Business vs Politicians – Guess Who Knows Better?

In order to remain competitive, entrepreneurs and other business owners and managers must constantly strive to predict future conditions in the market. They do so with a variety of means – surveys, statistics, industry forecasting, etc. Financial success depends on being able to allocate resources today so it matches future demand or supply. Let's assume that Walter runs "Block by Block," a road construction company. Walter has been keeping track of the price of the materials needed to make concrete and believes that it is going to go up soon. As a good businessman, he orders more. It turns out that he is correct; his decision has lowered his costs of operation. To the extent that he outsmarted his competitors, he has gained an advantage in terms of profit margins, allowing him to lower prices, give raises, invest more in equipment, or save. At any rate, his decision is correct. Had he erred, he would have incurred a relative loss against other players in the industry and would be at a disadvantage.

But the price of input factors is merely one of the many issues that must be considered. Conditions in the market vary according to customer preference. There are changes in fashion and technological advances, for instance, and successful entrepreneurs are those who can best keep up with the changes. Then there is the choice of where and when to start a business, who to hire, whether to partner with other businesses, and literally hundreds or thousands of other factors to balance and consider.

Today, the role of the capitalist is mostly ignored or undermined by the bureaucratic mindset found in politicians and court intellectuals. Capitalists, like all human actors, take risks when they put their own property at stake. They try to maximize their success rate and reduce their losses. Robert Kiyosaki said that "it's not your knowledge that makes you rich, it's your abilities." So even if politicians or "system managers" read up on all of the business and marketing gurus out there, they wouldn't still be able to bargain, sell, assess risk and perform the other abilities that a true entrepreneur develops. One summer running a lemonade stand as a kid will do more for your entrepreneurial skills than a lifetime as a politician or government bureaucratic manager.

Now on to prices. What about them? Prices are records of past exchanges which reflect both real scarcity and subjective valuation of goods. Prices can motivate and guide the entrepreneur in terms of better information. That said, their main task, the one that the state and socialist endeavors in general lack, is to allow us to make economic calculation. The kid running a lemonade stand will easily know that he is doing something valuable to others because he's turning a profit. That is, the price that people actually pay is high enough for the kid to obtain a profit. Thus, he knows that his time and other scarce resources have been invested efficiently. He has combined various resources (cups, lemon, ice, napkins, labor) and turned them into something more valuable to the customer than the sum of the parts. It is clear that when the purchase was made, the customer at that moment preferred the lemonade over another product and also to the individual products and resources that would be necessary for the customer to make the lemonade himself.* This is how the market works; it is simple and a win-win situation for both parties.

Politicians have no way to do even the simplest of things like the above. Nobody buys their services; they impose them. They learn very different abilities during their "careers," such as bootlicking, backstabbing, and pretending to be busy. They serve no consumer and indeed none can be found unless you count pundits, bureaucrats, leeches and lobbyists. As the ancient Chinese saying teaches us, "One cannot serve two masters at the same time." The politician has to spend more than half of his time making his "internal clients" happy while at the same time keeping others from looking better than him. What a terrible waste of time. That's an awful lot of R&D for new products, efficiency gains and product improvement that never took place. The larger the public sector, the smaller the space for true production for human well-being. In fact, because choice is taken away from the consumer – that is, from the rest of all of us – we are stuck in a win-loose situation with these parasites.

While companies spend billions in product development, the state resorts to taxing billions. And while it is true that the market is dynamic and businesses do fail, making room for a better allocation of resources, the same cannot be said for government production (redistribution really). Ask yourself why the FDA or CIA for FAA or any other agency – why they do not go away having failed over and over? On the contrary: they exist in perpetuity. Of course, when there's a constant supply of money, we just hear about "reform" or "putting the right people in office" or, even worse, calls for "better funding." The problem will remain the same so long as free entrepreneurs, not blind socialist mice, run the game.

Finally, it boggles the mind how ordinary people place so much trust into politicians. How is possible that a bunch of political parasites, who usually live far away, magically have the ability to know what is best for you? They are just guessing. Further, even if they were somehow able to know what is best for you in a certain aspect or two, why assume that they know everything about every imaginable subject? In fact, why assume that they know anything at all? If an official has a degree in law or engineering, for example, most of the time they debate and vote on issues that they have no idea about. Sure, they have panels, discussions, experts and all kinds of "debate" takes place. But so what? They still impose the decision at gun point and they make the taxpayer pay for it. Horrendous!

Businessmen have one master: the consumer. Politicians aim to serve all of society yet they end up destroying it, usually under the motto of "for your own good." We wonder why we let them manage or design precisely the things we consider most critical to our lives such as education, health care, food and personal interactions. We'd rather have the state run the lemonade stands, and let the kids (especially the most ambitious ones) take over the roads, schools and hospitals, so they turn a profit and we know something good is actually going on.

*This is the reason why one cannot really run the government as a business. We often hear, especially at the municipal level, how the local politician plans to run the city or town as business. What is meant here is that they will attempt to cut waste and to run it efficiently. Yet this is economic ignorance. The government cannot do anything efficiently so long as it continues to tax, legislate and monopolize services. The mere fact that the government taxes, legislates and monopolizes shows that people would prefer something else instead. If a politician disagrees with this statement, that is, if they do not believe that people would prefer something else instead of what they are being "offered," they would have to support the abolition of as much of the state as possible and see where people would freely spend their money.

The top TEN TRENDS

That will drive business in the next 10 years

1 Business Aimed At the Bottom of the Pyramid Despite Latin America´s economic growth, the vast majority of the region´s population continues to live in poverty. According to data from the Economic Commission for Latin America and the Caribbean (ECLAC), 38.5% of Latin America´s population -- 205 million people – are considered poor. Designing products and services to better serve this segment of the population can have a dual positive effect: As new business opportunities open, they generate a “virtuous circle” of development. Just look at the boom in micro-credit and prepaid cell phones and their impacts on low-income people and micro-business. For resource extraction enterprises such as mining and oil companies, this tendency is manifested through the development of business clusters in zones of influence near their operations, which help sustain over time the economic benefits generated by mining or petroleum exploitation. 2 Renewable Energy For reasons that have as much to do with cost as they do with the environment, the world is moving towards low carbon emissions development model, in which renewable energy sources will play an increasingly important role. This also means new business opportunities. According to the Latin American Energy Organization (Olade), Latin America is only taking advantage of 26% of its hydroelectric and 4 % of its renewable energy potential. Last year, the state of São Paulo commissioned a study to identify the chief sources of greenhouse gas emissions in its territory, which, among other things, will assist in the development of business around carbon credits. In addition to hydroelectric energy, biofuels, wind and geothermal power will dominate the energy picture in the coming years. 3 Water Management The scarcity of fresh water is another issue that will be prominent on a global level in the years to come and will have a major impact on the business landscape. A number of projects –from real estate development to mining and energy— could remain on paper only due to the scarcity of this key resource. The development of technologies for more efficient use of water, whether through recycling, decreasing water losses or desalinization of sea water, will be one of the most promising business opportunities in the next decade. 4 Process Automation The rapid development of information and telecommunications technologies indicates that process automation will be one of the keys to cost reduction and greater efficiency in company operations, whether in a bank or a mine. This phenomenon will create a gradual yet significant change in how business is conceived and managed in the coming years. 5 Process Integration Closely related to the process automation trend, process integration will significantly transform company organizational charts. In the financial sector, bank tellers are no longer simply processing transactions but selling solutions, equipped with on-screen access to all kinds of information about their clients. For resource extraction companies, assignment of tasks in the field will no longer be a purely engineering decision, but will become part of commercial and customer support processes. 6 The New Metamorphosis of IT and Telecommunications We move in an IP world, in which every day more communication occurs through the now-famous Internet protocol. The phenomenon has brought about important changes, starting with voice over IP or experiments with photonic technology for remote operations of heavy equipment, initiated by Chilean copper company Codelco in conjunction with NTT of Japan. But this is just the beginning. “We haven’t seen anything in comparison with what is to come in the next 10 years,” says Jose Antonio Rios, international president of Global Crossing, one of the largest fiber optic network companies in the world. Which of the systems and architectures, such as IP Multimedia Subsystem (IMS) in telecommunications or the Service Oriented Architecture (SOA) in information systems, will predominate is not easy to guess. But what is clear is that the progress shown by information and telecommunications technologies in the next 10 years will radically change the way business is managed. 7 A Multipolar World The end of the Cold War brought an end to a geopolitical model that divided the world under the hegemony of two global powers. In recent years the world has been largely under the influence of one major power, the United States. But now, with the rise of China’s economic power, this scenario is changing. Will we see a return to the bipolar world of the Cold War? No. China depends on the U.S. and European markets and has abandoned confrontational diplomacy, exercising its power in a more subtle way and promoting a multipolar world. China’s geopolitical strategy will have effects on Latin America and will influence the design of foreign and trade policies in the region. The China-Brazil alliance within the World Trade Organization and the free trade agreement signed by China and Chile are early manifestations of the new Chinese diplomacy. 8 New Multinational Corporations and South-South Investments The trend began to appear in the 1990s, but in the last few years has begun to gain strength. Major multinational companies are no longer exclusively based in developed countries. A growing number of global players, such as Brazil’s CVRD, Mexico’s Cemex, Huawei of China and India’s Tata have become industry leaders and active participants in mergers and acquisitions throughout the world. Their global presence will continue to grow and increasingly their business decisions will be made using criteria based on the global market. At the same time, so-called “south-south’ investments will continue to increase. According to figures from UNCTAD, the United Nations Conference on Trade and Development, in 2005 south-south investments represented one-third of the total foreign direct investment flow in the world. 9 A Wireless World The telecommunications revolution is progressing toward a world that is clearly wireless, at least for the last mile. We are not just talking about the ubiquitous cellular phone handset. Wireless applications are just now beginning to demonstrate their potential. For an idea of where this technology is taking us, just consider the evolution of small radio-frequency identification devices that allow you to monitor a tire from thousands of kilometers away, or the combination of cellular phone technology with satellite technology for asset management. 10 Fiscal Reform It’s one of the major tasks still pending in most Latin American countries, with extreme cases such as Mexico, where the government barely collects taxes equal to 12% of the country’s GDP (excluding oil taxes), or that of Brazil, where taxes totaling 34% of the nation’s GDP are collected through a tangled and irrational tax system. The rationalization of taxes is one of the major issues on the Latin American economic agenda and a key for improving the region’s competitiveness and the standard of living of its people.

Senate Panel Clears Mukasey to Be Attorney General

Nov. 6 -- A U.S. Senate panel cleared Michael B. Mukasey's nomination to be President George W. Bush's third attorney general, setting the stage for probable confirmation by the full Senate this week.

Two Democrats joined all nine Republicans on the Senate Judiciary Committee to approve Mukasey's nomination to head the Justice Department. Eight other Democrats on the panel, including Chairman Patrick Leahy of Vermont, opposed confirmation because Mukasey refused to say whether waterboarding, an interrogation technique that simulates drowning, amounts to illegal torture.

``I wish that I could support Judge Mukasey's nomination,'' Leahy said. ``But this is an administration that has been acting outside the law.''

On Nov. 1, Bush defended Mukasey, saying that announcing a legal opinion on waterboarding would ``give the terrorists a window into which techniques we may use and which ones we may not use'' and could put U.S. intelligence agents in ``legal jeopardy.'' Today, the White House expressed appreciation for the committee vote and said Mukasey has ``demonstrated that he will be an exception attorney general.''

Mukasey, 66, a retired federal judge, was nominated by Bush to succeed Alberto Gonzales, who left office in September following a nine-month investigation into allegations he politicized decisions at the Justice Department.

Independent Legal Advice

Democrats accused Gonzales, a former White House counsel, of putting political loyalty to Bush ahead of providing independent legal advice to the president on such issues as torture, detention and surveillance of suspected terrorists without a court warrant.

``Alberto Gonzales owed his political career and his legal career to a good extent to President Bush. Judge Mukasey does not,'' said Dianne Feinstein of California, one of the Democrats who voted to confirm him. ``Mukasey in my view is going to be a very different attorney general.''

Mukasey told the panel that waterboarding is ``repugnant,'' but said he couldn't give a legal opinion without studying the issue. He vowed to review waterboarding and the legal basis for any harsh interrogation technique once he became attorney general.

Mukasey's confirmation is needed because the Justice Department became ``dysfunctional'' during this year's controversy over the firing of nine federal prosecutors, said Arlen Specter of Pennsylvania, the panel's ranking Republican.

Before the waterboarding controversy erupted, ``Mukasey was deemed to be an ideal candidate for the next attorney general,'' Specter said. His qualifications made it ``almost seem as if he came out of central casting.''

`Back That Up'

Specter said Mukasey assured him in a telephone call that if Congress votes to outlaw waterboarding, ``Judge Mukasey said he would back that up'' by advising the president he couldn't supersede that law. That decision should be made by Congress and lawmakers should pass such legislation, Specter said.

Democrats who opposed Mukasey said that pledge was an evasion of responsibility. ``Mukasey is trying to outsource his job to the Congress,'' said Massachusetts Democrat Edward Kennedy.

Support by Feinstein and Charles E. Schumer of New York ensured Mukasey's nomination would get to the full Senate.

Schumer noted that virtually no senator doubted Mukasey's ability to lead the Justice Department, which he said ``has been run into the ground by the Bush administration.''

Because Bush threatened not to nominate someone else if Mukasey were rejected, ``all the work we have done to pressure Attorney General Gonzales to resign would be undone in a moment,'' Schumer said.

Waterboarding became an issue following the disclosure in news reports that the Central Intelligence Agency used the tactic three times to question al-Qaeda operatives after the Sept. 11, 2001, terrorist attacks. The Bush administration has refused to say whether it ever used waterboarding in questioning suspected terrorists.

A new focus on trade-based terrorism financing

Moneylaundering.com and Fortent Inform recently posted a very interesting article on Trade-Based Money Laundering and terrorism financing to which I contributed. Trading of commodities has been a key terrorism financing vehicle for years, as a way to provide cover for illegal activities and transactions, especially in Sudan and the Balkans.

One of the main characteristics of the Al Qaeda network has been its ability to operate behind a traditional economic and financial network, the best example was provided by the network formed between 1983 and 1996 in Sudan, that crystallized for several years the overall spectrum of facilities and tools at bin Laden’s disposal to carry out its fundamentalist goals, through apparent legitimate companies and charities.

This trend was later observed in many investigations, including in Europe, where an Al Qaeda cell in Spain was operating behind several real estate companies.

In November 2006, a post on a jihadi website (Alsayf.com) was still recommending as an "Innovative method of communication between components of the cell", "to open a small company, real estate office or any industrial company", in order to recruit members, organize meetings and raise funds.

The Moneylaundering.com article suggests that international regulators such as the FATF could focus on new regulations in this field. It is indeed more than necessary, although agreeing and imposing international regulations will not be an easy task, due to the complexity of identifying illegal transactions when confronting legitimate businesses. From the experience of past investigations, this is usually determined in a case by case basis. Regulators could usefully work on identifying and listing patterns of suspicious investments or transactions, based on various parameters of a transaction, including its pricing, financial structure, actors and location.

Central bankers see more credit pain

Central bankers past and present warned on Tuesday of more credit pain to come as Germany's Commerzbank and a big American lender became the latest to reveal losses from U.S. subprime mortgage lending.

IndyMac Bancorp Inc, one of the largest independent U.S. mortgage lenders, posted a quarterly loss more than five times as big as it had projected while Commerzbank's profits undercut forecasts due to a big subprime investment write-down.

Bank of England Governor Mervyn King said banks would take some considerable time to flush out total losses related to mass defaults on U.S. mortgages leant to people ill-equipped to pay.

"We have several more months to get through before the banks have revealed all the losses that have occurred, and have taken measures to finance their obligations that result from that, but we're going in the right direction," King told the BBC.

Banks, particularly in the United States, have come clean about huge losses tied to the subprime mortgage sector.

IndyMac's net loss was $202.7 million versus a profit of $86.2 million a year earlier, as it was battered by mounting defaults and a collapse in investor demand for its loans.

Commerzbank posted a third quarter net profit of 339 million euros ($493 million) after writing off 291 million euros of assets exposed to the market for risky U.S. mortgages.

Others have already announced far bigger hits.

The head of U.S. banking giant Citigroup quit on Sunday, taking the blame for expected losses of $8-11 billion before taxes, on top of $6.5 billion it wrote off three weeks ago.

Charles Prince's departure came five days after Merrill Lynch & Co ousted its chief executive, Stanley O'Neal, following an $8.4 billion write-down there.

Citigroup has named veteran financial expert Richard Stuckey to head a new team managing its subprime mortgage portfolio, according to an internal memo seen by Reuters, a move taken positively by the U.S. stock market.

GREENSPAN ALARMED

Former Federal Reserve Chairman Alan Greenspan and billionaire investor George Soros said the downturn in the U.S. housing market had yet to take its full toll on growth.

Greenspan told a forum in Tokyo that high inventories of unsold homes presented a major risk to the U.S. economy and that he was not sanguine about how quickly the glut could be reduced.

"We still need to accelerate the rate of inventory liquidation, and that will mean bringing housing starts down and sales up. We have a long way to go," said Greenspan, who was answering questions via video link from Washington.

Soros said in a lecture at New York University that the U.S. economy was on the verge of a serious correction.

"I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Federal Reserve Chairman Ben) Bernanke is seeing," he said.

The Fed has already slashed rates by 75 basis points to 4.5 percent in an effort to limit damage to the broader economy from the housing market slide and resulting liquidity squeeze.

SCARY NUMBERS

Markets were first gripped by a credit crunch in August when interbank lending dried up as banks realized they did not know which of them was dangerously exposed to shaky U.S. home loans.

With precarious U.S. mortgages bundled up into complex financial products and sold on around the globe, uncertainty about where the exposure lies remains intense.

Money markets tightened on Tuesday, reflecting renewed jitters -- London interbank offered rates for dollar deposits posted their biggest increase since late September.

Estimates of eventual total losses vary but all the figures put forward are staggering.

JPMorgan thinks the financial services industry is sitting on $60 billion in undisclosed losses. Bill Gross, chief investment officer at the world's No. 1 bond fund PIMCO, characterizes the subprime crisis as a "$1 trillion problem".

Greenspan said about $900 billion of subprime mortgages had been securitized into fixed-income instruments, and the excess level of unsold homes was driving price declines that are eroding the value of the securities backed by those mortgages.

"The critical issue on the whole subprime, and by extension the whole financial system, rests very narrowly on getting rid of probably 200,000-300,000 excess units in inventories in the United States," he said.

Stock markets rose modestly, after Monday's Citigroup-led sell-off, but experts were loath to predict a prolonged rally.

"There's lots of uncertainty ... after the Citi writedowns, which gives the impression we haven't seen the end of it," said Philippe Gijsels, strategist at Fortis Bank in Brussels.

Dreaming of one President for Europe

IN THE underbrush of the European jungle, away from the crashing feet of the biggest European Union leaders, the clever, nimble creatures who have made the EU project their life's work are up to something.

Your correspondent was at a gathering in Brussels when the subject came up (as it does around here) of the scramble about to begin for the next round of big EU jobs. A complicated question was asked, about whether the pro-integration camp would need to rewarded with a job like European Commission president, if the more sceptical Tony Blair were chosen as the first president of the European Council (a new post, which will see current heads of government elect an ex-prime minister or some such big cheese to chair EU leaders' summits for a two and a half year term, renewable once).

An old Brussels hand raised an eyebrow. And what, he asked, makes you think that the next president of the European Commission, and the first president of the European Council cannot be one and the same person?

Um, because nobody has suggested merging the two jobs, someone suggested.

Well, there's nothing in the new treaty that stops the same person holding both jobs, came the old hand's retort.

Is that what some people are dreaming of, he was asked.

Absolutely, replied the old hand, a man of very good contacts.

Is this a serious possibility? This blogger would have to guess not. It would give a new joint president a lot more power than some governments, notably Britain's, intended giving any European official when they finally agreed the new Lisbon treaty. But is it being talked about in some circles in Brussels, in the nooks and crannies where the bush babies of EU evolution scurry about beneath the notice of dinosaur-like nation states? By the sound of it, yes.

Pakistan: Musharraf's second coup

Image: Wikipedia

Pakistani leader Pervez Musharraf declares a state of emergency, rounds up his political opponents and stifles the media in a desperate attempt to hang on to power, using the war on terror as a justification for sacrificing democracy. In the meantime, Washington must reconsider its relationship with this trusted ally and what the real goals of the war on terror should be. From ISA.

Ostensibly, the war on terror is the modern-day savior of democracy, but increasingly we find that it is instead its defiler. In Pakistan, where few would now be surprised at the lengths to which General Pervez Musharraf is willing to go to hold on to power, democracy is the greatest victim of the war on terror.

Over the weekend, Musharraf outdid himself in imposing emergency rule and arresting hundreds of opposition figures and protesters. And the restoration of democratic legitimacy now seems a nearly insurmountable challenge.

Musharraf has sent a clear message to the people of Pakistan: He will not be opposed, and the war on terror is his trump card. On Saturday, the general declared a state of emergency, which means crucial parliamentary elections scheduled for January will be postponed. On Sunday, he followed up this measure by arresting hundreds of his opponents, including judges, human rights activists and politicians.

Though Musharraf and his spokespeople insist that the elections will still take place at an undisclosed date, the general will take pains to ensure that any future poll will not lead to the restoration of civilian rule - a step long-awaited by the public.

As for the media, Musharraf took steps to silence their voices, blocking broadcasts by private television channels in most cities, and even jamming domestic signals for the BBC and CNN.

Chief Justice Iftikhar Mohammed Chaudhry is reportedly locked up in his home in Islamabad, with a police cordon making sure he stays put and isolated, according to local media reports, while senior judges are being replaced by those friendly to Musharraf.

On Sunday, police broke up a small demonstration near the presidential compound. And troops have been stationed outside main government buildings. The country's lawyers were reportedly planning more protests, but the police presence and violent crackdown hoped to lessen the number of people willing to risk taking to the streets.

However, on Monday, Pakistan police used teargas and batons to fight back lawyers protesting the imposition of emergency rule and the series of raid and arrests targeting the opposition. In Karachi, police used batons to break up protesting lawyers, and in Lahore, police used tear gas to disperse lawyers who had raided the offices of the local chief justice, a Musharraf loyalist. In all, around 200 lawyers were arrested in Lahore and dozens in Karachi, according to local news reports. As many as 500 political opponents had been arrested over the weekend, prior to this outbreak.

Surely none can doubt the extent of the crisis that has engulfed Pakistan under Musharraf's rule. The instability that has followed in his authoritarian wake can in no way be credited as a victory for the war on terror. His decisive actions against terrorist threats have only emboldened extremists while furiously chipping away at the democratic system. Few are convinced of the Pakistani leader's dedication to the war on terror when his democratic opponents are rounded up with as much gusto as Islamic extremists on the country's restive border with Afghanistan.

The timing of this second coup could not have been more significant: the Supreme Court was scheduled to rule very soon on a parliamentary vote that reelected Musharraf - who originally seized power in a 1999 coup - as president. The vote had been boycotted by the opposition and the Supreme Court was set to rule on the legitimacy of the ballot. A state of emergency ensures that this will not happen - at least until the judges are replaced with loyalists.

Musharraf has also announced that his previous pledge to quit his post as army chief is now "in limbo."

All of this is not to say that Islamic extremism is not a very serious threat in Pakistan, but the real question is whether Musharraf has perhaps not compounded that threat and even used it to foster a state of emergency that secures his future leadership of the country.

In October, 139 people were killed in a bomb attack in Karachi, during a parade to welcome former prime minister Benazir Bhutto home after years in self-imposed exile. Since July alone, 800 Pakistanis have been killed in attacks - most of them in retribution for Musharraf's highly publicized storming of the Red Mosque, which was said to be sheltering Islamic extremists. But his latest coup will bring the Islamists to the forefront as - with the rest of Musharraf's political rivals rounded up and behind bars - they constitute the country's main opposition group.

Musharraf may shout "war on terror" until blue in the face, but even his staunchest supporters in Washington seem to be wavering in their support.

The US has stuck by the president - who has so far been easily molded to serve the interests of the war on terror even at the expense of democracy and stability. However, Secretary of State Condoleezza Rice criticized Musharraf's actions and said Washington would review its aid disbursements to Pakistan (US$10 billion over the past half decade), which have largely gone to the military.

In a weekend statement, Senator Joseph Biden, chairman of the Senate Foreign Relations Committee, urged the Bush administration to "move from a Musharraf policy to a Pakistan policy."

In recent months, Washington had been busy trying to foster a power-sharing deal between Musharraf and Bhutto (another would-be pawn in the war on terror). Things had been going fairly well until this weekend: Musharraf had promised to shed his military uniform, forfeiting his unconstitutional dual tenure of the presidency and military leadership, and cutting a deal with Bhutto that would have seen massive corruption charges against her dropped and paved the way for her to become prime minister again. With Bhutto in the prime minister's seat, Washington surmised that the power of the country's Islamic parties would be quelled.

That deal now seems all but forgotten.

However, US Defense Secretary Robert Gates remained less than committed to pressuring his Pakistani ally, telling reporters during a visit to Beijing that Musharraf must return his country to "law-based, constitutional and democratic rule as soon as possible," but adding this telling caveat: "We are reviewing all our assistance programs [to Pakistan], although we are mindful not to do anything that would undermine counter-terrorism efforts."

Having placing all its eggs in the Musharraf basket, Washington is ill-prepared to completely abandon its ally with no alternative plan in place.

In the meantime, protests continue, and though the state of emergency initially suppressed these to a level of relative insignificance, Monday's protests by lawyers, particularly in Karachi and Lahore, demonstrate that the people have not succumbed to the silence of fear.

Musharraf has backed democracy into a corner, leaving the people with a choice between two unpleasant options: silence or revolt. The Pakistani leader is clearly banking on the notion that the people are not ready to risk a revolution just yet. It is too early to tell whether they will indeed call his bluff.

DAILY ECONOMIC DATA

Despite Fear: Economy Still Strong

With all the turmoil and volatility in financial markets, we understand investor unease. However, because the Fed is not tight (and never was), tax rates remain low (and are protected by the threat of veto), trade protectionism is more bark than bite, technology continues to proliferate, and productivity remains robust, we do not foresee any serious economic slowdown.

Yes, the housing market is down sharply, and yes credit markets are in turmoil, but these problems are localized. Exports are booming, real GDP grew 3.9% in the third quarter, and the labor market remains stout.

Moreover, since the GDP report was released last Wednesday, new data on construction, shipments of capital goods and inventories point to an upward revision to above 4%. Meanwhile, October ISM reports show continued expansion in both manufacturing and non-manufacturing sectors of the economy.

Unfortunately, investors have become so pessimistic, strong economic data is virtually ignored. For them, the goal-posts have been moved. Many suggest that since the credit crunch did not start until August the strong third quarter growth rate was a mirage. Just wait until data for the fourth quarter starts to roll in and clear signs of a slowdown become obvious, they say.

But there is a problem with this line of thought. All of this was well known months ago and most forecasters still underestimated the strength of the economy. The same is true for third quarter earnings of S&P 500 companies, with upside surprises still running at the same 65-70% level they have had for many years now.

What appears to be happening is that just like recent periods of economic stress, the fundamentals of this huge economy remain intact. And as long as they do, the US economy will remain resilient. Some early data already suggest that this is the case.

The most important piece of data so far for the fourth quarter arrived on Friday and it was excellent news. Payrolls expanded by 166,000 in October and the number of hours worked in the private sector hit a new record high. Meanwhile, although October vehicle sales were down from September, they were still above expectations.

True, housing will remain a drag on real economic growth. But home building’s share of GDP has already shrunk roughly 30%, meaning that sector’s weakness has less of an impact on the overall economy. Moreover, the trade deficit is shrinking rapidly as exports boom. Exports are taking up the slack of a housing slump.

The disparity between the conventional wisdom and actual economic performance continues to resemble what happened after both the 1987 stock market crash and the 1998 credit market freeze. On both occasions, pessimism about the economy was palpable. Yet, real GDP actually accelerated. It grew 3.2% in the year before the 1987 crash and 4.1% in the year after. For the so-called “seizing-up” of financial markets in 1998, the economy grew 3.7% in the year before, and 4.4% in the year after.

On both occasions, faster than expected economic growth forced the Federal Reserve to retract its emergency interest rate cuts and eventually move rates higher than when the financial market turmoil began. We expect this time to be no different. With strong economic growth through at least 2008 will come higher interest rates. It’s only a matter of time.

ISM Non-Manufacturing Index increases to 55.8 in October

The ISM non-manufacturing business barometer (a measure of production growth in the services sector) increased to 55.8 in October from 54.8 in September. The consensus expected a decline to 54.0. Levels above 50 signal expansion and levels below 50 signal contraction in the services sector.

· On the positive side, the new orders index increased to 55.7 from 53.4 and the index for new export orders rose to 56.0 from 50.0 in September.

· On the negative side, the backlog of orders fell to 43.5 from 47.0 in September and the employment index, while still above 50, declined to 51.8 from 52.7.

· The prices paid component declined to 63.5 in October from 66.1 in September.

Implications: The U.S. service sector got stronger in October. The ISM Non-Manufacturing Index at 55.8 is consistent with our view that the U.S. economy is growing at a 3% annual rate in the fourth quarter. Combined with Friday’s Labor Department report, which showed an October payroll increase of 166,000, there is little evidence that the so-called “credit crunch” is causing significant economic weakness. The pain in the housing industry is being offset by strength in other sectors

Cannabis Thrives in an Afghan Province

Two years ago the province, which abuts Uzbekistan and Tajikistan, was covered with opium poppies — about 27,000 acres of them, nearly enough to blanket Manhattan twice. This year, after an intense anti-poppy campaign led by the governor, Balkh’s farmers abandoned the crop. The province was declared poppy free, with 12 others, and the provincial government was promised a reward of millions of dollars in development aid.

But largely ignored in the celebration was the fact that many farmers in Balkh simply switched from opium poppies to another illegal crop: cannabis, the herb from which marijuana and hashish are derived.

As the Afghan and Western governments focused on the problem of soaring Afghan opium production, which hit record levels this year and remains a booming industry, cannabis cultivation increased 40 percent around the country, to about 173,000 acres this year — from about 123,500 acres last year, the United Nations said in an August report. And even though hashish is less expensive per weight than opium or heroin, the report said, cannabis can potentially earn a farmer more than opium poppies because it yields twice the quantity of drug per acre and is cheaper and less labor intensive to grow.

“As a consequence,” the United Nations report warned, “farmers who do not cultivate opium poppy may turn to cannabis cultivation.”

Many farmers in Balkh have done just that, officials and residents say, and the province now has one of the most bounteous cannabis crops in the country.

The plant is certainly not hard to find. It lines the main highways leading into Mazar-i-Sharif, the provincial capital, and is visible to passing drivers. The crop’s chief byproduct, hashish, is sold openly at many roadside fruit and grocery stands, particularly around Balkh, the ancient citadel town about 15 miles west of Mazar-i-Sharif.

Late on an October afternoon, Muhammad Ayud, 30, a kindly sharecropper, was finishing a day of work at the three-acre parcel he farms here in this poor village just outside the town of Balkh. His plot was covered by a forest of cannabis plants, some more than nine feet tall.

“This is nothing,” he said, gesturing toward the towering plants. “If you give it real fertilizer, you’d see how tall it grows!”

Last year Mr. Ayud’s parcel was mostly opium poppies. But his crop was wiped out by government officials during a campaign led by the provincial governor, Atta Mohammad Noor, who jailed dozens of growers for disobeying him and personally waded into several poppy fields swinging a stick at the flower stems.

Mr. Ayud, one of only two wage earners in his 16-member family, lost most of his expected earnings for the year, about $1,000, he said.

This year he planted cannabis instead, with some cotton as a fallback in case the government followed through on its promises to eradicate the illicit crop. It was a return to a family tradition, he said. His father and grandfather grew cannabis here.

Mr. Ayud said he knew it was illegal to grow cannabis, but that it was the only crop that would produce enough profit to feed his family. “I don’t have anything else to grow,” he said. The difference in potential earnings is vast: cannabis can earn about twice the profits of a legal crop like cotton, local officials say.

Farmers in this region have cultivated cannabis for more than 70 years and, by the estimates of several Balkh residents, at least half the adult male population smokes hashish. Resinous, pungent and black, the hashish is sold in thin, palm-size sheets that resemble large tire patches and sell for about a dollar each. Hashish from this area — called Shirak-i-Mazar, or Milk of Mazar — was once prized by smokers around the world, though its primacy has since been supplanted by varieties from other countries.

Many farmers here, as elsewhere in Afghanistan, process the cannabis into hashish in their homes, then sell it to traffickers who come to their doors to pick it up. The best hashish is exported, residents here say, while the inferior stuff is consumed nationally.

Mr. Atta says he has a plan to eradicate cannabis next growing season. Farmers have begun to harvest their current crop, and officials say they do not want to destroy the farmers’ livelihood without giving them time to plant an alternative.

“Marijuana is not difficult to control, like poppy,” the governor said in an interview in October in his vast, opulent office in Mazar-i-Sharif. “It’s very easy to eradicate. It’s a very simple issue.”

But Mr. Atta said he was still waiting for the development money that the central government and international community had promised Balkh in return for ridding itself of opium poppies. The money — he puts it at more than $5 million; officials in the central government say it is closer to $3 million — is earmarked for a range of projects including rural development programs to promote farming alternatives to poppies and cannabis.

Mr. Atta cautioned that unless the money arrived promptly, he could not guarantee that the farmers would eschew poppies.

“It’s the responsibility of the central government and international community to improve the lives of farmers, which they aren’t doing,” he said. “Well, we’ll try our best to not let them grow poppy, but it’s going to cause problems.”

Many farmers around the town of Balkh suggested that forswearing cannabis might be harder than poppies. Not only are cannabis and hashish a more integral part of their customs, they said, but beyond cannabis there are no profitable alternatives.

The farmers said they would not grow cannabis only if the government provided an alternative source of livelihood, or improved the market for their legal crops.

“If, in the future, the government helps the farmers — and really helps — we will destroy all the poppy and cannabis,” said Hoshdel, 40, a well-weathered farmer in Khwaja Gholak who has nine children. “If they don’t help us, I swear I’ll grow it.

THE REAL NEW WORLD ECONOMIC ORDER....MUSLIM BROTHERHOOD

Economic and financial regulatory organizations, date back to the 1920s invention of Muslim Brotherhood (MB) founder Hassan Al-Banna, who designed political, economic, and financial infrastructures to enable Muslims to fulfill a key form of jihad mandated by the Koran (Al Jihad bi-al-Mal — financial jihad) “you… should strive for the cause of Allah with your wealth and your lives....” – 61:10-11.

He viewed finance as a critical weapon to undermine the infidels — and “work towards establishing an Islamic rule on earth.” To do that, he understood that Muslims must create an independent Islamic financial system to parallel and later supersede the Western economy.

Al-Banna’s contemporaries and successors (such as the late Sayed Qutb and current Yusuf Qaradawi) set his theories and practices into motion, developing sharia-based terminology and mechanisms to advance the financial jihad — “Islamic economics,” finance and banking.

Early 1930s MB attempts to establish Islamic banking in India failed. Egyptian president Gamal Abdul Nasser shut down the second attempt, in 1964, after only one year, later arresting and expelling the Muslim Brothers for attempts to kill him. Saudi Arabia welcomed this new wave Egyptian dissidents, as did King Saud bin Abdul Aziz earlier waves in 1954 and 1961. Their ideas so appealed to him and his clerics that in 1961, Saud funded the MB’s establishment of the Islamic University in Medina to proselytize their fundamentalist Islamic ideology, especially to foreign students.

In 1962, the MB convinced the king to launch a global financial joint venture, which became the cornerstone and engine to spread Islam worldwide. This venture created charitable foundations, which the MB oversees.

The first were the Muslim World League (MWL) and Rabitta al-Alam al-Islami, uniting Islamic radicals from 22 nations and spinning a web of many other charities with hundreds of offices worldwide. In 1978, the kingdom backed another MB initiative, the International Islamic Relief Organization (IIRO), which with all these “charities” are implicated for funding al Qaeda, the 9/11 attacks, Hamas and others.

These “charities” are used to advance the political agenda set forth by the MB. “I don’t like this word ‘donations’,” Qaradawi told BBC Panorama on July 30, 2006.

“I like to call it jihad with money, because God has ordered us to fight enemies with our lives and our money.”

In 1969, the Saudis convened Arab and Muslim states to unify the “struggle for Islam,” and have, ever since, been the OIC’s major sponsor. The 56 OIC members include Iran, Sudan, and Syria. Based in Jeddah “pending the liberation of Jerusalem,” the OIC charter mandates and coordinates “support [of] the struggle of the Palestinian people...recovering their rights and liberating their occupied territories.”

The OIC charter includes all the MB principles. Its first international undertaking in 1973 was to establish the Islamic Development Bank “in accordance with the principles of the Shariah,” as prescribed by the MB, and launching the fast growing petrodollar-based Islamic financing market. The IDB, more a development than commercial bank, was established largely “to promote Islamic banking worldwide.”

“[A]n Islamic organization must serve God…” and ultimately sustain “the growth and advancement of the Islamic way of life,” writes Nasser M. Suleiman in Corporate Governance in Islamic Banking.”

And so it has done — as noted in a 1991 U.S. Library of Congress report on Sudan’s Faisal Islamic Bank, established in 1977 under Sudan’s Faisal Islamic Bank Act, by Saudi prince Mohammed ibn Faisal Al Saud, and initiated and managed by local Muslim Brotherhood members and their party the National Islamic Front. Soon other political groups and parties formed their own Islamic banks. Together, Sudanese Islamic banks then acquired 20-percent of the country’s deposits — providing the financial basis to turn Sudan into an Islamic state in 1983, and promoting the Islamic governmental policies to date.

From 1975 to 2005, the IDB approved over $46 billion in funding to Muslim countries, ostensibly to develop their economic and educational infrastructures, but effected little regional economic impact. Their educational efforts, however, paid huge yields — via the rapid and significant spread of radical Islam worldwide.

Moreover, in 2001 alone, the IDB transferred $538 million raised publicly by Saudi and Gulf royal telethons to support the Palestinian Intifada and families of Palestinian suicide bombers. The IDB has also channeled U.N. funds to Hamas, as documented by bank records discovered in the West Bank and Gaza. And yet the IDB received U.N. observer status in 2007.

The IDB and other Islamic financial successes encouraged MB leaders to formalize al-Banna’s vision. In 1977 and 1982, they convened in Lugano, Switzerland to chart a master plan to co-opt Western economic foundations — capitalism and democracy — in a treatise entitled “Towards a Worldwide Strategy for Islamic Policy,” also known as the Project. MB spiritual leader Qaradawi wrote the explicit document, dated Dec. 1, 1982.

The 12-point strategy includes diktats to “establish the Islamic state and gradual, parallel work to control local power centers...using institutional work as means to this end.” This requires “special Islamic economic, social and other institutions,” and “the necessary economic institutions to provide financial support” to spread fundamentalist Islam.

Consequently, the IDB founded the AAOIFI in 1990. AAOIFI members include the Saudi Dallah Al-Baraka Group (DAG), al-Rajhi Banking & Investment Corporation, and Kuwait Finance House; each of its members were implicated in funding al Qaeda and other MB offspring according to Richard Clarke, former counterterrorism chief . The 18 AAOIFI members also include Iran and Sudan, both on the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions list; Iran is an U.S. State Department-designated terror sponsoring state, too. UAE banks wired half of the funding for the 9/11 attacks

In addition, the “de facto Islamic Central Bank,” the Islamic Financial Services Board (IFSB), was established in 2002 in Kuala Lumpur “to absorb the 11 September shock and reinforce the stability of Islamic finance.” Chairing the organizers’ meeting, then Malaysian Prime Minister Mohamed Mahathir stated, “A universal Islamic banking system is a jihad worth pursuing to abolish this slavery [to the West].”

IFSB members include the central banks of Iran, Sudan, and Syria (all designated state sponsors of terrorism) and the Palestinian Monetary Authority (PMA), which is widely documented since its inception as a terror funder.

According to DAG and Islamic Chamber of Commerce and Industry (ICCI) President Saleh Kamel, more than 400 Islamic financial institutions currently operate in 75 countries. They now hold more than $800 billion in assets — growing 15 percent annually. HSBC, UBS, J.P. Morgan Chase, Deutsche Bank, Lloyds TSB and BNP Paribas, are but a few that offer Islamic banking and sharia-based products to their Western clients — and promote them as “ethical investments.”

“Governments have political considerations,”“ said senior N.Y. Senator Charles Schumer, upon learning in September that Bourse Dubai intends to buy 20 percent of NASDAQ. Republican Senator Bob Bennett of Utah countered, saying, “Dubai is making a purchase on the open market of an asset that’s for sale. What’s wrong with that?”

Senator Bennett is correct — buying portions or all of NASDAQ is perfectly legal. Moreover, no changes could be made to NASDAQ regulations without Securities and Exchange Commission (SEC) approval. But of concern is Bourse Dubai’s Islamic influence in the heart of the U.S. markets and economy. And the deliberate United Arab Emirates (UAE) devaluation of the dollar since December 2006 is vastly increasing their purchasing power.

Bourse Dubai began operating as the world’s first fully sharia-compliant stock exchange, in December 2006. Sharia compliance requires companies traded to also be sharia-compliant, and establishes a special tax on all the others to “purify” them.

The Islamic “purity” (Tazkiya) of Bourse Dubai was approved by the sharia board of the 1991-Bahrain-registered and based Accounting and Auditing Organization for Islamic Financial Institutions (AAIOFI). The AAIOFI laid the groundwork for the global Islamic financial network and regulates all Islamic financial organizations and products, including Bourse Dubai.

Like every Muslim country, the United Arab Emirates (UAE) collects mandatory Islamic charity (Zakat- the Third Pillar of Islam — an annual wealth tax), of about 2.5-percent from Muslim institutions and companies. Being non-Muslims, foreign banks and oil companies theoretically don’t pay Zakat. But foreign banks and oil companies in fact do pay 20 percent of their profits, but rather than Zakat, these mandatory payments are called “tax.”

Zakat we are told, is to help the needy. However, Muslim Brotherhood spiritual leader, Yusuf Qaradawi decrees, “Declaring holy war…is an Islamic duty, and fighting ….is the Way of Allah for which Zakat must be spent.” In his 1999 publication, “Fiqh az-Zakat,” Qaradawi adds,

The most important form of jihad today is serious, purposefully organized work to rebuild Islamic society and state and to implement the Islamic way of life in the political, cultural and economic domains. This is certainly most deserving of Zakat.

And as previously demonstrated time and again, Muslim jihadist-terror organizations are indeed prominent Zakat recipients.

In 2003, the UAE established an independent federal agency collecting Zakat on government tax revenues from “companies listed on the Dubai Financial Market and Abu Dhabi Securities Market… oil-producing companies and branches of foreign banks.” In 2007 these revenues were estimated at $13.5 billion.

Saudi Arabia, for example collects $18 billion a year in Zakat — which includes the 20-percent flat corporation tax from foreign companies. The Saudis claim that the money collected develops their infrastructure. However, two thirds of Saudi men are unemployed and the infrastructure is crumbling. Yet, since the 1970s, the Saudi government has spent more than $100 billion to build thousands of mosques, Islamic centers and Islamic studies programs in universities worldwide.

On April 30, 2007 the Organization of the Islamic Conference (OIC) — which also initiated Muslim riots after the Danish Mohammed cartoon publications — established the clerical International Commission for Zakat. The ICZ replaces more than 20,000 organizations that previously collected the money. The Islamic clerics’ centralized “expert committee” in Malaysia now supervises and distributes Zakat funds globally. The new committee will shortly distribute roughly $2 billion collected over Ramadan this year to Muslim charities.

Rapidly rising oil prices fill the coffers of Islamic banks, the expansion of sharia economics and financial jihad — threatening the U.S. and entire non-Muslim world, in real-time.

Yet, still unaware of the implications of importing sharia finance, hoards of American bankers will later this month convene at New York’s Islamic Finance Summit at the Helmsley (Oct. 29-30, 2007) — which will focus on “Innovations in Sharia compliant Finance.”

In view of the facts, Senator Schumer has a valid point.

Indeed, shortly after 9/11, Osama bin Laden called on Muslims ““to concentrate on hitting the U.S. economy through all possible means,” going on to say “Look for the key pillars of the U.S. economy. Strike the key pillars of the enemy again and again and they will. ”

The pending NASDAQ acquisition, purchases of over 52 percent of the London Stock Exchange (LSE) and 47.6-percent of OMX (Nordic exchange), and the vigorous expansion of sharia finance, all steadily implement al Banna’s plan to spread and ultimately impose sharia worldwide. The Islamic new international economic wo