a 'fraud' bigger than madoff?

Independent | In what could turn out to be the greatest fraud in US history, American authorities have started to investigate the alleged role of senior military officers in the misuse of $125bn (£88bn) in a US -directed effort to reconstruct Iraq after the fall of Saddam Hussein. The exact sum missing may never be clear, but a report by the US Special Inspector General for Iraq Reconstruction (SIGIR) suggests it may exceed $50bn, making it an even bigger theft than Bernard Madoff's notorious Ponzi scheme.

Despite the vast sums expended on rebuilding by the US since 2003, there have been no cranes visible on the Baghdad skyline except those at work building a new US embassy and others rusting beside a half-built giant mosque that Saddam was constructing when he was overthrown. One of the few visible signs of government work on Baghdad's infrastructure is a tireless attention to planting palm trees and flowers in the centre strip between main roads. Those are then dug up and replanted a few months later.

Iraqi leaders are convinced that the theft or waste of huge sums of US and Iraqi government money could have happened only if senior US officials were themselves involved in the corruption. In 2004-05, the entire Iraq military procurement budget of $1.3bn was siphoned off from the Iraqi Defence Ministry in return for 28-year-old Soviet helicopters too obsolete to fly and armoured cars easily penetrated by rifle bullets. Iraqi officials were blamed for the theft, but US military officials were largely in control of the Defence Ministry at the time and must have been either highly negligent or participants in the fraud.

The end of the Bush administration which launched the war may give fresh impetus to investigations into frauds in which tens of billions of dollars were spent on reconstruction with little being built that could be used. In the early days of the occupation, well-connected Republicans were awarded jobs in Iraq, regardless of experience. A 24-year-old from a Republican family was put in charge of the Baghdad stock exchange which had to close down because he allegedly forgot to renew the lease on its building.

an american foreign legion?

Middle East Online | A leaner, meaner, higher tech force -- that was what George W. Bush and his Secretary of Defense Donald Rumsfeld promised to transform the American military into. Instead, they came close to turning it into a foreign legion. Foreign as in being constantly deployed overseas on imperial errands; foreign as in being ever more reliant on private military contractors; foreign as in being increasingly segregated from the elites that profit most from its actions, yet serve the least in its ranks.

Now would be a good time for President Barack Obama and Secretary of Defense Robert Gates to begin to reclaim that military for its proper purpose: to support and defend the Constitution of the United States against all enemies, foreign and domestic. Now would be a good time to ask exactly why, and for whom, our troops are currently fighting and dying in the urban jungles of Iraq and the hostile hills of Afghanistan.

A few fortnights and forever ago, in the Bush years, our "expeditionary" military came remarkably close to resembling an updated version of the French Foreign Legion in the ways it was conceived and used by those in power -- and even, to some extent, in its makeup.

For the metropolitan French elite of an earlier era, the Foreign Legion -- best known to Americans from countless old action films -- was an assemblage of military adventurers and rootless romantics, volunteers willing to man an army fighting colonial wars in far-flung places. Those wars served the narrow interests of people who weren't particularly concerned about the fate of the legion itself.

the politics of economic disaster

Agence Global | Every day, I read another economist, journalist, or government official opining on how best to achieve economic recovery in this country or that. Needless to say, the remedies all contradict each other. But almost all of these pundits seem to me to live in fantasyland. They actually seem to believe their remedies will work in some relatively short period of time.

The fact is that the world is only at the beginning of a depression that will last for quite a while and will get far worse than it is now. The immediate issue for governments is not how to recover but how to survive the growing popular anger they are all, without exception, facing.

Let us start with the economic realities of the present. Just about everybody throughout the world -- governments, enterprises, individuals -- has been living above their income for the last 10-30 years, and doing it by borrowing. The world went giddy with inflated earnings and inflated consumption. Bubbles have to burst. This one has now burst (or actually several bubbles have burst). The impossibility of continuing on this path has sunk into consciousness, and suddenly everyone has gotten scared that they are running out of real money -- governments, enterprises, individuals.

When that fear takes over, people stop spending, or lending. And when spending and lending declines significantly, enterprises stop producing or slow down. They may close down entirely, or at least fire workers. This is a vicious cycle, since closing down or firing workers leads to lower real demand and causes further reluctance to spend or to lend. It's called depression, and deflation.

right america feeling wronged

worth seeing as the sentiments expressed in this documentary will unfortunately figure prominently in our lives over the next few years...,

EU Götterdämmerung

UK Telegraph | Failure to save East Europe will lead to worldwide meltdown. The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point. If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.

Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.

"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.

The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.

Mr Pröll tried to drum up support for his rescue package from EU finance ministers in Brussels last week. The idea was scotched by Germany's Peer Steinbrück. Not our problem, he said. We'll see about that.

Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.

Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the ruble.

"This is the largest run on a currency in history," said Mr Jen.

In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.

Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.

They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).

Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.

Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

it's a dirty job but someone had to do it

ChrisMartenson.com| Look, people at the supermarket checkout counter don't understand how serious the situation is. If we can't go on getting oil at the rate we have become accustomed to those shelves will be bare. The stuff's getting scarce now. The Chinese are after it; that's why they're supporting murderous regimes in Africa without asking any questions. Now you can't secure the stuff just by being nice and asking to buy some; you have to go after it strenuously and sometimes you have to throw a little weight around, or some other bastard will get it first. That's what geopolitics is about. It's dog eat dog and devil take the hindmost out there. Most wars in history have been about grabs for resources. That's what The Great game in central Asia has been about and is about now. We have to secure our oil fields and we have to get safe routes for those long pipelines to sea ports, through foreign countries, some of which don't like us much. We can't build them and we can't protect them unless we have military bases and unless we bribe or bully some of those regimes into doing what we want.

So can't you see that we had to take Iraq and Afghanistan. And what if Saddam had decided to stop trading oil in US dollars! GW and the team bit the bullet; they did what was necessary. And GW has been a great front man; he's taken the flak for a tough and dirty but crucial job. When everyone's criticising and you can't tell them what you are really doing its best if the mess looks like a mistake made by a buffoon.

Yes of course they were clumsy. In the past they have pulled off most of the coups and assassinations and invasions neatly and quietly - got rid of Noriega, Lumumba, the Sandinistas, put in the Shah, supported our kleptocrat Suharto in Indonesia for 30 years, eliminated deviance in Haiti and Grenada (especially important that, can't let the little ones get away with deviating - sets a bad example the rest might see they can follow) with not a grumble at home. Mind you they did stuff up a bit on Cuba and Venezuela.

So yes they did miscalculate in Iraq and Afghanistan but securing the empire is a difficult job, and it's a vital job. You cannot live in the way you have become accustomed, let alone have the 3% p. growth you insist on, unless we go on getting control of most of the dwindling resources an that means running those countries to our benefit not theirs. George and the Neo-cons have done it for you, in difficult circumstances. I think their critics should just be a bit more understanding and appreciative. If you want to go on living with your too-big houses and your plasmas and your jet-away vacations just quit the backchat and support your empire and those who secure it for you.

This letter to George Bush is an oldie but goodie written by Ted Trainer. Mr. Trainer's extensive writings on Farmer Brown and global livestock mismanagement can be found here.

hegemonic hustle...,

METimes | It remains to be seen how President Obama, the idealist liberal, views King Abdullah, the traditional monarch. The king has not left events to chance. Since the Gaza crisis, he has intensified his efforts to situate himself as the ultimate problem solver in the Middle East and the faithful defender of U.S. interests in the region. He and his government have consistently sent messages concerning peace with Israel, isolating Iran, and weakening Iran's supporters in the Arab world, i.e. Syria, Hezbollah, Hamas, and other nationalistic organizations. On Feb. 3, Abdullah's government issued an implicit call for Arabs to be aware of Iran's policies disguised as defending Arab and Muslim interests. The government, too, in cooperation with Egypt, organized a conference on Feb. 3 for foreign ministers of U.S.-allied states to back the peace initiative with Israel.

Motivated by ensuring the survival of and maintaining security in the kingdom, Abdullah is counting on Washington's traditional support. This may explain why he appears to be in a race with time to demonstrate to President Obama that his kingdom is a trusted ally which is willing to utilize its unlimited wealth and resources to steer events in the region into a direction that serves Israel's concerns for security, while optimizing what he perceives as American interests in the region.

Abdullah understands that Obama seeks to differentiate his administration's foreign policy from that of his predecessor, and that Obama might not agree or see eye to eye with him. Nevertheless, Abdullah knows that, at this moment, he holds the key to two important factors: the free flow of oil and peace with Israel. He is betting that Obama ultimately reciprocates his friendly gestures.

american bankster....,

Baseline Scenario | When you cut through the technical details and the marketing distractions, sorting out the US banking fiasco comes down to one, and only one, question. How tough are you willing to be on the people who control the country’s large banks?

One option is to be gentle with them and adopt only ideas that they pre-approve. This route involves complicated schemes to purchase, lend against, or otherwise “wash” toxic assets out of the banks using taxpayer subsidies. This will be expensive (for the taxpayer), messy politically, and - most likely - will not work, in the sense of restoring the banking system to something close to its normal mode of functioning; check with Hank Paulson for details.

Alternatively, you can be tough and take steps towards really assessing which banks are insolvent when you use market prices to value their assets. These banks can be taken over in a scaled-up FDIC-type procedure (no golden parachutes!), and controlling stakes in fully recapitalized banks can be sold off immediately to new private owners. The new private owners can handle, under proper anti-trust supervision, the break up the banks. This approach will be cheaper for the taxpayer (but nothing is free at this stage), easier to explain to the electorate and their representatives, and it will work - this is in fact the standard prescription because it always works. But it will not make powerful bankers happy.

So which way is the Obama Administration heading? We honestly don’t yet know; the signals are mixed.

Fist tap to rembom for the Simon Johnson interview and baseline scenario.

ireland ‘could default on debt’

Times Online | FEARS are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector.

The cost of buying insurance against Irish government bonds rose to record highs on Friday, having almost tripled in a week. Debt-market investors now rank Ireland as the most troubled economy in Europe.

Simon Johnson, the former chief economist of the International Monetary Fund, called for this weekend’s meeting of G7 finance ministers to put Ireland’s troubles at the top of the agenda.

Johnson said: “Don’t, please, tell me more about the basic principles of financial reform unless and until you have addressed the Irish problem. And don’t tell me the Irish have to sort this out for themselves. Eventually, the world always comes to help; check your notes on Iceland.

islamicate bomb

LATimes | Reporting from Washington — Little more than a year after U.S. spy agencies concluded that Iran had halted work on a nuclear weapon, the Obama administration has made it clear that it believes there is no question that Tehran is seeking the bomb.

In his news conference this week, President Obama went so far as to describe Iran's "development of a nuclear weapon" before correcting himself to refer to its "pursuit" of weapons capability.

Obama's nominee to serve as CIA director, Leon E. Panetta, left little doubt about his view last week when he testified on Capitol Hill. "From all the information I've seen," Panetta said, "I think there is no question that they are seeking that capability."

The language reflects the extent to which senior U.S. officials now discount a National Intelligence Estimate issued in November 2007 that was instrumental in derailing U.S. and European efforts to pressure Iran to shut down its nuclear program.

As the administration moves toward talks with Iran, Obama appears to be sending a signal that the United States will not be drawn into a debate over Iran's intent.

"When you're talking about negotiations in Iran, it is dangerous to appear weak or naive," said Joseph Cirincione, a nuclear weapons expert and president of the Ploughshares Fund, an anti-proliferation organization based in Washington.

Cirincione said the unequivocal language also worked to Obama's political advantage. "It guards against criticism from the right that the administration is underestimating Iran," he said.

Iran has long maintained that it aims to generate electricity, not build bombs, with nuclear power. But Western intelligence officials and nuclear experts increasingly view those claims as implausible.

U.S. officials said that although no new evidence had surfaced to undercut the findings of the 2007 estimate, there was growing consensus that it provided a misleading picture and that the country was poised to reach crucial bomb-making milestones this year.

afghan pitfalls

Dissident Voice | Under pressure, the Taliban could launch another attack inside India. After the attacks on Mumbai last November, India was threatening ‘surgical strikes’ against Pakistan, forcing Pakistan to divert its troops to the eastern front. Another Mumbai, followed by Indian surgical strikes against Pakistan, could produce consequences too horrendous to contemplate.

Are US objectives in Afghanistan so vital as to bring two nuclear powers to the brink of a war?

Iran was not much of a factor when British India and Soviet Union were fighting in Afghanistan. It is now. In Iraq, Iran favored the defeat of the Sunni insurgency once it had denied the United States a victory. In Afghanistan, Iran prefers to create a quagmire for the Americans, ensuring a long stalemate between them and the Taliban.

In light of the consequences that have flowed from the US presence in Afghanistan, who would advise an escalation? President Obama still has time to put on hold his plans to send more troops to Afghanistan. Instead, the best political minds around the world should be examining the least costly exit from a war that promises to become a quagmire, at best, and, at worst, a disaster, which no US objective in the region can justify.

Unless, dismantling the world’s only Islamicate country with the bomb is an objective worthy of such horrendous costs. (this is of course the sixty four thousand dollar question. I suspect that the dismantling and prevention of further "islamicate" nuclear capabilities/ambitions is among Farmer Brown's prime directives)

zbig on iraq last year....,

Washington Post | The overall goal of a comprehensive U.S. strategy to undo the errors of recent years should be cooling down the Middle East , instead of heating it up. The "unipolar moment" that the Bush administration's zealots touted after the collapse of the Soviet Union has been squandered to generate a policy based on the unilateral use of force, military threats and occupation masquerading as democratization - all of which has pointlessly heated up tensions, fueled anti-colonial resentments and bred religious fanaticism. The long-range stability of the Middle East has been placed in increasing jeopardy.

Terminating the war in Iraq is the necessary first step to calming the Middle East , but other measures will be needed. It is in the U.S. interest to engage Iran in serious negotiations - on both regional security and the nuclear challenge it poses. But such negotiations are unlikely as long as Washington 's price of participation is unreciprocated concessions from Tehran . Threats to use force on Iran are also counterproductive because they tend to fuse Iranian nationalism with religious fanaticism.

Real progress in the badly stalled Israeli-Palestinian peace process would also help soothe the region's religious and nationalist passions. But for such progress to take place, the United States must vigorously help the two sides start making the mutual concessions without which a historic compromise cannot be achieved. Peace between Israel and Palestine would be a giant step toward greater regional stability, and it would finally let both Israelis and Palestinians benefit from the Middle East 's growing wealth.

We started this war rashly, but we must end our involvement responsibly. And end it we must. The alternative is a fear-driven policy paralysis that perpetuates the war - to America 's historic detriment.

iraq was the first 'resource war' of the century

Guardian | The Iraq war was just the first of this century's "resource wars", in which powerful countries use force to secure valuable commodities for themselves, according to the UK government's former chief scientific adviser.

Sir David King predicted that with human population growing, natural resources dwindling and seas rising because of climate change, the squeeze on the planet would lead to more conflict.

"I'm going to suggest that future historians might look back on our particular recent past and see the Iraq war as the first of the conflicts of this kind – the first of the resource wars," he told an audience of 400 in London as he delivered the British Humanist Association's Darwin Day lecture.

Implicitly rejecting the American and British governments' argument that they went to war to remove Saddam Hussein and search for weapons of mass destruction, he said that the US was very concerned about energy security and supply because of its reliance on foreign oil from unstable states. "Casting its eye around the world – there was Iraq," he said.

This strategy could also be used to maintain supplies of other essentials such as minerals, water and fertile land, he added. "Unless we get to grips with this problem globally, we potentially are going to lead ourselves into a situation where large, powerful nations will secure the resources for their own people at the expense of others."

elite moral deviancy no longer shocks..,

Guardian | It is true that thoughtlessness and apathy rather than malicious intent on the part of majorities helps their representatives to perpetrate or cover up such atrocities as Gujarat, the blockade of Gaza, or the occupation of Kashmir - forms of violence less obvious or written about than 9/11, Saddam Hussein's regime, and the recent terrorist attacks on Mumbai. But this doesn't make thoughtlessness and apathy less destructive in actuality than the malevolence of despots and terrorists.

Hannah Arendt's phrase "banality of evil" refers precisely to how a generalised moral numbness among educated, even cultured, people makes them commit or passively condone acts of extreme violence. Arendt marvelled at "the phenomenon of evil deeds, committed on a gigantic scale, which could not be traced to any particularity of wickedness, pathology or ideological conviction in the doer, whose only personal distinction was a perhaps extraordinary shallowness".

Shallowness and ignorance have been our lot in the mass consumer societies we inhabit, where we were too distracted to act politically, apart from periodically deputing political elites to take life-and-death decisions on our behalf. We were shielded from many of the deleterious consequences, which worked themselves out on obscure people in remote lands. The free world's economic implosion is bringing home the intolerable cost of this collective deference to apparently efficient elites and anonymous, overcomplex institutions.

It is too easy to blame Bush, who told Americans to go spend and consume while he ratcheted up pain levels in Iraq and Afghanistan, or the grotesquely overrated technocrats running banks and businesses. As the New York Times columnist Frank Rich reminded Americans last week: "We spent a decade feasting on easy money, don't-pay-as-you-go consumerism and a metastasizing celebrity culture. We did so while a supposedly cost-free, off-the-books war, usually out of sight and out of mind, helped break the bank along with our nation's spirit and reputation."

The prosperity many democracies enjoyed lulled citizens into political torpor. The prospect of economic collapse has persuaded a majority of Americans to exercise more individual judgment than they showed while re-electing Bush in 2004. But collective failures of the kind Barack Obama spoke of in his stern inaugural speech will continue to occur among citizens of other democracies - and they will have no Obama to exhort them to personal responsibility.

In any case, economic disasters or foolish wars are hardly guaranteed to bring about large-scale individual self-examination or renew the appeal of truly participatory democracy. They are more likely to make authoritarianism attractive, as European democracies in the 1930s and Russia in recent times demonstrated. Many Indians and Israelis seem set to elect, with untroubled consciences, those who speak the language of torturers and terrorists. More disturbingly, these corrupted democracies may increasingly prove the norm rather than the exception.

global economy top threat to u.s.

NYTimes | The new director of national intelligence told Congress on Thursday that global economic turmoil and the instability it could ignite had outpaced terrorism as the most urgent threat facing the United States.

The assessment underscored concern inside America’s intelligence agencies not only about the fallout from the economic crisis around the globe, but also about long-term harm to America’s reputation. The crisis that began in American markets has already “increased questioning of U.S. stewardship of the global economy,” the intelligence chief, Dennis C. Blair, said in prepared testimony.

Mr. Blair’s comments were particularly striking because they were delivered as part of a threat assessment to Congress that has customarily focused on issues like terrorism and nuclear proliferation. Mr. Blair singled out the economic downturn as “the primary near-term security concern” for the country, and he warned that if it continued to spread and deepen, it would contribute to unrest and imperil some governments.

“The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests,” he said.

peak oil arrived yesterday....,

Financial Times | Demand for oil will fall this year at the fastest rate since 1982, the International Energy Agency has forecast.

The rich countries’ energy think-tank has again cut sharply its prediction for world oil demand this year, and now expects it to average 84.7m barrels per day, down 1m b/d from last year, because of the steep downturn in the world economy.

This year is expected to mark two successive years of falling demand for the first time since 1982-83.

Fuel demand has ”plummeted” in the US and is falling in many other countries, the IEA said. Even in China, one of the countries that powered the global growth in oil demand up to 2007, the rise in consumption is expected to slow sharply.

However, the IEA also warned that sharp production cuts from Opec, the oil producers’ cartel, would mean that by the end of the year there would need to be a ”substantial” draw-down in oil stocks, unless demand weakens even further, or supply from non-Opec countries turns out to be stronger than expected.

Opec cut its agreed production levels by 4.2m b/d in the second half of last year, and could well cut production again at its next meeting on March 15 in a bid to raise oil prices from this week’s levels below $40.

The IEA’s forecast for oil demand this year is 570,000 b/d lower than it predicted in January, reflecting the sharp deterioration in the assessment of the world economic outlook from the International Monetary Fund.

Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series

Click to go and view GDP, Unemployment, and Dollar charts...,

is the eu cracking up?

Telegraph | To recap, Mr Sarkozy last week pointedly referred to a Peugeot-Citroen plant in the Czech Republic to say that planned French government aid to automakers would be on the condition that all cars would be "Made in France". This is what he said: "If you build a Renault plant in India to sell Renaults to Indians, that's justified, but if you build a factory, without saying the company's name, in the Czech Republic to sell cars in France, that's not justified".

Like it or not, that is what the EU's single market is all about. Is Mr Sarkozy now against it? Question that and then what is left for the EU?

This all comes as the Elysée announces up to 6 billion euro worth of handouts (£5.25 billion) to Renault and PSA Peugeot-Citroen.

The five year loans will include conditions such as a halt to layoffs and a suspension of factory closures in France.

Prague is furious.

Mirek Topolanek, the usually unflappable Czech PM, has lashed out by warning Mr Sarkozy that the Lisbon Treaty, much beloved in Paris and Berlin, might be a casualty.

"If someone wanted to really jeopardise the ratification of the Lisbon Treaty, he could not have chosen a better way and a better time," he snarled on Monday.

A Czech statement: "As the Prime Minister of the Czech Republic I do not understand the argument that it is unjustifiable to manufacture cars for the French market in the Czech Republic. The attempts to use the financial crisis to introduce such forms of protectionism and protective measures may slow down and threaten the revival of the European economy".

Fist tap to Intellectual Insurgent for this data.

a toxic force rises in israel

Guardian | The hawkish camp thumped the centre left on Tuesday, and that's even when you generously count Kadima and Labour – co-authors of operation Cast Lead – as the centre left. But this is about more than a victory for the right. Something else happened and its face belongs to Avigdor Lieberman, the kingmaker whose 15 seats are essential if either Bibi or Livni are to govern without each other.

He does not fit straightforwardly on the Israeli right wing. For one thing, he is avowedly secular. Indeed, much of his appeal was to anti-religious voters who liked his demand for civil unions, thereby breaking the orthodox rabbinate's current monopoly on state-sanctioned marriage. Talk of liberalising the sale of pork products proved too much for at least one religious party, whose spiritual leader warned that a vote for Lieberman was a vote for Satan. The result is that Bibi may find assembling a coalition that includes both the religious parties and Lieberman impossible.

But it's not this idea which has made Lieberman such a toxic force. For that you have to look to the slogan that drove his campaign: "No loyalty, no citizenship." He would insist that every Israeli swear an oath of loyalty to Israel as a Jewish state: anyone who loses will lose his citizenship.

Israel Beytenu denies this is racist, insisting that every Israeli will have to swear the oath, Jewish or Arab. It is true that plenty of ultra-orthodox Jews who don't accept the authority of a godless secular state may also refuse. But the target is clearly Israel's 1.45 million Arabs. If they will not swear their allegiance, explains Lieberman deputy Uzi Landau, "They will have residency rights but no right to vote or be in the Knesset."

It is a truly shocking idea. I asked several Israel Beytenu luminaries if they could name a single democracy anywhere that had removed citizenship from those who already had it. I asked what they would make of demanding that, say, British Jews, swear an oath of loyalty to Britain as a Christian country on pain of losing their right to vote. I got no good answers.

There was a time when such a poisonous idea would have been confined to the lunatic extremes of the racist Kach party, led by Meir Kahane (of whose youth wing Lieberman was once a member). Twenty five years ago Kahane was banned from the Knesset. Now his heir is courted by the two main parties, desperate for his support. Kadima is untroubled by the loyalty oath scheme; Bibi says he agrees with it.

Who is to blame for this? Israel Beytenu puts the blame on the Israeli Arab leadership for flaunting their "disloyalty", especially during January's Gaza offensive when several prominent Israeli Arabs proclaimed their solidarity with Hamas. They say no democratic society could tolerate such a fifth column, cheering on a mortal enemy.

Mexico Drug Violence Spurs Worry In U.S.

NPR | U.S. intelligence officials say a collapse in Mexico is one of their nightmare scenarios, and several new studies have been raising anxiety levels further in the United States.

Mexico's ambassador to the U.S., Arturo Sarukhan, brushed off some of the more dire warnings, which he said are promoted by people seeking "juicy deals" with contractors in Mexico.

Shannon, with the U.S. State Department, says he does not believe that Mexico will become a failed state, as some have warned. However, he says "the struggle is real" and the ability of the Mexican state to continue political and economic reforms is "at risk."

"Organized crime and trafficking cartels are trying to hobble the state and weaken it so that it can't interfere with their activities," he says.

A former U.S. ambassador to Mexico, Jeffrey Davidow, says the U.S. shouldn't fool itself into thinking it can solve all of Mexico's problems.

"We cannot deny the responsibility of the United States in terms of a market for drugs and a sales point for guns," Davidow says. "But the fact of the matter is not much of what the United States is going to do, in the short term, is going to have an impact on this horrendous growth of insecurity."