We Are What We Eat

Michael Pollan writes:

If you are what you eat, and especially if you eat industrial food, as 99 percent of Americans do, what you are is corn. During the last year I've been following a bushel of corn through the industrial food system. What I keep finding in case after case, if you follow the food back to the farm — if you follow the nutrients, if you follow the carbon — you end up in a corn field in Iowa, over and over and over again.

Take a typical fast food meal. Corn is the sweetener in the soda. It's in the corn-fed beef Big Mac patty, and in the high-fructose syrup in the bun, and in the secret sauce. Slim Jims are full of corn syrup, dextrose, cornstarch, and a great many additives. The “four different fuels” in a Lunchables meal, are all essentially corn-based. The chicken nugget—including feed for the chicken, fillers, binders, coating, and dipping sauce—is all corn. The french fries are made from potatoes, but odds are they're fried in corn oil, the source of 50 percent of their calories. Even the salads at McDonald's are full of high-fructose corn syrup and thickeners made from corn.

Corn is the keystone species of the industrial food system, along with its sidekick, soybeans, with which it shares a rotation on most of the farms in the Midwest. I'm really talking about cheap corn — overproduced, subsidized, industrial corn — the biggest legal cash crop in America. Eighty million acres — an area twice the size of New York State — is blanketed by a vast corn monoculture like a second great American lawn.

I believe very strongly that our overproduction of cheap grain in general, and corn in particular, has a lot to do with the fact that three-fifths of Americans are now overweight. The obesity crisis is complicated in some ways, but it's very simple in another way. Basically, Americans are on average eating 200 more calories a day than they were in the 1970s. If you do that and don't get correspondingly more exercise, you're going to get a lot fatter. Many demographers are predicting that this is the first generation of Americans whose life span may be shorter than their parents'. The reason for that is obesity, essentially, and diabetes specifically.

Where do those calories come from? Except for seafood, all our calories come from the farm. Compared with the mid-to-late 1970s, American farms are producing 500 more calories of food a day per American. We're managing to pack away 200 of them, which is pretty heroic on our part. A lot of the rest is being dumped overseas, or wasted, or burned in our cars. (That's really how we're trying to get rid of it now: in ethanol. The problem is that it takes almost as much, or even more, energy to make a gallon of ethanol than you get from that ethanol. People think it's a very green fuel, but the process for making it is not green at all.)

Overproduction sooner or later leads to overconsumption, because we’re very good at figuring out how to turn surpluses into inexpensive, portable new products. Our cheap, value-added, portable corn commodity is corn sweetener, specifically high-fructose corn syrup. But we also dispose of overproduction in corn-fed beef, pork, and chicken. And now we're even teaching salmon to eat corn, because there's so much of it to get rid of.

There is a powerful industrial logic at work here, the logic of processing. We discovered that corn is this big, fat packet of starch that can be broken down into almost any basic organic molecules and reassembled as sweeteners and many other food additives. Of the 37 ingredients in chicken nuggets, something like 30 are made, directly or indirectly, from corn.

Now, how do you get people to eat so much of this reengineered surplus corn? That took the ingenuity of American marketing. One example is supersizing. When I was a kid, Coke came in these lovely little eight-ounce glass containers. Today, a 20-ounce container is the standard size for soda. The idea that you could sell soda that way was an invention. It has a history, and you can find the individual responsible, an ingenious movie theater manager named David Wallerstein, who invented the idea of supersizing and sold it to Ray Kroc, founder of McDonald's.

Before you go out and sue McDonald's over the size of your waistline, consider that overproduction of cheap corn is government policy. It's done in the name of the public interest, using our taxpayer dollars. American taxpayers subsidize every bushel of industrial corn produced in this country, at a cost of some four billion dollars a year (out of a total of 19 billion dollars in direct payments to farmers).

But before you blame subsidies for all these problems keep in mind that agricultural overproduction is an ancient problem that long predates subsidies. In any other business, when the price of the commodity you're selling falls, the smart thing to do is to curtail production until demand raises prices. But farmers don't do that, because there are so many of them, and because they all operate as individuals, without any coordination. So when prices fall farmers actually expand production, in order to keep their cash flow from falling. This economically and environmentally disastrous phenomenon has resulted in an increase in the American corn harvest from four billion to ten billion bushels since the 1970s.

How do we begin to change this system? First, we all need to begin to pay attention to the Farm Bill, working to develop farm programs that allow farmers to stay in business without falling into the trap of overproduction. Most city people don't realize the stake they have in it. They assume it's a parochial concern of members of Congress from farm states, but it's not. If it were called the Food Bill, I think we would all pay a lot more attention to it, and get a saner result. The Farm Bill sets out the rules of the game that everyone is playing in, whether you're an industrial or an organic farmer, whether you're eating industrially or not.

The other thing we can do is become responsible consumers. I’ve never liked the word "consumer." It sounds like a character who’s using up the world, rather than creating anything. I was at a gathering in Italy last October where Carlos Petrini, the founder and president of Slow Food International, offered a wonderful redefinition of the word. He called the consumer a “cocreator.” I think that’s exactly right, and we’ve seen why: with the organic movement, consumers and farmers have shown how they can work together as cocreators of an alternative food system. We need to join together now, to recruit a larger and larger army of cocreators, to rewrite the rules of the game — and “cocreate” a different kind of food system.

Secret ID Law to Get Hearing

Wired reports:

Although John Gilmore lives just five blocks from San Francisco's Department of Motor Vehicles, his driver's license is expired. On purpose.

The outspoken, techno-hippie, wealthy civil libertarian doesn't want to give his Social Security number to the DMV.

Neither will he show his driver's license at airports, or submit to routine security searches. This refusal to obey the rules led him to file suit against the Bush administration (Gilmore v. Gonzales) after being rebuffed at two different airports on July 4, 2002, when he tried to fly without showing identification. One airline offered to let Gilmore fly without showing ID, but only if he underwent more intensive security screening, which he declined.

On Thursday, Gilmore and his lawyers will get 20 minutes in front of the 9th U.S. Circuit Court of Appeals to make their argument against identification requirements and government secrecy, in a case that time and shifting public opinion has transformed from a quirky millionaire's indignant protest into a closely watched test of the limitations of executive branch power.

"The nexus of the case has always been the right to travel," Gilmore said. "Can the government prevent Americans from moving around in their own country by slapping any silly rules on them -- you have to show ID, you have to submit to searches, you have to wear a yarmulke?"

Gilmore has sunk thousands of dollars into fighting identification requirements, but he also personally committed to not traveling in the United States if he has to show identification.

So Gilmore has not taken a train, an intercity bus or a domestic flight since July 4, 2002. He still flies internationally.

Gilmore describes himself as being under "regional arrest," and said he would love to drive and fly again.

"I'm a millionaire," Gilmore said. "I can do whatever the fuck I want, right? Why should I run around without an ID? Because no one else was paying attention to that and letting our liberties slip down the drain. I figured it was worth some amount of money and some amount of personal sacrifice to keep a free society."

Gilmore has long been a prominent figure in the privacy and civil liberties communities -- he co-founded the Electronic Frontier Foundation. But many civil liberties advocates begged Gilmore not to file suit in 2002 because they were certain he would lose and set bad case law, according to Gilmore's lawyer, Jim Harrison.
Things might be different in late 2005.

"The same people that were telling John that you really should not do this while the country is inflamed are the same ones that filed friend-of-the-court briefs to the 9th Circuit," Harrison said.

Gilmore also thinks the mood of the country has changed. "It is now considered patriotic to criticize the president," Gilmore said.

While civil liberties groups now publicly back Gilmore's challenge to government secrecy, many privacy advocates still privately grumble that Gilmore's case is not the best vehicle for challenging identification requirements.

On Thursday, Gilmore will argue that the government's secret identification rules -- no federal law compels travelers to show ID -- and no-fly list infringe on his First Amendment rights, but don't make the country safer.

In addition, government lawyers long denied the existence of the rule -- which predates the Sept. 11 terrorist attacks -- even though there are signs in airports cautioning passengers that they are required to show identification.

The government recently switched tactics, acknowledging the rule exists but arguing that the identification requirement is a law-enforcement technique.

So far, the government has refused to show Gilmore the order compelling airlines to ask for identification, saying that the rule is "sensitive security information," a security designation that was greatly expanded by Congress in 2002, allowing the Transportation Security Administration wide latitude to withhold information from the public.

Gilmore argues that secrecy and the power of the "sensitive security information," or SSI, designation is to blame for the repeated privacy scandals at the TSA.

"TSA and DHS in general have set themselves up to be insulated from criticism, to have their inner workings be invisible, because they can pull this magic SSI shield over anything they do," Gilmore said. "And what you see are the natural consequences of that kind of secrecy, which is that incompetence is never detected and corrected."

Patron Saints of Right Wing Think Tanks Acquire Georgia Pacific Corp

Oil barons Charles and David Koch, two of the nation's worst environmental criminals, now control the country's largest privately held company

Media Transparency reports:
In a move that does not bode well for the nation's forests, last month the Koch brothers of Kansas engineered a $13.2 billion buyout of forest products producer Georgia Pacific Corporation, making Koch Industries the nation's largest privately held company. The purchase includes Koch's assumption of $7.8 billion in Georgia Pacific debt, making the total purchase price $21 billion.

The Kochs are smart, focused, and incredibly wealthy. For years they've been pushing both a libertarian and free-market agenda through tens of millions of dollars in contributions to conservative causes, candidates and organizations.

During the late 1980s and early 1990s, Congress investigated their company over allegations that they had stolen over $30 million worth of oil from Indian tribes in Oklahoma. In January 2000, the Environmental Protection Agency leveled "the largest civil fine ever imposed on a company under any federal environmental law to resolve claims related to more than 300 oil spills from its pipelines and oil facilities in six states," according to Justice Department press release; the fine was severely reduced after John Ashcroft became Attorney General.

One of the brothers was recently honored (scroll down for pix) for his generous support of the American Ballet Theatre's production of Raymonda. Who are these men with deep right-wing ties who own a company that will soon become the nation's largest privately held corporation? They're the Kochs from Kansas, and they control Koch Industries.

According to the Toronto Globe and Mail, Koch's purchase of Georgia Pacific would vault Koch past food producer Cargill Inc. as the largest privately held company in the United States, with $80-billion in revenue and 85,000 employees in 50 countries.
In a way, the Georgia Pacific acquisition "completes the circle" for Koch, Scott Silver told Media Transparency. "The ideologues running the land management agencies are the product of the think tanks created by, and funded by, the Koch family," Silver, the executive director of the environmental group Wild Wildnerness, pointed out. "Those ideologues are now in a position to permit Koch's newest acquisition, Georgia-Pacific, to further rape and pillage the public's lands. These think tanks promote the Free-Market ideal when it serves their interests to do so, but in reality, they are firmly committed to the ideal of enriching private interests at enormous direct cost to the American taxpayer."

The Koch (pronounced "coke") brothers, Charles, David, William and Frederick are sons of Kansas. Thirty-eight years ago, Charles took over the company from his father, company founder Fred Koch. According to a recent piece in Business Week, Charles, 70, and David, 65, now "own the bulk of the company after elbowing out their other brothers ... in 1983," buying out William and Frederick for $470 million and $320 million, respectively. In 1998, in a chilling display of family disunity, "the two sets of brothers walked silently past one another in court as William and Frederick lost a lawsuit to extract more money from Charles and David."

In 1940, Fred Koch founded the company as an oil refiner. A graduate of MIT, he was an original member of the anticommunist ultra-conservative John Birch Society, founded in 1958. The sons did not fall far from the tree: Both Charles and David graduated from MIT and have been deeply involved in conservative politics.

According to "Axis of Ideology," (PDF Executive Summary) a 2004 report by the National Committee on Responsive Philanthropy, the two dominant Koch boys have "a combined net worth of approximately $4 billion, placing them among the top 50 wealthiest individuals in the country and among the top 100 wealthiest individuals in the world in 2003, according to Forbes."

Between 1999 and 2001, they gave more than $20 million to a host of conservative organizations; "most of their contributions go[ing] to support organizations and groups advancing libertarian theory, privatization, entrepreneurship and free enterprise," "Axis of Ideology" pointed out (click here to see aggregated grants from the three Koch foundations).

"David, who is executive vice-president and a board member, ran for Vice-President on the Libertarian Party ticket in 1980 and both Charles and David are directors of the free-market advocating Cato Institute and Reason Foundation," Business Week recently pointed out. In an interview with National Journal, David Koch described his philosophy this way: "My overall concept is to minimize the role of government and to maximize the role of the private economy to maximize personal freedoms."

According to SourceWatch, a project of the Center for Media & Democracy, the brothers are "leading contributors to the Koch family foundations, which supports a network of Conservative organizations and think tanks, including Citizens for a Sound Economy, the Manhattan Institute, the Heartland Institute, and the Democratic Leadership Council."

Charles Koch co-founded the Cato Institute in 1977, while David helped launch Citizens for a Sound Economy [http://www.mediatransparency.org/story.php?storyID=40" target="_blank"] in 1986. Over the years, they have given more than $12 million to each, according to the NCRP report. George Mason University is also a well-funded recipient of Koch largesse; receiving more than $23 million from the family's foundations between 1985 and 2002, according to the NCRP.

Charles and David Koch control several family foundations including the Charles G. Koch Foundation, the David H. Koch Foundation and the Claude R. Lambe Foundation. Koch money also flows through Triad Management Services, "an advisory service to conservative donors on groups and candidates to support." Put more precisely, SourceWatch notes that Triad "is a Tom Delay-affiliated organization that launders money from large corporations into congressional campaigns."

Originally and perhaps not surprisingly given their libertarian bent, the brothers were not aficionados of former Republican Kansas Senator Bob Dole. Some reports have it that they considered him more or less as just another spineless politician. In 1986, however, "the Kochs' disdain for Dole began to dissipate when Koch Industries sought financial advantage under 'technical corrections' to a tax revision act," veteran reporter Robert Parry wrote in an extensive investigative report for The Nation magazine. "The Washington Post," Parry noted, "reported that Koch Industries approached Dole and secured the Senator's aid in inserting an exemption from a new real-estate depreciation schedule, a change that was worth several million dollars to the company."

"As a Senate leader ... [Dole] appeared willing to trade his influence for the keys to the Koch political money vault," Parry pointed out in "D(OIL)E: What Wouldn't Bob Do For Koch Oil?" David Koch became "a national vice chairman of the Dole presidential campaign's finance committee ... [and] lin[ed] up deep-pocket contributors for his candidate and the G.O.P." Koch "also helped Dole achieve majority leader status through his checkbook, contributed mightily to a Dole foundation and even turned his Gatsbyish estate in Southampton, New York, into the site for celebrating Dole's 72nd birthday in July 1995, raising $150,000 for his campaign."

One of the strangest aspects of the Koch story is how little the general public knows about the brothers or the company. "Koch is a huge company -- bigger than Microsoft, but few people have heard of it," said Bob Williams, a project manager at the Center for Public Integrity, and the co-author of the report "Koch's Low Profile Belies Political Power: Private Oil Company Does Both Business and Politics With the Shades Drawn."

"Despite its size and political largesse, Koch is able to dodge the limelight because it is privately-held, meaning that nearly all of its business dealings are known primarily only by the company and the Internal Revenue Service," Williams and Kevin Bogardus, co-author of the report, wrote. The company "has spent nearly $4 million on direct lobbying on more than 50 pieces of legislation before Congress, helping shape the debate on everything from limiting class action lawsuits to repealing the estate tax," William and Bogardus pointed out.

In a November 15 News Release issued by the Institute for Public Accuracy, Williams pointed out that the company is "politically active, in campaign contributions, lobbying and, probably most importantly, founding and funding right-leaning libertarian think tanks." The acquisition could have profound effects since both the oil and lumber industries have significant environmental ramifications. "Koch is very solicitous of its many friends in Washington; and when it gets in an environmental bind, it is not shy about calling on those friends in Washington," Williams added.
Williams' 2004 "Koch's Low Profile Belies Political Power" noted that:
"Despite its size and political largess, Koch is able to dodge the limelight because it is privately held, meaning that nearly all of its business dealings are known primarily only by the company and the Internal Revenue Service."

"Although it is both a top campaign contributor and spends millions on direct lobbying, Koch's chief political influence tool is a web of interconnected, right-wing think tanks and advocacy groups funded by foundations controlled and supported by the two Koch brothers."

"Koch has had plenty of run-ins with government regulators and other legal problems in recent years. Through it all, the company has shown a remarkable knack for getting criminal charges dropped and huge potential penalties knocked down."
"Koch has also shown a remarkable ability to get rid of or modify environmental policies and other government rules it doesn't like."

"Amongst the most important, visible and powerful proponents of public lands privatization are the Cato Institute, the Property and Environment Research Center (formerly known as Political Economy Research Center) and the Reason Institute," said Scott Silver, the executive director of Wild Wilderness, a Bend, Oregon-based grassroots environmental organization. "Koch funds have played a major role in the operation of each of these organizations."

The Koch family "is amongst the most powerful and influential movers and shakers promoting privatization in America," Silver added. Over the past several decades, "their money created an extensive infrastructure of Libertarian and Free-Market think tanks from which President Bush has drawn to staff the highest rungs of the land management agencies."

The acquisition of Georgia-Pacific, which "does extensive logging on public lands" and "is a heavily subsidized form of corporate welfare," could accelerate the trend toward the privatization of our national forests Silver argued. "Logging companies such as Georgia-Pacific strip lands bare, destroy vast acreages and pay only a small fee to the federal government in proportion to what they take from the public. They do not operate in the Free-Market when they log public forests."

Over the years, Koch has been "a major polluter," SourceWatch reported. "During the 1990s, its faulty pipelines were responsible for more than 300 oil spills in five states, prompting a landmark penalty of $35 million from Environmental Protection Agency (EPA). In Minnesota, it was fined an additional $8 million for discharging oil into streams. During the months leading up to the 2000 presidential elections, the company faced even more liability, in the form of a 97-count federal indictment charging it with concealing illegal releases of 91 metric tons of benzene, a known carcinogen, from its refinery in Corpus Christi, Texas."

After Bush took office in 2000, the 97-count indictment was reduced by 88. The balance was then settled when, "two days before the trial" then- Attorney General John Ashcroft "settled for a plea bargain in which Koch pled guilty to falsifying documents. All major charges were dropped, and Koch and Ashcroft settled the lawsuit for a fraction" of the possible $350 million in fines. (According to SourceWatch, Koch had contributed $800,000 to the Bush election campaign and other Republican candidates.)

That did not stop the company from polluting: In 2003, Koch bought Invista, the world's largest fibers company (which owns brands such as Lycra and Teflon) from DuPont for more than $4 billion in cash. According to a November 11 report in The News Virginian -- serving Waynesboro, Staunton and Augusta County, Va. -- "the Virginia Department of Environmental Quality log[ed] 16 spills by the textiles plant this year [and] warned Invista in a Nov. 9 violation notice that 'civil charges' and 'corrective action' might be on the way."

A follow-up editorial two days later pointed out that Dupont, which previously owned the plant, used "the South River as a toilet for nearly 75 years," but when the operation "employed 4,000-plus locals in high-paying jobs, the powers-that-be here seemed to ignore the mercury the plant dumped into our river." Before the acquisition by Koch, the plant employed about 1,000 workers; now the workforce numbers about 700.

Up in the Air

Where is the Iraq war headed next?

In the New Yorker, Seymour Hersh wrote:

In recent weeks, there has been widespread speculation that President George W. Bush confronted by diminishing approval ratings and dissent within his own party, will begin pulling American troops out of Iraq next year. The Administration’s best-case scenario is that the parliamentary election scheduled for December 15th will produce a coalition government that will join the Administration in calling for withdrawal to begin in the spring. By then, the White House hopes, the new government will be capable of handling the insurgency. In a speech on November 19th, Bush repeated the latest Administration catchphrase: “As Iraqis stand up we will stand down.” He added, “When our commanders on the ground tell me that Iraq forces can defend their freedom, our troops will come home with the honor they have earned. One sign of the political pressure on the Administration to prepare for withdrawal came last week, when Secretary of State Condoleezza Rice told Fox News that the current level of American troops would not have to be maintained “for very much longer,” because the Iraqis were getting better at fighting the insurgency.

A high-level Pentagon war planner told me, however, that he has seen scant indication that the President would authorize a significant pullout of American troops if he believed that it would impede the war against the insurgency. There are several proposals currently under review by the White House and the Pentagon; the most ambitious calls for American combat forces to be reduced from a hundred and fifty-five thousand troops to fewer than eighty thousand by next fall, with all American forces officially designated “combat” to be pulled out of the area by the summer of 2008. In terms of implementation, the planner said, “the drawdown plans that I’m familiar with are condition-based, event-driven, and not in a specific time frame”—that is, they depend on the ability of a new Iraqi government to defeat the insurgency. (A Pentagon spokesman said that the Administration had not made any decisions and had “no plan to leave, only a plan to complete the mission.”)

A key element of the drawdown plans, not mentioned in the President’s public statements, is that the departing American troops will be replaced by American airpower. Quick, deadly strikes by U.S. warplanes are seen as a way to improve dramatically the combat capability of even the weakest Iraqi combat units. The danger, military experts have told me, is that, while the number of American casualties would decrease as ground troops are withdrawn, the over-all level of violence and the number of Iraqi fatalities would increase unless there are stringent controls over who bombs what.

“We’re not planning to diminish the war,” Patrick Clawson, the deputy director of the Washington Institute for Near East Policy, told me. Clawson’s views often mirror the thinking of the men and women around Vice-President Dick Cheney and Defense Secretary Donald Rumsfeld. “We just want to change the mix of the forces doing the fighting—Iraqi infantry with American support and greater use of airpower. The rule now is to commit Iraqi forces into combat only in places where they are sure to win. The pace of commitment, and withdrawal, depends on their success in the battlefield.”

He continued, “We want to draw down our forces, but the President is prepared to tough this one out. There is a very deep feeling on his part that the issue of Iraq was settled by the American people at the polling places in 2004.” The war against the insurgency “may end up being a nasty and murderous civil war in Iraq, but we and our allies would still win,” he said. “As long as the Kurds and the Shiites stay on our side, we’re set to go. There’s no sense that the world is caving in. We’re in the middle of a seven-year slog in Iraq, and eighty per cent of the Iraqis are receptive to our message.”

One Pentagon adviser told me, “There are always contingency plans, but why withdraw and take a chance? I don’t think the President will go for it”—until the insurgency is broken. “He’s not going to back off. This is bigger than domestic politics.”
Current and former military and intelligence officials have told me that the President remains convinced that it is his personal mission to bring democracy to Iraq, and that he is impervious to political pressure, even from fellow Republicans. They also say that he disparages any information that conflicts with his view of how the war is proceeding.

Bush’s closest advisers have long been aware of the religious nature of his policy commitments. In recent interviews, one former senior official, who served in Bush’s first term, spoke extensively about the connection between the President’s religious faith and his view of the war in Iraq. After the September 11, 2001, terrorist attacks, the former official said, he was told that Bush felt that “God put me here” to deal with the war on terror. The President’s belief was fortified by the Republican sweep in the 2002 congressional elections; Bush saw the victory as a purposeful message from God that “he’s the man,” the former official said. Publicly, Bush depicted his reëlection as a referendum on the war; privately, he spoke of it as another manifestation of divine purpose.

The former senior official said that after the election he made a lengthy inspection visit to Iraq and reported his findings to Bush in the White House: “I said to the President, ‘We’re not winning the war.’ And he asked, ‘Are we losing?’ I said, ‘Not yet.’ ” The President, he said, “appeared displeased” with that answer.

“I tried to tell him,” the former senior official said. “And he couldn’t hear it.”
There are grave concerns within the military about the capability of the U.S. Army to sustain two or three more years of combat in Iraq. Michael O’Hanlon, a specialist on military issues at the Brookings Institution, told me, “The people in the institutional Army feel they don’t have the luxury of deciding troop levels, or even participating in the debate. They’re planning on staying the course until 2009. I can’t believe the Army thinks that it will happen, because there’s no sustained drive to increase the size of the regular Army.” O’Hanlon noted that “if the President decides to stay the present course in Iraq some troops would be compelled to serve fourth and fifth tours of combat by 2007 and 2008, which could have serious consequences for morale and competency levels.”

Many of the military’s most senior generals are deeply frustrated, but they say nothing in public, because they don’t want to jeopardize their careers. The Administration has “so terrified the generals that they know they won’t go public,” a former defense official said. A retired senior C.I.A. officer with knowledge of Iraq told me that one of his colleagues recently participated in a congressional tour there. The legislators were repeatedly told, in meetings with enlisted men, junior officers, and generals that “things were fucked up.” But in a subsequent teleconference with Rumsfeld, he said, the generals kept those criticisms to themselves.

One person with whom the Pentagon’s top commanders have shared their private views for decades is Representative John Murtha, of Pennsylvania, the senior Democrat on the House Defense Appropriations Subcommittee. The President and his key aides were enraged when, on November 17th, Murtha gave a speech in the House calling for a withdrawal of troops within six months. The speech was filled with devastating information. For example, Murtha reported that the number of attacks in Iraq has increased from a hundred and fifty a week to more than seven hundred a week in the past year. He said that an estimated fifty thousand American soldiers will suffer “from what I call battle fatigue” in the war, and he said that the Americans were seen as “the common enemy” in Iraq. He also took issue with one of the White House’s claims—that foreign fighters were playing the major role in the insurgency. Murtha said that American soldiers “haven’t captured any in this latest activity”—the continuing battle in western Anbar province, near the border with Syria. “So this idea that they’re coming in from outside, we still think there’s only seven per cent.”

Murtha’s call for a speedy American pullout only seemed to strengthen the White House’s resolve. Administration officials “are beyond angry at him, because he is a serious threat to their policy—both on substance and politically,” the former defense official said. Speaking at the Osan Air Force base, in South Korea, two days after Murtha’s speech, Bush said, “The terrorists regard Iraq as the central front in their war against humanity. . . . If they’re not stopped, the terrorists will be able to advance their agenda to develop weapons of mass destruction, to destroy Israel, to intimidate Europe, and to break our will and blackmail our government into isolation. I’m going to make you this commitment: this is not going to happen on my watch.”

“The President is more determined than ever to stay the course,” the former defense official said. “He doesn’t feel any pain. Bush is a believer in the adage ‘People may suffer and die, but the Church advances.’ ” He said that the President had become more detached, leaving more issues to Karl Rove and Vice-President Cheney. “They keep him in the gray world of religious idealism, where he wants to be anyway,” the former defense official said. Bush’s public appearances, for example, are generally scheduled in front of friendly audiences, most often at military bases. Four decades ago, President Lyndon Johnson, who was also confronted with an increasingly unpopular war, was limited to similar public forums. “Johnson knew he was a prisoner in the White House,” the former official said, “but Bush has no idea.”

Within the military, the prospect of using airpower as a substitute fo American troops on the ground has caused great unease. For one thing Air Force commanders, in particular, have deep-seated objections to the possibility that Iraqis eventually will be responsible for target selection. “Will the Iraqis call in air strikes in order to snuff rivals, or other warlords, or to snuff members of your own sect and blame someone else?” another senior military planner now on assignment in the Pentagon asked. “Will some Iraqis be targeting on behalf of Al Qaeda, or the insurgency, or the Iranians?

“It’s a serious business,” retired Air Force General Charles Horner, who was in charge of allied bombing during the 1991 Gulf War, said. “The Air Force has always had concerns about people ordering air strikes who are not Air Force forward air controllers. We need people on active duty to think it out, and they will. There has to be training to be sure that somebody is not trying to get even with somebody else.” (Asked for a comment, the Pentagon spokesman said there were plans in place for such training. He also noted that Iraq had no offensive airpower of its own, and thus would have to rely on the United States for some time.)

The American air war inside Iraq today is perhaps the most significant—and underreported—aspect of the fight against the insurgency. The military authorities in Baghdad and Washington do not provide the press with a daily accounting of missions that Air Force, Navy, and Marine units fly or of the tonnage they drop, as was routinely done during the Vietnam War. One insight into the scope of the bombing in Iraq was supplied by the Marine Corps during the height of the siege of Falluja in the fall of 2004. “With a massive Marine air and ground offensive under way,” a Marine press release said, “Marine close air support continues to put high-tech steel on target. . . . Flying missions day and night for weeks, the fixed wing aircraft of the 3rd Marine Aircraft Wing are ensuring battlefield success on the front line.” Since the beginning of the war, the press release said, the 3rd Marine Aircraft Wing alone had dropped more than five hundred thousand tons of ordnance. “This number is likely to be much higher by the end of operations,” Major Mike Sexton said. In the battle for the city, more than seven hundred Americans were killed or wounded; U.S. officials did not release estimates of civilian dead, but press reports at the time told of women and children killed in the bombardments.

In recent months, the tempo of American bombing seems to have increased. Most of the targets appear to be in the hostile, predominantly Sunni provinces that surround Baghdad and along the Syrian border. As yet, neither Congress nor the public has engaged in a significant discussion or debate about the air war.

The insurgency operates mainly in crowded urban areas, and Air Force warplanes rely on sophisticated, laser-guided bombs to avoid civilian casualties. These bombs home in on targets that must be “painted,” or illuminated, by laser beams directed by ground units. “The pilot doesn’t identify the target as seen in the pre-brief”—the instructions provided before takeoff—a former high-level intelligence official told me. “The guy with the laser is the targeteer. Not the pilot. Often you get a ‘hot-read’ ”—from a military unit on the ground—“and you drop your bombs with no communication with the guys on the ground. You don’t want to break radio silence. The people on the ground are calling in targets that the pilots can’t verify.” He added, “And we’re going to turn this process over to the Iraqis?”

The second senior military planner told me that there are essentially two types of targeting now being used in Iraq: a deliberate site-selection process that works out of air-operations centers in the region, and “adaptive targeting”—supportive bombing by prepositioned or loitering warplanes that are suddenly alerted to firefights or targets of opportunity by military units on the ground. “The bulk of what we do today is adaptive,” the officer said, “and it’s divorced from any operational air planning. Airpower can be used as a tool of internal political coercion, and my attitude is that I can’t imagine that we will give that power to the Iraqis.”

This military planner added that even today, with Americans doing the targeting, “there is no sense of an air campaign, or a strategic vision. We are just whacking targets—it’s a reversion to the Stone Age. There’s no operational art. That’s what happens when you give targeting to the Army—they hit what the local commander wants to hit.”

One senior Pentagon consultant I spoke to said he was optimistic that “American air will immediately make the Iraqi Army that much better.” But he acknowledged that he, too, had concerns about Iraqi targeting. “We have the most expensive eyes in the sky right now,” the consultant said. “But a lot of Iraqis want to settle old scores. Who is going to have authority to call in air strikes? There’s got to be a behavior-based rule.”

General John Jumper, who retired last month after serving four years as the Air Force chief of staff, was “in favor of certification of those Iraqis who will be allowed to call in strikes,” the Pentagon consultant told me. “I don’t know if it will be approved. The regular Army generals were resisting it to the last breath, despite the fact that they would benefit the most from it.”

A Pentagon consultant with close ties to the officials in the Vice-President’s office and the Pentagon who advocated the war said that the Iraqi penchant for targeting tribal and personal enemies with artillery and mortar fire had created “impatience and resentment” inside the military. He believed that the Air Force’s problems with Iraqi targeting might be addressed by the formation of U.S.-Iraqi transition teams, whose American members would be drawn largely from Special Forces troops. This consultant said that there were plans to integrate between two hundred and three hundred Special Forces members into Iraqi units, which was seen as a compromise aimed at meeting the Air Force’s demand to vet Iraqis who were involved in targeting. But in practice, the consultant added, it meant that “the Special Ops people will soon allow Iraqis to begin calling in the targets.”

Robert Pape, a political-science professor at the University of Chicago, who has written widely on American airpower, and who taught for three years at the Air Force’s School of Advanced Airpower Studies, in Alabama, predicted that the air war “will get very ugly” if targeting is turned over to the Iraqis. This would be especially true, he said, if the Iraqis continued to operate as the U.S. Army and Marines have done—plowing through Sunni strongholds on search-and-destroy missions. “If we encourage the Iraqis to clear and hold their own areas, and use airpower to stop the insurgents from penetrating the cleared areas, it could be useful,” Pape said. “The risk is that we will encourage the Iraqis to do search-and-destroy, and they would be less judicious about using airpower—and the violence would go up. More civilians will be killed, which means more insurgents will be created.”

Even American bombing on behalf of an improved, well-trained Iraqi Army would not necessarily be any more successful against the insurgency. “It’s not going to work,” said Andrew Brookes, the former director of airpower studies at the Royal Air Force’s advanced staff college, who is now at the International Institute for Strategic Studies, in London. “Can you put a lid on the insurgency with bombing?” Brookes said. “No. You can concentrate in one area, but the guys will spring up in another town.” The inevitable reliance on Iraqi ground troops’ targeting would also create conflicts. “I don’t see your guys dancing to the tune of someone else,” Brookes said. He added that he and many other experts “don’t believe that airpower is a solution to the problems inside Iraq at all. Replacing boots on the ground with airpower didn’t work in Vietnam, did it?”

The Air Force’s worries have been subordinated, so far, to the political needs of the White House. The Administration’s immediate political goal after the December elections is to show that the day-to-day conduct of the war can be turned over to the newly trained and equipped Iraqi military. It has already planned heavily scripted change-of-command ceremonies, complete with the lowering of American flags at bases and the raising of Iraqi ones.

Some officials in the State Department, the C.I.A., and British Prime Minister Tony Blair’s government have settled on their candidate of choice for the December elections—Iyad Allawi, the secular Shiite who served until this spring as Iraq’s interim Prime Minister. They believe that Allawi can gather enough votes in the election to emerge, after a round of political bargaining, as Prime Minister. A former senior British adviser told me that Blair was convinced that Allawi “is the best hope.” The fear is that a government dominated by religious Shiites, many of whom are close to Iran, would give Iran greater political and military influence inside Iraq. Allawi could counter Iran’s influence; also, he would be far more supportive and coöperative if the Bush Administration began a drawdown of American combat forces in the coming year.

Blair has assigned a small team of operatives to provide political help to Allawi, the former adviser told me. He also said that there was talk late this fall, with American concurrence, of urging Ahmad Chalabi, a secular Shiite, to join forces in a coalition with Allawi during the post-election negotiations to form a government. Chalabi, who is notorious for his role in promoting flawed intelligence on weapons of mass destruction before the war, is now a deputy Prime Minister. He and Allawi were bitter rivals while in exile.

A senior United Nations diplomat told me that he was puzzled by the high American and British hopes for Allawi. “I know a lot of people want Allawi, but I think he’s been a terrific disappointment,” the diplomat said. “He doesn’t seem to be building a strong alliance, and at the moment it doesn’t look like he will do very well in the election.”

The second Pentagon consultant told me, “If Allawi becomes Prime Minister, we can say, ‘There’s a moderate, urban, educated leader now in power who does not want to deprive women of their rights.’ He would ask us to leave, but he would allow us to keep Special Forces operations inside Iraq—to keep an American presence the right way. Mission accomplished. A coup for Bush.”

A former high-level intelligence official cautioned that it was probably “too late” for any American withdrawal plan to work without further bloodshed. The constitution approved by Iraqi voters in October “will be interpreted by the Kurds and the Shiites to proceed with their plans for autonomy,” he said. “The Sunnis will continue to believe that if they can get rid of the Americans they can still win. And there still is no credible way to establish security for American troops.”

The fear is that a precipitous U.S. withdrawal would inevitably trigger a Sunni-Shiite civil war. In many areas, that war has, in a sense, already begun, and the United States military is being drawn into the sectarian violence. An American Army officer who took part in the assault on Tal Afar, in the north of Iraq, earlier this fall, said that an American infantry brigade was placed in the position of providing a cordon of security around the besieged city for Iraqi forces, most of them Shiites, who were “rounding up any Sunnis on the basis of whatever a Shiite said to them.” The officer went on, “They were killing Sunnis on behalf of the Shiites,” with the active participation of a militia unit led by a retired American Special Forces soldier. “People like me have gotten so downhearted,” the officer added.

Meanwhile, as the debate over troop reductions continues, the covert war in Iraq has expanded in recent months to Syria. A composite American Special Forces team, known as an S.M.U., for “special-mission unit,” has been ordered, under stringent cover, to target suspected supporters of the Iraqi insurgency across the border. (The Pentagon had no comment.) “It’s a powder keg,” the Pentagon consultant said of the tactic. “But, if we hit an insurgent network in Iraq without hitting the guys in Syria who are part of it, the guys in Syria would get away. When you’re fighting an insurgency, you have to strike everywhere—and at once.”

Pentagon Expanding Its Domestic Surveillance Activity

Fears of Post-9/11 Terrorism Spur Proposals for New Powers

The Washington Post reports:

The Defense Department has expanded its programs aimed at gathering and analyzing intelligence within the United States, creating new agencies, adding personnel and seeking additional legal authority for domestic security activities in the post-9/11 world.

The moves have taken place on several fronts. The White House is considering expanding the power of a little-known Pentagon agency called the Counterintelligence Field Activity, or CIFA, which was created three years ago. The proposal, made by a presidential commission, would transform CIFA from an office that coordinates Pentagon security efforts -- including protecting military facilities from attack -- to one that also has authority to investigate crimes within the United States such as treason, foreign or terrorist sabotage or even economic espionage.

The Pentagon has pushed legislation on Capitol Hill that would create an intelligence exception to the Privacy Act, allowing the FBI and others to share information gathered about U.S. citizens with the Pentagon, CIA and other intelligence agencies, as long as the data is deemed to be related to foreign intelligence. Backers say the measure is needed to strengthen investigations into terrorism or weapons of mass destruction.

The proposals, and other Pentagon steps aimed at improving its ability to analyze counterterrorism intelligence collected inside the United States, have drawn complaints from civil liberties advocates and a few members of Congress, who say the Defense Department's push into domestic collection is proceeding with little scrutiny by the Congress or the public.

"We are deputizing the military to spy on law-abiding Americans in America. This is a huge leap without even a [congressional] hearing," Sen. Ron Wyden (D-Ore.), a member of the Senate Select Committee on Intelligence, said in a recent interview.

Wyden has since persuaded lawmakers to change the legislation, attached to the fiscal 2006 intelligence authorization bill, to address some of his concerns, but he still believes hearings should be held. Among the changes was the elimination of a provision to let Defense Intelligence Agency officers hide the fact that they work for the government when they approach people who are possible sources of intelligence in the United States.

Modifications also were made in the provision allowing the FBI to share information with the Pentagon and CIA, requiring the approval of the director of national intelligence, John D. Negroponte, for that to occur, and requiring the Pentagon to make reports to Congress on the subject. Wyden said the legislation "now strikes a much fairer balance by protecting critical rights for our country's citizens and advancing intelligence operations to meet our security needs."

Kate Martin, director of the Center for National Security Studies, said the data-sharing amendment would still give the Pentagon much greater access to the FBI's massive collection of data, including information on citizens not connected to terrorism or espionage.

The measure, she said, "removes one of the few existing privacy protections against the creation of secret dossiers on Americans by government intelligence agencies." She said the Pentagon's "intelligence agencies are quietly expanding their domestic presence without any public debate."

Lt. Col. Chris Conway, a spokesman for the Pentagon, said that the most senior Defense Department intelligence officials are aware of the sensitivities related to their expanded domestic activities. At the same time, he said, the Pentagon has to have the intelligence necessary to protect its facilities and personnel at home and abroad.

"In the age of terrorism," Conway said, "the U.S. military and its facilities are targets, and we have to be prepared within our authorities to defend them before something happens."

Among the steps already taken by the Pentagon that enhanced its domestic capabilities was the establishment after 9/11 of Northern Command, or Northcom, in Colorado Springs, to provide military forces to help in reacting to terrorist threats in the continental United States. Today, Northcom's intelligence centers in Colorado and Texas fuse reports from CIFA, the FBI and other U.S. agencies, and are staffed by 290 intelligence analysts. That is more than the roughly 200 analysts working for the State Department's Bureau of Intelligence and Research, and far more than those at the Department of Homeland Security.

In addition, each of the military services has begun its own post-9/11 collection of domestic intelligence, primarily aimed at gathering data on potential terrorist threats to bases and other military facilities at home and abroad. For example, Eagle Eyes is a program set up by the Air Force Office of Special Investigations, which "enlists the eyes and ears of Air Force members and citizens in the war on terror," according to the program's Web site.

The Marine Corps has expanded its domestic intelligence operations and developed internal policies in 2004 to govern oversight of the "collection, retention and dissemination of information concerning U.S. persons," according to a Marine Corps order approved on April 30, 2004.

The order recognizes that in the post-9/11 era, the Marine Corps Intelligence Activity will be "increasingly required to perform domestic missions," and as a result, "there will be increased instances whereby Marine intelligence activities may come across information regarding U.S. persons." Among domestic targets listed are people in the United States who it "is reasonably believed threaten the physical security of Defense Department employees, installations, operations or official visitors."

Perhaps the prime illustration of the Pentagon's intelligence growth is CIFA, which remains one of its least publicized intelligence agencies. Neither the size of its staff, said to be more than 1,000, nor its budget is public, said Conway, the Pentagon spokesman. The CIFA brochure says the agency's mission is to "transform" the way counterintelligence is done "fully utilizing 21st century tools and resources."

One CIFA activity, threat assessments, involves using "leading edge information technologies and data harvesting," according to a February 2004 Pentagon budget document. This involves "exploiting commercial data" with the help of outside contractors including White Oak Technologies Inc. of Silver Spring, and MZM Inc., a Washington-based research organization, according to the Pentagon document.

For CIFA, counterintelligence involves not just collecting data but also "conducting activities to protect DoD and the nation against espionage, other intelligence activities, sabotage, assassinations, and terrorist activities," its brochure states.

CIFA's abilities would increase considerably under the proposal being reviewed by the White House, which was made by a presidential commission on intelligence chaired by retired appellate court judge Laurence H. Silberman and former senator Charles S. Robb (D-Va.). The commission urged that CIFA be given authority to carry out domestic criminal investigations and clandestine operations against potential threats inside the United States.

The Silberman-Robb panel found that because the separate military services concentrated on investigations within their areas, "no entity views non-service-specific and department-wide investigations as its primary responsibility." A 2003 Defense Department directive kept CIFA from engaging in law enforcement activities such as "the investigation, apprehension, or detention of individuals suspected or convicted of criminal offenses against the laws of the United States."

The commission's proposal would change that, giving CIFA "new counterespionage and law enforcement authorities," covering treason, espionage, foreign or terrorist sabotage, and even economic espionage. That step, the panel said, could be taken by presidential order and Pentagon directive without congressional approval.

White House spokeswoman Dana Perino said the CIFA expansion "is being studied at the DoD [Defense Department] level," adding that intelligence director Negroponte would have a say in the matter. A Pentagon spokesman said, "The [CIFA] matter is before the Hill committees."

Sen. John W. Warner (R-Va.), chairman of the Senate Armed Services Committee, said in a recent interview that CIFA has performed well in the past and today has no domestic intelligence collection activities. He was not aware of moves to enhance its authority.

The Senate Select Committee on Intelligence has not had formal hearings on CIFA or other domestic intelligence programs, but its staff has been briefed on some of the steps the Pentagon has already taken. "If a member asks the chairman" -- Sen. Pat Roberts (R-Kan.) -- for hearings, "I am sure he would respond," said Bill Duhnke, the panel's staff director.

What Jim Rogers is Buying Now

Jim Rogers, investment legend, talks to MoneyWeek about investing in commodities, the price of oil, the new Federal Reserve chairman - and the value of orange juice as a safe haven investment

Money Week Interviews Jim Rogers, "Investment Legend":

Harry Stourton: Let’s start with oil. You’ve been bullish on the price for some time, but now it has fallen from its peaks, what do you think will happen next?

Jim Rogers: Oil has fallen from $70 a barrel to $55. And I think it will go lower – it’s normal to have a correction in any kind of market. But this is a short-term thing. My view is that the next surprise is going to be how high the price of oil stays and how high it goes ultimately. There have been no big oil discoveries in the last 35 years and all the major oil fields are in decline. The UK has been one of the world’s great exporters for 25 years, but it is going to be importing oil within the decade. Malaysia will be importing oil within the decade; Indonesia is now importing oil and has been thrown out of Opec as a result. Mexican production is in decline; the oil fields in Alaska are in decline. Unless somebody finds a lot of accessible oil and finds it soon the price of oil is going to go much, much higher.

HS: What about Saudi? Doesn’t it have the capacity to increase production?

JR: In 1979, the last time Aramco (the Saudi state oil company) had its reserves independently audited, there were 245 billion barrels in reserve. We then didn’t hear from Saudi Arabia for a decade and in 1988 it announced it had 260 billion barrels of oil. Now, Saudi Arabia announces every time that it has 260 billion barrels of oil. It’s the goddamndest thing you ever saw – they’ve produced 63 million barrels of oil in the last 17 years, but their reserves never go up, never go down! Yet all the other fields in the world are in decline. I’m not a geologist, but I know something’s wrong.

HS: So oil companies should really be spending more on exploration?

JR: Yes. Exploring is expensive and they haven’t been doing enough of it because their budgets put the oil price at $28. Well, maybe oil is going to go to $28, but if it goes to $28, buy all that you can cause it ain’t gonna stay there very long! They should be raising their forecasts and hence the amount they spend on finding new oil. Instead, they’ve been spending money buying up other oil companies to increase their reserves, but that does not increase the world’s reserves. It’s great for the CEOs, but it doesn’t do much for the supply of oil in the world.

HS: Do you invest in oil exploration firms?

JR: Not really. Studies show that you make more money investing in commodities themselves than in the shares of companies that produce them. I own Woodside Petroleum, and in the commodities sector as a whole BHP and Rio Tinto, but I’ve owned these for a long time. I wouldn’t buy them now.

HS: What about refining companies?

JR: I don’t own any, but some of the refining firms are making a fortune. There have been no new refineries built in the US for 30 years.

HS: So do you think there is opportunity in the new energy technology sector?

JR: Oh yeah, it’s going to happen – no question, it’s going to happen. But someday, a long way away. Wind power is not all it’s cracked up to be – it’s not that easy. You’ve got to have the right wind and, even in the best places, wind is only effective, say, 40% of the time. Solar energy is not competitive at present prices – it only will be if oil goes to $150 a barrel. New energy firms will end up making money; that certainly will happen as the price of oil continues to go higher and as the availability of hydrocarbons declines. And that may be what brings the oil bull market to an end someday – perhaps in 2018, 2022, whenever this commodities bull market is going to end. Yeah, there’s certainly going to be effective alternative-energy sources, but you won’t be able to get them working competitively in the next decade, no matter how hard you try.

HS: Let’s move on to the metals. Copper is making all-time highs.

JR: Again, nobody is opening any major new copper mines. Phelps Dodge, which I think is the second-largest copper company in the world, says it is just going to continue to develop and maybe enlarge its present mines. Most copper companies have made that same decision; most base metals companies have made that decision. Like oil firms, the big mining concerns are just buying other mining companies to grow instead of spending money on new mines.

HS: So prices will keep going up. You’ve come out often as being bearish on the dollar. It has rallied a lot this year. What are your views on its prospects now?

JR: In 2003 and 2004, everyone was selling the US dollar. It was on the front page of The New York Times for about three days in December 2004. That kind of coverage is always a sure sign that whatever the subject is, it’s about to go the other way. That rally is continuing partly because US has given the multinational corporations these gigantic tax breaks to bring money back into the US this year, so that is what they are doing. I don’t know how much further the rally has to go, but I have a feeling that something may happen to cause the final spike. It could be that Bush is going to pull out of Iraq sooner than expected, or it could be bird flu decimating Europe, but not America. But whatever it is that causes the final spike, I urge you to sell. I am still extremely bearish on the US dollar fundamentally in the long term. I have not sold any dollars for a while, but I plan to sell a lot more when, and if, the final spike comes.

HS: In favour of which currencies?

JR: Maybe the Canadian dollar, the Singapore dollar, the New Zealand dollar. The yen has been very weak recently. I’m not thinking about it right now because the US dollar rally hasn’t finished yet.

HS: We are about to see a regime change at the federal reserve. Ben Bernanke will be taking over from Alan Greenspan. What does that mean for markets?

JR: Disaster. Bernanke will probably ensure the demise of the Federal Reserve. It won’t be completely his fault – Greenspan has laid the foundations – but the problem is that Bernanke doesn’t understand currency markets. He is the guy who said we control the printing presses and we will run them as fast as we have to. He’s the guy who says it doesn’t matter if the US has its biggest trade deficit ever. I’m not the only person who’s getting worried about it. The Iranians are going to start trading oil in non-US dollars next year and there are other people starting to try to figure out what in the hell to do about this situation. Bernanke does not understand that – on the contrary, he thinks there isn’t a problem. You know we’ve had two Central Banks in the US before, they both failed and this one looks like it’s going to fail too.

HS: The long-term issues with the dollar aside, how do you see things panning out for the US economy next year?

JR: The economy has been, and is, slowing and will continue to slow for a variety of reasons. We will probably have a recession next year, but whether it’s short and sweet or the beginning of the end, I don’t know.

HS: That won’t be good for commodity prices will it?

JR: Maybe, maybe not. In the 1970s we had some horrible recessions, hard times all over the world. The UK, despite being one of the five largest economies in the world at that time, went bankrupt. The IMF had to come in and bail it out. But we still had a very good bull market in commodities. That doesn’t mean the same thing will happen this time round, but on the other hand, agriculture commodities are priced so far below their all-time highs it’s hard to see them falling, and the Chinese are not going to suddenly stop eating if America has a recession. They are also not going to stop wanting and needing electricity, many hundreds of millions of Chinese don’t have electricity yet and they are going to get electricity whether the US is in recession or not.

HS: Are you concerned about the global real-estate bubble?

JR: I am certainly worried about the UK, Spain, Netherlands, Australia and some parts of the US. I am short home builders in the US, for example, but in the US there are many states where real estate has done virtually nothing. You can go to Akron, Ohio and they don’t know there’s a real-estate boom going on. On the East Coast and in Florida and California, yes, there has been a bubble, but it is slowing pretty quickly. It looks as if it may have peaked in July and prices are now going down in much of the US. But look back to Iowa or Oklahoma and it looks different. Prices haven’t moved yet, but they will. All those farmers and miners are all going to be making a lot of money in the next 15 years and so prices will go up. In parts of Canada, real estate will continue to rise. And probably the Middle East too. There’s a huge boom there, but in places like that where the next decade will be a prosperous one, real estate will do fine.

HS: You say prices are falling in many parts of the US. How serious a problem is that?

JR: It’s going to be one of the causes of next year’s recession. I know of a building in New York on Fifth Avenue across from the Metropolitan Museum where there are only 12 flats in the building and four of them are for sale and they are not moving. The price war hasn’t started in the building yet, but it will. Inventories are building up in many places and the sellers are starting to realise that it isn’t so easy to sell as it was. At the same time, buyers are thinking, “Hey, we don’t have to rush anymore.” So it’s started.

HS: What’s your current view on global stockmarkets?

JR: Europe has been doing better than the US, partly because a lot of people are afraid to put their money in the US and also because the ECB’s monetary policy is even looser than the Federal Reserve’s. But I suspect that if the US has problems next year, Europe will have problems too. Maybe not as bad as the US, but problems nonetheless. And if the oil price keeps moving down, say to $45 or $48 (this isn’t a prediction), then there’ll be less money coming out of the oil-producing states to shift into markets. Overall, I would rather own Japanese shares than US ones right now. And I would rather own European shares than US shares, too. Still, I’m not urging you to buy Japanese shares. I own Japanese shares and I am not selling a single one, but at the same time, I wouldn’t buy a single one right now.

HS: So you think Middle Eastern money has been supporting European markets?

JR: Some of it is going to Europe, which is another reason those markets have done better than those in the US. These days, if your name is Mohammed, even if you are a fourth-generation American who has never been to the Middle East and doesn’t know who the prophet was, you can very well suddenly find yourself having your assets being confiscated and being questioned by the police for no real reason at all. This keeps happening and so they are afraid to put their money in the US. It’s less likely to happen in Europe, it’s less likely to happen in Japan and so a lot of this money is going into Europe and Japan and Asia.

HS: And into Middle Eastern stockmarkets?

JR: Yes a lot of it has been going locally, in the Kuwait market, all the markets, andSaudi Arabia. Prices are going through the roof. Stockmarkets in the Middle East are in a wild bubble – there are local chemical companies in Saudi Arabia that are worth more than BP. This, as I say, is partly because many Middle Easterners are afraid to put their money in the US and some are even afraid to put it in Europe, and so all that money is staying home and going into stocks and property. As I said, some of the stocks are unbelievably overpriced. But, as in most bubbles, just because they’re unbelievably overpriced doesn’t mean they can’t get even more unbelievably overpriced, that’s what usually happens.

HS: You say you wouldn’t buy any Japanese stocks at all at the moment. Why is that?

JR: The Japanese market has doubled in two years. That doesn’t mean it can’t double in the next two years – it fell 85% more or less from its peak, so has come from a very low base, and even having doubled is still far, far below its all-time high. But the pace of its rise has started accelerating and anything that has doubled in two years and is starting to accelerate... well, it is not my ideal place to jump in.

HS: But you’re comfortable with the fundamentals in Japan?

JR: More comfortable than I am with those in the US and many other places. The Japanese have huge business interests in China and that makes it one of the best ways to play China. They also moved a lot of their manufacturing to southeast Asia to cut costs, so the profits of the Japanese companies are continuing to do well. Maybe the workers in Japan don’t like the fact that the factories are now in Indonesia or Vietnam, or somewhere, but as far as the Japanese companies are concerned, this kind of move enhances their profitability. They are also not as dependent on the US as they used to be. Thirty years ago, I think something like 45% of their trade was in the US, but that’s shifted. Now around 45% of Japan’s trade is with Asia. So there has been a dramatic change in the last 30 years.

HS: Are there other stockmarkets around the world that you think are interesting?

JR: Natural resource economies look good. Canada would be better than the US if you were going to invest in North America. Brazil will do a lot better in the next 15 years than it has in the past quarter of a century. Even Argentina will do better. Peru, Chile – these are natural resource-based economies that are reasonably well managed. I’m not suggesting that Argentina is well managed, I’m just saying that it is better managed than places such as The Congo, for instance, and it’s better managed than it has been in the past.

HS: Have you invested in Latin America yourself?

JR: I do have some investments in Latin America. It’s going to be a whole lot better than it has been in the past because they are natural-resource-based economies and that’s where the money is. So if you have the time and energy to look abroad, it’s likely you’ll do better with most South American markets than elsewhere. They are going to do a whole lot better in the next 15 years than in the past 15.

HS: I know you’re particularly keen on soft commodities, but they are not moving much yet are they?

JR: If I could only buy one sector in November of 2005 – be it metals, energy or agriculture – it would be agriculture. Sugar has done extremely well, but it is still 80% below its all-time high. Coffee has done pretty well, but it’s still 70%-75% below its all-time high.These commodities still have enormous potential.

HS: So what are your favourite commodities right now?

JR: If I tell you my favourite commodities, you’d better sell them. I am just not good at timing. But if you looked at, say, coffee, or cotton, or soya beans, or maize, you might find some opportunities.

HS: What about China itself? We know it’s driving the price rises in a lot of these commodity markets, but what about investing in China?

JR: When I say I’m bullish on China, which I am, I’m talking about being bullish on it as a nation, as an economy, but not necessarily as a market. I’m still not buying Chinese shares. I had thought there would be a correction in China and that, as a result, there would be better opportunities to buy Chinese shares, but it hasn’t happened. I own Chinese shares, but I bought them in 1999.

HS: Are you still concerned there may be a correction or crash of any kind coming in China?

JR: I expect a correction in real estate – I would have thought it would have happened by now, but it hasn’t. Or not dramatically anyway. They tell me it is happening slowly though. As it goes on, I would expect a lot of speculators in real estate to get wiped out – maybe in the next few weeks or months. I thought they would have been wiped out already. But this kind of thing will make no difference to the wider growth story. If you’re in agriculture, or if you’re in coal mining, electricity – you are having one of the greatest booms of your life and it’s going to last for another 15 years. You know, in some parts of the Chinese economy they won’t have a clue that a bunch of real-estate speculators got wiped out in Shanghai or someplace.

If real-estate speculation collapses and a lot of people get wiped out, it will have some ripple effects, but the guy out there building electricity plants won’t even know what’s happening because he’s too busy and he’s making too much money. It’s the same for the farmers – agriculture in China is just booming. Many parts of the Chinese economy are going to continue to grow over many years to come, regardless.

HS: What about India?

JR: As a nation, China still has a much better future than India. I own a few shares in India Hotels because of the tourism, but I’ve owned these for a long, long time. No, I wouldn’t buy any Indian shares right now.

HS: And Russia?

JR: It’s a disaster spiralling down into a catastrophe. It’s run up, because of oil and commodities, just as Saudi Arabia’s run up, but I’m as pessimistic about the future of Russia as I am about the future of Saudi Arabia. Russia continues to disintegrate. All the ex-Soviet Union states continue to disintegrate. Ukraine may be the next to split into two or three pieces – they are all going to split up.

HS: Now that they have joined the EU, do you invest in eastern European countries?

JR: No. They don’t have much to sell to the rest of the world.

HS: You have said that you are thinking of moving to China. Do you mean it?

JR: We spent several weeks this summer in Shanghai and Singapore just seeing how we felt. I think it is more likely we would move to Singapore, at least at first, because Singapore is easier to move to than Shanghai. We have more or less decided to move to Singapore, it’s just a question of winding down in the US and gearing up in Singapore. Asia is extremely exciting. It’s like moving to London in 1805, or New York in 1905. The future is Asia.

HS: Thanks for talking to us.

Jim Rogers on gold: orange juice is better

HS: You’ve never been a great gold bug have you?

JR: No. I own some gold, but I think you will make more money in other commodities – like sugar – than in gold.

HS: But there is an increasing supply deficit isn’t there?

JR: Not as much as in some other commodities. One of the reasons that I’m not as bullish on gold as I am on other things is that the amount of gold being mined kept going up, even during the bear market. Seventy-five per cent of the money spent looking for metals is spent looking for gold. Nobody is out there looking for zinc, nobody wants to find nickel or tin – they’re all out there looking for gold. And don’t forget the mutual funds and the central banks have gigantic amounts of gold that they want to sell – I don’t know if they’re right or wrong to want to do so – it doesn’t matter what I think. But they do want to sell, so supply and demand is not nearly as good for gold as it is for other things.

HS: But if the dollar declines sharply, won’t demand for gold as a safe haven rise?

JR: Sure, but then again, all commodities are safe havens right now. Orange juice is a better safe haven, coffee is a better safe haven. If the world looks like it is about to come to an end, people will grab for gold and it will sky rocket, but they will also grab for wheat and maize and a lot of other stuff if the world is about to come to an end, because we desperately need to eat. Certainly, the Chinese are getting more prosperous and want more gold, but they also want more sugar right now – they want more everything. I own gold. I’m not bearish, I just don’t think you are going to make as much money there as in other things.

HS: What about silver?

JR: I own some silver too, but again, it isn’t a favourite. Due to technology, the demand from photography is changing quickly and there are still inventories of silver around the world – nothing like as much as there is of gold, but there are a lot more inventories of silver around the world than there are zinc or lead, and that will continue to be the case.

Waist Deep in Big Oil

The Nation reports:
The mid-November revelation in the Washington Post that as early as February 2001 senior executives of at least four of the country's biggest oil companies met with aides to Vice President Cheney has reopened the debate over Big Oil's influence on the Bush Administration's energy policy. The immediate controversy concerns whether executives of ExxonMobil, Conoco, Shell and BP America misled the Senate Energy and Commerce committees when they denied knowledge of the meetings in testimony on November 9. The leaked documents confirm that these meetings in fact took place, but because Republican chair Ted Stevens declined to oblige the executives to testify under oath--which committee Democrats strongly protested at the time--they cannot be charged with perjury. (They could, however, be charged with making false or fraudulent statements to Congress.)

The executives' evasive answers have renewed questions about the functioning of the secretive White House Energy Task Force, especially its unwillingness to draft policies that transcend the interests of Big Oil. The focus on industry profits and prevarication, although it's important, misses a much more important reason for the Bush Administration's desperate attempts to keep documents related to the task force secret. In a word: Iraq.