Tuesday, August 29, 2006

9/11 and the American Empire
Thursday, May 12, 2005 - 12:02 PM

I will begin by unpacking the key terms in the title of my talk: “9/11,” “American empire,” and “religious people,” beginning with the last one.

1. Religious People

Although I am a Christian theologian, I am in this talk addressing religious people in general. I am doing so because I believe that religious people should respond to 9/11 and the American empire in a particular way because of moral principles of their religious traditions that are common to all the historic religious traditions.[1] I have in mind principles such as:

Thou shalt not covet thy neighbors’ oil.
Thou shalt not murder thy neighbors in order to steal their oil.
Thou shalt not bear false witness against thy neighbors, accusing them of illicitly harboring weapons of mass destruction, in order to justify killing them in order to steal their oil.

This language is, of course, language that we associate with the Abrahamic religions—Judaism, Christianity, and Islam. But the same basic ideas can be found in other religious traditions.

I turn now to “American empire,” which has been a highly contentious term.

2. American Empire: Divergent Views

In his 2002 book American Empire, Andrew Bacevich points out that it was long a “cherished American tradition [that] the United States is not and cannot be an empire.”[2] The words “American empire,” he adds, were “fighting words,” so that uttering them was an almost sure sign that one was a left-wing critic of America’s foreign policy. But as Bacevich also points out, this has all recently changed, so that now even right-wing commentators freely acknowledge the existence of the American empire. As columnist Charles Krauthammer said in 2002: “People are coming out of the closet on the word ‘empire.’”[3] This new frankness often includes an element of pride, as exemplified by Krauthammer’s statement that America is “no mere international citizen” but “the dominant power in the world, more dominant than any since Rome.”[4]

Given this consensus about the reality of the American empire, the only remaining matter of debate concerns its nature. The new frankness about the empire by conservatives is generally accompanied by portrayals of it as benign. Robert Kagan has written of “The Benevolent Empire.”[5] Dinesh D’Souza, after writing in 2002 that “American has become an empire,” added that happily it is “the most magnanimous imperial power ever.”[6] According to Krauthammer, the fact that America’s claim to being a benign power “is not mere self-congratuation” is shown by its “track record.”[7]

Commentators from the left, however, have a radically different view. A recent book by Noam Chomsky is subtitled America’s Quest for Global Dominance[8] Richard Falk has written of the Bush administration’s “global domination project,” which poses the threat of “global fascism.”[9] Chalmers Johnson was once a conservative who believed that American foreign policy aimed at promoting freedom and democracy. But he now describes the United States as “a military juggernaut intent on world domination.”[10]

Andrew Bacevich is another conservative who has recently changed his mind. Unlike Johnson, he has not come to identify with the left, but he has come to agree with its assessment of the American empire.[11] He now ridicules the claim “that the promotion of peace, democracy, and human rights and the punishment of evil-doers—not the pursuit of self-interest—[has] defined the essence of American diplomacy.”[12] Pointing out that the aim of the US military has been “to achieve something approaching omnipotence,” Bacevich mocks the idea that such power in America’s hands “is by definition benign.”[13]

3. 9/11: Four Interpretations

If “American empire” is understood in different ways, the same is all the more true of the term “9/11.” For those Americans who accept the official interpretation, 9/11 was a surprise attack on the US government and its people by Islamic terrorists.

For some Americans, “9/11” has a more complex meaning. This second group, while accepting the official interpretation of the attacks, thinks of 9/11 primarily as an event that was used opportunistically by the Bush administration to extend the American empire. This interpretation is effectively presented by writers such as Noam Chomsky, Rahul Mahajan, and Chalmers Johnson.[14]

For a third group of Americans, the term “9/11” connotes an event with a more sinister dimension. These citizens believe that the Bush administration knew the attacks were coming and intentionally let them happen. Although no national poll has been taken to ascertain how many Americans hold this view, a Zogby poll surprisingly indicated that almost half of the residents of New York City do.[15]

According to a fourth view of 9/11, the attacks were not merely foreknown by the Bush administration; they were orchestrated by it. Although thus far no poll has tried to find out how many Americans hold this view, polls in Canada and Germany some time back indicated that this view was then held by 15 to 20 percent of their people.[16]

4. 9/11 and the American Empire Religious people who take the moral principles of their religious tradition seriously will probably have very different attitudes toward the American empire, depending upon which of these four views of 9/11 they hold.

If they accept the official view, according to which America was the innocent victim of evil terrorists, then it is easy for them to think of America’s so-called war on terror as a just war. This is the position taken by Jean Bethke Elshtain, a professor of ethics at the University of Chicago’s Divinity School, in a book called Just War Against Terror.[17] From this perspective, the “war on terror” has nothing to do with imperial designs. It is simply a war to save the world from evil terrorists.[18]

The second interpretation of 9/11, according to which the Bush administration cynically exploited the 9/11 attacks to further its imperial plans, has quite different implications. Although it thinks of the attacks as surprise attacks, planned entirely by external enemies of America, it usually regards these attacks as “blowback” for injustices perpetrated by US imperialism. This second view also typically regards the American response to the attacks of 9/11, which has already led to hundreds of thousands of deaths, as far worse than the attacks themselves. This interpretation of 9/11 would lead people who take their religion’s moral principles seriously to support a movement to change US foreign policy.

An even stronger reaction would normally be evoked by the third interpretation, for it entails that the Bush administration allowed thousands of its own citizens to be killed on 9/11, deliberately and cold-bloodedly, for the sake of advancing its imperial designs, and then used this event as an excuse to kill hundreds of thousands of people in other countries, all the while hypocritically portraying itself as promoting a “culture of life.” Of course, those who accept the previous interpretation know that hypocrisy with regard to the “sanctity of life” has long been a feature of official rhetoric. And yet most Americans, if they learned that their government had deliberately let their own citizens be killed, would surely consider this betrayal qualitatively different. For this would be treason, a betrayal of the oath taken by American political leaders to protect their own citizens.

If this third view implies that the Bush administration is guilty of a heinous and even treasonous act, this is all the more the case with the fourth view. For many Americans, the idea that we are living in a country whose own leaders planned and carried out the attacks of 9/11 is simply too horrible to entertain. Unfortunately, however, there is strong evidence in support of this view. And if we find this evidence convincing, the implications for resistance to US empire-building are radical.

As Bacevich has emphasized, the only remaining debate about the American empire is whether it is benign. The interpretation of 9/11 is relevant to this debate, because it would be difficult to accept either the third or the fourth interpretation and still consider American imperialism benign.

I turn now to some of the evidence that supports these views. I will look first at evidence that supports (at least) the third view, according to which US officials had foreknowledge of the attacks.

5. Evidence for Foreknowledge by US Officials

A central aspect of the official story about 9/11 is that the attacks were planned entirely by al Qaeda, with no one else knowing the plans. A year after the attacks, FBI Director Robert Mueller said: "To this day we have found no one in the United States except the actual hijackers who knew of the plot."[19] Since that time, federal officials have had to admit that they had received far more warnings prior to 9/11 than they had previously acknowledged. But these admissions, while raising the question of why further safety measures were not put in place, do not necessarily show that federal officials had specific foreknowledge of the attacks. One could still, as did the 9/11 Commission, accept the conclusion published at the end of 2002 by the Congressional Joint Inquiry, according to which “none of [the intelligence gathered by the US intelligence community] identified the time, place, and specific nature of the attacks that were planned for September 11, 2001.”[20]

Unfortunately for the official account, however, there are reports indicating that federal officials did have that very specific type of information. I will give two examples.

David Schippers and the FBI Agents: The first example involves attorney David Schippers, who had been the chief prosecutor for the impeachment of President Clinton. Two days after 9/11, Schippers declared that he had received warnings from FBI agents about the attacks six weeks earlier—warnings that included both the dates and the targets. These agents had come to him, Schippers said, because FBI headquarters had blocked their investigations and threatened them with prosecution if they went public with their information. They asked Schippers to use his influence to get the government to take action to prevent the attacks. Schippers was highly respected in Republican circles, especially because of his role in the impeachment of Clinton. And yet, he reported, Attorney General Ashcroft repeatedly failed to return his calls.[21]

Schippers’ allegations about the FBI agents were corroborated in a story by William Norman Grigg called “Did We Know What Was Coming?”, which was published in The New American, a very conservative magazine. According to Grigg, the three FBI agents he interviewed told him “that the information provided to Schippers was widely known within the Bureau before September 11th.”[22]

If Schippers, Grigg, and these agents are telling the truth, it would seem that when FBI Director Mueller claimed that the FBI had found no one in this country with advance knowledge of the plot, he was not telling the truth.

The Put Options: The government also would have had foreknowledge of the attacks because of an extraordinarily high volume of “put options” purchased in the three days before 9/11. To buy put options for a particular company is to bet that its stock price will go down. These purchases were for two, and only two, airlines—United and American—the two airlines used in the attacks, and for Morgan Stanley Dean Witter, which occupied 22 stories of the World Trade Center. The price of these shares did, of course, plummet after 9/11. As the San Francisco Chronicle said, these unusual purchases, which resulted in profits of tens of millions of dollars, raise “suspicions that the investors...had advance knowledge of the strikes.”[23]

For our purposes, the most important implication of this story follows from the fact that US intelligence agencies monitor the market, looking for signs of imminent untoward events.[24] These extraordinary purchases, therefore, would have suggested to intelligence agencies that in the next few days, United and American airliners were going to be used in attacks on the World Trade Center. This is fairly specific information.

These two examples imply the falsity of the Joint Inquiry’s statement that “none of [the intelligence gathered by the US intelligence community] identified the time, place, and specific nature of the attacks.” Indeed, one of the FBI agents interviewed by William Grigg reportedly said: “Obviously, people had to know...It’s terrible to think this, but this must have been allowed to happen as part of some other agenda.”[25]

He was right. This would be terrible. There is considerable evidence, however, that the full truth is even more terrible—that the reason some US officials had foreknowledge of the attacks is because they had planned them.

6. Evidence that US Officials Planned and Executed the Attacks

The evidence for this fourth view consists largely of features of the attacks, in conjunction with behavior by US officials, that cannot be explained on the assumption that the attacks were planned and executed entirely by foreign agents. I will give four examples.

The Military’s Failure to Prevent the Attacks and Its Changing Explanations: One feature of the attacks that suggests complicity by US officials is the twofold fact that the US military failed to prevent the attacks on 9/11 and then, since that time, has give us conflicting explanations for this failure. These changing stories suggest that the military has been trying to cover up the fact that a “stand-down” order was given on 9/11, canceling the military’s own standard operating procedures for dealing with possibly hijacked airplanes.

It is clear that some agency—either the military or the FAA—failed to follow standard procedures on 9/11. When these procedures are followed, the FAA, as soon as it sees signs that a plane may have been hijacked, calls military officials, who then call the nearest air force base with fighters on alert, telling it to send up a couple fighters to intercept the plane. Such interceptions usually occur within 10 to 20 minutes after the first signs of trouble. This is a routine procedure, happening about 100 times a year.[26] (One of the many falsehoods in the recent debunking essay in Popular Mechanics is its claim that in the decade before 9/11, there had been only one interception, that of golfer Payne Stewart’s Learjet.[27] Actually, at about 100 a year, there would have been closer to 1,000 interceptions during that decade.) On 9/11, however, no interceptions occurred.

Why not? The military’s first story was that no planes were sent up until after the Pentagon was hit. The military leaders were admitting, in other words, that they had left their fighters on the ground for almost 90 minutes after the FAA had first noticed signs of a possible hijacking. That story suggested to many people that a stand-down order had been given.[28]

By the end of the week, the military had put out a second story, saying that it had sent up fighters but that, because the FAA had been very late in notifying it about the hijackings, the fighters arrived in each case arrived too late. One problem with this story is that if FAA personnel had responded so slowly, heads should have rolled, but none did. An even more serious problem is that, even assuming the truth of the late notification times, the military’s fighters still had time to intercept the hijacked airliners before they were to hit their targets.[29] This second story implied, therefore, that standard procedures had been violated by the military as well as the FAA.

To try to defend the military against this accusation, The 9/11 Commission Report gave us, amazingly, a third version, according to which the FAA, after giving the military insufficient warning about the first hijacked airliner, gave it absolutely no notification of the other three until after they had crashed. But as I have argued in The 9/11 Commission Report: Omissions and Distortions, this account is wholly implausible. Besides portraying FAA personnel, from top to bottom, as incompetent dolts, the 9/11 Commission’s account rests on claims that contradict many credible and mutually supporting testimonies. In some of these cases, the fact that the Commission is simply lying is abundantly obvious.[30] In addition, this third story implies that the military’s second story, which it had been telling for almost three years, was almost entirely false. If our military leaders were lying to us all that time, why should we believe them now? And if our military is lying to us, must we not assume that it is doing so to cover up its own guilt?

In sum, the behavior of the military both on 9/11 and afterwards, combined with the fact that the 9/11 Commission had to resort to lies to make the US military appear blameless, suggests that military leaders were complicit in the attacks. A similar conclusion follows from an examination of the attack on the Pentagon.

The Strike on the Pentagon: One of the debates about this attack is whether the Pentagon was hit by American Airlines Flight 77, as the official account says, or by a military aircraft. Either story, however, implies that the attack was, at least partly, an inside job.

If we assume that the Pentagon was struck by Flight 77, we must ask how this could have occurred. The Pentagon is surely the best defended building on the planet, for three reasons. First, it is only a few miles from Andrews Air Force Base, which has at least three squadrons that keep fighter jets on alert at all times to protect the nation’s capital. To be sure, part of the official story is that Andrews was not keeping any fighters on alert at that time. But as I argued in my critique of The 9/11 Commission Report, that claim is wholly implausible.[31]

Second, the US military has the best radar systems in the world. One of its systems, it has bragged, “does not miss anything occurring in North American airspace.” This system is also said to be capable of monitoring a great number of targets simultaneously, as would be necessary in the case of a massive missile attack.[32] Given that capability, the official story, according to which Flight 77 flew toward the Pentagon undetected for 40 minutes, is absurd, especially at a time when the Pentagon knew the country was under attack. Any unauthorized airplane coming towards the Pentagon would have been detected and intercepted long before it got close.

Third, the Pentagon is ringed by anti-missile batteries, which are programmed to destroy any aircraft entering the Pentagon’s airspace, except for any aircraft with a US military transponder.[33] If, by some fluke, Flight 77 had entered the Pentagon’s airspace, it could have escaped being shot down only if officials in the Pentagon had deactivated its anti-aircraft defenses.

So, even if we accept the official story, according to which the Pentagon was hit by Flight 77 under the control of al Qaeda hijackers, we must conclude that the attack succeeded only because the Pentagon wanted it to succeed.

There are, furthermore, many reasons to reject the official story. First, the alleged pilot, Hani Hanjour, was a terrible pilot, who could not possibly have flown the trajectory allegedly taken by Flight 77. Second, this aircraft hit the Pentagon’s west wing, which for many reasons would have been the least likely spot for alien terrorists to target: Hitting the west wing would have required a very difficult maneuver; this wing was being renovated, so it contained very few people, and many of them were civilians working on the renovation; the renovation involved reinforcement, so that a strike on the west wing caused much less damage than would have a strike on any other part of the Pentagon; and Rumsfeld and all the top brass, whom terrorists surely would have wanted to kill, were in the east wing, as far removed from the west wing as possible. A third problem with the official story is the fact that the initial damage caused to the west wing was far too minimal to have been caused by the impact of a Boeing 757. A fourth problem is that photographs and eyewitnesses in the immediate aftermath failed to provide any unambiguous evidence of the remains of a Boeing 757. Fifth, the fact that the aircraft was not shot down by the Pentagon’s anti-aircraft defense system suggests that it was an aircraft of the US military. Sixth, there are videos that would show whether what struck the Pentagon was really a Boeing 757, but the FBI confiscated these videos right after the strike and, since then, authorities have refused to release them.[34]

So, whether we accept or reject the claim that the Pentagon was struck by Flight 77, the evidence indicates that the attack was, at least partly, an inside job.

The Collapse of the WTC Buildings: We can conclude the same thing about the attacks on the World Trade Center. Why? Because the collapses of the Twin Towers and Building 7 had to have been examples of controlled demolition, brought about by thousands of explosives placed throughout each of the buildings. No foreign terrorists could have obtained the kind of access to the buildings that would have been required.

One reason for concluding that these three buildings were brought down by explosives is the very fact that they did collapse. High-rise steel-frame buildings have never—before or after 9/11—been caused to collapse by fire, even when, as in the Philadelphia fire of 1991 and the Madrid fire of February 2005, the fires were much larger, much hotter, and much longer-lasting than the fires in the Twin Towers and Building 7.

The second reason is the specific nature of the collapses, each feature of which points to explosives. For example, the buildings collapsed straight down, and at virtually free-fall speed, as in controlled demolitions, and then the rubble smoldered for months. With regard to the Twin Towers in particular, many people in the buildings said that they heard or felt explosions; virtually all the concrete of these enormous structures was pulverized into very fine dust (try dropping a piece of concrete from a great height; it will merely break into small pieces, not turn into very fine dust particles); much of this dust, along with pieces of steel and aluminum, was blown out horizontally several hundred feet; most of the steel beams and columns came down in sections about 30-feet long, conveniently ready to be loaded on trucks; and pools of molten steel were found beneath the rubble. These and still more effects point to the existence of very powerful, precisely placed explosives.[35]

The third fact supporting the theory of controlled demolition is evidence of a deliberate cover-up. If the buildings’ steel beams and columns had indeed been broken by explosives, an examination of the steel would have revealed this fact. However, although it is normally a federal offence to remove evidence from a crime scene, the steel was quickly loaded on trucks and put on ships headed for Asia.[36]

I will mention one more sign of a deliberate cover-up. Insofar as there is an official theory as to why the towers collapsed, it is the “pancake” theory, according to which the floors above the destruction caused by the airplanes collapsed to the floor below, which then started a chain reaction. This theory does not even begin to explain the actual nature of the collapses, such as the fact that they occurred at virtually free-fall speed. But even if the pancake theory were otherwise remotely plausible, it would not explain what happened to the 47 massive steel columns that constituted the weight-bearing core of each tower. They should have still been sticking up many hundreds of feet in the air (just like the spindle of the old-fashioned phonograph player, when the records pancaked). The 9/11 Commission Report avoided this problem, incredibly, by simply denying the existence of these columns. After saying, falsely, that most of the weight of each tower was born by the steel columns in its exterior walls, this supposedly authoritative report said: “The interior core of the buildings was a hollow steel shaft, in which elevators and stairwells were grouped.”[37] Such a desperate lie is a sure sign of a deliberate cover-up.

In any case, when we look at all these features of the collapses, the idea that they could have caused by the impact of the airplanes plus the resulting fires is ridiculous. This is even clearer with regard to Building 7, which was not hit by an airplane. Its collapse remains so impossible to explain, except as controlled demolition, that The 9/11 Commission Report did not even mention it—as if there were nothing remarkable about the fact that for the first time in history, fire alone was said to have caused the sudden collapse of a high-rise steel-frame building (an event that would have been even more remarkable given the fact that the building had fires on only a few floors).[38]

In sum, the collapses and the cover-up—like the strike on the Pentagon, the military’s failure to prevent the attacks, and its changing stories—show that the attacks must have been planned and executed by our own political and military leaders.

The same conclusion can be inferred from the behavior of the Secret Service agents with the president that morning.

The Behavior of the Secret Service: As everyone wo saw Michael Moore’s Fahrenheit 9/11 knows, President Bush was in a second-grade classroom in Florida when he was informed about the second strike on the World Trade Center. This report left no doubt that the country was suffering a terrorist attack. And yet the president simply sat there. Many people have asked why he did not spring into action, assuming his role as commander-in-chief.

But the real question, which Michael Moore mentions in passing, is why the Secret Service did not immediately rush him away from the school to a safe place. Bush’s location had been highly publicized. And if the attacks were a complete surprise, executed solely by foreign terrorists, the Secret Service agents would have had no idea how many planes had been hijacked. They would have had to assume that the president himself might be one of the targets. For all they would have known, a hijacked airliner might have been headed towards the school at that very minute, ready to crash into it. And yet these agents, who are highly trained to respond instantly in such situations, allowed the president to remain in the classroom another 10 minutes. They then allowed him to deliver his regularly scheduled TV address, giving any suicide hijackers and even wider window of opportunity. This behavior makes sense only if the head of the Secret Service detail knew that the planned attacks did not include an attack on the president. And how could this be known for certain unless the attacks were being carried out by people within our own government?

Although many more examples could be given, these four are sufficient to suggest that there is no escape from the frightening conclusion that 9/11 was engineered by members of the Bush administration and its Pentagon. As to why they would do this, at least part of the answer is clear from the way in which they have used 9/11: to advance the American empire. Immediately after 9/11, in fact, members of the Bush administration repeatedly referred to the attacks as an opportunity—in the words of Donald Rumsfeld, an opportunity “to refashion the world.”[39] Seeing this connection between 9/11 and US imperial ambitions can be a stimulus to face up fully to the awful truth about the American empire.

Fully Facing the Truth about the American Empire

To be sure, as Chomsky, Falk, and Chalmers Johnson illustrate, strong portrayals of American imperialism as far from benign can be drawn without any suggestion that the Bush administration arranged 9/11. These portrayals can be drawn from publicly available documents.

One such document is the “National Security Strategy of the United States of America,” published by the Bush administration in September of 2002. David North says, not unfairly, that this document “asserts as the guiding policy of the United States the right to use military force...against any country it believes to be, or it believes may at some point become, a threat to American interests.” “No other country in modern history,” adds North, “has asserted such a sweeping claim to...world domination.”[40]

Another such document, called “Vision for 2020,” was published in February of 1997 by the US Space Command. The mission statement at the head of this document reads: “U.S. Space Command--dominating the space dimension of military operations to protect US interests and investment.”[41] There is no mention of democracy and human rights. In the body of the document, in fact, we find this amazingly candid statement: “The globalization of the world economy...will continue with a widening between ‘haves’ and ‘have-nots.’” The point of this statement is that as the domination of the world economy by the United States and its allies increases, the world’s poor will get still poorer, making the “have-nots” hate America all the more. We will need, therefore, the power to keep them in line.

The United States can do this—and this is the document’s main message—through “Full Spectrum Dominance,” which will involve merging “space superiority with land, sea, and air superiority.” Dominance in space will include, the document frankly says, the power “to deny others the use of space.”

By speaking only of the Space Command’s effort to develop a “missile defense system,” the Pentagon and the White House like to suggest that its purpose is purely defensive. But the goal includes weaponizing space so as to give US forces, in the words of a more recent document, a “prompt global strike capability, whether nuclear or non-nuclear, [that] will allow the US to rapidly and accurately strike distant...targets.”[42] The fact that the U.S. Space Command’s program is an aggressive one is announced in the logo of one of its divisions: “In Your Face from Outer space.”43

Simply from these and other documents, taken in conjunction with the actions of the Bush administration and the US military, we can see through the claim that the US project of creating the first truly global empire is a benevolent or at least benign enterprise. However, we can fully grasp the extent to which this project is propelled by fanaticism based on a deeply perverted value system only when we realize that the terrorist attacks of 9/11 were orchestrated by our own leaders—and that they did this to provide the justification, the fear, and the funding for the so-called war on terror, which would be used as a pretext for enlarging the empire.

I will illustrate this point with one of the most brazen examples of the use of 9/11 to get funding. Shortly before the current Bush administration took office, a document entitled Rebuilding America’s Defenses was published by an organization called the Project for the New American Century,[44] founding members of which included Dick Cheney, Paul Wolfowitz, and Donald Rumsfeld. This document focused primarily on getting more tax money allocated for the technological transformation of the US military, with the centerpiece of this technological transformation being the US Space Command’s project to weaponize and thereby control space. Because this transformation of the US military will be very expensive, the document said, it will probably proceed very slowly—unless America suffers “some catastrophic and catalyzing event—like a new Pearl Harbor."[45] It is interesting that on the night of 9/11, President Bush reportedly wrote in his diary, “The Pearl Harbor of the 21st century took place today.”[46]

In any case, earlier that evening, Secretary of Defense Rumsfeld was on message. We might assume that he would have been disoriented by the fact that the Pentagon had just, on his watch, suffered an unprecedented attack. Instead, he was ready to use the attacks to obtain more money for the US Space Command. In front of television cameras, Rumsfeld berated Senator Carl Levin, then chairman of the Senate Armed Services Committee, saying:
Senator Levin, you and other Democrats in Congress have voiced fear that you simply don’t have enough money for the large increase in defense that the Pentagon is seeking, especially for missile defense... Does this sort of thing convince you that an emergency exists in this country to increase defense spending...?[47]
This strategy worked. Congress immediately appropriated an additional $40 billion for the Pentagon. Since then, furthermore, the president has gotten every additional appropriation he has sought for the so-called war on terror.

Besides being a rousing success in obtaining increased spending for military purposes, 9/11 also provided the pretext for putting many military bases in Central Asia. Zbigniew Brzezinski, in his 1997 book, The Grand Chessboard, had said that doing so would be crucial for maintaining “American primacy,” partly because of the huge oil reserves around the Caspian Sea. Indeed, it may have been from this book that the Project for the New American Century got its idea that a new Pearl Harbor would be helpful. Brzezinski, explaining that the American public had “supported America’s engagement in World War II largely because of the shock effect of the Japanese attack on Pearl Harbor,”[48] suggested that Americans today would support the needed military operations in Central Asia only “in the circumstance of a truly massive and widely perceived direct external threat.”[49] And indeed, thanks to the attacks of 9/11, the Bush administration was able to carry out its plan to attack Afghanistan—a plan that, we now know, had been formulated several months before 9/11.[50] The White House now has a friendly government in Afghanistan and the Pentagon has military bases there and in several other countries of Central Asia.

We also know that the intention to invade Iraq existed long before 9/11 and that this intention was based on imperial designs, not disgust with Saddam’s wickedness.[51] In the Project for the New American Century’s 2000 document, we read: “While the unresolved conflict with Iraq provides the immediate justification, the need for a substantial American force presence in the Gulf transcends the issue of the regime of Saddam Hussein.”[52[ The US military is now intending to build several permanent bases in Iraq, which has the world’s second largest known oil reserves. The attacks of 9/11 again provided the pretext, as the Bush administration deceived a majority of the American people into believing that Saddam was connected with Osama bin Laden and even directly responsible for the attacks of 9/11.

I suggested earlier that seeing the true connections between 9/11 and the global domination project helps us understand how fully this project reflects “fanaticism based on a deeply perverted value system.” This is a value system that is diametrically opposed to the value systems on which all the great religious and moral traditions of the world have been based. These traditional value systems say that we should not covet, steal, and murder, and that we should make sure that everyone has the necessary means for a decent life. But our government’s project for global domination is carried out in the name of the greed of the “haves” of the world to have still more, even if it means killing hundreds of thousands of people and letting millions more die every year of starvation and poverty-related diseases. We can now see, furthermore, that some political and military leaders are so fanatically infected with these perverted values that they are willing to kill thousands of their own citizens, then endlessly use a deceptive account of these terrorist attacks to justify “a war on terror,” in the name of which they claim the right to do virtually anything they wish, ignoring all principles of morality and international law.

How Should Religious People Respond?

I now turn, finally, to the question of how religious people should respond to 9/11 and the American empire. My discussion of this question must be very brief, consisting merely of four suggestions.

First, discover and then speak the truth: I would suggest that religious people should--if they have not done so already—study about both 9/11 and the American empire to see if they find the claims I have made about them true. If they do, then they should do everything in their power to make others aware of these facts.

Second, create new means to spread the truth: It is clear that the mainstream press in America is complicit in the cover-up of the truth about the American empire in general and 9/11 in particular. For example, my second book, which exposes many outrageous lies in The 9/11 Commission Report, has not been reviewed by any mainstream publication; the same was true of my earlier book, The New Pearl Harbor. There are, of course, alternative publications, both in print and on the internet, that seek to expose the truth about the American empire. Most of these, however, fail to deal with 9/11. And most of them are indifferent or even hostile to religion, so they do not provide effective organs to communicate with religious communities. Perhaps the most important thing that could be done by religious groups concerned with getting out the truth about 9/11 and the American empire would be the creation of new means of communication, means through which the total contrast between the values of the religious traditions and the values of the global domination project can be made clear. On this basis, an ecumenical religious movement to oppose the global domination project, partly by exposing the truth about 9/11, might be formed.

Third, formulate proposals for subverting the global domination project: As such a movement begins to form, it will need to decide rather concretely how to go about trying to subvert the global domination project. We need, therefore, proposals for how to do this from religious thinkers of the various tradition. I will soon, I hope, be publishing my own proposal, which is centered around the idea of global democracy.[53] Other people will favor different proposals. But I stress the importance of having such proposals from religious thinkers. It is probably only such proposals, drawing explicitly on the moral principles of the religious traditions, that will have the power to move large numbers of people.

Fourth, form alliances with other moral nongovernmental organizations (NGOs). I have emphasized that it is important for representatives from the various religious traditions who take their common moral principles seriously to join forces. Indeed, my motto is: “Religions of the world unite! You have nothing to lose by your impotence.” But it is essential, at the same time, for these religious groups to forge alliances with what we can call the other moral NGOs of the world. Whether they are working for human rights, for peace, for ecological sustainability, or some related cause, the moral principles that motivate these NGOs are diametrically opposed to the values of the global domination project. By emphasizing the moral principles that we have in common, NGOs that are and are not explicitly religious can join forces in opposing that radically immoral project.

I will close with the observation that, insofar as Americans participate in this anti-imperialist movement, their activities will be deeply patriotic, because they will be seeking to call our nation back to its moral ideals, which stand diametrically opposed to the values implicit in the global domination project.

To view all the detailed endnotes please go to the next page


David Ray Griffin is a former Professor of Theology at the School of Theology at Claremont and Claremont Graduate University, and the author of The New Pearl Harbor: Disturbing Questions about the Bush Administration and 9/11 and 9/11 Commission Report: Omissions and Distortions.


1. On the idea of moral principles common to all traditions, see Michael Walzer, Thick and Thin: Moral Argument at Home and Abroad (Notre Dame: University of Notre Dame Press, 1994), and Gene Outka and John P. Reeder Jr., eds., Prospects for a Common Morality (Princeton: Princeton University Press, 1993). This idea of a common morality presupposes moral realism, according to which some basic moral principles exist in the nature of things. I have defended moral realism in “Morality and Scientific Naturalism: Overcoming the Conflicts,” in Philosophy of Religion in the New Century: Essays in Honor of Eugene Thomas Long, ed. Jeremiah Hackett and Jerald Wallulis (Boston: Kluwer Academic Publications, 2004), 81-104, and in “Theism and the Crisis in Moral Theory: Rethinking Modern Autonomy,” in Nature, Truth, and Value: Explaining the Thought of Frederick Ferré, ed. George Allan and Merle Allshouse (Lanham, Md: Lexington Books, 2005).

2. Andrew J. Bacevich, American Empire: The Realities and Consequences of U.S. Diplomacy (Cambridge: Harvard University Press, 2002), 30, 218-19.

3. Krauthammer’s statement is quoted in Emily Eakin, “All Roads Lead To D.C.,” New York Times, Week In Review, March 31, 2002.

4. Charles Krauthammer, “The Bush Doctrine,” Time, March 5, 2001, quoted in Chalmers Johnson, The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (New York: Henry Holt [Metropolitan Books], 2004), 68.

5. Robert Kagan, “The Benevolent Empire,” Foreign Policy, Summer 1998: 24-35.

6. Dinesh D’Souza, “In Praise of an American Empire,” Christian Science Monitor, April 26, 2002.

7. Charles Krauthammer, “The Unipolar Era,” in Andrew J. Bacevich, ed., The Imperial Tense: Prospects and Problems of American Empire (Chicago: Ivan R. Dee, 2003), 47-65, at 59. This track record, he says, proves that “the United States is not an imperial power with a desire to rule other countries.”

8. Noam Chomsky, Hegemony or Survival: America’s Quest for Global Dominance (New York: Henry Holt [Metropolitan Books], 2003). As shown by this and many of Chomsky’s previous books--one of which is titled Deterring Democracy (New York: Hill and Wang, 1992 [2nd ed.])--his reading of America’s “track record” is very different from Krauthammer’s.

9. Richard Falk, “Will the Empire Be Fascist?” Global Dialogues, 2003; “Resisting the Global Domination Project: An Interview with Prof. Richard Falk,” Frontline, 20/8 (April 12-25, 2003).

10. Chalmers Johnson, The Sorrows of Empire, 33, 4.

11. In light of the fact that the present lecture was delivered at the University of Wisconsin at Madison (April 18, 2005), I should point out that Bacevich discusses two left-leaning historians from whose analysis of US foreign policy he has benefited, Charles Beard and William Appleton Williams, and that Williams studied at Madison (where Beard exerted great influence) and then began teaching there in 1957, becoming the founding father of what historians have dubbed the “Wisconsin school” (see Bacevich, American Empire, 3-31).

12. Bacevich, American Empire, 7, 46.

13. Ibid., 133, 52.

14. See Chomsky’s Hegemony or Survival, his 9-11 (New York: Seven Stories, 2001), and his Foreword to Phyllis Bennis, Before and After: US Foreign Policy and the September 11th Crisis (Northampton: Olive Branch [Interlink Books], 2003); for Rahul Mahajan, see The New Crusade: America’s War on Terrorism (New York: Monthly Review Press, 2003) and Full Spectrum Dominance: U.S. Power in Iraq and Beyond (New York: Seven Stories Press, 2003); for Johnson, see The Sorrows of Empire.

15. See www.zogby.com/news/ReadNews.dbm?ID=855. This information, however, was evidently not considered news fit to print by the New York Times and other mainstream sources. Also generally unknown is the fact that already in 2002, the Atlanta Journal-Constitution, believing that Congresswoman Cynthia McKinney had charged that the Bush administration had foreknowledge of the attacks, conducted a poll that asked its readers if they were “satisfied the Bush administration had no advance warning of the September 11 attacks.” Surprisingly, 46 percent of the respondents said “No, I think officials knew it was coming.” See “Poll Shocker: Nearly Half Support McKinney's 9/11 Conspiracy Theory,” Newsmax, Wednesday, April 17, 2002 (www.newsmax.com/showinside.shtml?a=2002/4/17/144136). I discussed the McKinney episode in The New Pearl Harbor: Disturbing Questions about the Bush Administration and 9/11 (Northampton: Olive Branch [Interlink Books], 2004), 161-64, 242-44nn.

16. On the Canadian poll, see the Toronto Star, May 26, 2004. On the German poll, see Ian Johnson, “Conspiracy Theories about Sept. 11 Get Hearing in Germany,” Wall Street Journal, September 29, 2003.

17. Jean Bethke Elshtain, Just War Against Terror: The Burden of American Power in a Violent World (New York: Basic Books, 2003).

18. This interpretation is given in the most extreme, simplistic, and misleading terms in David Frum and Richard Perle, An End of Evil: How to Win the War on Terror (New York: Random House, 2003). To mention Frum and Perle as publicly endorsing the official view of the 9/11 attacks does not, of course, imply that they actually hold this view.

19. I quoted this statement in The New Pearl Harbor (henceforth cited as NPH), 69.

20. This statement is contained in the summary of the final report of the Joint Inquiry conducted by the House and Senate intelligence committees, posted at http://intelligence.senate.gov/press.htm under December 11, 2002; it is quoted in NPH, 69.

21. See The Alex Jones Show, Oct. 10, 2001; “David Schippers Goes Public: The FBI Was Warned,” Indianapolis Star, Oct. 13, 2001; and “Active FBI Special Agent Files Complaint Concerning Obstructed FBI Anti-Terrorist Investigations,” Judicial Watch, Nov. 14, 2001.

22. William Norman Grigg, “Did We Know What Was Coming?” The New American 18/5 (March 11, 2002).

23. The San Francisco Chronicle, Sept. 29, 2001. The 9/11 Commission tried to scotch these suspicions. Its most important claim is that it found that 95 percent of the puts for United Airlines were purchased by “[a] single U.S.-based institutional investor with no conceivable ties to al Qaeda” (The 9/11 Commission Report: Final Report of the National Commission on Terrorist Attacks upon the United States, Authorized Edition [New York: W. W. Norton, 2004], 499 note 130). But this argument is viciously circular. What is at issue is whether people other than al Qaeda knew about the attacks in advance, perhaps because they had helped plan them. But the Commission simply assumes that al Qaeda and only al Qaeda planned and knew about the attacks. Accordingly, runs the Commission’s logic, if the investors who purchased the put options in question had no ties with al Qaeda, they could not possibly have had insider knowledge. They were simply lucky.

24. UPI, Feb. 13, 2001; Michael Ruppert, “Suppressed Details of Criminal Insider Trading Lead Directly into the CIA’s Highest Ranks,” From the Wilderness Publications (www.fromthewilderness.com), Oct. 9, 2001.

25. William Norman Grigg, “Did We Know What Was Coming?” The New American (www.thenewamerican.com) 18/5: March 11, 2002.

26. Major Mike Snyder, a NORAD spokesman, was quoted right after 9/11 as saying that interceptions are carried out “routinely”; see Glen Johnson, “Otis Fighter Jets Scrambled Too Late to Halt the Attacks,” Boston Globe, Sept. 15, 2001 (http://nl.newsbank.com/nl-search/we/Archives?p_action=print). With regard to the figure of about 100 times a year, the FAA has reported that there were 67 interceptions between September 2000 and June 2001 (FAA News Release, August 9, 2002, cited in William Thomas, “Pentagon Says 9/11 Interceptors Flew: Too Far, Too Slow, Too Late,” in Jim Marrs, Inside Job: Unmasking the 9/11 Conspiracies [San Rafael: Origin Press, 2004], 145-49).

27. This “fact” in the cover story of the March 2005 issue of Popular Mechanics, “9/11: Debunking Myths,” is typical of the quality of research provided by its “senior researcher,” 25-year old Benjamin Chertoff, cousin of Michael Chertoff, the new head of the Department of Homeland Security (see Christopher Bollyn, “Ben Chertoff of Popular Mechanics: Cousin of Homeland Security Director, Michael Chertoff,” http://www.911wasalie.com/ phpwebsite/index.php?module=pagemaster&PAGE_user_op=view_page&PAGE_id=33). Young Chertoff’s debunking article, published shortly after a coup at this Hearst-owned magazine in which the editor-in-chief was replaced (see Christopher Bollyn, “The Hidden Hand of the C.I.A. and the 9/11 Propaganda of Popular Mechanics,” http://www.rumormillnews.com/ cgi-bin/members/forum.cgi?bem=67011 has itself been effectively debunked by many genuine 9/11 researchers. See, for example, Jim Hoffman, “Popular Mechanics’ Deceptive Smear Against 9/11 Truth,” http://911review.com/pm/markup/index.html, and Peter Meyer, “Reply to Popular Mechanics re 9/11,” http://www.serendipity.li/wot/pop_mech/reply_to_popular_mechanics.htm. To be sure, these articles by Hoffman and Meyer, while agreeing on many points, take different approaches in response to some of the issues raised in Chertoff’s article. But both articles demonstrate--in their distinctive points as well as the points they have in common--that Popular Mechanics owes its readers an apology for publishing such a massively flawed article on such an important subject. (As a professor, I would give it a D-, unless, of course, it had been written for a class in the art of composing effective propaganda, in which case a grade of B- would be assigned--nothing higher because its distortions and outright falsehoods can be so easily exposed by anyone knowing much about the topic.)

28. See David Ray Griffin, The 9/11 Commission Report: Omissions and Distortions (Northampton: Olive Branch [Interlink Books], 2005), 141-43 (this book is henceforth cited as 9/11CROD).

29. See 9/11CROD, 143-51.

30. My accounts of the Report’s lies aimed at defending the US military’s behavior, which I cannot even begin to summarize here, fill Chapters 12-16 of 9/11CROD.

31. 9/11CROD, 159-64.

32. Thierry Meyssan, Pentagate (London: Carnot, 2002), 115, quoting “PAVE PAWS, Watching North America’s Skies, 24 Hours a Day” (www.pavepaws.org).

33. Thierry Meyssan, 9:11: The Big Lie (London: Carnot, 2002), 112, 116.

34. For my discussion of these problems in the official story, see either Chapter 2 and the Afterword of NPH (updated edition) or Chapter 3 of 9/11CROD. Confirmation from the Department of Justice that such videos (from the Citgo Gas Station and the Sheraton Hotel near the Pentagon) do exist is provided at http://www.flight77.info/pics/2.jpg.

35. For discussion of these features of the collapses, see NPH, Chapter 1 and the Afterword (updated edition), or 9/11CROD, Chapter 2.

36. See NPH, 20, 177; 9/11CROD, 30.

37. The 9/11 Commission Report (see note 23, above), 541 note 1.

38. See NPH 20-23 or 9/11CROD 28-32.

39. “Secretary Rumsfeld Interview with the New York Times,” New York Times, October 12, 2001. Condoleezza Rice made a very similar comment, which is quoted in Chalmers Johnson, The Sorrows of Empire, 229. Also The National Security Strategy of the United States of America, published September 2002, frankly said on page 28: “The events of September 11, 2001 opened vast, new opportunities” (http://www.whitehouse.gov/ nsc/nss.html

40. David North, “America’s Drive for World Domination,” in Bacevich, ed., The Imperial Tense, 66-77, at 66.

41. This document, which was signed in February 1997 by then USAF Commander in Chief Howell M. Estes III, was at one time available at http://www.spacecom.af.mil/ usspace. This website is, however, no longer functional. Also, although the US military has a website devoted to “Joint Vision Historical Documents” (www.dtic.mil/ jointvision/history.htm), the February 1997 document is not included. There is a document from May of that year entitled “Concept for Future Joint Operations,” which is subtitled “Expanding Joint Vision 2010.” The website also has that previous document (Joint Vision 2010), which was published during the tenure of General John Shalikashvili as Chairman of the Joint Chiefs of Staff (1993 to 1997). But it as if the document from February 1997 never existed; perhaps it was later deemed too candid. However, at this writing it could still be found on the website of Peace Action Maine (http://www.peaceactionme.org/ v-intro.html). And it was discussed in Jack Hitt, “The Next Battlefield May Be in Outer Space,” The New York Times Magazine, August 5, 2001.

42. Air Force Space Command, “Strategic Master Plan FY06 and Beyond,” October 1, 2003 (http://www.peterson.af.mil/hqafspc/ Library/Library.asp).

43. Quoted in Hitt, “The Next Battlefield May Be in Outer Space.”

44. The Project for the New American Century, Rebuilding America’s Defenses: Strategy, Forces and Resources for a New Century, September 2000 ( www.newamericancentury.org).

45. Ibid., 51.

46. This according to the Washington Post, Jan. 27, 2002.

47. Department of Defense News Briefing on Pentagon Attack (http://www.defenselink.mil/ cgi-bin/dlprint.cgi), quoted in The New Pearl Harbor, 100.

48. Zbigniew Brzezinski, The Grand Chessboard: American Primacy and Its Geostrategic Imperatives (New York: Basic Books, 1997), 24-25.

49. Ibid., 212; cf. 35-36.

50. See NPH 89-92 or 9/11CROD 122-28.

51. See NPH 92-95 or 9/11CROD 129-34.

52. Rebuilding America’s Defenses, 14.

53. Fair-minded people will, of course, wait until I have actually published this proposal, with my explanations of what I mean—and do not mean—by “global democracy” and why I believe it to be necessary, before they proceed to offer criticisms of it.
Read Between All Those For-Sale Signs

Published: August 27, 2006
REAL bubbles pop. They are fully formed one moment and gone the next. Financial bubbles rarely meet with such a definitive end, which has always been the biggest problem with the metaphor. They let out their air in unpredictable bursts, and it’s usually impossible to figure out whether they have finished deflating or are just starting to.

Still, the latest housing numbers seem like they could be a turning point. A real estate crash might not be the most likely outcome, but it certainly seems legitimate to think about what one would look like.

The number of building permits being issued is falling at a rate usually seen only in recessions. In July, 11 percent fewer existing homes were sold than were sold a year earlier; 22 percent fewer new houses were sold. After the new-house data was released last week, Capital Economics, a consulting firm, wrote an e-mail message to its clients that began, “New day, same depressing housing market story.”

The fate of the housing market will influence whether the economy will merely slow over the next year, as the Federal Reserve forecasts, or fall into a recession for the first time since early 2001. Lehman Brothers, the investment bank, said Friday that “for-sale” signs had replaced gas-price signs as the most important indicator of potential trouble.

The collapse of most bubbles does not have a single obvious starting point, like a bad corporate earnings report or an interest-rate rise. Instead, the psychology of buyers and sellers shifts, slowly at first and then sometimes in a cascade.

“It’s always mystified people about why these things turn,” said Robert J. Shiller, a Yale economist and author of “Irrational Exuberance,” a history of speculation. “People want something concrete.”

There seem to be three major paths that housing could follow over the next year: a soft landing, the start of a long slump, or a crash. A soft landing is the one predicted — and preferred — by most economists on Wall Street and at the Fed. A long slump is what many past real estate booms turned into. A crash is the outcome that a small group of analysts say is the only possible ending for the biggest housing boom of all.

Their prediction looks better than it did a few weeks ago, but even they aren’t sure whether this is the beginning of the end or another false turning point. “The funny thing about bubbles,” Mr. Shiller said, “is that you never know when they’re over.”

For a crash to happen, prices would have to decline significantly in some once-hot markets. So far, as sales have slowed and the number of houses on the market has soared, many owners have chosen to sit tight. If they were instead to decide that selling later would be even worse than selling now, this could change quickly.

The doomsayers’ strongest argument may be that too few families can afford prices in some metropolitan areas. In Las Vegas, Los Angeles and Miami, prices have almost doubled since 2003, and they have risen about 50 percent in New York and San Francisco, the National Association of Realtors says.

Jumps of this magnitude have little precedent. To afford homes, some buyers, especially in California, have resorted to aggressive mortgages, like those that allow artificially low payments in the early years. In effect, families seem to be buying houses they cannot afford, in the hope that their incomes or property values will rise significantly. “Prices just shot up too much,” said Robert T. McGee, chief economist at U.S. Trust, an investment firm based in New York. The firm has forecast a soft landing for housing, he said, but “as time goes by that starts to look like wishful thinking.”

If prices do decline, some of the first victims would be families in a financial bind that are unable to rescue themselves by refinancing their mortgage. Foreclosures would then rise, damaging banks and increasing the number of homes for sale.

Even homeowners not in danger of losing their home — an overwhelming majority, certainly — might respond to falling prices by cutting spending, particularly if they had been counting on their home’s value to serve as a retirement account. That could force job cuts in a wide range of industries.

Already, the housing slowdown has begun damaging the job market. Builders, mortgage lenders and real estate agencies have stopped adding to payrolls. Defined broadly, the real estate sector has accounted for 44 percent of jobs created since 2000 and employs more than one in 10 American workers, according to Moody’s Economy.com.

Perhaps the biggest reason to be skeptical about a real estate crash is that the country has not really suffered through one before. Not since the Depression has the combined value of residential real estate fallen over the course of a full year. Homes seem to be much less vulnerable to crashes than other assets, because people rarely sell them in a panic.

But earlier booms have been followed by modest price declines in some cities that turned into long periods in which increases trailed inflation. After peaking in much of California and the Northeast in the late 1980’s, house values fell during the recession of 1990-91 and then drifted for years, often rising more slowly than the price of milk.

In inflation-adjusted terms, prices in the New York and Washington areas did not return to their late-80’s peak until 2002. In Boston, it didn’t happen until 2000, and in San Francisco, 1999.

It isn’t hard to imagine a similar chain of events over the next decade. Based on futures contracts traded on the Chicago Mercantile Exchange, investors expect the median house price in Los Angeles, New York and some other regions to fall about 5 percent in the next year, which would be similar to the decline that started the 90’s slump.

From there, prices might start rising again, but at a slow enough pace that incomes would eventually catch up. Families that now need an exotic mortgage to buy a house in Los Angeles could eventually afford one the old-fashioned way.

Interest rates could play a role in a long slump, too. They have been falling for much of the last decade, helping push house prices higher by allowing buyers to afford bigger mortgages. Most economists expect rates to remain lower than they were a generation ago but not to return to the extremely low levels of a few years ago, making big swings in house prices, in either direction, unlikely.

Christopher J. Mayer, director of the Paul Milstein Center for Real Estate at Columbia University, argues that the recent drop in sales does not suggest that a larger bust is coming. “So far we have only seen people asking pie-in-the-sky asking prices and not getting them,” said Mr. Mayer, who expects housing to continue slowing but not enough to create a recession.

He believes that the boom in house prices was largely a result of the appeal of “superstar cities” like New York and San Francisco that are unlikely to lose their allure. In much of the rest of the country, prices are not unusually high, considering the relatively low interest rates.

Moreover, few borrowers are falling behind on their mortgage payments, and the economy looks fairly healthy outside of housing. So if prices start falling, new buyers may jump into the market and prevent any extended slump. “The fundamentals of real estate are solid, still,” said James Gillespie, chief executive of Coldwell Banker, the real estate company.

Which is it, then — a brief pause, or a big correction?

“Either argument is very compelling. I can debate myself on it,” said Mark Zandi, chief economist at Moody’s Economy.com. “That’s why there’s a great deal of uncertainty.”
August 28, 2008
The Pause That Depresses: Recession to Begin Within Six Months and Depression Prior to 2008Q2

Note: Please feel free to forward, post and publish.

Clouds are gathering over the US economy and quite a few highly informed people can now see them. What is not understood is that this storm will result in a flashflood and a “the Great Deluge.” Americans are lot less prepared for the coming economic storm than the residents of New Orleans were prepared for Katrina exactly a year ago. While Katrina was only a category 3 hurricane, the next economic hurricane that will hit the US, already gathering strength for a while, would have the force of a category 5 storm, with econ-winds of above 175 mph, when it strikes.

The economic forecasters that we do have, to inform the public, give fortunetellers a bad name. A case in point is economist Diane Swank, a pretty face that frequently appears on financial TV, whom I heard saying, answering a question on what the Yield-Curve was forecasting, “this indicator will crash,” i.e., totally fail this time. If economists, as a group, had any professional integrity, let alone any shame, they will pay for advertorials to inform the public that they are incapable of forecasting recessions and depressions. The stock market might have predicted, “nine out of the past five recessions,” as Nobel economist Samuelson is supposed to have quipped, how many have economists, as a group, predicated? A fat zero. So, please ignore a crank like myself, or any other non-economist prognosticator of the economy, if you must, but don’t hold your breath for an economist to forecast a recession until after the economy is already in a recession. And in many cases until it has already come out of a recession. The best ability to forecast recessions and depressions is to be found among those that dwell into investments and among professional speculators. A degree in economics is a very big hindrance in forecasting recessions and depressions; on that history’s verdict is clear.

Why can’t America have a recession? Because Americans can’t afford it! Especially, not now. There is a book titled, When Wish Becomes a Thought, by an American sociologist that encapsulates the truth about most people’s forecasts. Add to this the most common psychological disease among Americans – Optimitis Americanitis – and you have all the makings of a grand denial and its consequences (this disease has been carried on by many Indians and Chinese to their native lands). As we saw in the case of New Orleans, catastrophes are more likely to hit those who are least prepared. Or, so it would seem.

The proximate cause of the coming recession would be the bursting of the Housing Bubble, existence of which lot less people deny now than a year ago, and one can list more than a dozen indicators to support the case for a recession within the next 12 months. Here are just a few that quickly come to mind:

1. NAHB (National Association of Homebuilders) Index, at a 15-year low and at levels that precede recessions.

2. LEI – Exhibiting a condition of peaking, since Jan’06, which ALWAYS leads to a recession after average of 11 months (thank you David Rosenberg of Merrill Lynch).

3. Yield-Curve that began to invert in Feb’06 and now is very close to the level (10Y-3M-YD = -0.32%) that ALWAYS leads to a recession within 12 months but mostly in 4-8 months.

4. Consumer Confidence – very low, despite the employment holding OK.

5. Break in the Scam Market in May despite very good earnings and huge buying of their own Scam by corporations.

6. The Pause – the main reason is the expectation of a weaker economy, but how much weaker? (More later).

I have been among the leaders of those who saw the Housing Bubble building and predicted a recession once the Housing Bubble bursts. In fall of 2004, I thought that the Housing Bubble was in the process of deflating. Based on that I forecast the recession to begin before the end of 2006Q2. I was wrong about the deflation of the Housing Bubble to begin in the fall of 2004 (which took place exactly a year later) and, hence, wrong on the dates and probabilities of recession I outlined in the fall of 2004. In the forecasting business making mistakes is not uncommon. The important thing is to learn from the failures. I learned two things – gathering historical data on housing, including supply and demand, and to spend lot more time on understanding various leading indicators and gather data on them. The most important part of this process was to accurately quantify the predictive powers of the Yield-Curve. It is the best predictors of the recessions as well as periods of falling inflation, as presented in my editorials over the past six months:

Feb-27-2006 Why Yield Inversion Foretells Recession?

Feb-28-2006 The Best Way to Interpret Yield-Curve’s Ability to Forecast Recessions

Mar-06-2006 Accurate Characterization of Yield-Curve and Recession Probabilities

Jun-17-2006 Yield-Curve, Inflation, and Recessions: Are Recessions Necessary to Control Inflation in the US?

My big break in being on the top of the Housing Bubble Watch came with the historical data on the Fundamental Demand for housing (as in a place to live, including second homes, or for a dwelling, i.e., number of households) and the supply. It is true that the prices were going up so rapidly because of the market demand outstripping the market supply, but what if the market demand were to be Speculative Demand, as I suspected and claimed? The data settled that question as well as repudiated all the arguments by the bulls who claimed that Fundamental Demand for house-dwellings (a term from Adam Smith) was leading to the rapid increase in prices. Just a few days ago, Paul Kasriel, an economist I respect along with David Rosenberg of Merrill Lynch, wrote an article on the Supply-Demand question:

August 25, 2006 New Homes Market: Worst Supply-Demand Situation Since Early 1970s by Paul Kasriel

Well, I foresaw this coming more than a year ago:

07/31/2005 The US Housing Supply-Demand: Countering Lies with the Facts

In July of 2005 I became convinced that when this Speculative Demand driven bubble bursts it would be ugly. Thus far, even though the burst has barely begun, it has not disappointed. It will make all the previous bubbles and crashes look mild by comparison.

Connecting the Dots

Few weeks ago, Ron Insana, one of the better commentators on CNBC, said, during a debate on inflation, “Inflation peaks during the first year of a recession (you can see for yourself in Fig 1. of http://www.safehaven.com/article-5390.htm). How many people know this fact even today?

How many of you believe that Bernanke will let inflation keep rising for another six months, let alone a year? If inflation does not start going down, and continues going down, in another six months he will be forced to apply the brakes if for no other reasons than to establish his credibility. Assuming that it takes up to nine months for inflation to start to fall, we will already be in a recession in nine months. I personally think that inflation will start to come down lot sooner than nine months. Why? The Pause!

One risk that Bernanke will not take is that of letting the inflation going out-of-control. Even the current level is way outside the 1-2% declared target zone by Bernanke and various Fed officials who have bought into that. The Pause is a clear signal of expectation by the Fed of weakening economy, led by Housing Bubble bursting, and once the economy starts to weaken due to Asset Deflation, the Fed can’t control its slipping into a recession, as we already learned, once again, in 2000-01. The fact is that bursting of an asset bubble is a psychological phenomenon and there isn’t much the Fed can do in a short period. By the time the Fed knows that the economy has weakened into a recession, usually it is late by several quarters. The Fed will have to use terms like slowdown, soft landing, orderly retreat, etc., until we are well into a recession.

I have already indicated, earlier, that the Yield-Curve is now at the point where the recession is highly likely to occur in 4-8 months.

Two Most Important Economic Reports

Existing Home Sales reports for the months of August and September. I have been waiting for the August report for some nine months. What is so special about that report? The housing broadly peaked in August 2005 and the YoY comparisons will look plain ugly. Here is what I see between the August and the September reports:

1. The YoY nominal median prices of homes, nationwide, will be negative.

2. The YoY nominal median prices of homes for the state of California will be negative.

3. Sales volume will be down 20-50% across most of the areas in the US.

The first hasn’t happened for some 53 years and it will get the attention of all the bulls in denial of how serious the housing problem is going to be for the economy – a hard landing and the beginning of the first depression since the Great Depression.

Why the Depression?

It Is the Debt, Stupid!

All asset bubbles are “Credit Bubbles.” Well, Debt is just the other side of Credit. I think that Americans are running out of bubbles. No? Also, the Fed and its constituency, Bankrupters and Fraudsters of New York City (BFNYC), are running out of “options” to push more Consumption Debt (yes, mortgage is consumption debt) and Scams. And it was the unprecedented push of Consumption Debt, mostly via “reckless mortgage lending,” that has kept the US economy out of a recession for the past four years. I think that the “Bush recovery” has been pushed as far as it could be pushed already. Nicht mehr, nicht mehr, nicht mehr. (No more, no more, no more).

Now, about the Deflation case. Most people misjudge the powers of the Fed. Almost all its power, long-term, is a matter of The Confidence Game (title of a book on the Fed). Fed is in no position to inflate as most inflationists think. Deflation will come so suddenly, as a result of the Demand Destruction leading to inflation falling very fast and going from +1.0%, YoY, to below zero within months, that Fed will not be able to pre-empt it. Once Deflation takes root for few months it would be very hard to get rid of. The proverbial Pushing On the String (not being able to Pushing ON More Debt!) will become a reality. It would be good for Americans to learn about the limits of Fed’s power in being able to manipulate the economy. Americans will also learn a thing or two about what wealth is and what an investment is.

Be safe!

Jas Jain, Ph. D.
Prophet of Doom and Gloom

Monday, August 28, 2006

China's Wealth Woes
With its dollar hoard rising at $17 billion a month and about to pass the $1 trillion mark, Beijing is finding out that it is possible to have too much money.

By George Wehrfritz
Newsweek International
Sept. 4, 2006 issue - Sometime over the next few weeks, a shipment of lawn furniture, brake pads, lamps or the like is going to make history. The manufacturer, one among tens of thousands churning out product 24/7 in China's humming coast-al cities, will fill an order bound for the United States, take payment in American dollars and add a 12th zero to Beijing's foreign reserve—pushing the tally over the $1 trillion mark. Neither buyer nor seller will realize the transaction's significance, and barring an unforeseen shock to the global trading system, China's reserve will continue to rise by roughly $17 billion a month.

Beijing's growing dollar hoard represents the most dangerous imbalance in today's global economy. The United States is both importing heavily from China and borrowing heavily from the country to finance those purchases, pushing the dollar down and putting the two economic superpowers on a collision course. Washington politicians demand that Beijing raise the value of the yuan against the dollar, and Chinese officials have hinted that if pushed too hard they might shift their near-trillion-dollar reserve out of U.S. Treasury bonds, which could trigger a U.S. and global recession. The main thing preventing this confrontation is the fact that both sides have too much to lose. Former U.S. Treasury secretary Lawrence Summers once called this "the balance of financial terror." What has gone widely unremarked is that, increasingly, this balance is threatening China as much as the United States.

The United States has been worrying for the past 25 years about a mounting trade deficit and the threat it poses to America's financial pre-eminence. But China now views its surplus with growing alarm, too. Its dollar mountain reflects huge demand for Chinese goods and the Chinese currency needed to buy those goods. In mid-2005, Chinese officials, under intense pressure, did allow the renminbi to rise slightly, by just over 2 percent, but they fear—with some reason—that to go further could undermine their export competitiveness and lead to bankruptcies. Speculators, however, are betting that China will have no choice. The global market assumption that the renminbi is destined to rise is now "the key problem" for China's economy, warned the head of the National Bureau of Statistics, Qiu Xiaohua, last week. "It is fair to say that China is actually fighting a game against worldwide speculative capital ... If not handled properly, this will damage the national interest and endanger economic security."

In an economy that, for all its might, is still in the developing stage, it is no small trick to absorb $17 billion a month without destabilizing consequences. The cash is leaching into the economy, fueling growth of 11.3 percent in the second quarter, the fastest rate since 1994, threatening a meltdown. And every solution begets new problems: China has tried command economics, like simply ordering banks to grant fewer loans or publicly denouncing provincial officials who spend too recklessly, but that undermines its efforts to reform the banking sector using the market. It has tried raising interest rates, which can restrain growth but also attracts more dollars—from investors seeking returns, not import buyers—and weakens domestic demand. "They're in a trap," says Ronald McKinnon, a Stanford University economist, in reference to China's surging exports and undervalued currency. "And there isn't an easy way out."

Beijing works hard to dampen or "sterilize" the impact of the incoming dollars on the domestic economy. To do this, the People's Bank of China (the central bank) buys dollars from commercial banks for renminbi-denominated bonds, then limits how much the banks can lend. Yet it's no coincidence, economists say, that investments in fixed assets, from roads to real estate, have shot up in tandem with the foreign-currency reserve since 2000. "This will be the sixth successive year in which investment rises more rapidly than the underlying economy," says Nicholas Lardy, a senior fellow at the Institute for International Economics in Washington. "Not a sustainable recipe for growth."

Another embarrassment of China's rising fortune is that it has begun to undermine financial reforms launched a decade earlier. To make banks more market-oriented, Beijing has discouraged politically motivated lending to debt-laden state enterprises, welcomed minority foreign partners and made bank chiefs accountable for their profits and losses. Yet the People's Bank also undercuts those profits when it forces banks to help sterilize dollars by buying low-interest renminbi-denominated bonds. Regulators also set real interest rates artificially low (currently under 3 percent) to deter the "hot money" betting on a yuan revaluation, but that cheap money flows into new factories and property developments. "Wholly or partially state-owned enterprises continue to receive most of the funding," says a new study by McKinsey & Co., noting that the pattern "not only explains the large volume of nonperforming loans in China's banking system but also decreases the economy's overall productivity."

Beijing is justifiably worried that any significant rise in the value of its currency could create psychological momentum for more appreciation. "The more people buy into the argument, the worse it gets," says Nicholas Kwan, regional head of economic research at Standard Chartered Bank in Hong Kong. "By the time [the renminbi] reaches the point where everyone thinks it has risen enough, they're in big trouble." But the longer Beijing keeps its currency artificially low, argues Lardy, the more capital will be misallocated into marginal investments, the slower banking reforms will progress and the costlier the bill for nonperforming loans in the financial system will ultimately be. Lardy figures (conservatively) that the renminbi is undervalued by about 15 percent, and says that if the currency were actually allowed to rise that much, many of the investments now being made in China would be pushed into the red.

Why not simply spend the dollar reserve? That's what Japan did in the '80s and early '90s, when its export surplus was mounting and its top corporations and tycoons bought everything from Hollywood studios to impressionist masterpieces. Indeed, Chinese experts are mulling spending ideas, mostly of a far less glamorous sort, from building a strategic petroleum reserve at a cost of $30 billion to forming a Chinese Peace Corps, with thousands of humanitarian workers. But none of that, economists say, is enough to significantly slow the growth of China's foreign reserves. "The problem with these ideas is that you can't actually spend much money on them," says Stephen Green, head economist for Standard Chartered in Shanghai. "They don't have many choices."

Still, China is trying to spend down at least some of its trade surplus by investing abroad. Beijing's model here is Singapore, which spends its own huge trade surplus (in excess of 10 percent of GDP) on things like telecoms and ports abroad, says Kwan. "The Singaporean way is not to hold too many T-bills, but to buy stock in Microsoft or banks in Indonesia." Now Beijing is encouraging Chinese insurance companies and pension funds to invest $8.3 billion in foreign bonds and securities, and urging others to buy up strategic raw materials, particularly petroleum reserves, in places like Africa.

The catch here is that, as an emerging giant, China can't fly under the global radar like tiny Singapore. Witness what happened when Chinese oil giant CNOOC tried to buy Unocal last year, only to be run off by U.S. congressional opposition. This kind of backlash against Chinese acquisitions is likely to rear its head again, even though it offers a solution to today's huge trade imbalance.

So China continues to park the bulk of its reserve in U.S. Treasury bills, the bonds in which creditors hold most of America's huge public debt. China now owns some $330 billion worth, second only to Japan's $640 billion. Thus China fuels American consumption, not the emergence of a Chinese consumer market that could drive long-term growth.

The roots of this contradiction go back to the early 1980s and the start of reform in China, when the late patriarch Deng Xiaoping opened the manufacturing sector, but not the banks, to foreign investors. The good news was that the closed system inoculated China against the rush of global capital that toppled banks across Asia in the crisis of 1997-98. The bad news: banks had no competitive incentive to learn proper risk management, or to introduce modern retail banking or consumer lending. Now the system is such a mess that China fears to open it. And it sits on a huge pile of idle dollars that its own banks are unable to employ fully at home.

All of which speaks to a fundamental dilemma: who wants to be a trillionaire? China does, for sure, but it is also increasingly aware of the burdens of wealth.

© 2006 Newsweek, Inc.
Published on 1 Nov 2005 by KERA/Energy Bulletin. Archived on 26 Aug 2006.

Simmons-Kunstler interview
by Glenn Mitchell and Jeffrey J. Brown


Matt Simmons and Jim Kunstler were interviewed on November 1, 2005 by Glenn Mitchell on KERA 90.1, the local PBS station in Dallas, Texas.

Matt and Jim, who had never met until that night, were in town for a symposium that night on: "The unfolding energy crisis and its impact on development patterns," sponsored by the Southern Methodist University Environmental Sciences Department and the Greater Dallas Planning Council. Among the financial underwriters were T. Boone Pickens and Chesapeake Energy.

This was a fairly remarkable interview, partly because Matt Simmons and Jim Kunstler, coming from vastly different backgrounds, had basically reached the same conclusions regarding Peak Oil. It's also interesting to see how events have unfolded since this interview.

Glenn Mitchell was a master at what he did; unfortunately, he passed away quite suddenly shortly after this interview, and he is deeply missed in the Dallas area. However, KERA has continued with a very good noon time (Central time) talk show in the same format that Glenn used. You can listen to the show, via the Internet, at www.kera.org.

The Simmons/Kunstler interview is available on an audio CD, from KERA 90.1. I highly recommend this interview as a great low key way to introduce people to the Peak Oil concept. Following is the ordering information:

KERA 90.1 can provide additional CDs for $10 each. Interested parties should send a check or money order along with details about the program (Simmons/Kunstler Interview on 11/1/05) to:

Talk Show CD Request
KERA 90.1
3000 Harry Hines Blvd.
Dallas, TX 75201

- Jeffrey J. Brown



Glenn Mitchell
Matt Simmons
Jim Kunstler

MITCHELL: Jim, welcome.


MITCHELL: Matthew, nice to have you.

SIMMONS: Thank you.

MITCHELL: Let me start with you Matthew. Lots of places produce oil. How do the Saudis come to dominate the market?

SIMMONS: Well they had the luxury of finding five unbelievably giant oil fields that could be produced at almost at will for a long period of time through a really small number of wells. And over the years as the United States finally peaked and went into decline they became the largest oil producer on Earth. They actually don’t produce more than about 8 million barrels of over 80 million barrels of oil we now use per day, but the problem is they are the only country that anyone knows of that hopefully has the capacity to keep expanding their production to meet ever-growing need for oil. So it’s not as much how much oil they produce today, it’s the fact that they are the only country that realistically could start to grow production as long as the world continues to use more oil.

MITCHELL: Jim, what’s the connection with modernity in oil?

KUNSTLER: Well our industrial societies are powered by oil. They are the final fuel source in the sequence that went from wood to coal and now to oil and there is kind of an accompanying delusion that there will naturally be another fuel source that “they” will come up with to replace oil. And this is the hope of a great many Cornucopians who believe that we are going to be able to keep running the Interstate highway system and Walt Disney World and all of the accessories of our car dependent lifestyle going.

MITCHELL: I was on CNBC this morning with an old corporate Cornucopian that is coming out with a book in the next few months that effectively argues that oil is actually renewable and is being baked inside the Earth as we speak.

KUNSTLER: Yeah….that’s a group of people who think the earth has a creamy nougat center.

MITCHELL: You know the guy actually believed it.

KUNSTLER: Well you know I think you can say that the delusional thinking in this country is already pretty high and is probably going to increase as the stress on our society grows and the stress will grow as our society is challenged to find a way to adapt to an energy scarce reality. You know Dick Chenney was famous for saying that the American way of life is non-negotiable. I think the truth is that reality is going to negotiate it for us if we refuse to join in on the negotiations.

MITCHEL: If you want to talk with us we're at 800-933-5372 or also at GMS@kera.org. Jim Kunstler’s book is called The Long Emergency Surviving the Converging Catastrophes of the 21st Century.

With us by phone is Matthew Simmons. His book Twilight in the Desert, the Coming Saudi Oil Shock and the World Economy. They both are going to be at the SMU tonight or actually at Highland Park United Methodist Church for a seminar program called the Unfolding Energy Crisis at its Impact on Development Patterns. There will be a book signing at 6:00 and then the talk starts at 7:00. If you want more information about that you can call 214-768-2743. But if you have a question for us right now…800-933-5372 or GMS@kera.org. Matthew, how much Saudi production is politically dictated?

SIMMONS: I’m not sure what you mean by politically dictated.

MITCHELL: In other words who says how much they pump everyday?

SIMMONS: Oh I think basically they pump all the oil they can.

MITCHELL: Oh okay.

SIMMONS: There is no evidence anymore. Now four years ago they were carefully shutting in some of their supply. But even during the time they were shutting stuff in, it had a lot more to do with worries they had about their fields than actually trying to keep oil off the market. When Saddam Hussein invaded Kuwait and required the world to pull all stops to actually embargo Iraq and Kuwait’s oil, in a ninety day period of time Saudi Arabia took their oil production back from 5 million barrels a day where it had been resting during the 80s to 8 million barrels a day and they have been flat out every day ever since then.

MITCHELL: Jim, in your book you describe this as being a darker time than the eve of World War II. That was pretty dark. Why is this darker?

KUNSTLER: Yes. Well because in a way the challenges we face are much more intractable. World War II was in some ways a fairly simple struggle between good and evil between fatuous authoritarian government and democracy. Between particular tyrannical figures like Adolph Hitler who had declared his ambitions. So it was a clear-cut struggle. This is going to be a tremendous challenge to the United States in particular because we have developed a way of living that is a tremendous liability for us. We have this living arrangement called suburban sprawl which we have invested all of our post-war wealth in and which we now believe we are entitled to live in forever and keep on expanding and moreover to have an economy that is mainly based on the increasing production of more suburban sprawl which is to say “a living arrangement with no future.” And this presents tremendous psychological and economic problems for us. For example…think of suburbia as being the greatest misallocation of resources in the history of the world, because it is a living arrangement that really doesn’t have a future. Okay. Well, you put so much of your own wealth and your own spirit and your collective resources into this infrastructure for living that you can’t imagine letting go of it. And so what we’ll see is I believe a tremendous battle to maintain the entitlements of a way of life that really has no future. And it is going to be a tremendous act of futility. It’s going to take all of the effort that we should be putting into a much more intelligent response to this permanent energy crisis. All of the effort we could be putting into that is being diverted into a defence of suburbia and it’s going to be a very unfortunate and tragic thing.

MITCHELL: If we assume that there is no creamy nougat center in the Earth Matthew, when will the oil run out?

SIMMONS: The oil will actually never run out. One of the reasons that too many people scoff about the notion of peak oil is that they immediately think that we are running out of oil. The problem isn’t running out, the problem is peaking. And the problem of peaking wouldn’t be a big deal if we created a world where demand was also peaking. The problem is - and while Jim is talking about the United States I worry a lot more about the whole world - we have created a world that’s on a road map to needing at least 120 million barrels a day of oil to be daily consumed by 2020, which is only 15 years away. We could easily by then have a world where the supply has dropped from 82 million/83 million barrels a day now down to 70 or 60. At 60 million barrels a day we haven’t run out of oil. We just have an enormous gap between what we needed and what we can use.

KUNSTLER: You know the further implication of that is that it will generate enormous competition. Enormous contests to get control of the remaining oil in the world, and you know all bets are off about how that’s going to play out. Does it mean that the Chinese are going to try to control the oil in Central Asia? They have less oil than we do, the Chinese. They are madly running around the world now making contracts for oil with Venezuela, with the Canadians for the Alberta tar sands. What are we going to do if we cannot maintain our police station in Iraq in the Middle East which we set out by the way in order to modify and influence the behavior of those nations in the Middle East so we could continue buying their oil.

Well that’s a project that is not working out very well for us and we cannot be confident about our ability to control the terrain or the populations of these unfriendly nations. What happens when we have to leave that part of the world? Will we retain access to the 2/3 of the remaining oil that’s there? And how soon may that happen? You know these are all tremendous questions that we are not even beginning to ask ourselves.

MITCHELL: Matthew?

SIMMONS: Yes sir.

MITCHELL: What about India and China? When they start really using oil?

SIMMONS: Well the China’s use is doubled in the last 7 to 8 years. But what is astonishing is if you take the total amount of growth in China it is less than the growth in the last five years from the United States. And China today on a per capita basis still uses less than 2 barrels of oil per person. India still only uses about 1 barrel per person. If India and China both some day grew with no population increase, which is unrealistic, to the level of Mexico today, which is about 6 ½ barrels per person, you would have to add 44 ½ million barrels a day of additional oil. It’s impossible.

MITCHELL: If you want to talk to us we’re at 800-933-5372. We’re also at GMS@kera.org. Jim Kunstler and Matthew Simmons my guests. Let’s get a call from Stephen in Dallas. Hi.

CALLER: Hello.

MITCHELL: Hi there.

CALLER: Hey. I just about a month ago I read a commentary by or an article by the Governor of Montana who suggested that Montana possesses a third of the coal in the United States and the Nazis seem to have done pretty well by taking coal and turning it into oil, natural gas and gasoline. I’m not suggesting that the energy crisis can be averted because of this but what I’m suggesting is that the United States actually did have a coal to liquids project - a number of plants were built…I’m just guessing 80 years ago. And we essentially possess 33% of the world’s resources in terms of the potential of using coal.

MITCHELL: Okay. Let’s get a response first. Matthew, what do you think?

SIMMONS: Well it’s interesting. There is a pilot project that the Department of Energy in Patel Institute where they’re actually working up the numbers on right now that we start out at 25,000 barrels a day and ultimately ramp up to 75,000 barrels a day which we would call a teapot refinery. I was asked last week whether our firm would kind of scrub out the numbers when they were done. I said, "sure, what’s your estimated costs?" - "We don’t have any idea. It’s going to be really expensive." So I think the important thing to remember is that when South Africa worked on coal to liquids and when Germany worked on coal to liquids, we were using tiny amounts of oil then. So I think that coal to liquids can work but I think it’s going to be very difficult to actually scale up and actually even make a dent on a world that basically needs to grow by 2 to 3 million barrels a day per year.

KUNSTLER: We are going to use every alternative fuel that we can. There is no question about it. But the bottom line is that no combination of alternative fuels, whether they are synthesized coal liquids or wind power, solar power, hydrogen or anything else, no combination of these things will allow us to run the Interstate highway system, Wal-Mart and Walt Disney World the way we are accustomed to running them. We are going to have to make other arrangements and that’s what the people in this country don’t get.

MITCHELL: I suppose this is an obvious question Matthew. But you do raise it in your book. In what sense is oil not just another commodity?

SIMMONS: Whoever made that statement up ought to be shot or have their throat cut out. (LAUGH). Oil turns out not even to be a commonality term. The difference between light sweet oil which comes out of the ground at fast rates and heavy sour oil is the difference between having a Rolls Royce and having a jalopy. And then you get into unconventional oil, which people casually toss around today -say, oh don’t worry there are the tar sands of Canada. The tar sands of Canada are effectively a first cousin of coal - very energy intensive to convert into usable oil. So each of the grades of oil are so totally different that we should have never lumped them all together like calling all vehicles cars. So that’s the first mistake. The second mistake is that it’s the best energy source the world’s ever known about that could actually be stored and used as transportation fuel. So, while we might have misused the oil in the last few years in the belief that it would last forever, if we hadn’t had it we would be a very, very different world today. So the idea that we call it just another commodity I think led a lot of the economists in to thinking that it would last forever.

MITCHELL: Alright let’s get some calls. We have full board of callers and we’ll start with Michael in Garland. Good afternoon.

CALLER: Hi, good afternoon. I’m so glad to hear you addressing this problem head-on and directly rather than beating about the bush because I believe you…it is a serious problem. For the last 100 years of an oil age what kind of legacy do we have? We can’t breathe our air. We’re coddling dictators around the world. We’re starting wars to protect or to police sources of oil like you mentioned and political corruption. I don’t have all the answers but I would like to hear your opinion on one answer that I’m researching. Automobiles today based on internal combustion can be swapped out with electric. Electric technology with motors has advanced to a point where they can be recharged on the run. The project I’m working with however is working with Chinese engineers. We don’t have either the interest or the education here in this country to solve this problem on our own.

MITCHELL: Alright, what about electric cars?

KUNSTLER: Well I think that we are putting too much of our effort and attention into trying to increase the mileage of our vehicles and the efficiency of our vehicles and make our cars run better and trying to keep the whole car dependent system going. You know the trouble here is not that we are using the wrong kind of cars. The trouble is that we have created this tremendous infrastructure for car dependency. And you know we have to spend more of our effort on other things. Let me give you an example. We have a railroad system that the Bulgarians would be ashamed of. There isn’t one project that we could do that would be more meaningful than to restore the American railroad system. It would have a tremendous impact on our oil consumption plus it would have many other benefits like enabling people who cannot drive to get around. Just having a multi-model system for transportation would be a tremendous thing. And the fact that we are not even beginning to talk about this shows how unserious we are. And how abstracted from our sense of reality we are.

SIMMONS: The other thing that’s very important. I agree with Jim, other than saying that after we rebuild the rails we need to basically restore and make as efficient as possible our port system, because actually getting goods off rails on to boats gives another rash of big improvement energy efficient. But the problem of the electric car turns out to be a very insidious even worse problem. We are in a natural gas crisis worse than we are in an oil crisis. And since we have turned to natural gas as our incremental source of electricity, we cannot basically start creating new markets for electricity that are not current markets because we are going to have to learn how to live with less electricity too.

MITCHELL: Let’s get a call next from Mike in Dallas. Hi.

CALLER: Yeah. Hi, how you doing? One of the things that’s most aggravating is it shows that people aren’t wrapping their heads around this problem is people sitting in the winter or the summer running their engines in the cars when they are parked just to keep their heater or their air conditioning going. Anyone who knows a little bit of history knows that Japan started a war with the United States over oil and I was just wondering if we don’t get our heads around this - we don’t have a Manhattan style project to solve this problem - are we going to eventually run in to a Chinese super state that is not going to let us grab all the oil anymore?

SIMMONS: You know all you have to do is go back and think about the behavior that kids demonstrated in musical chairs. When you get down to the last few kids and fewer chairs you start getting apparent human behaviors, so the question is if we don’t address this, yeah, we are going to have fistfights with everybody.

SIMMONS: But I also think that we actually can wake up in time and actually address the issue in a remarkably short period of time - change our society so that we actually are driving less and shipping goods by rail and shipping goods over water. We can liberate organizations whether they are companies or universities that all operate today under an obsolete concept - that if you are a large group you need to be under one roof because we have to communicate.

KUNSTLER: We are going to have to significantly downscale, rescale, resize and reorganize all of the major activities of American life. We are going to have to do agriculture in a different way. We are going to have to grow a lot more of our food locally. We are going to have to rescale and reorganize trade and commerce. The big box model for commerce is very shortly going to come to an end. That’s Wal-Mart and Target and all of that. We are going to have to rebuild local interdependent networks of economic activity of a kind that were systematically and methodically destroyed by large corporations. And we are going to have to get on that job soon. And when we do we are going to find that our communities will restore themselves. We are going to probably have to say goodbye to the gigantic centralized school districts with their yellow fleets of school buses that run an average of 100,000 miles a year. All of these things are going to have to be changed. And you know this tremendous inertia in our culture we have all these investments we have made in the infrastructure for running things they way we run them. And we are not going to change them easily. There is going to be a titanic struggle to maintain the entitlements to these things whether they can be maintained or not. But you know what? Circumstances are going to compel us to change whether we like it or not. There has been a big argument over suburbia for the last fifteen years, and some of the apologists for it like David Brooks of the New York Times have made the argument repeatedly that suburbia must be great because people like it. And by the way that’s a foolish argument just to begin with, but the fact of the matter is whether people like it or not it’s coming off the menu. We are not going to be able to do it anymore whether we like it or not. And that’s…you know, life is tragic. This is not a Bruce Willis movie where we are going to be rescued at the last moment by some miracle. Life is tragic. History is remorseless and history doesn’t care whether we pound our culture down a rat hole. And that’s what we are in the process of doing. By not paying attention.

MITCHELL: So what are we headed for, some sort of Jeffersonian agricultural democracy?

KUNSTLER: Well I wouldn’t put it that way. I would say in the interim we’re headed for what I call the long emergency and that’s why I entitled my book that way. We’re headed for a period of hardship and turbulence in which a lot of people are not going to want to change, in which there is going to be a lot of friction and conflict between nations and classes within nations. And a tremendous amount of tumultuous economic loss of value of property, of jobs that will never come back and incomes that will be lost forever. Tremendous turbulence in the financial markets, because remember when you have industrial economies that are powered by oil and oil becomes increasingly a scarce resource, you’re not going to have normal economic growth in industrial societies. And when you don’t have that, all of the paper markers that represent the expectation and hope that growth will continue - like stocks and bonds and currencies and derivatives and all kinds of financial instruments - people are going to lose their faith in those. And faith is the only thing that sustains their value. So, we’re headed into a tremendous period of hardship and difficulty and we have to start immediately in addressing the changes that we have to make.

MITCHELL: If you have a question 800-933-5372. We’re also at GMS@kera.org. Let’s get a call from Fletcher in Dallas. Hi.

CALLER: Hi. I had two questions. The first is probably a very, very easy question and I’m the only one who doesn’t know the answer to it. I wanted to know basically where is our oil going? Cars and buildings. What percentage…..

KUNSTLER: That’s a simple question to answer. 70% of the oil barrel in the United States and the world is used for transportation and about 98% of our transportation energy comes from oil. So that’s basically passenger cars and buses and trains and trucks. It turns out the big semi-trucks are the single biggest energy hog we have in the world today, getting 3 to 6 miles per gallon. So the SUV, actually, if you get 6 people in it, is actually a pretty good product to have.

MITCHELL: Kind of a mini-bus?

KUNSTLER: Yes. We just have to use them as mini-buses.

MITCHELL: What was your second question?

CALLER: The other one is probably a lot more difficult and that is what do you guys think is the best way to get out of this mess?

SIMMONS: Well I’ll take a stab at that. I think we need to reform energy data ASAP and have a global mandated standard of field by field production reports quarterly and the number of well bores. It sounds technical but that data would prove technically how close we are to be peak oil. Right now we just have a theological debate - a bunch of people saying I believe it’s a problem and a bunch of people saying I believe it’s not a problem. Once we prove it’s a problem then we have a global energy summit and we approach it the same way we created the United Nations. Hopefully a more productive organization. And we work out a new way to systematically redo how we use oil so that we don’t have wars and so forth. I actually think if we get a global standard in place it actually could end more peacefully than I think Jim is probably is afraid of, and I think if we don’t understand this Jim could prove to be an optimist.

KUNSTLER: Yeah I tend not to be idealistic about this. I tend to think we’re not going to have international tax and treaties and understandings that are going to make this easy for us. I think it will probably be an international scramble and contest. Although ultimately as this occurs I think the bigger nations will exhaust themselves as we are in the process of doing in Iraq - exhausting ourselves militarily and financially in running that war. We will probably withdraw into our own regions of the globe and the world will become a bigger place - the problems that we struggle with will be problems that we struggle with in our own regions and countries.

MITCHELL: Let’s get a call next from Andrea in Dallas. Hi.

CALLER: Hi. My question is you know how can I as an individual do something to either reduce my consumption or I mean I just kind of feel like a tiny little raindrop in a big giant ocean and I mean what can I do to help make….?

KUNSTLER: I mean you are not going to save the world Andrea. You know there are things that you can do and you would probably be better off thinking about the things that relate to your life, for example. People are going to have to make some better choices about where they are going to live in this country. Parts of the United States are not going to make it. You know Phoenix is not going to make it. It’s going to be substantially depopulated. In Las Vegas the excitement will be over. I happen to think that the Sunbelt as a whole is going to suffer in direct proportion to the amount that it benefited from the cheap oil fiesta of the last 40 years and may not be a great place to be. I think that the upper Midwest and the northeastern America will probably be somewhat more successful. Although all of America I think is going to be in trouble.

CALLER: How will Dallas fair?

KUNSTLER: Well I think Dallas has some liabilities. The Dallas Metroplex is at an extraordinarily overgrown hypertrophy. It’s going to be a tremendous liability because most of it will not be suited for retrofitting. A lot of it is simply going to lose its value and it’s usefulness. You also have a climate here which is a little bit tough to take in the hot part of the year and people actually have more trouble when it’s too hot than they do when it’s too cold. That’s the reason there were no really substantial cities in the southern United States until after World War II.

And so the kind of choice you have to start thinking about is what kind of vocation or profession can I choose that really has a future. You know….don’t choose public relations and marketing. Don’t choose some kind of abstract kind of job that depends on parasitizing some other activity.

CALLER: You mean like interior design? That’s what I do.

KUNSTLER: Exactly. I'm sorry. We’re probably going to have to follow much more hands on kinds of occupations and you know they are probably self-evident.

MITCHELL: Carpentry, for example.

KUNSTLER: Well we can't all be carpenters, but you know we can be carpenters. We can be paramedics. A lot of people are going to be working in agriculture. Agriculture is going to come back to the center of American life in a way that we couldn't imagine.

SIMMONS: One of our great role models of what we needed today is a Texas company - agriculture as whole foods. Their secret is they have a string of organic farms, Mom and Pop farming within thirty (30) miles of every store and they have avoided all of this food that comes from continents in a way that doesn't taste good.

MITCHELL: I like the fact that both of you think that trains should make a comeback.

SIMMONS: Well they have to. I think that would be a wonderful thing.

KUNSTLER: It is so amazing that we are not talking about this and it tells me - a registered Democrat - it tells me a lot about the cluelessness and brainlessness of the Democratic Party right now.

SIMMONS: You know unfortunately the green movement jumped on the idea of an 80 mile per gallon car that basically was probably impossible to actually create and would take thirty years, but that's their solution when what they should have been championing for is the return of trains and ports.

KUNSTER: And walkable communities.

SIMMONS: And walkable communities.

KUNSTLER: You know Matt, it even goes further than that because you know the unintended, tragic consequence of that project of creating the hyper car is that it only promotes the idea that we can continue to be a car dependent society. It's absolutely crazy.

SIMMONS: I'm a so anti CAFE standards, because I think once we past them a lot of people said well we've solved the problem. And unless we demolish the 220 million vehicles we have on the road today it hasn't even started to address the problems.

MITCHELL: Email from Paul who says "What will it take to get Americans to change their oil dependent lifestyle? Serious writers such as yourselves have been addressing this issue for decades yet very little has been or is being done."

KUNSTLER: I don't think that we have been addressing it for decades at all.

SIMMONS: Nor do I.

KUNSTLER: It's only really been in the last ten years since a group of eminent elder statesman geologists retired from the industry and started to speak their minds, once they were established in their pensions. And started to essentially tell the truth about the world oil supply situation. And you know oddly enough even while that conversation has been going on for ten years most of the American people don't want to believe it and our leaders do not want to believe it. You know there is a question about why our leadership is so bad. My own opinion about it is that the dirty secret of the American economy is that it's mostly about the creation of suburban sprawl. We don't have that much of a manufacturing economy anymore. And if you subtract all the suburban sprawl activities like the housing bubble, the real estate industry, the mortgage mills, all of the accessories of the housing bubble like the strip mall building and all that stuff. If you subtract that from our economy there is not a lot left besides fried chicken and open-heart surgery. And you know neither John Kerry or George Bush or any people at the highest level want get up and say Americans we cannot have a suburban sprawl economy anymore because all it represents is an investment in stuff that we are not going to be able to use in 5 or 10 years.

SIMMONS: I think it's probably even more insidious than that because for 50 years we've had a concept that the Middle East had unlimited amounts of oil. We actually worry more about if we can keep them from flooding the world with oil and destroying the rest of the world's oil industry because it's so cheap. Then we occasionally worried a little bit about geopolitics and we created an illusion that free and cheap energy would last forever. And so once you have that illusion - you know it wasn't quite as sinister as I think maybe Jim's comment would suggest - it was stupidity, and then compounding that are too many people who call themselves energy experts. I encounter these people all the time that basically talk about ingenuity and hard work and technology and creativity and how they will basically make energy usable forever at cheap prices.

KUNSTLER: Matt, this is Jim and I really am compelled to ask you this because people have asked me this repeatedly. Matt Simmons has on many occasions has consorted with and talked to the leaders and business and politics in America. You have advised George Bush at various times over the last 5 years and we really are puzzled about whether these guys get it or not.

SIMMONS: You know ironically I think they are starting to. I think part of the problem is that, yeah, that I speak out loudly when I'm in Washington and I speak out loudly when someone calls me, but so do lots of other people lobby to say we have no problems and I'm expert…..trust me we have no problems. It's very interesting though. There is a Congressman from Western Maryland Roscoe Bartlett, who was elected to Congress 14 years ago, who, from our website, got very concerned about peak oil. Congressman Bartlett - when he was elected to Congress 14 years ago was 66 years old - has his Ph.D. in Science. And he has basically spent a better part of an hour in the Oval Office with President Bush discussing peak oil. President Bush has asked the National Petroleum Council to gear up, roll up their sleeves and do a very serious analysis about how real is this issue. We are going to have to battle a lot of entrenched people that basically just…they don't believe it's an issue. And I don't think they have any axe to grind. They just basically don't think it's an issue because Adam Smith rules the oil business.

KUNSTLER: Well what you're saying you know is that the delusional thinking in our society is so broad and so wide and so deep that it runs into absolutely every level. And one of the ideas that you just expressed I think is at the center of it - the notion that we can replace our energy with technology. And you know I have to tell you I saw this live and in person when I went to the Google Headquarters in San Francisco. You know the greatest new tech company of the Internet era, right. And when an author comes to town they snatch the author and take them down to their headquarters to give a talk. They did that to me, so I went down and talked to them and I gave them my point of view that we were facing a big problem with energy, and one after another these guys got up and said "Dude we've got technology."

SIMMONS: I keep asking these guys "what technology?"

KUNSTLER: Well the deal is that they think that because they have been successful in moving pixels around screens that they can do anything. And what this really relates to Matt, is that we have developed an incredible sense of grandiosity about what our powers are and what we are able to do and that is tremendously dangerous for us.

SIMMONS: A growing number of people are finally starting to listen and get concerned and dig into the figures. It's why I'm so passionate about data reform, because if we have a globally mandated standard of data reform - and that can happen this year because all the major companies have the data we need - then you could take this argument out of a Church. Get it away from the theology of I believe this or I believe that and look at facts. And the facts are what I think scare people enough to basically do something before everything unravels.

MITCHELL: Here is a question from Gregory who is listening online in Memphis. This goes to your question about figuring out how much oil there is. He says "could you explain the water fraction of Saudi oil as an indicator of oil field exhaustion?"

SIMMONS: Yeah, what Saudi Arabia did when it was actually run by the Aramco companies was to prevent reservoir pressures from collapsing as oil was produced. They started a technique of injecting water while reservoir pressures were high in order to basically keep pressing the water up and keeping the pressures high. And today to pump about 8 million barrels a day of oil you would have to inject between 15 and 18 million barrels a day of water. So the water cut finally starts rising and as the water cut rises and the well water crowds of the oil. That's what finally causes depletion. So that's simply what it's all about.

MITCHELL: Let's get a call next from Gerald in Wichita Falls. Hi.

CALLER: Hi. I had a two-part question. First of all as I've passed by these refineries I have not passed one yet that didn't have a flair going up. If the price of natural gas is so high why don't they reuse that gas rather than just burn it off?

SIMMONS: I think what that's all about is basically pressure problems with the refineries - it's an emergency escape valve to keep a bigger problem from happening. They are not intentionally flaring the gas because they don't know what to do with it. So this way you don't always see flares. They are not a good sign, but it's not some sort of a casual plan. Now 60 years ago, ironically, you could fly over Texas in a plane and all of Texas was alive at night. We were flaring natural gas all over. First time I flew over the Middle East at night was in the early 70s, and you know when we got close to Bahrain where the plane was stopping, there looked like there was a large city - no it was just the gas flaring off the giant oil fields.

CALLER: Okay and the second part of my question, I remember back in the early 70s, it was about 1973. There were two gentlemen that were driving around the country that were explaining to people how they could get their cars to run about 200 per miles per gallon of gasoline and since then I've heard of several other people who had simple developments that could do that but yet they all seem to disappear. I've heard several that have died under mysterious circumstances and I was wondering is there anything really to that?

KUNSTER: I certainly get a lot of letters from people I regard as cranks saying that these things….but what it comes down to really is first of all it's sort of paranoid conspiracy theory and I'm allergic to conspiracy theories. It's another gloss on the old perpetual motion idea.

MITCHELL: Let's go to Ron in Dallas. Hi.

CALLER: Hi guys. I appreciate your time. Real quick question and then a follow-up. Number 1 - assuming that we put together all of the UN concept where the world's going to decide what it needs to do about oil, how to distribute it, how to handle it, how we all are going to get along together and everything just works beautifully, still ultimately some day it's going to come when we have no oil and I'm wondering what happens? Has anybody predicted….? What happens after that?

SIMMONS: Once we start weaning ourselves in a more efficient use we certainly buy ourselves time to try to figure out where the problems will be. Whether we can create some effective additional transportation and fuels. Natural gas is a lot harder to figure out and that's actually a worse problem in my opinion than oil. But I think that we don't have time to basically invent a lot of new things now. We have to attack significantly the consumption size. Another idea we have talked about is the railroads. Liberate organizations so as not to force people to all to come to work and work under one roof. Why do you have 1,000 people under one roof? So we can communicate. How many people even know each other? We have the tools today to allow people to work wherever they want, close to home or at home and be paid on productivity standards versus showing up from 9 to 5.

KUNSTLER: I would add something to that coming from a somewhat different angle. I think the 21st Century is going to be much more about staying where you are. And not so much about constant, ceaseless, incessant mobility which we have become accustomed to, and you know which we now assume is the norm. I would advise anybody thinking about the global oil predicament and it's ramifications to check all of their assumptions at the door about what life is going to be like in the future.

SIMMONS: But ironically, I don't think it has to come to an end. I think in fact if we make these changes it would be a better life and we would be more productive and have more free time. Ironically, we might look back…I think Tom Freeman's book The World is Flat is a fabulously interesting book to read but the world actually wasn't flat. It actually needed to get back round and get back to villages.

KUNSTLER: Yeah and I happen to think that Tom Freeman's thesis is quite incorrect. The idea that globalism is a permanent circumstance…

SIMMONS: Embedded in the concept was free, cheap…energy forever.

KUNSTLER: Yes and what he seemed to miss was the fact that globalism was a product of a very special set of circumstances at a very special time of….

SIMMONS: Globalism was actually sort of ironically the squaring of suburbia.

KUNSTLER: Uh-huh. I'm going to have to reflect on that.

MITCHELL: You guys can carry that on tonight. Let's get a call from April in Commerce. Hi.

CALLER: Hi. I was calling because someone referenced about electric cars and natural gas and how we’re short on natural gas and my call isn't in particular to electric cars so much as why haven’t we explored the option of more solar power and more electric like wind-power.

MITCHELL: Okay, we’ll ask, thanks. Matt, go ahead.

SIMMONS: Wind actually works. It’s commercial. For a long time it didn’t because gas prices were so cheap, but wind works fine now. Solar works, but it is just not very commercial. But the problem is neither one of them creates sustainable energy unless the wind is blowing or the sun is shining. So they’re just kind of emergency generators if you want to take home from that way. It turns out the environmentalists are out to hate wind just as much as they hated everything else. It was great when it was a concept.

KUNSTLER: But as you say the sun has to shine and wind doesn’t always blow.

SIMMONS: And all they create is electricity, and not very much of it.

KUNSTLER: Yeah you can’t run commercial airliners on solar or wind and you know there are a lot of problems associated with that. We certainly are going to use solar and wind. My guess is that we’re going to use them at a very local, perhaps a household level. It’s all a matter of scale. The other question associated with these things is, can you even have the hardware for solar and wind without an underlying oil economy? And I’m not sure that we can because they are complicated to manufacture and fabricate. They require exotic metals and energy and all sorts of questions like that.

MITCHELL: Let’s get a call from Jim in Dallas. Hi.

CALLER: Yes. I just had a quick comment that if people are really interested in learning how to live a self-sustaining life, they really should go back and look at how the hippies lived and look at the Whole Earth catalog and various sources like that on creatively living within your means and self-sustaining life, rather than second and third hand existence where other people are constantly doing for you.

SIMMONS: Well as a child of the 60s and as sort of a crypto hippy or ex-hippy it was sort of a good start but it wasn’t quite as simple as that you know. Hippies love their Volkswagens buses and hippies love their electric guitars. In fact, you know the whole phenomenon of powerful electronic music in a strange way is a perfect illustration of, you know, how we expressed ourselves at the very high point of the cheap oil fiesta. And I think that’s a good argument for going back and learning acoustic instruments.

MITCHELL: Well if want to get more of this tonight, the presentation is at 7:00 tonight at Highland Park United Methodist Church. It’s called the Unfolding Energy Crisis and its’ Impact on Development Patterns. There is a book signing at 6:00 p.m. followed by the program at 7:00 p.m. If you want more information about that you can call 214-768-2743 or go to our website. All the information is there. Jim Kunstler’s book is called The Long Emergency, Surviving the Converging Catastrophes of the 21st Century. Matthew Simmons’ book is Twilight in the Desert, the Coming Saudi Oil Shock and the World Economy. Matthew, thank you very much.

SIMMONS: Thank you for having the program.

MITCHELL: Jim thanks.

KUNSTLER: A pleasure to be here.

~~~~~~~~~~~~~~~ Editorial Notes ~~~~~~~~~~~~~~~~~~~

UPDATE (27 Aug): At last! We have the edited transcript. "Tar zans" has now been corrected to be "tar sands"
UPDATE (26 Aug) - fixed several spots in the transcriptions. Reader SP points out that the (inaudible) spots in the first caller's question about coal-to-gas are probably "Fischer-Tropsch" process. Reader DM points out that "nugget" should be "nougat."