxpayer will pay for the big losses Wall Street made.

And now he is openly ‘talking his book’:

Buffett told us the financial system was on the brink of collapse last week before Paulson and Bernanke went to Congress with their plan.  And he warns that last week will "look like Nirvana" if a bailout plan isn’t passed by Congress.

He calls the current crisis everyone’s problem, not just Wall Street’s, with the markets in a "very, very difficult situation."

This is high class gangster capitalism. Buffet did not make all his money by NOT being shameless.

And when such fine deals can be made, thanks to Paulson, why not take care that more of such will come along?

Buffett said Paulson is doing a great job, and he recommended that the next president keep him as Treasury Secretary for another year or so.

Utterly shameless.   

Paulson uses medical terms to describe the state of the financial system.

Paulson told ABC it was essential to prevent the financial system from clogging up, "because if it does clog up, this is going to have an adverse effect on people’s abilities to get jobs, on their budgets, on their retirement savings, on lending for small businesses and so that’s where the first priority has got to be."

Bernanke too:

Sen. Charles Schumer, D-N.Y., discussing statements that Federal Reserve Chairman Ben Bernanke made to the Senate Banking Committee Tuesday, said he "told us that our American economy’s arteries, our financial system, is clogged and if we don’t act the patient will surely suffer a heart attack _ maybe next week, maybe in six months, but it will happen."

The fear is that losses and deleveraging on Wall Street will lead to scarcity of credit on Main Street. 

But as David C. Johnston points out, there is little evidence that such scarcity exists:

Ask this question — are the credit markets really about to seize up?

If they are then lots of business owners should be eager to tell how their bank is calling their 90-day revolving loans, rejecting new loans and demanding more cash on deposit. I called businessmen I know yesterday and not one of them reported such problems. Indeed, Citibank offered yesterday to lend me tens of thousands of dollars on my signature at 2.99 percent, well below the nearly 5 percent inflation rate. That offer came after I said no last week to a 4.99 percent loan.

So for one we wonder if Paulson’s diagnosis is correct at all.

But let us assume for a moment that it is. What is then the best therapy for clogged arteries.

Any practitioner will tell a person with that diagnosis to first stop the bad habits. Stop smoking, eat less fat and cholesterol heavy stuff, do sports. I have yet to see the Fed, the Treasury and Congress to make any step into that direction. Where is the regulation that will prevent the clogged financial arteries from immediately clogging up again after this proposed bailout? Where is the behavior change that is needed?

To repair clogged arteries doctors have developed angioplasty. Inserting and expanding a tiny balloon at the site of the blockage. The Paulson bailout would provide the balloon to widen the financial arteries. But doctors usually combined angioplasty with the implantation of a stent, a small metal coil that will keep the artery open. The stents that will keep the financial arteries open are not part of the Paulson program. Instead of some permanent solution, Paulson would have to repeat the balloon trick again and again.

Sometimes arteries are damaged so badly that they can not be reopened. Lehman or Indybank come to mind. In such a case either other arteries must take care of the blood flow or the doctors will install a shunt: a segments of a leg vein is sewn onto the arteries to shunt blood around blocked areas.

Paulson argues for other arteries to take over. He wants to donate taxpayer money to Wall Street so Wall Street can lend it to Main Street. Is he sure that those arteries are in better shape than Lehman and Indybank? The shunt solution may actually be the better one. If the U.S. government really can spend $700 billion on this problem, why not shunt them around Wall Street?

If there is a scarcity of credit on Main Street, is there any reason why the government can not lend directly to Main Street, i.e to consumers and producers of real products? The government does not use Wall Street to collect taxes. So why should Wall Street be used to distribute taxpayer money?

Paulsons diagnosis may be correct and the arteries may really clog up. There certainly was some trouble in the arteries of interbank lending last week. But the therapy he is pressing for is not the best one and it is unlikely that it will lead to permanent healing. The patient needs: a. behavior change and b. a better blood distribution system. The Paulson’s program does not provide either.

Congress needs to take a wider view on this issue. Paulson rushes in as a doctor with a ready diagnosis and a therapy and wants immediate approval for emergency action. His diagnosis may well be wrong, the therapy he proposes will not lead to permanent healing and the case for an emergency has yet to be made.

And what if the doctor is the real problem here and this the real diagnosis?

We have a treasury secretary in America – Hank Paulson. I’m afraid he’s gone insane. He’s become like the Colonel Kurtz of Treasury Secretaries. He’s gone native. He’s co-opted trillions of dollars of American taxpayers’ money and he’s playing hedge fund like a rogue trader. We have got a rogue trader in the Treasury Secretary’s office. He’s being aided and abetted by Ben Bernanke who’s been discredited as the entire Federal Reserve Bank has been utterly discredited. We’re looking at a possible inflationary depression in America and the worse is yet to come, much worse is yet to come."

$700 billion is a lot of money and there are many alternative uses. For example – the money could pay $35,000 per year to 2 million people for 10 years to do something sensible like repairing bridges and levees. That would have lots of positive secondary effects on production, local development and taxes. Saving a few thousand jobs at Wall Street hardly looks like the optimal way to spend so much money.

For once, let’s try bubble up instead of trickle down.

While the media still fret about subprime loans, Asset Backed Securities and the Paulson bailout, the real monsters slowly creep into the public view.

Frequent MoA readers will know these monsters. Jérôme warned here about Credit Default Swaps in April 2005. In April 2006 I posted on European ‘financial war gaming’ of large defaults involving these. My April 2008 piece on The Problem with Credit Default Swaps ended with the line:

Compared to what will happen in the CDS markets, the losses in subprime mortgages will look like small change.

So: ‘Who could have know … ‘? 

Yesterday New York state governor David Patterson announced that he will start to regulate certain Credit Default Swaps:

Cont. reading: On Regulating Credit Default Swaps

Billmon:

We may not be there yet. Both the dollar and the commodity prices could stabilize, at least temporarily — particularly if the Cheney Administration (or should I say the Goldman Sachs Administration?) and the Dems in Congress can quickly reconcile their differences and ram the MOAB through the legislative colon (and up ours). Further disasters are not inevitable — or at least, they don’t have to happen all at once.

But if and when it comes, disaster (the kind that turns financial panics into searing generational memories) will unfold in a string of events that will look very much like what we saw in the markets today — only on steroids.
Things Become More Serious

The Mother of All Bailouts plan gives the Treasury not only authority to buy and sell Mortgage Backed Securities, but allows it to deal in any financial instruments including leveraged derivatives.

This evolved over the various versions.

The original Paulson proposal said:

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.– The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

…
Sec. 12. Definitions.

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

All media reports and blogs I have read about this assume that the Treasury under this plan would only buy Mortgage Backed Securities, i.e. bonds backed my mortgage payments.

But the above language also includes Credit Default Swaps. Insurance contracts or derivatives, that guarantee the recoverability of MBS and change their value in relation to an MBS’ value.

The language in the Treasury Fact Sheed on the proposal is even wider:

Cont. reading: The Treasury Morphs Into A Hedgefund

The probably best coverage of the War on Iraq is by McClatchy’s Washington Bureau.

But Iraq, despite continuing daily carnage there, has now mostly fallen off the radar in U.S. news. The Washington Bureau followed that general move and eliminated the years-old Iraq link from its main menu.

McClatchy Washington Bureau a few days ago (bigger)

McClatchy Washington Bureau now (bigger)

Instead of news from Iraq we now get ‘Polls’. The most recent one says Most Americans think U.S. is losing war on terrorism.

Will eliminating Iraq from news frontpages change that opinion?

Cont. reading: Iraq Off The Menu

"What we cannot escape," one Pentagon policy planner told us, "is a confrontation with Pakistan.  Pakistan holds the key to success for us in Afghanistan."
Afghanistan: How Does This End?, Swoop, Sept 20, 2008

If one wants to make sense of the big bombing that hit the Marriott hotel in Islamabad yesterday, one has to look at the bigger strategic picture.

If you believe the usually ‘western’ media, the U.S. is still an ally of Pakistan and India is still a neutral country. In reality the U.S. and India are allied in a war against Pakistan and China.

Foreign policy elements in India and the in U.S. see China as their respective big strategic enemy. But both want – for now – avoid an open conflict. The center of gravity in this silent war against China are the hydrocarbon reserves in Central Asia, the Middle East and Africa and the transport routes for these.

The war in Afghanistan and the war in Pakistan can be seen as proxy wars between these three big powers over the energy issue.

Cont. reading: Who Is Behind the Bombing in Islamabad?