For the first time, the Signs Team's most popular and discerning essays have been compiled into book form and thematically organized.

These books contain hard hitting exposés into human nature, propaganda, psyop activities and insights into the world events that shape our future and our understanding of the world.

The six new books, available now at our bookstore, are entitled:

• 911 Conspiracy
• The Human Condition
• The Media
• Religion
• The Work
• U.S. Freedom

Read them today - before the book burning starts!

NEW ORLEANS, Louisiana -- Parts of New Orleans are flooded with up to six feet of water Monday after some of the pumps that protect the low-lying city failed under the onslaught from Hurricane Katrina, Mayor Ray Nagin said.

Nagin said the Lower 9th Ward of New Orleans, on the east side of the city, was under five to six feet of rising water after three pumps failed.

WGNO reporter Susan Roesgen, who is with the mayor at the Hyatt hotel, said New Orleans police had received more than 100 calls about people in the area trapped on their roofs.

The National Weather Service reported the Industrial Canal, in the eastern part of the city, had breached a levee and three to eight feet of water could be expected.

The weather service reported "total structural failure" in some parts of metropolitan New Orleans, where Katrina brought wind gusts of 120 mph. While it offered no details, it said it had received "many reports."

Katrina came ashore Monday morning in southeastern Louisiana as a Category 4 storm, with winds topping 140 mph.

At 11 a.m. ET, the National Weather Service said Katrina had degraded to a Category 3 storm with maximum sustained winds near 125 mph.

New Orleans was prepared for a catastrophic direct hit from the powerful storm. About a million people fled the area, and about 10,000 people who couldn't leave hunkered in the mammoth Louisiana Superdome.

The National Hurricane Center said that the western eye wall was passing over the city at about 10 a.m. ET. (Watch video update on Katrina's path)

While the counterclockwise spin of a hurricane usually leaves the worst damage on its eastern edge, CNN meteorologist Chad Myers cautioned that "there's not really an easy side of a Category 4 storm" on the Saffir-Simpson scale.

CNN's John Zarella said that the wind was howling through the buildings in downtown New Orleans, ripping off chunks of debris and causing whiteout conditions.

He said that water was rushing down the street and had risen up to the wheel wells of parked cars.

Earlier, reporter Ed Reams from affiliate WDSU told CNN that Katrina ripped away a large section of the Superdome's roof. (See video of conditions within the darkened Superdome)

"I can see daylight straight up from inside the Superdome," Reams reported.

National Guard troops moved people to the other side of the dome. Others were moving beneath the concrete-reinforced terrace level.

About 70 percent of New Orleans is below sea level and is protected from the Mississippi River by a series of levees.

NHC deputy director Ed Rappaport told CNN that New Orleans could expect a storm surge of 15 to 20 feet.

That surge wouldn't top New Orleans' levees, but CNN's Myers noted that "there may be a 20-foot surge, but there may be a 20-foot wave on top of that."

Louisiana Gov. Kathleen Blanco said it was too soon to feel any sense of relief.

"We don't know yet," she said. "We still have a long way to go throughout this day. We are watching. We are worried of course."

At 11 a.m. ET, the storm was centered about 35 miles east-northeast of New Orleans and 45 miles west-southwest of Biloxi, Mississippi. Hurricane force winds extended about 125 miles from the storm's center.

The storm was moving north at 15 mph.

The storm's eastern eye wall was approaching Biloxi and Gulfport, Mississippi.

Authorities in Gulfport told CNN that 10 feet of water cover downtown streets.

"There is intense damage," said CNN's Gary Tuchman from Gulfport. "We are watching the dismantling of a beautiful town."

"We are watching these building deteriorate and break down before our eyes," he said. "Because the water is so deep, boats are floating up the street. There is extensive damage here. This is essentially right now like hell on earth."

In Biloxi, CNN meteorologist Rob Marciano reported that wind gusts topping 100 mph were starting to pull the roofs off of nearby buildings. (Watch video report from Biloxi, Mississippi)

Hurricane warnings are posted from Morgan City, Louisiana, eastward to the Alabama-Florida state line, including New Orleans and Lake Pontchartrain. This means winds of at least 74 mph are expected in the warning area within the next 24 hours.

A tropical storm warning is in effect from the Alabama-Florida state line eastward to Destin, Florida, and from west of Morgan City to Intracoastal City, Louisiana. A tropical storm warning is also in effect from Intracoastal City, Louisiana, west to Cameron, Louisiana, and from Destin, Florida, eastward to Indian Pass, Florida.

A tropical storm warning means tropical storm conditions, including winds of at least 39 mph, are expected within 24 hours. [...]

NEW ORLEANS, Louisiana - Hurricane Katrina claimed its first victims in Louisiana as it slammed into barrier islands while dumping torrential rain on a wide swath of the US Gulf of Mexico coast and threatened more death and massive destruction.

The hurricane made its first landfall as its northern eye crossed the coast near Grand Isle, one of Louisiana's barrier islands, at about 1000 GMT on Monday, said Martin Nelson, an official with the
National Hurricane Center.

"We may have a second landfall later on," Nelson said in a brief telephone interview.

Although slightly weaker than on Sunday, the monster storm has already forced hundreds of thousands of residents from New Orleans to Biloxi, Mississippi, to flee and seek refuge on higher ground. [...]

US President George W. Bush declared a state of emergency that clears the way for federal aid, and urged people to get out of the hurricane's path.

"We cannot stress enough the dangers this hurricane poses to Gulf Coast communities. I ask citizens to put their safety and the safety of their families first by moving to safe ground," Bush said from his Texas ranch. [...]

Authorities also ordered evacuations in neighboring Mississippi, which is also expected to be slammed by the monster storm.

Since Katrina raged dangerously close to offshore oil platforms, most of which have been evacuated, oil prices hit new record highs after crossing 70 dollars a barrel in Asia Monday and were expected to go higher.

The deadly storm wrought havoc in Miami and other areas of south Florida last week, killing seven people, uprooting trees and flooding entire neighborhoods.

About half a million people still had no electricity on Sunday.

Katrina is the 11th named Atlantic storm this year and among the most powerful Atlantic hurricanes on record. Records going back to 1851 show that only three category-five hurricanes have hit the United States in more than 150 years.

Of three category-five storms noted in history, Hurricane Andrew killed more than two dozen people when it slammed into south Florida in 1992, while Camille caused more than 250 deaths in Mississippi in 1969, and "Labor Day" killed about 600 people in the Florida Keys in 1935.

NEW ORLEANS - Hurricane Katrina turned slightly to the east before slamming ashore early Monday with 145-mph winds, providing some hope that the worst of the storm's wrath might not be directed at this vulnerable, below-sea-level city.

Katrina, which weakened slightly overnight to a Category 4 storm, turned slightly eastward before hitting land, which would put the western eyewall - the weaker side of the strongest winds - over New Orleans.

But National Hurricane Center Director Max Mayfield warned that New Orleans would be pounded throughout the day Monday and that Katrina's potential 20-foot storm surge was still more than capable of swamping the city.

Katrina, which a day before had grown to a 175-mph, Category 5 behemoth, made landfall about 6:10 a.m. CDT east of Grand Isle in the bayou town of Buras.

The storm hammered the Gulf Coast with huge waves and tree-bending winds. Exploding transformers lit up the predawn sky in Mobile, Ala., while tree limbs littered roads and a blinding rain whipped up sand on the deserted beach of Gulfport, Miss.

Katrina's fury also was felt at the Louisiana Superdome, normally home of professional football's Saints, which became the shelter of last resort for about 9,000 of the area's poor, homeless and frail.

Electrical power at the Superdome failed at 5:02 a.m., triggering groans from the crowd. Emergency generators kicked in, but the backup power runs only reduced lighting and cannot run the air conditioning.

About 370,000 customers in southeast Louisiana were estimated to be without power, said Chenel Lagarde, spokesman for Entergy Corp., the main energy power company in the region. [...]

Mayor Ray Nagin said he believed 80 percent of the city's 480,000 residents had heeded an unprecedented mandatory evacuation as Katrina threatened to become the most powerful storm ever to slam the city.

"It's capable of causing catastrophic damage," Mayfield said. "Even well-built structures will have tremendous damage. Of course, what we're really worried about is the loss of lives.

"New Orleans may never be the same."

Crude oil futures spiked to more than $70 a barrel in Singapore for the first time Monday as Katrina targeted an area crucial to the country's energy infrastructure, but the price had slipped back to $68.95 by midday in Europe. The storm already forced the shutdown of an estimated 1 million barrels of refining capacity.

Terry Ebbert, New Orleans director of homeland security, said more than 4,000 National Guardsmen were mobilizing in Memphis and would help police New Orleans streets. [...]

For years, forecasters have warned of the nightmare scenario a big storm could bring to New Orleans, a bowl of a city that's up to 10 feet below sea level in spots and dependent on a network of levees, canals and pumps to keep dry from the Mississippi River on one side, Lake Pontchartrain on the other.

The fear is that flooding could overrun the levees and turn New Orleans into a toxic lake filled with chemicals and petroleum from refineries, as well as waste from ruined septic systems.

Nagin said he expected the pumping system to fail during the height of the storm. The mayor said the U.S. Army Corps of Engineers was standing by to get the system running, but water levels must fall first.

"We are facing a storm that most of us have long feared," he said. "This is a once-in-a-lifetime event."

Major highways in New Orleans cleared out late Sunday after more than 24 hours of jammed traffic as people headed inland. At the peak of the evacuation, 18,000 people an hour were streaming out of southeastern Louisiana, state police said. [...]

New Orleans has not taken a direct hit from a hurricane since Betsy in 1965, when an 8- to 10-foot storm surge submerged parts of the city in seven feet of water. Betsy, a Category 3 storm, was blamed for 74 deaths in Louisiana, Mississippi and Florida.

Evacuation orders also were posted all along the Mississippi coast, and the area's casinos, built on barges, were closed early Saturday. Bands of wind-whipped rain increased Sunday night and roads in some low areas were beginning to flood. [...]

Katrina hit the southern tip of Florida as a much weaker storm Thursday and was blamed for nine deaths. It left miles of streets and homes flooded and knocked out power to about 1.45 million customers. It was the sixth hurricane to hit Florida in just over a year.

NEW ORLEANS - When Hurricane Katrina hits New Orleans on Monday, it could turn one of America's most charming cities into a vast cesspool tainted with toxic chemicals, human waste and even coffins released by floodwaters from the city's legendary cemeteries.

Experts have warned for years that the levees and pumps that usually keep New Orleans dry have no chance against a direct hit by a Category 5 storm.

That's exactly what Katrina was as it churned toward the city. With top winds of 165 mph and the power to lift sea level by as much as 28 feet above normal, the storm threatened an environmental disaster of biblical proportions, one that could leave more than 1 million people homeless.

"All indications are that this is absolutely worst-case scenario," Ivor van Heerden, deputy director of the Louisiana State University Hurricane Center, said Sunday afternoon.

The center's latest computer simulations indicate that by Tuesday, vast swaths of New Orleans could be under water up to 30 feet deep. In the French Quarter, the water could reach 20 feet, easily submerging the district's iconic cast-iron balconies and bars.

Estimates predict that 60 percent to 80 percent of the city's houses will be destroyed by wind. With the flood damage, most of the people who live in and around New Orleans could be homeless.

"We're talking about in essence having - in the continental United States - having a refugee camp of a million people," van Heerden said.

Aside from Hurricane Andrew, which struck Miami in 1992, forecasters have no experience with Category 5 hurricanes hitting densely populated areas.

"Hurricanes rarely sustain such extreme winds for much time. However we see no obvious large-scale effects to cause a substantial weakening the system and it is expected that the hurricane will be of Category 4 or 5 intensity when it reaches the coast," National Hurricane Center meteorologist Richard Pasch said.

As they raced to put meteorological instruments in Katrina's path Sunday, wind engineers had little idea what their equipment would record.

"We haven't seen something this big since we started the program," said Kurt Gurley, a University of Florida engineering professor. He works for the Florida Coastal Monitoring Program, which is in its seventh year of making detailed measurements of hurricane wind conditions using a set of mobile weather stations. [...]

ANNA MARIA ISLAND - Ten miles off our coast are areas bereft of sea life along the Gulf floor. The devastated marine communities span 2,162 square miles - larger than the state of Delaware.

The Fish and Wildlife Research Institute in St. Petersburg, and Sarasota's Mote Marine Laboratory continue investigating reports of "dead zones," or areas devoid of life in the Gulf of Mexico from Sarasota to New Port Richey.

Preliminary results were released Tuesday from a three-day research cruise conducted last week from the mouth of Tampa Bay to Pasco County, indicating that oxygen and sea life are beginning to return to some affected areas.

Also on Tuesday, the Sierra Club held a press conference to call for local, state and federal authorities to curb pollution of coastal areas and fund research into algal blooms and coastal degradation.

It is unclear how much of a role pollution played in the latest red-tide season and resulting reef devastation, but researchers said oxygen is returning to areas that had little or none during the past two weeks, an encouraging sign to the institute's Cynthia Heil.

"The bottom communities are still impacted, but it's the first step in the recovery process," Heil said.

The bottom waters of sample areas from northern Pinellas and Pasco counties, however, still show conditions of anoxia, the absence of dissolved life-sustaining oxygen, and hypoxia, or little dissolved oxygen.

The most intense anoxic areas appear to lie between Anna Maria Island north to Pasco and Hernando counties, said Richard Pierce, senior scientist and director of Mote's center of ecotoxicology.

Offshore from Sarasota, areas of low oxygen were found last week at the 1 mile mark and further south to the Fort Myers area, Pierce said.

Scientists are still unsure whether the mass mortalities were caused from direct contact with the red tide toxin or the secondary effects of oxygen depletion from the decomposition of marine life, Heil said.

The preliminary report said there's a strong thermocline, the zone where the water changes temperature and can prevent upper and lower water levels from mixing and diluting the red tide toxin or pockets of anoxia.

High concentrations of the red tide toxin Karenia brevis were found at the surface and bottom of nearshore regions, as well in the surface waters offshore of the affected area.

Affected sites showed low visibility and high levels of hydrogen sulfide. Hydrogen sulfide is produced by bacteria, emits a rotten-egg-like smell and turns metals black, two occurrences reported by divers last week.

The full report, expected to be released today, will include data from Mote Marine focusing on areas south of Longboat Pass.

The waters off Longboat Pass is where captain Wayne Genthner said he first witnessed the absence of life from the water's surface to sea floor.

"Last Wednesday, (I) found a dead zone seven miles out of Longboat Pass," Genthner told The Herald. "I went diving down there and did five others the same day to confirm my observations."

At Tuesday's press conference, Genthner said the situation has shrunk his weekly charter boat revenue from $3,000 to $300 per week.

Genthner said fish are moving further west so he must take fishing charters further out. The result is higher expense in gas and potential safety issues.

"What happens if a storm gets in between me and land?" Genthner said.

Dr. Larry Brand, a scientist at the University of Miami, also spoke at the press conference to share the results of a study he conducted for Lee County using data going back to the 1950s.

"The red tide organisms are 10 times more abundant than 50 years ago," Brand said.

According to the data from the Gulf between Tampa Bay and Sanibel, Brand said the blooms are more intense, spatially larger and longer lasting.

MATAGORDA CO., TX - Miles and miles of dead fish are turning up in Texas waters and it's hitting Matagorda especially hard.

From the sky, a sea of white is covering the mouth of the Colorado River. Upon closer look, you'll see dead fish – millions of them.

"Unbelievable if you haven't seen it before," said Matagorda County Commissioner George Deshotel.

The stunning images of devastation run for miles. It's one of the largest fish kills people in the town of Matagorda have seen in years.

Ronnie Dodd runs a spring bridge and watched dozens of fish die from his perch.

"The flounder were trying to get to the side of the edge of the bank and trying to come up and get air," he told us.

Surprisingly, this is a natural event caused by stagnant water and little wind, rain, or flow.

"Millions of these menhaden come in from the Gulf into the Colorado River and because of low tidal action and low wind action, there's nothing to replenish the oxygen in the water," said Deshotel.

Texas Parks and Wildlife is closely monitoring the situation.

"It'll run its course, and when it's done, it's done," said Bill Balboa with Texas Parks and Wildlife. "It may happen again, but it happens all up and down the coast."

But for now, Matagoda is the worst place...a place with a community that depends on the fish that are quickly dying.

The fish began dying a few days ago. If the menhaden keep coming in and the conditions don't change, more can die. And that's not good news for the local economy.

Back in 1995, there was a similar situation. Then, 60 million fish turned up dead. If you see dead fish, shrimp or crabs, contact the Texas Parks and Wildlife Department's 24-hour hotline. That number is 512-389-4848.

HURRICANES can trigger swarms of weak earthquakes and even set the Earth vibrating, according to the first study of such effects.

When Hurricane Charley slammed into Florida in August 2004, physicist Randall Peters of Mercer University in Macon, Georgia, had a seismometer ready to monitor any vibrations in the Earth's crust. He did so for over 36 hours as Charley travelled briefly over Florida, then slid back out into the Atlantic.

As the hurricane reached land, the seismometer recorded a series of "micro-tremors" from the Earth's crust. This happened again as the storm moved back out to sea. Then, as Charley grazed the continental shelf on its way out, it caused a sharp seismic spike. "I suspect the storm triggered a subterranean landslide," says Peters.

More surprisingly, the storm also caused the Earth to vibrate. The planet's surface in the vicinity of the hurricane started moving up and down at several frequencies ranging from 0.9 to 3 millihertz. Such low-frequency vibrations have been detected following large earthquakes, but this is the first time a storm has been found to be the cause (www.arxiv.org/physics/0506162).

Two coronal mass ejections hit Earth's magnetic field on August 24th, sparking a severe geomagnetic storm. Bright auroras appeared over Canada and many US states. The display was especially good in New Zealand and Australia, where sky watchers saw a rare display of Southern Lights:

A Category 5 hurricane, the most severe type measured, Katrina has been reported heading directly toward the city of New Orleans. This would be a human catastrophe, since New Orleans sits in a bowl below sea level. However, Katrina is not only moving on New Orleans. It also is moving on the Port of Southern Louisiana. Were it to strike directly and furiously, Katrina would not only take a massive human toll, but also an enormous geopolitical one.

The Port of Southern Louisiana is the fifth-largest port in the world in terms of tonnage, and the largest port in the United States. The only global ports larger are Singapore, Rotterdam, Shanghai and Hong Kong. It is bigger than Houston, Chiba and Nagoya, Antwerp and New York/New Jersey. It is a key link in U.S. imports and exports and critical to the global economy.

The Port of Southern Louisiana stretches up and down the Mississippi River for about 50 miles, running north and south of New Orleans from St. James to St. Charles Parish. It is the key port for the export of grains to the rest of the world -- corn, soybeans, wheat and animal feed. Midwestern farmers and global consumers depend on those exports. The United States imports crude oil, petrochemicals, steel, fertilizers and ores through the port. Fifteen percent of all U.S. exports by value go through the port. Nearly half of the exports go to Europe.

The Port of Southern Louisiana is a river port. It depends on the navigability of the Mississippi River. The Mississippi is notorious for changing its course, and in southern Louisiana -- indeed along much of its length -- levees both protect the land from its water and maintain its course and navigability. Dredging and other maintenance are constant and necessary to maintain its navigability. It is fragile.

If New Orleans is hit, the Port of Southern Louisiana, by definition, also will be hit. No one can predict the precise course of the storm or its consequences. However, if we speculate on worse-case scenarios the following consequences jump out:

- The port might become in whole or part unusable if levees burst. If the damage to the river and port facilities could not be repaired within 30 days when the U.S. harvests are at their peak, the effect on global agricultural prices could be substantial.

- There is a large refinery at Belle Chasse. It is the only refinery that is seriously threatened by the storm, but if it were to be inundated, 250,000 barrels per day would go off line. Moreover, the threat of environmental danger would be substantial

- About 2 percent of world crude production and roughly 25 percent of U.S.-produced crude comes from the Gulf of Mexico and already is affected by Katrina. Platforms in the path of Katrina have been evacuated but others continue pumping. If this follows normal patterns, most production will be back on line within hours or days. However, if a Category 5 hurricane (of which there have only been three others in history) has a different effect, the damage could be longer lasting. Depending on the effect on the Port of Southern Louisiana, the ability to ship could be affected.

- A narrow, two-lane highway that handles approximately 10,000 vehicles a day, is used for transport of cargo and petroleum products and provides port access for thousands of employees is threatened with closure. A closure of as long as two weeks could rapidly push gasoline prices higher.

At a time when oil prices are in the mid-60-dollar range and starting to hurt, the hurricane has an obvious effect. However, it must be borne in mind that the Mississippi remains a key American shipping route, particularly for the export and import of a variety of primary commodities from grain to oil, as well as steel and rubber. Andrew Jackson fought hard to keep the British from taking New Orleans because he knew it was the main artery for U.S. trade with the world. He was right and its role has not changed since then.

This is not a prediction. We do not know the path of the storm and we cannot predict its effects. It is a warning that if a Category 5 hurricane hits the Port of Southern Louisiana and causes the damage that is merely at the outer reach of the probable, the effect on the global system will be substantial.

As they happily watch their houses swell in value, Americans are changing their attitudes toward mortgage debt. Increasingly, a home is no longer a nest egg whose equity should never be touched, but a seemingly magical ATM enabling the owner to live it up or just live.

Homeowners took $59 billion in cash out of their houses in the second quarter, double the amount in the 2004 quarter and 16 times the average rate of the mid-1990s, according to data released this month by mortgage giant Freddie Mac.

People are cashing out so quickly that the term "homeowner" may soon be inaccurate. Fifty years ago, Americans owned, on average, three-quarters of their house and the lender owned the rest. These days, it's approaching an even split.

This spend-now-rather-than-save-for-later phenomenon has produced undeniable benefits. Experts attribute much of the nation's economic growth to cash-out refinancings, home equity loans and other methods of tapping rising home values. And additional real estate investments financed by home equity have contributed to the rising home prices that bring owners such pleasure.

But the spending spree has a price. With the savings rate at zero, consumers' eagerness to tap home equity is only worsening their retirement outlook, financial advisors say.

If mortgage rates rise sharply or home prices fall, many homeowners could be in financial turmoil. They may be unable to service their loans, or could even find that their homes are worth less than their mortgages.

Such a prospect seems unimaginably distant to Doug Levy, a university administrator in San Francisco.

When his two-bedroom condominium rose in value by 10% - which took nine months in the hot Bay Area real estate market - Levy refinanced. That increased the size of his mortgage but gave him $25,000 to pay bills and take a modest skiing vacation in British Columbia. He's considering tapping his equity again if his condo continues to appreciate.

"It's like I'm sleeping in my piggy bank," said Levy, 44. "In this market, real estate is a liquid asset."

Bill and Barbara Brockmann have a different view of their house. The retired Huntington Beach couple is sitting on half a million dollars of equity, but they're ignoring it. They aren't drawing on it to buy a new car or invest in a condo in Miami.

"I don't like debt," said Bill Brockmann, 79. "I don't buy anything I can't pay for."

Such thriftiness has gone out of fashion. What was once considered undesirable - taking on large debt - is now seen as smart. And what used to be smart - becoming debt-free - is described as imprudent.

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress."

He called it "very unsophisticated."

Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. "If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing."

The financial services industry is doing all it can to avoid letting consumers be foolish. Ditech.com touts home loans as a way to pay off credit cards, and Morgan Stanley says they're a good way to fund education expenses. Wells Fargo suggests taking a chunk out of your house to finance "a dream wedding."

One obvious reason for the 69% rise in mortgage debt over the last five years is the exploding cost of homes, which has far outstripped wage growth. That's led many buyers to interest-only loans and skimpy down payments, both of which minimize their equity. [...]

"There is no longer an incentive to paying off your mortgage," said Levy. "The only way I'll ever pay mine off is if I win the lottery."

That's probably the only way he'll ever be able to stop working, too. "I'm never going to be able to retire, because I'll never have enough money in the bank."

The temptation to add debt can be overwhelming. Between 1997 and 2003, the percentage of people who owned their own homes outright, without any mortgage debt, declined from 38.9% to 34.6%, according to Census figures.

"Why can't people stay on diets? Because once you get down to a certain level, you start feeling good, and then you splurge," said Richard Targett, a research analyst with Ernst & Young. "So when your home goes up in value, you take that cruise. You figure, I got money in my house, I didn't earn it, let me spend some."

But he warned that if home prices stopped their rapid ascent - which might be happening this summer - Doug Levy won't be the only one who has to have a job for the rest of his life.

"If you're not working, where would you get the two grand you need every month for your mortgage?" Targett said. "We're living longer, retiring younger, and don't want to give up our lifestyles. Something's got to give."

The old way had much less built-in risk. [...]

CMG Financial Services, a mortgage company in San Ramon, Calif., introduced another tool this summer: a combination checking account and mortgage.

It works like this: Your paycheck is deposited into your account and immediately applied to your mortgage principal. Over the course of the month, as you spend money on food, gas and other necessities, the principal creeps back up. But the result is that your mortgage debt gets paid off more quickly.

That's the theory, at least. Of course, if you're indulgent, you can pay much less of your mortgage - like none. Any shortfall is added on to the principal.

"This loan gives you a lot of power," said CMG's vice president of marketing, Doug Nesbit. "You can use it, you can abuse it."

In the old days, retirees who were house-rich and cash-poor generally downsized, perhaps moving in with their kids or retiring to the Sunbelt. To help consumers avoid those fates, reverse mortgages have been developed, which allow them to drain the equity from their houses while still living in them.

Irvine-based Financial Freedom Corp. says one of the major reasons people buy its reverse mortgages is "lifestyle enhancement" - extra money to have fun. Financial Freedom says it is on track this year to nearly double the 5,000 reverse mortgages it sold in 2004 in California.

The Brockmanns have resisted all such newfangled products, as well as the advice of their 55-year-old daughter. "Take out a line of credit and go travel," Sandi Bandfield said she had suggested. "Interest rates are so low, your payments would be next to nothing. You'd be enjoying life."

They already do. [...]

For their eldest daughter, the more houses the better. Bandfield was a medical transcriptionist until recently; her husband Bud, 49, is an independent electrical contractor. They bought their home in Boulder Creek, Calif., near Santa Cruz, for $157,000 in 1989. Substantially remodeled, it's now worth at least four times that.

Last year, the couple began talking about retirement. "We don't want to work forever, and someone's got to pay for this house," Bandfield said. "We have a nice life, but nothing in savings to speak of. I saw us relegated to a dinky gray condo in Las Vegas if we didn't do something."

Stocks? "I dabbled. I think I made $26 last year." Social Security? "It's piddly. Who wants to live like that?"

Real estate seemed the obvious, and only, answer. The couple attended seminars, began to educate themselves. They remortgaged their home to buy a three-bedroom in Visalia, then a two-bedroom cabin near Lake Arrowhead. More recently, they bought two houses in Colorado.

Buying houses to rent them out is a popular strategy. The National Association of Realtors estimates that as many as a quarter of all homes were purchased last year by investors, drawn by the lure of immediate rental income and long-term appreciation.

Bandfield's goal is 10 properties, each yielding $1,000 a month above the mortgage and upkeep. That would nicely fund their retirement. "If we don't do anything," she said, "we're going to have nothing."

WALL STREET shuddered yesterday after Alan Greenspan, the United States' central banker, warned American homebuyers that they risk a crash if they continue to drive property prices higher.

He said that the US house-price spiral had become an economic imbalance, threatening stability like the country's trade gap or its budget deficit.

In a pre-retirement speech to fellow central bankers at Jackson Hole, Wyoming, Mr Greenspan said that people were investing in houses as if they were a one-way bet, not allowing for the risk of price falls. He said "history had not dealt kindly" with investors who kept ignoring risks.

The Federal Reserve Chairman's warning, his strongest yet, sent share prices falling on Wall Street, at one point knocking 66 points off the Dow Jones industrial average. By the close the Dow had recovered to 10,397.30, down 53.30 points.

Traders said that Mr Greenspan's comments were reminiscent of his 1996 inveighing against "irrational exuberance" on the stock market, for fear that a crash there would hit consumers and push the economy into recession. When the share price bubble finally burst, Mr Greenspan cut Federal interest rates to 1 per cent, triggering the flood of cheap loans for housing. He fears that rate increases set in train as the economy recovered could throw the housing market into reverse and suggested that the twin deficits would now restrict his room to manoeuvre if a house price downturn hit spending. Asset prices were, he complained, driving monetary policy more than ever before.

Share traders were also worried by an unexpectedly sharp fall in the University of Michigan consumer confidence index, a small but influential barometer, which fell for the first time in three months. The expectations index slid from 88.5 to 76.9.

Rob Carnell, of ING Bank in London, said that Mr Greenspan's warning was an eerie reminder of a successful campaign last summer by Mervyn King, Governor of the Bank of England, to "use rhetoric rather than interest rates" to cool an overheating homes market. Britain has avoided a crash thus far.

On traditional tests, about a third of US local homes markets are now markedly overpriced. Over the past five years, the average US house price has risen by 50 per cent, half the rate of increase in UK prices in the five years to summer 2004. However, prices have risen more sharply in favoured areas, such as New York, and more than doubled in a few cities, such as San Diego.

You owe $145,000. And the bill is rising every day. That's how much it would cost every American man, woman and child to pay the tab for the long-term promises the U.S. government has made to creditors, retirees, veterans and the poor.

And it's not even taking into account credit card bills, mortgages - all the debt we've racked up personally. Savings? The average American puts away barely $1 of every $100 earned.

Our profligate ways at home are mirrored in Washington and in the global marketplace, where as a society America spends $1.9 billion more a day on imported clothes and cars and gadgets than the entire rest of the world spends on its goods and services.

A new Associated Press/Ipsos poll finds that barely a third of Americans would cut spending to reduce the federal deficit and even fewer would raise taxes.

If those figures seem out of whack to you, if they seem to cut against the way you learned to handle money, if they seem like a recipe for a national economic nightmare - well, then, at least you're not alone.

A chorus of economists, government officials and elected leaders both conservative and liberal is warning that America's nonstop borrowing has put the nation on the road to a major fiscal disaster - one that could unleash plummeting home values, rocketing interest rates, lost jobs, stagnating wages and threats to government services ranging from health care to law enforcement.

David Walker, who audits the federal government's books as the U.S. comptroller general, put it starkly in an interview with the AP:

"I believe the country faces a critical crossroad and that the decisions that are made - or not made - within the next 10 years or so will have a profound effect on the future of our country, our children and our grandchildren. The problem gets bigger every day, and the tidal wave gets closer every day."

Federal Reserve Chairman Alan Greenspan echoed those worries just last week, warning that the federal budget deficit hampered the nation's ability to absorb possible shocks from the soaring trade deficit and the housing boom. He criticized the nation's "hesitancy to face up to the difficult choices that will be required to resolve our looming fiscal problems."

Certainly, there are those who feel such comments bring to mind the preachers who predict the end of the world at a specific time and place, and have always been wrong. And undeniably, borrowing isn't all bad - easy access to money has been a critical tool in building America's businesses, from mom-and-pops to multinationals.

But something has changed. More than two centuries ago, Benjamin Franklin warned: "He that goes aborrowing, goes asorrowing." Now, a laugh-til-you-cry commercial portrays a man with a beautiful home and car declaring: "I'm in debt up to my eyeballs. I can barely pay my finance charges. Somebody help me."

The epidemic of American indebtedness runs from home to government to global marketplace. [...]

The AP/Ipsos poll of 1,000 adults taken July 5-7 found that a sweeping majority - 70 percent - worried about the size of the federal deficit either "some" or "a lot."

But only 35 percent were willing to cut government spending and experience a drop in services to balance the budget. Even fewer - 18 percent - were willing to raise taxes to keep current services. Just 1 percent wanted to both raise taxes and cut spending. The poll has a margin of error of 3 percentage points.

The nation's political leaders could hardly be said to have a mandate calling for fiscal responsibility. [...]

Some note things are getting better: The latest reports project a deficit of $331 billion for 2005, nearly $100 billion less than expected. Outstanding debt - the amount of securities and bonds that must be repaid - is far below what it was in the early 1990s.

But bigger worries lie ahead.

The nation's three biggest entitlement programs -
Social Security, Medicare and Medicaid - make promises for retirement and health care (for the elderly and the poor) which carry a huge price tag that balloons as the population grows and ages.

Add it up: current debt and deficit, promises for those big programs, pensions, veterans health care. The total comes to $43 trillion, says Walker, the nation's comptroller general, who runs the Government Accountability Office. That's where the $145,000 bill for every American, or $350,000 for every full-time worker, comes from.

Simply hoping for good times to return won't erase numbers like that, Walker says.

"There's no way we're going to grow our way out of our long-range fiscal imbalance," he says, adding that the country must re-examine tax policy, entitlement programs and the entire federal budget.

"I really do not believe the American people have a real idea as to where we are and where we're headed, and what the potential implications are for the country if we don't start making some tough decisions soon," he says. [...]

Some people, however - including economists - think the picture isn't so gloomy.

Ben Bernanke, who recently left the Federal Reserve Board to serve as President Bush's top economic adviser, has argued that the problem is not with the United States. The trouble lies overseas, where people want to save rather than spend their money. The key is to encourage other countries to spend and invest more, he says, though he also believes that the federal budget needs to be balanced.

By raising the issue of foreign investment, Bernanke touches on another area that scares economists - America's inexhaustible desire for foreign goods.

The trade deficit - the difference between what America imports and what it exports - is the highest it's ever been, both in absolute numbers and in comparison to the size of the economy.

As a society, Americans are on track this year to spend $680 billion more on foreign goods such as Chinese-made clothes, Japanese-made cars and Scandinavian cell phones than overseas buyers do on American goods. The crush of arriving, Asian-made products recently spurred the Port of Los Angeles to switch to 24-hour operations.

Nearly two decades ago, the country fretted over a trade imbalance equal to 3.1 percent of the overall economy, or the gross domestic product. It's more than twice as big now, roughly 6.5 percent. [...]

In the end, Roubini, Walker and others say, disaster is still avoidable, but it's going to require the American people and the country's leaders to clean financial house - to reduce the federal deficit and the trade deficit. Global economics may drive some changes: if Japanese cars cost more, for example, Americans may buy less-expensive GMs.

If not, the future poses some frightening what-ifs:

• What if the dollar plummets? Do stocks follow? How about pensions?
• What if interest rates soar? How would all the new homeowners, who stretched to buy with adjustable and interest-only loans, cover their mortgages?
• How would consumers with record credit-card debt make their payments? Would they stop buying? Stop taking vacations? What will happen if they go bankrupt? New rules going into effect later this year make it harder on such debtors.
• How would government, which depends on the taxes of a strong economy to operate, keep all its promises?

Roubini says time is critical because the worse debt becomes, the more vulnerable America is to shocks in the global economic systems - another spike in oil prices, another major terrorist attack, another major military conflict.

Comment: Or perhaps an enormous hurricane striking a vital US shipping port...

OK, now back to you. No one's asking you to write a check to cover that $145,000, not yet. But the pressures are building around the world, in Washington, and in America's homes to straighten out our finances or get ready for a real mess.

"We're living beyond our means," Roubini says, "and we have to get our act together."

The Dow Jones Industrial Average of the United States stock market closed at 10,406.20 on Friday, down 1.5% from 10,559.23 a week earlier. The NASDAQ closed at 2123.99, down 0.5% from last week's close of 2135.56. The yield on the ten-year U.S. Treasury Note was 4.18%, down four basis points from 4.22 at the previous week's close. The dollar closed at 0.8140 euros, down 0.9% from 0.8217 euros at the previous week's close. The euro closed at 1.2285 dollars up from 1.2177 a week ago. Oil closed at 66.13 dollars a barrel on Friday, up 1.7% from $65.05 on the previous Friday. In euros, oil would be valued at 53.83 euros a barrel at Friday's close, up 0.8% compared to 53.42 at the previous Friday's close. Gold closed at 441.80 dollars an ounce on Friday, up slightly from the previous week's close of $441.60. That would put gold at 359.63 euros an ounce, down 0.8% from 362.65 a week earlier. Comparing gold to oil, an ounce of gold would buy 6.68 barrels of oil, down 1.6% from 6.79 the week before.

The University of Michigan's Consumer Confidence report for July/August came out Friday and the numbers were worse than expected, which helped drag the stock market down and increase anxiety among economic analysts and players.

With the price of energy rising, with wages falling or stagnating, with the price of health care in the United States rising rapidly, and with the price of college educations rising rapidly, it should be no surprise that everyone outside of the elite think that the economy is in bad shape. Recently there have been attempts by the elite to understand why the rest of us feel that way:

Why a booming economy feels flat

Personal income is one key area where workers have fallen behind, compared with past periods of strong wage growth.

By Mark Trumbull
Staff writer of The Christian Science Monitor

Think back to the last time the American economy was rapidly rolling forward: output growing more than 4 percent a year, millions of new jobs were created, and unemployment on a downward slope.

Yes, the 1990s was a golden economic era. But the description refers to the performance that began last year.

Despite continued strong economic growth, this expansion is clouded with enough complications and uncertainties that, for many, it doesn't feel like good times.

The reason? A boom in corporate profits has not yet created a job market that makes workers feel secure, economists say. Hiring hasn't skyrocketed. Worse, wages are stagnant. This paycheck squeeze may prove more worrisome than soaring oil prices and concerns over a housing bubble. Some experts worry that wage stagnation may prove more permanent this time, because of an increasingly global market for labor.

Few economists claim that today's economy matches the late 1990s, when unemployment was lower and job numbers seemed to rise as easily as the Dow Jones Industrial Average.

There are real differences - higher oil prices are just the most obvious. But the current expansion is also occurring against a backdrop of worries.

The pace of job growth, for one thing, was almost imperceptible during two years of concern about a "jobless recovery." Now that the economy has some momentum, the financial press is focused on threats to consumer well-being, such as the burden of energy costs and a soaring real estate market.

"Surveys show that even though the economy is growing reasonably strongly, a lot of households don't feel that," says Nariman Behravesh, chief economist at Global Insight in Lexington, Mass.

He points to two key reasons. First, since the last recession ended in November 2001, job growth has been weak until last year, when the Labor Department's employer survey showed a gain of 2.2 million jobs. Second, wage growth has been lackluster, despite strong gains in worker productivity.

Normally, as employees are able to produce more in each hour of work, the result is greater cash flow that can be divvied up between workers and owners or investors. In the long run, rising productivity means rising wages and living standards.

But in the short run, "most of the gains in the economy have gone into profits rather than wages," says Mr. Behravesh.

The latest numbers from the Labor Department, in fact, show average weekly earnings for US workers have fallen by 0.5 percent in the past year, after adjusting for inflation.

The divergence between productivity has sparked a debate among economists. Some say the gap is temporary, and will narrow as the labor market tightens and workers get more leverage to bargain. Others worry that it's a sign of new realities in the global marketplace that are pushing down US wages as workers compete with increasingly educated rivals in places such as India, China, and South Korea.

Whichever view proves more valid in that debate, many Americans are feeling the combined pinch of slow wage growth, jobs that still aren't as plentiful as many would like, and a stock market that's snorting pretty softly for a bull.

Only 37 percent of the public thinks the national economy is in good shape, according to a June poll by the Pew Research Center poll. That's higher than two years ago, but down from 2004. Perhaps more ominously, the percentage of the public rating their own financial situation positively fell to 44 percent, down from 51 percent in January. Sixty percent say jobs are too scarce in their community.

This analysis exemplifies one of the worst aspects of neo-liberalism: a complete blind spot when it comes to exploitation. Notice the "not-yet" wording: "A boom in corporate profits has not yet created a job market that makes workers feel secure, economists say." Notice also the resort to that old chestnut of economists, the "long run," regarding the contrast between rising productivity and stagnating wages: "Normally, as employees are able to produce more in each hour of work, the result is greater cash flow that can be divvied up between workers and owners or investors. In the long run, rising productivity means rising wages and living standards."

Paul Krugman, under fewer illusions, depicts the situation more clearly than do the experts quoted in articles like the one above:

Summer of Our Discontent

By PAUL KRUGMAN
August 26, 2005

For the last few months there has been a running debate about the U.S. economy, more or less like this:

American families: "We're not doing very well."

Washington officials: "You're wrong - you're doing great. Here, look at these statistics!"

The administration and some political commentators seem genuinely puzzled by polls showing that Americans are unhappy about the economy. After all, they point out, numbers like the growth rate of G.D.P. look pretty good. So why aren't people cheering?

Some blame the negative halo effect of the Iraq debacle. Others complain that the news media aren't properly reporting good economic news. But when your numbers tell you that people should be feeling good, but they aren't, that means you're looking at the wrong numbers.

American families don't care about G.D.P. They care about whether jobs are available, how much those jobs pay and how that pay compares with the cost of living. And recent G.D.P. growth has failed to produce exceptional gains in employment, while wages for most workers haven't kept up with inflation.

About employment: it's true that the economy finally started adding jobs two years ago. But although many people say "four million jobs in the last two years" reverently, as if it were an amazing achievement, it's actually a rise of about 3 percent, not much faster than the growth of the working-age population over the same period. And recent job growth would have been considered subpar in the past: employment grew more slowly during the best two years of the Bush administration than in any two years during the Clinton administration.

It's also true that the unemployment rate looks fairly low by historical standards. But other measures of the job situation, like the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply.

Employers certainly aren't having trouble finding workers. When Wal-Mart announced that it was hiring at a new store in Northern California, where the unemployment rate is close to the national average, about 11,000 people showed up to apply for 400 jobs.

Because employers don't have to raise wages to get workers, wages are lagging behind the cost of living. According to Labor Department statistics, the purchasing power of an average nonsupervisory worker's wage has fallen about 1.5 percent since the summer of 2003. And this may understate the pressure on many families: the cost of living has risen sharply for those whose work or family situation requires buying a lot of gasoline.

Some commentators dismiss concerns about gasoline prices, because those prices are still below previous peaks when you adjust for inflation. But that misses the point: Americans bought cars and made decisions about where to live when gas was $1.50 or less per gallon, and now suddenly find themselves paying $2.60 or more. That's a rude shock, which I estimate raises the typical family's expenses by more than $900 a year.

You may ask where economic growth is going, if it isn't showing up in wages. That's easy to answer: it's going to corporate profits, to rising health care costs and to a surge in the salaries and other compensation of executives. (Forbes reports that the combined compensation of the chief executives of America's 500 largest companies rose 54 percent last year.)

The bottom line, then, is that most Americans have good reason to feel unhappy about the economy, whatever Washington's favorite statistics may say. This is an economic expansion that hasn't trickled down; many people are worse off than they were a year ago. And it will take more than a revamped administration sales pitch to make people feel better.

The missing piece of the puzzle here is exploitation. As Krugman points out, the reason wages are falling (in real terms) while productivity is rising is that the difference has gone to corporate profits, which are divided between the owners and high ranking corporate officers. CEO compensation is still shooting upward. This has been a conscious decision to stiff the average working person. They will claim that, given "global labor competition" it is inevitable, but if the elite truly wanted to avoid increasing exploitation, they could easily do so. Or, as John Cooper put it:

To what extent is organized piracy, theft by taking, deception and illusion, bands of brigands conspiring to take from the general population for their own interests responsible for the income spread? Capitalist economic mythology perpetuates a comfortable rationale for the most unjust behaviors and conditions, allaying the doubts and guilt of the unjust and suppressing the retributive desires of the oppressed. Fair and equal chance plays a miniscule role: that economic success is a lottery is surely a myth. Another is that market economics fairly and equitably distribute the wealth and wellbeing.

Markets and the market place are NOT governed by laws of nature but are a carefully contrived con to cover and justify the transfer of wealth from those with too little to those with already far too much. The invisible hand of the marketplace does not achieve the general good, fairness or balance, but rather the exploitation of the poor, ignorant and gullible by the avaricious, greedy and insensitive. The purpose of markets is to focus and concentrate wealth, not distribute wellbeing: the wealthy get more and better; the impoverished, less and must do without. What would an economic system be like that - rather than transferring wellbeing from the poor to coddle the rich - provided equitably for all?

Meanwhile, anxious working people in the United States are rushing to declare bankruptcy before the new, more stringent personal bankruptcy rules take effect and elites are looking for new ways to park their money outside the U.S. and the dollar before the crash comes. Despite all the free-floating anxiety, most people you meet have a disconnect between what they fear might happen and what future scenarios they base their actions on. In other words, most people still behave as if the situation in the future will be similar to what it is today. That people would cling to the belief that things will be fine is not surprising. Fewer people alive can remember the Great Depression. But it goes deeper than that:

Heavy clouds, no rain

by Doug Wakefield
August 25, 2005

"He looked in the sky but he looked in vain Heavy clouds, but no rain"
- Sting

"Because the market has not dropped sharply, it will not drop sharply."

If there is one thought that will cost investors billions in the near future, it is this one. The price action of the major US indices over the last year appears to have anesthetized investors into a lethargic state making it improbable that they will prepare their investments before the next major move. I am not talking about hundred point moves on the Dow, but thousand point moves. Why is this happening? Why is this lethargy so instinctive in our behavior?

First, let's start with the human brain and how we are wired as human beings.

Robert Prechter's book, The Wave Principal of Human Social Behavior and the New Science of Socionomics, allowed me to understand why all investors, including myself, have such a difficult time preparing for future investment opportunities and spend most of their time reviewing the most recent numbers on their quarterly statements. In his book, Prechter notes that "Dr. Paul McLean, former head of the Laboratory for Brain Evolution at the National Institute of Mental Health, has developed a great deal of evidence that suggests we have a 'triune' brain, one that is divided into three basic parts. The primitive part of the brain stem, called the basal ganglia, controls the impulses essential to survival. The limbic system controls emotions, and the neocortex, which is significantly developed only in humans, is the seat of reason. Thus, we actually have three connected minds: primal, emotional, and rational."

The basal ganglia controls the brain functions that are instinctive, such as the desire for security, the reaction to fear, the desire to acquire, the desire for pleasure, being accepted in our social circles, and even choosing our leaders. More pertinently, this area of the brain controls behaviors such as flocking, schooling, and herding. The limbic system is the seat of emotions and guides behavior required for self preservation. It operates independent of our reasoning capabilities, and therefore, has the capacity to generate out-of-context, affective feelings of conviction that we attach to our beliefs regardless of whether they are true or false.

...And, what about the neocortex? It is in a far inferior position. The neocortex is involved in processing ideas and using reason. However, it is trumped by the limbic system in that the limbic system is faster, controls the amplitude, or intensity of emotions, and unfortunately has no concept of time nor learns from experience. Truly, for the afore mentioned reasons, we are not hard wired to make good investment decisions.

Since herding is a natural instinct, and money decisions are one of the most emotional charged areas to handle, then it only makes since that, without understanding the power of these instincts, investors are not even aware of their incapacity to take action to prepare for a sharply declining market. (As an aside, if you still have a hard time believing that the markets could decline sharply, read my articles, "Surfing the Tsunami" and "An Asset Allocator's Nightmare.")

...While we can all read this article with our minds engaged, away from the distraction and noise of Wall Street and Washington, when we meander back into the milieu of daily life, it becomes very hard to prepare for something that appears as though it will not occur. Since no one desires to see the financial and social changes that accompany a bear market, it becomes even easier to push off until tomorrow what we do not want to address today. The more times we don't make a decision to change, the more we are emotionally rewarded with the fact that so far nothing happened. Fifty point declines are met with fifty point rallies. The sky is blue. The grass is green. No rain comes.

...Dr. [Benoit] Mandelbrot, discoverer of fractal geometry, is known as one of the greatest math minds of the 20th century. While his work was not widely accepted through the 1960s and 1970s, after the crash of 1987, his work on fractals and market risk brought him to the forefront of the financial world. He has contributed greatly to Monte Carlo simulation models, which are used all over the world today.

One aspect of his work was the discovery of what he calls the Joseph and Noah Effects. Sometimes markets, like nature, reveal patterns of movement that stay within a certain range, like Joseph's seven years of preparing for the famine and seven years of living through it, as recounted in Genesis. There are other times when the data moves violently outside its normal range. These violent reactions, much like a tsunami or hurricane, are referred to as the Noah Effect.

While we can all see the Joseph and Noah Effects in weather patterns and other life experiences, amazingly, many in the financial world still espouse theories that focus only on the Joseph Effect. They assume that changes that occur from a Noah Effect cannot be seen ahead of time, and are thus to be ignored. They reason, that since no one can time the day and hour, the season becomes unimportant as well. The focus of all numbers becomes the "average." Unfortunately, historical, real world losses are not as forgiving as the "average."

Traditional asset allocation models deal with portfolio fluctuations only within two to three standard deviations. Traditional economic models hold that for an event to occur within a deviation of two means it occurs 95% of the time while a deviation of three would reflect events that occur 98% of the time. Mandelbrot notes two problems with this line of thinking. Moves beyond 2 and 3 standard deviations occur much more frequently in the historical record than allowed for in traditional models. And additionally, these extreme moves, accounting for large percentage changes in price, occur in miniscule amounts of time. So rather than a steady flow of asset prices, we see jerky action followed by stasis.

So, how frequently have investors seen changes beyond 3 standard deviations?

Since we will more fully expound on the second half of Mandelbrot's work, for the sake of space, please allow this summation: "Prices only rarely follow the predicted normal pattern. The Brownian data shows 98% of the changes in the markets occur within three standard deviations and no changes greater than five. However the historical record shows that changes of more than five deviations happened two thousand times more often than expected. Under normal rules such an event should occur only once every seven thousand years; in fact, it happens once every three or four years. Statisticians call this a "fat tail" and it means the standard model of finance is wrong."

So, how costly has it been to investors who ignored deviations beyond 3%, hoping that the Noah Effect will have not impact on their finances?

Let's look at three examples. First, a currency study by Citigroup in 2002 revealed a deviation of 10.7. This equated to a one-day drop of 7.92%. Traditional finance would say the odds of this happening were the equivalent of one day out of 15 billion years. To make this even more compelling, consider another study on currencies that revealed that in the 4,695 trading days from 1986 to 2003 half the decline of the dollar to the yen occurred in just ten (10) days. Put another way, half the losses occurred in .21% of the trading days. My last illustration reflects the S&P 500 during the secular bull market of the 1980's. Fully 40 percent of the positive returns from that ten year period occurred in ten days, or .5% of the time. And for the curious, let's look at the Crash of '87. This one-day event took markets to a deviation of 22. Remember, standard asset allocation models only address 2 to 3 deviations.

Are we as investors condemned to be blind sided by these Noah Effects? Is the safest way to invest in these periods to follow the crowd and buy an index or basket of indices? History and science does not support this "random walk" mentality.

If there are hundreds of logical arguments for the Noah Effect occurring in the markets today, why is it so hard to make changes now to address this issue?

The Journal of Behavioral Finance had a great article recently called "Self is not Neutral". In this piece Gao and Schmidt write, "Rationalization doesn't mean, 'acting rationally.' It means attaching desirable motives to what we have done so that we seem to act rationally. In other words, people seek justification for their behavior. Rationalization makes people feel good."

With the millions of marketing dollars spent on teaching advisors how to help their clients "feel comfortable," is it any wonder that so many investors and advisors, surrounded by the emotional comfort of the herd and blinded by what we want to see, would ignore all the warning signs of a Noah effect until after the event costs them dearly.

...In our current placid market environment, it may be tempting to dismiss this article for its "extreme views." However, a study of history and science suggests that the longer the Joseph Effect continues, the more violent the Noah Effect will be when it occurs.

As you put down this article and go back to your day-to-day life, I hope you will force yourself to override your emotions and logically consider your surroundings. Make sure you are thinking and preparing for future events and not rationalizing your ways to the "comfortable" music emanating from the Wall Street and Washington rhetoric.

It is hard for most of us to act on the basis of future disasters, though. While many people can see future declines in, say, stock prices, housing prices or the value of the dollar, most cannot foresee severe drops. In other words, many people would not be surprised to see housing prices drop 10% to 20% in the next couple of years, but few people expect an 80% drop.

Some people do manage, however, to act on a clear view of what is to come economically and politically: the people who are most responsible for making those future disasters! For these people, herd instincts and a clear-eyed view of what's in store for the rest of us work together seamlessly. They just expect that their herd will prevail. Al Martin has been tracking where the top 10% wealthiest Americans have been putting their money. As he points out, they are more than 70% Republican and have good connections with the ruling regime. In other words, they are in the know. Following the money in this case might give us a good idea of what's in store for the near future. Not surprisingly, the conclusions are disturbing.

In the last 12 months there have been some significant changes in the investing patterns of the top 10% of the nation. ...As we have reported since 2003, when we started the AlMartinRaw.com Smart Republican Money Index, the top 10% of the nation, continue to be heavily invested in gold. They continue to be net sellers of gold stocks. In other words, what they're doing is increasing the percentage of their holdings in gold. How they are doing that, however, is what is more important.

They have been, and continue to be, net sellers of gold stocks and buyers of the new gold ETF, or electronically traded fund, which we have mentioned before, which trades under the symbol GLD.

...ETF or electronically traded funds has several meanings. In this case, what we are talking about is a fund that actually holds and trades the direct metal. It's not a company that digs it out of the ground then refines it and sells it, as in a mining company. The only thing the gold ETF does is simply hold and trade the metal.

...Metal stocks in general pay a tiny dividend. We've noted this before that, for instance, the dividend of the Philadelphia XAU (gold and silver index) is now less than .6% per annum.

In other words, what the top 10% are saying is that "We are prepared to sacrifice this small dividend to eliminate political, economic, military risks, etc. We now want to own the bullion directly."

... What's important for the average investor to understand is that the top 10% have said that the dividend that gold and silver, etc. stocks pay no longer compensates the investor for the risk.

Also, what the top 10% of the nation are saying is that: Since these ETF's, although they trade in the United States, are all formed as offshore entities in jurisdictions, which have not signed on to any collateral Patriot Act restriction or potential confiscation vis-a-vis the government and the U.S. Treasury, they are also a way to hold bullion and be immune from any potential confiscation in the United States in the future.

You can ultimately take delivery of the bullion if you wish to do so. And you can take delivery of it offshore – outside the jurisdiction of the United States, in other words. And those are the primary advantages.

Why has this become an advantage? Because if you know that the Bush Cheney Regime has set the nation on a path of no return, not in an economic sense, but in a political sense, then you know what's coming. Whatever regimes follow, they're going to follow, effectively, the same path because Bushonomics has precluded any other option. Whatever subsequent regimes may follow, they, too, are going to become increasingly more hostile to citizens holding gold. They, too, will become ever more hostile to citizens expatriating assets.

...Therefore what the top 10% is saying -- We are prepared to accept a potentially lower return for the security of owning the underlying metal. But we also want to own the metal in such a fashion where A), we do not have to report direct ownership of the physical metal, B) where we can take delivery of the physical metal in a jurisdiction outside the United States, and C) the metal is not potentially confiscatable even if we remain U.S. citizens with a primary residence in the United States, so long as we maintain a 'secondary domiciliary' in the jurisdiction in which we are going to take delivery.

...Hence, we would note, the top 10% of the nation, what are their favorite places to maintain second residence and/or some sort of corporate, and/or trust domiciliaries. They are the Cayman Islands, the Netherland Antilles, Switzerland and Tahiti – all jurisdictions which have absolutely no collateral agreements with the United States Treasury.

What is more important are the changes that have occurred in the last 12 months within the AlMartinRaw.com Smart Republican Money Index. We are seeing, for the first time ever new publicly traded corporations, new publicly traded master limited partnerships, publicly traded pools and funds, etc. are becoming available wherein they were not available before.

But we are seeing now a substantial flow of money, which had been previously negligible, wherein the top 10% of the nation are now having as much as 20% of their portfolios invested in non-renewable and/or semi-renewable resources, principally food production, water production, other non-precious, non-industrial, but nonetheless valuable and necessary metal and mineral production, forest production, etc.

We would note that, for years, the top 10% of the nation was not heavily invested into this area, for two reasons.

The first reason is that publicly traded corporations who dealt in these areas, resource-related stocks, never paid very much of a dividend. And they were also price-sensitive to the underlying value of the commodities. In other words, in times of inflation and a declining dollar, resource-related stocks did well, but in other times, they did not. You could not point to a 20-year period wherein you could say there was a reliable return of X.

And this is what's different in the last two years. First, it is the realization that the planet is falling apart. The realization that the people living on this planet have already used up 95% of its non-renewable resources and the likelihood that semi-renewable resources, for a variety of reasons, including changing climate, pollution, changing governmental attitudes, etc., are going to become more uncertain in the future.

Furthermore, the planet is facing, as the World Resource Council has pointed out, a water crisis starting in the 2020's. Also the World Food Council had a study done in concert with the governments of Sweden and the Netherlands, which financed the research study. They found that the planet is going to undergo a shift, starting in the 2020's, wherein food production in the northern hemisphere of the planet will fall sharply, as much as 80%, over a period of 20 years, and food production in the southern hemisphere of the planet, which is where most of the Third World nations are located, is going to increase.

This has spurred, in recent years a variety of new publicly traded corporations that didn't exist two years ago. These are new publicly traded master limited partnerships, pools, funds, etc. that have now purchased agriculture production and water production in south-of-the-border countries, particularly the case in South America, where the largest purchasers of Brazilian agricultural land are US-based pools and funds.

These are unlike the huge agri-business firms like ConAgra or Archer Daniels Midland. This is what confuses some investors. These are not companies that are formed to profit or to have a business based on the processing, storage, transportation of grain, etc. In other words, they are purchasing the actual land. They are having the land cleared. They are having it planted and they are building their own processing, storage, transportation facilities in partnership with the Brazilian government.

The reason you would want to buy these companies is because they actually control the food. The value is not even necessarily in the land. The value is what the land can produce; namely, the actual food, the cereal grain, etc. that the land can produce. They're not looking to profit in other ways. In other words, they are at the very beginning of the so-called agricultural pipeline. This is being done because of the belief, that in 20 years' time, we are going to be looking at potentially $100/bushel for soybeans, and potentially $30/bushel for corn. That's the reason this is being done.

Then there will be a softer dollar and world paper currencies will be effectively declining in value relative to the amount of commodities they can buy. We're not talking now about paper currencies fluctuating in value amongst themselves or against each other. But there is a general decline now in what the global paper currencies will buy in terms of hard commodities.

Who's going to buy it? People are still going to eat, and they're still going to buy it, and they're not going to care how much they have to pay for it.

...Not only are the top 10% of the nation now investing more than ever before in newly created public companies, partnerships, pools, funds, etc. that are now direct producers of agriculture; not processors, not transporters, but the direct producers of agriculture, but you can find this also true in the water business, where the top 10% of the nation is now investing in companies, and these are reasonably recently formed companies, through the same vehicles–partnerships, pools, etc.–that have purchased the direct water. Privatization of water is also in the plan.

...So, this is the second track: the purchase of direct food and water production.

The third track that we have seen through the AlMartinRaw.com Smart Republican Money Index is a dramatic reduction in the number of shares owned of defense contractors.

We have seen the top 10% being large net sellers of what we tend to think of as the traditional large-system defense contractors– Boeing, Martin Marietta, Northrop Grumman, Lockheed Martin etc.

This is an interesting shift. The money they have been raising out of the sale of large-system defense contractors has largely been reinvested in small publicly traded so-called specialty military police and defense subcontractors.

These are small companies which produce highly specialized weaponry and/or high-technology, specifically aimed for the government market – the identification of citizens with microchip technology, surveillance technology, as well as companies that produce small non-lethal or so-called semi-lethal higher-technology weapons systems which are specifically used to control protests and riots.

These companies are involved in manufacturing products for high-tech surveillance, law enforcement, specialty firearms and weapons, etc.

This also includes the new genre of prison construction, which really isn't even prison construction anymore. They're moving away from that old Correction Corp. of America model into a newer, high-tech, or third generation model of modular prison building, which isn't prison but detainment centers.

In other words, they're meant to house a specific category of so-called non-categorized detainees that can now be held forever under the Patriot Acts. These are what could be termed seditious or treasonous population segments.

The construction methods use modular construction, which is cheap and can be put together quickly and lasts virtually forever. Much more high technology in terms of control and management. And these are facilities that are purposely meant to be built very discreetly

So we are seeing a shift by the top 10%, interestingly enough, out of large-system defense industries into what is called quasi-military population control management stocks. If you put this all together, it gives you an idea of the future. The top 10% already know what the future's going to look like. Why? Because they're making it happen.

...The top 10%, by their investments and the changes in those investments, are telling you what the future of this planet is going to look like. Gradual destabilization of governments and economies. Increasingly destabilized currency bases. Collapses in future governmental programs because they can't be funded and they're not being funded now. Disruption and shortages in food and water production. Rising civil unrest that will need to be controlled. Potential confiscation of hard assets. This is what the future looks like.

These bets placed by the most well-connected people in the power hierarchy provide the best insight into the real plans of the world's elite as well as a counterargument to those who think that things are fine economically, and that free-market economics are all we need to ensure future growth and prosperity. If that were the case, why would they need all those detention centers?

There is a potentially fatal flaw at the heart of the global economy: the strong possibility of financial meltdown following a collapse of confidence in the greenback, Clyde Prestowitz tells Bruce Stannard

THE nightmare scenario that haunts global strategist Clyde Prestowitz is an economic September 11 -- a worldwide financial panic triggered by a sudden massive sell-off of US dollars that would lead inexorably to the collapse of economies around the world.

If that happens, Prestowitz predicts: "It would make the Great Depression of the 1930s look like a walk in the park."

Australia would be sucked into the vortex of such a recession, which would cause great hardship throughout the world, he warns.

Prestowitz is not a doomsayer, neither is he alone in his views. As president of the Economic Strategy Institute, a Washington think tank, he is in regular contact with the most influential US business leaders, several of whom -- Warren Buffet and George Soros included -- have taken steps to hedge their currency positions against the possibility of a cataclysmic plunge in the greenback.

"Right now," he says, "we have a situation in which the US is running huge trade deficits -- about $US650 billion ($766 billion) in 2004 -- which are financed by borrowings from the central banks of Asia -- mainly the Chinese and the Japanese. All the world's central banks are chock-full of US dollars -- they're holding many more dollars than they really want. They're holding those dollars because at the moment there's no great alternative and also because the global economy depends on US consumption. If they dump the dollar and the dollar collapses, then the whole global economy is in trouble.

"However, some countries have a bigger stake than others in maintaining the status quo. China and Japan have a big stake in maintaining the flow of their exports to the US and keeping the US economy humming. Russia, on the other hand, does not export much to the US. India doesn't export much to the US. Yet Russia and India are also big dollar-holders. They hold many more dollars than they really want or need.

Comment: Indeed. See next article regarding Russia...

"It doesn't take any great stretch of the imagination to see what could happen if one of these central bank managers decides to dump dollars. We had a situation recently when a mid-level official at the Central Bank of Korea used the word 'diversification'. It was a throwaway remark at some obscure lunch, but there was instantaneous overreaction. The US stock market fell by 100 points in 15 minutes because the implication was that South Korea might be shifting out of US dollars.

"So picture this: you have a quiet day in the market and maybe some smart MBA at the Central Bank of Chile or someplace looks at his portfolio and says, 'I got too many dollars here. I'm gonna dump $10 billion'. So he dumps his dollars and suddenly the market thinks, 'My god, this is it!' Of course, the first guy out is OK, but you sure as hell can't afford to be the last guy out.

"You would then see an immediate cascade effect -- a world financial panic on a scale that would dwarf the Great Depression of the 1930s."

Prestowitz says the panic could be started by something as simple as a hedge-fund miscalculation.

"We had exactly that scenario in the US recently," he points out, "when a big hedge fund called Long Term Capital Management went belly-up. These guys were pros. They had two Nobel prize-winning economists writing their trading algorithms, and their traders were the creme de la creme among New York bond traders.

"They made a big bet -- a trillion dollars leveraged 20 to one, and they blew it. They went belly-up. That threatened to bring down the whole system so US Federal Reserve chairman Alan Greenspan had to organise a bail-out through the Federal Reserve Bank of New York.

"Now consider this: there are currently 8000 hedge funds in the US alone. Every day $6 trillion of derivative instruments trade on international markets. If there are four people in the world who understand those trades, I'd be surprised. So the potential for another disaster is not insignificant. This is why Warren Buffet, chairman of investment giant Berkshire Hathaway, is betting $US21 billion against the dollar. This is why currency speculator and hedge fund manager George Soros has also made a big bet against the dollar.

"Soros is one of the greatest currency speculators of all time. He was the guy who broke the British pound in the early 1990s by betting $US10 billion it would fall. He made a quick billion when it did. In 2002, he warned that the greenback was in danger of losing a third of its value. Of course, it could be argued that Soros is a professional hedge fund manager whose job is to play the ups and downs of currencies and his remarks could be seen more as manipulation than prophecy. And yet, in conversations with me, Soros has expressed concern about the market fundamentalist view that prevails in Washington and parts of Wall Street.

"This is the belief that markets are self-correcting and best left alone. Soros calls this a dangerous siren song. Far from being self-correcting, he emphasises, markets tend to excess. They over-shoot. Anyone with any experience of markets knows this.

"When markets are going down, all the weaknesses get concentrated, and you need intervention at the right time to stop things from getting out of control. If the dollar started to melt down, the results could be really nasty. A 1930s-style global depression is not out of the question."

To underscore the point that he is not alone in this, Prestowitz cites Paul Volcker, head of the Federal Reserve before Greenspan, who has said publicly there is a 75 per cent chance of a dollar crash in the next five years.

"No wonder people look at this and say, 'Holy cow!'," he says. "No one knows for sure what will happen, but clearly the global markets could implode very quickly. The lack of an alternative to the dollar is the only reason it hasn't taken a big fall already."

Prestowitz, formerly a trade adviser and negotiator for former US president Ronald Reagan, believes the US will continue to be the world's most powerful economy for the foreseeable future. But he foreshadows an inexorable decline, a trend that is likely to continue "depending on the way we play our cards".

"Right now, we're playing them just about as badly as it's possible to play them, and that has geo-political implications." he says. "We've outsourced trying to deal with North Korea to China, we really can't deal with Iran, so we've outsourced that to the EU, which is struggling, and Iran is cozying up to China. Other bad actors like Zimbabwe's Robert Mugabe and Sudan are cozying up to China.

"America's global hegemony is already under challenge, and that challenge is going to become more and more evident as the extent of the relative US economic decline becomes evident. Right now, the US dollar is probably 40 per cent overvalued versus the Japanese yen or the Chinese renminbi. How's the US going to look as a global power when the dollar is at 50 per cent of its current value?"

Three Billion New Capitalists by Clyde Prestowitz is published by Basic Books at $US39.95

MOSCOW - Russia and China might consider replacing dollar in bilateral trade, a senior banking expert said on the eve of the Third Russian-Chinese Banking Forum opening Monday.

Garegin Torsunyan, president of the Association of Russian Banks (ARB), said, "There are many ways to establish direct currency exchange and appropriate exchange rates with our Chinese partners."

A certain step in this direction has already been made when Russian and Chinese banks were allowed to open mutual corresponding accounts, he added.

At the same time, Torsunyan said it was difficult to establish direct currency exchange considering that the Russian currency was not convertible abroad.

The use of the dollar in servicing Russian-Chinese trade is the result of Russia's monetary policy, the expert said.

"The fact that we have been using the dollar in our trade with a neighboring country for many years while having a more stable and undervalued domestic currency is the result of our monetary and economic policy," he said.

"The value of the Russian national currency is much higher than we have currently set," he added. "Foreign countries evaluate the Russian currency on the basis of our own evaluation."

According to the expert, such under-evaluation is the result of "inferiority complex" and lack of self-respect in economic sphere.

In mid-term perspective, there is a necessity to form a "base currency" in South East Asia, he added. The Euro program was developed in the 1960s to counter the expansion of the dollar. Therefore, it is logical to form the third and the fourth global currencies, Torsunyan said.

"Until recently we believed it would be the yen, although at present this prospect is doubtful," the banking expert said.

He does not discard the possibility that the yuan or the unified currency of China and South Korea could be chosen as a "base currency" in the future.

I briefly spoke to my brother on the phone a few days ago, and told him I thought "we" were going to nuke Iran. Immediately...and without drawing a breath, he responded, "Yeah, we have to".

"We have to?" I questioned in my head, before remembering that I was talking to one of the true believers.......but he was my brother, and I wanted him to understand the truth about the twisted chain of events that was bringing us to the eve of destruction, so I told him, I thought that the collapse of the Twin Towers was a "put up" deal. "It's on tape! I saw the plane crash into it!"

"I know. I know." I quickly came back. "I'm not saying that. I'm saying, the way the towers came down so neatly. It looked like they were professionally blown."

"I don't believe that!" he snapped back. "The jet fuel melted the beams."

"There's also some tape out there that looks like HE (high explosive) detonations, well below the fires."

"Well, you can believe what you want to believe." he shoved back at me, sounding more like he meant to say, "You can believe what you want to believe.....you crazy sum-bitch," and then quickly changed the subject.

And so goes America.......or at least, a good portion of it that still believes in the administration's myth of fighting infidel terrorists who hate us for our freedom. Although the neo-con's plan of controlling the Middle Eastern oil reserves has been in the making for decades, our countrymen seem to be either marginalizing the ominous risk we are taking, as if this was to be just another "cold war" sideshow...or they are embracing the ideology, be it for "national security", money or a misguided religious belief that God wants us to kill these infidels. Just as the world ignored Adolf Hitler's book, Mein Kampf, which laid out der Furher's "road map for peace", in Europe...many of our countrymen have ignored the true intentions of our "War on Terror".

Most of the country is now focused on the debate over bringing our troops home...and when? They do not seem to realize that the war in Iraq, important as it seems at the moment, is nothing compared to where we're going to be, in a very short time. While the networks are dazzling us with politicians like Senator Hagel (R)Nebraska, labeling the war another Viet Nam, up against General Schoomaker's latest comments of keeping a hundred thousand troops in Iraq, for the next four years , war planners have been preparing for our next move. Most sane people would assume that the administration already has it's hands full, wrestling with the ever-worsening insurgency in Iraq, while trying to stamp out the fires of the growing war protest at home...and is certainly in no shape to take on the Persian Empire! We could stop now and try to solidify our defense of the North and Western Persian Gulf oil fields, guaranteeing our "fair share" of the remaining reserves and preventing any threat of boycott, as we saw in the 70s...but the strategy has never been to simply supply and protect the United States and it's oil fueled economy. The strategy is to control virtually all Middle Eastern reserves and thereby, control our global competitors, such as China and Japan...but to accomplish this, we must also control Iran's vast oil and gas reserves. Without that, we have no creditable monopoly.

To make matters worse, our "nouveau oil rich", Asian friends and former Soviet satellite states are beginning to jump ship on the Bush government. Uzbekistan, Kazakhstan, Krygyzia and Tajikistan joined other Shanghai Cooperation Organization (SCO) members Russia, China, India, Pakistan and Iran, in calling for the U.S. to vacate the bases "seized" in the aftermath of 9/11 (Uzbekistan, in particular, asked us to leave, supposedly because we criticized them for violently putting down an anti-government demonstration...but of course, the U.S. is well known for provoking such rebellions, with selfish hopes of gaining control over the host country).

Now, Russia and China have begun running joint military maneuvers, after shaking hands on an anti-globalization pact, and the Chinese have sent senior military attaches to Iran to discuss cooperation between their armed forces, as the two countries have just signed a preliminary accord worth $70 billion to $100 billion, by which China will purchase Iranian oil and gas and help develop Iran's Yadavaran oil field near the Iraqi border. Earlier this year, China also agreed to buy $20 billion in liquefied natural gas from Iran over a quarter-century.

With the fiasco of Iraq bearing down harder on the administration each day...and the slow starting but finally moving war protest, sparked by Cindy Sheehan, the neo-cons must now move forward with all haste. They are on the clock and they will be forced to act soon...or they, themselves, will be sacrificed by the "powers that be". But the question remains, how can they possibly attack Iran, with the military already so extended in Iraq and Afghanistan?

Of course, we first have to have a "legitimate" reason to commence hostilities. With Iran's refusal to stop enriching uranium, we could go to the U.N. Security Council but that would take forever and China would probably veto any war resolution.....and as we know, from the last time we went to the U.N., the Security Council has their timetable...and Bush has his.

Some think we will immediately retaliate for a "false flag" attack, which many claim happened on 9/11 in the United States and on 7/7 in the U.K. If that's the case, the only ones who will believe it at this point are the terminally ignorant Bush believers...but unfortunately, they still make up a sizable portion of this country, and, as long as they remain "believers", the neo-cons cannot be forced out of power.

Another possibility is the U.S. Navy blockading the Straits of Hormuz, cutting the supply of oil going out of Iran, and therefore, the amount of money coming in. That sanction could be justified by Iran's refusal to stop processing uranium and their assistance to the insurgency in Iraq. Blockades are still considered acts of war, and I feel sure this would bring a swift and violent response from Teheran, upon our military in the region, and targets here at home, escalating the situation, tit for tat, into total war between the two parties.

Israel could also incite the war, as they too, have a great stake in stopping Iran from producing the bomb. They could attack Iran's bunkers, using American built F-15s, with either nuclear or conventional warheads, as they did at Osirak in 1981. Some have suggested that this would take the heat off of the U.S., giving us plausible deniability. Iran, of course, would retaliate with any and all possible means, making little distinction between the Israelis and their U.S. allies. Whatever the provocation, we will attack with a massive bombing campaign throughout the country, hitting military command and control, radar and air-defense systems, troop concentrations, and bunkers deep within the ground that are said to contain Iran's nuclear research and production. Although we have conventional bunker busters, totally capable of "closing down" those sites down, it seems we will be using mini-nukes, just to show the world that we can...and will...use them. Although the Pentagon first tried to advertise the new "mini-nukes" as low-yield, safe below the ground weapons, Congressional studies show that the radiation contamination would be no less than that of the same kilo-tonage burst at ground level. In other words, these mini-nukes will not only destroy anything or anyone within the bunker and the immediate area...but will also kill hundreds of thousands, down wind, with widespread contamination.

Not only do we not have to use these nuclear weapons to close down the bunkers, buried deep below the Persian dessert, we would not have to occupy Iran...but only a little piece of it, to capture the reserves. There ain't much oil in downtown Teheran.....so, why go downtown? The historically Arab province of Khuzeatan (Most Iranian Arabs live in the province capitol of Ahwaz or along the coast of the Persian Gulf), where most of Iran's oil reserves are located, recently held demonstrations for independence from "Persian" Iran, and is the same area that Saddam tried to "liberate", during the 1980's, Iran-Iraq War. With the province's common border with Iraq and the U.S. military close at hand, we could support the uprising by recognizing Khuzeatan's independence and rushing in forces to protect our new "friend"...and their oil.

The cold, hard facts are, it doesn't really matter how this all will begin nor what justification will be used to set it off. If we strike Iran with nuclear weapons, then other nuclear powers will use this precedent to justify their own use of the bomb, against their own "terrorists". Russia could use them against the Chechnyans and China might use them against Taiwan. Tit for tat, ally for ally, the entire world will, once again, stumble their way into global war. Only this time, we have the power to kill virtually every living thing on Earth.

My brother, we have kept the "genie" in the bottle for sixty years. You have lived your life, I have lived mine...but our children have not lived theirs. If we do not stop these mad men...and stop them, now....... World War III has already begun.

How does one explain all the misguided, unwise, sometimes outright boneheaded things the Bush administration has done since taking over nearly five years ago, and continues to do on a pretty much daily basis? How is it possible for a group of supposedly intelligent, experienced individuals to take this many wrong turns? Wouldn't you think that once in a while, even by accident, that George W. Bush and his advisers would make a decision that made sense?

Can this much mismanagement happen totally at random? Would the occupants of the Bush White House have us believe that all these things, these missteps, these miscalculations, these attempts to deceive, that they all, you know, just kind of happened?

I'm not so sure. And I'm not the only one starting to ask questions. More and more, it seems unlikely that mere human beings could make this many mistakes without some sort of misguiding force, a kind of supernatural entity that has trouble remembering where it put its car keys.

That's where unintelligent design comes in.

Once one embraces the concept of unintelligent design — a kind of doofus-like cosmic force — it becomes much easier to get your head around the operations of the Bush administration.

I mean, making executive decisions randomly would still probably result in doing the right thing 50 per cent of the time. So how does one explain such consistent goofiness, like invading a nation based on evidence that the administration knew didn't exist in the first place?

Or exposing a CIA employee's identity just to settle some personal scores?

Ignoring international trade agreements you've signed on to?

Adopting a head-in-the-sand approach to the connection between human activity on the planet Earth and global warming?

Letting the boss be photographed on the ranch, golfing and cutting brush and chilling out and generally having a good ol' time while young Americans die overseas?

Not having the media savvy to have that same boss take a stroll down the driveway and chat with a woman whose son was one of those young Americans?

Doing an end run around the Senate to send a loose cannon to the U.N., while supposedly promoting democracy abroad?

Not firing a defence secretary who totally misjudged how many troops would be needed to secure Iraq?

Giving rich folks back home huge tax cuts while soldiers go without adequate body armour?

Looking upon scientific and medical innovations like they're some sort of voodoo and letting other nations take the lead in these areas for the first time?

You can't tell me that some magnificently dumb force, more confused and baffled than all the members of the Bush administration put together, didn't have a hand in this.

But I know what some of you skeptical types are thinking. You're thinking, hey pal, where's your proof? Where's the actual evidence, the cold, hard facts, to support my contention that unintelligent design has played a role in the decisions of the Bush administration?

Well, that's easy. I have none. Not one shred of solid evidence. But let me ask you this. What evidence do you have that I'm wrong? My theory explaining Bush White House screwups is, by its very nature, impossible to disprove. And if you can't disprove it, then you don't have much choice but to consider it as an alternative.

That's why I'm pushing to have universities start teaching my unintelligent design theory in their political science courses. Sure, these know-it-all professors may be teaching that Bush and his ilk do what they do because they're captives of their own ideology, that they're pandering to baser instincts and popular prejudices to shore up support among certain constituencies, that they're willing to put their own political interests ahead of those of regular Americans.

Yeah, well, maybe. But my theory doesn't take as long to explain on the final.

SMYRNA, Tenn. - Members of a church say God is punishing American soldiers for defending a country that harbors gays, and they brought their anti-gay message to the funerals Saturday of two Tennessee soldiers killed in Iraq.

The church members were met with scorn from local residents. They chased the church members cars' down a highway, waving flags and screaming "God bless America."

"My husband is over there, so I'm here to show my support," 41-year-old Connie Ditmore said as she waved and American flag and as tears came to her eyes. "To do this at a funeral is disrespectful of a family, no matter what your beliefs are."

The Rev. Fred Phelps, founder of Westboro Baptist in Kansas, contends that American soldiers are being killed in Iraq as vengeance from God for protecting a country that harbors gays. The church, which is not affiliated with a larger denomination, is made up mostly of Phelps' children, grandchildren and in-laws.

The church members carried signs and shouted things such as "God hates fags" and "God hates you."

About 10 church members protested near Smyrna United Methodist Church and nearly 20 stood outside the National Guard Armory in Ashland City. Members have demonstrated at other soldier funerals across the nation.

The funerals were for Staff Sgt. Asbury Fred Hawn II, 35, in Smyrna and Spc. Gary Reese Jr., 22, in Ashland City. Both were members of the Tennessee National Guard. [...]

With the Pentagon still in flames from the Sept. 11 terrorist attack, Shawn Kelley arrived to survey a surreal scene: mangled metal, charred ruins and firefighters hosing the smoky roof, crawling over rubble, searching for survivors.

Kelley had come to the Pentagon to help deal with a terrorist strike on America. Four years later, he's working to prevent one.

Every month or so, Kelley travels from his suburban Washington home to the New Mexico desert to train police, firefighters and others how to detect — and stop — suicide bombers.

For Kelley, who helped coordinate firefighters at the Pentagon, this is no textbook lesson. He's convinced America will face an attack again.

"It's not 'if' it's going to happen," he says. "It's 'when' it's going to happen." [...]

BAGHDAD - US forces in Baghdad shot dead a Reuters television soundman and wounded a cameraman, Iraqi police said.

"American soldiers opened fire on the team, killing the soundman and wounding the cameraman before detaining him," the police said.

The crew had arrived at the scene of an earlier rebel attack on an Iraqi police convoy in al-Adel district, west of Baghdad, which killed two and wounded one, police said.

US ambassador to Iraq Zalmay Khalilzad said the incident was unfortunate but stopped short of apologising.

"This is unfortunate... but sometimes mistakes are made. We don't target civilians," he said when questioned by reporters covering the finalisation of Iraq's first post-Saddam Hussein constitution.

"Military operations unfortunately are not a perfect science... Sometimes mistakes happen, and when they are made we investigate," he added.

Reuters said 35-year-old Waleed Khaled was shot in the face and took at least four bullets to the chest, while cameraman Haidar Kadhem was wounded in the back.

"I heard shooting, looked up and saw an American sniper on the roof of the shopping centre," Kadhem told colleagues who arrived at the scene before he was detained by US troops, it said.

Two Iraqi colleagues who arrived on the scene minutes after the shooting were also briefly detained, then released, Reuters said.

They said that Khaled was still alive when they reached him, and that US troops refused to give him water despite the blazing sun.

"They (US soldiers) treated us like dogs. They made us... including Khaled who was wounded and asking for water, stay in the sun on the road," Reuters quoted a television crew member Mohammed Idriss as saying. [...]

BEERSHEVA, Israel - A Palestinian blew himself up while trying to board a bus in southern Israel in the first suicide attack since the evacuation of settlers from Gaza, puncturing hopes that the historic pullout would break the cycle of violence.

Palestinian militant groups Al-Aqsa Martyrs Brigades linked to
Fatah and Al-Quds Brigades of Islamic Jihad jointly claimed the bombing, in a statement sent to AFP.

Around 40 people were taken to hospital after the blast in Beersheva, the vast majority of them suffering from shock, although two were in a serious condition, medical sources said.

More serious carnage appeared to have been averted after security at the city's main terminus prevented the attacker from boarding.

The attack comes almost exactly a year to the day after 15 Israelis were killed in a twin attack on two buses in Beersheva.

"This operation is a response to the arrogance of the Zionist occupation, to the terrible massacre committed in Tulkarem against the mujahedin of the Al-Quds Brigades and the Al-Aqsa Martyrs Brigades," the groups said in a joint statement.

Earlier Sunday an anonymous caller had telephoned AFP, claiming responsibility for the attack in the two groups' names.

The statement said the attack was "a response to the Nazi declarations (by Israel) concerning the continued presence of its soldiers at access points to the Gaza Strip as well as the annexation of our people's land in Jerusalem."

An Israeli ministerial commission recommended on Friday that Israel maintain security control of the Gaza border despite the deployment of 750 Egyptian border guards to clamp down on smuggling.

Israeli troops on Wednesday killed four activists of Palestinian leader Mahmud Abbas's Fatah movement and a local leader of Islamic Jihad during an arrest operation in the West Bank town of Tulkarem.

Four masked gunmen from Islamic Jihad parading in the Gaza town of Khan Yunis earlier said the attack was revenge for the Israeli operation in Tulkarem, and warned of more strikes against Israel.

"We will retaliate for Israeli attacks and we will continue our resistance in the West Bank," said one of the black-hooded men outside the town's centuries-old stone castle.

Earlier, the anonymous caller had told AFP the attack was carried out by a man named Alaa Zaakik, 25, from Beit Omar, which lies between Bethlehem and Hebron in the West Bank.

But Zaakik's family, contacted by AFP, denied he had carried out the attack, stressing he was arrested for questioning by Israeli forces on Saturday. A Palestinian security source also said he could not have been the bomber.

The statement said the name of the suicide bomber "will be revealed later for security reasons."

Abbas told reporters that he condemned the suicide attack, describing it as a "terrorist operation."

His national security advisor Jibril Rajub said however that Israel had to expect the consequence of its "crime" in Tulkarem.

"Israel must know that if it continues with this state terrorism it will lead to more violence in the region," Rajub told AFP.

Israel's Internal Security Minister Gideon Ezra said that the action of the bus driver and two security guards had "averted a major disaster".

Ezra said Israel would "not hesitate to respond" to the attack which he said underlined how "the Palestinian Authority must dismantle the terrorist groups."

But he also expressed hope that it would not herald a start to a new round of bloodshed.

"I think and I hope that this attack does not mark the start of a wave of terrorism," Ezra told AFP at the scene of the blast.

The bus driver who alerted the security guards said he had challenged the bomber as he looked suspicious. "He was very pale so I warned the guards," Eli Horech said.

Israeli Prime Minister Ariel Sharon has argued that his controversial pullout of settlers and troops from Gaza, the first time that Israel has left occupied Palestinian territory, would improve the security of Israelis.

Right-wing critics however claimed that it encourages militant groups who have been portraying the pullout as an act of surrender. [...]

The smiling couple enjoying an alfresco lunch in one of Paris's busiest street cafés did not notice that they were being photographed. In an unguarded moment, the man, dressed casually in denim shirt and jeans, leant across to hold his companion's hand. With that simple gesture, the future of one of France's most high-profile political marriages was thrown into doubt.

Last week, the photographs of Cécilia Sarkozy - the 47-year-old wife of the French interior minister, Nicolas Sarkozy - and her alleged lover, the events organiser Richard Attias, were published in the weekly magazine Paris Match. There was also a shot of the two of them sightseeing in New York, accompanied by an article detailing the couple's various public appearances over the past few months.

Now Mr Sarkozy, 50, is believed to be considering divorce rather than run the risk of damaging his political reputation as leader of the Union for a Popular Majority (UMP) political party.

The Sarkozys are also, according to political colleagues, taking advice on whether to sue Paris Match. Hervé Mariton, the vice-president of the UMP, told The Sunday Telegraph that the magazine article was "regrettable".

"Recently, Paris Match has pushed the limits and has been put in its place," he said. "It is being sued by the former prime minister, Jean-Pierre Raffarin, for taking photos of his holiday in Crete following his resignation. Jean-Louis Borloo, the minister of social cohesion, sued the magazine for taking snaps of a weekend away with his wife."

Although the French are relatively tolerant of their male politicians having affairs, they are unlikely to be as sympathetic towards a cuckolded husband. "Nearly all of our successful male politicians have a history of affairs and divorces," said one political commentator. "François Mitterrand had a long-standing mistress and this was seen as evidence of his masculinity - his virility, if you like. For Sarkozy, it's the very opposite."

The damage has been further compounded by the embarrassingly public nature of the alleged affair. The relationship is believed to have started last autumn after the Moroccan-born Mr Attias, 45, staged an American-style convention to anoint Mr Sarkozy as president of the UMP, which was founded by President Chirac. Mrs Sarkozy subsequently appeared at Mr Attias's side in May, at the World Economic Forum in Jordan, which he also organised.

Since then, Mr Attias, who has a 15-year-old daughter from his first marriage, has had his contract to organise UMP events terminated.

In July, Mrs Sarkozy and Mr Attias were seen holidaying in Cannes, where they are said to have hired a convertible car, walked to the supermarket to do their shopping and to have dined in some of the city's most prestigious restaurants.

Later, they were spotted sightseeing in Manhattan and Paris.

Sources in Mr Sarkozy's entourage have blamed President Chirac's aides for spreading the rumours to undermine the president's chief rival and would-be successor in the Élysée Palace in 2007 - a change that, apart from anything else, could well be good for Britain. Mr Sarkozy, a reform-minded conservative, appears far less obsessed than the present leader with trying to blame Britain for European Union problems.

Although Mr Sarkozy's marital troubles were already public knowledge - the interior minister admitted to the media in May that he had given himself 100 days to save his marriage - publication of the photographs has raised suspicions of a political dirty tricks campaign.

Mr Sarkozy has been in open mutiny against the Mr Chirac for the past three years and has told journalists and colleagues that he suspects Dominiqe de Villepin, the prime minister and a Chirac protégé, of wanting to undermine his growing popularity.

The notoriously strict privacy laws in France ensure that such intrusion into the private lives of public figures is rare but an exception is believed to have been made with the Sarkozys because of their willingness to talk about their marriage in public.

Paris newspaper editors say that their limited reporting of the Cécilia affair was justified because Mr Sarkozy had paraded his wife and son in a bid to boost his presidential prospects. "I warned him that all this American-style publicising his family would come back to bite him one day," said a friend of the minister.

But Mr Mariton insisted that "most French politicians and indeed journalists continue to give great importance to the French tradition of separating public and private life".

He added that it seemed as if the French press simply wanted to punish Mrs Sarkozy for "playing a different role from other politicians' wives".

Until recently, Mrs Sarkozy was her husband's chief-of-staff and has been compared to Jackie Onassis and Hillary Clinton. Tall, glamorous and a former fashion model, she has been closely associated with her husband's political rise and is considered an asset in a political world dominated by elderly men.

Some sources are now privately expressing doubt as to whether Mr Sarkozy will be able to realise his political ambitions without her. But she is said to have been uneasy in the limelight, having inherited the bohemian spirit of her maternal great-grandfather, the Spanish composer Isaac Albéniz who died in 1909. Her father, André Ciganer, was a Russian emigré who fled the Soviet regime and became a furrier in Paris.

"I don't see myself as a First Lady," she has said. "That bores me. I'm not politically correct: I potter about in jeans, combats or cowboy boots."

She married her first husband, Jacques Martin, a French television star with whom she had two children, when she was 20. Coincidentally, the marriage certificate was signed by Mr Sarkozy, in his capacity at the time as mayor of Neuilly.

She was divorced in 1989 and married Mr Sarkozy seven years later. They have an eight-year-old son, Louis.

Mrs Sarkozy has joined her husband, holidaying in the seaside resort of Pyla in south-west France. The couple have been seen jogging together.

A spokesman for Mr Sarkozy said: "You will have no comment from us. There's no point in reacting to rumour."

A moderate earthquake occurred at 10:58:02 (UTC) on Saturday, August 27, 2005. The magnitude 5.4 event has been located in MINDANAO, PHILIPPINES. The hypocentral depth was estimated to be 172 km (107 miles). (This event has been reviewed by a seismologist.)

A strong earthquake occurred at 18:38:19 (UTC) on Saturday, August 27, 2005. The magnitude 6.0 event has been located SOUTH OF PANAMA. (This event has been reviewed by a seismologist.)

A moderate earthquake occurred at 04:43:40 (UTC) on Sunday, August 28, 2005. The magnitude 5.5 event has been located in NORTHERN SUMATRA, INDONESIA. (This event has been reviewed by a seismologist.)

BEIJING, China (AP) -- China, home to more than 300 million smokers, has ratified an international treaty prohibiting tobacco advertising and will ban tobacco vending machines, the government said Monday.

The World Health Organization Framework Convention on Tobacco Control was ratified Sunday by the National People's Congress, the official Xinhua News Agency said.

Parliament leaders "supported the treaty by announcing that China will ban tobacco vending machines of any kind" in mainland China, Hong Kong and Macau, Xinhua said.

The treaty requires China to ban tobacco advertising, promotion and sponsorship on radio, television, print media and the Internet within five years, according to Xinhua.

It also prohibits tobacco company sponsorship of international events and activities.

China has tightened regulations meant to prevent minors from buying tobacco, but enforcement has been uneven.

Some 5 million smokers in China are under 18, according to the government.

Chinese tobacco companies sold 1.8 trillion cigarettes in 2003, Xinhua said, citing the Chinese Association on Smoking Control.