Veterans Disarmament Bill Could Come Before The Senate At Any Time

www.gunowners.org
Sunday September 23, 2007

The Senate could bring up the Veterans Disarmament Bill at any time, as a result of its passage in the Judiciary Committee a few weeks ago. The bill -- introduced by F-rated Rep. Carolyn McCarthy and Sen. Patrick Leahy -- is ready to come to the floor.

Gun Owners of America delivered draft amendments to every Senate office yesterday, providing important changes that must be made to the bill. Among others, the most important amendment would make it clear that veterans suffering from PTSD are NOT prohibited persons, and thus, are not to be denied the ability to purchase a firearm simply because of emotional problems resulting from their service to this country.

The Military Order of the Purple Heart is opposed to the McCarthy-Leahy bill, having stated on June 18 of this year, that "For the first time the legislation, if enacted, would statutorily impose a lifetime gun ban on battle-scarred veterans."

Military veterans are justifiably concerned that this bill will legitimize the very thing that President Clinton did over seven years ago, when his administration added 83,000 names of veterans -- suffering from maladies such as PTSD -- into the NICS background check system.

Proponents of the bill argue that this bill gives veterans a mechanism for getting their names off of the prohibited person list. That's like giving a mugger access to your home, but then stating you can hire a lawyer and pay THOUSANDS UPON THOUSANDS of dollars to eventually (maybe) get your stolen items back.

If the proponents are right -- that this bill will actually help gun owners -- then surely they won't object to friendly amendments that are designed to make it unmistakably clear that military veterans or grownups who suffered with ADHD as children will never be denied the ability to purchase a firearm, simply because they once had a "determination" from an anti-gun shrink that said there was the MINISCULE possibility that they could pose a danger to themselves or others.

You can be sure that if the McCarthy-Leahy bill passes, it will just be a first step. Consider some of the bigoted statements made by celebrities and politicians which not only show their contempt for gun owners but their pompous thinking which leads them to believe that we are all crazy for wanting to own a gun:

"I don't know that he's mentally qualified to own that gun." -- Democrat Presidential candidate Joe Biden, insulting a YouTube viewer during a debate after the man referred to his semi-auto as his "baby" (July 25, 2007).
"Isn't it possible that we all have that bit of insanity in us? That's why I'm for gun control.... I don't really believe that a human being who feels [things] should have the option [that is, access to a gun] at their fingertips." -- Actress Jodie Foster, quoted in a Brady Campaign to Prevent Gun Violence press release (August 20, 2007).
And then there're the studies which will be, no doubt, used by liberal anti-gunners to strip away the gun rights from more and more law-abiding citizens, using the pretext that a shrink's diagnosis proves these people shouldn't own guns:

"A quarter of the Afghanistan and Iraq war veterans treated with US government-funded health care have been diagnosed with a mental disorder, according to a study published Monday." -- AFP news (March 12, 2007)
"The number of American children and adolescents treated for bipolar disorder increased 40-fold from 1994 to 2003, researchers report today in the most comprehensive study of the controversial diagnosis. Experts say the number has almost certainly risen further since 2003." -- New York Times (September 4, 2007)
Even before the studies started rolling in, gun haters were already working the legal loopholes as best they could. When the Veterans Administration got caught adding veterans' names into the NICS system during the Clinton presidency, they defended their actions by saying it was "required by law" -- a statement which was just flat out false.

But it's notable to hear what a spokesman for the VA said in an interview with WoldNetDaily (June 27, 2000). He said the most common way of finding a veteran "incompetent" is when he or she receives a formal rating of incompetency from a VA panel of medical representatives or from "a duly authorized VA medical center, government agency, or even a PRIVATE PHYSICIAN." (Emphasis added.)

That's what HR 2640 is all about. McCarthy and Leahy (and others like Sen. Chuck Schumer) are forging the legal chains that will be used to keep hundreds of thousands -- if not millions -- of decent, law-abiding Americans from owning guns... not because of what a court rules, but because of what ONE INDIVIDUAL says.

Over two hundred years ago, Patrick Henry warned about the "chains" that were being forged to enslave them. If he were here today, would he not warn us again?

Thankfully, there are many of you who are sounding the alarm. State groups from all over the nation are pumping out alerts to supplement what GOA is doing at the national level. Just yesterday, the New Hampshire Firearms Coalition (NHFC) called its members to action, stating that HR 2640 is a Trojan Horse, which sounds justified on the outside with promises of keeping "mental defectives" from having firearms. But when one takes a closer look at the details of the bill, the group said, it reveals "a huge expansion in those who will become a prohibited person; an expansion that could potentially include most Americans."

In addition to pointing out how many shrinks could prohibit average Americans from owning guns, NHFC points out that many pediatricians could make similar anti-gun "determinations" (using the language of the bill) to disarm their patients -- since after all, these docs believe that "any household with firearms is 'dangerous,' even if they are properly stored."

Good point.

ACTION:

1. Stay informed. GOA has a mammoth section on our website which both gives the specifics of the Veterans Disarmament Act and answers the claims made by supporters of the bill. Please go to http://www.gunowners.org/netb.htm to get more information, including the proposed GOA amendments that were delivered to each Senator on Tuesday.

2. Alert others. Forward this alert to pro-gun friends and family and ask them to take action as well.

3. Take action. Please contact your Senators, even if you have already done so. You can use the pre-written message below and send it as an e-mail by visiting the GOA Legislative Action Center (where phone and fax numbers are also available).

----- Pre-written letter -----
Dear Senator:

I oppose the Veterans Disarmament Act, which is being pushed by Rep. Carolyn McCarthy (HR 2640) and Sen. Patrick Leahy. This bill will expand the 1993 Brady Law and disarm hundreds of thousands of combat veterans, among others.

I understand that Gun Owners of America distributed several amendments recently to every senatorial office to address the mistaken arguments that supporters of the bill have. I also understand that proponents of this bill are claiming it will actually help gun owners.

They argue that this bill gives veterans a mechanism for getting their names off of the prohibited person list. That's like giving a mugger access to your home, but then stating you can hire a lawyer and pay thousands upon thousands of dollars to eventually (maybe) get your stolen items back.

Well, if the proponents are right -- that this bill will actually help gun owners -- then surely they won't object to friendly amendments that are designed to make it unmistakably clear that military veterans or grownups who suffered with ADHD as children will never be denied the ability to purchase a firearm, simply because they once had a "determination" from an anti-gun shrink that said there was the MINISCULE possibility that they could pose a danger to themselves or others. That is what the GOA amendments are designed to do.

I still believe that the Brady Law has done more to register gun owners and deny guns from of law-abiding Americans than to keep guns out of criminals' hands. But adopting these amendments will at least prevent an anti-gun administration from doing what the Clintons did in 2000 when the Veterans Administration added the names of some 83,000 veterans into the NICS system.

Sincerely,

****************************

CNN: The war with Iran has begun

Live Leak
Sunday September 23, 2007

Discussion on CNN with Col. Sam Gardiner who clearly states that the war in Iran is already underway and that a second phase of overt military action will soon begin.

Families play it safe at national wellness event: Fingerprinting, ID cards part of Kids Day

NICOLE GERRING
Times Herald
Sunday September 23, 2007

MARINE CITY- Children had their faces painted, ate free pizza and cookies and tried their skills on a rock climbing wall at Belle River Elementary School on Saturday afternoon.

But their parents didn't bring them to the school just to have fun - they had their children fingerprinted and checked out for cavities and spinal problems as part of Kids Day America.

The event, initiated by the World Wellness Foundation, has been taking place for more than a decade in cities around the world and arrived in Marine City for the first time this year.

Zimmer Chiropractic of Marine City and other local agencies and businesses pitched in to educate families about health and safety issues.
Children were given an emergency child identification card with a dental record form; space for a photo; questions such as address, height, weight and blood type; and boxes for each fingerprint.

Lt. Tim Donnellon of the St. Clair County Sheriff Department, which conducted the fingerprinting with Marine City Mayor George Bukowski, said the fingerprints and the ID books are useful in an emergency situation.

"It's for (the families) education and prevention and it will aid us," he said, if a child is lost or kidnapped.

Charlotte Schwartz brought her 5-year-old twins, Lynn and Wilfred Schwartz, to the event because she heard about the fingerprinting session through their school.

"We thought it would be a good idea to get at least the fingerprints done and on file," she said. She said she also liked having her children be seen by a dentist and chiropractor without having to make and pay for medical appointments.

Randy Allor of Marine City said he brought his son, Ryan Allor, 9, and his friends and cousin to the event for the fingerprinting and to spend time as a family.

"It gives us time to share," he said.

When they had completed the check-ups and ID books, families were fed pizza, hot dogs and cookies and had a chance to play in an inflatable obstacle course and house and climb a synthetic rock wall.

All events were free, but donations were collected for the Make-A-Wish Foundation, which grants wishes to terminally and severely ill children.

Iran promises missiles will fly if US attacks

Tim Shipman
London Telegraph
Sunday September 23, 2007

Iran has threatened to retaliate with missile attacks if Western forces launch raids against the Islamic state's nuclear programme — putting on a defiant show of military force to back up the message.

The Iranian president, Mahmoud Ahmadinejad, addressed a military parade in Teheran and mocked threats from the United States, while the head of the Revolutionary Guards said Iran would "pull the trigger" if attacked.

Their bellicose intervention came as officials in Washington warned that time was running out for the secretary of state, Condoleezza Rice, to "get a result" from diplomacy or hand the initiative to White House hawks who want military action.

Mr Ahmadinejad spoke out as he led a parade to mark Iran's war with Iraq, which included a flypast by three Saegheh jet fighters and armoured vehicles, one of which bore the slogan "Death to America".

In a message directed at Western diplomats, he told the crowds: "Those who think that by using such decayed tools as psychological warfare and economic sanctions, they can stop the Iranian nation's progress are making a mistake."

The parade also featured medium-range ballistic missiles which are capable of hitting Israel or US bases in Iraq and the wider Gulf region.

Asked how Iran would respond if any country allowed its territory to be used as a base for an attack, Mohammad Ali Jafari, the head of Iran's elite Revolutionary Guards, said: "You have seen the -missiles. Just pull the trigger and shoot."

He added: "Our message to the enemies is: Do not do it. They will regret it, as they are regretting it in Iraq."

Mr Ahmadinejad today arrives in New York for a meeting of the United Nations General Assembly where the US, Britain, France and Germany are drawing up plans for new sanctions against Iran.

Diplomats are conscious that firm action is needed this week to bolster the position of Miss Rice, who wants to show that diplomacy can isolate Iran and constrain Teheran's weapons programmes.

One official in Washington said: "Condi really needs to get a result to show other members of the administration that it's working."

He said that some officials believe the vice-president, Dick Cheney, has given her "just enough rope to hang herself" by pursuing the diplomatic route.

A state department source who wants the diplomacy to succeed, said that administration hawks had closely studied the international fallout from Israel's clandestine raid on Syria the week before — which US officials say was targeted at nuclear materials sold by North Korea — as a guide to how military action against Iran would be received.

"Their attitude is: where was the fuss? Some of them think they would get away with it in Iran," the source said.

UN Security Council members Russia and China have refused to back tougher action on Iran, so the Bush administration is assembling a diplomatic "coalition of the willing" — a phrase widely use before the war in Iraq — to set up US and European sanctions against the Iranian regime. These would punish banks and companies that deal with Iran.

A Western diplomat said: "The Americans are hugely frustrated that they can't get any more from the Russians and Chinese."

Secret US air force team to perfect plan for Iran strike

Sarah Baxter
London Times
Sunday September 23, 2007

THE United States Air Force has set up a highly confidential strategic planning group tasked with “fighting the next war” as tensions rise with Iran.

Project Checkmate, a successor to the group that planned the 1991 Gulf War’s air campaign, was quietly reestablished at the Pentagon in June.

It reports directly to General Michael Moseley, the US Air Force chief, and consists of 20-30 top air force officers and defence and cyberspace experts with ready access to the White House, the CIA and other intelligence agencies.

Detailed contingency planning for a possible attack on Iran has been carried out for more than two years by Centcom (US central command), according to defence sources.

Checkmate’s job is to add a dash of brilliance to Air Force thinking by countering the military’s tendency to “fight the last war” and by providing innovative strategies for warfighting and assessing future needs for air, space and cyberwarfare.

It is led by Brigadier-General Lawrence “Stutz” Stutzriem, who is considered one of the brightest air force generals. He is assisted by Dr Lani Kass, a former Israeli military officer and expert on cyberwarfare.

The failure of United Nations sanctions to curtail Iran’s nuclear ambitions, which Tehran claims are peaceful, is giving rise to an intense debate about the likelihood of military strikes.

Bernard Kouchner, the French foreign minister, said last week that it was “necessary to prepare for the worst . . . and the worst is war”. He later qualified his remarks, saying he wanted to avoid that outcome.

France has joined America in pushing for a tough third sanctions resolution against Iran at the UN security council but is meeting strong resistance from China and Russia. Britain has been doing its best to bridge the gap, but it is increasingly likely that new sanctions will be implemented by a US-led “coalition of the willing”.

Iran’s President Mahmoud Ahmadinejad, who arrives in New York for the United Nations general assembly today, has been forced to abandon plans to visit ground zero, where the World Trade Center stood until the September 11 attacks of 2001. Politicians from President George W Bush to Senator Hillary Clinton, the Democratic frontrunner in the 2008 race for the White House, were outraged by the prospect of a visit to New York’s most venerated site by a “state sponsor” of terrorism.

Bush still hopes to isolate Iran diplomatically, but believes the regime is moving steadily closer to obtaining nuclear weapons while the security council bickers.

The US president faces strong opposition to military action, however, within his own joint chiefs of staff. “None of them think it is a good idea, but they will do it if they are told to,” said a senior defence source.

General John Abizaid, the former Centcom commander, said last week: “Every effort should be made to stop Iran from obtaining nuclear weapons, but failing that, the world could live with a nuclear-armed Iran.”

Critics fear Abizaid has lost sight of Iran’s potential to arm militant groups such as Hezbollah with nuclear weapons. “You can deter Iran, but there is no strategy against nuclear terrorism,” said the retired air force Lieutenant General Thomas McInerney of the Iran policy committee.

“There is no question that we can take out Iran. The problem is the follow-on, the velvet revolution that needs to be created so the Iranian people know it’s not aimed at them, but at the Iranian regime.”

Checkmate’s freethinking mission is “to provide planning inputs to warfighters that are strategically, operationally and tactically sound, logistically supportable and politically feasible”. Its remit is not specific to one country, according to defence sources, but its forward planning is thought relevant to any future air war against Iranian nuclear and military sites. It is also looking at possible threats from China and North Korea.

Checkmate was formed in the 1970s to counter Soviet threats but fell into disuse in the 1980s. It was revived under Colonel John Warden and was responsible for drawing up plans for the crushing air blitz against Saddam Hussein at the opening of the first Gulf war.

Warden told The Sunday Times: “When Saddam invaded Kuwait, we had access to unlimited numbers of people with expertise, including all the intelligence agencies, and were able to be significantly more agile than Centcom.”

He believes that Checkmate’s role is to develop the necessary expertise so that “if somebody says Iran, it says: ‘here is what you need to think about’. Here are the objectives, here are the risks, here is what it will cost, here are the numbers of planes we will lose, here is how the war is going to end and here is what the peace will look like”.

Warden added: “The Centcoms of this world are executional – they don’t have the staff, the expertise or the responsibility to do the thinking that is needed before a country makes the decision to go to war. War planning is not just about bombs, airplanes and sailing boats.”

Stunning future ahead for Taser

David Parsley
London Times
Sunday September 23, 2007

TOM SMITH has been called a killer, he has received death threats and has had to wear a bullet-proof vest. But the worst the chairman of stun-gun maker Taser International has experienced was when the company he co-founded was facing collapse.

The threats and body armour were part of everyday life for Smith and his brother Rick in 2005 when the American authorities were investigating whether the high-voltage Tasers used by police caused permanent injury. As the informal investigation by the Securities and Exchange Commission (SEC) got under way, Taser’s share price plummeted.

“You certainly find out who your friends are at a time like that,” said Smith during a recent trip to Europe to drum up investor support.

In April 2005 Taser opened its head office and manufacturing centre in Scottsdale, Arizona. “It wasn’t your average HQ launch,” recalls Smith. “We had to move the opening from outside the front door to the open space of the car park after receiving death threats. Flanked by police, we cut the ribbon and my wife hugged me. She burst into tears as she felt the bullet-proof vest under my shirt.

“But that wasn’t the worst time of my life as we were 100% confident we would win. We knew our safety claims were accurate.”

When the SEC made the probe formal two years ago, the Smith brothers, against legal advice, called the SEC investigators to say they were on their way to New York to see them. They took 100,000 pages of evidence, answered anything and everything thrown at them and were cleared of all allegations three months later.

“I know it sounds awful, but it wasn’t as bad as the situation in 1999,” said Smith, referring to the product that almost destroyed the business.

The Auto Taser was a steering-wheel lock that sent a powerful electric shock through a thief trying to remove it. When the product won the Innovations Award at the Consumer Electronics Association Show in 1998 the Smith boys thought they had a certain success on their hands. But even slashing the Auto Taser’s price by 20% to $199 (£99) didn’t make it a winner. The product could not compete with cheaper, simpler alternatives.

“That was the toughest part of my life,” said Smith. “We were living in a small condo, driving a small Kia car and we were about to lose all our money, our mum and dad’s money and heading for failure. We had always lived month by month since launching the company, but now we were living day by day.

“The Auto Taser was like the bearded lady. Everyone wanted to look at it, but nobody wanted to take it home.”

Indeed, Taser has not enjoyed the steadiest of financial rides at any point in its history. Smith revealed the company had enough money in the bank to cover its monthly payroll on only two occasions between 1993 and 1999. Yet the group was able to raise $12m for its float in 2001.

This was largely due to dumping the Auto Taser and focusing on production of its first stun gun, the M26. It wasn’t long before the police began to take an interest, with the New York Police Department becoming the first to try it. Now, 11,000 of the 18,000 American police agencies use Taser’s latest 50,000-volt X26 model.

Taser stands for Tom Swift’s Electric Rifle. It was invented by former Nasa chief scientist Jack Cover, who was a fan of the Tom Swift adventure novels. Cover created the first gun almost 40 years ago but it wasn’t until the Smith brothers went to him in 1993 that the technology was developed to create a Taser effective enough to be viable in the real world of law enforcement and self-protection.

In April 2003, the Taser arrived in Britain. Initially, it was tested by five police forces. Now Tasers are used by every force in the country and, since the beginning of this month, unarmed officers carry them.

Smith believes that convincing the British police of the Taser’s worth will help the company sell it to more cautious forces overseas. Australia, New Zealand and Singapore are three target territories and Taser has just won an order for 1,249 guns from the French interior ministry.

After its flotation Taser made a small profit in 2002 of $361,591 on sales of $9.8m. Both 2003 and 2004 were better, with profits of $7.6m and $30.5m respectively. At the beginning of 2005 the company was valued at $2 billion. Then the SEC inquiry hit the shares and orders. Profit slumped to $1.5m in 2005 and the after-effects caused a loss of almost $7m in 2006. By the end of the SEC probe, Taser had lost 87% of its value but it bounced back this year and is now valued at $985m, up 115% in 12 months.

In July Taser announced its most successful second quarter, recording sales of almost $26m. Smith is cautious, but points out that analysts have forecast Taser’s sales will reach $90m this year, a 30% increase on its best postfloat performance.

Smith, however, is aware that investors, the public and potential clients still have one question - is the Taser safe? Smith, who has been “tasered” 15 times, has no doubts. Taser’s slogan is “saving lives every day” and the firm has won all 52 lawsuits brought against it. “In my opinion it’s the greatest advance in human rights,” he said. “We’re seeing injury reduction in America by between 40% and 70% to both suspects and officers. The evidence overwhelmingly shows lethal force is being reduced.”

The latest product to hit the American market is the C2, or Lady Taser. Despite the nickname, its resemblance to the Star Trek phaser has ensured a market among security-conscious men as well as women. The gun fires two electrical probes that stun a person for 30 seconds.

Other products in the pipeline include the Remote Area Denial system, which isa bank of Tasers piled together to protect areas such as airport boundaries and military bases. A Taser robot is being developed to be sent into situations to incapacitate the target before anyone goes in to face the danger. Finally, there is the wireless X-REP Taser, under trial by police in Britain, which has a range of up to 40 metres compared with a few feet for the existing stun guns.

Smith is seeking institutional investors in Europe and there is even talk of a dual listing in London. “A float in London is something we’re thinking about,” he said, “but it’s only a thought right now. If anything happened it would be in 2008, but we are a way off making that decision.”

One thing is for certain. Smith is happier than he has been since he launched the company almost 15 years ago. The bullet-proof vest has gone and his family has plenty of food on the table.

Musharraf opponents arrested in Pakistan as top court prepares to resume hearings

International Herald Tribune

ISLAMABAD: The Supreme Court was set to resume hearings Monday on the legality of General Pervez Musharraf's bid to be re-elected president, amid a crackdown on opposition leaders for allegedly planning to foment unrest.

The decision by the court, which is considering a series of legal actions, is expected within days, with the vote by federal and provincial legislators scheduled for Oct. 6. Attorney General Malik Mohammed Qayyum has expressed confidence that Musharraf will prevail, saying the government has a very strong case.

Some parties have asked the nine-judge panel to declare Musharraf ineligible to run as long as he retains his powerful dual role as army chief - a post that he has offered to resign after he is voted in.

The opposition has also pledged to mount street protests, and anti-Musharraf lawyers said they would blockade the Election Commission to prevent the general from filing his nomination papers Thursday.

But the government threw a chill into the anti-Musharraf movement by arresting several of its senior leaders Saturday night. Others who were targeted in police sweeps in Islamabad went into hiding, calling the arrests a sign of desperation by the president.

"The government has ordered the arrests of opposition leaders because they were threatening a law-and-order problem in the capital," the deputy information minister, Senator Tariq Azim said, confirming the detention of "five or six" senior figures in the opposition coalition, the All Parties Democratic Movement.

"Nobody will be allowed to take the law into their own hands," Azim said.

Security officials said the Islamabad police had orders to take into preventive custody some 35 opposition leaders - many of them linked to Nawaz Sharif, the prime minister Musharraf overthrew in a 1999 coup, or to a coalition of Islamist parties opposed to the president's alliance with the United States.

"Musharraf has now become desperate to crush the opposition in order to unconstitutionally and illegally become president for another term," Ahsan Iqbal, spokesman for Sharif's party - a key member of the opposition alliance -said by mobile phone from hiding.

"We will challenge these detentions in court and also protest in the streets," Iqbal said. "The government cannot break our resolve to struggle for democracy through such fascist tactics."

The police served a warrant on Javed Hashmi, acting president of Sharif's party, the Pakistan Muslim League, at an apartment complex for lawmakers Saturday.

The warrant said he would be jailed for 30 days to stop him from making inflammatory speeches at protests where "miscreants" could "cause disruption and acts of sabotage and terrorism."

"They are ruling the country with the gun in hand," Hashmi told a reporter at his apartment, where four armed police stood guard outside. "They think that the uniform, not the people of Pakistan, are the source of power."

The crackdown forced Sharif's party to postpone a meeting of its senior leaders in Islamabad on Sunday that had been called to discuss plans for Sharif's return to Pakistan, Iqbal said.

The sweep mirrored tactics used to ensure no crowds turned out to welcome Sharif when he tried to return from exile two weeks ago. Hundreds of opposition activists were briefly jailed to prevent them reaching Islamabad's airport. Sharif was swiftly expelled to Saudi Arabia.

Musharraf's popularity and power have eroded since his attempt to fire the Supreme Court's chief justice earlier this year. His administration is also struggling to contain a surge in Islamic militancy.

Musharraf has called for moderate political forces to unite to defeat extremism and has held talks on a possible power-sharing deal with former Prime Minister Benazir Bhutto, who has vowed to return home Oct. 18 after eight years of self-imposed exile.

Bhutto has also threatened to withdraw her lawmakers from Parliament if Musharraf does not compromise.

Weakening dollar creates dilemma on both sides of the Atlantic

23 Sep, 2007
Economic Times

PARIS: The fall in the value of the dollar against the euro is gathering pace, creating some advantages but also serious difficulties on both sides of the Atlantic, analysts say. Exporters are under pressure in Europe, inflationary pressures are likely to rise in the United States and funding the US current account deficit will become more difficult.

The euro continued its ascent on Friday, passing 1.41 dollars for the first time, with analysts saying there was nothing to stop it going on to smash 1.45 dollars or higher. "We see nothing to interrupt the trend," said Veronique Riches-Flores, chief economist at Societe Generale.

John Silvia, chief economist at Wachovia, predicted that conditions were such that the euro could soon climb to 1.45 dollars. The US Federal Reserve bank last week dropped its main interest rate from 5.25 percent to 4.75 percent, in a bid to galvanise the embattled US economy, which has been battered by the crisis in the "subprime" home loan sector.

The central bank signalled that it could drop rates even further. At the same time the European Central Bank has dug in and continues to point to inflationary pressures -- auguring ill for a drop in rates despite pressure for action from some European political leaders.

"It is probable that the Fed will drop again its main rates, while the ECB will perhaps leave its own unchanged, or even raise them," said Rafael Martorell at BNP-Paribas. The cut in US interest rates reduces interest in the dollar and boosts the attractiveness of the euro. In Europe, the strong euro has a number of benefits, most notably it makes oil imports cheaper because crude is priced in dollars.

It also reduces the price of other imports from outside the European Union: an advantage for consumers, as well as certain industries that rely on imports. The strong euro also allows large European groups to buy assets overseas at lower prices.

However, European exporters are starting to feel the pinch because the strong euro makes their exports more expensive for overseas consumers whose currencies follow the fluctuations of the dollar. The eurozone's trade account, a measure of its trade relations with the rest of the world, dropped to a surplus of 4.6 billion euros in July from 7.6
billion euros.
France is particularly affected, with its trade deficit rising above 30 billion euros year on an annual basis in July. Concern is also setting in in Germany, the EU's export champion, whose trade surplus nevertheless increased in July despite the surging euro and troubles on financial markets.

"If the dollar continues to fall that will cast a shadow over our export prospects," German Economy Minister Michael Glos said in the newspaper Bild last week.

However with the notable exception of France, which is increasingly critical of the European Central Bank, most European governments have maintained their silence faced with the euro's new records. On the other side of the Atlantic, the weakness of the dollar, which for the first time for 31 years is at parity with the Canadian dollar, is an advantage for exporters, but makes imports more expensive.

This can help reduce the country's trade deficit, but also accelerates inflationary pressures because imports become more expensive.

It also makes life more risky for buyers of American treasury bonds, making it difficult to finance US public debt, Societe Generale's Riche-Flores said. The Federal Reserve Bank, which appears to want to continue to drop its rates again "finds itself in a delicate situation," said Evariste Lefeuvre, an economist at Natixis.

And some analysts predict the trend of falling dollar is set to continue. "With memories of the dollar collapses seen in the fourth quarters of 2002, 2003 and 2004 still fresh in the memory of many people, the risk seems to be growing of a dramatic acceleration higher in euro/dollar," said Simon Derrick at the Bank of New York Mellon.

Economy isn't so appealing outside U.S.

September 23, 2007
Union Tribune

“Helicopter” Ben Bernanke lived up to his nickname last week when he slashed the Federal Reserve's key federal funds rate, pumping cheap money into the economy in the same way that a firefighting helicopter drops water onto a forest fire.

The fire that Bernanke hopes to put out is the Great American Mortgage Crisis, which has burned brighter and hotter than many economists had previously thought possible.

The people who cheered loudest over Bernanke's move were the Wall Street financiers who helped the mortgage crisis occur in the first place, doling out cheap money supplied by Bernanke's predecessor, Alan “Goldilocks” Greenspan.

But in the world beyond Wall Street's movers and shakers and CNBC's talking heads, the reaction was a bit different.

From the Persian Gulf to Beijing to Zurich, there is increasing skittishness about the health of the U.S. economy and the wisdom of our economic policies. Bernanke's kowtowing to the powers-that-be on Wall Street did nothing to allay those fears.

It is probably no coincidence that on the day after Bernanke's decision, rumors stirred that Saudi Arabia was considering changing the peg for its currency from the dollar to the euro – which ultimately could make gas a lot more expensive for Americans.

Already this summer, foreigners have been pulling back from U.S. investments. In July, foreigners sold a net $9.4 billion in U.S. Treasury bonds, one of the largest sell-offs on record. Foreign sales of dollars have pushed the value of the U.S. currency to its lowest point ever against the euro. The Canadian dollar, which used to trade for less than 70 U.S. cents, is now equal to the U.S. dollar and will probably soon surpass it.

Of course, Americans might be tempted to say, as they often do, “Goldangit! Who cares what them durned furriners think?”

The fact is that just as it required a lot of foreign money to get us into the economic mess we're now dealing with, it may require a lot of foreign money to pull us out. And if we treat them too cavalierly – or if we make our market too unprofitable – they might take their money and run. Which could make life difficult for all of us.

For good or for ill, our economy has become so intertwined with the global economy that it will be hard to quickly correct our current economic problems without massive infusions of foreign money.

And one place we could feel the pinch is our troubled housing market.

It's a quaint but very outdated concept to think that when you sign a mortgage in San Diego, it ends up in the vault of a U.S. bank or mortgage firm.

In general, mortgages tend to end up at Wall Street investment firms like Bear Stearns or Merrill Lynch. They, in turn, repackage the mortgages into bundles of loans that they sell to the banks or investment houses as far away as Beijing, Tokyo, Riyadh or Zurich. And those investors, in turn, count on generating a steady income from the monthly mortgage payments.

It's the Globalization of Debt, which on face value might seem more benign than, say, the Globalization of Lead-Painted Toys. But it has tied the fate of our real estate market, in part at least, to the investment decisions of foreign bankers. And in recent months, they haven't liked what they've seen.

This globalization was aided by “Goldilocks” Greenspan. (He's famed for his belief that the economy should not grow too hot or too cold, but just about right – although investment adviser Peter Schiff suggests that his Goldilocks Economy is really just another fairy tale.)

Following the Asian economic crisis of 1998, Greenspan and other central bankers created a virtual sea of liquidity in the world marketplace, printing money and lowering interest rates to prevent a worldwide recession.

The bankers accomplished their mission. But that surfeit of cash also helped inflate the late 1990s' stock market bubble, which subsequently went bust. And after the stock market imploded in 2000, Greenspan pumped in even more cash to help stave off a recession and instead gave us a housing bubble.

Wall Street firms, awash with cash, helped develop increasingly risky securities for foreign investors who were also awash with cash. Those investors, especially in a new market like China, may have had no idea what “no down, no doc ARMs” were. Instead, they probably had the idea that nobody goes broke buying U.S. real estate.

As of last year, foreigners held 45 percent of U.S. Treasury bills, 33 percent of U.S. corporate bonds and 19 percent of U.S. agency notes.

But the United States has been a notoriously bad investment in recent years, largely because of the lax monetary policies of the Fed. The U.S. dollar has plummeted to the extent that – if you judged our economy by the euro rather than the dollar – it is as if we have been in a recession for the past seven years. Judged by euros, the Dow Jones industrial average is still well below the highs it hit in 2000.

Ironically, last week's interest-rate slashing by the Federal Reserve, designed to keep the economy from falling into recession, may chase away so much foreign money that our economic problems will only grow worse. If you were a foreigner, why would you invest in a country where the combination of an anemic dollar and interest rates robs your investment of its value?

If we want foreign investments to help prevent an already dire situation from turning into a catastrophe, we might need to offer a little more than a rock-bottom interest rate. Otherwise one little helicopter might not be able to do much against a spreading conflagration.