From the hustings and the airwaves this campaign season, America's political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people.

What they don't talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

There's a good reason politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.

"There's no sexiness to it," laments Leita Hart-Fanta, an accountant who has just heard Walker's pitch. She suggests recruiting a trusted celebrity - maybe Oprah - to sell fiscal responsibility to the American people.

Walker doesn't want to make balancing the federal government's books sexy - he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the "demographic tsunami" that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government.

"He can speak forthrightly and independently because his job is not in jeopardy if he tells the truth," said Isabel V. Sawhill, a senior fellow in economic studies at the Brookings Institution.

Walker can talk in public about the nation's impending fiscal crisis because he has one of the most secure jobs in Washington. As comptroller general of the United States - basically, the government's chief accountant - he is serving a 15-year term that runs through 2013.

This year Walker has spoken to the Union League Club of Chicago and the Rotary Club of Atlanta, the Sons of the American Revolution and the World Future Society. But the backbone of his campaign has been the Fiscal Wake-up Tour, a traveling roadshow of economists and budget analysts who share Walker's concern for the nation's budgetary future.

"You can't solve a problem until the majority of the people believe you have a problem that needs to be solved," Walker says.

Polls suggest that Americans have only a vague sense of their government's long-term fiscal prospects. When pollsters ask Americans to name the most important problem facing America today - as a CBS News/New York Times poll of 1,131 Americans did in September - issues such as the war in Iraq, terrorism, jobs and the economy are most frequently mentioned. The deficit doesn't even crack the top 10.

Yet on the rare occasions that pollsters ask directly about the deficit, at least some people appear to recognize it as a problem. In a survey of 807 Americans last year by the Pew Center for the People and the Press, 42 percent of respondents said reducing the deficit should be a top priority; another 38 percent said it was important but a lower priority.

So the majority of the public appears to agree with Walker that the deficit is a serious problem, but only when they're made to think about it. Walker's challenge is to get people not just to think about it, but to pressure politicians to make the hard choices that are needed to keep the situation from spiraling out of control.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he's accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank.

"We all agree on what the choices are and what the numbers are," Fraser says.

Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America -
Bill Gates, Warren Buffett and those Google guys included.

A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.

And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.

People who remember Ross Perot's rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn't grown dramatically relative to the size of the economy.

But that's about to change, thanks to the country's three big entitlement programs - Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two.

And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive.

Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation's gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget.

Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania have an even scarier way of looking at Medicare. Their method calculates the program's long-term fiscal shortfall - the annual difference between its dedicated revenues and costs - over time.

By 2030 they calculate Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion.

Medicare so dominates the nation's fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem.

"Obviously health care is a mess," says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. "No one's been willing to touch it, but that's what I see as front and center."

Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary.

Calculations by Boston University economist Lawrence Kotlikoff indicate that closing those gaps - $8 trillion for Social Security, many times that for Medicare - and paying off the existing deficit would require either an immediate doubling of personal and corporate income taxes, a two-thirds cut in Social Security and Medicare benefits, or some combination of the two.

Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders - primarily the central banks of China, Japan and other big U.S. trading partners - have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that's a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government's debt, those interest payments increasingly go overseas rather than to U.S. investors.

More serious is the possibility that foreign lenders might lose their enthusiasm for lending money to the United States. Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it wouldn't just be the government's problem. All interest rates would rise, making mortgages, car payments and student loans costlier, too.

A modest rise in interest rates wouldn't necessarily be a bad thing, Rogers said. America's consumers have as much of a borrowing problem as their government does, so higher rates could moderate overconsumption and encourage consumer saving. But a big jump in interest rates could cause economic catastrophe. Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Macroeconomic meltdown is probably preventable, says Anjan Thakor, a professor of finance at Washington University in St. Louis. But to keep it at bay, he said, the government is essentially going to have to renegotiate some of the promises it has made to its citizens, probably by some combination of tax increases and benefit cuts.

But there's no way to avoid what Rogers considers the worst result of racking up a big deficit - the outrage of making our children and grandchildren repay the debts of their elders.

"It's an unfair burden for future generations," she says.

You'd think young people would be riled up over this issue, since they're the ones who will foot the bill when they're out in the working world. But students take more interest in issues like the Iraq war and gay marriage than the federal government's finances, says Emma Vernon, a member of the University of Texas Young Democrats.

"It's not something that can fire people up," she says.

The current political climate doesn't help. Washington tends to keep its fiscal house in better order when one party controls Congress and the other is in the White House, says Sawhill.

"It's kind of a paradoxical result. Your commonsense logic would tell you if one party is in control of everything they should be able to take action," Sawhill says.

But the last six years of Republican rule have produced tax cuts, record spending increases and a Medicare prescription drug plan that has been widely criticized as fiscally unsound. When President Clinton faced a Republican Congress during the 1990s, spending limits and other legislative tools helped produce a surplus.

So maybe a solution is at hand.

"We're likely to have at least partially divided government again," Sawhill said, referring to predictions that the Democrats will capture the House, and possibly the Senate, in next month's elections.

But Walker isn't optimistic that the government will be able to tackle its fiscal challenges so soon.

"Realistically what we hope to accomplish through the fiscal wake-up tour is ensure that any serious candidate for the presidency in 2008 will be forced to deal with the issue," he says. "The best we're going to get in the next couple of years is to slow the bleeding."

The dollar is still the world's reserve currency, even though it hasn't deserved this status for a long time. The devaluation of the dollar can't be stopped -- it can only be deferred. The result could be a world economic crisis.

The two things investors crave most are high yields and high security. Since you can never have both at the same time, the moods of investors are like an emotional roller coaster. They shift constantly from fear to greed and back -- although major investors, like corporations and states, clearly prefer security over fancy returns. Their fear is stronger than their greed. They'll freely relinquish the really fat profits as long as the stability of their billions is guaranteed. They're afraid of political unrest, they loathe overly dramatic changes in currency value and the mere thought of creeping inflation sends them into a state of panic.

Few countries are able to provide the greatest possible security in the face of these dangers. They include the United States and Switzerland. Indeed, this security is why the dollar isn't just used in trading and investment, but also functions as the world's reserve currency. Almost every country in the world distrusts its own currency to the extent that it prefers to invest the money from its treasury in the United States.

One can almost completely rule out the possibility of political unrest in the United States. Inflation is combated by the Federal Reserve Bank. Given the size of the currency's spread and the quantity of dollars circulating worldwide, speculators have no cause to get overly anxious about the dollar.

Thus, those who have money prefer to keep it in dollars. The United States disposes of a virtual monopoly on the commodity called security. For many investors, purchasing a US government bond is nothing other than a way of preserving their money. In 2005, only 20 percent of all currency reserves in the world were held in euros, whereas more than 60 percent were held in dollars. The introduction of the euro was a considerable success, and one should not downplay it. Nevertheless, the dollar has remained the world's currency anchor. As long as this anchor rests firmly on the ocean floor, stability is guaranteed for the national economies that invest in the dollar.

But if that anchor should tear itself loose and begin to drift freely in the ocean of global finance, the chaos that ensues would result in trouble for more than just exchange rates.

Buying to avoid selling

But why are the same traders who used to purchase products now so mad about dollar bills? Why do they rely on the good called security -- a commodity whose quantity cannot be increased at all? Doesn't every business student learn that the currency of a country is only as stable -- and hence as valuable -- as what the national economy of that country has to offer and produces? Does no one see that the tension between the dream and the reality is increasing and that this tension will snap, leading to suffering for millions?

Of course they see it! Investors can see what is happening. They wonder about it and shake their heads. It even scares them a little, sending chills down their spine. But they keep buying dollars as though possessed. The greater their doubts, the more greedily they order dollars. Indeed, that's exactly what is so crazy about these investors and their behavior: The client isn't just a client. He creates the security he's purchasing by the very act of purchasing it. If he were to stop buying dollars tomorrow, suspicion about the currency would spread and insecurity would grow. Then the dream would end. The dollar would start to falter and all the wealth held in dollars would lose its value. Of course, that's not something investors want to see happen.

The only way to fight a weak dollar is to strengthen it. Many people no longer care whether the US currency still justifies the faith people seem to have in it. The new game, which amounts to playing with fire, works exactly the other way around: The dollar deserves the faith it gets because otherwise it loses that faith. Dollars are bought so they don't have to be sold. The dollar is strong because that's the only thing that can prevent it from growing weak. Reality is ignored because only by ignoring it can the dream come true. Or, to put it still more clearly: Behaving irrationally has become rational behavior.

Everyone knows the danger

Of course, those playing this game know that, in the long term, currencies can't be stronger than the national economies from which they derive. Consumption without production, imports without exports, growth on credit -- these are all things that can't last in this world. Ken Rogoff, the former chief economist of the International Monetary Fund (IMF) and a man who thinks as clearly as he speaks brashly, recently criticized US economic policy even as he seemed to be praising it: Rogoff said the current boom in the United States is "the best economic recovery money can buy."

But if things have become that obvious, why aren't investors recoiling in fear? Why do foreigners, US presidents of all stripes and even Federal Reserve presidents known for their seriousness allow themselves to get involved in such a risky game, when the risk is that of destroying everything? Why aren't those mechanisms of market regulation functioning that are supposed to represent the advantage of the capitalist system over planned economies?

The answer is terrifyingly simple: Everyone knows how dangerous the game is, but continuing to play it strikes them as less dangerous than quitting. After all, what's to be gained from overreacting? Investors allowed themselves to get caught in the dollar trap years ago, and there's no easy way out. If they start taking their dollar bills and government bonds to the market themselves, they would lose money -- either gradually or all at once. They would like to avoid both scenarios, at least for a time. A president who does no more than recognize the situation as an important issue may lose his position as public discontent looks for a vent. Though the governors of the Federal Reserve Bank are under the strongest obligation to tell the truth, they have let the right moment for effective intervention slip by.

Waiting for the signal

Alan Greenspan, the legendary former chairman of the US Federal Reserve, did much to feed the dollar illusion. Whenever skepticism increased, he raised the key interest rate. Any rise in the key interest rate also serves as a sort of risk premium for those who took their chances by investing in the dollar. When doubts about the sustainability of US economic growth were heard, Greenspan set out to dispel them immediately. For a man better known for his mumbling and preference to keep people in the dark about the financial world, he spoke with remarkable precision. "Overall, the household sector seems to be in good shape," he said in October of 2004. If the global financial market's managers worship Greenspan, then it's at least partly because he's given their dream a lease on life of several more years.

His successor has no other option but to do the same thing. He knows that every piece of advice issued by someone in his position will have consequences. If he issues a warning about the skewed state of the economy, the warning itself instantly becomes a self-fulfilling prophecy. Even if he chooses a subtle formulation, the financial market will perfectly understand what he's saying. Everyone is waiting for the sign that the trend has reversed. No one is hoping for that sign, but no one can afford to miss it either.

At this point, a legitimate objection could be formulated: namely, that financial markets don't normally obey politicians. So why aren't the markets correcting themselves in this instance as they normally do? Who or what is preventing investors from behaving differently towards the dollar than they behaved towards New Economy stocks?

They're going to do it. The only question is when. Financial investors aren't tax collectors or accountants: Their job isn't that of a meticulous overseer. They love excess, and they regularly cause markets to overheat. After all, speculation is the business they're in, and being in that business involves living with the risk of going too far. Their professional attitude resembles that of race car drivers whose goal is victory and not avoiding accidents at all costs. What remains unclear is just how dramatic the crash will be. Experts have often forecast the effects of a dollar meltdown. If the downward trend were to begin, interest on credit would rise step by step in an attempt to curb devaluation. That way, the dollar crisis would spread from the world of currencies to the real world of factories, businesses and household accounts within days.

Major and minor private investments yield lower returns when interest rates climb. People would start to save, the economy would falter and eventually shrink. The first mass layoffs would arrive soon afterwards. US citizens would have to once more drastically reduce their level of consumption, as unemployment and waves of bankruptcy would shake up the country. Millions of households would become unable to pay back their bank loans. Then real estate prices and share values would begin to drop, having been overpriced for years and used as mortgages for consumer credit. When the real estate bubble bursts, consumption inevitably dwindles even further. The hunger for imports would fade, causing problems for exporting countries as well. It would only be a matter of days before newspapers would once more feature a term that seemed to have disappeared decades ago: world economic crisis.

Steroids for the giant

Last century, the United States already suffered from one deep economic crisis that gradually spread to the rest of the world. The Great Depression lasted 10 years and brought mass unemployment and starvation to the United States. The country's economic power sank by one-third. The crisis virus wrought havoc all over the West. Six million people were unemployed in Germany when the economic fever was at its peak.

Today's investors face a difficult choice, one they're not to be envied for. They can see the relative weakness of the US economy and they're registering the tectonic shifts in the world economy. They know that a great statistical effort is being made to prolong the American dream. For some time now, government statistics have announced sensational productivity leaps for the US economy -- productivity leaps that, strange as it may seem, haven't led to any rise in wages for years. This is in fact genuinely bizarre: Either capitalists are reaping the fruits of increased productivity all by themselves -- which would be a political scandal even in capitalism's heartland -- or the productivity leaps exist only on paper. There is much to suggest that the second hypothesis is correct.

Half the world is impressed by the low levels of unemployment in the United States. The other half knows that these statistics aren't official, but the result of a voluntary telephone survey. Many of those who declare themselves employed are assistants and day workers. Working just one hour a week is enough for one to be classified as "employed." Given that it's considered antisocial to declare yourself unemployed, the US statistics may well say more about American society's dominant norms than about its actual condition.

The US economy's high growth rates aren't to be completely trusted either. They are the result of high public and private debt. In no way do they express an increased output of domestically produced goods and services that the United States has achieved by its own strength. They say more about the successful sales ventures of Asians and Europeans. New loans taken by the US government were responsible for fully one-third of US economic growth in 2001. In 2003 they were responsible for a quarter. The United States is an economic giant on steroids -- doped so its decline in performance doesn't become too apparent.

Trust in God, market style

For capital market investors, reality isn't reality until the majority of investors are convinced it is reality and have begun reacting accordingly. Right now, everyone is watching everyone else closely. Everyone knows the dream of the stable economic superpower has ended, but everyone is keeping his eyes shut just a little longer.

Government bonds and shares don't have any objective value -- nothing you can see, weigh, taste or even eat. Their value is measured by investors' faith that the purchasing power of $1 million will still be $1 million 10 years from now, rather than having been reduced by half. This faith is measured on the markets almost every second -- and the measure used is nothing but the faith of other investors. As long as the faithful outnumber the skeptics, everything works out fine for the dollar (and the world economy). The trouble starts the day the scale begins to tip.

The process is complicated by the fact that investors aren't driven by blind faith alone. In part, it seems, hard facts also push them to extend their credit of trust a little longer. US economic growth -- an impressive figure on paper -- is an important benchmark. When it is high, investors feel reassured in their faith in the power of the US domestic economy to perform well. True, the trade balance deficit has skyrocketed since it first appeared in the mid-1970s. But the economy is growing steadily anyway, as the dreamers note with growing self-confidence. It may not be growing as rapidly as the Chinese economy, but it is growing twice as fast as the European economy.

And yet this benchmark is not as reliable as it seems. The faith investors have in the figure has actually helped create it. After all, the purchasing price of a government bond feeds almost directly into state consumption, just as the purchasing price of a share makes companies more inclined to consume. It also extends the credit basis of millions of private households -- which in turn boosts consumption. In this way, the expectations of investors -- including the expectation that the United States will continue to grow -- transform into certainties almost all by themselves.

In other words, the capital of trust creates the very growth rates it needs in order to justify itself. US economic growth, in fact, is fueled by ever-increasing consumer spending -- puzzling given that American wages are dropping as is industrial output. Still, everyone knows the answer to this riddle. The rise in consumption isn't based on an expansion of production, a rise in wages or even an increase in exports. To a large extent, it's based on the growing debt. But why do banks keep issuing credit? Because they accept the ever-increasing prices of stocks and real estate as a kind of collateral. A closed circuit of miraculous money minting has been created.

Self-delusion

The extent of this self-delusion can be read in the balance sheets of the banks: Almost no one is saving money in the United States today. The US foreign debt grows by about $1.5 billion every weekday and has now reached about $3 trillion. Private household debt, both at home and abroad, has reached $9 trillion -- and 40 percent of these debts has been incurred since 2001. The Americans are enjoying the present at the cost of selling off ever larger chunks of their future. Arguably, the imminent economic crisis is the most thoroughly predicted one in recent history. Rather than refuting the crisis, the current US economic boom merely heralds it.

Biologists have observed similar phenomena in plants contaminated by toxins. Before they wither, they produce one last batch of healthy shoots -- to the point that they can hardly be distinguished from healthy plants. Some speak of a panic bloom.

So who will be the first to destroy the dollar illusion? Aren't all investors bound together by an invisible link, since every attack on the key currency would lead to a loss of value for them, perhaps even destroying a large part of their financial assets? Why should the central banks of Japan or Beijing throw their dollars onto the market? What could make US pension funds wilfully destroy their wealth, held in dollars? What sense would it make to send the United States into a deep crisis when that crisis could drag all the other states along?

The underlying motive is the same as the one that once prompted investors to buy dollars -- fear. This time it is fear that someone else may be faster, fear that the dollar's strength won't last, fear that every day spent waiting may be one day too long. It's fear that the herd instinct of global financial markets will set in and overtake those who can't keep up.

Weaker than they say

These days, the dollar is making a lot of people uncomfortable. One morning many dollar-owners will wake up and look at the facts about the US economy without their rose-colored glasses -- just as private investors woke up one day and took an unflinching look at the New Economy, only to see companies whose market value couldn't be justified by even the most dramatic of profit increases. Some of the revenue forecasts that had been issued far exceeded the total value of the market. The Nasdaq presented the spectacle of a stock market whose added value increased by 1,000 percent in just a few years, when the nominal growth of the US economy during the same period was only 25 percent.

Greed triumphed over fear for a few years -- but then fear came back. The value of high-tech shares plummeted by more than 70 percent in just a few months, and they're still less than half as high as they were then. Even the Dow Jones, a stock market index based on the value of the largest US companies, was devalued by some 40 percent.

Much the same fate is in store for the dollar and for dollar loans. The United States has sold more security than it has to offer. The expectations traded will turn out to be valueless because they can't be met. Just as the New Economy was unable to provide investors with either the growth or the profits that had been predicted for investors, currency traders will one day have to admit that the economy backing the currency they sold is weaker than they claimed.

The crash can be deferred, but not stopped

The dependence of foreign central banks on the dollar will defer its crash, but it won't prevent it. Today's snowdrift will become tomorrow's avalanche. The masses of snow are already accumulating at breathtaking speed. The avalanche could happen tomorrow, in a few months or years from now. Much of what people today think is immortal will be buried by the global currency crisis -- perhaps even the leadership role of the United States.

Incidentally, the commission that former US President Bill Clinton created to investigate the negative balance of trade concluded in clear terms that the government has to do whatever it can to put an end to the growing disparity between imports and exports. It demanded that the public give up its optimism and return to realism, that people start saving again and that the state reduce its imports in order to prevent too hard a crash landing.

None of that has been done. In fact, what is being done is the opposite of everything the experts recommended. Debt is growing, imports are increasing and an optimism now lacking every basis in reality has become official state policy. Lester Thurow, a member of Clinton's commission, draws the sober conclusion that no one will believe the US balance of trade could produce a crisis "until it happens."

Negotiations between Gazprom and five Western energy majors -- France's Total, the Norwegian firms Statoil and Hydro and Chevron and ConocoPhillips from the United States -- to determine which would enter into a consortium with the gas monopoly to develop the field had intensified since the short list of pretenders was announced last year. Because of its size, and the fact that it could open the way for Russian gas (in liquefied form) to penetrate the U.S. market, Shtokman was a crucial issue in Russia's foreign relations. It was also the single largest foreign investment project on the table.

Acknowledging that developing the field represents an enormous technical challenge, Gazprom sought out foreign partners with the technology, specialists and experience it lacked. A consortium arrangement would also have spread the economic risks associated with the project. Gazprom will now have to turn to creditors to finance Shtokman's development, which could cost as much as $50 billion by the time the field comes online. One of the U.S. firms could also have offered marketing connections on the downstream side in North America. In return for a minority stake in the development, Gazprom sought equity in the foreign companies.

One can only imagine the look on the faces of the executives at the five firms when the news came across the wires. Instead of informing the companies directly, Miller chose to drop the bombshell in an interview on Russia Today, a Kremlin-funded, English-language television channel that is often ridiculed as a propaganda mouthpiece in the West.

Immediately after the announcement, analysts with technical knowledge of gas-field development stated definitively that Gapzrom was incapable of going it alone unless the timeframe for the project were pushed back by several years and the cost estimate increased by as much as 15 percent. Even then, doubts remain about the feasibility of the project without foreign help. Gazprom has no experience in the development of a relatively remote offshore deposit of this immense size. Miller himself implicitly acknowledged this when he said the company would hire foreign firms as contractors.

It came as no surprise, however, that one of the five majors soon declared its unwillingness to participate in such an arrangement. Analysts expressed doubt that the market for offshore development contractors could in principle meet Gazprom's needs for Shtokman.

In short, there appears to be no economic logic to Gazprom's decision. So the question that arises is: Why? Since no one knows exactly what the foreign firms had put on the table, it is possible that the move was a not-so-subtle bargaining tactic. It could have been a saber-rattling gesture meant to scare the majors into improving their offers, which could well have been below fair value. Following President Vladimir Putin's confirmation at a news conference in Germany of Gazprom's plan to go it alone, however, the decision seems to be final.

This leaves two possibilities, neither of which bode well for Russia's investment climate. Either Gazprom has decided that economic priorities -- getting the field online according to the current timetable and cost estimates and tapping the U.S. market -- are secondary to total state control, or Moscow has allowed this decision to become hostage to the downward spiral in Russia's relations with the West, and with the United States in particular. Indeed, rumors circulated several months before the announcement that the U.S. firms might be excluded from the consortium because of Washington's perceived intransigence in Russia's WTO-accession negotiations. After Miller's announcement these rumors only intensified.

No matter which of the two explanations are closer to the truth -- or even if both factors played a role -- the Shtokman decision is a turning point in Russia's energy policy. Following the Yukos affair, the state established more or less stable rules of the game for cooperation with Western energy concerns. The primary guiding principle was that the national champions, Gazprom and Rosneft, would participate as majority stake-holders in all new development projects and should also be given shares in deals signed in the Yeltsin era that are perceived by the current regime as unfair. Foreign firms were encouraged to take up minority positions in these developments, as the state acknowledged that their expertise and resources were critical for accelerating the projects. Beyond these major caveats, however, the state preached cold-blooded economic pragmatism and rejected the practice of linking the task of making money to petty political concerns.

While this framework would seem to make Russia an unattractive place for foreign companies to do business, investors were relatively content. They are generally more concerned with the stability of the rules of the game, not their restrictiveness.

Many have argued that such ground rules, if they ever existed, were done away with long ago and that Shtokman fits into a pattern with the recent assault on Sakhalin-2. But Gazprom's intention to take a minority stake in the Sakhalin-2 project has been clear for over a year and fits in with the scheme described above. Shell, the majority shareholder in the operating consortium, was given a choice: Either let Gazprom in or face the consequences.

Shtokman, by contrast, was a clean slate. If Gazprom has decided to proceed without bringing in foreign partners based on political motivations, and despite the economic consequences, the rules have changed and we could be entering a new period of instability in the investment climate. Shtokman might signal the end of the paradigm of cooperation between the national champions and foreign firms, and thus the unraveling of Putin's oft-noted pragmatism in dealings with foreign energy majors. As relations between Russia and the West continue to deteriorate, we could see other key decisions subjugated to the political whims of the Kremlin. The investment climate will inevitably suffer as a result.

The lesson from this episode is that political systems in which power is highly concentrated in the executive branch tend to be incapable of long-term credible commitment to policies necessary for the development of market economies. Of course, the total fragmentation of a political system is also not conducive to economic development, either, and this was part of the motivation behind Putin's centralization drive. But the pendulum may now have swung too far in the opposite direction. The previous period of perceived stability in the investment climate could well have been a short-lived phenomenon.

Samuel Charap, a doctoral candidate at St. Antony's College, Oxford University, is currently conducting research in the political science department of the Higher School of Economics in Moscow.

In his speech at the Communications Palace, in which the governments in power privatized the Andean country´s natural resources ten years ago, President Evo Morales stated that the recovering of hydrocarbons is part of the change of the neo-liberal model aimed by his government.

"We should tell social movements and all Bolivians that the fight was not in vain. We can say that the mission was fulfilled", stressed Morales.

The Bolivian leader ensured the foreign oil companies that his government will respect all the regulations and they will have juridical security.

In that sense, the president underlined that the contracts are transparent and prove that Bolivian has now partners and not owners of its natural resources.

By contrast, Russia made last year seven billion dollars selling weaponry to Asia, Africa and Latin America, a notable increase from 5.4 billion the year before.

This successful deal making has propelled Russia to the position of the top arms supplier to the developing world, the report said on Sunday.

France rose to second place, inking last year 6.3 billion dollars worth of deals for delivery of military hardware, up from just one billion dollars in agreements in 2004.

Frances success, the study said, was attributable to a 3.5-billion-dollar agreement with India for the sale of six Scorpene diesel attack submarines.

US congressional experts also predicted that an aggressive sales pitch by Paris could eventually collide with key interests of the United States and its allies as France usually pursued its national interests rather than
NATO alliance considerations.

"So the potential exists for policy differences between the United States and major West European supplying states over conventional weapons transfers to specific countries," warned Richard Grimmett, the main author of the report.

Russia's rise to the pinnacle of the world arms business was fueled by its booming trade with two emerging Asian giants -- Indian and China -- as well as Iran, a controversial client whose buying power was nonetheless greatly enhanced by high oil prices.

Last year, Russia agreed to sell India 24 SA-19 air defense systems for 400 million dollars as well as Smerch multiple-launch rocket systems for about 500 million, according to the report.

Moscow will also overhaul an Indian diesel submarine for about 100 million, and to provide India with BrahMos anti-ship missiles.

In addition to fulfilling its long-term sales agreement with China for Su-27 fighter jets, destroyers and submarines, Russia also agreed last year to sell China 30 IL-76TD military transport aircraft and eight aerial refueling tankers for more than one billion dollars, the document said.

New arms deals between Moscow and Beijing also include sales of various military aircraft engines worth more than 1.2 billion dollars.

"These arms acquisitions by China are apparently aimed at enhancing its military projection capabilities in Asia, and its ability to influence events throughout the region," Grimmett noted.

Meanwhile, Iran, fearing airstrikes against its nuclear facilities, is buying from Russia 29 SA-15 Gauntlet air defense systems for over 700 million.

Moscow, the report said, also agreed last year to upgrade Irans Su-24 and Mig-29 aircraft as well as their T-72 main battle tanks.

The US fall to third place was explained by a scarcity of new expensive contracts.

The largest US 2005 deal involved upgrading AH-64A Apache helicopters for the United Arab Emirates for a total of over 740 million dollars.

While noting that China's 2005 arms sales total was a modest 2.1 billion dollars, the report pointed out that Iran and
North Korea were reportedly among clients receiving Chinese missile technology.

The document, therefore, warned that "China can present an obstacle to efforts to stem proliferation of advanced missile systems."

The CRS usually delivers its reports to interested lawmakers rather than the public.

The arms trade study was sent to legislators last week and obtained by AFP late Saturday.

The 700-page report, to be published on Monday, said that no matter what we do now the chance "is already almost out of reach" to keep greenhouse gases at a level which scientists say should avoid the worst effects of climate change.

It said the world does not have to choose between tackling climate change and economic growth, contradicting
President Bush who pulled out of the Kyoto Protocol against global warming in part because he said it would cost jobs.

"The evidence gathered by the review leads to a simple conclusion: the benefits of strong, early action considerably outweigh the costs," said the report, prepared for British Prime Minister Tony Blair and finance minister Gordon Brown.

"Our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century," it said.

It precedes U.N. climate talks, starting in Nairobi on November 6, focusing on finding a successor to Kyoto which ends in 2012.

Blair is pushing for a post-Kyoto framework that would include the United States -- the world's biggest producer of greenhouse gases that cause climate change -- as well as major developing countries such as China and India.

Kyoto obliges 35 rich nations to cut emissions of greenhouse gases -- which come mainly from burning fossil fuels in power plants, factories and cars -- by some 5 percent from 1990 levels by 2008-12. Many Kyoto nations are above target.

POOR WILL SUFFER MOST

Stern said that, on current trends, average global temperatures will rise by 2-3 degrees centigrade within the next 50 years or so, compared with temperatures in 1750-1850.

If emissions continue to grow, the earth could warm by several more degrees, with severe consequences that would hit poor countries most, the former World Bank chief economist said.

Melting glaciers would initially increase flood risk and then reduce water supplies, eventually threatening one-sixth of the world's population, mainly in the Indian sub-continent, parts of China and the South American Andes, he said.

Declining crop yields, especially in Africa, could leave hundreds of millions unable to produce or buy enough food, he said. Rising sea levels could result in tens to hundreds of millions more people flooded each year.

The report estimates stabilising greenhouse gases in the atmosphere will cost about 1 percent of annual global output by 2050. But if the world does nothing, it could cut global consumption per person by between five and 20 percent.

Stern called for a coordinated international approach to combat climate change, saying the effort must be shared fairly by rich and poor. He suggested rich nations take responsibility for emissions cuts of 60-80 percent from 1990 levels by 2050.

Countering global warming would bring new opportunities to industry, he said, estimating the market for low-carbon energy products could be worth at least $500 billion a year by 2050.

He advocated a doubling of worldwide public spending on research and development into low-carbon technologies and a sharp increase in incentives to encourage people to use them.

Stern said a global carbon price was needed, affixing a clear cost to pollution, and this could be created through tax, trading or regulation.

Since the minute Dick Cheney authorized the no-bid contracts for Halliburton, the granddaddy of war profiteering has been ripping off American tax payers left, right and center through the use of these cost plus contracts and another clear-cut profiteering scheme was recently revealed in testimony at a Senate Democratic Policy Committee hearing.

On September 18, 2006, Julie McBride, a former Halliburton employee with the company's Morale, Welfare & Recreation Department (MWR) in Iraq, testified that "the mantra at Halliburton camps goes, 'It's cost plus, baby.'"

Ms McBride was hired as an MWR Coordinator in Camp Fallujah at facilities that organize recreational activities for off-duty troops.

The two MWR facilities that she coordinated were a Fitness Center and an Internet Café. The Fitness Center had gym equipment, pool and ping pong tables, video games, and a large room for movies, fitness classes and dances, and the Internet Café housed telephones, computers, and a library.

At Camp Fallujah, she testified, she became concerned about several Halliburton practices and especially with the procedures used to compile the headcount for the MWR Department.

"Funding for the MWR Department," Ms McBride stated, "was evidently based, in part, on the headcount that Halliburton reported."

She explained that to obtain a headcount, each off-duty soldier who entered the Fitness Center or the Internet Café had to sign in, and that the number of soldiers on the sign in sheet was referred to as the "Boots in the Door" count.

She then testified that she and other MWR employees were directed to utilize a specific methodology to intentionally inflate this head count to run up costs and described how it worked.

"To begin," she told the panel, "each hour, on the hour, Halliburton staff were instructed to record the number of soldiers in each of the five rooms of the Fitness Center, and in the Internet Café library."

"In addition," she said, "each person who used any equipment in the Fitness Center was
required to sign a form."

"This included balls, ping pong paddles, pool cues, board games, video games, etc.," she noted

"Further," she testified, "a record was kept of the number of troops who attended fitness classes or other activities."

At the end of each day, she said, Halliburton instructed MWR Coordinators to prepare a situation report, or "sit rep," to record what was purported to be the MWR head count for the day.

"To inflate that figure," Ms McBride explained, "the Coordinators began by adding together the "Boots in the Door" count, and the hourly totals for each room in the Fitness Center throughout the day and in the library."

"For example," she said, "I was present in Iraq on February 27, 2005, when the "Boots in the Door" count at the MWR facility in Fallujah was about 330."

"The hourly count that day," she noted, "for each room was over 1,300."

"These totals were then combined for a Fitness Center headcount in excess of 1,600," she stated, "or five times the actual number of troops that came into the facility."

On top of that she said, Halliburton would often add the number of troops who attended a fitness class or activity, even though each person had already been counted when he or she came in the door, and counted a second time in the hourly head count.

In addition, she testified, they would often add on the total number of equipment items that were checked out that day and sometimes they would even add the number of towels checked out by the troops.

"One day in February 2005, for example," Ms McBride told the panel, "179 towels were added into the headcount."

On another day in January 2005, she said, they added 240 bottles of water used by the troops that day.

"Sometimes," she testified, "they used a sum total for the headcount that was higher than the "Boots in the Door," hourly room counts, activity count, equipment count, and towels count combined."

After adding together all of the numbers to arrive at a "sum total," she said, Coordinators were instructed to throw away the original "Boots in the Door" figure and the larger total was then designated as the headcount for that day and emailed to Halliburton administrators who compiled the numbers for all of the MWR facilities in Iraq.

"There are many other Halliburton MWR Coordinators who can verify this procedure," she told the committee.

Ms McBride went on to describe how the fraudulent headcounts are used to generate millions of dollars in unearned profits for the company by running up costs. "By inflating the number of users," she said, "Halliburton can rationalize a greater need for facilities, equipment, staffing and administrators than actually exists."

"The additional staffing," she said, "does not benefit the troops, but it does benefit Halliburton."

"Under its contract," Ms McBride points out, "the more facilities, equipment, staff and administrators Halliburton can show a need for, the more profit Halliburton makes."

She said that she also watched Halliburton employees use their control of the MWR and dining facility requisition procedures to requisition many items for their own personal
use, by claiming that the items were for the troops.

"I have personally observed," she said, "cases of soda, stacked on top of each other in Halliburton administrative offices, which Halliburton employees obtained this way."

She pointed out that the employees not only drank soda free but they also generated more undeserved profits for Halliburton by running up the cost of supplies.

"By contrast," she told the committee, "US soldiers who make a quarter as much, or less, must go to the PX to purchase their soda with money from their own pockets."

Ms McBride also described how Halliburton employees exploit requisitions to obtain luxuries that are not afforded to the troops. "One example of this," she said, "was a Super Bowl party, for Halliburton employees only, at taxpayer expense."

According to Ms McBride, Halliburton requisitioned a big screen TV and lots of food for employees and thus, under the cost plus contract, the company even made money off its private Super Bowl party.

Following the party, she said, the Halliburton employees arranged a live television connection for the big screen TV so that they could watch more football games.

She told the committee that many Halliburton employees did not seem to care about the soldiers and often ignored troop requests, or treated them like an annoyance.

"Those same employees," she said, "indulged their own whims at taxpayer expense."

She also described methods used by Halliburton to discourages employees from speaking out about these issues. "It's not easy to stand up to Halliburton," she told the committee.

"After I voiced my concerns about what I believed to be accounting fraud," Ms McBride said, "Halliburton placed me under guard and kept me in seclusion."

She said her property was searched, and she was specifically told that she was not allowed to speak to any member of the US military. "I remained under guard until I was flown out of the country," she said.

In concluding her testimony, Ms McBride expressed her admiration and devotion to the US troops in Iraq as well as her purpose in testifying before the committee.

"During my time at Camp Fallujah," she said, "I came to love the young men and women in the military, who serve our country so well."

"It was an honor for me to help them in any way," she stated.

"I will never forget their kindness," she said, "and their courage has inspired me to speak out now on their behalf."

Democrats have promised to end Halliburton's war profiteering in Iraq as soon as they take control of Congress and hopefully tax payers will hold them to it.


(Evelyn Pringle is a columnist for OpEd News and an investigative journalist focused on exposing corruption in government and corporate America. Email evelyn.pringle@sbcglobal.net)

"I drove that bus better than most of the LYNX drivers could," the teen, who is too young to drive legally, told a deputy after he was stopped and arrested. "There isn't a scratch on it. I know how to start it, drive it, lower it, raise it."

Davis had previously been charged for a similar bus theft. Details of that case were unavailable Sunday.

Passengers and deputies noted Davis drove the bus at normal speeds and made all the appropriate stops on the route. One passenger, suspicious of the youthful looks of the driver, called 911.

The bus had two passengers when deputies stopped it in Fern Park, about 20 kilometres north of the fairgrounds. Authorities believe Davis picked up a total of three passengers and collected only a few dollars.

He was charged with grand theft auto and driving without a license. A court hearing was scheduled Tuesday to determine whether he will be charged as an adult.