The Dow closed at 10,785.22 on Friday, down slightly (0.1%) from last week's 10,796,01. The NASDAQ closed at 2,058.62, down 0.9% from last week's close of 2076.66. The interest rate on the ten-year US Treasury Bond was 4.26% up sharply from last week's 4.08%. Gold closed at $427.10 (324.60 euros) an ounce, up 1.2% in dollars from last week's $422.00 (327.89 euros) but down 1% in euros. Oil closed at $48.35, up 2.5% from last week's $47.16 close and up 4% over the last two weeks. The dollar lost ground again against the euro, closing at .7650 euros or 1.3072 dollars per euro, down 1.56%. An ounce of gold would buy 8.83 barrels of oil on Friday down from 8.95 the week before. 

An ominous, yet realistic, sense of foreboding is starting to break through the happy talk.

Consumer sentiment fell in February for the second straight month, puzzling analysts who haven't been paying attention. Bush's dilemma has always been that to maintain power, to invade countries and to get things like Social Security "reform" done, he has to scare people. Scaring people, however, hurts the economy by destroying optimism.

More attention is being paid to the "inverted yield curve" this past week, due in part to the fact that Alan Greenspan had no explanation for it during his congressional testimony on Thursday and that inverted yield curves always precede recessions.  An inverted yield curve is when short-term interest rates are higher than long-term interest rates.  In other words, since the US Federal Reserve Board began to raise interest rates (the short-term ones) the long-term rates on ten-year bonds (as well as longer term bonds and housing mortgage rates) have actually gone down. This situation almost always predicts a serious recession.

Here's what the New York Times said in an article by Jonathan Fuerbringer:

WHEN Alan Greenspan says he cannot explain why longer-term interest rates are so low, what's an investor to do? Take cover.

Some money managers are doing just that because they have had the same problem as Mr. Greenspan, the Fed chairman: they cannot understand the decline of longer-term rates despite six increases in short-term rates by Fed policy makers since June.

"This development contrasts with most experience," Mr. Greenspan said last week in testimony to Congress. "Other things being equal, increasing short-term interest rates are normally accompanied by a rise in longer-term yields."

Instead, the yield on the Treasury's 10-year note has fallen to 4.26 percent from 4.69 percent at the end of June 2004, despite a climb of 1.5 percentage points in the central bank's short-term rate benchmark, to 2.5 percent. While Mr. Greenspan cited many possible reasons for this unusual happening, he ultimately concluded that "it remains a conundrum."

That's enough to make Paul A. McCulley cautious. "When the Fed chairman says he's scratching his dome, you should be scratching yours," said Mr. McCulley, a portfolio manager and economist at Pimco, the asset management and mutual fund company in Newport Beach, Calif. "You should always be wary when the central bank says an asset price is aberrant."

Thomas H. Atteberry, a manager of the New Income fund at First Pacific Advisors in Los Angeles, agrees. "He's the guy who is supposed to have all the information," Mr. Atteberry said of the Fed chairman. "And he is telling me he doesn't know why. Why commit capital to a long-term investment when you don't understand why it's valued that way?"

Mr. Greenspan also acknowledged that he was puzzled by other economic behavior. Although investors seem willing to take on more risk, businesspeople appear reluctant to do so. Capital investment has lagged behind the big rise in corporate profits. And worker productivity, a factor in restraining inflation, has proved to be "notoriously difficult to predict," he said.

There were other disturbing aspects to Greenspan's remarks. Greenspan said to Congress on Thursday that by permitting the further growth of federally backed mortgage companies, Fannie Mae and Freddie Mac, "we are placing the total financial system of the future at a substantial risk" [Read full article]. That is apocalyptic language for Greenspan. Fannie Mae and Freddie Mac are government-chartered companies that buy up mortgages from private lenders.  They are also privately owned by shareholders, but they enjoy the perception by the market that they are federally backed, since investors don't think that the government can let them fail for social, political and economic reasons. Since 1997, their holdings have tripled, growing to $1.5 trillion.

Greenspan urges cuts at Fannie, Freddie

Fed chief says $1.5 trillion mortgage portfolio will cause problems for nation's financial system.

February 18, 2005: 9:19 AM EST

WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan urged Congress to significantly cut the mortgage portfolios of the big mortgage firms Fannie Mae and Freddie Mac to avoid "almost inevitable" problems for the U.S. financial system.

Greenspan has in the past expressed concern about the growth of the companies' mortgage holdings, saying they could pose a risk if allowed to increase unchecked. The Fed chairman went farther Thursday, telling members of the House Financial Services Committee they should require the companies to slash their mortgage holdings.

Congress is weighing tighter supervision of the mortgage finance companies after accounting controversies and senior management ousters at both firms in 2003 and 2004.

Fannie Mae and Freddie Mac buy home loans from lenders and repackage them as securities for investors, but they also retain mortgages and mortgage-backed securities for their portfolios.

Congress chartered the shareholder-owned companies to ensure there are plenty of funds available for home buyers to take out mortgages.

Greenspan said in response to lawmakers' questions that the growth of those portfolios, which together top $1.5 trillion, primarily allows the companies to leverage their federal charters to generate substantial profits.

"We have found no reasonable basis for that portfolio above very minimal needs and what I would suggest is that for liquidity purposes they're able to hold U.S. Treasury bills in whatever quantity they would choose ... and a $100 billion, $200 billion, whatever the number might turn out to be, limit on the size of the aggregate portfolios of those institutions," he said.

A Freddie Mac official disagreed with Greenspan, saying that Freddie Mac's mortgage and mortgage-security purchases pump money into mortgage markets, lowering costs by boosting demand and guaranteeing stability even during unsettled periods, such as the Asian debt crisis of 1997-1998.

"Our retained mortgage portfolio helps us fulfill our charter purposes of providing liquidity and stability to the U.S. residential mortgage market in good and bad economic times," said Freddie Mac spokeswoman Sharon McHale.

But Greenspan said congressional failure to cap the growth of the companies' mortgage portfolios would invite potentially serious risk. He recommended that lawmakers pass legislation within several years requiring Fannie Mae and Freddie Mac to divest a large share of their holdings.

"Over time, several years, that should be done because these institutions, if they continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios which they need to do for interest risk diversion, they potentially create ever-growing potential systemic risk down the road," Greenspan said.

While there is no risk now, problems are "almost inevitable" in the remainder of the decade if lawmakers fail to act, he added.

"If you get large enough ... and something goes wrong, then we have a very serious problem, because the existing conservatorship does not create the funds which would be needed to keep these institutions going in the event of default, which is what the conservatorship is supposed to do, and we have no obvious stabilizing force within the marketplace," he said.

"Enabling these institutions to increase in size -- and they will, once the crisis passes ... -- we are placing the total financial system of the future at a substantial risk," Greenspan added.

Criticisms of Greenspan's tenure as Fed chief have grown louder in recent months. A headline for an article at Forbes.com screams, "World on Brink of Ruin." That is not the kind of language publications like Forbes usually use. Is there an effort to scare the public to cause a crash?  Or are they covering themselves because they know it will happen soon? Here is what Forbes said about Greenspan:

Alan Greenspan, that Matador of the Money Supply, the esteemed Impresario of Interest Rates, has suffered precious few slings or arrows over his many years as chairman of the Federal Reserve. Even the White House has had to offer its critiques off the record for fear of roiling the markets or upsetting the chairman's Elvis-in-Vegas-like following. So when the chief economist of one of the world's most prestigious banks calls Greenspan a bum, that's a big deal.

And yesterday it happened. Stephen Roach, the chief economist for Morgan Stanley & Co., one of the most powerful investment banks and one of the 50 largest companies in the world, says Greenspan has "driven the world to the economic brink."

Writing in an upcoming issue of Foreign Policy, Roach says that when Greenspan steps down as chairman of the Federal Reserve next year, he will leave behind a record foreign deficit and a generation of Americans with little savings and mountains of debt. Americans, Roach says, are far too dependent on the value of their assets, especially their homes, rather than on income-based savings; they are running a huge current-account deficit; and much of the resulting debt is now held by foreign countries, especially in Asia, which permits low interest rates and entices Americans into more debt.

Here's Marshall Auerback:

Economists, politicians, and business executives have repeatedly voiced unease about the imbalances in the global financial system, which have been reflected in the dollar's steep fall against the euro and other currencies until recently. But most expressed skepticism that the Bush administration would reduce the trade and budget deficits, which have fed those imbalances. The White House has said that it does not view these issues as a major problem because foreigners still view the American economy as an attractive investment, and Mr Greenspan has recanted some of his earlier expressed concern about the dangers of ignoring America's mounting imbalances.

The scope of the global imbalances and the potential for crisis makes piecemeal, orthodox solutions to the global imbalance problem unworkable and far too slow. The U.S. service-based economy, with more limited economies of scale than those of newly industrializing economies such as China, will not be able to export its way out of the problem. The only demand left for US goods is largely concentrated in industries such as aerospace and high technology.  But these are industries where exports pose national security risks, particularly if the exports are directed toward "strategic competitors" such as China, which generally have extremely poor records in terms of safeguarding intellectual property rights.

As we have noted many times before, there is a danger that over time, the US economy will find itself in a "debt trap", with an accelerating deterioration in its net foreign asset position and its overall current balance of payments (as net income paid abroad begins to explode).   We have never been in a position before where the world's leading economy has been subject to this condition, so it is difficult to make the case for traditional remedies, such as trade devaluation (where the corresponding knock-on effects would invariably create a huge international growth shock, thereby throwing into doubt the strategy of the US achieving net export growth). Because the US is such a vast economy, it cannot eliminate its current account deficit as readily as a smaller economy.  When it tries to improve its trade balance through devaluation or through restrictive demand management, its sheer size affects the economies of its trading partners adversely and to an appreciable degree. Understandably, they object and resist. When foreign economies resist dollar devaluation and the dissipation of their current account surpluses, the U.S. may have to raise interest rates in order to induce creditors to continue financing its debt build-up. 

So the problem is likely to get worse, which could ultimately lead to "solutions" that prove highly disruptive to the existing system of multilateral trade and cooperation which has developed over the past several generations. A resort to out and out military force cannot ultimately be ruled out. 

If a full-blown crisis does occur, the macroeconomic challenge would be unlike anything the United States has faced in more than half a century. While this would be a time of wrenching, painful change, the new adverse circumstances might also inspire a great shift toward radically different political solutions than have hitherto been considered within the realm of acceptability.

The first imperative--an unavoidable necessity--would be to suppress consumption through credit-restraining measures, fiscal caution or tax reform, and to stimulate greater domestic savings, yet somehow to keep the economy growing. If this great adjustment is left to market forces alone, the predictable consequences will be to punish the innocent--struggling households and small businesses--first.

The jump-shift strategy may ultimately take the form of a "wartime strategy" – not the phony "war on terror" strategy invoked after the September 11, 2001 attacks (in which Messrs O'Neill and McTeer, amongst others, exhorted Americans to go back to the shopping malls, to show the terrorists that they "couldn't win"). A more accurate precedent is World War II, an extraordinary era of economic development that virtually shut down many forms of domestic consumption (cars and housing) while the government's spending on war production launched major new industries (electronics, petrochemicals, modern aircraft and many others). Essentially, accelerated investment and forced savings replaced consumer spending as the leading fuel for economic growth. After the war, pent-up desires and needs became the economic demand that drove the long postwar era of prosperity.

Of course, an important difference from the World War II example is that it is difficult to see how reconstruction could be financed primarily through deficit spending, given that the country is already burdened by growing indebtedness.  This leads to the possibility of the US repudiating its existing debt obligations to external creditors.  A decisive President might start by bringing up a taboo subject--tariffs--and inform the world that the United States is prepared to impose a temporary general tariff of 10 or 15 percent on all US imports. Every multinational would have to rethink its industrial strategy, because some of its production might be stranded in the wrong country.

The idea of tariffs is so alien to conventional wisdom it probably sounds illegal. In fact, there is provision for "temporary adjustments" under the new World Trade Organisation rules.  It is also worth noting in any case that the legal technicalities of a global multilateral system didn't stop Richard Nixon, who stunned the world in 1971 when he abruptly announced a 10 percent import surcharge, devalued the dollar and unilaterally discarded the Bretton Woods monetary system. Nor did it stop President Roosevelt in the 1930s, during which he declared it illegal to own circulating gold coins, gold bullion, and gold certificates.  In essence, the federal government forced itself into the position by refusing to repay its bond holders in gold coin, forcing them to accept US dollars instead. Hence, subsequent to FDR's executive order, all holders of such bonds were forced to accept legal tender currency instead of "gold coin of the present standard of value." The act of confiscating gold itself was a violation of private property rights and was illegal – but the taboo was broken. As author Eric Englund notes, "[B]y not paying bondholders in gold coin, the U.S. government has technically defaulted on past Treasury bond obligations." Americans (and their foreign creditors) might come to see more of these types of actions from future American President.

It is true that such actions on the part of the US may well provoke reactions in kind.  On the other hand, given the lack of restraint evident in the country's current foreign policy aspirations, it is hard to envisage that an economic response to the Americans' abrogation of existing obligations would come without some possibility of a robust military response (or at least the threat of one). The US has already show itself willing to address the problem that it does not make enough of what the rest of the world wants by going to war to monopolise control of the supply and distribution of what the world needs, petroleum. There are other war aims, of course, but control of the global hydrocarbon net is certainly the most important. As market strategist Chris Sanders has noted, "The truth is that the dangerously destabilising idea has rooted in Washington that, in the words of Vice President Cheney, 'deficits don't matter (we proved that in the 90s).'  He is right of course in pure power terms; a fuller expression of Cheney's dictum might well add, 'as long as we are able to force everyone else to accept them (deficits).'" 

Already, it appears clear that the US is driven to rely more on military adventure because the economic house is in disarray and "overstretched". They can't just bludgeon their way economically anymore. They have to use the stick. Any close look at the inauguration speech bears out the reliance on forcing the world to conform to us dictates.  Why should this not extend ultimately to existing debt arrangements if the US finds itself facing an Argentina-like predicament?  All these outcomes may sound quite improbable at this moment. Certainly, the establishment would brush them aside. But do not dismiss the possibility that dramatic change and epic political reforms lie ahead.  As we have said many times before, Washington's elites will not go down without a fight.

A guest commentator on PrudentBear.com, Max Fraad Wolf, advises us not to listen to the happy talk, but to think:

Indexes drift upward pulling predictions, expectations and your leg. It is high time to more profoundly question the wisdom being peddled by the Fed, administration and financial press. I strongly recommend that investors listen less and think more.

Let's start with the basics on which most agree. 2005 will see a deceleration of S&P 500 profit growth. US GDP growth will also likely decelerate. The consensus 2005 estimate from the Economist magazine is for 3.5% GDP growth down from 4.4% in 2004. US interest rates and monetary policy will remain stimulative, but less so, as they meander toward neutrality. As this goes to press, broad and narrow US money supply growth is above, and interest rates are below, long term historic norms. This can only continue if we double dip. Huge trade and budget deficits, near or above 2004 record levels, are a virtual certainty. Yes, you listened to Greenspan assert that weakening dollars will suddenly reverse a 15-year secular trend in trade imbalances. He mentioned this as another weak job report was issued, but didn't bother to base his claim on any particular fundamentals. That presents an opportunity to implement the new credo, "don't listen, think."

If you follow this simple rule, your rose-colored goggles will fog over as your temperature rises, and you will be driven toward their removal. No sooner than you slip off those worn out lenses, will you find the following puzzling:

A merger wave seems well established. You have been listening to stories about how this is a great omen for stocks. Stop and start thinking. Over the past five years we have discovered that most of the last great merger wave's shining stars are light years away from real enduring benefit to share holders - from AOL- Time Warner to HP-Compaq.

Secondly, the drivers to the mega-mergers are pricing power, competition reduction and cost cutting opportunity. That explains much of the recent activity, and it also signals discomfort that leading businesses have with investment in their own industries. Amidst monetary stimulus and hype, firms are looking to hunker down, remove competitors, slash costs and pass along material price increases to debt burdened consumers facing declining market choices. In addition, several major firms are looking to invest repatriated profits- at the new much lower tax rates on these funds. However, they seem disinterested in capital investment or hiring. This is supposed to reflect a healthy environment for stocks.

How many times is a turn in events Iraq right around the corner? Iraq's recent vote propelled Shia religious leaders and secessionist Kurds into dominance alongside an apparently growing insurgency. This is not the kind of news that rationally leads to popping corks and fine cigars. Yes, it was nice to see that many voted despite the credible threat of death. However, this hardly justifies the Iraq victory premium in the markets, let alone a further run up. Look at the latest issue of Foreign Affairs. In it you will find leading experts extolling their considered "best" option, rapid withdrawal. Is it plausible this suggests that they have been thinking, not listening and are not impressed?

Chronic bulls simultaneously celebrating the ability of declining dollars to overpower trade deficits and the reassurance offered by rising dollars amid forecasts that call for the dollar to end the year at or above where it began. We are told variously that declining greenbacks are helpful, trade rebalancing and likely to reverse direction. Sounds great, but doesn't stand up well to the application of reason. Negative balances of trade are built into our macro economy and our place in the global economy. These imbalances will not substantively change unless the structure of the US economy or the global economy does. Our earnings are insufficient, our savings non-existent and our demand insatiable. Our place is to borrow and spend. Correction of the imbalances would require this to change. Few even acknowledge that possibility, yet they endlessly forecast either painless correction or the sustainability of the present arrangement. Both offer reassurance and buoy sagging spirits and prices. Sadly, they are little more than howling gusts of hot air Prozac. If you listen, you will feel better. If you think you will feel worse.

US equities are not cheap and neither is the dollar. Thankfully, this is not very widely understood. Thus, the safety offered by the mob. To stay happily in the game, one need only ignore reality. Look no further than Greenspan for an impeccable role model.

Of course, you are safe in the mob until the whole mob runs off a cliff.  Better to think objectively and face reality.

JEDDAH, Saudi Arabia - Moves by Middle East oil exporters and Russia to switch some revenue from dollars to euros lie behind the U.S. currency's weakness, and a further rise in crude prices could prompt more declines, the billionaire investor George Soros said on Monday.

Soros told delegates to the Jeddah Economic Forum that the dollar's fall should help to lower the U.S current account and trade deficits, but warned that a fall beyond an undisclosed "tipping point" would severely disrupt markets.

The U.S. current account deficit is more than five percent of gross domestic product despite the currency's three-year slide. The dollar, however, has staged a comeback recently, gaining about 3.6 percent against the euro and three percent versus the yen so far this year.

"The oil exporting countries' central banks ... have been switching out of dollars mainly into euros and Russia also plays an important role in this. That is, I think, at the bottom of the current weakness of the dollar," Soros said. [...]

We live in strange times. When fun is equated with destruction and murder. Consider if you will this comment summarising a personal military ethos and directed to us by former US Marine officer Lieutenant General James Mattis...

"It's fun to shoot some people. You go into Afghanistan, you've got guys who slap women around for five years because they don't wear a veil. You know, guys like that ain't got no manhood anyway, so it's a hell of a lot of fun to shoot them."

It was this same Lieutenant General Mattis who dismissed photographic evidence of the slaughter by US-led forces of dozens of people at an Iraqi wedding party last year. Among the dead were 27 members of the extended Rakat family their wedding guests and even the band of musicians hired to play at the ceremony. 11 of the dead were women. 14 were children.

In November last year Operation Phantom obliterated the historic and beautiful city of Falluja in Iraq the home of over 300,000 people before the merciless onslaught by US forces. Hundreds of thousands of children and an equal number of the sick and the elderly have died in Iraq as a direct result of sanctions imposed on Iraq by the United Nations.

There were no weapons of mass destruction so Iraq constituted no threat to countries in the West. Clearly the specific purpose to invading Iraq was to reduce the country to third world status and lessen its influence in the Middle East on behalf of Israel and corporate interests across the globe. World populations conditioned through the media principally to accepting the basic concept of the "enemy" and the "alien" respond in Pavlovian fashion to such words as "evil" and "dictator" and are correspondingly evoked into a war like mode and disposition and as often as not this leads to a manufactured desire for revenge.

The unrelenting remorseless media demonization of the Serbian people and President Slobodan Milosevic serves as exemplar without parallel of this Orwellian consciousness controlling process.

War is an immensely profitable enterprise for a relatively small number of people for whom it is an absolute necessity to control the consciousness or to put it another way annihilate the consciousness of millions of people across the globe.

The most effective way to do this is through sensationalism which is basically a disguised form of sadomasochism. In short you create a desire for and addiction to all that is sensational…. Public crucifixions were certainly sensational as were public beheadings and hangings and gladiatorial contests. Unquestionably all this blood letting paved the way for an acceptance of slaughter unlimited in mass warfare.

Desensitization is the purpose of this exercise. In this blood soaked age the capacity to desensitize the great mass of people everywhere is truly phenomenal.

Drugs and excessive use of alcohol and an addiction to loveless and mechanistic style pornography obliterating any concept of affection or consideration for others is projected as "normal" and all that is debased and meretricious and gratuitously violent is daily fare on television screens across the world .

No longer are we afforded time to reflect as we are ceaselessly besought by the deceivers and would be manipulators of the collective consciousness to "move forward" as we are bade quite sternly to "come to terms with" grief and loss and the leave taking of loved ones and matters over which we may have little or no control but nevertheless require reflection.

Perhaps we should resist this cold blooded imperative to live precisely in the moment as we might perhaps challenge the martial call to "move forward" perceiving it to be in no way concerned with our personal or collective welfare but rather to be a directive to conform to an ethos of a militaristic - even imperialistic - ethos. [...]

Newspapers from around the world on Thursday raised accusation fingers to Israel regarding the assassination of Lebanese Prime Minister Rafic Hariri.

Turkish "Yeni Asya" Newspaper said that Israel is involved, directly or indirectly, in the assassination of Hariri.

"Israel involvement in the crime is a fait accompli, it doesn't need a fortune-teller to inform reality," the Newspaper added in an article published on Thursday.

In Prague, "Bravo" Newspaper said in an analysis that the history of the Middle East tells that Israel was behind all assassination acts which were carried out against Arab figures.

In Paris, L'Humanite Newspaper, for its part, said that Israel could be behind murdering Hariri, stressing that Israel has an interest in the crime, namely to be far away from the resumption of peace process which Syria repeatedly called for.

Meanwhile, Deputy Kuwaiti Premier Mohammad Sharar strongly denied involvement of any Arab party into the killing of Hariri. "Assassinating Hariri is considered an assassination of peace, security and stability in Lebanon," Sharar told the UAE al-Khaleej Newspaper, adding that settling political disputes like this way is a condemned terrorism.

DAMASCUS - President Bashar al-Assad is willing to withdraw Syrian troops from neighbouring Lebanon in line with the Taef accords that ended the civil war there, Arab League chief Amr Mussa said.

"During our meeting, President Assad expressed his firm desire, more than once, to continue implementing the Taef accord and to withdraw from Lebanon in keeping with this agreement," Mussa said after talks with Assad in Damascus.

Syria is facing mounting pressure from the Lebanese opposition and the international community to pull out all its troops from Lebanon, three decades after they were first stationed there shortly after the start of the civil war.

"Taef and the withdrawal are part of Syrian policy. Steps in these matters will be taken shortly," Mussa added. [...]

The 300-kilo car bomb that killed former Lebanese prime minister Rafik Hariri in Beirut last week is being widely blamed on Syria. The Bush administration in the U.S., cheered on by Israel, accused Syria of "terrorism," withdrew its ambassador and all but threatened Damascus with war.

A Syrian role in the crime defies logic, though not possibility. Syrian President Bashar-el-Assad's regime is desperately seeking to avoid providing U.S. President George W. Bush with a pretext for war and has urgently sought improved relations with Washington.

Hariri dealt comfortably with Syria for years. Though opposed to the continued presence of 15,000 Syrian "peacekeeping" troops in Lebanon, Hariri was not a major threat to Damascus. In fact, this consummate but pragmatic Levantine politician played all sides and had enjoyed close political and business links to Syria. Suspicion points at Lebanon's far-rightist, anti-Syrian Maronites, Israel's Mossad or violent Islamists. All have an interest in destabilizing Lebanon and hurting Syria.

Other suspects include rogue elements from one of Syria's many competing security agencies, or business rivals of billionaire Hariri, who was a brilliant but ruthless entrepreneur.

The professional expertise of the bombing strongly suggests a state intelligence agency. Hariri's murder is only the latest in at least a dozen unsolved political assassinations in Lebanon over the past two decades.

Desire to oust Assad

The Beirut bombing occurred as the White House is intensifying efforts to overthrow Syria's government. The U.S., France and the UN Security Council are demanding that Syria pull its troops out of Lebanon. Syrian forces had been invited in to end Lebanon's bloody 15-year civil war.

They remained and made sure pro-Syrian politicians ran Lebanon. Damascus refuses to pull out until Israel withdraws its troops occupying the Golan Heights and West Bank.

Syria has never entirely accepted Lebanese independence. French colonialists created Lebanon out of historical Syria to create a Maronite Christian-dominated enclave.

Washington has totally adopted Israel's view that Syria is a dangerous threat and a supporter of terrorists -- meaning Palestinian resistance groups Hamas and Islamic Jihad and Lebanon's welfare and resistance organization Hezbollah.

Israel is determined to get revenge on Hezbollah, which defeated its attempts to turn Lebanon into an Israeli protectorate and drove Israeli occupation forces from Lebanon -- a small but vicious war this writer saw firsthand.

Israeli PM Ariel Sharon's rightist Likud Party may be renewing previous efforts to bring Lebanon back into Israel's sphere of influence. For the past quarter century, Syria and Israel have waged a dirty war of bombings and assassinations to dominate Lebanon and Jordan.

The White House is hoping its threats and economic siege of Syria will provoke the overthrow of the Assad regime. This strategy might work.

A fragile mosaic

Like Iraq, Syria is a fragile ethnic/religious mosaic held together by an iron-fisted central government. Bashar al-Assad inherited his regime in 2000 from his father, Hafiz, a wily, ruthless general who had ruled Syria since 1970. The younger Assad is trying to modernize, liberalize and reform Syria but faces heavy resistance from the Baath party's old guard, which fears too much change, a la Gorbachev, will produce revolution.

The Assads belonged to a secretive religious sect, the Alawi, considered heretics by Syria's majority Sunni Muslims. Alawi make up only 10% of Syria's 17 million people. But their dominance of the armed forces and intelligence services allowed Assad Sr. to rule Syria for three decades. A similar process occurred in Iraq, where minority Sunnis held power by controlling the army and security forces.

The elder Assad crushed numerous attempts by the Sunni majority and Islamists to overthrow his regime. I visited the city of Hama just after the Assad regime killed 10,000 rebelling members of the Muslim Brotherhood.

Many Syrians would like to be rid of the Assad regime and U.S.-imposed economic sanctions but fear sudden change will produce chaos or civil war.

Israel would welcome Syria's implosion, as it did Iraq's. Hence current Israeli efforts to press the White House and Congress to overthrow Syria's unloved, isolated regime, whose only ally is Iran -- itself a leading target on America's Mideast hit list.

To any intelligence analyst, it should be obvious that the United States has already embarked on a psychological warfare (psywar) campaign to keep Iran on tenterhooks in the hope of thereby breaking its will to resist US pressure to agree to the dismantling of its uranium enrichment capability.

It is in this context that one has to view the rhetoric of "no option excluded" coming at regular intervals from President George W Bush, Secretary of State Condoleezza Rice and other US leaders, orchestrated leaks to the media of Pakistan's cooperation with the US in a possible covert action against Iran's military nuclear capability, of increasing Israeli contacts with Pakistan, of US drones (unmanned surveillance planes) flying unhindered over Iran's nuclear establishments from bases in Iraq, and the latest reports of a mysterious blast near the southern port city of Dailam in Iran on Wednesday.

Iranian leaders would be making a serious miscalculation - as Saddam Hussein of Iraq did - if they underestimated the determination of not only the US, but also of Israel, to see that Iran does not acquire a capability for the production of nuclear weapons.

It would be a serious mistake on the part of Iranian leaders and policymakers to think that the disastrous consequences of the US-led military intervention in Iraq and pressure from the rest of the world - with even the United Kingdom reportedly hesitant to go whole hog with the United States in the case of Iran, as it did in the case of Iraq - would deter any US military or paramilitary action against Iran, despite undoubted difficulties.

In its efforts to prevent Iran from acquiring any capability that might bring a nuclear weapon within its reach, the US has three options. The first is military - an open military intervention, as in Iraq, to bring about regime change and the dismantling of Iran's nuclear capability. The Iraqi experience and the continuing instability there, two years after the US occupation, ought to discourage such an adventurist course of action.

The US underestimation of the sense of patriotism and national pride of the Iraqis is largely responsible for the mess it has created for itself in Iraq. The Iranians have even a much stronger sense of patriotism and national pride than the Iraqis, and the US would be landing in another mess if it invaded Iran.

The second option is to do an Osirak in Iran - destroy its nuclear establishments through clandestine action, either from the air or the ground or both, as Israel did to Iraq's French-aided Osirak reactor in the early 1980s.

Both the US and Israel have the capability to do so, acting in tandem or independently of each other, but a repeat of Osirak in Iran would be beset with serious difficulties, the likes of which Israel did not face in Iraq. Osirak was still under construction when Israel attacked it and it had not yet been commissioned. Hence Israel did not have to worry about collateral damage to civilians and the environment in the area due to possible radioactive leakages or other hazards. Moreover, the French engineers working on the construction quietly collaborated with the Israelis by remaining absent from the construction site at the time of the bombing. This helped minimize, if not avoid, French casualties.

In Iran, the US and Israel face two types of nuclear establishments - those already constructed and possibly already secretly working - and those still under construction and yet to be commissioned. In the first category would come the nuclear enrichment facility at Natanz and possibly one other place. Under the second category would come the nuclear power stations at Bushehr under construction by the Russians, despite US pressure to stop.

A clandestine US and/or Israeli strike on the construction sites at Bushehr should be feasible without causing much collateral damage to Iranian civilians and the environment. But how about the Russians employed for the construction? Will they cooperate by remaining away from the site at the time of the raid?

A strike against Bushehr, even if successful, would not put an end to US concerns. The real source of concern at present ought to be Iran's uranium-enrichment capabilities. They would have the first priority for both the US and Israel. Here, the dangers of incalculable collateral damage to civilians and the environment could be high. This ought to act as a deterrent, but if the concerns of the US and Israel cross the limits of tolerance, they may not hesitate to organize a raid, even at the risk of serious collateral damage.

The third option is psywar, utilized with the aim of breaking the Iranian will so that the other two options become unnecessary. This option has no unacceptable risks, but its ability to produce the expected results is uncertain.

The US has already embarked on this option. The psywar is being waged at two levels - the political and the paramilitary. The political psywar, which is democracy-centric, is directed at the Iranian people and is being waged through Iranian dissidents in the US and elsewhere. It aims to keep alive and aggravate the divide between the reformists and the fundamentalist clerics and the liberals and the conservatives in Iranian civil society. It also seeks to exploit the already existing pockets of alienation inside Iran - and create more. The flow of US funds and sophisticated means of propaganda mounted from California and Iraq play an important role in this.

The paramilitary (covert) psywar, which is nuclear-centric, seeks to convey a message not only to Tehran, but also to Moscow, about the consequences of Iran pressing ahead on the nuclear path in disregard of the concerns of the US, other Western countries and Israel. This psywar is being waged from bases in Iraq and Pakistan. Its purpose is to create fear in the minds of Tehran and Moscow about the inevitability of US paramilitary action against Iran's nuclear establishments if they do not see reason and give up their present obduracy. The actions mounted by the US also seek to demonstrate its capability for paramilitary action, if it decides to act.

It is in this context that one has to view the reported mysterious blast at Dailam, which is in Bushehr province. The location of the blast is about 150 kilometers from the site where the Russians are constructing the nuclear-power stations.

Confusion in Tehran over the incident, which was reportedly spectacular without causing any human casualties, is evident from the contradictory statements emanating from Iran on the cause of the blast.

The Associated Press news agency quoted an Iranian Interior Ministry spokesman, Jahanbakhsh Khanjani, as saying, "An airplane flew over Dailam today. Minutes later, there was an explosion. But we have no reason to say it's a hostile attack. There is a big possibility that it was a friendly fire by mistake."

Iran's state TV al-Alam, which was the first to break the story, said the explosion was possibly caused by a rocket from an aircraft. Subsequently, it changed its version and said the blast might have been the result of an aircraft accidentally dropping its fuel tank.

Officials of Bushehr province, however, said the explosion was connected to "geophysical exploration" in the region, in connection with the construction of a dam.

A spokesperson of Iran's Supreme National Security Council said there was no incident and that people were stirring trouble with such reports. She reportedly said the council had declared that reports of a blast near the nuclear plant were just part of an ongoing campaign of psychological warfare against Iran.

Officials at the Russian Embassy in Tehran and at the Russian Ministry of Atomic Energy in Moscow - which is overseeing construction at the Bushehr nuclear plant - reportedly told CNN in a phone interview that there had been no explosion at the plant area itself.

Given the normal lack of transparency in Tehran, one may never know what really happened, but it is quite possible that the explosion was the result of a US air-mounted paramilitary (covert) operation meant to demonstrate the United States' ability to carry out such an operation without being detected and prevented by the Iranians, and at the same time convey a message to Tehran and Moscow of the seriousness of US concerns over the nuclear issue and its determination to put an end to Iran's clandestine nuclear plans.

By carrying out the strike in the same province in which the Russians are constructing the nuclear power stations, but away from the construction site, the Americans could have sought to convey their message without creating any international controversy due to human casualties and other damage.

B Raman is additional secretary (retired), cabinet secretariat, government of India, and currently director, Institute for Topical Studies, Chennai, and distinguished fellow and convener, Observer Research Foundation, Chennai Chapter.

President George W Bush set strict limits on the EU's global ambitions last night, saying that there was no need for the Franco-German goal of forming an alternative superpower.

In an interview with The Daily Telegraph, his first with a British newspaper since his re-election last year, he pointedly rejected a call by Chancellor Gerhard Schröder for Nato to be overhauled. Mr Schröder's words have been widely interpreted as an attempt to give the EU's fledgling foreign and military bodies more muscle.

"I disagree," Mr Bush said. "I think Nato is vital. Nato is a very important relationship as far as the United States is concerned. It is one that has worked in the past and will work in the future just so long as there is that strong commitment to Nato."

Echoing Tony Blair's repeated calls for Europe and America to work together, Mr Bush had emollient words for Europe's leaders before his visit next week.

He implicitly acknowledged that the time for the unilateralism of his first term was over. His message next week would be that America needed Europe on its side and could not "spread freedom" alone. [...]

Moscow - Russian special forces launched an assault on a building in the Caucasus on Sunday, killing suspected Islamic rebels with poison gas, Russian news agencies reported.

The situation was confused on Sunday several hours after special forces opened up with automatic fire on the first storey of the house in Nalchik, capital of the Kabardino-Balkaria republic, which borders war-torn Chechnya.

According to Ria Novosti, the forces used a "special gas" and continued to fire at the building to distract the men holed up inside.

They were waiting for the gas to disperse before inspecting the whole building, Interfax said, adding that human remains had been found in the first floor apartment.

It was not clear how many rebels had been in the building. News agencies put the number at between three and five.

Police, special forces and armoured troop carriers had been ranged against the building since Saturday morning and authorities announced they were negotiating with the rebels to give themselves up.

The public prosecutor for Kabardino-Balkaria said the people inside were "members of illegal gangs who had taken part in various terrorist acts and military operations in Chechnya", Ria Novosti said.

On Saturday regional authorities said they were the last members of a small Islamic group calling itself Jammaat Yarmuk, decimated in a similar assault by Russian special forces in Nalchik in January, when seven members of the group died.

CARACAS : Venezuelan President Hugo Chavez threatened to suspend oil exports to the United States if someone tries to assassinate him, adding that US President George W. Bush would be to blame.

"If they kill me, there will be a really guilty party on this planet whose name is the president of the United States, George Bush," Chavez said on his weekly radio program, "Hello, Mr. President."

"If, by the hand of the devil, those perverse plans succeed ... forget about Venezuelan oil, Mr. Bush," he said.

Chavez said he was convinced that Washington was "sketching out the assassination plans" before his Bolivarian Revolution advances in Venezuela and Latin America.

Chavez revealed a week ago that Cuban President Fidel Castro had warned him of a US assassination plot.

"Now, I am going to say it. Neither Fidel Castro nor I talk nonsense.

"If something happens to me, I blame the president of the United States," he said.

"I will not hide. I am going to be in the streets with you. I entrust myself to God, but I know that I have been condemned to die," Chavez said.

"Each second of my life I will spend in the struggle and God's will be done," he said.

Castro said on February 12: "If Chavez is assassinated, the blame will fall on Bush.

"I say that as someone who has survived hundreds of the empire's (assassination) plans," he said.

Chavez has also recently accused the United States of being involved in an April 2002 coup, which removed him from power for less than two days.

Washington has accused Chavez of being undemocratic especially when it comes to the Venezuelan opposition, and has more recently criticized arms purchases from Russia and Brazil.

Venezuela is the only Latin American member of the Organization of the Petroleum Producing Countries, and sells about 1.5 million barrels daily to the United States, nearly as much as Saudi Arabia.

US Secretary of State Condoleezza Rice recently called Chavez "a negative force" in Latin America, and the State Department backed Colombia in a recent dispute between the Caribbean neighbors over the arrest of a Colombian rebel in Caracas by Colombian officials without Venezuela's knowledge or consent.

"The United States knows that I have a 70 percent (approval rating)," Chavez said. "And they know that I am unbeatable in the 2006 elections and that they cannot isolate us from our brother countries, despite their blackmail attempts."

Off goes former Father Paul Shanley to state prison in Massachusetts for twelve to fifteen years, convicted of "digitally raping" and otherwise sexually abusing Paul Busa two decades ago. Shanley's now 74; the earliest he can hope for parole is when he's 82, at which point the DA could determine that he is still, though frail, "a sexually dangerous person" and should be confined for whatever years remain. A DA in Massachusetts exercised just that option in the case of another ex-priest, James Porter, who was released last year after pleading guilty in 1993 to molesting twenty-eight children. At the time of his death in February at the age of 70, Porter was in civil confinement, with the state seeking to keep him behind bars indefinitely.

So Shanley must know that most likely he will never see the light of day, unless through a barred window. He has more pressing concerns, namely the distinct possibility that he will be murdered in prison, a hope expressed by more than one person present at his sentencing, where Christian compassion, always rationed in Massachusetts, was in short supply. "I want him to die in prison, whether it's of natural causes or otherwise. However he dies, I hope it's slow and painful," declared Shanley's accuser, Paul Busa, a 27-year-old firefighter, in a written statement read in court.

The menacing words "or otherwise" were no doubt intended to evoke the fate of John Geoghan, a priest sent to a Massachusetts prison in 2002 for fondling a 10-year-old. Although Geoghan was being kept in "protective custody," he was strangled to death by a man serving a life term for killing a gay man. There have been allegations that prison guards were complicit in his murder. Paul Busa's father, Richard, is a corrections officer, and other relatives, including Paul's wife, are in Massachusetts law enforcement.

In his written statement Busa said that Shanley "is a founding member of NAMBLA and openly advocated sex between men and little boys." It's this supposed distinction, as the man who created the North American Man Boy Love Association, that has earned Shanley his throne in the Ninth Circle of the damned. It was one of the credentials in his résumé as presented in a two-and-a-half-hour PowerPoint presentation to the press in April 2002 by Roderick MacLeish Jr., the personal-injury lawyer representing Busa. At that presentation MacLeish released Shanley's ample diocesan file to the media, which hurriedly repeated MacLeish's allegations without pausing to scrutinize the file.

Had they done so, they would have found nothing to buttress the claims that Shanley founded NAMBLA, or was ever a member, or had ever advocated sex between men and little boys, or had a thirty-year record of child abuse complaints made against him or a history of being moved from parish to parish. Yet all these allegations have become the common currency of Shanley's biography, and if guards usher a murderer into his cell, the killer will probably have the NAMBLA charge at the top of his mind. Shanley's defense counsel, Frank Mondano, has said that during jury selection every potential juror was aware of the Shanley scandal, and what they most commonly "knew" was that Shanley was somehow involved with NAMBLA.

When my colleague JoAnn Wypijewski began to report on the Shanley case in 2002, the first thing she did was read the 1,600-page diocesan file that MacLeish had brandished. It became clear to JoAnn that in a case that had consumed the press, most conspicuously the Boston Globe, which ran almost daily stories on the priest scandal for years, she seems to have been the only reporter to have taken the trouble to look at the church dossier.

What she found in the documents were many, many pages of Shanley's fervent defense of homosexuality as a normal human variation and the uproar these arguments provoked in the Church. (Shanley, like many in his generation, found support for his assertions in Alfred Kinsey's 1950s sex surveys.) In terms of sexual abuse, the Church file has one complaint from the 1960s, which Shanley denied and his superior, rightly or wrongly, determined to be baseless; then nothing until the early 1990s, when a few accusers imputed various abuses to the priest dating back to the 1960s or '70s.

But nowhere was there any support for the claim that Shanley was a founder of NAMBLA or had attended a NAMBLA meeting; JoAnn, despite many discoveries about Shanley's active sex life as a priest, found no external evidence to back the charge. For her fascinating report on Shanley, see the September/October 2004 issue of Legal Affairs and jw01292005.html.

What landed Shanley in prison was not anything in the Church's file but the uncorroborated "recovered memories" of one man, Paul Busa. This case is a throwback to the early 1990s and before, when people were put behind bars for lifetimes on the basis of memories elicited by leading questions of psychotherapists. Ultimately, after years of patient effort by a few journalists, psychoanalysts, psychological researchers and advocates for justice, "recovered memory" as a tool of the latter-day Inquisition fell into well-deserved disrepute. In the state that gave us Salem in the seventeenth century and the Amiraults (all wrongly sent to prison on charges brought by Middlesex county DA Martha Coakley) in the twentieth, Shanley's case has reintroduced recovered memory to the courtrooms of the twenty-first.

In Shanley's trial, prosecution witnesses would not confirm Busa's claim that he was regularly taken from religious-instruction classes by Shanley. Nor would they confirm that they had ever seen the priest alone with Busa, or had seen anything untoward in the years 1983-89, during which Busa claims abuse. These claims were based on memories that became active in 2002, following Busa's conversation with his girlfriend about the nearly identical recovered memories of his friend Gregory Ford. Ford was dropped by the prosecution in the same case, as were two others, their stories apparently deemed by the DA too vexed for courtroom use.

No facts relative to the charges intruded into the courtroom; only emotion. Superior Court Judge Stephen Neel should have dismissed the charges, as requested by the defense. In the atmosphere of Massachusetts it would have taken courage to do that, and truly extraordinary courage for anyone on the jury (which included a therapist) to have insisted that memories are not evidence, and that there was far more than reasonable doubt in this case.

WASHINGTON - Intent on securing the vulnerable Arizona border from illegal immigrant crossings, U.S. officials are bracing for what they call a potential new threat this spring: the Minutemen. Nearly 500 volunteers have already joined the Minuteman Project, anointing themselves civilian border patrol agents determined to stop the immigration flow that routinely, and easily, seeps past federal authorities.

They plan to patrol a 40-mile stretch of the southeast Arizona border throughout April when the tide of immigrants crossing the U.S.-Mexico border peaks.

"I felt the only way to get something done was to do it yourself," said Jim Gilchrist, a retired accountant and decorated Vietnam War veteran who is helping recruit Minutemen across the country.

"We've been repeatedly accused of being people who are taking the law into our own hands," said Gilchrist, 56, of Aliso Viejo, Calif. "That is an outright bogus statement. We are going down there to assist law enforcement." [...]

Beijing - Two men killed four children and seriously wounded at least eight others on Sunday at an indoor skating rink in China's northwest region of Xinjiang, before one of them committed suicide, state media said.

The two unidentified men rushed into the skating rink on the third floor of a commercial building, which houses markets on the lower floors, and killed four children, said Xinhua news agency, without saying how they died.

One of the assailants then jumped out of the building and killed himself, while the other was arrested by police.

Police were trying to determine a motive for the attack.

China has been dogged by a series of attacks on children in the past year.

In December a man forced his way into a primary school in northeast Jilin province and slashed 12 young children before cutting his own throat.

In November a man stabbed eight teenagers to death as they slept and injured four others after breaking into a school dormitory in central Henan province.

Other recent attacks include a man with a knife and homemade bombs targeting 28 children in a kindergarten in east China's Suzhou city. No one was killed.

The spate of violence against children prompted the government to issue a nationwide plan aimed at improving security in schools and kindergartens.

Some experts have blamed the increase in violent incidents in China, including growing cases of mass murder, on increasing economic disparity and loosening social controls.

LOOGOOTEE, Ind. -- A man burst into a trailer home Sunday and shot to death his two children, his estranged wife and her boyfriend before killing himself along a road in southern Indiana, police said.

Arthur Lee Smith, 36, entered the home his estranged wife shared with her boyfriend and shot both of them in the head. Smith then entered a bedroom and shot his and his wife's two children, ages 4 and 5.

Minutes after a neighbor reported the gunfire to police, an officer confronted Smith, who was walking along a roadway, telling him to stop.

"He just kept on walking and then pulled out a 9 mm Luger pistol, put it to his head and killed himself,'' state police Sgt. Todd Ringle said.

HOUSTON A 52-year-old psychiatric patient who had a heart ailment died after Harris County constables shocked him with a stun gun.

Chief Deputy J-C Mosier says the two constables went to the man's mother's home yesterday to serve a mental health commitment warrant.

Mosier says the deputies used the Taser after the man resisted their efforts to take him away.

The man continued to struggle with the deputies, but he then started having trouble breathing.

He was taken by ambulance to a hospital -- where he later died.

Mosier says the deputies knew the man had health problems but were unaware of his heart ailment.

Tasers temporarily paralyze people by using two barbed darts to deliver a 50-thousand-volt jolt.

Colombo - Sri Lanka's military launched an investigation into the poisoning of 17 soldiers on Sunday amid allegations they had been forced to eat plastic explosives during a training exercise.

The 17 soldiers undergoing commando training were admitted to a hospital early on Sunday, a military official here said adding that one of them was in a critical condition.

An initial military report suggested the men may have handled the explosives before eating and ingested them accidentally. But subsequently military police were called in to probe allegations that they had been forced to eat highly malleable C-4 type plastic explosives.

An instructor of the soldiers had fled the base in northern Sri Lanka following the incident, a military source said.

Woody Creek - Hunter S. Thompson died of a self-inflicted gunshot wound at his home in Woody Creek on Sunday night. He was 67.

Regarded as one of the most legendary writers of the 20th century, Thompson is best known for the 1972 classic "Fear and Loathing in Las Vegas." He is also credited with pioneering gonzo journalism - a style of writing that breaks tradition rules of news reporting and is purposefully slanted.

Pitkin County Sheriff Bob Braudis, who is a close personal friend of Thompson, confirmed the death. His son, Juan, found him Sunday evening.

"On Feb. 20, Dr. Hunter S. Thompson took his life with a gunshot to the head at his fortified compound in Woody Creek, Colorado. The family will shortly provide more information about memorial service and media contacts. Hunter prized his privacy and we ask that his friends and admirers respect that privacy as well as that of his family," Juan Thompson said in a statement released to the Aspen Daily News.

"Details and interviews may be forthcoming when the family has had the time to recover from the trauma of the tragedy," Braudis said in an interview from Owl Farm, the rural Woody Creek home he moved into in the 1960s.

Thompson grew up in Kentucky. He is married to Anita Thompson, who grew up in Fort Collins. His son Juan lives and works in Denver. His grandson is William Thompson.

Thompson's books include "Hell's Angels," "The Proud Highway" and his most recent effort, "Hey Rube: Blood Sport, the Bush Doctrine, and The Downward Spiral of Dumbness."

PRINCE GEORGE, B.C. – An elementary school in Prince George is closed Friday for intensive cleaning, following an outbreak of Norovirus earlier this week.

More than 80 students and several teachers at Spruceland Elementary were away on Wednesday and Thursday with symptoms of nausea, vomiting, and diarrhea. [...]

MELBOURNE, Australia : Hundreds of people were evacuated from an airport in Melbourne in Australia Monday after a mystery illness struck passengers and staff, sending nearly 30 people to hospital, officials said.

Paramedics, firefighters and hazardous materials crews in full protective clothing rushed to the airport after staff in a domestic terminal began suffering nausea and vomiting, dizziness, headaches and respiratory problems, emergency workers said.

Hundreds of staff and passengers were evacuated from the terminal while the emergency crews unsuccessfully sought the source of toxic fumes believed responsible for the symptoms, ambulance services spokesman James Howe said.

Within five hours of the first reports of a person feeling unwell, 29 people had been rushed from the terminal to hospital and another eight were being treated at the airport, he said.

Paramedics set up a field hospital outside the airport and some two dozen ambulances were on scene to ferry the sick to hospital. [...]

One of the world's top researchers investigating outbreaks of bird flu in South-East Asia says she is extremely concerned by the scientific evidence emerging about the virus.

Nancy Cox is the head of the flu division of the United States Centre for Disease Control.

She says research now shows that bird flu is capable of mutating into a form that can spread from humans to humans.

"We found that for the 2003 virus, the virus had actually changed its receptive binding or its ability to bind to the receptors that are in human cells," she said.

"This shows that the virus can actually change in such a way, or has actually changed in the past in such a way, that might make it more easily transmitted from person to person."

She also says the recent spurt of human infections increases the likelihood that a mutant strain would arise that could spread between humans

"It's impossible to predict what the consequences would be. We might have a relatively mild pandemic like we did in 1968," Dr Cox said.

"Alternatively, we could have a relatively severe pandemic as occurred in 1918 or perhaps even worse."

The World Health Organisation says there have been 55 confirmed cases of bird flu in humans and 42 deaths.

KHABAROVSK, - A powerful cyclone hitting southern Khabarovsk region, has grounded planes and paralyzed the work of intercity and commuter buses, the regional meteorological service reported on Sunday.

All planes from Moscow and other cities have been diverted to Blagoveshchensk, Vladivostok and other airports as they failed to land at Khabarovsk. Flights from Khabarovsk have also been delayed.

All bus routes to Birobidzhan, Bikin and other cities have been cancelled because of snowdrifts on highways. Even commuter routes have been cancelled.

According to the meteorological service, heavy snowfalls and gale-force winds will persist in the southern part of the Khabarovsk region for at least another 24 hours.

DHAKA : Eighty-one people are confirmed dead and at least 100 more are missing after a ferry capsized when it was hit by a cyclone overnight near the Bangladesh capital Dhaka, police said.

Thousands of relatives, many distraught, gathered near the scene of the tragedy to await news of missing family members.

Some survivors contradicted the official figure for the missing, saying up to 500 people could have been on board.

Fire service and police divers found 44 bodies Sunday, bringing the total number of corpses recovered to 81 after the accident in the Buriganga river on the outskirts of Dhaka, police officer-in-charge Mustafa Ahmed told AFP.

"Our father, two cousins and three other relatives are dead, Five more relatives are missing," said two brothers, both in tears, who gave their names as Naser and Mannan. The party of 13 people had been travelling to a wedding, they said.

Delwar Husain, 50, told AFP he saved his life by jumping from the deck of the boat, although his 20-year-old daughter Beauty died.

"It was very crowded. There were more than 400 on board, I think. There were heavy winds and the ferry lurched and then I think it was hit by a trawler.

"It was chaos. I lost my daughter. Then I jumped and swam to the shore," he said.

Another survivor, Shahidul Islam, 45, said he had identified the body of his brother-in-law. "I think there were between 450 and 500 passengers on the launch," he said.

"The wind came out of nowhere. I tried to hold my brother-in-law's hand as I jumped but it was dark and everything was confused and he got lost."

Police said they believed about 200 people were on board the boat, the MV Maharaj.

The accident happened at Pagla Bazar when the ferry was caught in a pre-monsoon cyclone while sailing from the capital to the central town of Chandpur.

"Some of the passengers who survived said that it capsized immediately after the cyclone hit, trapping them inside," said traffic inspector Mohiuddin, from the Dhaka Ferry Terminal.

The vessel was registered as having 167 people on board, he said, but the true number could be higher as ferries in Bangladesh are often overcrowded. [...]

SRINAGAR, India : At least 41 people have been killed in Indian Kashmir after the heaviest snowfall in two decades brought life in the region to a near-halt, officials and witnesses said.

Sixteen bodies were recovered from two villages hit by an avalanche near a mountain tunnel about 100 kilometres (62 miles) south of Srinagar, Kashmir's summer capital, an army spokesman said.

About 40 people were missing from the villages and army teams with sniffer dogs were searching for survivors, Lieutenant Colonel V.K. Batra said.

Earlier in the day, 11 bodies were recovered after an avalanche hit Loren village in southern Poonch district, police said, while 12 deaths were reported overnight from similar snow-related accidents in Doda, Udhampur, Srinagar and Budgam district.

Two people were killed in a house collapse in Dras district.
This takes the death toll in two weeks of heavy snow to 69, including 19 soldiers. [...]

LOS ANGELES -- A Pacific storm that came ashore Saturday produced tornadoes near San Diego as it made its way inland.

One twister struck at about 9:15 a.m. in the town of Fallbrook. It gathered momentum as it headed northeast, National Weather Service Meteorologist Philip Gonsalves said.

An hour later, a tornado was reported near the Riverside County line. Buildings were damaged and powerlines were knocked down, Gonsalves said.

A tornado was also reported in Temecula, where there were reports of animals injured, Gonsalves said.

Almost 400 lost power due to that tornando, San Diego Gas & Electric spokesperson Anne Silva said.

Power had been restored to all but 130 customers by 1:30 p.m. she said.

More rain is on its way to Southern California and the San Diego area, putting homeowners in mudslide-prone areas on high alert.

PORT BLAIR, India : The tsunami-lashed Andaman and Nicobar Islands have suffered 9,500 aftershocks since an undersea earthquake December 26 sent giant waves crashing into the emerald green archipelago, India's top geologist said.

But K.N. Mathur, director-general of the Geological Survey of India, said the tremors were incapable of triggering tsunamis similar to those that claimed at least 288,800 lives in 11 countries in Asia and Africa.

"There's still large-scale panic among the islanders of Andaman and Nicobar and we want to assure them there's no cause for alarm," the geologist told AFP on a visit to the Andaman's tsunami-ravaged capital of Port Blair that wound up Friday.

Authorities have reported an exodus of hundreds of islanders fleeing this tropical paradise for mainland India, petrified of the aftershocks.

"Since January 6 when my department installed five seismographs in different places of the Andamans, we recorded 9,500 aftershocks," the government scientist said.

The chain of Indian-administered islands spans the seas from Myanmar to Indonesia.

"This is a normal pattern and should not be mistaken" as a signal of a new earthquake, Mathur said. [...]