Educate Yourself

Week in Review
For the week 8/14/2006 - 8/18/2006
Brian Trumbore
President/Editor, StocksandNews.com

At a press conference on Monday, President George W. Bush was asked whether he thought Hizbullah was a winner in its war with Israel.

"First of all?if I were Hizbullah, I'd be claiming victory too. But the people around the region and the world need to take a step back and recognize that Hizbullah's action created a very strong reaction that unfortunately caused some people to lose their lives, innocent people to lose their lives.

"I think when people really take a look at the type of mentality that celebrates the loss of innocent life, they will reject that type of mentality.

"And so, you know, Hizbullah, of course, has got a fantastic propaganda machine and they're claiming victories. But how can you claim victory when, at one time, you were a state within a state, safe within southern Lebanon, and now you're going to be replaced by a Lebanese army and an international force?

"None of this would have happened, by the way, had (UN Resolution 1559) been fully implemented. Now is the time to get it implemented. It's going to take a lot of work, no question about it."

No, Mr. President, yesterday was the time to get 1559 implemented, not now. You sat back and did nothing and the result was a devastating conflict that further enhanced the power of all the bad players in the region, from Hizbullah to Syria to Iran.

Five weeks after the war started, President Bush still shows an incredible lack of understanding as to Hizbullah's power and influence in ordinary Lebanese society over vast swaths of that country. I wrote on May 7, 2005, in this very space after my time in Beirut and the Bekaa Valley:

"Hizbullah does not represent all of the nation's Shiites but I saw firsthand just how popular it is among the lower classes. Yes, Hizbullah does build schools and hospitals and while it's difficult for an American (let alone an Israeli constantly under threat from Hizbullah and its growing missile arsenal) to understand this, it's a fact."

So now we see Hizbullah passing around Iran's money as Lebanon begins its massive rebuilding effort and while it's impossible to tell just how broad Hasan Nasrallah's support will be a year or two from now, especially in light of the fact this is one shaky ceasefire, it's clear Hizbullah is a force to be reckoned with at a time when both the U.S. and Israel thought it could be taken down.

But for now, while our leader in Washington stammers, Israel is doing some real soul-searching of its own. In the first big debate following the ceasefire, Prime Minister Ehud Olmert said the war had demonstrated "(Israel) will respond with force to every terror act, from the north or the south, from land or sea?.and that the State of Israel won't suffer any harm to its sovereignty or citizens."

Olmert avowed that UN Resolution 1701 was recognition "the entire international community agrees that the terror state in Lebanon must be annihilated. The Security Council decided unanimously that there are only Israel and Lebanon - no longer a state within a state, no longer a terror organization permitted to act inside Lebanon as the long arm of the axis of evil that stretches from Tehran to Damascus and used Lebanon in its weakness as a tool in its war."

Olmert said "IDF operations over the past month have hurt the murderous organization (Hizbullah) to a degree that is not yet known to the public. Its weapons, its long-range arsenal and the self-confidence of its fighters and leaders have been harmed," adding Hizbullah's leadership will be hunted down "at every time and in every place, and we won't ask permission from anyone" to destroy them.

Olmert admitted "There were mistakes made (in managing the war)" but "We won't sink into blame and guilt. We don't have that luxury."

Opposition leader and former Prime Minister Benjamin Netanyahu finally let loose. "Unfortunately, there will be another round (in this war) because the government's just demands weren't met" by the ceasefire agreement.

"The (kidnapped) soldiers weren't returned home, Hizbullah was not disarmed?Right now, we are (merely) in an interim period between wars. And there is no one who will prevent our enemies from rearming and preparing for the next round?.We are living in a coma, and received a warning telling us to return to reality as it is, and to return to ourselves and to those values that will secure our existence in the future." [Jerusalem Post]

Meanwhile, Syrian President Bashar Assad blasted Israel in his first post-war address on Tuesday, while praising a Hizbullah "victory" that had helped destroy U.S. plans to reshape the Middle East.

"Their 'New Middle East,' based on subjugation and humiliation, and denial of rights and identity, has turned into an illusion," Assad said in reference to Washington's goals.

Assad also blasted Israel's supporters in Lebanon, alluding to the anti-Syrian majority in parliament, as he made clear his intention of exerting his influence in the country yet again.

And on the issue of badly needed humanitarian and reconstruction aid, Washington appears bent on letting Hizbullah take the lion's share of the credit. Lebanon's interior minister said "(The Americans) ask us to do a lot, and they don't help us to do it, which is so different from what the Iranians have done to help Hizbullah. Our people are comparing what the Iranians are doing and the Americans are doing for their friends."

This is the reality, folks, and as for the implementation of a permanent ceasefire, complete with 15,000 Lebanese forces and eventually an equal number of UN peacekeepers in the south, there are major problems here. The Lebanese Army, with its Hizbullah sympathizers, is showing up and has already said it wouldn't disarm Nasrallah's forces, while the UN still hasn't settled on rules of engagement, which has most nations that might be willing to contribute troops saying 'Wait a second, we aren't doing anything until you tell us what they are.'

There's a new round of French bashing going on and the French better step up as they had promised earlier, but at the same time if I'm President Jacques Chirac I'm not doing squat until I know what the rules are. Americans would blast any leader of ours who just blindly sent in our troops without knowing them.

This is also yet another time when the world community pays for having a pitiful leader of its own in UN Secretary General Kofi Annan. LEAD, for crying out loud, Kofi. There will be plenty of time later for you to attend your Manhattan soirees.

And not for nothing but as Americans were forced to watch coverage of one of the true creeps on the planet, that androgynous life form who "confessed" to killing JonBenet Ramsey, this coming Tuesday, Iran is finally slated to counter proposals for dismantling its uranium enrichment program. Iran is not likely to address the Security Council's demand it suspend it by Aug. 31, rather Tehran has long said on Aug. 22 it would speak to an earlier package of incentives. No doubt they feel rather emboldened by the outcome of the war, while for its part the reality is sinking in among Israeli leaders that a preemptive strike may be a necessity, sooner rather than later, even if they haven't a clue exactly what they're hitting.

For now, though, in keeping with my policy of presenting all sides of the debate, following is more opinion on the Israel/Lebanon war as well as the war on terror in general.

"It is important to note that the Syrians and Iranians were able to engage in one of the biggest terrorism-sponsorship events in history, at no cost whatsoever - a point that will surely not escape the attention of those countries' leaders?.

"On the public relations front, Israel came in for far more condemnation than Tehran and Damascus. This in itself is a victory for the latter. Imagine being able to arm, train and incite a terrorist group to violate an international border and deliberately target another country's civilians, suffer no cost, and make your victim come out looking worse!

"Most important of all, the stock of Iran and Syria has risen across the Arab world. They are now the heroes of the resistance. For the first time, the Persian/Arab, Shiite/Sunni wall has been breached. Within Syria, though not Iran, the adventure also increased the regime's domestic popularity. This is a definite win/win situation."

"Why did Olmert and his minister falter at the last minute? [Ed. In halting the troops pending a diplomatic solution.] Was he unable to withstand international pressure at the critical moment? Was the scepter of lengthening casualty lists too much for him?

"The answer to these questions will probably be stuff for historians, but now many Israelis, including those who sat for a month in stifling bomb shelters, reservists who dropped everything and reported to their units and the families who anxiously awaited a telephone call from their sons in Lebanon and dreaded the knock of the local IDF liaison are feeling that their sacrifice has been betrayed.

"After years of dismissing the UN as an ineffectual and anti- Israel organization, how can Israelis believe that of all the possibilities, it will be the one to make sure that Hizbullah never again threatens our northern towns and villages.

"Despite all its failings, including the recent ones, there remains only one institution that Israelis firmly trust, and that is the IDF. Now Olmert will go down in history as the prime minister who didn't let the army finish the job?.

"The ceasefire in the north, if it is implemented at all, also signals the end of the political ceasefire. Politicians on the Right and Left are already clamoring for Olmert's head, both wings claiming, from their own point of view, that at least 120 lives have been sacrificed for no real purpose."

"Not since Saddam Hussein invaded Kuwait has a Middle Eastern leader made such a grievous mistake, both in underestimating his foe and miscalculating the impact of his own course of action.

"Inexperience at the helm combined with hesitation and uncertainty produced an unmitigated fiasco, one that raises serious questions about whether this person is truly fit to lead.

"While many might view the above description as referring to Prime Minister Ehud Olmert and his handling of the war in the north, there is in fact another figure in the region, one to whom it would appear to be even more applicable. And that person is none other than Iranian President Mahmoud Ahmadinejad?.

"Indeed, by transferring advanced rockets and weaponry to Hizbullah, Tehran and Damascus have just unwittingly proven one of the Bush administration's central contentions regarding the need for preemptive action against rogue states in the global war on terror.

"The two countries have demonstrated that they are ready and willing to share missile systems with a terrorist organization, thus strengthening the case that they must be prevented from obtaining weapons of mass destruction at all costs?.

"Through their actions, Iran has just made the case, better than the most eloquent of Washington press spokesmen ever could, as to why they pose a grave and immediate threat to the entire free world with their obstinate pursuit of nuclear weapons. And it is this very same argument, which the Iranians have just unwittingly bolstered, that Bush may one day soon choose to make in justifying the need for possible military action against Iran?.

"In other words, to borrow Lenin's phrase, Iran and Syria may have just sold the rope from which they themselves will eventually hang."

"Talk about wake-up calls. The arrest in England of 21 people who allegedly planned to blow up airplanes over the Atlantic Ocean is about as dramatic and dangerous as it gets in the wake- up call department. Something is driving average young men to plan and execute deeds of almost unimaginable inhumanity, targeting innocent civilians in the West who have nothing to do with whatever conflict may be at hand here?.

"It is high time that people of influence in all these societies recognize that their civilians are being terrorized because opinion-molders in these societies have allowed themselves to be politically terrorized into ignoring the obvious links between conditions in Arab societies and the growth and spread of terror. There can be no doubt that events in the Arab world contribute significantly to turning middle class men into world class monsters.

"The two most important cases are Palestine and Lebanon. Here is where Anglo-American-Israeli policies combine with the prevalent absence of serious Arab political leadership and responsibility to leave masses of ordinary Arabs feeling helpless and vulnerable. They see, feel and must somehow react to the mass suffering, death, displacement, pauperization and dehumanization that are now transmitted around the world on television.

"The Israeli atrocities in Lebanon are merely the latest example of this modern legacy, but Israel's American-supported assault on the Palestinians is just as brutal, and much older. A new report issued Thursday shows that 170 Palestinians were killed in the occupied Gaza Strip in the latest Israeli military offensive between June 27 and August 8, with 151 individuals killed in July alone?.More significantly, the report by the Palestinian Monitoring Group reveals that 138 of the 170 Palestinians killed were civilians, and 25% of the civilian fatalities were children?.

"We've had a spike in terror and greater resistance against Israel, the Anglo-Americans and Arab regimes. We have yet to see responsible political leaders here or there grasp the simple truth that ordinary men and women in this region have known for decades: bad policies that chronically brutalize ordinary people inevitably transform some of those people into senseless death and revenge machines that only want to brutalize in return."

"UN Security Council Resolution 1701 ensures that military action in South Lebanon will be accompanied by a political process. The cost of delaying that process - due to the United States and the United Kingdom delaying the meeting of the Security Council for one month - has been high for Israel. The Israeli government has been discredited and serious wrinkles in the U.S.-Israeli relationship have been exposed. The Israelis now have to contend with a political arena that is in utter disarray.

"On the other hand, delaying the process - and prolonging the Lebanese people's suffering - has sparked an unprecedented level of solidarity in Lebanon. By rallying around a national stand, the country achieved a diplomatic breakthrough and obtained key changes in the final UN resolution. These changes reflect the fact that even as guns were firing and civilians were fleeing, Lebanon's political culture was maturing?.

"But the Lebanese are not out of the woods just yet. There is still a question of whether Syria will change the pattern of destabilizing Lebanon and deliver the documents that will allow the Lebanese to reclaim the Shebaa Farms. There is also a possibility that the United States will obstruct the process of implementing 1701 before Lebanon and Israel can reach closure. However, if these two parties refrain from being spoilers, the Lebanese will have a rare opportunity to rebuild on solid ground, not the quicksand of political grievances that threatens to give way to another war?.

"Lebanon also has a rare opportunity to strengthen its army as it extends control over Lebanese territory. Israel's wanton destruction of Lebanon has made a very strong case to the Lebanese people for the need to have a creative and viable defense strategy. The best strategy would be one where Hizbullah's arms and expertise were institutionalized within the Lebanese Army.

"The coming months will require considerable adaptation on the part of the political class. All leaders?will need to go beyond their divisive sectarian stances in order to better accommodate the Shiite identity that has been in the background of Lebanon's landscape for the last 1,000 years. In doing so, they can learn a lot from Hizbullah's professional and serious approach - whether in politics, warfare or organization. The private sector, including bankers, industrialists, lawyers and especially journalists, will also need to recognize that the third republic's success will require their constructive participation. They must stop preying on the weaknesses of the political system and become responsible participants in the public discourse that will be necessary for Lebanon's growth."

"The Lebanese have suffered decades of war and conflict with Israel. What we need now from Syria is not subversive manipulation of Lebanese politics or the micro-management of our political affairs for financial gain. What we need from Syria is a simple piece of paper, a signed document that states unequivocally that the Shebaa Farms are Lebanese."

[Ed. I can't help but note the focus on Shebaa Farms, as I long ago told you this was key.]

"In the past month, and for some time before that, we have heard just about every possible suggestion about how to deal with Hizbullah: Attack it, degrade it, disarm it, wean it away from its friends in Syria and Iran, engage it politically, bring it into the Lebanese government in a bigger way, pressure it to show its real aims, drive it away from the border, or incorporate its military wing into the Lebanese armed forces. One piece of advice that has not been heard sufficiently, and that strikes us as eminently sensible and relevant, is to learn from Hizbullah's history and to emulate those aspects of its ways that could help the people of this region live more productive, peaceful lives.

"Hizbullah did not suddenly materialize magically on a Persian carpet or a divine edict. The organization methodically built itself up and sharpened its capabilities in all fields over a period of years. The core of its success is its capacity to identify the real needs of its constituents, meet those needs systematically through an efficient network of staff and managers, and not to waste time bragging about the fact in public?.

"Others in Lebanon have achieved similar success, in fields such as medicine, engineering, the arts, banking and many others. This is not a story of particularly Shiite values or religious motivation. It is a narrative of professionalism, and its consequences - of individuals who collectively identify a need, define a goal, plan a strategy and get the job done. Hizbullah happens to be the Lebanese organization that has taken this degree of professionalism to the highest degree of impact on the public - good or bad impact, depending on your perspective. Politically, Hizbullah will be challenged, engaged, opposed and long debated. Organizationally and logistically, it has historic lessons to teach all other Arabs in the country and the region. Those Arabs, including the Lebanese, should be alert enough to recognize the rare capacity for efficacy that Hizbullah has developed, and apply it in those crucial fields of public life and national development that have suffered so much mediocrity in the recent past."

"Near the end of his speech on Monday, Hizbullah's secretary general, Sayyed Hasan Nasrallah, began sounding, ominously, like a president. I say ominously, because Nasrallah has not been elected president, though the current tenant of that office [Ed. Syria's lackey Emile Lahoud] does make us pine for better. In outlining his vision of a stronger state, the Hizbullah leader plainly implied he intended to help reshape that state, and how else would he do so except by bending it around his own party's priorities? ?.

"Then on Tuesday we heard Bashar Assad effectively call for a coup d'etat against the March 14 majority. [Ed. the post-Rafik Hariri democracy movement from 2005.] The Syrian president declared that Hizbullah should transform its military 'victory' in the South into a political victory in Beirut, and accused March 14 of being the intended beneficiaries of Israel's onslaught?.

"So what did Nasrallah mean by a strong state? You have to imagine that he was in part thinking of his 'defensive plan,' whereby Lebanon would essentially ask Hizbullah to be a vanguard in facing down permanent Israeli threats. But since that plan has gone nowhere, since it effectively brought Israel back into Lebanon, Hizbullah must have a newer version in hand. But would the Lebanese go along with seeing their languid Mediterranean playground transformed into a somber garrison state?"

"The elementary fact - which far too many in the West deny - is that our civilization has been forced into a defensive war to the death with fanatical strains of Islam - both Shia and Sunni. We may be on the offensive militarily, but we did not start this war - and it's all one war, from 9/11's Ground Zero, through Lebanon and Iraq, and on to Afghanistan.

"Until that ugly fact gains wide acceptance, we'll continue to make little decisive progress. American or Israeli, our troops are trying. But the truth is that we're really just holding the line.

"We have not yet begun to fight. And many among us still dream of avoiding this war altogether.

"It can't be done. Because our enemies - Hizbullah, al Qaeda, Islamist militias, regimes in Iran, Syria and elsewhere - are determined to confront us.

"Israel's rep for toughness is in tatters. Hizbullah triumphant. Iran cockier than ever. Syria untouched. Lebanon's government crippled. An orgy of anti-Semitism in the global media. Anti- Americanism exploding among Iraqi Shias inspired by Hizbullah.

"Want more good news? After finally calling our enemies by the accurate name of 'Islamo-fascists,' President Bush backtracked so fast the White House lawn was smoking. Then he declared that Israel had won.

"And that ain't all, folks. If you're an Israel supporter - as I proudly admit to being - get ready for some tough love. Not only did Israel's abysmally incompetent government start a war impulsively and prosecute it half-heartedly, the country's military leadership failed, too. Chief of Staff Lt. Gen. Dan Halutz, who was going to destroy Hizbullah from the skies, reportedly put his main effort on the eve of war into selling off his stock holdings before his bombs could weigh down the market. Now that's insider trading!

"But that was just one jerk-general dishonoring his uniform. The serious news is that the IDF's reserve forces were a shambles when they mobilized. Information from an inside source reveals that, when the reserves' warehouses and depots were opened, key stocks were missing - stolen.

"What was gone? Fuel, weapons, ammunition, food, spare parts - all that a modern military needs to go to war. And I doubt it ended up in Iceland.

"The IDF has great combat leaders and brave soldiers. But Hizbullah's boys proved tougher - and we can't pretty it up. The terrorists were willing - even eager - to die for their cause. Israeli leaders dreaded friendly casualties. And IDF troops - except in elite units - lacked the will to close with the enemy and defeat him at close quarters.

"Israel tried to fight humanely. Hizbullah was out to win at any cost. The result was inevitable?.

"Oh, I almost forgot those two IDF soldiers whose kidnapping triggered all this. But I can be forgiven, since Israel's leaders forgot about them long before I did: The UN resolution Olmert welcomed makes no binding and immediate demand for their return.

"And the world is going to let Iran build nuclear weapons. Get ready for Round Two."

"The first thing to do is to drop the metaphor of a 'war on terrorism.' Wars are mostly fought with arms on battlefields between soldiers of opposing countries. Wars have beginnings and ends. None of these characteristics apply here.

"Terrorism can now be carried out with boxcutters and airplanes as easily as with explosives. Office buildings and commuter trains and coffee shops are today's battlefields. There are no uniforms, and often those doing the killing are acting in the name of causes or movements.

"There is another reason to jettison the martial vocabulary. Terrorism cannot be defeated by arms alone. Other instruments of policy, including intelligence, police work and diplomacy, are likely to play a larger part in any effective policy.

"Second, it is essential to distinguish between existing and potential terrorists. Existing terrorists need to be stopped before they act; failing that, societies need to protect themselves and have ready the means of reducing the consequences of successful attacks?.

"Terrorism must be stripped of its legitimacy; those carrying it out must be shamed. No political cause justifies the taking of innocent life. Arab and Muslim leaders need to make this clear, be it in public pronouncements by politicians, lectures by teachers, or fatwas by leading clerics. The initial critical reaction on the part of several Arab governments to Hizbullah's kidnapping of Israeli soldiers is a sign that such criticism is possible, as are selective comments by a number of Muslim religious leaders.

"But terrorism also needs to be stripped of its motivation. This translates into the U.S. and others spelling out the gains Palestinians can expect in a peace agreement with Israel and what Sunnis and Shiites can reasonably expect in Iraq's new political order. Bringing about a lasting ceasefire in Lebanon will also help calm the emotions that will lead some to become terrorists and others to sympathize.

"The way ahead is clear: vigilance against violence coupled with political possibility. Such a counter-terrorism policy will not eliminate the scourge of terrorism any more than modern medicine can eliminate disease. But it does hold out the promise of reducing it to a scale that will not threaten the openness, security, or prosperity of modern societies."

"Democracies are in a fix. If your enemy will gladly die for his cause while you wouldn't think of dying for yours (not that you even know what it is: freedom? liberty?) then clearly the fight is not to the swift but to the suicidal. The obvious short-term remedy is cold, lethal technology. But the reliance on high-tech stuff has not subdued Iraq, and it utterly failed in Lebanon as well. These are the realities of the new warfare, and if they are the 'birth pangs of the new Middle East,' then what is being produced is not some cute, babbling democracies but a hideous monster.

"Cooperation between Pakistani and British law enforcement (the British draw upon useful experience combating IRA terrorism) has validated John Kerry's belief (as paraphrased by the New York Times Magazine of Oct. 10, 2004) that 'many of the interdiction tactics that cripple drug lords, including governments working jointly to share intelligence, patrol borders and force banks to identify suspicious customers, can also be some of the most useful tools in the war on terror.' In a candidates' debate in South Carolina (Jan. 29, 2004), Kerry said that although the war on terror will be 'occasionally military,' it is 'primarily an intelligence and law enforcement operation that requires cooperation around the world.'

"Immediately after the London plot was disrupted, a 'senior administration official,' insisting on anonymity for his or her splenetic words, denied the obvious, that Kerry has a point. The official told The Weekly Standard:

" 'The idea that the jihadists would all be peaceful, warm, lovable, God-fearing people if it weren't for U.S. policies strikes me as not a valid idea. [Democrats] do not have the understanding or the commitment to take on these forces. It's like John Kerry. The law enforcement approach doesn't work.'

"This farrago of caricature and non sequitur makes the administration seem eager to repel all but the delusional. But perhaps such rhetoric reflects the intellectual contortions required to sustain the illusion that the war in Iraq is central to the war on terrorism, and that the war, unlike 'the law enforcement approach,' does 'work.'

"The official is correct that it is wrong 'to think that somehow we are responsible - that the actions of the jihadists are justified by U.S. policies.' But few outside the fog of paranoia that is the blogosphere think like that. It is more dismaying that someone at the center of government considers it clever to talk like that. It is the language of foreign policy - and domestic politics - unrealism.

"Foreign policy 'realists' considered Middle East stability the goal. The realists' critics, who regard realism as reprehensibly unambitious, considered stability the problem. That problem has been solved."

"Muslim leaders have now accused the (British) Government of pursuing a foreign policy that has angered even moderate Muslims and of willfully ignoring their protests that Britain's stance on Iraq, Palestine and Lebanon was stoking Muslim militancy - an ahistorical accusation that ministers have rejected as tantamount to blackmail. Against this background, the Government's promise after the latest alleged plot to step up its engagement with Muslim leaders and the launch next month of a new Commission on Integration and Cohesion look distinctly unpromising.

"There are, indeed, flaws in the government strategy. The first is to imagine there is a single Muslim 'community.' There is not. Britain's 1.6 million Muslims are split by ethnic origin, tradition, language, sect and generation. Iraqis and Algerians differ greatly in culture and outlook from those of Pakistani and Bangladeshi backgrounds. Sufis, who were recently welcomed at Downing Street, have a far more tolerant tradition than the narrow-minded, puritanical Wahhabis.

"The second mistake is to think that Muslim 'leaders' can deliver. Islam has no ecclesiastical hierarchy; leaders are recognized by their piety and scholarship, and many are in jealous competition with each other. Fearful of losing credibility, no leader, therefore, can espouse the call for 'moderation' without appearing to compromise with secularism and Western values or being seen as a government stooge. Extremists always claim that they are more fundamentalist, more pious and therefore 'better Muslims.' And those leaders embraced by the British Establishment have little idea of the frustrations, in part, motivating hopelessly underachieving young Muslim men in the suburbs of northern cities.

"Islam needs a reformation, but many of its opinion leaders recognize that they will not benefit from a more tolerant, less ideological religion. They see Islam and their role in Islam as immutable, and denounce as apostates men, and women such as the Canadian Irshad Manji especially, who call for a renaissance of critical thinking. But unless there is more respect for such calls, more tolerance of women's rights and views and less fear in denouncing extremism, the government dialogue with Muslim leaders will yield little. Only when moderation commands the respect, credibility and allegiance of more Muslims will the nexus with terrorism be challenged."

"(As) the world contemplates the nervous breakdown of American policy in the Middle East, it is something President George Bush should surely be asking himself, or at least his fellow Americans. How'm I doin'?

"Let's see. You invaded Iraq because you argued you would be able to bring about a peaceful, democratic society in the heart of the Arab world, a step vital to the eradication of modern terrorism. Many of us supported the project because we believed the stakes were so high that you would not stint in committing the resources necessary to achieve it.

"But you tried to do it on the cheap. If many of us miscalculated the scale of the threat Iraq posed, there was no excuse for the woeful lack of preparation by your Administration for the task of pacifying the country?.

"Well, you supported and perhaps even encouraged Israel to invade Lebanon last month, after repeated provocations by terrorists. The aim - a good one in principle - was to crush Hizbullah, weaken its Syrian and Iranian sponsors and put Lebanon on a path to long-term, terror-free stability. But when the largely aerial campaign predictably failed and equally predictably led to the world's media reaching their one-sided conclusion about Israel's 'aggression,' you quickly backtracked. You encouraged Israel to accept a ceasefire that amounts to the country's most serious defeat in its 57-year history.

"The result? A strengthened Hizbullah and a new Arab hero, Sheikh Hasan Nasrallah; a reprieve for the beleaguered Assad regime in Damascus and a further fillip to Iranian ambitions; a strategic setback for Israel and the condemnation of Lebanon tragically to replay the turmoil of the 1980s.

"How'm I doin'? You rightly identified Iran as the gravest threat to the West's long-term security and you pledged to bend U.S. policy to ensure that it did not gain the regional hegemony that would allow it to blackmail the world into acquiescence of its hateful ideology. Above all, Iran would be stopped from getting the bomb.

"The result? The despised regime in Tehran has emerged as the true hegemonic power in the region, leeching on the battered bodies politic of Iraq, Afghanistan and Lebanon, elevating its brand of Shia fundamentalism into position as the dominant force in the Islamic world and continuing on its path towards nuclear status?.

"Now we have the worst of all worlds. Not only is the U.S. despised around the globe, it can't even make its supposed hegemony work. It's one thing to be seen as the bully in the schoolyard; it's quite another when people realize the bully is actually incapable of getting anybody else to do what he wants. It's unpleasant when people stop respecting you, but it's positively terrifying when they stop fearing you.

"What we have now is a situation in which the world's only superpower, with the largest economic and military advantage any country has ever enjoyed on Earth, is pinned down like Gulliver, tormented by an army of fundamentalist Lilliputians.

"Some will say that the U.S.'s ineffectiveness is a direct result of the loss of its 'soft' power. Alienating the rest of the world has weakened its ability to achieve its objectives. Idiocies such as Abu Ghraib and the brief flirtation with torture as a legitimate instrument undoubtedly hurt America's image. But I don't truly see how the failings in the Middle East could have been avoided by Washington's being nicer to foreigners. What's been missing is resolute leadership.

"It is hard for me to recall a time when the world was such a scary place. No one should rejoice at America's weakness. The world is scarier still because of it."

The market resumed its winning ways after a pause the previous week. The major catalyst, aside from the ceasefire in the Middle East, was tame inflation data in the form of producer and consumer price figures for July that were both below expectations; up 0.1%, ex-food and energy, for the PPI, and up just 0.2%, core, for the CPI.

So the feeling is the Federal Reserve will not have to raise interest rates anew when it gathers September 20, though the Board will have August inflation data to ponder at that time.

It also helped this week that oil prices declined, thanks in part to BP's shutdown at Prudhoe Bay not being quite as serious as first thought, but crude still closed above $70 for the 9th straight week at $71.14. What happens in the next few days regarding Iran and the nuclear issue will be a major factor in determining future price levels.

Gasoline futures have also been declining as the summer driving season wraps up and with no hurricanes as yet posing a threat, which could translate to a $2.80-$2.85 level at the pump over the coming weeks.

But then you have housing, on which there will be a slew of data this coming week.

For now, the National Association of Realtors said homebuilder confidence continues to plummet, sales were off 7% in the second quarter from 2005's pace, housing starts were down 2.5% for the same period, and even in Middle America, actual price declines are not out of the ordinary.

This week we had multiple releases on California and for the six- county Southern California market, sales in July were off a whopping 27% from July 2005, the slowest pace since 1997, and the median price was up just 4.9%, its slowest rate of increase in six years.

Josh P. passed along info on San Diego County where the median home price in July actually fell 1.8%, year-over-year. [6% from November's peak.] Sales here are off 30%.

And check this out in Los Angeles County. Last year at this time there was a ratio of one condo on the market for every one sold. Today it's seven on the market for every one with a For Sale sign.

Separately, the Dallas Morning News reported residential foreclosures in North Texas, including Dallas-Fort Worth, are up 30% from a year ago. And yet the economy is still solid here.

But for how long? The news from retailers such as Wal-Mart and Home Depot wasn't exactly inspiring this week as the companies discussed the impact of higher gasoline prices on their key demographic, as well as the slowing housing market.

Then there's Ford. The automaker announced it is slashing production in North America to levels not seen since the 1980s; a full 21% reduction in the fourth quarter. Sadly, that's a lot of folks who will be struggling.

The real key over the coming months is to look for further employment weakness. If job losses start to mount across the board, from more than just one or two segments, then recession is a certainty.

But if employment levels stay relatively strong, we'll muddle through a bit longer, though that doesn't mean the stock market will celebrate because either way earnings are not going to be better than current expectations the second half of this year.

That's an overly simplistic view of things and doesn't begin to take into consideration the usual global hot spots and another spike in oil.

Nor does it factor in China. This week the central bank here raised interest rates 27 basis points (they can't do 25?.just have to be different) in the government's ongoing effort to rein in growth. Specifically, officials singled out the "overly rapid expansion in fixed-asset investment."

Investment in projects like roads, rails, and new airport terminals have screamed ahead 30.5% in the first seven months of the year, while retail sales are up 13.7%, year-over-year, and industrial production is up 16.7%.

In other words, I've only been off about four years in calling a slowdown here, that's for sure. But the government itself is scared to death of the coming collapse. You think our Federal Reserve has trouble negotiating a soft landing from 4% growth? Try doing it from 10%-11%.

And I was musing this week that the Beijing Olympics are but two years away. The last thing the commies want are massive demonstrations by millions of unemployed around that time, but it could just work out that way.

--It was a great week for equities as the Dow Jones was up all five days and gained 2.6% to 11381. The S&P 500 added 2.8% to close at 1302, its highest mark since May 11, and Nasdaq climbed 5.2% to 2163, the best week for it since May 2003. But Nasdaq is still down 1.9% on the year.

No mystery why bonds continued to rally. The inflation data was nirvana and oil declined $3. Some of the housing figures didn't bode well either for those looking for the Fed to hike interest rates this fall.

--It wasn't a good week for Dell, nor has it been a good multi- year stretch for that matter, as the computer maker had to recall 4.1 million notebook lithium batteries made by Sony because of a fire risk, not normally a good thing. But these same Sony batteries are also used in some Hewlett-Packard and Apple models.

Dell also reported earnings that were far from stellar, but even though they had pre-warned the state of the company was less than rosy just weeks earlier, the stock was slammed anew on word it is the subject of a SEC inquiry into its revenue recognition methods.

--Hewlett-Packard received an awful lot of good publicity for a meager 5% revenue gain in the second quarter; though overall computer sales, and notebook revenues, specifically, were both up 14% as the company continues its comeback under the leadership of Mark Hurd. [Former CEO Carly Fiorina is home sticking pins in her Mark Hurd bobblehead doll.]

[By the way, on Aug. 12, 1981, the personal computer was born as IBM launched the 5150 for $1,565. It was about 650 times slower than today's PCs. Apple (1977) and Atari (1979) were earlier but they failed to develop a mass market.]

"When the nation's accounting-rule makers proposed in 2004 that companies treat employee stock options as an expense that cuts into profit, corporate executives all but stormed the Financial Accounting Standards Board's headquarters in Norwalk, Conn.

"In letters and public statements, business leaders declared that such an accounting rule would damage their bottom lines, compromise their ability to attract talented employees and make them less competitive against foreign rivals that didn't face similar requirements. Their protests failed to sway FASB; the new rule went into effect this year.

"Now, some of the same companies that opposed it are among those caught up in a widening probe by federal authorities of companies that allegedly 'backdated' employee stock options."

Well whaddya know. And among the latest companies to warn it may have to restate earnings as a result of fraudulent accounting practices is anti-virus software maker McAffee, which admits its previously reported financial statements for the past three years were less than honest.

Yet the backdating practice still has its defenders. The Journal's Holman Jenkins Jr. continues to be one, and Scott P. pointed out to me that Larry Kudlow opined on CNBC that it was time to "stop bashing business" when it came to all the investigations. As Scott said, isn't it wonderful, in essence, to be able to take a "market mulligan." That's what backdating options is about, after all.

--Google is celebrating its second anniversary as a public company this month and Bloomberg's Mark Gilbert points out that insiders, shorn of all restrictions, have now sold almost 23 million shares, or about $7.4 billion of stock.

Gilbert adds that while there is nothing "evil" about this, "it is remarkable that not a single Google insider has bought a single share of the company in the 18 months since the IPO lock-ups expired."

--Toyota likes to promote itself these days as an American car company with its large employee base here in the States, but the fact is only 55% of U.S. sales are of autos manufactured in North America.

--Bill Miller, portfolio manager for the Legg Mason Value Trust, has beaten the S&P 500 for 15 straight years; but this year on a total return basis he is down a whopping 12%. Which also means his three-year record is now 3% below the S&P on an annualized basis, equally dreadful. This past week happened to be one when all manner of business publications opted to pile on, which is only appropriate.

--As the Journal pointed out, the law recently passed by Chicago's City Council to mandate a much-higher minimum wage than required by law is causing 'big box' retailers to rethink their expansion plans. Both Target and Wal-Mart have put major projects in the Chicago area on hold.

"Non-financial debt in the U.S. expanded at a rate of 6% in 2001, grew by 10% in 2005, and has been swelling at an even faster rate this year. At this pace, debt is growing an astounding 50% faster than GDP.

"Meanwhile, outstanding credit derivative contracts increased from about $4 trillion at the end of 2003 to more than $17 trillion at the end of 2005; and the large volume of financial market activity so far this year suggests that outstanding derivative contracts are even higher now. The recent surge of these instruments is not just about reducing risk; it is fueling speculation."

Kaufman was commenting on the fact the Federal Reserve's moves in hiking interest rates have had little effect as both corporations and individuals have found ways around the traditional rules of Fed policy.

--Corporate arrogance, part XXIX: Citigroup Director Robert Rubin said he would no longer fly for free on company aircraft used for personal business. The former treasury secretary said from here on he will reimburse Citigroup for personal travel. There's really no reason to comment further, except to nominate him for the "Dirtball Hall of Fame."

--Merck suffered a double whammy as a New Jersey Superior Court judge overturned a Vioxx-related verdict from last November because it's since come to light the company withheld evidence showing heart attacks could occur with use of Vioxx less than 18 months. In a second case a New Orleans jury ruled against Merck and ordered it to pay $51 million to a heart attack victim in finding the company "knowingly misrepresented or failed to disclose" information to a patient's doctors.

--A federal judge ruled the tobacco industry had continued to deceive the public in marketing cigarettes as "low tar" or "light" or "natural" or with other "deceptive brand descriptors which implicitly or explicitly convey to the smoker and potential smoker that they are less hazardous to health than full-flavor cigarettes."

But Judge Gladys Kessler also ruled the industry could not be forced to underwrite a multibillion-dollar program to help smokers quit and so tobacco shares such as Altria's soared.

--Indra Nooyi, 50, is taking over as CEO of PepsiCo in about two months, replacing Steve Reinemund, 58, who is retiring.

What's significant about Ms. Nooyi's promotion is that she thus becomes the leading female CEO in terms of market capitalization.

--Worldwide, agriculture accounts for 80% of global water consumption, with water usage increasing by six times in the past 100 years with the potential to double again by 2050, according to experts at the International Water Management Institute.

But the institute's director said "The water is there (to meet needs, such as in Asia and Africa), the rainfall is there, but the infrastructure isn't." [Reuters]

--Karen "hold the" Mayo Kozlowski isn't pleased hubby Dennis is behind bars for 8-25 years as a result of his Tyco-related chicanery, so she's filed for divorce seeking half the assets while citing the marriage was "irretrievably broken." I'll go along with that. The former Ms. Mayo, who met the Jack Welch-wannabe while she was a waitress, has one problem, however. Dennis has been ordered to pay $167 million in restitution and fines, first. And some appreciation for that $2 million birthday party he threw her, eh?

--My portfolio: I don't repeat this every week but for new readers I'm sticking with my allocation of 80% cash / 20% stocks as, for fun, we see if the editor can beat the market in 2006.

Iraq: July was the most violent month yet in the war, with the morgue in Baghdad taking in 1,850 bodies or more than half the total deaths in the country. And it's still simmering on the border with both Turkey and Iran as the Kurds continue to rile up these two in what could easily escalate into a full-blown conflict.

Japan / South Korea / China / Russia: Where to begin? The Russians shot dead a Japanese fisherman on a vessel that had ventured into the disputed Kurile Islands territory, long claimed by Japan but occupied by Russia, while three other fishermen were detained as a furious government in Tokyo demanded an apology.

The Kremlin issued a statement: "The Russian Foreign Ministry expresses its deep regret in connection with the death of one of the crew members?(But) it is clear that responsibility for this incident rests with those who were directly guilty and also with those representatives of the Japanese authorities who connive in poaching by Japanese fishermen in Russian territorial waters."

Earlier in the week, Japanese Prime Minister Koizumi, in one of his last official acts, visited yet again the Yasukuni Shrine that honors Japan's war dead, including some convicted of war crimes. As expected, this infuriated South Korea and China further as relations with these two have deteriorated to the worst levels in decades.

"The Japanese prime minister's visit to the Yasukuni shrine is a total disrespect for the Korean government and people," said South Korea's foreign minister.

Chinese Foreign Minister Li Zhaoxing condemned Koizumi for "ignoring the international community and Asian neighbors and also the Japanese people's concerns and objections." Mr. Li added the visit "gravely offends the people in countries victimized by the war of aggression" and "undermines the political foundation of China-Japan relations."

But wait, there's more? "By insisting on paying homage to the Yasukuni Shrine where these war criminals are remembered in disregard of the concern and opposition from the international community, Japan's Asian neighbors and the people in Japan, Prime Minister Koizumi is challenging international justice and trampling human conscience."

Back in Seoul, President Roh said "Japan must repent sincerely and prove clearly it will not repeat its past wrongdoing by translating apologies into action."

For his part, Koizumi issued a statement as part of a national memorial service.

"Our country inflicted great loss and suffering on the peoples of many countries, especially Asian countries.

"On behalf of the Japanese people, I would like to express deep remorse and humbly express condolences for the victims."

In defending his trip to Yasukuni he added, "I do not go to justify the past war or to glorify militarism. I go with the feeling that we should not wage war again and that we must not forget the sacrifice of those who went to war and died." [South China Morning Post]

This is obviously not a small matter for the big players in the region and it will only become a larger issue in September when Shinzo Abe, as expected, takes over for Koizumi. Abe is going to propose a complete overhaul of Japan's post-World War II, 1947 pacifist constitution that would grant the military far more power.

Internally, Japan has been debating the use of pre-emptive strikes on North Korea following its recent missile tests. While Japan's military doesn't as yet have a true capability, a majority wants it to move fast to develop one.

Overall, whether it is Yasukuni or revamping the constitution, "A Japan that freely talks of bombing locations in Asia brings back some rather unpleasant memories," as foreign policy expert John Feffer told Defense News. "So as Japan moves to become more 'normal' in military affairs, expect worsening relations with its neighbors, even as the United States tries to arm-twist allies and adversaries alike into accepting the new reality."

As for North Korea, there are conflicting reports on a possible underground nuclear weapons test, an act I warned years ago would shake the world financial markets. Whether or not it actually does, it is sure to have an impact on U.S. mid-term elections and perhaps Kim Jong-il is saving it for an October surprise.

Meanwhile there is confusion over just how many died in North Korea's recent floods. A reputable aid organization says as many as 54,000, while Pyongyang had earlier said "549" with "295" missing. The International Red Cross has weighed in, however, and believes the actual numbers are closer to the government's figures.

Afghanistan: I realize this is a sensitive topic, but the U.S. military has made more than its shares of mistakes here and it's making it exceedingly difficult to win over the hearts and minds.

The latest incident was an airstrike that accidentally took out 10 Afghan border policemen, an act that had President Hamid Karzai fuming. You just know these incidents receive far more press in the local media than any suicide attacks.

Separately, if you enjoy doing heroin while reading this column it would appear cheaper forms are on the way as Afghanistan's poppy crop is heading towards a record harvest, some 257,000 acres worth or about 40% more than 2005. Afghanistan produces about 90% of the world's poppy.

Ukraine: New Prime Minister Viktor Yanukovych, a former ally of the Kremlin before he lost the presidential election to Viktor Yushchenko during the Orange Revolution of 2004, evidently won assurances in his first trip to Russia since taking office that natural gas giant Gazprom will not raise prices the rest of 2006 and is amenable to negotiating a fair pact for 2007 and beyond. This is a clear effort on the Kremlin's part to woo Ukraine back into its orbit. But Yanukovych is in a tough position, as Yushchenko would not have accepted him as prime minister without assurances Yanukovych will keep the government on a path that favors the West on issues such as NATO membership.

Mexico: A top drug lord was captured by U.S. authorities while deep-sea fishing in the Pacific. No word on whether or not he landed the big one before his capture, but some in Mexico are skeptical as to whether he himself is really a big fish.

Dow Jones +2.6% [11381]
S&P 500 +2.8% [1302]
S&P MidCap +3.5%
Russell 2000 +4.8%
Nasdaq +5.2% [2163]

Note: There is one place in the world, it seems, where accessing the Net is virtually impossible; that being Western Ireland and the town of Lahinch that is like a second home to me. So I'm heading there this week for a little golf and will be unable to respond to your e-mails until my return.

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