"A GM default would be absolutely huge," said Jonathan Loredo, of credit manager Cairn Capital. "It would be the biggest thing to hit the market in terms of losses and operational stress."

There is no understating the scale of GM's problems. It is losing market share in the United States, has $300 billion of long-term debt, provides health benefits to 1.1 million people (at the rate of about $1,500 per car produced), is threatened with a strike by its largest supplier, which is bankrupt, and is being investigated by the Securities and Exchange Commission.

Few who invest do not have some level of exposure -- GM stock and debt is held by the biggest investment banks and smallest retail buyers.

GM, or its financing arm GMAC, is present in around 65 percent of synthetic collateralized debt obligations (CDOs), according to Standard & Poor's, and underlies an estimated $1 trillion of default swaps.

The company's impact is evidenced by the CDX credit default swap indices. The U.S.-based CDX4 equity tranche, containing GM, trades at 36 points up front; the same tranche in series 5, without GM, costs 27.5 points. One firm out of 125 accounts for almost a third of the premium.

All that for a company with a market capitalization of $12.8 billion.

Still, investors struggle to judge whether the automaker, which sells 21 percent of cars in the United States, will ultimately perish.

"A bankruptcy filing is unlikely this year," said Christophe Boulanger, auto analyst at Dresdner Kleinwort Wasserstein. "Unless Delphi goes on strike -- in which case they would stop production and it would all be over."

Parts supplier Delphi, which filed the biggest bankruptcy in U.S. automotive history in October, is negotiating with the
United Auto Workers union and GM over wage and benefit issues, with a strike threatened if there is no settlement.

GMAC PIVOTAL

Should a strike be called, GM could be bankrupt by June, Boulanger said. After that any scenario might play out, but the status of GMAC will be crucial.

GMAC has traded at a premium to its parent in the credit markets on hopes a controlling stake will be sold, ring-fencing the company and possibly returning it to investment grade. Yet, despite GM's best efforts, no buyer has emerged.

Further complicating the outlook, if GMAC is not sold, and GM does go bankrupt, it is uncertain GMAC would be consolidated in the filing.

For bond investors, a GM bankruptcy would be hard, but a GMAC bankruptcy would be disastrous. GMAC is home to three quarters of the group's bonds, and is found in a large proportion of outstanding synthetic CDOs.

"The high degree of portfolio overlap between synthetic CDO transactions sets this asset class apart," said Standard & Poor's analyst Andrew South. "A rating action on GM could have a widespread effect on many CDOs."

The complex market in CDO squared, or CDOs of CDOs, also faces significant risk following a GM downgrade, one London-based hedge fund manager said.

"To be blunt -- it would be carnage," he said.

Part of that carnage would be in the back offices of financial institutions, which will have literally millions of transactions to unwind, and banks are already under regulator pressure over backlogs in credit derivatives.

Of course, the best possible outcome may also be the most likely. That is, GM will survive.

Having spent around $15 billion renewing its product offering, it is certain the company will do everything in its power to avoid bankruptcy, Boulanger said.

There are positive signs on negotiations with unions, a cap on salaried retirees' health care at 2006 levels, and 30,000 job cuts planned.

Further, the precedents are good. In 1980, Chrysler stepped back from the brink, while Nissan Motor performed a similar feat 20 years later.

Ultimately it is probably investors who are best placed to judge GM's prognosis, and the cost of one-year default protection on GM is currently higher than five-year protection.

In other words, if the elephant is still in the room in 18 months, you can probably ignore it.

As widely expected, the U.S. central bank's rate-setting Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate target a quarter percentage point to 4.75 percent, the highest level since April 2001.

In a statement announcing its action, the Fed repeated further rate rises may be needed, suggesting it was comfortable with financial market expectations for rates climbing to 5 percent in coming months.

"Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace," the Fed said in a statement explaining the outcome of the two-day meeting that started on Monday.

It added that higher energy and commodity prices so far appeared to be having only a modest impact on core prices and inflation expectations were still contained.

"Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures," the Fed said, repeating wording from its January 31 statement.

The dollar rose in the wake of the decision while bond and stock prices fell on the prospect of more rate rises ahead.

The U.S. economy appears to have bounced back smartly after growing at a sluggish 1.6 percent annual rate in the final three months of 2005. Some forecasters think first-quarter growth in U.S. gross domestic product could top a rapid 5 percent pace.

Fed officials, however, expect the pace of economic growth to moderate as the year progresses, helping to keep the risk of higher inflation under wraps.

Still, with the unemployment rate at a historically low 4.8 percent and the amount of unused industrial capacity dwindling, the central bank is not ready to drop its inflation offensive.

"The committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance," the central bank said, using identical language to the statement issued after its last meeting.

U.S. crude oil futures surged above $65 a barrel on Tuesday, a reminder of the lofty energy prices that have been weighing on the economy. While gasoline costs fell in February, they have marched higher this month.

Fed officials have said core inflation, which strips out volatile food and energy prices, is already running near the upper edge of their informal comfort zone.

The central bank's favorite gauge of core inflation rose 1.8 percent in the 12 months through January. Many officials have said they want to keep it under 2 percent.

Some economists think the U.S. central bank will push interest rates up just once more, perhaps at its next meeting on May 10, before calling a halt to the credit-tightening campaign it kicked off in June 2004.

Others think the economy will continue to exhibit enough vigor to spur more action from the Fed.

It is up to Bernanke, who took over from Alan Greenspan on February 1, to try to foster a consensus among Fed officials over the delicate question of exactly when rate hikes should end.

In the latest sign of the economy's strength, issued as Fed policy-makers met, the private Conference Board said its index of consumer sentiment jumped to 107.2 in March, its highest in almost four years, from 102.7 last month.

Fed officials are closely eyeing the U.S housing sector, which is showing signs of cooling after a long boom. The government said on Friday new home sales tumbled 10.5 percent in February, the biggest drop in nearly nine years.

Many economists expect consumer spending to moderate as homeowners, who have been tapping their home equity to make purchases, find their home values rising more slowly.

So far the United States has easily financed its endeavors in Iraq, as well as undiminished levels of domestic social-welfare spending, not by the traditional solution of raising taxes (in fact, taxes have been cut numerous times since 2001, an occurrence unheard of during previous wars) but by running huge budget deficits, such as fiscal year 2006's projected shortfall of US$423 billion.

Accompanying the federal budget deficit is the huge US trade deficit, burgeoning out of control as more and more of previously domestically produced consumption items are outsourced to foreign, mostly Chinese, manufacture. The stimulative US budget fiscal position assures that Americans will have all the money needed to buy them.

Standard economic theory since the adoption of floating foreign exchange rates in 1973 states that big trade deficits auto-correct by having the currency of the profligate nation depreciate. Thus if Brazil is buying more from, say, South Korea than South Korea is buying from Brazil, there will be more South Koreans with Brazilian reals (earned from the exports to Brazilians ) than there will be Brazilians with won.

In most cases, this would lead to selling of the currency of the deficit country, since there will be a surplus of the deficit country's currency in these foreigners' hands. The selling will drive down the value of the deficit currency; that will eventually make consumption of the shiny foreign goodies too expensive, and eventually the trade deficit will equalize.

This has traditionally not happened with foreigners holding US dollars. The United States dollar is what is called a "reserve currency", ie, foreigners are willing to hold dollars even though they can't easily use them as the domestic currency in their home markets. Without the selling that would accompany all the exporters to the United States trading their dollars for their home currencies, the US dollar stays higher than the economic fundamentals would theorize it should, and the great American global shopping spree can continue.

The ledger of how much more capital the US sucks in to finance its consumption as compared with how much it sends out to invest is called the current account deficit. The money that foreign exporters hold in US dollars and then invest in US government or private bonds, stocks or short-term bills is entered in the minus column on the current account. As the US domestic savings rate is so pitifully low, the United States must import a huge amount of foreign capital just to finance that huge federal government budget deficit.

From an even then huge $531 billion in 2003, the current-account deficit has been rising in recent years by more than 20% a year, last year's was $805 billion, and the projection for 2006 is more than $975 billion - that's almost 7% of gross domestic product. In other words, America's spending addiction, from DVD players to destroyers, means that the nation consumes 7% more than it produces.

But until very recently, financing this hunger wasn't all that much of a problem.

The most important US government economic statistical report that you've never heard of is called the Treasury International Capital (TIC) report. The current-account data report how much the US needs to finance its lifestyle; the monthly TIC data report what it actually gets.

Thus in 2003, the current-account deficit meant that the US needed to entice $531 billion from the rest of the world. TIC data reported that what it actually got was $747 billion. For 2004, the need was $666 billion; it actually got $915 billion. For 2005, the need was $801 billion; $1.025 trillion was actually received. Many economic commentators believe that as this excess foreign capital started sloshing around and through the US banking and financial system, it kept US interest rates low and thus fired the tremendous rallies in real-estate and stock-equity prices that have occurred in the past few years.

But nothing good lasts forever. From reaching a high of $117.2 billion in August 2005, the TIC reports are showing a steady decline in foreign inflows, down to $74 billion in December, and $78 billion for January, the last month for which data are available. The nasty thing about this is that with a projected $975 billion current-account deficit for this year, the US is no longer getting what it needs from the world to maintain its lifestyle. The foreign-capital food supply is dwindling just as the hunger increases.

True, the actual shortfall is not yet very large, right now less than $5 billion a month. But I see the salient fact here as not being the current-account deficit minus TIC-inflow shortfall right now, but the rather significant 35% absolute reduction in inflows since last summer. As the US political system shows absolutely no indication of being either desirous or even able to deal with its fiscal profligacy (the recent congressional farce surrounding the increase in the debt ceiling being an example), the current-account deficit will only rise; unless US households are willing to increase their savings rates massively (very unlikely, since I haven't seen any "going out of business" signs on Best Buy or Circuit City lately) or the declining-TIC-inflow trend reverses, there's trouble ahead for the latest US experiment in cut-rate conquest.

There are many ways this trouble could manifest itself. Since much of this foreign-capital inflow finds its way into long-term US Treasury securities, it's hardly surprising that, with the recent shortfall in TIC inflows, Treasury interest rates are rising to their highest levels in two years. If demand is falling, then the market is marking down prices, and the basic rule of bond markets is that yields move in inverse directions to prices. Rising mortgage rates will put the US real-estate boom in real jeopardy, and it has been US homeowners pulling spendable cash out of the inflated values of their homes that has generated much of the consumption component of recent US growth.

It is also possible that this could lead to a sharp selloff in the US dollar, as has been happening in the dollar-euro market since November. If foreigners with export earnings from the US do not put it back into US assets, they will not just keep it stuffed in their mattresses; they will look around for interest-bearing instruments denominated in euros, sterling, yen, or a dozen other currencies.

This will cause these currencies to appreciate in value, and the dollar to fall. If you've ever looked at the back page of The Economist magazine you'll have seen the huge foreign-exchange reserves being built by countries that have recently been the winners in the global trading game. As of December, the International Monetary Fund lists Japan's reserves at $847 billion, China's at $819 billion, Taiwan's at $253 billion, South Korea's at $210 billion, Russia's at $194 billion, and India's at $137 billion. These reserves, held overwhelmingly as US dollars, are the potential gasoline just waiting for the match to set alight a huge global economic conflagration.

If somebody starts selling his dollar reserves, even if it's only a portion of his dollar portfolio, other countries could be forced into panic selling of their huge dollar reserves. The foreign-exchange markets are the biggest and most liquid in the world, but whether they would be able to absorb the amount of selling that could emerge from portfolio adjustments this large is a very open question.

More likely there would be a sharp overshoot in the dollar-selling, leading to a perhaps 20-30% decline in dollar values within a very short time. For the US, this would mean a sharp rise in the prices of everything it imports, especially crude oil. That would mean inflation, with the Federal Reserve raising interest rates to contain it, or maybe the economy would bypass the intermediate inflationary phase and head straight into deep recession or depression.



Either way, the great run of US prosperity would be over. Worldwide, along with the global contractionary effects of US economic growth suddenly stopping or going into reverse, the effect of an almost instantaneous 20% haircut in the value of the world's financial reserves would be no picnic, either.

On the first day of class, business teachers like me love to introduce our sleepy students to the concept of TANSTAAFL - there ain't no such thing as a free lunch. The United States may soon be introduced to the concept of TANSTAAFE - there ain't no such thing as a free empire. Specifically, will the nation still think it's so important to control the sands of Samarra, or the streets of Fallujah, or, for that matter, those of Baghdad if, like the signs say in US doctors' offices, "payment is expected at the time of service"?

Julian Delasantellis is a management consultant, private investor and professor of international business in the US states of Washington.

Were Bush merely another big spender, his presidency wouldn't differ from other pork barrel administrations, but Bush's radicalism goes far beyond spending. Bush supports outsourcing American jobs, and he has taken an irreverent approach to the U.S. Constitution.

Bush bears no resemblance to a political conservative. A political conservative does not confuse government with country. Patriotism means loyalty to country. Bush, however, demands allegiance to his government: "You are with us or against us!" Critics of the Bush administration are branded "unpatriotic" and even "treasonous."

Loyalty to country means allegiance to the Constitution, the Bill of Rights and the separation of powers. It does not mean blind support for a president, an administration, or a political party.

The separation of powers and civil liberties that were bequeathed to us by the Founding Fathers are the protectors of our liberty. Bush, who swore on the Bible that he would defend and uphold the Constitution, has made it clear that he will not let the Constitution get in the way of expanding the powers of his office.

Bush has over-ridden a number of protections in the Bill of Rights. The right to assemble and to demonstrate has been infringed. The Secret Service now routinely removes protesters from the scene of Bush political events. Many unthinking Americans go along with this authoritarianism because they don't agree with the protesters, but once the right is lost, everyone loses it.

Bush has ignored habeas corpus and claims the unconstitutional power to arrest and detain people indefinitely without a warrant and without presenting charges to a judge. This is the most dangerous abuse of all, because whoever is in office can use this power against political opponents. Many unthinking Americans are not concerned, because they think this power will be used only against terrorists. However, as the Bush administration has admitted, many of its detainees are not terrorists. Most are innocent people kidnapped by tribal leaders and sold to the U.S. for the bounties paid for "terrorists."

Bush has refused to obey statutory law, specifically the Foreign Intelligence Surveillance Act (FISA). Bush claims that as commander-in-chief he has the right to ignore the law and to spy on Americans without a warrant. Many unthinking Americans are unconcerned, saying that as they are doing nothing wrong they have nothing to fear. This attitude misses the point in a large way. If a president can establish himself above one law, he can establish himself above all laws. There is no line drawn through the law that divides the laws between the ones the president must obey and the ones he need not obey.

FISA does not interfere with government spying for national security purposes. Secrecy is protected, because the court of federal judges that issues the warrants is secret. Moreover the law allows the government to spy first and then come to the court for a warrant. The purpose of the warrant is to be sure that the government is spying for legitimate purposes and not abusing the power to spy on political opponents for nefarious purposes.

When presidents sign a bill passed by Congress that they think might be interpreted in ways that could impinge on the powers of their office, they add a "signing statement" to protect traditional presidential powers. Under Bush this practice has exploded. Bush has used signing statements considerably in excess of all previous presidents combined. Moreover, Bush uses the statements not to protect president powers, but to nullify acts of Congress, such as Republican Senator John McCain's law against torture. Bush is using signing statements to turn the presidency into a dictatorship in which the executive is not accountable to laws passed by Congress. The next step is simply to announce that the executive is not accountable to elections either.

Bush's government is the first in our history in which there are no dissenting voices and no debate. Uniformity of opinion is more characteristic of a dictatorial government than a conservative one. Bush's government is all of one mind, because all important positions are held by neoconservatives.

Neoconservative is a deceptive term. It means "new conservatives," but there is nothing conservative about neocons. Neoconservatives believe in imposing their agenda on other countries--the antithesis of American conservatism.

In short, real conservatives believe in conserving the Constitution, government accountability, and civil liberties, and avoiding foreign entanglements. Judging by its behavior and its statements, the Bush administration stands completely outside the conservative tradition.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: paulcraigroberts@yahoo.com

School officials acknowledge the sale of the buses on the Internet auction site may puzzle some people used to more traditional school fundraisers like bake sales.

"There's no shame in it. Not one bit," said school board president Phyllis Landrieu. "This is a new mechanism for selling things. I think it's very upbeat what we're doing."

Only 23 of 117 Orleans Parish public schools have reopened. They face a $111 million shortfall _ about a quarter of the district's $430 million annual operating budget. The district also has $264 million in outstanding debt, carried over from before Hurricane Katrina.

A total of 85 schools flooded, and wind damaged many more. It took three months for the first public school to reopen. Now, the schools that are holding classes have around 9,500 students, about 15 percent of the 60,000 enrolled before the storm.

The school district plans to put one bus up for sale on eBay this week. If it succeeds, more of the 259 ruined buses will be offered.

"It's an example of how bad the situation is that we would have to come up with this idea," said Richard White, schools spokesman.

The district plans to contract out its student transportation.

Sponsors Kent Conrad and Byron Dorgan, North Dakota Democrats, said they would try to attach the legislation to a spending bill expected to go to a floor vote soon. The House already has passed its version of the bill.

"My hope is those who blocked (aid) on the House side will change their minds," said Dorgan, referring to a refusal by House Republican leaders to allow the aid last year despite Senate passage.

Conrad said the package would compensate producers for weather-related crop and livestock losses as well as the impact of a steep rise in fuel and fertilizer prices.

Some 22 farm groups, including the American Farm Bureau Federation and the National Farmers Union, support the legislation. Seventy percent of U.S. counties were declared disaster areas last year. Besides hurricane damage in Florida and Gulf Coast states, spring floods hit farmland in the northern Great Plains and drought blistered crops from the southern Plains to the eastern Corn Belt.

"Weather-related disaster losses combined with declining commodity prices and skyrocketing energy costs are putting farmers in a financial bind," said NFU President Tom Buis.

Two dozen senators -- seven Republicans and 14 Democrats -- sponsored the bill.

The Saudi stock market accounts for half of the value of all Arab exchanges, with a capitalization of around $650 billion. Over a two week period, the capital value of the Saudi market slid by more than 30 percent. By March 16, the Financial Times was reporting that the main Saudi index was "down 21 percent from its all-time high, but Dubai, where the collapse began earlier, was 51 percent off." On March 26, in defiance of optimistic forecasts, the Saudi stock market fell 626.65 points. Of the 79 listed companies, 72 saw their price drop. "A lot of wealth is disappearing overnight," Shahid Hameed, head of asset management at Manama-Bahrain-based Securities & Investment Co, told Bloomberg news.

How strange it is that in an area of the world that has been officially named a strategic priority for the United States since the 1970s, an economic meltdown is underway and shows no signs of slowing any time soon and yet people in our country are almost totally unaware it is happening.

Why the stock markets across the region are being shattered is not clear; international observers and analysts on the scene admit it remains somewhat a mystery. However, it is becoming increasingly clear that the panic behind the rout is interrelated with the political and military situation in the Middle East and Gulf region, the U.S. conflict with Iran and the continuing costly and destabilizing war in Iraq. It cannot bode well for the political or economic security of the international community.

The total combined value of the stock exchanges in the Gulf countries fell March 14 to just under one trillion dollars, down some $159 billion from their in 2005 value and more than $250 billion below their all-time high.

"'Collapse,' 'Domino effect,' 'Bleeding' screamed headlines in Arab newspapers," reported the Financial Times, as Arab investors tried to come to terms with the region-wide collapse in stock market prices.

"It is pure panic and its snowballing effect on investor sentiment which are triggering the fall. We cannot any more call it a correction as it is a crash," Dhaheer Quraish, general manager of Essham Securities, told the Dubai-based Khaleej Times.

Evidently there were no street demos in the Saudi capital, but Saudi politicians demanded state action to stop the market decline.

There were, however, hospital visits. "High-Living Saudis Panic as Stock Market Collapses," reported the London Daily Telegraph (March 17), observing that Saudi "rich kids have been selling their cars and even rushing to the doctor after a whirlwind stock market crash saw huge profits perish. Heart-attacks, stress, hospitalization, and panic selling are all reported results of the Saudi collapse, which has seen tens of billions of dollars in losses in a fortnight."

"Many speculators have disappeared after big losses of the past 10 days and some have been transferred to hospitals, though their families claim they are out of the country," reported Beirut's Daily Star on March 11 -- three days before "Black Tuesday."

"Stock markets in Saudi Arabia, Dubai, Kuwait and other Arab countries plunged in unison this week as investors hit the exits simultaneously. US investors are barely aware that these markets even exist let alone bothered by this panic," observed the online finance commentator Capuchinomics.com.

Now, while I know next to nothing about the intricacies of stock exchanges, I couldn't help but be intrigued as to why the major mass media in the U.S. have either not noticed that the Middle East stock markets are crashing or don't think it worth reporting.

Although financiers in various Arab countries argued that their respective governments should refrain from taking measures to shore up the markets as the crisis deepened, the governments announced various measures to do just that.

Over the period since Black Tuesday, most exchanges in the region have been on a roller coaster, more often than not ending the day going down as governments announced various measures to stabilize them. Although Saudi politicians had demanded that the government act to prevent a full-scale market crash, the Saudi officials at first said the government would not intervene to stop the slide. Later, the Saudi government moved to allow foreign residents to trade directly in the market (they were previously restricted to investing in mutual funds) while it began considering a proposal to split shares in order to pull its market out of the doldrums. Authorities in Dubai, meanwhile, put forward a plan to divide listed firms between active and non- active, depending on the number of daily trades, and separate the weaker firms from the main index.

On March 14 Prince Alwaleed bin Talal, the world's eighth-richest man, announced he was putting $2.7 billion of his own money into Saudi Arabian stocks. The prince (worth $23.7 billion), according to Bloomberg, would buy 10 billion Saudi riyals worth of stock over the next few weeks. His spokesperson Heba Fatani said, "The prince is a patriot."

The public stance of most business observers in the Arab countries is that the exchanges were afflicted by a bubble and that the market declines are merely a "correction." Most attribute it to speculative trading on the part of small investors who have taken up trading vigorously over recent years. Over the past three years the Saudi exchange has ballooned 620 percent. The total value of stocks in Tunisia, the UAE, Jordan, Lebanon, Qatar, Kuwait, Oman, the Palestinian Authority, Egypt, Saudi Arabia, Bahrain and Morocco more than doubled last year.

However, other factors for the fall are being cited, including growing unease over the political situation related to the war in Iraq and the torpedoing of the U.S. port management deal involving Dubai Ports World. The expectation is that the correction will continue, having, in the words of the Financial Times, "a few more months to run."

It is obvious that the situation in the world, and particularly the region, has contributed to the stock market crisis and that it will have considerable consequences for the future of the countries involved and the international economy. This makes the major U.S. media's obliviousness to the situation ever more curious.

Henry T. Azzam, chief executive officer at Jordinvest and MobileCom, Jordan, writing in the Daily Star of Lebanon, said his colleagues expect the markets' downward trend to continue and then "eventually revert back to a positive slope in late 2006 as broad economic indicators remain robust." However, he wrote, "The economic impact of the current correction should not be underestimated. Many small investors will be forced to exit the market with losses incurred. Those who stay will experience the reverse of the 'wealth effect.' People will feel that their wealth has shrunk and this will discourage them from spending. The impact of this on economic growth is difficult to assess, but it would definitely reduce consumption and weaken in the process overall economic activities."

But who knows what the future holds?

Financial Times analyst Philip Coggan has suggested that how the stock market crisis will play out is very much connected to future political and military developments in the region. "If the recent volatility in markets is to turn into a rout, a catalyst will be needed," he wrote March 17. "It could be US/Iran where discussions are increasingly heated. The global economy has lived with oil at $70 a barrel: could it live with $80 or $100?"

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Carl Bloice is a writer based in San Francisco.

"We have received a list of questions from our American colleagues requiring additional agreement which we considered settled long ago," Putin told a Kremlin meeting with Russian business leaders.

Putin added that the U.S. move "artificially pushes back the course of negotiating process."

Russia is the largest economy outside the 149-member WTO and its negotiators hope to wrap up entry talks -- under way for 13 years -- during its inaugural presidency this year of the Group of Eight powerful nations.

Moscow has struck bilateral deals with all of the WTO's existing members except for the United States, Australia and Colombia.

Talks with Washington have snagged on U.S. calls for Russia to open up its financial services sector and stamp out video and software piracy.

Discussions last week in Geneva made little headway on a comprehensive entry deal, a final hurdle which requires the backing of all of the WTO's existing members before Russia can join the trade club.

National Security Council spokesman Fred Jones disputed Haney's contentions on the war.

"I think the president has made increasingly clear why we are in Iraq and the value he places on the military," Jones said Monday. "He has said decisions on troop levels will be made by commanders on the ground."

A 1970 graduate of Pepperell High School, Haney is now executive producer and technical adviser for the new CBS hit drama "The Unit," based on his 2002 memoir titled "Inside Delta Force."

His comments follow a round of speeches by President Bush last week, marking the third anniversary of Operation Iraqi Freedom. Bush called Iraq "the central front in the war on terror" in an appearance at the City Club of Cleveland in Ohio and said the security of the United States is directly linked to the liberty of the Iraqi people.

"By standing with them in their hour of need, we're going to help the Iraqis build a strong democracy that will be an inspiration throughout the Middle East," Bush said. "A democracy that will be a partner in the global war on terror."

But Haney said Bush "may well have started the third world war" by his focus on Iraq instead of on Saudi Arabia's role in funding and encouraging the centuries-old culture clash between Sunnis and Shiites in the Middle East.

"Saudi Arabia is the root source of Islamic extremism and terrorism," he said. "But this administration keeps the public blinded to the fact because it makes so much money from the monarchy."

Haney said his concerns are military, not political, and he is surprised more "dyed-in-the-wool" Republicans are not speaking out.

"I don't care if it was the pope in charge; wrongdoing does not recognize partisanship," he said. "I had the same problem with (former President) Clinton and the Democrats - you should clean up your own mess."

The few experienced soldiers who have challenged the Bush strategy - such as U.S. Army joint chief Gen. Eric Shinseki - have been marginalized and forced out, Haney said.

Shinseki retired in August 2003, after testifying before Congress that postwar Iraq would need an occupying force of hundreds of thousands of troops.

"At every turn, in the upper levels of our administration, they refused to listen to what they did not want to hear," Haney said.

He said Shinseki's fate served as a warning to other career soldiers considering public contradictions of Defense Secretary Donald Rumsfeld.

"Rumsfeld said the generals are getting all the troops they ask for, but they've gotten the word not to ask," he said. "If you don't play ball, you don't get that other star or that book deal or the chance to sit on corporate boards when you retire."

Still, Haney said he is hearing of a few commanders ready to buck the pressure and reject the blame for failed Iraq policies. Despite what supporters claim, he said, criticizing Bush's decisions is not unpatriotic.

"The henchmen of Hitler said it. The henchmen of Pol Pot said it. Every low-life tyrant has said it, but it is the duty of every American citizen to stand up and say it when something is wrong," he said. "This administration has wrapped itself in the troops. They've learned from Vietnam to say, 'If you don't support me, you don't support the troops,' but they're hiding behind those kids."