The Anti-Christ of Outsourcing
Former Reagan aide, lobbyist lash each other in Virginia primary

By BOB LEWIS
AP Political Writer
June 10, 2006
RICHMOND, Va. -- One Democrat calls his rival the "anti-Christ of outsourcing" U.S. jobs and argues that he's trying to buy a win in the Virginia primary.

The other fires back, labeling his opponent a sexist who is hostile to affirmative action and is, at heart, a Republican.

Well at least we know what these fellows believe is a Moral Equivalence.

Anti-Christ = Republican.

But I wonder if the Republican epithet might just backfire?

Because of all the qualities that can be attributed to Republicans by those who support them and by those who do really think they are the Anti-Christ there is one characteristic that has stood out in recent years.

Republicans as a rule eat up True Democrats at the Polls.

Is it wise to sling an aspersion, which also means Winner at your opponent?


Read the whole text of the article it's worth a chuckle or two.

Reminds me of a previous post I wrote called
the Lemming Left.

The Democratic Party seems to be bound and determined to run off the edge of a cliff.

Howard Dean, Moveon.org and other assorted irrational Bush haters, rather than trying to avoid this,seem to be petulantly complaining they are not stampeding fast enough.

How does Karl Rove do it?

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The Seventh Seal
"And when he had opened the seventh seal, there was silence in heaven" from The Revelation of St. John the Divine 8.1

I know that I have said this previously, but the propensity of the Universe to use Synchronicity to get my attention seems at times overwhelming.

For me this means a series of seeming less random, unconnected events which suddenly click into a new pattern in reality.

My latest journey of discovery started one night recently when I was doing a google search for an old post of mine. I find doing a search with keywords and the name of my site, easier than trying to remember when I wrote something and browsing through my last year of posting.

Much to my surprise I found my URL in a footnote of a pdf file on this website.


The Iran Policy Committee

I was a footnote in their latest White Paper

What Makes Tehran Tick?, 10 May, 2006, PDF


It would also appear this site is not composed of unemployed, unknowns sitting a computer, smoking cigarettes, drinking coffee, pounding on a computer in their pajamas.

The Iran Policy Committee is comprised of former officials from the White House, State Department, Pentagon, intelligence agencies, the Congress, as well as experts from think tanks and universities. The mission of the IPC is to educate the international community about the need to find an option for Iran between failing diplomacy and difficult military action against Iran-regime change in Tehran.

Needless to say I was flattered to be in such company. I did a bit of patting myself on the back the other day in, My own post here.

Post Press Conference Release: What Makes Tehran Tick?

I have been thinking about it off and on. I was not the author of the information, I merely had posted what I thought were important thoughts I found on an Iranian Blog, by someone who called himself Winsteed.

Iran Hopes

MY Post was merely a duplicate of his from Sunday, July 10, 2005

At this point in time what I think of the most is the last sentence or two from that article.

Let the regime be happy for the moment that it has silenced the people. But it is only silence before the storm.

For you see, Tuesday, October 04, 2005 is the last post on that website.

It is true Blogs come and go, people lose interest, they find other things they wish to do.

But we take much for granted here in the West, such as Freedom of Speech. We hear some talking glibly of
"Speaking Truth to Power" and they have NO idea what that means. They believe a reduction in CD sales makes them martyrs.

In Winsteed's World "Speaking Truth to Power" can have far serious consequences.

Maybe that was not such a good idea?

Last Sunday, agents of the State Security Forces opened fire on Shovan Qaderi and two of his friends in the town of Mahabad. The security forces then tied Qaderi?s body to a Toyota jeep and dragged him in the streets, according to eye-witnesses.

Since then, several hundred people in Mahabad have been arrested during numerous hit-and-run clashes and house-to-house raids.

Yes we take much for granted, but thanks to the miracle of the world wide web, my own small part and the White Paper of the Iran Policy Committee, the Mullahs did not totally silence this true Martyr to Liberty. His words, ideals, and dreams are preserved.


It was while I mused on these matters that the Cosmic Balance of Synchronicity struck me.

We have those who wish to silence us here too! They claim to have noble goals as well. I had just recently written about this.


When Will They Make Up Their Minds

John McCain
I would rather have a clean government than one where quote First Amendment rights are being respected,

Without the First (and Second) Amendments we will have neither Clean Government, nor Freedom of Speech.

But there lies the Synchronicity of the Universe, BOTH the Guardian Council and Senator McCain desire a Clean, more Moral Government and Society, though I will admit, so far Senator McCain has yet to expand his concepts to include a Committee for the Propagation of Virtue and the Prevention of Vice

I will give the Devils their due, their goals are noble and lofty, they wish to protect the lumpen masses from having to make their own decisions. The goals of Marxist-Leninism were also lofty and noble and resulted in the extermination of over 100 million human beings.

But such concepts have no place in a Free Society and a man who espouses them is unfit to be nominated for the Presidency of the Unites States of America. He cannot fulfill his spoken wishes and at the same time uphold his

Senate Oath of Office

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.

Much less that of the Presidency. Some may think I exaggerate, I want them to look one more time at this and think long and hard upon what it means.

John McCain
I would rather have a clean government than one where quote First Amendment rights are being respected,

I know not what course others may take; but as for me, give me liberty or give me death! Those words spoken by Patrick Henry, March 23, 1775. ring as true now as they did then, for some of us.

I say to Senator McCain Take your hands OFF the Seventh Seal!

The Gospel of St Johns is to some prophesy, I admit I took the phrase out of context as warning.

This does not make the warning untrue.

"And when he had opened the seventh seal, there was silence in heaven" from The Revelation of St. John the Divine 8.1

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Sinister Government Plot
When I read Michelle Malkin's article on the THE TINFOIL HAT CONVENTION, I realised for one more time that we can depend on the Lemming Left to run off a cliff, as long as we don't get in their way. ;-)

Tin Foil Hats MIT Study indicates that the legendary "tin foil" protection against Government Mind Control Transmissions does not protect, but instead acts as a waveguide, actually amplifying the waves, obviously specifically targeting those who have grown suspicious of the government's sinister plot




Hat Tip to WMT Mornings with Greg Alan

How appropriate is that considering the title.

I usually catch Greg on the way home from work. You can also catch his blog at
Confessions of a Radio Talk Show Host This morning he mentioned an MIT Study done on the effectiveness of Tin Foil Hats by MIT.


On the Effectiveness of Aluminum Foil Helmets:

Abstract

Among a fringe community of paranoids, aluminum helmets serve as the
protective measure of choice against invasive radio signals. We
investigate the efficacy of three aluminum helmet designs on a sample
group of four individuals. Using a $250,000 network analyzer, we find
that although on average all
helmets attenuate invasive radio frequencies in either directions
(either emanating from an outside source, or emanating from the
cranium of the subject), certain frequencies are in fact greatly
amplified. These amplified frequencies coincide with radio bands
reserved for government use according to the Federal Communication
Commission (FCC). Statistical evidence suggests the use of helmets may
in fact enhance the government's invasive abilities. We speculate that
the government may in fact have started the helmet craze for this reason.

Introduction

It has long been suspected that the government has been using
satellites to read and control the minds of certain citizens. The use
of aluminum helmets has been a common guerrilla tactic against the
government's invasive tactics
[1].
Surprisingly,
these helmets can in fact help the government spy on citizens by
amplifying certain key frequency ranges reserved for government
use. In addition, none of the three helmets we analyzed provided
significant attenuation to most frequency bands.

We describe our experimental setup, report our results, and conclude
with a few design guidelines for constructing more effective helmets.

The three helmet types tested

Classical

Fez

Centurion

We evaluated the performance of three different helmet designs,
commonly referred to as the Classical, the Fez, and the Centurion.
These designs are portrayed in Figure 1. The helmets were made of
Reynolds Aluminum foil. As per best practices, all three designs were
constructed with the double layering technique described elsewhere
[2].

A radio-frequency test signal sweeping the ranges from 10 Khz to 3 Ghz
was generated using an omnidirectional antenna attached to the Agilent
8714ET's signal generator.



The receiver antenna was placed at various places on the cranium of 4
different subjects: the frontal, occipital and parietal lobes. Once
with the helmet off and once with the helmet on. The network analyzer
plotted the attenuation between the signals in these two settings at
different frequencies, from 10Khz to 3 Ghz. Figure 4 shows a typical
plot of the attenuation at different frequencies.

Results

For all helmets, we noticed a 30 db amplification at 2.6 Ghz and a 20
db amplification at 1.2 Ghz, regardless of the position of the antenna
on the cranium. In addition, all helmets exhibited a marked 20 db
attenuation at around 1.5 Ghz, with no significant attenuation beyond
10 db anywhere else.

Conclusion

The helmets amplify frequency bands that coincide with those allocated
to the US government between 1.2 Ghz and 1.4 Ghz. According to the
FCC, These bands are supposedly reserved for ''radio location'' (ie,
GPS), and other communications with satellites (see, for example, [3]). The 2.6 Ghz band coincides with mobile phone technology. Though not
affiliated by government, these bands are at the hands of
multinational corporations.

It requires no stretch of the imagination to conclude that the current
helmet craze is likely to have been propagated by the Government,
possibly with the involvement of the FCC. We hope this report will
encourage the paranoid community to develop improved helmet designs
to avoid falling prey to these shortcomings.

So it appears that rather than giving protection, tinfoil hats actually AMPLIFY the signal? OOPS!

Linked to
The Conservative Cat at Continue the Conversation and Evolve to a Higher Level
The Political Teen at Open Trackbacks: Tuesday

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It's The Cherry On The Sundae
It's the Icing on the Cake.
It Is Poetic Justice
In the Most Impressive Way.

Zarqawi didn't die instantly

Al-Qaeda leader Abu Musab al-Zarqawi was still alive when American forces arrived on the scene of an air strike that targeted him but died of his injuries shortly after, a US general said.



"From the debrief this morning, which gave us greater clarity that we had before, Zarqawi in fact did survive the air strike," said Major General William Caldwell, a US military spokesman.



Iraqi police, the first on the scene, found Zarqawi alive and put him on a stretcher. US troops arriving later were examining him on the stretcher when he died, the general said in a video conference, according to AFP.



The US forces "went immediately to the person on the stretcher, were able to start identifying him by some distinguishing marks on his body. They had some kind of visual facial recognition."



"According to the person on the ground, Zarqawi attempted to sort of turn away off the stretcher. Everybody resecured him on the stretcher, but he died immediately thereafter," Caldwell said.



Caldwell said there was nothing in the report that indicated that Zarqawi was shot or died of wounds other than those received in the bombing.



? 2006 Al Bawaba (www.albawaba.com)

Which means to me that he might have known he had been captured.

That is a scenerio I prefer to the house being hit with smart bombs and Zarqawi never knowing what hit him.

Yes I have a vindictive streak. I much prefer him knowing he was captured and had no place to run. With any luck he might actually have thought we would treat him as he did his own captives.

Some might say, I dehumanise Zarqawi, which would be wrong. In more than one sense actually.

The Truth is that I cannot dehumanise Zarqawi he beat me to it.

For those who do not understand or condemn go here
and take a look at the photos and quotes on the bottom of the page.
Technorati Tags:Iraq_Zarqawi
I guess Great Minds think alike, the first referral link to my website I clicked on after putting this up was It keeps getting better and better By Techievampire

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When Will They Make Up Their Minds?

I hear Barbra Streisand is to do another farewell tour?

Barbra Streisand 2006/03/22Barbra Streisand farewell... again
Barbra Streisand farewell... again
Barbra Streisand is to do another farewell tour.

The singer-turned-actress - who last said 'goodbye' to fans in 2000 - will kick the 20 date run off in the autumn.

An insider told America's New York Post newspaper "Barbra will perform 'in the round' from the middle of arenas.

"She'll be paid $2 million per show, with the best tickets retailing for $1,500 a pop."

I ask you? How many times can someone say goodbye before they mean it? But at those prices I can understand the rationale for an encoure.

This is not uncommon on the Progressive Left. How many Talking Heads vowed solemnly to leave The US if Bush were to be elected, only to leave us waiting unfulfilled, both times?

They stand up indignantly exclaiming how they may oppose the War, but they support the troops, only to have hasty press conferences everytime there is a romour with which they can defame our fighting men and women.

Yes Mr Murpha, I am pointing at YOU

They Vote for Legislation, bfore they Vote against it and want to take credit for both positions?

They take an oath that states

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.

Then make statements like:

Dick Gephardt
When I'm president, we'll do executive orders to overcome any wrong thing the Supreme Court does tomorrow or any other day."

Now that certainly is a fine way to uphold Constitutional Rule of Law, isn;t it?

Or

John McCain
I would rather have a clean government than one where quote First Amendment rights are being respected,

Without the First Amendment we will have neither Clean Government, nor Freedom of Speech.

Benjamin Franklin warned us about people like this:

"Those Who Would Sacrifice Liberty for Security Deserve Neither."

Yes I know Senator McCain is a Republican, but does that sound like a Conservative?

Does it even sound like a Moderate?

Actions speak louder than words, and those words and his actions to destroy the First Amendment with Campaign Finance Reform and FEC Regulations, don't just speak, to any Lover of Liberty they shout

Saying one thing and doing another is bad enough, but we seem to be surrounded by those who say both.

The Progressive Left seems to be only consistant in their inconsistancy?

When Will They Make Up Their Minds? Keep their Promises amd LEAVE for GOOD?

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Who Wants To Rape Grieving Families?
I got the following in an email this Wednesday.

Whether it’s a water tax, a gas tax, a payroll tax … a utility tax, a cable tax, or a property tax … we’re taxed from the minute we wake up in the morning with that first cup of coffee to the minute we turn off the lights to go to sleep. And when we die, we even pay a death tax.

This absurd tax tells every American that no matter how hard you work or how wisely you manage your affairs, in the end the federal government is going to take it away.

The death tax raises minimal revenue yet it depresses savings and discourages entrepreneurship, leading to smaller business investment, weaker worker productivity, lower wages and less wealth creation. It is double and, in some cases, triple taxation and has been destroying businesses and ruining lives for four generations.

I am reminded of a case in Williamson County, TN. I know of a family there that inherited from their dad the 167 acre farm that they grew up working on. The kids considered keeping the farm … until they got the "inheritance tax" bill, which typically runs 40 to 50% of the current market value of a property in excess of $1 million.

The children needed to come up with hundreds of thousands of dollars within mere months of their dad’s death. Like so many other families who inherit the family farm, they simply couldn’t do that without selling the land.

This tax is flat WRONG, so tomorrow, Thursday, June 8, I will have the Senate vote on a full and permanent repeal of the death tax.

I urge you to sign my petition by clicking here and then call your Senators and let them know where you stand. If we work together, the death tax will become a disgraced relic of the past.

It turns out grieving families are now protected from the Financial Necrophilia of Government until 2010, but there lacked 3 votes to end a Filibuster so that the action could be permanent.

So 57 Senators voted to do the Right Thing, but there were 2 Republican Senators missing, which means 4 Democrats crossed the aisle and are to be honored. Voting against over 90% of your Party is nothing to take lightly.

Send the word to Congress in the same manner and with the same message that
American Family Business Institute addressed Senator McCain. Ask John McCain to keep his promise and vote to end the Death Tax. Tell him, we're Watching, tell him, we'll Remember.

So exactly which Senators are Ghouls(A grave robber.
An evil spirit or demon in Muslim folklore believed to plunder graves and feed on corpses.)??

Well it appears the entire Democratic Party with the exception of, Sens. Max Baucus, D-Mont., Blanche Lincoln, D-Ark., Ben Nelson, D-Neb., and Bill Nelson, D-Neb. from Farm Futures remember those names they Shine in Honor.

Now for two names that Slink in Infamy, "Lincoln Chafee, R-RI, and George Voinovich, R-Ohio, voted with a majority of Democrats against cloture."

A number of senators on the fence ended up voting against the motion to proceed, including Sens. Maria Cantwell, D-Wash., Patty Murray, D-Wash., Mary Landrieu, D-La., and Mark Pryor, D-Ark. Two senators were not present, Jay Rockefeller, D-W.V., and Chuck Schumer, D-N.Y.. Rockefeller is still recovering from back surgery, and it is not immediately known why Schumer was not present.

Senate leaders are meeting later today (Thursday) to explore other avenues of bringing permanent relief of the death tax. Senate Majority Leader Bill Frist has indicated the Senate will again try to vote on the repeal before the end of the Congressional year.

Question: What does a Progressive Socialist Politician look like when waiting for the owner of a Family Farm or Business to Die?



One thing that recent events have made painfully apparent. We cannot depend on the Left to Represent the Harkworking, Citizens of this Nation.

Tell them:

We're Watching, We'll Remember.

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Abu Musab al-Zarqaw RIH
I don't think I need to explain why I used RIH rather than RIP.

This just in over the wires.

Terror leader al-Zarqawi dead, Iraqi officials say

Thursday, June 8, 2006 Posted: 0801 GMT (1601 HKT)



BAGHDAD, Iraq (CNN) -- Abu Musab al-Zarqawi, the most wanted terrorist in Iraq, is dead, Iraqi Prime Minister Nuri al-Maliki said Thursday.

"Today Zarqawi has been killed," al-Maliki said. The announcement was greeted by cheers.

The announcement -- made at a news conference -- did not provide details on how the infamous militant was killed. An aide to the prime minister told CNN that the prime minister confirmed that al-Zarqawi has been killed.

State TV said al-Zarqawi apparently died near the city of Baquba, a volatile area northeast of Baghdad in Diyala province, a mixed Shiite-Sunni jurisdiction.

There have been many roadside bombings and shootings throughout the province and within the week, severed heads were found in fruit boxes there.

In Washington, two Pentagon officials told CNN that the government was awaiting al-Maliki's announcement in Baghdad before commenting on the report officially.

One official said the Pentagon is not sure of how the death was confirmed and that there might need to be "additional forensics" done before they can be fully confident the terrorist leader is dead.

Officials could provide no further details at this time

Other News at Forbes Iraqi PM: Abu Musab Al-Zarqawi Killed

the International Herald Tribune Zarqawi has been killed, Iraqi PM say

The Associated Press

Published: June 8, 2006
BAGHDAD Abu Musab al-Zarqawi, the Al Qaeda leader in Iraq who led a bloody campaign of suicide bombings, kidnappings and hostage beheadings, has been killed in a U.S. air raid north of Baghdad, Prime Minister Nouri al-Maliki said Thursday.

Maliki said Zarqawi was killed about Wednesday evening along with seven aides.

The Jordanian-born militant, who is believed to have personally beheaded at least two American hostages, became Iraq's most wanted militant, as notorious as Osama bin Laden, to whom he swore allegiance in 2004. The United States had put a $25 million bounty on Zarqawi.

and the Washington Post
Insurgent Leader Zarqawi Killed in Iraq

By Ellen Knickmeyer
Washington Post Staff Writer
Thursday, June 8, 2006; 3:50 AM

BAGHDAD, June 8 -- Abu Musab Zarqawi, leader of one of the most entrenched insurgent operations in Iraq, has been killed, Prime Minister Nouri al-Maliki announced Thursday.

Maliki, flanked by U.S. Gen. George Casey, who commands U.S. troops in Iraq, and U.S. Ambassador Zalmay Khalilzad, announced at a hastily called news conference: ''Today Zarqawi is defeated.'

Should anyone wonder about my sheer delight at this news, this is but one of the reasons.


Bombing in Iraq Kills Mostly Children

27 Die in Suicide Attack in Baghdad as U.S. Troops Hand Out Candy and Toys

By Andy Mosher and Khalid Alsaffar
Washington Post Foreign Service
Thursday, July 14, 2005; Page A19

BAGHDAD, July 13 -- Inside the morgue at Kindi Hospital lay the remains of Amjad Kudeer. Flying shrapnel from a suicide car bomb struck him in the head and chest Wednesday, killing him instantly. He was 13.

Outside the door to the refrigerated room, Amjad's sobbing mother called his name over and over, as if trying to summon him back to life. Then she looked up and asked: "What did he do to deserve this? They are killing children. Why? Why?"


Falah Jabbar, his wife and their 4-day-old daughter arrive at a hospital in eastern Baghdad after they were wounded in a suicide bombing. (By Khalid Mohammed -- Associated Press)


Amjad and more than a dozen other children from east Baghdad's al-Khalij neighborhood made up the majority of the 27 people killed when a suicide bomber drove into a crowd that had gathered around U.S. soldiers who were handing out candy and small toys, police said. The attack also killed one soldier, according to the U.S. military, and wounded at least 50 people

Soldiers you Defeat in Battle and Capture.

Criminals you Arrest, Try and Imprison.

Rabid Beasts you Hunt Down and Kill.

To Protect the Innocent.

Anyone who has the slightest mote of misplaced compassion, for this mad dog, needs to look at the following photos awhile and reflect.

There is much still before us to do, but the world ins in some small manner a cleaner place this morning.

Technorati Tag:Iraq

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Post Press Conference Release:
What Makes Tehran Tick?
I ran accoss this last night while I was doing some googling. So why am I posting about it? Well, for one thing it has some very good information on Iran in the White Paper. But the real reason is probably because on page 23 of 92 of the pdf they have a link to my website. ;-)

The Iran Policy Committee rolled out its fourth White Paper,
"What Makes Tehran Tick."
The paper analyzes the radical Islamist nature of the Iranian regime, why its character matters, and options to prevent a nuclear-armed Iran.


President of the IPC Professor Raymond Tanter, a former senior staff member of the National Security Council, stated that, "The Islamist nature of the regime takes on enhanced importance because Iran is on the road to acquiring nuclear weapons, and there are few exit ramps along the way." Tanter stated that, "Given the Islamist character of the Iranian regime and its nuclear potential, only regime change ends the threat of a nuclear-armed Islamist Iran. Diplomacy and military strikes would only delay the onset of the Iranian regime acquisition of nuclear arms." Tanter also brought to light the results of an IPC statistical study of over 2,400 public statements by Tehran over the last 27 years.


Using the quantitative content analysis techniques, the IPC research concludes that Iran's hostility toward Israel and the United States is less a result of feeling threatened or living in a "tough neighborhood" than by the nature of the regime's revolutionary ideology.


The study also demonstrates that the average intensity of the threat perceived to religious and revolutionary interests is higher than regime's perceived threat to traditional national interests.


With such limitations, a diplomatic resolution to the conflict between the international community and Iran is unlikely.


Rather than sliding toward military strikes, the IPC suggests that the international community empower the Iranian people, led by organized pro-democracy resistance groups like the Mujahedeen- e Khalq (MEK) and its umbrella group, the National Council of Resistance of Iran, to bring about change in their own country. Empowering the opposition requires the removal of the MEK and NCRI from the Foreign Terrorist Organizations list maintained by the Department of State.


IPC Executive Director Clare Lopez, a former CIA operations officer, led off the discussion of the nature of the regime in Tehran. Lopez noted that, "The leadership in Iran perceives itself as involved in two fundamental battles: a struggle for leadership in the Muslim world and a clash with modernization, democratization, secularization, and globalization, as embodied in Israel and the United States. The increasing belligerency of the regime's attitude is likely an attempt to pursue its perceived clash of civilizations, and to rally the Moslem population in the region around the regime's power structure by creating fear of external threats."


Professor Louis Rene Beres of Purdue University addressed legal and political justifications for potential preemptive actions by the State of Israel. Beres stated that, "In light of Iran's openly declared desire 'to wipe Israel off the map,' and the existential threat that nuclear weapons would pose, Israel would have clear justification under international law to undertake preemptive action against Iran."


Captain Charles Nash, (U.S. Navy retired), analyzed military options available to the United States and Israel. Nash pointed out that, "Although the United States has the capability to damage and delay Iran's nuclear program, there would be significant risks of escalation from Tehran, and military strikes would not be able to prevent the acquisition of nuclear weapons by Iran in the long term."


Lt. General Tom McInerney, (U.S. Air Force retired), emphasized, that "no option would be a viable option if it does not consider at its core, a central role for the Iranian opposition to lead regime change in Tehran."


The Iran Policy Committee is comprised of former officials from the White House, State Department, Pentagon, intelligence agencies, the Congress, as well as experts from think tanks and universities. The mission of the IPC is to educate the international community about the need to find an option for Iran between failing diplomacy and difficult military action against Iran-regime change in Tehran.

Yes I know it's not that big of a deal, but I want to bask in the illusion for a bit.
Technorati Tag:Iran

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An Inflection Point In China's Banking Problem
By George Friedman

The month of May witnessed an interesting phenomenon: a spate of reports on China's nonperforming-loan problem. What is most intriguing is that these reports did not come from organizations like Stratfor -- minor outfits that have been talking about this for a couple of years.
Like yours truly in The Lusty Chinese Economy?


It came from real, solid, serious mainstream organizations that were, and continue to be in some cases, quite positive about China on the whole. What is important here is not that China has a serious problem with bad loans in its banking system. That's old news. What is important is that mainstream analysts in the West now are taking official notice of it. The wide divergence between the Western perception of Chinese economic health and the realities of China's economy is beginning to close. There will be consequences to that.

The first report came from Ernst & Young, which released a study saying that China had a substantial problem with nonperforming loans (NPLs). We have to confess to not having seen that report, because the accounting firm withdrew it a few days later. The Chinese government blasted the report, using words like "ridiculous" and "distorted." Ernst & Young, which has a substantial practice in China, denied having retracted the report because of pressure from the government. Whatever their reasons for doing so, we wish we had been faster in asking for a copy.

No matter, because May also brought studies on the same subject from PricewaterhouseCoopers (PWC), McKinsey Global Institute, and Fitch. Each said the same basic thing: that Chinese banks have enormous NPL numbers on their books. The PWC report was issued by a group within the company that specializes in making markets in NPLs. Their news was that the water in China was fine and everyone should come in. McKinsey focused on inefficiencies in the Chinese banking system that should be cleared up, so that NPLs could decline and the Chinese gross domestic product could surge. Fitch was the harshest of the three, but that firm also argued that the Chinese had the tools in place to handle the problem. The bottom line was that all three acknowledged that NPLs were a big issue for China, but they took different approaches in trying to put the problem in perspective. In other words, they gave a warning without yelling "Fire!" Some of the reports were criticized by the Chinese, but none were blasted. Meanwhile, Moody's Investors Service has told us that they will be releasing a report in a couple of weeks. It will be interesting to see what their take is.

Let's begin this analysis by looking at a couple of quotes from these reports. McKinsey, for example, writes:

"Underlying these reforms, however, is capital misallocation by the system. Nonperforming loans are the most conspicuous outcome of this misallocation, but our research shows that the much larger volume of loans to underperforming ventures that don't go bad but yield only negligible returns are potentially more costly to China's economy."

Fitch's report states:

"Summing all of these figures, we come up with total official nonperforming loans of US$206 bn and other estimated problem loans of over US$270 bn in the banking system. We would reiterate, however, that a large portion of this latter figure is comprised of estimated Special Mention loans or loans that currently are not classified as nonperforming [emphasis Fitch's]. At the same time, there is an additional US$197 bn in NPL carveouts still remaining on the balance sheets of China's asset management companies, which no longer represent direct losses for banks but are a future liability for the government."

Fitch also states:

"Beyond this, estimating a rate of flow of new nonperforming loans is not an easy exercise given Chinese banks' extremely weak historical data and ongoing deficiencies in accounting and disclosure. Few banks report data on NPL flows, and those that do show recent flow rates in the extremely low single digits. We believe these numbers understate the likely level of ultimate credit losses, given what we know to be the slow evolution of a strong credit culture and risk management practices and our suspicion that China's over-reliance on investment-led growth comes at a cost to bank credit quality."

Fitch is estimating China's bad-loan situation (our term, lumping all these categories together) at $673 billion, but it warns that -- given Chinese accounting and reporting, and the fact that what reporting exists is not credible -- $673 billion is a low number. That's important. If $673 billion was the final number, then measures that are put in place could limit the ultimate losses to a level below that figure. If, however, the total number of bad loans is substantially higher than $673 billion -- which is our view of the situation -- then the system would be lucky to have to write off only this amount.

There are numerous ways to measure the magnitude of the problem, but one of the simplest is this. China is said to hold nearly $819 billion in foreign reserves. Fitch's conservative estimate of the bad loan situation comes close to matching that number, and a more liberal calculation would swallow those reserves up and then some. Put very simply, the Chinese banking system is in deep trouble -- and with it, so is the Chinese economy.

It has become an article of faith that China's economy is booming. The economy certainly is growing rapidly. But growth and size alone don't tell you how healthy an economic entity is. During the Great Depression, the U.S. economy was enormous, but it was crippled. Japan's economy was growing at a phenomenal rate in the 1980s, all the while heading for its disaster. Size and growth are but two measures of an economy -- or of a business. They do not tell you how well it is doing.

The basic problem of the Chinese economy, as in many Asian nations, is that the banks have not made loans with business considerations in mind. They made loans for political reasons and to maintain social stability. In many cases, loans were seen as being more like grants. As a result, they were invested in enterprises that did not make enough money to repay (or even attempt to repay) the loans. Frequently, rather than bankrupting the business or writing off the loan, the banks lent more money to the business -- so that it could repay old debts, and there was an appearance that the loans were viable. Loans went into land speculation or to investments in areas that were already overbuilt. (And this does not attempt to take into account ancillary problems, such as corruption and embezzlement, which also have been significant issues for the Chinese government.)

In the first part of 2006, there has been a huge surge in lending in China. With the economy already growing at rates of more than 9 percent, it would seem structurally impossible to grow it any faster. Shortages in skilled workers, management, buildings -- all these limit the rate of growth. The truth is that a substantial portion of the loans that went out were issued to keep bad loans floating, like using one credit card to pay the monthly payment on another. You can do that for a while, but you can't do it forever.

What keeps the Chinese system alive is not domestic consumption, which is not rising in tandem with overall growth. What keeps China afloat is exports -- exports in ever greater numbers, and with ever-smaller profit margins. Surging exports are critical to China, as they were to Japan before it. They generate the cash that allows the financial system to continue operating.

This is also the Achilles' heel of the Chinese economy, as Fitch points out:

"Given the weaknesses already discussed, we believe Chinese banks remain acutely vulnerable to an economic slowdown, although the analysis above recognizes that much work has been done to tackle these weaknesses and at a minimum suggests that Chinese banks and the government are more equipped today than in the past to deal with problems that may arise."

Here is the problem. The official policy of the Chinese government is to cool off the economy. In fact, the Chinese are attempting to cool growth only in certain sectors, where they perceive particularly dangerous bubbles starting to form. For the most part, however, they are doing everything they can to keep the economy hot, in order to try to manage the financial problem. Now, Fitch argues in its report that the Chinese banks are better equipped than in the past to deal with their problems. We agree with that assessment; they were completely unprepared in the past and now are abysmally prepared. You cannot prepare to deal with a loan situation as bad as that in China. You simply keep cycling as fast as possible and hope that something turns up.

In our view, this spate of reports on China's financial situation marks a turning point.

One of the things that has kept the Chinese economy booming was cheap exports. But another was the perception in the West that, underneath it all, China was sound. This perception induced foreign banks to invest in Chinese banks. There have, of course, been studies detailing the Chinese debt problem for some time: Standard & Poor's, for example, estimated the bad debt in 2002 at $600 million. That part isn't new.

However, when "irrational exuberance" (to quote Alan Greenspan) is at its peak, it is hard to break through the noise. Markets continue to rise, even as bad news comes out. Last week, for example, we saw the Bank of China make its initial public offering and shares soar, just as these financial reports were emerging. That doesn't mean these reports are wrong or that the Chinese have things under control. It simply means the market is ignoring news and rising on its own giddiness.

Nevertheless, a turning point has been reached that will be difficult to ignore. Reports from Stratfor are, of course, one thing. Reports from a single credit agency are another. But when a series of reports from highly respected, mainstream analysts all come out within a few days of each other -- with each, in their own way, telling the same basic story, it becomes hard for the system to dismiss that. Western companies moving into China have CEOs and CFOs who must exercise due diligence. There are now too many reports out there to be simply ignored. All of them are caveated. None of them write China off. But a critical mass is forming that will cut through the froth in due course.

Obviously, this does not mean that China will implode, disappear or anything like that. It will remain an enormous economy and an important one. But this does mean that the dynamics of the Chinese economy are shifting. The debt issue represents a deep structural problem that China will either deal with -- as South Korea did -- or not, as Japan did not. (Japan reaped more than a decade of economic stagnation as a consequence. It is significant that China lacks the degree of insulation that Japan built up; the economy has more external exposures and would not weather a similar crisis as well.) The point is that, ultimately, the books have to balance everywhere. That means that the huge structural imbalance of China, which these debts represent, must be rectified. And that process, as in all such matters, will be painful.

It is not clear how much pain Chinese society can withstand before it fractures. This is clearly a concern for Beijing as it tries, simultaneously, to reform the economy and to crack down on dissent. The Chinese, like anyone in this fix, try to put the best possible face on the situation. Which is why they exploded at Ernst & Young. But even the government in Beijing couldn't shout down the ensuing tidal wave of financial reports; instead, they grumbled and pointed to the passages that said it could all be managed.

Perhaps it can. But if it can, it won't be easy -- and we doubt that it is possible. We have been writing about this problem for several years now, and people keep asking when the crisis will come. Our answer is simple: If this isn't a crisis, what would a crisis look like? The Chinese financial system is sinking under nonperforming and underperforming loans. Mainstream Western analysts are all writing about the problem and calling for reforms that the Chinese cannot possibly implement in time to make a difference. At some point, the weight of evidence will shift the behavior of the Western financial community, and that will be that.

In the meantime, let the exports flow -- for they surely will, and in breathtaking quantities.

Send questions or comments on this article to analysis@stratfor.com.

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We The People
of What Country?

GOP Sen. Mitch McConnell sought to add to the bill a requirement that all voters in federal elections be required to present a valid photo identification.

"It is nonsense to suggest that somehow a photo ID for one of our most sacred rights should not be protected by a requirement that is increasingly routine in almost all daily activities in America today," said the Kentucky lawmaker, second-ranking Republican.

But Sen. Edward M. Kennedy, D-Mass., likened the proposal to a poll tax or a requirement for voters to pass a literacy test. "Now is not the time and this is not the place to consider an amendment that may disenfranchise a million or more poor, minority, disabled, and elderly voters -- all of them American citizens," he said.

Is it the million or more who might be disenfranchised that worrys Leave to Die Teddy, or could it be the 12 million or more who might not be able to vote illegally? After all the Honorable(?) Gentleman from MA is not noted for his Loyalty, nor his Honor, is he?

One thing that has become painfully obvious in the last few weeks is that many of our Representatives nd Senators are NOT representing the Citizens who have a right to it, but instead seem to be representing Citizens of OTHER Nations.

We The People of What Country?

Some maintain that we should boycott the coming election. I wonder. If Politicians elected as Conservative Candidates are not up to the Job will Liberal ones elected by default be better?

NO, I say. Vote for the least damaging choice but let them know they are on sufferance. Carry out the Good Fight in Primaries.

AND

Demand a position from your City, County and State Representatives.

After all the next generation of Congressional Members will be coming out of the State Houses and Senates. unless their name is Clinton, I guess.


Don't WAIT until they arrive in Congress to find out a mistake has been made. Demand their position on illegal immigrations and the representation of Citizens, early, they will be easier to weed out at that level.

This will be a long battle.

The betrayal of the Citizens of this country by those we have elected is something we must not

Forget.

The eradication of those who have betrayed us is something in which we must not


Falter

It is at task in which we must not

Fail


For those who have forgotten it is

We The People of

THE UNITED STATES

**This was a production of The Coalition Against Illegal Immigration (CAII). If you would like to participate, please go to the above link to learn more. Afterwards, email the coalition and let me know at what level you would like to participate.

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