Mumbai - Only The Beginning! It's the Two C's!

A ring of truth? Yes, an overstatement to make a valid point.

Also, an article pointing out the true villain is Congress and the inane laws which have helped cripple a once proud and leading industry as politicians used it to build and pay off constituents.

If the auto executives had any guts they would take their hats off instead of going hat in hand and tell the American people what they need to hear - It is Congress that needs to restructure itself along with our government .(See 1 and 1a below.)

Gingrigh poses a question? It is a clever idea to make a point but avoids the real issue - Congress needs to quit spending and gut itself by cutting government's operating costs and quit with the giveaways. (See 2 below.)

Mumbai lessons from my friend Elliot Chodoff. Elliot is a small weapons and unit expert and his analysis is worth reading. (See 3 below.)

Russia is rushing to help complete Iran's nuclear facitlity at Bushehr. (See 4 below.)

Congressional panel to release report suggesting a "dirty bomb" coming our way by 2013.

As I have been writing for months, a new and far more serious war is in the offing and maybe it will catch the attention of the Europeans over time as well as the "appeasers and head in the sand" crowd in our own land.

From the radical Islamic standpoint conditions for the perfect storm are forming - a feckless Europe and an America still asleep with a naive and untried president- elect, when it comes to the dangers we face, about to enter office.

With oil around $50/bbl now is the time to ratchet up greater economic sanctions against Iran in the hope their economy will implode thereby, causing a backlash against its leadership. Leadership which is leading Iran into a nuclear holocaust corner. Iran is virtually dependent upon oil exports and, according to reliable estimates, needs $90/bbl oil to remain economically viable. Alas, I predict, it will not happen because Germany is a beneficiary of Iranian commerce, the rest of Europe is dependent upon Russian energy and Russia is opposed to strong sanctions.

More importantly, we are too busy self-flagellating and for having caused radical Islamists to be the way they are because of our own past and current sins. The two C's - Colonialism and Capitalism. (See 5, 5a and 5b below.)

Meanwhile Iran makes a display of flexing its naval (navel?) muscle. (See 6 below.)

Does Israel's Labor Party and our own Democrat Congress have something in common? If you believe Horvitz they do - can't govern themselves so how can they govern their respective nations. POGO was right again - the enemy is us! (See 7 below.)

Various reactions to Mumbai and Indian threats regarding Pakistan. (See 8 and 9 below.)

I once worked with Henry Blodget. At the time he was arrogant, embued with his own self importance and this ultimately led to his own demise. Sometimes, however, those who were engaged in wrongful behaviour have special insights and are worth listening to. (See 10 below.)

Wehner on the limits of pragmatism! (See 11 below.)

I am quite aware of the fact many of my memo readers constantly remind me I publish too many articles and instead should make more of my own explanatory commentary. Thus, saving reading time and possibly increasing readership. My goal is to inform and to bring to the reader's attention articles that should be of interest in three areas: The Middle East, Politics and Economic matters. I prefer to let the articles speak for themselves and keep my own comments to a minimum. When I do comment I usually cite articles in support or opposition to try and offer some objective balance.

As for myself, I remain an unabashed hawk but try to stay within the bounds of rational behaviour. I do believe we are at war and that matters will only get worse. Historically speaking, Democracies are poor at prevention. Freedom and stretched economics tend to lull them into complacency. It's a getting and spending thing that causes us to diminish our power. Freedom and the blessings of production offer more life choices and that is where the focus should be but in order to have freedom and choice nations and free peoples must alway maintain vigilance and be prepared to defend against the "evil doers."

So read what you wish, know I hear you but plan to continue doing my thing my way.

Dick

1) A Modern Parable.

A Japanese company ( Toyota ) and an American company (Ford Motors)
decided to have a canoe race on the Missouri River Both teams
practiced long and hard to reach their peak performance before the
race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate
the reason for the crushing defeat. A management team made up of
senior management was formed to investigate and recommend appropriate
action.

Their conclusion was the Japanese had 8 people rowing and 1 person
steering, while the American team had 7 people steering and 2 people
rowing.

Feeling a deeper study was in order; American management hired a
consulting company and paid them a large amount of money for a second
opinion.

They advised, of course, that too many people were steering the boat,
while not enough people were rowing.

Not sure of how to utilize that information, but wanting to prevent
another loss to the Japanese, the rowing team's management structure
was totally reorganized to 4 steering supervisors, 2 area steering
superintendents and 1 assistant superintendent steering manager.

They also implemented a new performance system that would give the 2
people rowing the boat greater incentive to work harder. It was called
the 'Rowing Team Quality First Program,' with meetings, dinners and
free pens for the rowers. There was discussion of getting new paddles,
canoes and other equipment, extra vacation days for practices and
bonuses. The pension program was trimmed to 'equal the competition'
and some of the resultant savings were channeled into morale boosting
programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted
development of a new canoe, sold all the paddles, and canceled all
capital investments for new equipment. The money saved was distributed
to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to
even finish the race (having no paddles,) so he was laid off for
unacceptable performance, all canoe equipment was sold and the next
year's racing team was out-sourced to India.

Ford has spent the last thirty years moving all its factories out of the US , claiming they can't make money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen
plants inside the US. The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in
losses.

Ford folks are still scratching their heads, and collecting bonuses...

1a) Products that Nobody Wants
By Randy Fardal

Lawmakers plan to stage more inquisitions again this week, scolding Detroit auto executives for everything from product design to travel expenses. Not that the Democrat-controlled Congress intends to let them go bankrupt. That would hurt the unions more than any other campaign contributor, and labor unions just raised $80M to get Obama elected. The UAW PAC alone spent $11.5M this year on Democrat candidates, including a $3M ad campaign for Obama, so congress inevitably will acknowledge those "bribes" with a taxpayer-funded bailout.


But that inevitability won’t let the auto company CEOs avoid more symbolic water-boarding. Torturing auto execs benefits lawmakers in three ways: First, public opinion is against bailouts, so the hearings let lawmakers pretend they are spending this taxpayer money reluctantly, rather than gleefully; Second, since union leaders already have ginned up militant “solidarity” among workers by vilifying management, the hearings let lawmakers obligingly reinforce the union’s portrayal of management as greedy and evil; And finally, lawmakers always want press coverage.



As lawmakers compete for sound bites on the evening newscasts, we almost certainly will hear that tired phrase, "Detroit is building products that nobody wants." That may have been true back when Detroit had no US competition, but foreign challengers over the past few decades forced dramatic changes. Today, Detroit builds products that everybody wants: multiple brands, models, and dealer networks. In fact, Detroit probably will have to reduce the variety of choices it gives consumers in order to gain some competitive efficiency.


Most lawmakers aren't engineering, marketing, manufacturing, or finance experts. And they certainly can't predict what car buyers will want three or four years from now, when these Washington-designed models debut in dealer showrooms. Most lawmakers are lawyers. Lawyers don't produce consumer or durable goods, so they hardly are qualified to act as management consultants to the automotive industry.


Jaded by the congressional grandstanding, Americans actually think it's the lawmakers that produce products that nobody wants. According to the most recent Rasmussen poll, Congress's approval rating has been hovering around 9-12 percent for the past six months. On a ten point scale, congress would get a "1".


Meanwhile, those brilliant lawmakers demand that Detroit curtail production of SUVs, even though the SUV is one of the few products saving America's economy right now, with plants running overtime to meet demand. Recent SUV buyers also are quite happy with those products. For instance, the Ford Expedition gets a consumer rating of 9.1on a ten-point scale. That's nine times as good as congress's rating.


Busybody lawmakers also pass fuel economy regulations that make full-size family sedans an endangered species, yet the powerful Chrysler 300 sedan also gets a consumer rating of 9.1. What was Congress's rating again?


Sports cars are likely to be the vehicle most despised by our congressional product-marketing wizards. Leftists might paraphrase the Communist Party official in the movie Doctor Zhivago to declare that transporting only two people in an automobile is "unjust". No doubt many lawmakers share that philosophy, but recent buyers of the Chevrolet Corvette love their two-seat sports cars, giving them an average rating of 9.3. Granted, Congress has been getting lots of 9.3 ratings too, but that's on a 100-point scale, not a ten-point scale.


Despite the rise in fuel costs, if a typical family drives 20,000 miles annually, its vehicle expenses are less than $12,000, according to the IRS. That includes purchase or leasing costs, as well as fuel, insurance, maintenance, and all other expenses.


What does the typical American family pay for the "products" that Congress produces? Before the bailout frenzy, Congress was spending at an annual rate of about three trillion dollars. With about 110 million households covering those expenses, each family pays Congress directly or indirectly an average of more than $27,000 per year in taxes and loans. Remember, corporations don't really pay taxes; they just pass the bill on to consumers in the price of their products.


And now that Congress has virtually doubled this year's federal budget with "emergency" spending, they will take an average of about $50,000 per family out of the private economy and redistribute it to their favorite "charities". That might save the jobs of a few wealthy New Yorkers and UAW members, but a lot of productive small businesses could have been started with that money in places like Louisiana or Utah. Or if credit really is our biggest problem, think how much money we withdraw from our local banks to pay taxes. Much of that money could be used instead to fund car loans and mortgages in our local communities.


What products does Congress produce with all that money? Just a century ago, the primary job of Congress was to fund our national defense. But now they belittle our military leaders, including those leaders that ultimately are phenomenally successful. Conversely, just a century ago, government wealth transfer was deemed immoral and unconstitutional. Today, governments do little more than transfer wealth, while skimming a bit off the top to fund their own bureaucracies each time they touch it.


Congress actually gives products to many of its customers, free of charge. More than half of Americans now "receive significant income" from government programs. And more than 40 percent of households now have a negative effective federal income tax rate, mainly though refundable income tax credits. Given that, how can Congress possibly have an approval rating that's less than 40 percent? I certainly would rate Ford as "excellent" if they gave me free cars, gasoline, insurance, and maintenance.


If organizations are to be rebuked for making products that nobody wants, the United States Congress deserves the harshest punishment of all. As the big three auto CEOs deliver their recovery plans to lawmakers, Congress itself is being criticized for having no recovery plan of its own, despite writing a flurry of checks with “insufficient funds”.

Perhaps it’s time for Congress to slash payrolls, sell off unproductive units, and design more efficient products. After all, they’re asking taxpayers for trillions to bail them out. Where’s their austerity plan?



2)Thinking Anew and Acting Anew: A People’s Bailout Or A Politicians’ Bailout?
By Newt Gingrich

America is about to enter the post-Bush era. Two recent events -- the terrorist attack in Mumbai and the collapse of CitiBank -- are vivid warnings about the complex, uncertain and potentially very dangerous time we are about to enter.

In the New York Times last week, columnist Tom Friedman made the following stunning point:

I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.

“Why? Because in searing detail it exposed -- using Citigroup as Exhibit A -- how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.

The Pelosi-Paulson Model of Crony Capitalism, Predatory Politicians and Micromanaging Bureaucrats

It is vital that every American understand the implications of Friedman’s last sentence. “The financial meltdown involved a broad breakdown in personal responsibility, government regulation and financial ethics.”

Righting such a systemic wrong requires far more than the Pelosi-Paulson model of crony capitalism, predatory politicians and micromanaging bureaucrats. In fact, in the face of the scale of collapse Friedman is describing, throwing trillions of the American peoples’ dollars into a cynical, corrupt, unethical system is exactly the wrong thing to be doing.

And the scale of the problem we face in the financial world is matched by the scale of the challenges we face in the national security world.

Both these challenges require new thinking.

“As Our Case is New We Must Act Anew and Think Anew”

I often quote President Abraham Lincoln at times like this because he captured the challenge so perfectly in his annual address to Congress on December 1, 1862:

“The dogmas of the quiet past are inadequate to the stormy present and the occasional is piled high with difficulties, and we must rise to the occasion. As our case is new we must act anew and think anew. We must disenthrall ourselves and then we shall save our country.”

Lincoln’s call to think anew and act anew is especially important today because of the establishment nature of the team President-elect Obama is gathering. I write this with admiration and not with criticism.

The Danger of Looking to the Past in Times of Dramatic Change

President-elect Obama has done a good job of assembling sophisticated and highly respected teams for both national security and economic-financial policy.

Yet these two events -- Mumbai and CitiBank -- should remind us that knowledge about past systems and confident expectations based on past rules can actually be a detriment in dealing with periods of dramatic change. Peter Drucker wrote brilliantly about this problem in The Age of Discontinuities. Drucker argued that one can be an expert on the period before the discontinuity and one can learn to be an expert on the new period emerging after the discontinuity but during the discontinuity itself there is a real danger of past knowledge becoming very misleading.

Drucker’s argument is illustrated expertly in David Halberstam’s study of Vietnam War policy making in Washington, The Best and the Brightest. The new team being assembled by President-elect Obama would do well to heed its lessons.

A New Team of “Whiz Kids” In Washington DC?

Halberstam argues that it was precisely the confidence and the certainty of the team of “whiz kids” President Kennedy assembled which led them to make assumptions that proved to be false and to reject fact-based information which conflicted with their previous theories of how the world should work. They rushed into policies in Vietnam confident that what Halberstam called their “brilliant policies that defied common sense” would enable them to impose their will on reality. But with agony they learned that a harsh and unyielding reality was imposing its price in blood and treasure on America.

The new Obama teams for national security, finance, and the economy should ponder deeply the lessons of Drucker and Halberstam and question whether the theories and principles they are bringing into office are in fact the right solutions for today.

Mumbai and Citibank should be sufficient proof that the election of a new president has not changed any of the fundamental challenges facing America and threatening the civilized world.

How Much Damage Could a Mumbai-Style Attack Do To An American City?

The terrorist assault on Mumbai is a profound reminder that the world remains dangerous and there are many terrorists dedicated to destroying liberty and the rule of law as we know it.

For America, the scale and coordination of the Mumbai attack are a grim warning that our Homeland Security preparations are almost certainly inadequate.

If the Department of Homeland Security were to run a series of exercises in the first six months of 2009 replicating the Mumbai attack in cities like Boston, Charleston, Baltimore, Savannah, New Orleans, Houston, Long Beach, San Francisco and Seattle, it would be shocked to discover how much damage a ship-based assault team using simple weapons could inflict on an American city.

Pragmatic Decision Making Versus Institutional Reform

And if the Department of Homeland Security had the courage to go a step further and run tests involving simulated nuclear and biological weapons, the results would be so horrifying Americans would demand a crash program of preparedness beyond anything the current authorities can imagine.

The new Obama national security team is competent and professional and he is to be commended for his courage in recruiting Senator Clinton, Secretary Gates, and General Jim Jones. These three nominees are intelligent, tough minded, and hard working.

The greatest danger they will face is in their own belief that hard work and methodical pragmatic decision making can substitute for strategic planning and institutional reform.

America’s Immediate National Security Threats:

The fact is Mumbai is a grim reminder that more than seven years after the attack of 9/11 the United States and its allies have no solutions to the most difficult problems of terrorism on the planet.

• The Saudis are still shipping money overseas to recruit for the most militant wing of Islam.
• The Iranians are still trying to develop nuclear weapons so they can dominate the Persian Gulf and eliminate Israel from the face of the Earth.
• Pakistan has more nuclear weapons and is more unstable today than it was in 2001.
• The Taliban and its Pashtun allies in Northwestern Pakistan are as entrenched as they were in 2002 and are regaining strength in Afghanistan.
• The erosion of Western rule of law under the onslaught of internal Islamic demands is continuing to spread through Great Britain, Holland, and other countries.

America’s Long-Term National Security Needs

The long-term challenge of China as an economic, scientific and technological competitor requires a national security based assessment of the requirements for change in America. If we are to remain the leading power in the world 25 years from now we have to reform litigation, taxation, regulation, education, health, energy, and infrastructure. The scale of change needed is greater than the New Deal but in a fundamentally different direction.

As Tom Friedman has written in other columns and in several best selling books, the United States needs an extraordinary level of achievement to remain the most productive and most creative country in the world. And our national security leadership depends on precisely those characteristics as well.

Out: Republican and Democrat. In: Honesty, Productivity, Creativity, Effectiveness

The key words describing the kind of reform that will solve our economic and national security challenges in the next decade will not be liberal or conservative, Republican or Democrat.

They will be:

• Honesty
• Productivity
• Creativity
• Effectiveness

Next week I will focus on these four words and what they will mean for public policy in 2009.

Why Would You Give One More Dime of Your Taxpayer Money to a Company That Paid $400 Million to Name the New York Mets’ New Baseball Stadium “Citi Field”?

But for now, it’s worth stating what should be obvious: The Pelosi-Paulson centralized government, politician defined, bureaucratically implemented bailout system fails to meet the test of any of these four words of reform. It will not lead to more honesty, productivity, creativity or effectiveness.

Remember the reason for Tom Friedman’s disgust over the article about Citigroup: “Because in searing detail it exposed -- using Citigroup as Exhibit A -- how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye.”

Why would you vote for another $350 billion to go to people and institutions which fit that condemnation? Why would you give one more dime of your taxpayer money to a company that paid $400 million to name the New York Mets’ new baseball stadium “Citi Field”?

A Politicans’ Stimulus Package or a People’s Stimulus Package?

It’s the very bankruptcy of the current establishment which makes Congressman Louie Gohmert’s (R-TX) tax holiday proposal so intriguing.

Congressman Gohmert has calculated that the amount Speaker Pelosi and Secretary Paulson will be advocating for the second installment of the bailout -- $350 billion -- is more than the amount needed to allow every American to have a two month tax holiday from both the FICA (Social Security and Medicare) and income tax.

Let me repeat that: What Pelosi and Paulson are proposing to pour into crony capitalism is more than what it would cost to give every American taxpayer a total federal tax holiday for two months.

Which do you think would do more to get America growing again? $350 billion to failing managements, “overrated dopes” and “greedy cynics” or allowing every American to simply keep all their money for January and February?

The Money You Will Keep? Your Monthly Income Multiplied by .66

For the working poor a FICA tax holiday (the $350 billion Paulson was going to send to Wall Street would simply be used to cover the revenue losses in the Treasury so Social Security and Medicare would not lose a penny) will be a dramatic increase in take home pay. This one act will save more homes from bankruptcy than any centralized government bureaucratic red tape ridden system.

If you want to figure out how much Rep. Gohmert’s tax holiday would save you, Jed Babbin of Human Events has this advice:

Most Americans pay about 25 percent of their income in federal income tax and another 7.25 percent in FICA (Social Security and Medicare taxes). Computing how much money Gohmert’s tax holiday would leave in your family’s checkbook is very simple.

Take your monthly income (the gross amount shown on your pay stubs before tax and any other withholding) and multiply it by 0.66. That amount is roughly what Gohmert’s two-month tax holiday will leave in your pocket.

If a Two Month Tax Holiday Sounds Good, Why Not Six Months?

But there’s more.

Speaker Pelosi’s desire for an additional $700 billion Washington centered, government stimulus program would actually create the opportunity to offer an additional four months of FICA and income tax holiday for the American people.

If the American people knew they were going to have no personal federal taxes until July, 2009 how much debt could they pay down? How many mortgages would be saved? How many college tuitions could they pay? How much could they invest to rebuild their retirement accounts?

This is an example of what President Lincoln meant by “thinking anew.”

3) The Lessons of Mumbai
By Elliot Chodoff

The attack on Mumbai last week added yet another page to the large volume listing the deadly activities of terrorist organizations. As attacks continue, in Iraq, Afghanistan, and elsewhere, authorities are sifting through the destruction and tragedy in India, trying to find clues to “bring the perpetrators to justice” and to gather intelligence to help thwart future attacks. The first lesson of the attacks has already been misunderstood: this is not a criminal justice issue; it is war. This is not a new issue, but the lesson has yet to be learned (see “Justice or a Just War,” Archives, 13 September 2001. [http://www.me-ontarget.com/2001-archives-31/september-archives-100/45-justice-or-a-just-war]).

Some additional lessons are already clear:

The attackers used a hybrid method of both guerrilla and terrorist tactics, attacking civilian targets with military techniques, but also effectively engaging Indian military forces. This method, developed initially by Hizbullah in South Lebanon in the early 1990’s, was a synthesis of classical terrorism with lessons learned from the Mujahedeen in Afghanistan. Today, it has spread to Iraq, Afghanistan, Pakistan, and now India.

The attackers utilized basic infantry small-unit tactics of fire and maneuver, emphasizing movement to keep the police off balance. This method gave the attackers the advantages of surprise and initiative, essential for any operation, especially against a superior adversary.

The attack demonstrated that the terrorists are capable of good planning and organization, excellent staff work, but only mediocre execution. The plan to attack multiple targets with multiple teams, landing from the sea, was impressive, to say the least. The timetables, target selection, and sequencing provide further evidence that terrorist planners have imaginative skills that should not be underestimated, as they have demonstrated from the skyjackings of the 1960’s and 1970’s, through the Munich Olympics massacre in 1972, and, of course, 9/11.

The preparatory staff work for the attack, from intelligence and reconnaissance through logistics, shows that this is truly the strongpoint of international terrorism. With its network of operatives connected by high-tech communications technology, terrorist organizations can safely and conveniently gather the informational and material threads necessary to launch a complex operation in a hostile (to them) environment. They also clearly have the ability to learn from experience, theirs and others, and constantly upgrade their staff capabilities.

In contrast to their planning and staff successes, the actual execution of the operation was less impressive. True, hundreds were killed and wounded, and this adds up to an enormous human tragedy, but, if reports are to be believed, the plan was to kill 5000 victims. If that is truly the case, the terrorists fell far short of their objectives.

The attackers’ poor overall performance reflects the chronic lack of hands-on operational experience suffered by terrorist organizations: the sole terrorist survivor of Mumbay is unlikely to ever have the opportunity to share the tactical lessons he learned with other terrorists. In contrast to the planners and staff workers, the operatives of terrorist organizations often end their careers quickly, either in prison or “paradise.” Furthermore, extensive operational exercises, crucial to the success of any complex mission, would expose the terrorists to counterintelligence discovery, likely foiling their attack before it could be executed.

The terrorists made no demands, and issued no clear declarations of objectives or responsibility. Even the hostage-taking seems to have been more for tactical reasons, to complicate the security forces’ attack plans, rather than for negotiating purposes: apparently many, if not most, of the hostages were tortured and murdered long before the rescue attempts commenced.

The Mumbai attacks provide us with a glimpse of the terrorist vision of the future. For those who believed that terrorism was a means of improving a negotiating position over limited goals, Mumbai should help them realize that this conflict is neither limited nor over peripheral issues. It is looking more and more like total war with each attack.

4) Moscow races to finish Iran's Bushehr reactor by mid-2009


Iranian and Moscow sources report that Atomstroiexport, the Russian firm under contract to build and activate Iran's nuclear reactor at Bushehr, is offering nuclear engineers and technicians top salaries to leave for Iran at short notice. The Kremlin has promised Tehran to have the reactor up and running by mid-2009. Some 1,600 experts are already at work on the site; the project is short of another 500 to meet this deadline.

An Atomstroiexport spokesman explained this week the main technology for the station has already been installed "so the construction work is under way." Iranian sources report this is the first time Russian officials have admitted that the Bushehr reactor is close to completion.

Sergei Kiriyenko, director of the Russian company, visited Tehran on Nov. 27 to tie up the final stage of the reactor's construction. Kiriyenko, former Russian prime minister and personal emissary of the incumbent prime minister Vladimir Putin, again assured the Iranians that the reactor would be ready to go within a few months.

Sources add that the Bushehr plant will make it possible for Iran to produce plutonium for nuclear weapons. Its completion will provide Iran with an alternative weapons fuel option in addition to the enriched uranium already accumulated for its first nuclear bomb. US and Israel intelligence had believed the plutonium track lagged behind the uranium process. However, now that Moscow has embarked on a crash program to finish the Bushehr project, this no longer holds true.

5) Congress panel: 'Dirty bomb' attack on U.S. likely by 2013
By Natasha Mozgovaya


A United States Congressional report, set to be made public on Wednesday, states the U.S. will likely face a terrorist attack using nuclear or biological weapons - a so-called "dirty bomb" - by the year 2013.

A draft of the report notes that although terrorists currently lack the knowledge to make "dirty" weapons, which are created with the use of normal explosives and radioactive material and are designed to spread fallout over a large area, they can acquire it in the immediate future.


"The biological threat is greater than the nuclear," the commission said in its draft, adding that the U.S. government "needs to move more aggressively to limit" the spread of biological weapons.

The panel that issued the report also concluded terrorists will most likely carry out an attack with nuclear, biological or other weapon of mass destruction somewhere in the world in the next five years.

The bi-partisan report was written by the Commission on the Prevention of WMD Proliferation and Terrorism - whose members have also chaired the commission on the September 11 attacks.

The report lists possible threats to the U.S. security, and addresses the potential smuggling of nuclear arms in developing countries.

While panel completed the report before the terror attacks in Mumbai transpired, the recent murder spree has raised anxiety levels worldwide, and has shifted attention on to Pakistan as a breeding ground for terrorists and a growing nuclear power.

As a result, the report recommends that the U.S. administration increase cooperation with the Pakistani government, and help forge a viable alternative to the Islamist network that recruits militants.

At the same time, the panel also urges U.S. president-elect Barack Obama to adopt a harsh line in his dealings with Iran and North Korea.

In light of increased terrorist activities, the report calls for the U.S. administration to review international treaties regarding the distribution of unconventional weapons, and to ensure the United Nations nuclear watchdog enforce stricter regulation methods.

5a) Yes, the terrorists are winning
By Steven Emerson

This past Saturday, the New York Times ran an op-ed piece entitled "What They Hate about Mumbai," focusing specifically on the free market sins of that great city. With contrived evenhandedness, the op-ed managed to blame both Hindus and Muslim extremists-without blaming either party in particular for the murderous attacks.

Without realizing it, the Grey Lady had hit upon a great travel series. In the best spirit of jihad for dummies, why not a year's worth of op-eds focusing on "Why They Hate____" filled in, mad-libs style, with the U.S., Britain, Italy, Spain, Germany, the Netherlands, Morocco, Algeria, Tunisia, Israel, Jordan, Iraq, Egypt, Kenya, and the other 74 countries where radical Islam has reared its violent head? With only the moral blindness that the New York Times could capture, each op-ed would portray the attacks in a contrived even-handed way, without blaming, or even naming, the perpetrators of the attacks-Muslim jihadists.

Watching and reading reports of the Mumbai attacks was an Alice in Wonderland experience. Even after an Islamic terrorist group took credit, TV anchors and reporters assiduously avoided the term Islamic terrorist. They must have consulted with the Thesaurus for the Politically Correct to determine that the word "gunmen" would not offend any jihadist.

The real truth is that there is war against the West and the Jews by Islamic jihadists.

On Wednesday, even though everyone knew by then that the perpetrators were jihadists, CNN constantly referred to the terrorists as "extremists"-with no modifier. Hell, they could have been the Basque ETA or the ultra right wing U.S. militia. Then a CNN anchor asked his guest with totally innocence, "Now why would an extremist group target a Jewish house of worship?" Because, my dear politically correct anchor, it was an Islamist terrorist group.

The most that government officials, in cahoots with mainstream media, could utter were names like Al Qaeda (AQ) or Laskar-e-Taiba (LeT) as potential suspects. Yet even here, the discussions were mindless. One talking head said it could not be AQ since AQ behavior is to have massive simultaneous explosions (as if Al Qaeda follows a pre-programmed script). Another expert said LeT did not have the resources to carry it out, forgetting ever so slightly that all Islamic terrorist groups share resources, recruit from other terrorist groups, train each other, provide each other with equipment and, most importantly of all, want to destroy their "enemies."

In the United States, after 9/11, a group of American men (mostly converts) pleaded guilty or were found to be guilty of training with LeT and of trying to "wage war" against the United States. Evidence produced in the trial showed that LeT's website-before being taken down-focused disproportionately on two enemies: Americans and Jews. In 2004, Ismail Royer, an official with the Council on Islamic Relations (CAIR) who had trained with the Taliban, pled guilty to weapons and explosives charges. He was sentenced to 20 years in prison. In later grand jury testimony, Royer admitted that the cell's primary goal was to fight with the Taliban against United States forces in Afghanistan.

Our politically craven governments, followed in part by the media, have now started to ban the use of the term "Islamic terrorists" or "Islamic militants," insisting that they simply be called "extremists" or militants. The government's rationale was a page picked right out of the playbook of western radical Islamic strategy: Portray the use of the term "Islamic terrorist" as "racist" and as allegedly stigmatizing all Muslims.

Last year, the Departments of State and Homeland Security issued an internal memorandum that henceforth no one could use the term "Islamic terrorists" and could only use the generic term "militant" or "extremist." Even President Bush, who once invoked the term "Islamofacism," now refuses to use the term Islamic terrorist. In Canada, the author Mark Steyn was the subject of three human rights complaints and subsequent trials for calling radical Muslims terrorists and other such "slurs." He won all three tribunals.

It is time to stop caving in to the PC crowd. If we refuse to use the term Islamic terrorist, we conveniently take away any onus of responsibility for Islamic groups to halt the murderous ideology they propagate. In fact, in nearly EVERY claim of responsibility, which I studied, for hundreds of violent Islamic attacks which took place since 9/11, the common justification by the Muslim terrorist perpetrator was that there was a "war against Muslims" by the West and the Jews that had to be avenged. The real truth is that there is war against the West and the Jews by Islamic jihadists. And no amount of territorial withdrawal or peace negotiations will assuage them.

But thankfully, there remains a glimmer of hope, and not from the condescending columnists of the New York Times or the State Department know-it-alls, but from courageous Muslim moderates in this country like Zuhdi Jasser or brutally honest Muslim columnists in the Middle East. While the West refuses to utter the term Islamic extremists and as a corollary holds no one responsible, at least one Muslim columnist has the guts to tell the truth of where the responsibility lies.

Aijaz Zaka Syed, a Muslim columnist who wrote a column for Sunday's Khaleej Times Online:\

"It's all very well for us to say Islam has nothing to do with extremism and terrorism. We can go on deluding ourselves these psychopaths do not represent us..."

"The great religion that preaches and celebrates universal brotherhood, equality of men and peace and justice for all has been hijacked by a demented, miniscule minority. And, as my friend says, only Muslims can solve this problem. Only Muslims can confront these anarchists in their midst..."

"Only they can get their faith freed from the clutches of extremism. This is no time to hide. It's time to stand up and speak out. For the terrorists will continue to speak on our behalf, until we do not speak up. This is no time for silence. Enough is enough!"

Indeed, enough is enough. It is time to start listening to folks like Mr Syed or the courageous Zuhdi Jasser, rather than cave in to the PC crowd. Reporters seem incapable of reporting Islamic radicalism at home unless there is a conviction. And even then, as The New York Times has so dishonestly but consistently demonstrated, there are only good sheiks and good Islamic groups, not bad ones that preach jihad.

Even after the conviction of the defendants of all 108 counts in the Holy Land Foundation (Hamas) trial this past week, The New York Times poignantly focused its reporting not on the convictions for abetting terrorism and contributing to countless deaths of civilians, but on the tear jerking sobs of the wives and daughters of the convicted defendants who (surprise) claim their fathers were innocent. Now can you imagine the New York Times focusing its coverage sympathetically on the families of the convicted members of the KKK or neo-Nazis? Now further imagine reporters from the top newspapers getting their exclusive information for stories from un-indicted co-conspirators in the Hamas case.

It all comes together. After more than 7 years since 9/11, we can now issue a verdict: Islamic terrorists have won our hearts and minds. Let's thank those who made it happen: the U.S. government, European governments and the mainstream media. It's time to stop placating or being intimidated by Islamic front groups who masquerade as civil rights groups. In 2007, the perversity of was demonstrated when the FBI released its annual 2007 hate crime reports. Of the total 1,628 victims of anti-religious hate crimes, 69.2% were Jewish and 8.7% were Muslim. Yet by my still unfinished account, there were at least 40 times more stories last year about Islamophobia than about anti-Semitism.

The Mumbai massacre was a heavily planned plot carried out by Islamic terrorists. Period. Memo to Obama: Until the onus of responsibility is put on Islamic "civil rights" groups that want to ban free speech and claim that anyone who uses the term Islamic terrorist is a racist, there is no hope of winning the battle.

5b) The Mumbai atrocity is a wake-up call for a frighteningly unprepared world
By Melanie Phillips


Western commentators still don't grasp what the free world is facing. This was not merely a distant horror

Around the world, people have reacted with horror to the vile atrocities in Mumbai.

For three days, our TV screens transmitted images of carnage and chaos as the toll of murder victims climbed to upwards of 190 people, with many hundreds more injured.

Despite the fact that Western citizens were caught up in the attacks, there is nevertheless a sense that this was nothing to do with us — a horrible event happening in a faraway place.

Among commentators, moreover, there has been no small amount of confusion.

Were these terrorists motivated by the grievance between Muslims and Hindus over Kashmir, or was this a broader attack by Al Qaeda?

If British and American tourists were singled out over Iraq — which many assume is the motive for such attacks — why were Indians targeted in the Victoria railway station?

And why was an obscure outreach centre geared to Jews marked for slaughter?

Such perceptions and questions suggest that, even now, Western commentators still don't grasp what the free world is facing. This was not merely a distant horror.

We should pay the closest possible attention to what happened in Mumbai because something on this scale could well happen here.

But because we don't understand what we are actually up against, we are not doing nearly enough to prevent this — or something even worse — occurring; and if it were to happen here, we would be unable to cope.

The Mumbai atrocities show very clearly what too many obdurately deny — that a war is being waged against civilization.

It is both global and local. It is not 'our' fault; it has nothing to do with Muslim poverty, oppression or discrimination.

The Islamic fundamentalist fanatics use specific grievances — Kashmir, Iraq, Palestine, Chechnya — merely as recruiting sergeants for their worldwide holy war against all 'unbelievers'.

The Mumbai attackers targeted British, American and Indian citizens simply because they wanted to kill as many British, American and Indian 'unbelievers' as possible.

Where they found Muslims, they spared them.

They also singled out for slaughter the occupants of an outreach organization geared to Jews with no Israeli or political agenda — underscoring the point that at the core of the Islamists' hatred of Israel festers their hatred of the Jews.

This was not, as is so often described, 'mindless violence'.

On the contrary, the terrorists precisely calibrated both their choice of targets and the way in which they attacked them. This tells us many things.

India was chosen in order to further two aims. First was to foment greater tension between India and Pakistan.

No less important was the wish to destroy the ever more vital strategic alliance between India and the West in common defense against the Islamist onslaught.

That was why British and American visitors in those two grand hotels were singled out.

And that was why Mumbai itself was chosen — as the symbol of India's burgeoning commerce and prosperity and its links with the West.

The manner of these attacks also carried a message.

Many hostages were taken, but no attempt was made to use them to demand redress of any grievances. They were simply killed.

That made a statement that the terrorists' agenda is non-negotiable.

The attacks demonstrated, above all, the reach of the perpetrators and the impotence of their designated victims.

Those who believe that Islamist terror can be halted by addressing grievances around the world are profoundly mistaken.

With these atrocities, moreover, Islamist attacks have moved much closer to war than conventional terrorism.

The Iranian-born foreign affairs specialist Amir Taheri has pointed out that the Mumbai attacks embody the plan outlined by a senior Al Qaeda strategist after the U.S. decided to fight back following 9/11 — a decision that the Islamists had not expected.

This new strategy entails targeting countries with a substantial Muslim presence for 'low-intensity warfare' comprising bombings, kidnappings, the taking of hostages, the use of women and children as human shields, beheadings and other attacks that make normal life impossible.

Such a simultaneous, multi-faceted onslaught quickly reduces a city and a country to chaos. It can be repeated anywhere — and our cities must be among the most vulnerable.


6) Iran Starts Large-Scale Naval Drills

Iran's naval forces on Tuesday started a large-scale naval
exercise involving over 60 warships in the Persian Gulf.

The 5-day-long maneuver started today with the deployment of troops in and
around the strategic Straight of Hormuz and the troops are scheduled to
officially start their drills on Wednesday.

"Over 60 combat vessels will take part in the exercise, codenamed "Unity
87", in the Gulf of Oman," Commander of the Iranian Navy Rear Admiral
Habibollah Sayyari said yesterday.

The four-stage exercise will involve destroyers, missile boats, submarines,
helicopters, fighters and unmanned aerial vehicles (UAVs).

"The goal of the exercise is to improve the combat readiness of the Iranian
navy to counter potential external threats and to test modern weaponry
developed by the Iranian defense industry," the Admiral said.

Sayyari confirmed last week the delivery of two new domestically-built
missile boats, Kalat (Fortress) and Derafsh (Flag), as well as a
Ghadir-class light submarine to the Iranian navy.

Iran has launched a domestic weapons procurement campaign aimed at improving
its defense capabilities and has announced the development of 109 types of
advanced military equipment over the past two years.

Tehran has conducted several high-profile war games this year, while
promising to strike back hard against in the event of any attack.

Last week, Sayyari said that "All the movements of the enemy in Oman Sea,
Persian Gulf and Hormuz Strait are under control and the enemy will never
dare to enter Iran's waters."

The Bush administration and the Zionist regime of Israel have intensified
threats of military action against Iran during the last two years.

US forces attacked a Syrian village near the borders with Iraq on October
26, and the raid on Sukkariyah, which took place almost simultaneously with
an air raid on a Pakistani village, has raised speculation about the
likelihood of similar unilateral strikes by the US troops on other regional
states, including the Islamic Republic.

Speculation that Israel could also bomb Iran mounted after a big Israeli air
drill in June. In the first week of June, 100 Israeli F-16 and F-15 fighters
reportedly took part in an exercise over the eastern Mediterranean and
Greece, which was interpreted as a dress rehearsal for a possible attack on
Iran's nuclear installations.

Israel and its close ally the United States accuse Iran of seeking a nuclear
weapon, while they have never presented any corroborative document to
substantiate their allegations. Both Washington and Tel Aviv possess
advanced weapons of mass destruction, including nuclear warheads.

Iran vehemently denies the charges, insisting that its nuclear program is
for peaceful purposes only. Tehran stresses that the country has always
pursued a civilian path to provide power to the growing number of Iranian
population, whose fossil fuel would eventually run dry.

Iran has warned that it would target Israel and its worldwide interests in
case it comes under attack by the Tel Aviv.

The United States has also always stressed that military action is a main
option for the White House to deter Iran's progress in the field of nuclear
technology.

Iran has warned that in case of an attack by either the US or Israel, it
will target 32 American bases in the Middle East and close the strategic
Strait of Hormoz.

An estimated 40 percent of the world's oil supply passes through the
waterway.

In a Sep. 11 report, the Washington Institute for the Near East Policy says
that in the two decades since the Iran-Iraq War, the Islamic Republic has
excelled in naval capabilities and is able to wage unique asymmetric warfare
against larger naval forces.

According to the report, the Islamic Revolutionary Guards Corps Navy (IRGCN)
has been transformed into a highly motivated, well-equipped, and
well-financed force and is effectively in control of the world's oil
lifeline, the Strait of Hormuz.

The study says that if Washington takes military action against the Islamic
Republic, the scale of Iran's response would likely be proportional to the
scale of the damage inflicted on Iranian assets.

Meantime, a recent study by the Institute for Science and International
Security (ISIS), a prestigious American think tank, has found that a
military strike on Iran's nuclear facilities "is unlikely" to delay the
country's program.

7) Analysis: From party of government to laughingstock
By David Horovitz

An irreverent Britishism for absolute incompetence refers to someone who "couldn't organize a p*ss-up in a brewery." Labor on Tuesday demonstrated the political equivalent: It couldn't organize a vote in a polling booth.

Trying to drag itself into the 21st century with an ultra-modern computerized process for selecting its Knesset list, it neglected the ancient imperative to check and recheck the basics - in this case, to be sure that the vaunted new system actually worked.

It didn't. And those of the party's 60,000 members who had bothered to schlep to the polling stations to express a preference for "Bujie" over "Fuad," et al, were told to go home and try again on Thursday.

Whether or not these hardy Laborites do indeed come back, the danger for Labor is that precious few will want to vote for the party when it really matters, on February 10.

Tuesday's farce marks a new low point for the erstwhile party of government - the grouping that, under one name or another, led Israel through our first three decades of statehood.

Of course, it was only a computer failure, and these things can happen to anybody, but they happen to catastrophic effect to those who don't prepare effectively and don't have a fallback plan. If Labor is incapable of so much as running its internal elections, the Israeli electorate might henceforth be forgiven for thinking, how credibly should we take its claims to be capable of running the country?

Political parties have no divine right to eternal life. And in our ultra-volatile political system, they rise and fall like hemlines.

Even relative heavyweights can disappear in seconds: witness Shinui's evaporation, on the eve of the last elections, when its internal vote in January 2006 placed the "wrong" candidate (the long forgotten Rob Lowenthal) in the No. 2 spot (instead of veteran MK Avraham Poraz). A 15-seat Knesset party was doomed by dawn.

The irony of Labor's plight is that it does actually still stand for something - not only in its socioeconomic thinking, but also in its attitude to Israeli-Palestinian negotiations.

Party Chairman Ehud Barak is commonly castigated by alienated supporters for being too hawkish on the peace front, and is understandably upbraided by them for failing to tackle the illegal settlement outposts. But having been badly burned by the intransigent Yasser Arafat at Camp David in 2000, Barak has displayed a certain responsibility in his cautious approach to dealings with Mahmoud Abbas and his disinclination to out-compromise Kadima Prime Minister Ehud Olmert.

A more adept leader might have been able to position Labor as the only dependable alternative to Binyamin Netanyahu's resurgent Likud, and to have depicted Kadima as a motley crew of opportunistic unreliables, lost without their founder Ariel Sharon, stained by corruption, headed by a political naif, and unworthy of anyone's vote.

Instead, Labor must now battle the growing conventional wisdom that it is in terminal free fall - conventional wisdom that will doubtless inform another slew of still-worse opinion polls later this week, potentially accelerating a self-fulfilling slide into oblivion.

8) In the Wake Of the Mumbai Attacks: India's Deputy Interior Minister: All Mumbai Attackers Came From Pakistan; Pakistani Leader: "If India Attacks, Several Pakistans Will Be Created Within India"

The following are recent posts from MEMRI's Urdu-Pashtu Media blog http://www.thememriblog.org/urdupashtu . Visit daily for up-to-date news from the Pakistan and Afghanistan media.

India's Deputy Interior Minister: All Mumbai Attackers Came From Pakistan

Shakeel Ahmad, India's Deputy Interior Minister, has stated that the terrorists who carried out the November 26, 2008 Mumbai attacks were from Pakistan. He added that Azam Amir Kasav, the only one of the perpetrators of the three-day-long shootouts to be arrested, is also from Pakistan.

Ahmad noted: "The terrorists who have been killed in these encounters in Mumbai in the last few days were of Pakistani origin."

Pakistan has denied any involvement in the Mumbai attacks.

Azam Amir Kasav, also spelled Ajmal Kasab, told Indian investigators that he is from a village near Faridkot in Pakistan. There are two small towns by the name of Faridkot in Pakistan, one about 50 km from the city of Multan, and the other about 200 km from it.

However, Ahmad stopped short of blaming the government of Pakistan for the terror attacks, adding: "We are not saying that it [the 11/26 attack] is sponsored by the Pakistani government." [1]

To view this post on the MEMRI Urdu-Pashtu Blog:
http://www.thememriblog.org/urdupashtu/blog_personal/en/11743.htm


Pakistani Leader: "If India Attacks, Several Pakistans Will Be Created Within India"

Expressing a growing concern in Pakistan about a likely Indian response to the Mumbai terror attacks, Sheikh Rasheed Ahmed, who until early this year served as Pakistan's federal minister for information and broadcasting, warned that if India attacks Pakistan, several Pakistans will be created within India.

Urging the Pakistani government to give a suitable reply to Indian accusations that the 11/26 Mumbai attacks were planned by Pakistani nationals, Ahmed added that the U.S., Israel and India are working to dismantle Pakistan's Inter-Services Intelligence and the country's nuclear program.

Ahmed, who early this year formed his own political party called the Awami Muslim League, also asked the government of Pakistani Prime Minister Yousuf Raza Gilani to stop the supply lines through Pakistan to the U.S. and NATO troops in Afghanistan. He added: "If Pakistan stops the supply lines, NATO cannot fight the Afghan war even for two days." [2]

To view this post on the MEMRI Urdu-Pashtu Blog:
http://www.thememriblog.org/urdupashtu/blog_personal/en/11744.htm


Roznama Jang: Militant Organizations Support Pakistan Against India

The Urdu-language newspaper Roznama Jang reports that all key militant groups in Pakistan's tribal districts have offered a ceasefire in support of the Pakistani government should it decide to deploy its troops on the Indian border in view of the increasing tension after the Mumbai attacks.

There are indications that Pakistan may accept the ceasefire offer and stop military operations against the Taliban.

The report added: "As a positive sign that this ceasefire offer may be accepted, the Pakistan Army has, as a first step, declared before the media some notorious militant commanders, including Baitullah Mehsud and Maulvi Fazlullah, as 'patriotic' Pakistanis."

Baitullah Mehsud and Maulvi Fazlullah are the key leaders of the Taliban movement in Pakistan. Baitullah Mehsud has also been accused of plotting the assassination of former Prime Minister Benazir Bhutto.

The report added: "These two militant commanders... have invariably been accused of terrorism against Pakistan but the aftermath of the Mumbai carnage has suddenly turned terrorists into patriots."

Roznama Jang quoted a senior Pakistani security official as saying: "We have no big issues with the militants in Fata [tribal districts]. We have only some misunderstandings with Baitullah Mehsud and Fazlullah. These misunderstandings could be removed through dialogue." [3]

To view this post on the MEMRI Urdu-Pashtu Blog:
http://www.thememriblog.org/urdupashtu/blog_personal/en/11745.htm

[1] www.apakistannews.com, December 1, 2008; The Economic Times (India), November 30, 2008.

[2] Roznama Khabrain (Pakistan), December 1, 2008.

[3] Roznama Jang (Pakistan), December 1, 2008.


9) Taliban, Lashkar-e-Taiba Leaders Declare Readiness To Fight India In Event of Indian Military Action in Pakistan
By: Tufail Ahmad

In the wake of the 11/26 Mumbai terror attacks, there is a growing fear in Pakistan that the Indian Air Force may attack militant hideouts inside Pakistan, in a manner similar to the U.S. missile attacks on Taliban and Al-Qaeda safe havens within Pakistan’s tribal districts on the Pakistan-Afghanistan border.

On December 2, 2008, the mass-circulation Urdu-language newspaper Roznama Jang reported that the Indian Air Force may attack the town of Muridke, the headquarters of banned militant organization Lashkar-e-Taiba [1]. In Muridke, which is near Lahore, Lashkar-e-Taiba chief Hafiz Muhammad Saeed is operating his organization under the new name of Jamaatud Dawa.

On the other hand, the Taliban commanders, who are currently fending off U.S. missile attacks and who have been bogged down in bloody fighting with Pakistani security forces for the past several months, are seeking a new opportunity for a ceasefire with the Pakistani Army following the Mumbai attacks.


Roznama Jang: Pakistani Army Calls Taliban Commanders "Pakistani Patriots"

The Taliban’s ceasefire offer has been welcomed by hard-line Pakistani Army officers who oppose the U.S.-led War on Terror. On December 1, 2008, Roznama Jang reported that several key Taliban commanders have offered to support the Pakistani Army in the event of any likely Indian attack on Pakistan. In return, Pakistani Army officials have called the Taliban commanders "Pakistani patriots."

The Roznama Jang report added: "As a positive sign that this ceasefire offer [from the Taliban] may be accepted, the Pakistani Army has, as a first step, declared to the media some notorious militant commanders, including Baitullah Mehsud and Maulvi Fazlullah, as 'patriotic' Pakistanis [2]."

Baitullah Mehsud and Maulvi Fazlullah are the key leaders of the Taliban movement in Pakistan. Baitullah Mehsud has also been accused of plotting the assassination of former Pakistani prime minister Benazir Bhutto.

The report further noted: "These two militant commanders... have invariably been accused of terrorism against Pakistan, but the aftermath of the Mumbai carnage has suddenly turned terrorists into patriots."

Over the past few days, a number of Taliban commanders and spokesmen have contacted different Pakistani media organizations to offer their support to the Pakistani Army in its stand against India. On November 30, 2008, Wali Muhammad, a spokesman for the Taliban (Mullah Nazir group) in Pakistan’s tribal district of South Waziristan, warned of suicide attacks in India in the case of an attack on Pakistan.

Muhammad, who is also known as Shaheen, added: "Our differences with the [Pakistani] government notwithstanding, if the issue is the national security, we have 500 suicide bombers who will enter India [3]."

Urging religious and political parties to end their differences and to unite to defend the Pakistani nation, the Taliban spokesman stated that 15,000 armed Taliban fighters would fight alongside the Pakistani Army against India.


Taliban Spokesman: "[The Taliban] Understand How To Defend The Line Of Control [In Kashmir]."

On December 1, 2008, Maulvi Omar, the main spokesman for the Tehreek-e-Taliban Pakistan, also warned India that the Taliban fighters will stand side by side with the Pakistani Army and the security forces in the event of a war.

Omar added that the Indian threats following the Mumbai attacks are aimed not at the Pakistani army and security forces, but at Pakistan as a Muslim country.

Maulvi Omar also threatened that the Taliban fighters could join the Pakistani soldiers on the Line of Control in Kashmir. He added: "The Taliban have been defending the Durand Line [Pakistan-Afghanistan border] with our own weapons, and [we] understand how to defend the Line of Control [dividing Kashmir between India and Pakistan] [4]."

Another Taliban commander, Maulvi Faqir Mohammad, who is senior deputy head of the Tehreek-e-Taliban Pakistan, called the Pashtu-language newspaper Wrazpanra Wahdat from an undisclosed location to say that the fighters loyal to him are ready to defend Pakistan against any likely Indian attack on Pakistan [5]. Accusing Indian intelligence agencies of planning the Mumbai terror attacks, Maulvi Faqir Mohammad added that the Mumbai attacks were an attempt to defame Pakistan, and denied any Taliban involvement in them.


Khyber Agency: Ansarul Islam, Lashkar-e-Islam Offer Support To Pakistan

In Pakistan’s tribal district of Khyber Agency, there are two dominant militant organizations: Lashkar-e-Islam and Ansarul Islam. Both the groups have offered to fight alongside the Pakistan Army against India.

On November 30, 2008, Misri Khan, a spokesman for Lashkar-e-Islam, warned that in the event of an Indian attack, hundreds of thousands of Lashkar-e-Islam fighters will give an appropriate reply to the enemies of Pakistan.

Misri Khan added: "Our ancestors offered sacrifices for the defense of Pakistan’s borders, and Lashkar-e-Islam will not hesitate to make any sacrifice for the security of the nation [6]."

Similarly, Ansarul Islam, the second dominant group in the Khyber Agency, also announced that its fighters would defend Pakistan's borders against India.

On December 1, 2008, Ansarul Islam spokesman Mubin Afridi warned that thousands of their fighters are waiting for the Pakistani government's order to wage a war against India. He urged other militant groups to end their differences and join hands against India [7].


Jamaatud Dawa: The Time Has Come for the Infidels’ Atrocities Against The Muslim Ummah to End

Yahya Mujahid, a close aide to Hafiz Muhammad Saeed and a spokesman for the Jamaatud Dawa, told Roznama Jang that any aerial Indian attack on any of the Dawa-run religious seminaries and offices across Pakistan would be treated as an assault on Pakistani sovereignty. [8]

Hafiz Abdur Rahman Makki, another official with the Jamaatud Dawa, likewise warned that the Pakistani nation would not permit external conspiracies aimed at breaking up Pakistan to succeed. Addressing a gathering in Karachi, Makki accused international powers of trying to tighten the noose around Pakistan, and added: "The Ummah should unite; the time has come for the infidels’ atrocities against the Muslim Ummah to end [9]."

He also asked his followers not to run away from jihad if they did not have the capability to wage it, adding: "Acquiring capability and power is necessary to fight against the enemy. However, it is not correct to run away from jihad on this pretext [of lacking the necessary capability to wage it.]"


*Tufail Ahmad is Director of Urdu-Pashtu Media Project at the Middle East Media Research Institute (www.memri.org ).

[1] Roznama Jang (Pakistan), December 2, 2008.

[2] Roznama Jang (Pakistan), December 1, 2008.

[3] Roznama Jasarat (Pakistan), December 1, 2008.

[4] Roznama Jasarat (Pakistan), December 2, 2008.

[5] Wrazpanra Wahdat (Pakistan), December 2, 2008.

[6] Roznama Express (Pakistan), December 1, 2008.

[7] Wrazpanra Wahdat (Pakistan), December 2, 2008.

[8] Roznama Jang (Pakistan), December 2, 2008.

[9] Roznama Express (Pakistan), December 1, 2008.

10)The magnitude of the current bust seems almost unfathomable—and it was unfathomable, to even the most sophisticated financial professionals, until the moment the bubble popped. How could this happen? And what's to stop it from happening again? A former Wall Street insider explains how the financial industry got it so badly wrong, why it always will—and why all of us are to blame.
by Henry Blodget


Why Wall Street Always Blows It
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Well, we did it again. Only eight years after the last big financial boom ended in disaster, we’re now in the migraine hangover of an even bigger one—a global housing and debt bubble whose bursting has wiped out tens of trillions of dollars of wealth and brought the world to the edge of a second Great Depression.

Millions have lost their houses. Millions more have lost their retirement savings. Tens of millions have had their portfolios smashed. And the carnage in the “real economy” has only just begun.

What the hell happened? After decades of increasing financial sophistication, weren’t we supposed to be done with these things? Weren’t we supposed to know better?

Yes, of course. Every time this happens, we think it will be the last time. But it never will be.

First things first: for better and worse, I have had more professional experience with financial bubbles than I would ever wish on anyone. During the dot-com episode, as you may unfortunately recall, I was a famous tech-stock analyst at Merrill Lynch. I was famous because I was on the right side of the boom through the late 1990s, when stocks were storming to record-high prices every year—Internet stocks, especially. By late 1998, I was cautioning clients that “what looks like a bubble probably is,” but this didn’t save me. Fifteen months later, I missed the top and drove my clients right over the cliff.

Later, in the smoldering aftermath, as you may also unfortunately recall, I was accused by Eliot Spitzer, then New York’s attorney general, of having hung on too long in order to curry favor with the companies I was analyzing, some of which were also Merrill banking clients. This allegation led to my banishment from the industry, though it didn’t explain why I had followed my own advice and blown my own portfolio to smithereens (more on this later).

I experienced the next bubble differently—as a journalist and homeowner. Having already learned the most obvious lesson about bubbles, which is that you don’t want to get out too late, I now discovered something nearly as obvious: you don’t want to get out too early. Figuring that the roaring housing market was just another tech-stock bubble in the making, I rushed to sell my house in 2003—only to watch its price nearly double over the next three years. I also predicted the demise of the Manhattan real-estate market on the cover of New York magazine in 2005. Prices are finally falling now, in 2008, but they’re still well above where they were then.

Live through enough bubbles, though, and you do eventually learn something of value. For example, I’ve learned that although getting out too early hurts, it hurts less than getting out too late. More important, I’ve learned that most of the common wisdom about financial bubbles is wrong.

Who’s to blame for the current crisis? As usually happens after a crash, the search for scapegoats has been intense, and many contenders have emerged: Wall Street swindled us; predatory lenders sold us loans we couldn’t afford; the Securities and Exchange Commission fell asleep at the switch; Alan Greenspan kept interest rates low for too long; short-sellers spread negative rumors; “experts” gave us bad advice. More-introspective folks will add other explanations: we got greedy; we went nuts; we heard what we wanted to hear.

All of these explanations have some truth to them. Predatory lenders did bamboozle some people into loans and houses they couldn’t afford. The SEC and other regulators did miss opportunities to curb some of the more egregious behavior. Alan Greenspan did keep interest rates too low for too long (and if you’re looking for the single biggest cause of the housing bubble, this is it). Some short-sellers did spread negative rumors. And, Lord knows, many of us got greedy, checked our brains at the door, and heard what we wanted to hear.

But most bubbles are the product of more than just bad faith, or incompetence, or rank stupidity; the interaction of human psychology with a market economy practically ensures that they will form. In this sense, bubbles are perfectly rational—or at least they’re a rational and unavoidable by-product of capitalism (which, as Winston Churchill might have said, is the worst economic system on the planet except for all the others). Technology and circumstances change, but the human animal doesn’t. And markets are ultimately about people.

To understand why bubble participants make the decisions they do, let’s roll back the clock to 2002. The stock­-market crash has crushed our portfolios and left us feeling vulnerable, foolish, and poor. We’re not wiped out, thankfully, but we’re chastened, and we’re certainly not going to go blow our extra money on Cisco Systems again. So where should we put it? What’s safe? How about a house?

House prices, we are told by our helpful neighborhood real-estate agent, almost never go down. This sounds right, and they certainly didn’t go down in the stock-market crash. In fact, for as long as we can remember—about 10 years, in most cases—house prices haven’t gone down. (Wait, maybe there was a slight dip, after the 1987 stock-market crash, but looming larger in our memories is what’s happened since; everyone we know who’s bought a house since the early 1990s has made gobs of money.)

We consider following our agent’s advice, but then we decide against it. House prices have doubled since the mid-1990s; we’re not going to get burned again by buying at the top. So we decide to just stay in our rent-stabilized rabbit warren and wait for house prices to collapse.

Unfortunately, they don’t. A year later, they’ve risen at least another 10 percent. By 2006, we’re walking past neighborhood houses that we could have bought for about half as much four years ago; we wave to happy new neighbors who are already deep in the money. One neighbor has “unlocked the value in his house” by taking out a cheap home-equity loan, and he’s using the proceeds to build a swimming pool. He is also doing well, along with two visionary friends, by buying and flipping other houses—so well, in fact, that he’s considering quitting his job and becoming a full-time real-estate developer. After four years of resistance, we finally concede—houses might be a good investment after all—and call our neighborhood real-estate agent. She’s jammed (and driving a new BMW), but she agrees to fit us in.

We see five houses: two were on the market two years ago for 30 percent less (we just can’t handle the pain of that); two are dumps; and the fifth, which we love, is listed at a positively ridiculous price. The agent tells us to hurry—if we don’t bid now, we’ll lose the house. But we’re still hesitant: last week, we read an article in which some economist was predicting a housing crash, and that made us nervous. (Our agent counters that Greenspan says the housing market’s in good shape, and he isn’t known as “The Maestro” for nothing.)

When we get home, we call our neighborhood mortgage broker, who gives us a surprisingly reasonable quote—with a surprisingly small down payment. It’s a new kind of loan, he says, called an adjustable-rate mortgage, which is the same kind our neighbor has. The payments will “reset” in three years, but, as the mortgage broker suggests, we’ll probably have moved up to a bigger house by then. We discuss the house during dinner and breakfast. We review our finances to make sure we can afford it. Then, the next afternoon, we call the agent to place a bid. And the house is already gone—at 10 percent above the asking price.

By the spring of 2007, we’ve finally caught up to the market reality, and our luck finally changes: We make an instant, aggressive bid on a huge house, with almost no money down. And we get it! We’re finally members of the ownership society.

You know the rest. Eighteen months later, our down payment has been wiped out and we owe more on the house than it’s worth. We’re still able to make the payments, but our mortgage rate is about to reset. And we’ve already heard rumors about coming layoffs at our jobs. How on Earth did we get into this mess?

The exact answer is different in every case, of course. But let’s round up the usual suspects:


• The predatory mortgage broker? Well, we’re certainly not happy with the bastard, given that he sold us a loan that is now a ticking time bomb. But we did ask him to show us a range of options, and he didn’t make us pick this one. We picked it because it had the lowest payment.

• Our sleazy real-estate agent? We’re not speaking to her anymore, either (and we’re secretly stoked that her BMW just got repossessed), but again, she didn’t lie to us. She just kept saying that houses are usually a good investment. And she is, after all, a saleswoman; that was never very hard to figure out.

• Wall Street fat cats? Boy, do we hate those guys, especially now that our tax dollars are bailing them out. But we didn’t complain when our lender asked for such a small down payment without bothering to check how much money we made. At the time, we thought that was pretty great.

• The SEC? We’re furious that our government let this happen to us, and we’re sure someone is to blame. We’re not really sure who that someone is, though. Whoever is responsible for making sure that something like this never happens to us, we guess.

• Alan “The Maestro” Greenspan? We’re pissed at him too. If he hadn’t been out there saying everything was fine, we might have believed that economist who said it wasn’t.

• Bad advice? Hell, yes, we got bad advice. Our real-estate agent. That mortgage guy. Our neighbor. Greenspan. The media. They all gave us horrendous advice. We should have just waited for the market to crash. But everyone said it was different this time.

Still, except in cases involving outright fraud—a small minority—the buck stops with us. Not knowing that the market would crash isn’t an excuse. No one knew the market would crash, even the analysts who predicted that it would. (Just as important, no one knew when prices would go down, or how fast.) And for years, most of the skeptics looked—and felt—like fools.

Everyone else on that list above bears some responsibility too. But in the case I have described, it would be hard to say that any of them acted criminally. Or irrationally. Or even irresponsibly. In fact, almost everyone on that list acted just the way you would expect them to act under the circumstances.

That’s especially true for the professionals on Wall Street, who’ve come in for more criticism than anyone in recent months, and understandably so. It was Wall Street, after all, that chose not only to feed the housing bubble, but ultimately to bet so heavily on it as to put the entire financial system at risk. How did the experts who are paid to obsess about the direction of the market—allegedly the most financially sophisticated among us—get it so badly wrong? The answer is that the typical financial professional is a lot more like our hypothetical home buyer than anyone on Wall Street would care to admit. Given the intersection of experience, uncertainty, and self-interest within the finance industry, it should be no surprise that Wall Street blew it—or that it will do so again.

Take experience (or the lack thereof). Boom-and-bust cycles like the one we just went through take a long time to complete. The really big busts, in fact, the ones that affect the whole market and economy, are usually separated by more than 30 years—think 1929, 1966, and 2000. (Why did the housing bubble follow the tech bubble so closely? Because both were really just parts of a larger credit bubble, which had been building since the late 1980s. That bubble didn’t deflate after the 2000 crash, in part thanks to Greenspan’s attempts to save the economy.) By the time the next Great Bubble rolls around, a lot of us will be as dead and gone as Richard Whitney, Jesse Livermore, Charles Mitchell, and the other giants of the 1929 crash. (Never heard of them? Exactly.)

Since Wall Street replenishes itself with a new crop of fresh faces every year—many of the professionals at the elite firms either flame out or retire by age 40—most of the industry doesn’t usually have experience with both booms and busts. In the 1990s, I and thousands of young Wall Street analysts and investors like me hadn’t seen anything but a 15-year bull market. The only market shocks that we knew much about—the 1987 crash, say, or Mexico’s 1994 financial crisis—had immediately been followed by strong recoveries (and exhortations to “buy the dip”).

By 1996, when Greenspan made his famous “irrational exuberance” remark, the stock market’s valuation was nearing its peak from prior bull markets, making some veteran investors nervous. Over the next few years, however, despite confident predictions of doom, stocks just kept going up. And eventually, inevitably, this led to assertions that no peak was in sight, much less a crash—you see, it was “different this time.”

Those are said to be the most expensive words in the English language, by the way: it’s different this time. You can’t have a bubble without good explanations for why it’s different this time. If everyone knew that this time wasn’t different, the market would stop going up. But the future is always uncertain—and amid uncertainty, all sorts of faith-based theories can flourish, even on Wall Street.

In the 1920s, the “differences” were said to be the miraculous new technologies (phones, cars, planes) that would speed the economy, as well as Prohibition, which was supposed to produce an ultra-efficient, ultra-responsible workforce. (Don’t laugh: one of the most respected economists of the era, Irving Fisher of Yale University, believed that one.) In the tech bubble of the 1990s, the differences were low interest rates, low inflation, a government budget surplus, the Internet revolution, and a Federal Reserve chairman apparently so divinely talented that he had made the business cycle obsolete. In the housing bubble, they were low interest rates, population growth, new mortgage products, a new ownership society, and, of course, the fact that “they aren’t making any more land.”

In hindsight, it’s obvious that all these differences were bogus (they’ve never made any more land—except in Dubai, which now has its own problems). At the time, however, with prices going up every day, things sure seemed different.

In fairness to the thousands of experts who’ve snookered themselves throughout the years, a complicating factor is always at work: the ever-present possibility that it really might have been different. Everything is obvious only after the crash.

Consider, for instance, the late 1950s, when a tried-and-true “sell signal” started flashing on Wall Street. For the first time in years, stock prices had risen so high that the dividend yield on stocks had fallen below the coupon yield on bonds. To anyone who had been around for a while, this seemed ridiculous: stocks are riskier than bonds, so a rational buyer must be paid more to own them. Wise, experienced investors sold their stocks and waited for this obvious mispricing to correct itself. They’re still waiting.

Why? Because that time, it was different. There were increasing concerns about inflation, which erodes the value of fixed bond-interest payments. Stocks offer more protection against inflation, so their value relative to bonds had increased. By the time the prudent folks who sold their stocks figured this out, however, they’d missed out on many years of a raging bull market.

When I was on Wall Street, the embryonic Inter­net sector was different, of course—at least to those of us who were used to buying staid, steady stocks that went up 10 percent in a good year. Most Internet companies didn’t have earnings, and some of them barely had revenue. But the performance of some of their stocks was spectacular.

In 1997, I recommended that my clients buy stock in a company called Yahoo; the stock finished the year up more than 500 percent. The next year, I put a $400-a-share price target on a controversial “online bookseller” called Amazon, worth about $240 a share at the time; within a month, the stock blasted through $400 en route to $600. You don’t have to make too many calls like these before people start listening to you; I soon had a global audience keenly interested in whatever I said.

One of the things I said frequently, especially after my Amazon prediction, was that the tech sector’s stock behavior sure looked like a bubble. At the end of 1998, in fact, I published a report called “Surviving (and Profiting From) Bubble.com,” in which I listed similarities between the dot-com phenomenon and previous boom-and-bust cycles in biotech, personal computers, and other sectors. But I recommended that my clients own a few high-quality Internet stocks anyway—because of the ways in which I thought the Internet was different. I won’t spell out all those ways, but I will say that they sounded less stupid then than they do now.

The bottom line is that resisting the siren call of a boom is much easier when you have already been obliterated by one. In the late 1990s, as stocks kept roaring higher, it got easier and easier to believe that something really was different. So, in early 2000, weeks before the bubble burst, I put a lot of money where my mouth was. Two years later, I had lost the equivalent of six high-end college educations.

Of course, as Eliot Spitzer and others would later observe—and as was crystal clear to most Wall Street executives at the time—being bullish in a bull market is undeniably good for business. When the market is rising, no one wants to work with a bear.
Which brings us to the last major contributor to booms and busts: self-interest.

When people look back on bubbles, many conclude that the participants must have gone stark raving mad. In most cases, nothing could be further from the truth.

In my example from the housing boom, for instance, each participant’s job was not to predict what the housing market would do but to accomplish a more concrete aim. The buyer wanted to buy a house; the real-estate agent wanted to earn a commission; the mortgage broker wanted to sell a loan; Wall Street wanted to buy loans so it could package and resell them as “mortgage-backed securities”; Alan Greenspan wanted to keep American prosperity alive; members of Congress wanted to get reelected. None of these participants, it is important to note, was paid to predict the likely future movements of the housing market. In every case (except, perhaps, the buyer’s), that was, at best, a minor concern.

This does not make the participants villains or morons. It does, however, illustrate another critical component of boom-time decision-making: the difference between investment risk and career or business risk.

Professional fund managers are paid to manage money for their clients. Most managers succeed or fail based not on how much money they make or lose but on how much they make or lose relative to the market and other fund managers.

If the market goes up 20 percent and your Fidelity fund goes up only 10 percent, for example, you probably won’t call Fidelity and say, “Thank you.” Instead, you’ll probably call and say, “What am I paying you people for, anyway?” (Or at least that’s what a lot of investors do.) And if this performance continues for a while, you might eventually fire Fidelity and hire a new fund manager.

On the other hand, if your Fidelity fund declines in value but the market drops even more, you’ll probably stick with the fund for a while (“Hey, at least I didn’t lose as much as all those suckers in index funds”). That is, until the market drops so much that you can’t take it anymore and you sell everything, which is what a lot of people did in October, when the Dow plunged below 9,000.

In the money-management business, therefore, investment risk is the risk that your bets will cost your clients money. Career or business risk, meanwhile, is the risk that your bets will cost you or your firm money or clients.

The tension between investment risk and business risk often leads fund managers to make decisions that, to outsiders, seem bizarre. From the fund managers’ perspective, however, they’re perfectly rational.

In the late 1990s, while I was trying to figure out whether it was different this time, some of the most legendary fund managers in the industry were struggling. Since 1995, any fund managers who had been bearish had not been viewed as “wise” or “prudent”; they had been viewed as “wrong.” And because being wrong meant underperforming, many had been shown the door.

It doesn’t take very many of these firings to wake other financial professionals up to the fact that being bearish and wrong is at least as risky as being bullish and wrong. The ultimate judge of who is “right” and “wrong” on Wall Street, moreover, is the market, which posts its verdict day after day, month after month, year after year. So over time, in a long bull market, most of the bears get weeded out, through either attrition or capitulation.

By mid-1999, with mountains of money being made in tech stocks, fund owners were more impatient than ever: their friends were getting rich in Cisco, so their fund manager had better own Cisco—or he or she was an idiot. And if the fund manager thought Cisco was overvalued and was eventually going to crash? Well, in those years, fund managers usually approached this type of problem in of one of three ways: they refused to play; they played and tried to win; or they split the difference.

In the first camp was an iconic hedge-fund manager named Julian Robertson. For almost two decades, Robertson’s Tiger Management had racked up annual gains of about 30 percent by, as he put it, buying the best stocks and shorting the worst. (One of the worst, in Robertson’s opinion, was Amazon, and he used to summon me to his office and demand to know why everyone else kept buying it.)

By 1998, Robertson was short Amazon and other tech stocks, and by 2000, after the NASDAQ had jumped an astounding 86 percent the previous year, Robertson’s business and reputation had been mauled. Thanks to poor performance and investor withdrawals, Tiger’s assets under management had collapsed from about $20billion to about $6billion, and the firm’s revenues had collapsed as well. Robertson refused to change his stance, however, and in the spring of 2000, he threw in the towel: he closed Tiger’s doors and began returning what was left of his investors’ money.

Across town, meanwhile, at Soros Fund Management, a similar struggle was taking place, with another titanic fund manager’s reputation on the line. In 1998, the firm had gotten crushed as a result of its bets against technology stocks (among other reasons). Midway through 1999, however, the manager of Soros’s Quantum Fund, Stanley Druckenmiller, reversed that position and went long on technology. Why? Because unlike Robertson, Druckenmiller viewed it as his job to make money no matter what the market was doing, not to insist that the market was wrong.

At first, the bet worked: the reversal saved 1999 and got 2000 off to a good start. But by the end of April, Quantum was down a shocking 22 percent for the year, and Druckenmiller had resigned: “We thought it was the eighth inning, and it was the ninth.”

Robertson and Druckenmiller stuck to their guns and played the extremes (and lost). Another fund manager, a man I’ll call the Pragmatist, split the difference.

The Pragmatist had owned tech stocks for most of the 1990s, and their spectacular performance had made his fund famous and his firm rich. By mid-1999, however, the Pragmatist had seen a bust in the making and begun selling tech, so his fund had started to underperform. Just one quarter later, his boss, tired of watching assets flow out the door, suggested that the Pragmatist reconsider his position on tech. A quarter after that, his boss made it simpler for him: buy tech, or you’re fired.

The Pragmatist thought about quitting. But he knew what would happen if he did: his boss would hire a 25-year-old gunslinger who would immediately load up the fund with tech stocks. The Pragmatist also thought about refusing to follow the order. But that would mean he would be fired for cause (no severance or bonus), and his boss would hire the same 25-year-old gunslinger.

In the end, the Pragmatist compromised. He bought enough tech stocks to pacify his boss but not enough to entirely wipe out his fund holders if the tech bubble popped. A few months later, when the market crashed and the fund got hammered, he took his bonus and left the firm.

This tension between investment risk and career or business risk comes into play in other areas of Wall Street too. It was at the center of the decisions made in the past few years by half a dozen seemingly brilliant CEOs whose firms no longer exist.

Why did Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, AIG, and the rest of an ever-growing Wall Street hall of shame take so much risk that they ended up blowing their firms to kingdom come? Because in a bull market, when you borrow and bet $30 for every $1 you have in capital, as many firms did, you can do mind-bogglingly well. And when your competitors are betting the same $30 for every $1, and your shareholders are demanding that you do better, and your bonus is tied to how much money your firm makes—not over the long term, but this year, before December 31—the downside to refusing to ride the bull market comes into sharp relief. And when naysayers have been so wrong for so long, and your risk-management people assure you that you’re in good shape unless we have another Great Depression (which we won’t, of course, because it’s different this time), well, you can easily convince yourself that disaster is a possibility so remote that it’s not even worth thinking about.

It’s easy to lay the destruction of Wall Street at the feet of the CEOs and directors, and the bulk of the responsibility does lie with them. But some of it lies with shareholders and the whole model of public ownership. Wall Street never has been—and likely never will be—paid primarily for capital preservation. However, in the days when Wall Street firms were funded primarily by capital contributed by individual partners, preserving that capital in the long run was understandably a higher priority than it is today. Now Wall Street firms are primarily owned not by partners with personal capital at risk but by demanding institutional shareholders examining short-term results. When your fiduciary duty is to manage the firm for the benefit of your shareholders, you can easily persuade yourself that you’re just balancing risk and reward—when what you’re really doing is betting the firm.

As we work our way through the wreckage of this latest colossal bust, our government—at our urging—will go to great lengths to try to make sure such a bust never happens again. We will “fix” the “problems” that we decide caused the debacle; we will create new regulatory requirements and systems; we will throw a lot of people in jail. We will do whatever we must to assure ourselves that it will be different next time. And as long as the searing memory of this disaster is fresh in the public mind, it will be different. But as the bust recedes into the past, our priorities will slowly change, and we will begin to set ourselves up for the next great boom.

A few decades hence, when the Great Crash of 2008 is a distant memory and the economy is humming along again, our government—at our urging—will begin to weaken many of the regulatory requirements and systems we put in place now. Why? To make our economy more competitive and to unleash the power of our free-market system. We will tell ourselves it’s different, and in many ways, it will be. But the cycle will start all over again.

So what can we learn from all this? In the words of the great investor Jeremy Grantham, who saw this collapse coming and has seen just about everything else in his four-decade career: “We will learn an enormous amount in a very short time, quite a bit in the medium term, and absolutely nothing in the long term.” Of course, to paraphrase Keynes, in the long term, you and I will be dead. Until that time comes, here are three thoughts I hope we all can keep in mind.

First, bubbles are to free-market capitalism as hurricanes are to weather: regular, natural, and unavoidable. They have happened since the dawn of economic history, and they’ll keep happening for as long as humans walk the Earth, no matter how we try to stop them. We can’t legislate away the business cycle, just as we can’t eliminate the self-interest that makes the whole capitalist system work. We would do ourselves a favor if we stopped pretending we can.

Second, bubbles and their aftermaths aren’t all bad: the tech and Internet bubble, for example, helped fund the development of a global medium that will eventually be as central to society as electricity. Likewise, the latest bust will almost certainly lead to a smaller, poorer financial industry, meaning that many talented workers will go instead into other careers—that’s probably a healthy rebalancing for the economy as a whole. The current bust will also lead to at least some regulatory improvements that endure; the carnage of 1933, for example, gave rise to many of our securities laws and to the SEC, without which this bust would have been worse.

Lastly, we who have had the misfortune of learning firsthand from this experience—and in a bust this big, that group includes just about everyone—can take pains to make sure that we, personally, never make similar mistakes again. Specifically, we can save more, spend less, diversify our investments, and avoid buying things we can’t afford. Most of all, a few decades down the road, we can raise an eyebrow when our children explain that we really should get in on the new new new thing because, yes, it’s different this time.

11) The Limits of Pragmatism
By Peter Wehner

We live in an age in which pragmatism is hot and ideology is not.

Barack Obama is being praised for the centrists he is appointing to his Administration. It is said that the Obama team includes “the best and the brightest,” individuals driven by empirical evidence rather than political philosophy. “They [the American people] don’t want ideology,” according to Obama. “They want action and they want effectiveness.” Mr. Obama speaks about his appointments sharing his bent for “pragmatism.” Technocrats and Socratic dialogue are in, while conviction politicians and an adherence to political philosophy seem passé.

As it happens, I’m delighted that the (very early) indications are that President-elect Obama is exhibiting a centrism that was well-disguised during his days as an Illinois state legislator and U.S. Senator, when he amassed a very liberal voting record. His liberalism will undoubtedly reassert itself at various points along the way, and it can’t be stated often enough that we are only at the dawn of the Obama era. It may be that the man named by National Journal as the most liberal member of the Senate governs that way as President. Nevertheless, the selections Obama has made so far are an encouraging sign. In addition, Obama’s cautions about ideology are worth taking into account. It can indeed lead people to ignore facts that challenge their worldview (for example, denying progress of the so-called surge in Iraq long after it was clear it was succeeding).

At the same time, with pragmatism all the rage, it is worth considering its limitations.

When pragmatism–an approach to politics that is characterized by centrist, moderate, deal-cutting instincts rather than a commitment to core political principles–becomes a defining political identity, it often leads to ad hoc policies. Decisions are made discretely, in an unrelated fashion, and are not put within a larger philosophical framework. Pragmatism tends to be process-oriented, reactive, and crisis-driven. And it assumes politics is above all about management.

Politics is of course about the day-to-day management of affairs. But at its best it is about the pursuit of ideals like justice and liberty, partnership for the common good, and fostering the conditions that allow for human flourishing and excellence.

Competence is crucial in the implementation of policies, and success is impossible without it. Bad execution can discredit good ideas. But competence is not a sufficient end in itself. It needs to advance a larger human purpose.

In addition, competence is not courage. When gale-force political winds hit, pragmatists, because they do not have deep-seated convictions, rarely hold shape. Our finest politicians are those who withstand the pressure of the moment to pursue policies precisely because those policies are part of an overarching governing philosophy. A pragmatist avoids hard choices. A great leader makes them.

In the early years of his presidency, for example, Ronald Reagan pursued a tight monetary policy and provided unyielding support for Paul Volcker, then head of the Federal Reserve, despite a nasty recession which saw the unemployment rate exceed 10 percent, Reagan’s approval rating stuck in the mid-30s, and substantial mid-term election losses in 1982. But these policies were vital to wringing inflation out of the system, and they began what was then the longest peacetime economic expansion in our history. A politician less committed to a set of economic principles would have given up in the face of the ferocious criticism President Reagan received.

Mr. Obama’s victory has been compared to Reagan’s, but Obama may turn out to be the anti-Reagan. When he found himself in Hyde Park, he easily adjusted to his surroundings, and when he ran in the Democratic primary, Obama became the hope of the Left. But once he secured the nomination, he transformed himself into a centrist. That trend is continuing in the transition.

Obama’s victory, then, was based largely on his (appealing) personality and ethereal promises of “change,” not on a set of ideas. After having run for President for 21 months, and having been elected four weeks ago, no one can yet articulate what Obama-ism as a political philosophy is. He appears to believe he should be president because of who he is, rather than what he believes. Mr. Obama’s self-assurance seems to derive from his enormously high confidence in himself, rather than confidence anchored in a coherent worldview.

President-elect Obama’s apparent pragmatism is certainly preferable to liberalism; no worldview at all beats a misguided one. But we should bear in mind that a philosophical embrace of pragmatism has a cost as well. It inevitably robs politics of its higher, ennobling aims.

Those touting pragmatism as a balm and downplaying the role of political philosophy in our politics should also recall that the greatest figures in our history–including Abraham Lincoln, Martin Luther King, Jr., and Reagan–believed in a fighting faith. They cared deeply about political ideas, and it was their fidelity to those (good) ideas, rather than an attachment to pragmatism or a captivating personality, which left a deep, lasting imprint on our nation.

Pragmatism surely has an important place in our politics. But for some of us, it is still conviction politicians who create the great appeal and great drama of American politics