Gold prices seem to have broken through any past barriers. Here is a chart showing changes in the price of gold in number of weeks so far in 2005:



Here is Steven Lagavulin:

A Crisis of Confidence

Gold is on an unbelievable tear lately, blowing right through $500/oz and surging higher every day. And while I don't much talk about day-to-day market news, I think this is an incredibly significant event, and therefore one to take note of. For one thing it means gold has likely broken free of the chains the monetary-control stormtroopers have had it in for more than a decade. Now there's a whole host of reasons why it's in the interest of certain federal authorities to keep gold on a tight rein, but suffice it to say they all boil down to one thing: confidence. Authority is built on a foundation of popular confidence, and the major flagpost of that confidence is monetary strength (ie. strength in the dollar--or at least 'perceived' strength since in the larger scope controlled weakness is actually the integral purpose of the system...).

So it seems appropriate now to paint this picture in the proper light.

In the financial markets there are two ends to every stick as far as price movement is concerned, and such is especially the case with the price of gold. The common-man's viewpoint (which is also the view of the mass media) is simply that the "price" of gold is going up, but this incorrectly implies that the value of the dollar (or any other currency against which it's being measured) is holding stable and that it's only gold itself that is in rising demand. But in the price of any security or commodity, both the thing itself and the underlying currency in question are in flux, as neither one is of stable value. Therefore the price only reflects their value at a particular point relative to each other. This is why it can be observed that in a high inflation environment -- and all things being equal -- the Dow Jones Industrial Average will naturally tend to rise, but that it's a false assumption to believe that it's actually increasing in value. It's simply 'adjusting' itself to the declining value of the dollar.

However our particular case is special in that gold is generally held to be the most stable reference of value we know (when it's not being manipulated), for a host of practical reasons we probably don't need to go into. So the other end of the stick, which is actually the more valid point of view, holds that gold is the reference point by which the value of the dollar is being judged.

So long story short, I think there are a couple of scenarios: either gold has finally broken free of the gold-police and is racing to discover its real value in relation to the dollar and other currencies, or else we're witnessing a decisive plunge in currency confidence -- not just the US dollar but paper currencies in general, since investors are not simply fleeing one currency in favor of another but are effectively fleeing currencies altogether for real asset value (which, by the way, might suggest a possible connection with the recent decline in the real estate market -- the most recent wildly-popular avenue of "real asset value"...).

Of course fans of paper-money (you know, the Gub-mint) could argue that neither case is true, that this is simply an isolated surge in the demand for gold, an investment trend or secular commodity trend or such. But I'd protest that a move of this strength occuring in combination with strong movements in other precious metals, and in further conjunction with widespread social, political and economic crises, that what we're actually seeing is a combination of both these scenarios. In other words, a general crisis of confidence and flight to quality which has overwhelmed the Fed's ability to control the market any longer.

For those who are interested (and who don't regularly follow the deconsumption news room) I'll reference this November Barron's interview with Toqueville Gold Fund manager John Hathaway back in November, where he very effectively makes a case, as I interpret it, that gold is destined to rise simply because investors are fast running out of other options. And that my friends is a crisis of confidence, in a nutshell.

Also I think it's also important to note that in my experience market moves like this almost invariably anticipate a more general awareness in the social sphere....so I would expect to see this important tipping-point echoed in a myriad other ways over the next few months. And I might further add that there are many gold market analysts who have long held that a strong surge in gold would likely place some of those aforementioned monetary-control-freaks in a very disconcerting short-covering situation.

As for the housing bubble:

Housing market decline may cost 800,000 jobs, study says

December 8, 2005
Associated Press

A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to an economic report released Wednesday.

The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.

"We expect housing to start slowing the economy this quarter or the next," said Edward Leamer, director of the study done at the University of California, Los Angeles.

...The report cited several signs the decline could be under way:

- New construction of housing in October was down 5.6 percent from the previous month, with new construction of single-family housing accounting for a 3.7 percent dip.

- New-home sales have declined.

- Applications for home mortgages have trended downward since late September as rates increased.

- In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand.

"On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich wrote in the forecast. "The remaining questions are how hard the fall will be and when it will begin."

Let’s take a closer look at the signs in the crucial Boston market, one of the bubble regions, where asking prices are beginning a free-fall, dropping by a third in many cases:

Foreclosures up 35 percent this year

By Ken Maguire
Associated Press Writer
December 7, 2005

BOSTON -- Home mortgage foreclosure filings are on the rise in gritty cities and leafy suburbs, according to a new report showing a 35 percent increase statewide through October.

Filings in suburban Reading more than tripled and there's been a 113 percent increase in Lawrence compared with the same period last year, according to Land Court filings tracked by Framingham-based ForeclosuresMass.

"It spans the whole gamut of income levels," said Jeremy Shapiro, president of ForeclosuresMass.

The number of foreclosures filed through Oct. 31 was 9,459, compared with 7,003 in the same 10-month period last year, the report said. Essex County had the largest increase, at 50 percent.

Adjustable-rate and interest-only loans, which are riskier than traditional fixed-rate loans, are partly to blame. They've become popular because they cost less up front, but they require higher payments typically after a year or two.

"A lot of people don't realize what they're getting themselves into," said Jim Wilde, executive director of the Merrimack Valley Housing Partnership, which administers homebuying classes to residents of Lowell, Lawrence and the surrounding towns.

Interest-only loans, in which homeowners don't pay down the principle right away, are "gimmicks in order to qualify (homebuyers) for the first six months or year," Wilde said. "When the principle payments kick in, they're behind the 8-ball."

Wilde said that on Wednesday alone he talked one couple out of signing a "no documentation" loan that would have cost $2,000 a month. The prospective buyers had an annual household income of just $28,000.

"They would have never been able to make the payments," he said.

Among the state's three largest cities, Worcester had the largest increase with 52 percent, while filings were up 42 percent in Boston, and 20 percent in Springfield, Shapiro said.

In the suburbs, Reading had 28 filings compared with just eight in the first 10 months of 2004, the report said. Burlington's filings tripled, from nine to 27. Seekonk had a 163 percent increase, while Wareham was up 103 percent.

Another sign that the crash is happening is that asking prices in the Boston area are dropping in many cases by more than $100,000.

Sellers chop asking prices as housing market slows

Cuts of up to 20% are now common as analysts see signs of a 'hard landing'

By Kimberly Blanton
Globe Staff
December 9, 2005

Boston-area homeowners trying to sell their houses are sharply reducing asking prices -- in some cases, by $100,000 or more -- in response to the sudden slowdown in the real estate market.

Demand for single-family homes has declined as prices have risen in recent years and interest rates have begun to climb, causing the number of properties on the market to pile up.

The median price of a single-family home in Massachusetts has dropped 7 percent in the past two months, to $349,000 for sales that closed in October. But reductions in asking prices of 10 percent or 20 percent are now common in both high and moderately priced neighborhoods, according to real estate agents and listings of homes for sale. In Cambridge, price cuts averaged $300,000 in a sampling of a dozen houses listed in the $1.25 million to $4.3 million price range. In suburbs like Tewksbury and Hopkinton, homes originally listed for around $500,000 have been slashed to the low $400,000s.

"The evidence -- both early data and the anecdotes -- are pointing more toward a hard rather than a soft landing" in the housing market, said Nicholas Perna, an economic consultant in Ridgefield, Conn. "Prices could come down. Could it be 10 to 15 percent? There's no way of knowing, but what we're getting is more clues that you've got a decline in prices underway.

Agents said price cutting began last summer but accelerated in the past two months and is far more frenzied than in 2004, a year of record sales volume.

Today, homeowners in no rush still have the option of letting their listing expire, unsold, and putting the house back on the market in the spring when brokers hope conditions will improve.

But those who need to sell quickly -- couples in the midst of a divorce, employees who are relocating to another region, or owners who are purchasing another home, for example -- may have no choice but to entertain offers they would have scoffed at months or even weeks ago.

"It's unbelievable," said Polly Drinkwater, an agent with Coldwell Banker Cambridge, who has dropped the price on one of her listings $550,000, or 22 percent, since March. These "are very large drops," she said.

Last February, Gary and Susan Kazmer were confident of selling their Foxborough home for $949,900. He had landed a high-level job in Manhattan, and the couple planned to relocate their three daughters during the summer to a house they purchased in Mendham, N.J., with a bridge loan.

They built the Foxborough house on a pond in 1997 and filled it with extras: two marble fireplaces and hardwood floors with dark cherry borders. ''We called it our wow house," he said.

But it attracted little interest at that price, and Gil Campos of Re/Max Real Estate Center in Foxborough lowered the price to $899,000 in early August. Since then, it has been reduced four times, to $800,000. ''That's an unbelievable spiral," he said.

The Kazmers' limbo ended this week, when they accepted an offer, which Campos declined to disclose.

In spite of the collapse (I think we no longer need call it an "impending collapse" - it’s happening), consumer confidence is rising to allow producers and retailers to extract some more surplus for one last holiday season. A reader wrote in:

Regarding retail sales and gas prices: [While gasoline prices have fallen, they're still above last year's levels, and home heating costs are also expected to be high.] It'll be interesting to see what happens to gasoline prices about two weeks after the shopping season is over. I've heard it suggested that gas prices fell to accomodate the retail interests and ensure a fairly good Christmas shopping season.

In other words, gas prices fell because one corporate sector (oil) is scratching the back of another corporate sector (retail, Wal Mart) for a couple of key profit months. I wouldn't be the least bit surprised if gas prices went back up to $2.50-2.60 a gallon [after the holidays].

That seems to be the case and it seems to have worked, given the fact that economic optimism is on the rise in the United States during the crucial holiday shopping season:

Poll Shows New Optimism About the Economy

By JEANNINE AVERSA
AP Economics Writer

People are feeling better about the economy and their own financial situations, a hopeful sign they'll act more like Santas than Grinches while holiday shopping. The RBC CASH Index, based on polling by Ipsos, showed that consumer confidence clocked in at 85.5 in December, the second-highest reading of this year.

The pickup builds upon the rebound in consumer confidence staged in November, when the index jumped to 81. That revival came after confidence had been stuck in the doldrums in September and October, reflecting worries about sky-high energy prices and other fallout from the Gulf Coast hurricanes.

Economists attributed the December improvement to a retreat in gasoline prices, a ramp up in hiring and solid growth being logged by the overall economy.

"I think shoppers will be in a better frame of mind and may be more inclined to spend. It should be a reasonably merry Christmas," said Bill Cheney, chief economist at John Hancock Financial Services. "I imagine shoppers are feeling pretty good about the holiday even if there is some background insecurity driven by heating bills."

The fresh consumer confidence reading came after a string of good economic news.

Last week, the government reported the economy added 215,000 jobs in November, a clear sign businesses got back in the hiring groove after a two-month hurricane-spawned lull.

Another government report last week showed the economy grew at an energetic 4.3 percent rate in the July-to-September quarter despite the hurricanes' ill effects.
Many economists are confident solid economic momentum is being maintained in the current October-to-December quarter.

Against this backdrop, the National Retail Federation is predicting holiday sales this year will increase by a solid 6 percent from last year.

Still, just how generous shoppers may be feeling during the holidays will be influenced in part by how much home heating bills — pushed up by record high natural gas prices — crimp household budgets, analysts said.

Despite the December rise in consumer confidence, it is still lower than it was last December, when consumer confidence stood at 93.9.

...The biggest over-the-month improvement came from a measure looking at consumers' economic expectations over the next six months, including conditions where they live or work and their own financial positions.

That expectations measure rose to 53.9 in December, up from 44.5 in November. This gauge, which faltered dramatically in September and fell into negative territory, has risen since then but is well below the 70.5 reading registered in December 2004.

Consumers' feelings about jobs remained buoyant at 116.5 in December, following a strong reading of 119.8 in November. A year ago, this measure was at 111.1

A gauge looking at consumers' sentiments about current economic conditions rose to 92.8 in December. That was up from 91.1 in November, but was down from 102.7 in December 2004.

Another measure tracking consumers' feelings about making a purchase, saving and other investment decisions increased to 89.5 in December from 82.8 in the prior month. A year ago, this gauge stood at 99.2.

How can people be so optimistic? Is it all tied to oil prices? Are we that easy? Chad Hudson, in Can Consumers Save Christmas? suggests, as does the reader quoted above, that this is no accident:

Every time it appears that consumers will start to retrench, some form of stimulus has been injected to spur consumer spending. With the housing boom starting to get long in the tooth, the last boost to consumer spending will diminish. While it is likely consumers will come through for the holiday season, it might prove to be the last hurrah. For retailers, the expansion of retail space over the past several years will exacerbate any slowdown in spending.

How many more types of stimuli to consumer spending can there be? Here’s Paul Craig Roberts:

An Economy Driven By Debt
Don't Confuse the Jobs Hype with the Facts

By PAUL CRAIG ROBERTS
December 3/4, 2005

The November payrolls job report was announced Friday with the usual misleading hype. Spinmeisters made the most out of the 215,000 jobs. Looking beyond the glitter at the real facts, this is what we see. 21,000 of those jobs were government jobs supported by taxpayers. There were only 194,000 new jobs in the private sector.

Of those new jobs, 37,000 are in construction and only 11,000 are in manufacturing. The bulk of the new jobs--144,000--are in domestic services.

Wholesale and retail trade account for 20,000. Food services and drinking places (waitresses and bar tenders) account for 38,000. Health care and social assistance account for 27,000. Professional and business services account for 29,000. Financial activities gained 13,000 jobs. Transportation and warehousing gained 8,000 jobs.

Very few of these jobs result in tradable services that can be exported or help to close the growing gap in the US balance of trade.

The 11,000 new factory jobs and the 15,000 of the previous month are a relief from the usual loss. However, these gains are more than offset by the job cuts recently announced by General Motors and Ford.

Despite the gain in jobs, total hours worked declined as the average workweek fell to 33.7 hours. The decline in the labor force participation rate, a consequence of the shrinkage in well-paying jobs, masks a higher rate of unemployment than the reported 5 percent. The ratio of employment to population fell again in November.

Average hourly earnings (up 3.2 percent over the last year) are not keeping up with the consumer price index (up 4.3 percent).

Consequently, real incomes are falling.

This is not the picture of a healthy economy in which growth in high productivity, high value-added jobs fuel the growth in consumer demand and provide savings to finance Washington's red ink. What we are looking at is an economy that is coming unglued from the loss of jobs that provide ladders of upward mobility and from massive trade and budget deficits that are resulting in unsustainable growth in indebtedness to foreigners.

...Populations are hard pressed when the prices of goods rise relative to the price of labor, because this makes it impossible for the population to maintain its standard of living.

The US economy has been kept alive by low interest rates, which fueled a real estate boom. Consumers have kept growth alive by refinancing their home mortgages and spending the equity in their houses. Their indebtedness has risen.

Debt-fueled growth is qualitatively different from economic growth that results from an increase in high value-added jobs. Economists who look at the 3 percent economic growth rate and conclude that things are fine are fooling themselves and the public. When the real estate boom ends, what will be the source of new spending power?

But U.S. consumers are not total fools, as consumer credit has begun to fall:

Consumer credit slides in October

Wednesday December 7

WASHINGTON (Reuters) - U.S. consumer credit unexpectedly slid by a record $7.20 billion in October, on a big drop in loans taken for cars and boats, a Federal Reserve report showed on Wednesday.

The central bank said total consumer debt outstanding fell 4 percent to a seasonally adjusted $2.157 trillion from a revised $2.164 trillion in September. The rate of decline was the steepest since December 1990, and the dollar drop was the largest fall on record, the Fed told reporters.

Wall Street analysts polled by Reuters had expected a rise of $5.0 billion in consumer credit in October.

The Fed said non-revolving credit -- made up of closed-end loans for cars, boats, education expenses and holidays -- fell $5.58 billion in October.

Revolving credit, which includes credit and charge cards, dipped $1.63 billion.

Any time recently that consumers have gotten too confident, they start scaring us about Bird Flu. Then, when people get too scared to spend, they start circulating positive economic stories. It looks like we are about to shift from positive stories to scare stories about Bird Flu:

Reports detail bird flu effects on US

By Maggie Fox

A pandemic of bird flu could cause a serious recession of the U.S. economy, with immediate costs of between $500 billion and $675 billion, according to two estimates released on Thursday.

Both assume the H5N1 avian influenza now destroying flocks of poultry across Asia and parts of Europe makes the jump into humans and causes serious disease.

So far, H5N1 has killed 69 people and infected 135, but world health experts say it is very close to mutating into a form that easily passes among people.

If it does, it would likely closely resemble the 1918 pandemic strain of flu that killed anywhere between 20 million and 100 million people during World War I, both reports say. This means 30 percent of the population would be infected and more than 2 percent would die, the report from the Congressional Budget Office presumes.

"Further, CBO assumed that those who survived would miss three weeks of work, either because they were sick, because they feared the risk of infection at work, or because they needed to care of family or friends," the report reads.

"In addition to workers' absences, many businesses (such as restaurants and movie theaters) would probably suffer a falloff in demand because people would be afraid to patronize them or because the authorities would close them."

Doctor's offices and hospitals would be overcrowded, the CBO predicts.

"Currently, the United States has approximately 970,000 staffed hospital beds and 100,000 ventilators, with three-quarters of them in use on any given day. As a result, shortages could occur in critical areas such as ventilators, critical care beds, and drugs to treat secondary infections," the report reads.

HOSPITALS SPREADING INFECTION

Hospitals would have difficulty controlling infection and might become sources for spreading the illness, the CBO said -- a fear echoed by another group, the National Center for Policy Analysis.

A second report from New Jersey based WBB Securities LLC estimated 35 percent of the population would become ill and 5 percent would die.

It predicts a one-year economic loss of $488 billion and a permanent economic loss of $1.4 trillion to the U.S. economy.

"If the influenza affected humans at the same level of virulence as the current H5N1 strain, practically all patients would require hospitalization, which would result in a shortage of some 6.5 million hospital beds per day during the pandemic," the WBB report reads.

"Police, fire, sanitation and other critical service providers will be strained with short staff and overtime work, which will impact municipal and state budgets," it adds.

"There may even be civil disturbances caused by people who either believe they can take advantage of the situation or who feel they have little chance of survival so they may as well enjoy themselves while they can."

What the heck is that last statement all about? "Enjoy themselves?" I guess we can expect to see some agents provocateur providing the excuse for a crackdown during an epidemic.

Finally, in honor of the 25th anniversary of John Lennon’s assassination, here is a song he wrote about economics, class power and the Pathocracy. (See also the amazing interview of John Lennnon by Tariq Ali and Robin Blackburn in Counterpunch last week).

Working Class Hero
John Lennon

As soon as your born they make you feel small,
By giving you no time instead of it all,
Till the pain is so big you feel nothing at all.
A Working Class Hero is something to be,
A Working Class Hero is something to be.

They hurt you at home and they hit you at school,
They hate you if you're clever and despise a fool,
Till you're so f------ crazy you can't follow their rules.
A Working Class Hero is something to be,
A Working Class Hero is something to be.

When they've tortured and scared you for twenty odd years,
Then they expect you to pick a career,
When you can't really function you're so full of fear.
A Working Class Hero is something to be,
A Working Class Hero is something to be.

Keep you doped with religon, sex and T.V.,
And you think you're so clever and classless and free,
But you're still f------ peasents as far as I can see.
A Working Class Hero is something to be,
A Working Class Hero is something to be.

There's room at the top I'm telling you still,
But first you must learn how to smile as you kill,
If you want to be like the folks on the hill.
A Working Class Hero is something to be,

Yes , A Working Class Hero is something to be.
If you want to be a hero well just follow me.
If you want to be a hero well just follow me.

© Northern Songs Ltd

If one stops for a moment to reflect on the use of weaponry over the course of history, we see that as a civilization we have indeed made tremendous strides. From hand to hand combat with sticks and stones we moved into bows and arrows. The invention of gunpowder then heralded yet another new age. Since black powder muskets in the Civil War timeframe, we have now engineered and refined our way to high velocity precision rifles. Along the way, advances in aeronautics gave us the ability to shoot at our foes from high above the ground. Advances in science then gave us the ability to exploit the power inherent in the atom. Once combined with aeronautics, we were able to drop atomic bombs from an overhead aircraft not onto an individual below but onto an entire city below. Advances in computer controlled guidance systems now see us launching so called “smart” bombs from great distances using stealth type flying crafts. But, the best is yet to come. We are about to see a radical new type of weapon unveiled on the global stage. This weapon will not rely on explosive technology or flying aircraft. This weapon will not kill enemy troops. This weapon will not see one army invading the territory of another. No, instead this weapon will simply rely on supply and demand, the basic concepts that underpin Economics 101. This new weapon will be a financial weapon. In fact this weapon will be so powerful it will be able to inflict serious harm on the financial stability of an entire adversarial nation. This weapon is the BOURSE. That’s right – the BOURSE. The dictionary defines BOURSE as follows:

BOURSE: a word of French origin meaning a stock exchange for securities trading.

If I have totally confused you, don’t run away. Keep reading and follow my argument

If you think the invasion of Iraq was about 9-11 and Al-Qaida then I urge you to think again. Cast aside all that the major television networks have programmed into your daily thinking, take a deep breath and slowly exhale.

Now, think…real hard. Were any WMD’s (Weapons of Mass Destruction) ever found in Iraq? Has any connection between 9-11 and Saddam Hussein been solidly proven? The answer to both queries is a resounding NO.

So why then would the US, the world’s largest economic entity, undertake an invasion of Iraq to capture and remove leader Saddam Hussein?

The answer is all about economics. More specifically, Currency. That’s right, Currency. You see, Saddam Hussein had developed a very serious, very viable plan to sell Oil from his country in exchange for Euros. Had he succeeded in putting this plan into action, the damage to the stature of the US Dollar as the global reserve currency would have been un-fixable. Oil importing nations would have reduced their holdings of US Dollars and added Euros to their vaults. The damage to the US economy which is entirely predicated on US Dollar supremacy could have been quite serious indeed. So, in the immediate aftermath of 9-11, the US launched a major offensive under the rather attractive name Operation Iraqi Freedom to trounce any Oil for Euros plans once and for all.

But CNN told you a different story. Over and over, night after night you were reminded that Saddam Hussein was a monster. He was sitting on a massive cache of destructive weapons that threatened your safety. He was intimately linked to Al Qaida and global terror. Carefully crafted stories by embedded reporters and film footage of US and British troops moving triumphantly towards Baghdad made the while thing seem larger than life.

Now, fast forward to December 2005. As I write this edition of the Meridian Report, there is a growing sense of deja-vu. This time, it is Iran that is causing problems. But, CNN will have you believe that Iran is causing nuclear problems by refusing to scale back its nuclear program.

The real story is that by March 2006 Iran is threatening to have in place an entity called the Iranian Oil Bourse. Trading of Oil on this exchange will be denominated in – yes you guessed it – Euros.

A well choreographed play from Saddam’s little black book of game day strategies. The Iranian Oil Bourse will go toe to toe and compete for global prominence with NYMEX in New York and the International Petroleum Exchange in London. Oil trading on these exchanges is done in US Dollar terms. That is why when we hear a quote given for Oil it is always basis the US Dollar. Oil is the lifeblood of the global economy, the US Dollar is the global reserve currency and Oil is quoted in US Dollar terms. A simple 1-2-3 argument.

But this simple 1-2-3 argument may be about to come under attack. A successful start-up of trading operations on this Bourse could lead to an erosion of the US Dollar. Hence this Bourse is a de facto weapon. A weapon so ferocious, that has the ability to undermine the entire US economy, and topple the US Dollar from its lofty perch. After all, why would Oil importing nations need to keep as many US Dollars in reserve if they can purchase Oil in Euros?

The ramifications of a weakened US Dollar are serious. Global purchasers of US debt instruments may begin to shy away from a weaker currency in favor of Euro denominated debt instruments. This would place upward pressure on US interest rates and the serious imbalance of the US economy would be laid bare for all to see (as if we don’t already see it). After all, the US has no choice but to keep foreign investors interested in buying US debt. Management of the trade deficit and budget deficit depends on it. The housing market would surely collapse under the weight of higher interest rates. With mortgage rates now above 6% we are already seeing the signs of weakness of the housing market. Now imagine mortgage rates at 8% or even 9%. Given this scenario, it should come as little surprise that China recently moved all of a sudden to re-position its Renminbi currency away from the US Dollar and instead to a basket of global currencies. The Chinese are definitely not stupid. They have excellent relations with Iran and are well aware of the threat this new Bourse poses. Notice how the Chinese still have not told us the exact makeup of this basket? However, you can bet the Euro figures very prominently in the weighting of this basket.

With Operation Iraqi Freedom seemingly stuck in the mud and going nowhere what is the US to do?

Sadly, the answer may be that there is little the US can do. The most powerful military force on the planet may be paralyzed. A simple Bourse – an exchange where Oil is bought and sold – may prove to be the ultimate weapon.

There are rumors floating about that a repeat of a 9-11 type attack is in the offing in the US. This would pave the way for the US to unilaterally launch an all out attack on Iran in the interests of protecting the world from terrorists.

One of the consequences of this type of action would surely be a rapid deterioration of relations with other industrialized nations and a move by central bankers to quickly reduce US Dollar holdings. Such a move would also add more fuel to the already raging inferno of Muslim / US relations. So, not a likely strategy.

The US could try to garner support on the world stage for a group of Allies to stage an invasion of Iran to thwart further development of the Iranian nuclear program. However, given the problems with the Iraqi situation and with UK Prime Minister Tony Blair still smarting from his involvement in the Iraqi debacle, it is highly unlikely that this approach would work.

The US could simply decide to go it alone and launch a “shock and awe” attack on Iran to restore democracy and rid the world of one of the pivot points of the oft touted “axis of evil”. This no doubt would quickly degrade into mass chaos in the Middle East and global terrorism would quickly ratchet itself to new heights. While such a move would surely delight the Rumsfeld and Wolfowitz neo-conservative crowd, in all practicality an all out offensive would not be a good move.

This leaves us with the only other possibility and that is careful negotiation.

But, the Iranians and for that matter all the European importing nations are in the drivers seat and really have no motivation to even come to the negotiating table. Who says Oil has to be priced in US Dollars? Who says the world needs a single reserve currency? Maybe the world needs two reserve currencies. Maybe the days of US Dollar supremacy are over. Maybe it is time for the US to change its ways. Trim the debt, scale back operations in Iraq.

The US could well be boxed in to a corner.

A simple Oil Bourse in a Muslim country half-way around the world could be the straw that breaks the proverbial camel’s back. The day of financial reckoning could be at hand. We may be about to witness the next chapter in the story of the Rise and Fall of the American Empire. The Euro could be about to assume its spot as the #2 global reserve currency. As the US Dollar begins to falter under the weight of Oil being sold in Euros on the Iranian Bourse we will surely see a rise in the value of Oil Futures on Nymex. In fact we could see a rise in the value of all commodity futures that trade on the Chicago Board of Trade and the Chicago Mercantile and the New York Board of Trade. Not because these commodities are in scarce supply, but simply because it will take more units of a weakened US Dollar to buy a contract of Live Cattle or a bushel of Oats or a barrel of Oil. This will leave newly minted Fed Governor Ben Bernanke with a few inflationary conundrums of his own. Let’s hope Mr. Bernanke knows what he is doing and is up to the challenge left for him by his mentor, Easy Al.

In a recent edition of the Meridian Report I presented the case for a 4 year cycle pattern in the financial markets and noted that 2006 should produce a cyclical low and cause potentially serious harm to all those unsuspecting long term buy and hold type of investors out there. I suggested that there were a number of catalysts that could spark a market sell-off to lead us into this cycle low. I think it is fair to say we can now add the introduction of the Iranian Oil Bourse to this list of catalysts.

But here is the good news. Despite what the critics are saying, there is a lot of high octane excitement left in these energy markets. As we get closer to March 2006 and the opening of the Iranian Oil Bourse, the volatility in Oil prices and in energy stocks is sure to amplify and as we all know, volatile markets are the best for short term trading strategies. So, take your pick - energy service companies, oil and gas income trusts that trade on the Canadian markets, smaller cap up and coming producers, CBM players or the big name energy producers. These stocks will continue to provide lucrative trading opportunities in 2006. And I will do my level best to keep you all informed. Stay tuned…..

Former Republican Congressman and CIA official Bob Barr says that there is a danger - recent developments describe a trend - of America slipping into a totalitarian society and that the Bush administration are doing everything in their power to see that this happens.

During a radio interview with host Alex Jones, Barr outlined where the country is heading.

"Basically, as long as you smile when you demand to see somebody's ID at gunpoint sitting on a bus I guess it's OK for the government, that's sort of the way they operate. It can be a totalitarian type regime."

"I think it's a real danger where we have the military becoming involved in all sorts of domestic matters and we have the government being able to seize very private personal records on people without any suspicion that they've done anything wrong. This is a dramatic turn of events that has accelerated greatly since 9/11."

Barr made comments very similar to those of current Republican Congressman Ron Paul in stating that natural disasters could be used by the government as a pretext to abolish posse comitatus.

"If we have the military involved whenever there's a windstorm, rain or tornado then what we are doing is that we are undermining the entire basis on what our constitutional representative democratic form of government was founded."

Barr said that legislation like the Patriot Act and its imminent re-authorization and expansion were more of a threat to the American way of life than any terrorist attack.

"Even when the leaders in Washington say we're not going to let the terrorists change our way of life, they are implementing policies that do precisely that."

Barr elaborated that the manipulation of fear was a key cornerstone in the government's coup de 'tat on constitutional liberties.

"They're using people's fear of another terrorist attack to move forward with various government programs that the government has wanted to gather and put in place for many many years. They're using the fear which is now driving public policy in this country which is very unfortunate and very un-American. Our leaders are shamelessly playing on that fear to implement and grab power."

Speaking on the topic of the second amendment, Barr said that his position as a board member on the NRA enabled him to judge the difference between how the Clinton and Bush administration's approached the issue. Barr echoed the sentiments of many other prominent conservatives in expressing his frustration about how the Bush administration was even more anti-second amendment than the Clinton office.

"it's my impression to be honest with you, and this is confirmed by a lot of folks who are involved very heavily in regulatory matters involving firearms, that it is more difficult dealing with this administration than it was dealing with the prior administration."

Barr is currently working with the ACLU and others in trying to prevent the sunset clauses of the Patriot Act from being renewed, which could happens as early as this week.

David Dionisi, a former US army intelligence officer, is convinced that plans for a nuclear attack are under way.

Once a conservative Republican, Dionisi enjoyed success as a Fortune 500 business executive after leaving the army. But he later rejected his political beliefs and now advocates peace, social justice and humanitarianism.

In his new book, American Hiroshima, Dionisi argues decades of unjust US foreign policies will be largely to blame for sowing the seeds of hostility and vengeance which could lead to a nuclear catastrophe.

Aljazeera's Shaheen Chughtai caught up with Dionisi in London.

Dionisi had just flown from Liberia where he helps run a Catholic orphanage.

Aljazeera.net: You were once a conservative Republican. What made you change your beliefs?

Dionisi: The transformation was a discovery process. When I joined the military, I had a very limited view of what the US was doing around the world. Through my experiences as a military intelligence officer and later as a business executive doing international volunteer work, I started to see our foreign policies were often hurting people and making the world more dangerous.

One of the more dramatic moments in this process was when I was assigned to a unit focusing on implementing US foreign policy in central America. I was part of a rapid deployment team designed to go in and suppress forces working for social justice in places such as Honduras, Nicaragua, El Salvador and Guatemala.

You describe the US public as uninformed - why?

The major media outlets are owned by a handful of corporations interested in promoting advertising and pro-government messages. Anything that challenges the existing power structure very often fails to receive air time. I highlight Fox as an extreme example of the Republican propaganda machine.

But when your country is fighting a war, you have an obligation to understand what's really going on. If you don't, you can become an agent of injustice. If people can find the time to watch baseball or soccer etc, they can make an effort to read, travel, talk and not be limited to the messages of fear.

They also need to understand their history. In 1962, the Joint Chiefs of Staff presented a plan called Operation Northwood, which is now declassified. It proposed conducting mass casualty attacks on American targets and blaming it on Cuba to rally public support for war against Fidel Castro. President Kennedy rejected the plan. So we shouldn't just assume any future attack on our soil is the work of al-Qaida.

Your book condemns alliances with repressive regimes. Can't these be justified if they serve a greater cause?

History teaches us that when you form alliances that promote injustice, you can only expect injustice in the future. Kindness begets kindness and the inverse is also true.

The US fought the largest secret war in its history during the 1980s in Afghanistan - over $6bn was funnelled into that war. As a result, US collaboration with and responsibility for al-Qaida goes well beyond what most even informed Americans understand.

If you consider that there are over 500 prisoners in Guantanamo Bay from over 40 countries - though not a single one is from Iraq - and that the CIA recruited thousands of people from over 40 countries to be part of that war - none from Iraq - you can better understand how the US played a direct role in creating what became the Taliban and al-Qaida.

Bush supporters argue the removal of Saddam and the Taliban was beneficial and therefore justified military action.

That starts from an artificial premise. When the Bush administration says, "Well, it's great that Saddam's gone," it fails to acknowledge that Bush's father and President Ronald Reagan were key forces that helped create Saddam Hussein.

Looking at what happened in 1979 it can put a lot of this in perspective. As Reagan came into office, the US embassy hostages in Iran were released after 444 days in captivity. Americans don't know this wasn't a coincidence. The US had agreed in writing not to attack Iran and also paid Tehran $8bn. That's why that media event (of the hostages' release during Reagan's inauguration ceremony) occurred with such precise timing.

How do you know this?

These are facts that were subsequently published. The agreement with Iran was submitted for review by the current administration to see if it would be binding and prevent an attack in the near future.

Bush administration attorneys concluded it was signed under duress and therefore not binding. I know this from a former senior member of the Bush administration, a seasoned CIA officer named Ray Flynn.

The US felt humiliated; the Reagan administration wanted to hurt the Iranians but its hands were tied. So Saddam Hussein was used as the agent for that. He ended up invading Iran ... and you had this brutal war from 1980 to 1988 that killed over a million people.

What was the US role in that war?

By 1982, Iran had recaptured lost territory and Saddam asked the US for help. So President Reagan signed a National Security Decision Directive - NSDD 114 - to provide all means of support to Saddam Hussein. Donald Rumsfeld then went on a very sensitive mission to deliver satellite intelligence, other forms of intelligence and weapons of mass destruction (WMD).

That's why the current Bush administration was so confident Saddam had chemical and biological weapons; they knew the US had supplied the ingredients in the 1980s.

Saddam broke with the US, however, when he found out we were selling weapons to Iran in the mid-1980s - the Iran-Contra affair. All this puts the invasion of Kuwait into perspective. Saddam got clear messages from the US saying he could invade; plus he felt the US owed him one after betraying him over Iran.

All these wars form a continuum of injustice. Look at the UN economic sanctions in the 1990s that the US and UK refused to lift: over a million Iraqis died, including 500,000 children. That's more than the number who died from the Nagasaki and Hiroshima atomic bombings.

You list numerous "unjust" actions that led to attacks on US targets - isn't that justifying terrorism?

I talked to the CIA's Michael Scheuer, head of the "find Bin Ladin" team, and he stresses that people in the Muslim world are not fighting us because of our freedoms or elections but our foreign policy. This is something the Bush administration constantly twists.

The basic principle is: if you hurt someone, they're going to want to hurt you. We need to ask questions like: Why did 9/11 happen? Bin Ladin has a very clear articulation of why he's at war with the US, Britain, Israel and others. If Americans read it, they'll see it's very clear about things such as US forces on Arab land.

And it's not just an Arab or Muslim issue. I learnt this in South Korea where the US has had troops since 1950. When you're there that long, it sends a powerful message that you're not there to liberate, you're there to occupy.

You describe the US as the biggest WMD proliferator. Why?

The US has spent $5 trillion on 70,000 nuclear weapons since 1945 - more than the rest of the world combined. A Congressional report in 1999 found the designs for every deployed nuclear warhead - and for some not built yet - had been stolen and passed to China. Israel acquired its programme from the US too.

Despite this, ordinary Americans are more concerned about the Bush administration's lies and hyped-up warnings about WMD in places such as Iraq.

Is Iran really a threat to the US? An alliance between Shia Iran and Sunni-led al-Qaida seems far fetched.

Iran will not attack the US if the US does not attack Iran. Congressman Curt Weldon (who accuses Tehran of plotting to attack the States) talks about attacking Iran but such talk makes the world more dangerous. If we were Iran, we'd develop nuclear weapons simply because Israel has them. So the US should facilitate a process whereby Israel eliminates its nuclear weapons.

As for the religious differences between Iran and al-Qaida, yes, that's been true - but Bush's War on Terror has been pushing the sects together. Intelligence reports indicate Bin Ladin's son Saad has been based in Iran. No, we can't be certain they're helping each other. But in any case, the Bush administration does not want peace with Iran.

You say "kindness begets kindness". What's your evidence?

After the first world war, the Treaty of Versailles punished Germany harshly, producing hardship and hostility that the Nazis exploited. But after the second world war, when the Marshall Plan helped rebuild Germany and Japan, the US did more to promote democracy than at any time during the Cold war.

To make the world a safer place, we must aggressively attack the causes of suffering and hostility. Imagine if Bush had said after 9/11: "People are capitalising on our mistakes in the Middle East. So, let's ensure there is no hunger, lack of clean water, lack of education etc in the Muslim world." We would have made more friends and drained support for our enemies.

If we can't expect US foreign policy to change soon, isn't it too late to stop an American Hiroshima?

It's not too late although your point is realistic. But we can still influence the US response. Far more people will die in the retaliation and the counter-retaliation.

If the US had the wisdom, we could make the world safer. The US military budget was over $420 billion in 2005. We could split that three ways: a third on economic development in the Middle East, especially Iraq; a third on tackling injustice at home, such as providing universal healthcare - and that would still leave us with the world's biggest military budget.

People have to become more involved. The anti-Vietnam war movement is an example - but it failed to hold government to account. If we had tried (former Defence Secretary) Robert McNamara or (former Secretary of State) Henry Kissinger for crimes such as the illegal bombing of Cambodia, it would have sent a powerful message to future leaders. The Bush government today wouldn't have been so bold.

Ultimately, Americans need to understand many of them will die and parts of their country will become uninhabitable unless they hold their government to account.

Prime Minister John Howard condemned the violence, but said he did not believe racism was widespread in Australia.

"Attacking people on the basis of their race, their appearance, their ethnicity, is totally unacceptable and should be repudiated by all Australians irrespective of their own background and their politics," Howard said.

He added, "I'm not going to put a general tag (of) racism on the Australian community."

The rioters were reacting to reports that youths of Lebanese descent were responsible for an attack last weekend on two of the beach's lifeguards.

Police had increased the number of officers patrolling the beach after mobile phone text messages circulated calling for retaliation for the attack on the guards.

One white teenager among the rioters had the words "We grew here, you flew here" painted on his back. On the sand, someone had written "100 percent Aussie pride."

Two paramedics in an ambulance were injured as they tried to help youths trying to escape rioters, when members of the mob smashed the vehicle's windows and kicked its doors.

TV broadcasts showed a group of young women attacking another woman, whose ethnicity was not immediately clear.

The violence shocked this city of 4 million which prides itself on being a cultural melting pot.

"Our disgrace," said a front page headline in Sydney's Daily Telegraph. Below was a picture of white youths attacking a man of Arab appearance on a train.

"Let's be very clear, the police will be unrelenting in their fight against these thugs and hooligans," said Morris Iemma, the leader of New South Wales state. He said the riots "showed the ugly side of racism in this country."

Kevin Schreiber, the mayor of the district where Cronulla is located, said he was devastated by the rampage, but that he believed the rioters came "from far and wide to participate."

Cronulla, one of the few beaches in Sydney that is easily accessible by train, is often visited by youngsters from poorer suburbs, many of them of Arab descent. Residents accuse the youths of traveling in gangs and sometimes intimidating other beachgoers.

Bruce Baird, a government lawmaker, said anti-Muslim sentiment has risen in Australia since the Sept. 11, 2001, attacks and the 2002 bombings in Bali, Indonesia, that killed 88 Australians. He noted that six women from Cronulla were killed in the Bali bombings.

"Where this riot took place is actually the site of where we've got the Bali memorial for these women," Baird told Australian Broadcasting Corp. radio.

Kuranda Seyit, director of the Forum of Australia's Islamic Relations, described Australia as a "pluralist society, with many faiths and traditions all raveled into one."

He added: "This is the unique success of this nation, and we cannot let it fall into chaos and lawlessness."

"Right now the situation requires the focus on the international issue of protecting the peace of world," Gilad told Israel Radio. "But it isn't correct to say that a country that is threatened should deny that it will ever consider a different option."

Israel considers Iran one of its top enemies.

According to the newspaper report, Israel has a plan for a combined air and ground attack on targets in Iran if diplomacy fails to stop the nuclear programme. Sharon's inner Cabinet authorised the attack in a meeting last month, the newspaper said.

Sharon said earlier this month that the ability to take out Iran's nuclear programme by force "of course exists."

Although Israel is preparing for the possibility that Iran will acquire nuclear weapons, it won't lead the fight against the Islamic state's nuclear ambitions, Sharon said. Foreign Minister Silvan Shalom said today that "Israel can't live in a situation in which Iran has the atomic bomb."

Speaking to Israeli radio, Ehud Danoch, said: "As a Hollywood movie, I assume that it will be defined as a well-made film, but from the standpoint of the messages it sends, the messages are problematic."

Munich follows a hit squad from the Israeli secret service, Mossad, as it hunts down and kills the gunmen from the Palestinian Black September group who held hostage Israeli athletes during the Olympics. A botched rescue operation by German security forces ended in 11 of the athletes being killed.

Accusing Oscar-winning Spielberg of equating Mossad agents to the terrorists, Mr Danoch argued: "This is an incorrect moral equation. We in Israel know this. There is also a certain pretentiousness in attempting to treat a painful decades-long conflict by means of quite superficial statements in a movie."

The criticism is likely to disappoint Spielberg, who last week described his film to Time magazine as a "prayer for peace", insisting that the biggest threat to the Middle East was neither the Palestinians nor the Israelis but intransigence on both sides. "I wanted this film to be in memory of [the Israeli athletes] because they seem to have been forgotten," he told Time. "The silence about them by the International Olympic Committee is getting louder for me every four years."

But far from fostering reconciliation, early screenings have triggered considerable criticism from Israeli hardliners. "Jews pioneered Hollywood," wrote Jack Engelhard, the author of the best-selling novel and film, Indecent Proposal, on the Tel-Aviv-based website, ynetnews.com. "If, as our enemies say, we own Hollywood, well, here's the plot twist - we have lost Hollywood, and we have lost Spielberg. Spielberg is no friend of Israel. Spielberg is no friend of truth. His Munich may just as well have been scripted by George Galloway."

They had no idea that Israel wanted to use the material to make nuclear weapons, officials claimed.

But the new documents, according to the BBC programme, cast doubt on those claims. In 1958 the UK Atomic Energy Authority (UKAEA) wrote to Foreign office official Mr Donald Cape. He was the man who gave Foreign office approval for the deal. The UK had possibly bought too much heavy water from a Norwegian firm and wanted to sell the suplus.

According to the documents the energy authority said another Norwegian firm wanted to buy it to sell on to Israel.

Newsnight had a copy of Israel's contract with the firm which said it would provide heavy water from the UKAEA for Israel.

However, Mr Cape insisted the Government had told the truth.

He rubbished the allegation that Britain was a party to the sale. He dismissed as ''absolute nonsense'' the idea of selling it back to Norway.

''It was a sale back to Norway,'' he said. Cape iterated he had ''no idea'' Israel wanted to make nuclear weapons. But the BBC programme obtained confidential letters written by him before the delivery suggesting otherwise.

They allegedly show the Foreign Office knew Israel was secretly trying to buy uranium from South Africa. One letter allegedly quotes secret CIA reports from 1957 and 1958 which take the view ''the Israelis must be expected to try and establish a nuclear weapons programme as soon as the means were available to them.'' Other top secret Government documents reportedly say ''It has been, and remains our opinion, that Israel wanted an independent supply of plutonium so as to be in a position to make a nuclear weapon if she wished.'' ''We had no idea at that stage, nobody suspected not only in Britain but in the US that the Israelis hoped to manufacture nuclear weapons'' Mr Cape told BBC.

The appointment of Schröder, a close ally of Putin and an enthusiastic backer of the pipeline project, as head of the pipeline company shareholders' committee came as pipes were ceremonially welded at the official start of construction.

High-ranking Russian and German officials wearing fur hats stood in temperatures of minus 15 degrees Celsius and watched the welding in a forest clearing near the Vologda region town of Babayevo, 475 kilometers north of Moscow.

Further highlighting the close energy ties between Russia and Germany, Matthias Warnig, the head of Dresdner Bank's Russian operations, was appointed CEO of the pipeline project. Putin and Warnig have been friends since Putin's days in the St. Petersburg city administration in the 1990s.


The Wall Street Journal reported the two men knew each other in East Germany when Putin was a KGB agent, but Warnig has denied this.

Dresdner last week sealed an $800 million deal to buy one-third of Gazprombank, and in October advised Gazprom on its $13 billion purchase of Sibneft.

In Moscow and Berlin, analysts welcomed the appointments as giving the project political clout in Western Europe, but some politicians in Germany questioned whether Schröder's involvement was appropriate, given his recent role in greenlighting the project.

"It stinks," said Reinhard Buetikofer, co-chairman of Germany's Greens, the junior member in a coalition with Schröder's Social Democrats until September, The Associated Press reported.

Rainer Bruederle, an official of Germany's right-wing Free Democratic Party, said he hoped that Schröder's post would be purely honorary because if it were not it would raise questions about whether Schröder had kept his public and private affairs separate, The Associated Press reported.

It was not clear what role Schröder or the shareholder's committee would play in the pipeline's management, or under what financial terms Schröder had accepted the post, if any.

Gazprom CEO Alexei Miller stood in a forest clearing next to a long line of already connected pipes and waved for the welding to begin. After the pipes were joined, warmly dressed executives from Gazpom's German partners, BASF and E.ON, together with Prime Minister Mikhail Fradkov and German Economics Minister Michael Glos, signed their names on the pipe.

Officials, dignitaries and reporters were then bused to a nearby Gazprom depot where a group of heated tents had been erected. A news conference was held, and waiters from Moscow served black caviar to guests as fireworks lit up the dark December sky.

Friday's groundbreaking ceremony marked the start of construction of the land section of the pipeline, which will link to an existing network at Gryazovets, 250 kilometers east of Babayevo, and eventually run to the Baltic Sea port of Vyborg.

Schröder's appointment is likely to help the pipeline consortium defuse issues arising from the Baltic Sea route, which bypasses Russia's traditional transit countries Ukraine, Belarus and Poland. Gazprom is currently attempting to renegotiate higher gas prices with Ukraine.

With a planned 27.5 billion cubic meters of gas being pumped through the pipeline from 2010, rising to up to 55 bcm by 2012, gas supplies to these transit countries are potentially vulnerable.

Fradkov said at the pipeline ceremony that the Baltic route would bring down the cost of transporting gas to Europe.

"The fewer intermediaries there are along the transportation corridor, the cheaper and better we can carry out our obligations," Fradkov said.

Miller told the news conference that Gazprom would not continue to sell gas at below-market prices to Russia's immediate neighbors, and denied that the policy change was related to political changes, such as in relations between Russia and Ukraine.

"Gazprom will supply gas to everyone at European prices. Politics is when we talk about subsidies. But when we talk about equal terms for all, there's no politics in it," Miller said.

Miller said the land section of the pipeline would cost Gazprom $5 billion to build and would also be used to boost gas supplies to St. Petersburg and offer extra supplies to the Baltic countries.

The Yuletide decorations at the White House are simpler this year. The gaudy tinsel and the 155,000 lights of 2004 have given way to a more natural look of Christmas trees decorated with white lilies and pink roses that are replaced as they wilt. Guests at the holiday parties are noticing a different tone to George Bush too. He has never liked the 26 receptions, the thousands of punishing or limp handshakes, the graceless requests for souvenir cuff links with the presidential seal. But at some of the smaller gatherings this year, Bush has freed himself from the photo line to circulate with an intensity his friends haven't seen before. An adviser who encountered Bush on one of these reconnaissance missions through the Red Room last week tells TIME, "He's listening a little more because he's looking for something new. He's looking for ideas. He wants to hear what people are saying, because something might strike him as worth following up on."

No one has written a playbook for the President who is trying to stop a second-term slump before it becomes a long slide to oblivion. The most successful ones in modern times have gone about it in different ways, depending on the forces that were arrayed against them. Dwight Eisenhower, confronting a hostile Congress, made his mark with his veto pen. Ronald Reagan rid his White House of the aides whose incompetence and duplicity had produced Iran-contra, and engaged the Soviet foe he had once called an "evil empire." After Bill Clinton got past impeachment, he did what he could by Executive Order and picked his shots with Republicans on Capitol Hill--for instance, demanding more education spending in must-pass bills at the end of the year--boosting his popularity at their expense.

But recalibration and retrenchment do not come naturally to this President. Bush recently rejected a draft of an economic speech because it didn't mention his now dead proposal to restructure Social Security. He is still steamed because his nomination of White House counsel Harriet Miers for the Supreme Count imploded; he vented about it to African-American leaders who met with him last week to discuss racial issues and Katrina disaster relief--prompting one of them to gently remind him that it was not African Americans but conservative Republicans who were her undoing. His reading of late has tended toward military history, which offers the comfort that other wartime Presidents, notably Harry Truman, endured scathing criticism by their contemporaries only to be redeemed by history.

Advisers and friends say Bush has not let go of his faith in himself or his patented upbeat style. He still delights in nicknames: backstage last week before his big speech on Iraq, Bush called Richard Haass, chairman of the august Council on Foreign Relations, "Sheriff"--a play on the title of Haass's book, The Reluctant Sheriff. Pals visiting from Midland, Texas, this month thought they were there to buck up their old friend; instead, they found him relaxed and unperturbed. "The President believes he's serving at this time for a reason--that his instincts, experience and convictions are suited for big challenges," says Austin-based strategist Mark McKinnon. Or as Bush has put it, the job is "to make a difference, not to mark time."

But he may have done worse than mark time in the first year of his second term; he may have lost it--to scandal, to the collapse of his ambitious domestic-policy gambit on Social Security, to Administration incompetence in the face of a natural disaster and to mounting casualties in a war that most Americans now regard as a mistake. The public's trust in Bush's judgment and character has sunk, threatening both his legacy and the Republican hold on Congress.

White House strategists believe they have ended the slide in Bush's approval ratings, which lately have been topping 40% again. "It's time for the Bush comeback story!" one coached TIME for this article. "The perfect storm has receded. We have better news in Iraq, oil prices are down, and Katrina has kind of fallen off the radar screen in terms of public concern." But they know that Bush is running short of time to salvage his remaining three years. The focus will soon shift to the 2006 midterm elections and then to the race to replace him in 2008. And a midterm election that doesn't go the Republicans' way would draw a bright line of demarcation between a presidency and a lame-duck Administration.

The plan is to make January a critical month in what the President's aides hope will be a turning-point year. The White House expects a quick victory on Bush's Supreme Court nominee Samuel Alito, and the State of the Union speech will nod to big goals. But when it comes to fresh and concrete ideas, the list of what Bush will actually try to accomplish in 2006 is so modest that one bewildered Republican adviser calls it "an insult to incrementalism."

White House advisers tell TIME that the agenda for 2006 is in flux and that senior aide Karl Rove is still cooking up ideas. But the initiatives they have settled on sound more like Clinton's brand of small-bore governance: computerizing medical records; making it easier for workers to take their health benefits with them when they leave a job and--an idea that captured Bush's imagination in the aftermath of Hurricane Katrina--giving a boost to Catholic and other private schools as an alternative for inner-city children. While Bush still hopes to sign an immigration bill by summer and plans to talk a lot about the subject next year, his program to offer temporary legal status to illegal immigrant workers remains a tough sell with the conservatives in Congress.

Bush's team seems tired and short on inspiration. Advisers anticipate a high-profile departure or two from the White House staff before February. But the President dismisses the idea that any sort of housecleaning is in order. "Who do you think is talking?" he asks when he hears of public speculation about firings and resignations in his White House. Having escaped at least the first round of the CIA-leak investigation without being indicted, Rove, say associates, has taken the lead in crafting next year's agenda, brainstorming not only within the White House but also with lobbyists, think-tank experts, lawmakers and former officials of both the Reagan and the George H.W. Bush administrations. Friends of Rove, however, say that he feels bruised by the leak probe and that his relationship with his boss has never fully recovered from the fact that early in the investigation, he underplayed his role as a source for the journalists who revealed CIA officer Valerie Plame's identity. Says a Bush confidant: "The relationship is not bad, just changed."

Another sign of the investigation's toll on the White House operation is how much less Vice President Dick Cheney, 64, is seen and felt in the West Wing these days. The indictment of his former top aide, Scooter Libby, "hit him hard. Scooter was like a brother and a policy soul mate," says a Cheney friend. The Vice President once worked the same famously long hours as Rove and chief of staff Andrew Card, but now he has scaled back his White House schedule to being there "when he needs to be," the friend says, and otherwise keeps a regimen that is "a little more reflective of his age, station and health." Yet Cheney is still a big draw with the Republican base. The White House says he will have a heavy run of speeches on Iraq and economic policy over the next two months and will have a grueling fund-raising schedule for the midterm elections.

Whatever shifts may be taking place within the inner circle, the Bush operation remains frustratingly insular to its Republican allies outside the White House. When Senate Judiciary Committee chairman Arlen Specter wanted to have a private word with the President last week about the extension of the Patriot Act, he put on a tuxedo and waited in line at one of the White House Christmas parties. But Specter denies any suggestion that Bush has been distant and says the President remains confident and sunny, needling Specter about his raggedy trench coat during a trip to Pennsylvania: "Arlen, we're going to have to upgrade your wardrobe."

In any case, the White House is making an effort to smooth its often tense relations with Republicans on Capitol Hill. G.O.P. congressional aides say their White House counterparts are consulting them for the first time in five years. And Bush's speech last week touting a resurgent economy came only days after House Speaker Dennis Hastert and Senate majority leader Bill Frist privately implored Card and Bush counselor Dan Bartlett for more cheerleading from the White House. "Offense," says a top congressional aide. "We want him to play offense."

Nowhere is that more important than in confronting the nation's growing doubts about the Iraq war. Republicans are worried that Bush's message has been long on showmanship and short on facts. White House officials insist that 2006 will be "a transitional year" in Iraq, and have made it clear they will push Iraqi officials to swiftly form a government after this week's elections. Bush's gargantuan PLAN FOR VICTORY banner was not there when Bush went before the Council on Foreign Relations in Washington last week, nor did the event have the rapturous crowd that is the trademark of this White House's advance team. Indeed, Bush's appearance was so hastily arranged that the organization had trouble filling the seats and ended up inviting members by e-mail to bring a friend. But the speech itself, a sober view of what it will take to revive the Iraqi economy, was well received by a group that represents the élite in the foreign-affairs establishment. "I told him I thought it was a good speech. The White House is no longer in the triumphalist stage," says council president Haass, a former Administration official who has criticized the Iraq invasion as a "war of choice."

However improbable the odds at this point or modest his short-term goals, aides say, Bush still subscribes to Rove's long-held dream that his will be the transformational presidency that lays the groundwork for a Republican majority that can endure, as Franklin Roosevelt's New Deal coalition did, for a half-century or more. Once he gets past the midterm elections, Bush plans to introduce a concept that, if anything, is even more ambitious than his failed Social Security plan: a grand overhaul that would include not only that program but Medicare and Medicaid as well. Says strategist McKinnon: "He knows that part of what he brings to the presidency is an ability and commitment to chart a long course under public pressure." The question that will be answered in the coming year is whether America still believes in George Bush enough to follow.

John Holley and his wife, Stacey, were stunned when they found out the body of their only child, Matthew, who died in Iraq last month, would be arriving at Lindbergh Field as freight.

"When someone dies in combat, they need to give them due respect they deserve for (the) sacrifice they made," said John Holley.

John and Stacey Holley, who were both in the Army, made some calls, and with the help of U.S. Sen. Barbara Boxer, Matthew was greeted with honor and respect.

"Our familiarity with military protocol and things of that sort allowed us to kind of put our foot down -- we're not sure other parents have that same knowledge," said Stacey Holley.

The Holleys now want to make sure every fallen hero gets the proper welcome.

The bodies of dead service members arrive at Dover Air Force Base.

From that point, they are sent to their families on commercial airliners.

Reporters from 10News called the Defense Department for an explanation. A representative said she did not know why this is happening.

The depot itself first came into use in 1968 but for the last 15 years has been run as a joint venture by oil giants Total and Texaco. It is also used by the other leading petrol firms BP and Shell.

The depot is in operation 24 hours a day, with 400 tankers being filled at the site every day from a total of 26 storage tanks.

A high-pressure oil pipeline, run by British Pipeline, runs all the way from the Lindsey Oil Refinery in North Lincolnshire to the Buncefield site, where the oil is then stored.

It is one of three underground supply pipelines feeding Buncefield.

A two-day public inquiry was held into plans for the depot in Green Lane, Hemel Hempstead, but the development met with little local resistance.

However, during major protests against rising fuel prices in 2000, Buncefield became a focus for several demonstrations, with trucks used to block gates in and out of the depot.

Numerous houses near the plant have been damaged, and as the towering smoke continues to drift south over London thick fresh filth belches into a cloudless night sky.

The fuel capacity of the depot is believed to be in the region of 60m gallons stored in at least 26 colossal tanks.

Holding primarily petrol and kerosene, highly flammable jet engine fuel, Buncefield is a major supplier of Luton and Heathrow airports.

Further explosions have not been ruled out, but they are now unlikely as emergency services fence the fire into the northern half of the plant.

The initial explosions, which were felt as far afield as Surrey and Oxfordshire, shook the entire town of Hemel between 06.03am and six-thirty, smashing windows, cracking walls and bringing people running from their homes.
Local hospitals began receiving the walking wounded before 7.00am, mostly those cut by flying glass.

Police have declared the explosions a major industrial accident, though Total Oil which operates the depot (alongside Texaco) has accounted for all its people on site.

The M1 motorway which runs close by the depot was closed both ways between junctions 6a and 12 earlier today, but it has since reopened.

This morning...

Those Hemel residents determined to go out just stand and stare. People are wandering around with cameras and phones taking pictures of nothing but a solid wall of smoke.

Some started panic buying at the petrol pumps.

My own apartment building, which lies just three miles from the Buncefield plant, shook me awake shortly after 6.00am, and my first thought was that a train had crashed near Apsley station.

Within moments, however, a colossal tower of smoke was visible from my windows over the Grand Union Canal and it was clear that disaster had struck Buncefield.

"It's a brilliant day but the sun is just like a 40 watt light bulb through the smoke," said one eye witness.

Though the fumes are not believed to be toxic, the air over the town tastes acrid and police are advising people to close doors and windows.

Luton Airport, ten miles away, remains open. Fuel supplies to both airports will not be disrupted.

A casualty information number has been set up: 0800 096 0095

Police said the explosions at the Buncefield depot, near Hemel Hempstead, Herts, appeared to have been accidental, although many people in the area had at first feared a terrorist attack. Only two people were seriously injured.

The blasts, which began at 6am, could be heard up to 100 miles away - some reports suggested that they were felt as far away as northern France and the Netherlands - while flames leapt more than 200ft in the sky.

Windows and doors were blown in and roofs were damaged up to three miles from the depot, which is close to Junction 8 of the M1 motorway. A section of the M1 and other roads were closed and further disruption is likely today, with Junction 8 and the northbound M10 remaining shut, possibly for several days.

The cloud stretched in a 75-mile arc from Kent to Salisbury Plain. The Meteorological Office said it could remain for up to three days while the fire continued to burn. Firemen were awaiting the delivery of a quarter of a million litres of foam concentrate to help douse the flames.

Officials were trying to assess the impact of the cloud, which was believed to be of low toxicity, on the population and the environment. The people expected to be most seriously affected were those with asthma and other respiratory conditions.

About 2,000 people living near the depot were evacuated and police advised others to keep their windows and doors closed. "It is like it is doomsday," Richard Ayres, a resident, said. A worker at the depot, who was only 500ft from the blast, described how he ran for his life with other colleagues.

Terry Hine, who lives near Heathrow, said: "I am just so glad I am here. I shouldn't be here. We were less than 500ft away from it, surrounded by gasoline, kerosene, diesel. I just got out. Instinct takes over. It keeps you going. I just can't believe it - the firemen were going towards it."

The depot is the country's fifth largest fuel distribution centre and is used by BP, Shell and Texaco. It is partly owned by the British subsidiary of the French company Total, which also owned a fertiliser plant in Toulouse, southern France, where 30 people were killed in an explosion four years ago.

At the time of the blasts Buncefield contained 7.7 million gallons of oil, petrol and paraffin - five per cent of the country's fuel stocks. When operating at full capacity, it holds nearly 16 million gallons of oil, including petrol, diesel, paraffin and aviation fuel.

Hertfordshire police confirmed last night that they were looking into reports of two leaks at the depot in the last three weeks.

Mark Thompson, 43, a former fireman from Kings Langley, Herts, was driving by the site on November 23 when he noticed a strong smell of petrol.

"It was very pungent, then I noticed foam flying out of the depot across the road," he told the Sun. "Clearly there was some sort of leakage and someone was trying to deal with it."

Frank Whiteley, the chief constable of Hertfordshire, said: "We have had initial interviews with witnesses and there is nothing from their accounts to suggest anything other than an accident. Of course, this is a very important depot and it is natural that there will be this sort of speculation about terrorism."

Mr Whiteley said it was "miraculous" that no one had been killed.

Most of the injured suffered minor cuts from glass. One man who was standing 200 yards from the site was being treated in the intensive care unit of Watford General Hospital for injuries to his lungs.

A second person was under observation at Hemel Hempstead General Hospital.

Despite the oil industry's attempts to play down the impact of the explosions on fuel distribution, some motorists were ignoring appeals not to panic-buy.

Let us translate this statement. Hoagland is saying that the CIA lied about the Wilson affair and used it to undermine the Bush Administration, and that the Bush Administration was no match for the liars at the CIA.

So how does Hoagland propose to deal with a malicious intelligence agency? He began his column by saying, "Wouldn't a letter to the editor have sufficed?," as if a letter would have been sufficient to rebut Joseph Wilson's article in the New York Times disputing the Iraq-uranium link. Getting more serious further down into his column, Hoagland suggested that the administration could have taken on the CIA's poor intelligence on Iraq by citing "an independent stream of intelligence" from the British and others. He admits this would have generated "problems and counterattacks" from "the opposition leakers" but that "would have been better for you than aides taking it on themselves to plant stealthy suggestions of nepotism at the CIA."

Hoagland's column was an eye-opener. Here was a major columnist acknowledging a CIA covert operation against Bush using lies and disinformation. But rather than express outrage at this, or call for Congress to investigate a rogue intelligence agency, Hoagland's idea is for a different White House public relations strategy.

You've got to be kidding me.

In a column in the Wall Street Journal, appearing on the same day, Victoria Toensing said the Wilson affair was so sordid that the Congress had a duty to investigate. Toensing is a former chief counsel for the Senate Intelligence Committee and former deputy assistant attorney general in the Reagan administration.

Analyzing the Wilson affair and the CIA role in sparking the investigation, Toensing said that "The CIA conduct in this matter is either a brilliant covert action against the White House or inept intelligence tradecraft." The latter was a reference to the fact that Valerie Wilson could not possibly have been a true undercover CIA operative, and if it was the CIA position that she was, then the agency's methods for concealing its agents are laughable or incompetent.

Valerie's Wilson's cover was a joke. But we still lean toward the CIA covert-operation theory. And that is why a congressional investigation is needed. Do Congressional conservatives have the courage to take on the CIA?

We'd occasionally meet for a drink--he didn't like having lunch--at Café Deluxe on Wisconsin Avenue, near the National Cathedral and on my route home. In October 2003, as we each made our way through a glass of wine, he asked me what I was working on. I told him I was trying to get a handle on the Valerie Plame leak investigation. "Well," he said, "you're sitting next to Karl Rove's lawyer." I was genuinely surprised, since Luskin's liberal sympathies were no secret, and here he was representing the man known to many Democrats as the other side's Evil Genius.

I began spending a little more time than usual with Luskin as I tried to keep track of the investigation. But how it all bought me a ticket to testify under oath to special counsel Patrick Fitzgerald still floors me.

The week of Oct. 24, 2005, was Indictment Week--that Friday, the grand jury's term would expire, and it was expected that Fitzgerald would finish up his probe by then so he wouldn't have to start working with a new grand jury. It seemed clear that Scooter Libby, chief of staff to Vice President Dick Cheney, was in deep trouble, but Rove's status was uncertain. Sometime during that week, Luskin, who was talking at length with Fitzgerald, phoned me and said he had disclosed to Fitzgerald the content of a conversation he and I had had at Café Deluxe more than a year earlier and that Fitzgerald might want to talk to me.

Luskin clearly thought that was going to help Rove, perhaps by explaining why Rove hadn't told Fitzgerald or the grand jury of his conversation with my colleague Matt Cooper about former Ambassador Joe Wilson's wife until well into the inquiry. I knew what Matt had been through--the unwanted celebrity, the speculation unrelated to fact, the dissection of his life and career. I didn't face the prospect of prison, since Luskin clearly wanted me to tell Fitzgerald about the incident and thus Luskin was not a source I had to protect, but no journalist wants to be part of the story.

I clung to Luskin's word might, but the next week he told me Fitzgerald did indeed want to talk to me, but informally, not under oath. I hired a lawyer, Hank Schuelke, but I didn't tell anyone at TIME. Unrealistically, I hoped this would turn out to be an insignificant twist in the investigation and also figured that if people at TIME knew about it, it would be difficult to contain the information, and reporters would pounce on it--as I would have.

Fitzgerald and I met in my lawyer's office on Nov. 10 for about two hours. Schuelke had told him I would discuss only my interactions with Luskin that were relevant to the conversation in question. No fishing expeditions, no questions about my other reporting or sources in the case. He agreed, telling my lawyer that he wanted to "remove the chicken bone without disturbing the body."

He asked how often Luskin and I met during the period from fall 2003 to fall 2004 (about five times), when, where and so forth. I had calendar entries that helped but weren't entirely reliable. Did I take notes at those meetings? No. Luskin was more likely to speak freely if he didn't see me committing his words to paper. Did Luskin ever talk to me about whether Rove was a source for Matt on the subject of Wilson's wife?

That was the "chicken bone" Fitzgerald had referred to, the conversation Luskin had told him about that got me dragged into the probe. Here's what happened. Toward the end of one of our meetings, I remember Luskin looking at me and saying something to the effect of "Karl doesn't have a Cooper problem. He was not a source for Matt." I responded instinctively, thinking he was trying to spin me, and said something like, "Are you sure about that? That's not what I hear around TIME." He looked surprised and very serious. "There's nothing in the phone logs," he said. In the course of the investigation, the logs of all Rove's calls around the July 2003 time period--when two stories, including Matt's, were published mentioning that Plame was Wilson's wife--had been combed, and Luskin was telling me there were no references to Matt. (Cooper called via the White House switchboard, which may be why there is no record.)

I was taken aback that he seemed so surprised. I had been pushing back against what I thought was his attempt to lead me astray. I hadn't believed that I was disclosing anything he didn't already know. Maybe this was a feint. Maybe his client was lying to him. But at any rate, I immediately felt uncomfortable. I hadn't intended to tip Luskin off to anything. I was supposed to be the information gatherer. It's true that reporters and sources often trade information, but that's not what this was about. If I could have a do-over, I would have kept my mouth shut; since I didn't, I wish I had told my bureau chief about the exchange. Luskin walked me to my car and said something like, "Thank you. This is important."

Fitzgerald wanted to know when this conversation occurred. At that point I had found calendar entries showing that Luskin and I had met in January and in May. Since I couldn't remember exactly how the conversation had developed, I wasn't sure. I guessed it was more likely May.

As my meeting with Fitzgerald wrapped up, I asked what would happen next. He said he would consider whether he needed to interview me again under oath, but that if he did, he wouldn't require me to appear before the grand jury. I hoped that would be the end of it. But on Friday, Nov. 18--when I was on deadline, writing, ironically, about Washington Post reporter Bob Woodward's newly discovered role in the investigation--my lawyer called and told me Fitzgerald did indeed want me under oath. I realized that I now needed to share this information with Jay Carney, our Washington bureau chief. On Sunday, Nov. 20, I drove over to his house to tell him. He then called Jim Kelly, the managing editor. Nobody was happy about it, least of all me.

A new meeting with Fitzgerald was arranged for Dec. 8. Leaks about my role began appearing in the papers, some of them closer to the mark than others. They all made me feel physically ill. Fitzgerald had asked that I check a couple of dates in my calendar for meetings with Luskin. One of them, March 1, 2004, checked out. I hadn't found that one in my first search because I had erroneously entered it as occurring at 5 a.m., not 5 p.m.

When Fitzgerald and I met last Thursday, along with another lawyer from his team, my attorney, a lawyer from Time Inc. and the court reporter, he was more focused. The problem with the new March date was that now I was even more confused--previously I had to try to remember if the key conversation had occurred in January or May, and I thought it was more likely May. But March was close enough to May that I really didn't know. "I don't remember" is an answer that prosecutors are used to hearing, but I was mortified about how little I could recall of what occurred when.

This meeting lasted about an hour and a half. As before, Fitzgerald was extremely pleasant, very professional, and he stuck to his pledge not to wander with his questions. Does what I remembered--or more often, didn't remember--of my interactions with Luskin matter? Will it make the difference between whether Rove gets indicted or not? I have no idea. I didn't find out until this fall that, according to Luskin, my remark led him to do an intensive search for evidence that Rove and Matt had talked. That's how Luskin says he found the e-mail Rove wrote to Stephen Hadley at the National Security Council right after his conversation with Matt, saying that Matt had called about welfare reform but then switched to the subject of Iraq's alleged attempt to buy uranium yellowcake in Niger. According to Luskin, he turned the e-mail over to Fitzgerald when he found it, leading Rove to acknowledge before the grand jury in October 2004 that he had indeed spoken with Cooper.

One final note: Luskin is unhappy that I decided to write about our conversation, but I feel that he violated any understanding to keep our talk confidential by unilaterally going to Fitzgerald and telling him what was said. And, of course, anyone who testifies under oath for a grand jury (my sworn statement will be presented to the grand jury by Fitzgerald) is free to discuss that testimony afterward.

The investigation and Novak's role in it are "pretty serious stuff and the whole incident led Viveca and me to conclude that a leave of absence was wise," said Time's managing editor, Jim Kelly. "She and I will have a fuller discussion of this."

Novak's account in Time shows that many months before Rove corrected his grand jury testimony in October 2004, Novak told Rove's lawyer that she had heard that Rove revealed the CIA status of undercover officer Valerie Plame to Time reporter Matt Cooper.

"I wish I had told my bureau chief about the exchange," Novak wrote of her conversation with the lawyer, Robert Luskin, in the first half of 2004.

In October, in a last-minute effort to persuade Fitzgerald not to indict Rove, Luskin informed the prosecutor of the conversation with Novak. Fitzgerald interviewed Novak for two hours on Nov. 10.

"I hired a lawyer ... but I didn't tell anyone at Time," Novak wrote of the days leading up that interview. "Unrealistically, I hoped this would turn out to be an insignificant twist in the investigation and also figured that if people at Time knew about it, it would be difficult to contain the information, and reporters would pounce on it."

Eight days after Fitzgerald interviewed her, Novak was writing a story about Washington Post reporter Bob Woodward's newly emerging role in the Plame saga when she was told by her lawyer that Fitzgerald wanted her to testify. She informed her bureau chief, who called the magazine's managing editor.

"Nobody was happy about it, least of all me," Novak wrote.

The prosecutor questioned her under oath on Thursday.

Novak described her conversation with the lawyer, Robert Luskin, in a first-person account released Sunday on Time's Web site.

Luskin declined comment. Mark Corallo, a spokesman for Rove's legal team, said the deputy White House chief of staff has cooperated fully with prosecutors.

"The integrity of the investigation requires that we not discuss the substance of any communications with the special counsel," Corallo said in a statement. "Out of respect for the investigative process, we have abided by that rule and will continue to withhold comment on our interactions with the special counsel."

Six weeks ago, in a so-far successful effort to avert Rove's indictment, Luskin disclosed his conversation with Novak to the special counsel, Patrick Fitzgerald. Rove remains under investigation.

In her first-person account, Novak wrote that Luskin clearly thought disclosing their discussion "was going to help Rove, perhaps by explaining why Rove hadn't told Fitzgerald or the grand jury of his conversation with my colleague Matt Cooper."

Fitzgerald questioned Novak under oath Thursday, the day after the prosecutor began presenting evidence to a new grand jury considering evidence in the leak investigation.

The prosecutor is investigating the Bush administration's leaking of Plame's CIA status to the news media in 2003, as Plame's husband, former U.S. Ambassador Joseph Wilson, accused the administration of manipulating prewar intelligence on Iraq.

Novak says Luskin appeared surprised when told in 2004 of a possible Rove-Cooper conversation about the CIA status of Wilson's wife.

Luskin said in effect that "Karl doesn't have a Cooper problem. He was not a source for Matt," Novak wrote. "I responded instinctively, thinking he was trying to spin me."

Novak said she told Luskin "something like, 'Are you sure about that? That's not what I hear around Time.' He looked surprised and very serious" and at the end of their discussion that day said, "Thank you. This is important."

Novak said the conversation with Luskin occurred anywhere from January 2004 to May 2004; she thinks it was perhaps in March.

It was not until October 2004 _ sometime between five months and nine months after Novak's conversation with Luskin _ that Rove disclosed his conversation with Cooper to the prosecutor.

Rove's disclosure followed Luskin's discovery of a White House e-mail from July 11, 2003. The message, from Rove to then-deputy national security adviser Stephen Hadley, referred to Rove's conversation earlier that day with Cooper.

It is not known publicly whether Fitzgerald's investigators had the e- mail all along and simply overlooked it or whether the White House had not produced the e-mail for the prosecutor.

By the time Rove stepped forward to disclose the Cooper conversation to investigators, Cooper was under intense pressure from the prosecutor to reveal the original source of his information that Wilson's wife worked for the CIA.

Five months ago, his court appeals exhausted and after receiving a personal waiver from Rove, Cooper disclosed that his source had been the president's top political adviser.

Vice President Dick Cheney's former chief of staff, I. Lewis "Scooter" Libby, is under indictment in Fitzgerald's probe on five counts of perjury, obstruction of justice and lying to the FBI. Libby has pleaded not guilty.

Chouet's account was "at odds with our understanding of the issue," a U.S. government official said. The U.S. official declined to elaborate and spoke only on condition that neither he nor his agency be named.

However, the essence of Chouet's account — that the French repeatedly investigated the Niger claim, found no evidence to support it, and warned the CIA — was extensively corroborated by the former CIA official and a current French government official, who both spoke on condition of anonymity.

The repeated warnings from France's Direction Generale de la Securite Exterieure did not prevent the Bush administration from making the case aggressively that Saddam Hussein was seeking nuclear weapons materials.

It was not the first time a foreign government tried to warn U.S. officials off of dubious prewar intelligence.

In the notorious "Curveball" case, an Iraqi who defected to Germany claimed to have knowledge of Iraqi biological weapons. Bush and other U.S. officials repeatedly cited Curveball's claims even as German intelligence officials argued that he was unstable and might be a fabricator.

The case of the forged documents that were used to support claims that Hussein was seeking materials in Africa launched a political controversy that continues to roil Washington.

A special prosecutor continues to investigate whether the Bush administration unmasked a covert CIA operative in a bid to discredit her husband, a former diplomat whom the CIA dispatched in February 2002 to investigate the Niger reports. The diplomat, Joseph C. Wilson IV, like the French, said he found little reason to believe the uranium story. The investigation into the leak led to the indictment of Vice President Dick Cheney's former Chief of Staff I. Lewis "Scooter" Libby on charges of obstruction of justice and perjury.

The French opposed U.S. policy on Iraq and refused to support the invasion. But whether or not that made top U.S. officials skeptical of the French report on Niger, intelligence officials from both countries said that they cooperated closely during the prewar period and continued to do so. And the French conclusions on Niger were supported by some in the CIA.

The CIA requested French assistance in 2001 and 2002 because French firms dominate the uranium business internationally and former French colonies lead the world in production of the strategic mineral.

French officials were particularly sensitive to the assertion about Iraq trying to obtain nuclear materials given the role that French companies play in uranium mining in France's former colonies.

"In France, we've always been very careful about both problems of uranium production in Niger and Iraqi attempts to get uranium from Africa," Chouet said. "After the first Gulf War, we were very cautious with that problem, as the French government didn't care to be accused of maintaining relations with Saddam in that field."

The French-U.S. communications were detailed to The Times last week by Chouet, who directed a 700-person intelligence unit specializing in weapons proliferation and terrorism.

Chouet said the cautions from his agency grew more emphatic over time as the Bush administration bolstered the case for invading Iraq by arguing that Hussein had sought to build a nuclear arsenal using uranium from Niger.

Chouet recalled that his agency was contacted by the CIA in the summer of 2001 — shortly before the attacks of Sept. 11 — as intelligence services in Europe and North America became more concerned about chatter from known terrorist sympathizers. CIA officials asked their French counterparts to check that uranium in Niger and elsewhere was secure. The former CIA official confirmed Chouet's account of this exchange.

Then twice in 2002, Chouet said, the CIA contacted the French again for similar help. By mid-2002, Chouet recalled, the request was more urgent and more specific. The CIA was asking questions about a particular agreement purportedly signed by Nigerian officials to sell 500 metric tons of uranium to Iraq.

Chouet dispatched a five- or six-man team to Niger to double-check any reports of a sale or an attempt to purchase uranium. The team found none.

Chouet and his staff noticed that the details of the allegation matched those in fraudulent documents that an Italian informant earlier had offered to sell to the French.

On her first trip to Europe early this year she left the sensation of being fresh by listening rather than lecturing. The flirtation of power appeared to have a more seductive effect than arrogance. So the old face became a new face. But on this week's trip the iron butterfly emerged.

Rice arrived as the enforcer of the Bush administration's torture policy. She reminded the queasy Europeans that their intelligence services, one way or another, are involved in the rendition of hundreds of suspected terrorists transported through their airports for harsh interrogation in countries like Jordan and Egypt or secret CIA prisons known as "black sites." With her warnings, Rice recast the Western alliance as a partnership in complicity. In her attempt to impose silence, she spread guilt. Everybody is unclean in the dirty war and nobody has any right to complain. "What I would hope that our allies would acknowledge," she said, "is that we are all in this together."

For the European leaders, facing publics hostile to U.S. policy in Iraq and torture, Rice's visit was disquieting. In Italy, prosecutors have issued indictments of 22 current and former CIA operatives for their "extraordinary rendition" of an Egyptian suspect; among those indicted is the former Rome CIA station chief, whom an Italian judge has ruled has no immunity from prosecution. Italian Foreign Minister Gianfranco Fini, asked about renditions, said, "We know absolutely nothing. We have not one single piece of knowledge." If the Italian government knew the facts, it would investigate, he added.

In Britain, the Foreign Office released a diplomatic disclaimer that it has "no evidence to corroborate media allegations about the use of UK territory in rendition operations." But upset members of the House of Commons have launched a parliamentary inquiry into whether the U.K. has violated the European Convention on Human Rights and the United Nations Convention Against Torture. Foreign Minister Jack Straw sent Rice a letter requesting any "clarification the U.S. can give about these reports in the hope that this will allay parliamentary and public concerns."

When the Washington Post reported on the eve of Rice's trip that CIA prisons holding U.S. detainees exist in Romania, Poland and other Eastern European nations, it triggered an explosion. Even though Romania and Poland denied the report, the European Commission and the Council of Europe began investigations. The E.C. declared that for any member state to harbor a CIA prison would be "extremely serious" and bring down sanctions upon it.

In Germany, Rice was greeted by the new chancellor, Angela Merkel, eager to repair relations with the Bush administration made awkward by former Chancellor Gerhard Schroeder's opposition to the Iraq war. Rice's visit was supposed to smooth over the conflicts of the past, but instead it surfaced new ones that indicated that the divisions between Germany - and Europe - and the U.S. are rooted in the Bush administration's fundamental policies.

Rice arrived in Berlin on the heels of a Washington Post report about the rendition, to a secret CIA jail in Afghanistan called the Salt Pit, of a German citizen, Khaled el-Masri, who was tortured and imprisoned for five months in a case of mistaken identity. After meeting with Rice, Merkel announced that Rice had acknowledged that the U.S. had made a "mistake" in the case. But Rice countered with a statement denying she had said that at all. The reconciliation with Germany was botched; Merkel was embarrassed; and Rice's credibility, at least in the German press, was left in tatters.

Rice had hoped to quell the controversy before she landed. On Monday, as she boarded her plane at Andrew Air Force base in Washington, she delivered a lengthy statement on torture. Her speech was remarkable for its defensive, dense and evasive tone. It was replete with half-truths, outright falsehoods, distortions and subterfuges.

Her remarks can never sway or convince any European leader, foreign ministry or intelligence service, which have the means to make their own judgments. In her effort to persuade world opinion and reassure the American public, she raised the debate over torture to greater prominence and virtually invited inspection of her claims.

Rice has made memorable statements in the past. There was her appearance before the 9/11 Commission, in which she had trouble recalling the CIA's Presidential Daily Briefing of Aug. 6, 2001, titled "Bin Laden Determined to Strike in US," and dismissed its significance. There were her many assertions about Saddam Hussein's weapons of mass destruction, including nuclear weapons: "We don't want the smoking gun to be a mushroom cloud." There was her attack on Richard Clarke, the former counterterrorism chief on the National Security Council, for his disclosure that both she and the president did not regard al-Qaida as an urgent threat before Sept. 11, 2001, as a "scurrilous allegation." But her remarks on torture may turn out to be her most unforgettable full-length speech, tainting her tenure as secretary of state as indelibly as Colin Powell's speech making the case for the Iraq war before the United Nations blotted him.

"Torture is a term that is defined by law," said Rice. "We rely on our law to govern our operations." She neglected to explain that "torture" as she used it has been defined by presidential findings to include universally defined methods of torture, such as waterboarding, for which U.S. soldiers were court-martialed in 1902 and 1968 specifically on the basis of having engaged in torture.

But the Bush administration has rejected adherence to the Geneva Conventions as "quaint," in the term of then White House legal counsel and now Attorney General Alberto Gonzales; rejects torture as it is defined in the United Nations Convention Against Torture (although the U.S. is a signatory); and rejects torture as it is interpreted by other international expert bodies, including the European Human Rights Court, whose judgments are binding on the nations of the Council of Europe.

"The United States does not permit, tolerate or condone torture under any circumstances," Rice insisted in her statement. "Moreover, in accordance with the policy of this administration: The United States has respected - and will continue to respect - the sovereignty of other countries." But was the kidnapping of the Egyptian suspect in Italy that has resulted in the 22 indictments of CIA operatives a fiction? Have the Italian prosecutors been made aware that the event was a figment of their imaginations? Was holding el-Masri, the innocent German, not a violation of the sovereignty of another country?

Rice continued: "The United States does not transport, and has not transported, detainees from one country to another for the purpose of interrogation using torture. The United States does not use the airspace or the airports of any country for the purpose of transporting a detainee to a country where he or she will be tortured." But the German government was reported to have a list of 400 flights over European airspace for the purpose of renditions. And Amnesty International reports that there have been 800 such flights. Once again, Rice relies upon her own definition of "torture" to deny it.

She went on: "The United States has not transported anyone, and will not transport anyone, to a country when we believe he will be tortured. Where appropriate, the United States seeks assurances that transferred persons will not be tortured." In fact, the U.S. receives assurances from those countries that it would be unlikely that the suspects will be tortured, a technical loophole that provides for a washing of hands. Everybody on all sides understands that there will be torture, as there has been.

Rice's legal interpretations were authoritative, bland and bogus. It is hard to say whether they should be called Orwellian for their intentional falsity or Kafkaesque for their unintentional absurdity.

"International law allows a state to detain enemy combatants for the duration of hostilities," she said. But the administration has vitiated international law with its presidential findings. The "global war on terror" is a conflict without end; its time limit extends into perpetuity. So long as terror is used as a tactic, or the threat of terror exists, which it always does, a state of war, such as it is, justifies indefinite detention.

Then, Rice presented as the administration's position precisely the position it opposes: "Detainees may only be held for an extended period if the intelligence or other evidence against them has been carefully evaluated and supports a determination that detention is lawful. The U.S. does not seek to hold anyone for a period beyond what is necessary to evaluate the intelligence or other evidence against them, prevent further acts of terrorism, or hold them for legal proceedings." But the Bush administration has refused to place detainees within the criminal justice system. Instead, they have been kept in a legal limbo, denied the protections of both the U.S. justice system and the Geneva Conventions. The administration has hid "ghost detainees" from the International Red Cross. If the suspects are criminals, they have not been tried as criminals.

Rice cited two cases to make her point: Carlos the Jackal, the international terrorist captured in Sudan in 1994, and Ramzi Youssef, the 1993 World Trade Center bomber. But, unlike current detainees, both were put on public trial, Carlos in France, Youssef in the United States. And the European Commission on Human Rights issued a report that Carlos' rights were not violated. Both cases refuted in their particulars the larger argument Rice was making.

One case Rice did not cite was that of Ibn al-Shaykh al-Libi, a captured al-Qaida operative, whose claims about Saddam Hussein's possession of WMD were used by the administration to build the case for the Iraq war. "We've learned that Iraq has trained Al Qaeda members in bomb-making and poisons and deadly gases," President Bush said on Oct. 7, 2002, drawing on al-Libi's information. Al-Libi also provided the basis for a dramatic high point of Secretary of State Powell's U.N. speech: "the story of a senior terrorist operative telling how Iraq provided training in these weapons to Al Qaeda. Fortunately, this operative is now detained, and he has told his story. I will relate to you now, as he himself, described it." But al-Libi had been tortured and repeated to his interrogators what they had suggested to him. The Defense Intelligence Agency reported in February 2002 that al-Libi's information was dubious, and the CIA also questioned its credibility in a report in January 2003 - both reports made before the war. Rice's various statements created a pandemonium across Europe that she tried to quiet with a clarification Wednesday in Ukraine. The policy she had just declared we did not follow she announced we would no longer pursue. "As a matter of U.S. policy, the United States' obligations under the CAT [U.N. Convention Against Torture], which prohibits cruel, inhumane and degrading treatment - those obligations extend to U.S. personnel wherever they are, whether they are in the United States or outside of the United States," Rice said at a press conference with Ukrainian President Viktor Yushchenko.

Rice's erratic journey also raises the question of her own part in the policy. The Washington Post story on el-Masri reports that Rice intervened on the side of informing the German government, a disclosure that resulted in el-Masri's release. This fact suggests that Rice has a degree of authority and knowledge in the realm of detainees and "black sites."

Since 2003, Rice has repeatedly told representatives of Human Rights Watch and other similar organizations that the U.S. does not torture. There is no trail of memos tracing her involvement in the titanic struggle over U.S. torture policy between Powell and the senior military on one side and Dick Cheney, Donald Rumsfeld and John Ashcroft's Justice Department on the other. Was the national security advisor completely out of the loop? On Nov. 19., ABC News reported, "Current and former CIA officers tell ABC News there is a presidential finding, signed in 2002, by President Bush, Condoleezza Rice and then-Attorney General John Ashcroft, approving the [harsh interrogation] techniques, including waterboarding."

That technique has its origin in the Spanish Inquisition. Indeed, in 1490, a baptized Christian who was a secret Jew, a converso named Benito Garcia, was subjected to water torture. The process drew out of him a confession of the ritual murder of a Christian child by crucifixion to get his blood for a magic ceremony to halt the Inquisition and bring about Jewish control. The incident greatly helped whip up the fear that led to the expulsion of the Jews in 1492, as described by James Reston Jr. in his new book, "Dogs of God: Columbus, the Inquisition, and the Defeat of the Moors."

Since the Inquisition, the method of waterboarding has been little refined. But Rice, like Bush, says we did not and will not torture anymore.

Mai's case is hardly unique in Pakistan. During the first seven months of 2004, according to the independent Human Rights Commission of Pakistan, at least 151 Pakistani women were gang-raped and 176 were killed in the name of honor. The vast majority of perpetrators go unpunished. Yet Mai refused to remain silent. She said she would rather "die at the hands of such animals" than "give up her right to justice" and pursued her case despite the threat of further violence. Against the odds, she won. Six men involved in her rape have been punished, with two of them sentenced to death (although Pakistani human-rights groups and I oppose the death penalty), and the government awarded her compensation. Mai has used the money to open a school in her village so that the force of education can wash away this crime perpetuated in the name of tradition.

As long as the state refuses to fully challenge the brutality of tribal law, the plight of Pakistani women will continue. Mukhtar Mai is a symbol of their victimhood, but in her resilience she is also a symbol of their strength.

ASMA JAHANGIR is a founding member of the Human Rights Commission of Pakistan and U.N. Special Rapporteur on extrajudicial killings

In phone conversations in the last few days, she said that when she tried to step outside, police pointed their guns at her. To silence her, the police cut off her land line... Ms. Mukhtaran continued her protests by cellphone. But at dawn yesterday the police bustled her off, and there's been no word from her since. Her cellphone doesn't answer.

Asma Jahangir, a Pakistani lawyer who is head of the Human Rights Commission of Pakistan, said she had learned that Ms. Mukhtaran was taken to Islamabad, furiously berated and told that President Pervez Musharraf was very angry with her. She was led sobbing to detention at a secret location. She is barred from contacting anyone, including her lawyer. [NYT]

The US government has made it clear that it doesn't care:

... on Friday, just as all this was happening, President Bush received Pakistan's foreign minister in the White House and praised President Musharraf's "bold leadership." [NYT]

Meanwhile, the GoP (Government of Pakistan) baldly lies (surprise!) and tells the world that its actions are designed to protect Mukhtaran Mai:

Prime Minister Shaukat Aziz told reporters in Islamabad that any security measures in place were for the protection of Ms Mai. [BBC]

To make matters even worse, six of her rapists, originally sentenced to death, were due to be released today after the Lahore High Court said there was insufficient evidence to support their conviction. According to Kristof, the order for their release came...

on a Friday afternoon, when the courts do not normally operate... [this] apparently was a warning to Ms. Mukhtaran to shut up. [NYT]

(The men were not actually released, leading to complaints from the Lahore High Court.)

You, dear reader, know the drill. Get on the phone, get out your parchment and quill, start up the smoke signals and talking drums. Let President Musharraf, the Pakistani Embassy, the State Department, and your Congressman know how you feel. Mukhtaran Mai has been brave enough for several lifetimes. It's time we start doing our part to thank her.

Mai, 33, has never been allowed to attend school in a village traditionally dominated by men. In the rural Pakistan area where she lived, it is common for women to be used as an example to settle disputes, and sometimes women are even traded to resolve problems.

Mai herself was at the center of such a dispute three years ago. Her younger brother was accused of insulting a more powerful neighboring clan. Mukhtar was told that if she begged for her brother's pardon she would be able to clear the family name.

"It was in my mind that this is the tradition of the head of the council — that if a lady goes there, then he places his hand on the head of the woman and he says, 'OK, you are excused.'"

But that's not what happened. Members of the all-male council attacked and raped her.

"There, in the presence of 200 people, four men took me and they abused me. I told them, they're like my brothers, not to do this. But they did not listen to me," she said.

When it was over, Mai was forced to walk home half-naked and publicly disgraced.

"Not only have you been completely shamed, you have shamed your entire family," said New York Times columnist Nicholas Kristof. "And the way to wipe that out is to commit suicide. And that's the expectation across rural Pakistan."

But Mai's reaction was quite the opposite. She pressed charges against the rapists, and 14 men were arrested. Then, at great personal risk, she testified against her attackers in court. Six of the men were found guilty, and one was sentenced to death.

The case made international headlines. The embarrassed Pakistani government awarded Mai a sum equivalent to nearly 20 times the average annual Pakistani salary.

She could have moved away and started a new life. But instead, Mai used the money to build two local schools.

"Education is power. People can be trampled on if they are not educated. But if they are educated they can fight back," she said.

After the trial, the accused men appealed their sentences, and the province let five of them go free. Mai feared for her safety, but she pressed on.

Pakistan's supreme court later took the case and ruled in her favor. All 14 of the rapists and their accomplices are now in prison.

"Sexual violence is an issue for women in every country, and if a woman like Mukhtar Mai can speak out against it with such incredible odds, then really she can be an example for women globally," said Nisha Varia of Human Rights Watch.

In fact, Mai is doing just that.

"I've gained a lot of strength from building the school," she said. "I would not be alive today if I had not gained this strength, and I have more faith in Pakistan because of this."

The fissure, now 13 feet wide, formed in just three weeks after a September 14 earthquake in a barren region called Boina, 621 miles north east of the capital, Addis Ababa, said Dereje yesterday.

“We believe we have seen the birth of a new ocean basin,” said Dereje of Addis Ababa University. “This is unprecedented in scientific history because we usually see the split after it has happened. But here we are watching the phenomenon.”

The findings have been presented at a week-long American Geophysical Union meeting taking place in San Francisco that ends Friday.

“It’s amazing,” the BBC quoted one of the Afar researchers, Cindy Ebinger of the Royal Holloway University of London, as saying in San Francisco. “It’s the first large event we’ve seen like this in a rift zone since the advent of some of the space-based techniques we’re now using, and which give us a resolution and a detail to see what’s really going on and how the earth processes work.”

The Ethiopian Afar Geophysical Lithospheric Experiment, involving scientists from Royal Holloway and the universities of Leicester, Leeds and Addis Ababa, is using sensitive instruments to study what is happening deep within the earth.

Dereje said that the split is the beginning of a long process, which will eventually lead to Ethiopia’s eastern part tearing off from the rest of Africa, a sea forming in the gap. The Afar desert is being torn off the continent by about two centimetres each year.

“The crust under Afar is becoming like the crust found in the Red Sea,” said Dereje, head of earth science at Addis Ababa University. “Once the crust is formed you will have water because it is a low area and the water will migrate from the Red Sea and the Gulf of Aden. It becomes a basin.”

The scientists plan to set up an observatory to watch the split and see how it develops.

"I don't think we're ready yet, but we're getting there," said Richard McCarthy, executive director of the California Seismic Safety Commission, which issued the report. The commission, an independent advisory panel, formed a special committee to look at the dangers after last December's deadly tsunami in Southeast Asia.

In the past century, more than 80 tsunamis _ mostly minor _ have been recorded or observed along the California coastline.

The most deadly was in 1964 when a magnitude-9.2 earthquake in Alaska generated massive waves that killed 12 people. Scientists have also kept a close eye on a 680-mile fault 50 miles off the West Coast that behaves much like those that produced the 1964 Alaska quake and the Southeast Asia tsunami that killed more than 176,000 last year.

While catastrophic tsunamis rarely strike the West Coast, state officials are acutely aware of the potential for damage and loss of life as a result of booming development along the coastline.

About a million people live in low-lying coastal areas that are vulnerable to flooding by a tsunami. Existing building codes call for structures to be able to withstand severe shaking from an earthquake, but the report revealed that homes and businesses are rarely designed to hold up against tsunami-force surges.

The report also found most coastal communities lacked evacuation plans for residents because of funding problems.

The state Office of Emergency Services and the University of California have produced inundation maps that show the coastal areas most at risk, but few communities have used them to map out and mark evacuation routes, the report found.

Along with threatening lives and property, a giant tsunami would strike an economic blow to the state, given the vulnerability of its ports, the report said.

If a tsunami shut down the ports of Los Angeles and Long Beach for two months, the economic loss could reach $60 billion. The ports make up the third busiest port in the world, but its docks and terminals are only about nine feet above the water.

A massive wave higher than that could cause extensive damage, the report said. Thousands of pleasure boats and other crafts could come loose, and vehicles, equipment, containers and tools could get washed away.

In June, a tiny tsunami off the far Northern California coast exposed just how unprepared the region was to the threat.

Cities were confused by the differing tsunami warning messages that came from two centers operated by the National Oceanic and Atmospheric Administration. Since then, federal, state and local officials have met several times to agree on the best way to alert communities _ an action that won praise from the authors of the report.

A joint program by the NOAA and Federal Emergency Management Agency is also working on design guidelines for tsunami shelters that could extend to strengthening hospitals and other facilities as well.

Some months ago, OfficialWire published an article about untrue postings on Wikipedia, by Christian Wirth also known as RaDMan. Shortly after the devastating earthquake and tsunamis on December 26, 2004 in the Indian Ocean, Wirth took upon himself to wage a war against QuakeAID Foundation, Inc. Wirth's arsenal consisted of untrue, libelous writings that he and Wikipedia published as fact. All attempts, by QuakeAID's founder, to correct the untrue comments were re-edited, blocked or labelled as 'untrue' by a group of volunteers, who hold themselves untouchable and above the law.

John Seigenthaler and QuakeAID are not alone. Wikipedia cannot hold itself out as quintessential authority and deny responsibility and accountability. Likewise, to accept postings without vetting or cross-checking the material (not merely searching Google as Wikipedia's volunteers do) opens Wales and his 'Foundation' up to legal action, regardless of their published disclaimer. Indeed, to suggest that such a disclaimer affords any protection at all is nonsense. The first line of their disclaimer says it all: "General disclaimer – Use Wikipedia at your own risk". Until Seigenthaler learned of the untrue statements about him, he was not a user.

As a direct result of the most recent debacle, Wikipedia has stopped "Anonymous" users from creating new articles. That's a start, but registration on the website can consist of providing an email address and false name, so they have a great deal of work to do before anyone should consider the content found on Wikipedia credible.

In the meantime, QuakeAID has written once again to Jimbo Wales, demanding the untrue and libelous information be removed from Wikipedia, while a group of interested parties have joined together and plan to initiate legal proceedings against Wales and Wikipedia Foundation, Inc., and numerous others—the so-called anonymous 'volunteers'—who they believe should be held responsible for the content they publish.

For more information, visit www.WikipediaClassAction.org.

Mirecki also said he had retained an attorney.

The university "has a duty, as a protector of intellectual honesty and debate, to support its teaching staff when controversial issues are raised," he wrote.

University spokeswoman Lynn Bretz said Saturday that Mirecki resigned the chairmanship last week on the recommendation of faculty members.

The university "stands unequivocally in support of his First Amendment rights and his rights to academic freedom," Bretz said.

The controversy began with a course Mirecki planned to teach called "Special Topics in Religion: Intelligent Design, Creationism and other Religious Mythologies." The class was proposed after the Kansas Board of Education decided to include more criticism of evolution in its school science standards.

The class was canceled last week after e-mails surfaced in which Mirecki mocked religious conservatives as "fundies" and said a course describing intelligent design as mythology would be a "nice slap in their big fat face." He has apologized for those comments.

On Monday, Mirecki was treated at a Lawrence hospital for head injuries after he said he was beaten by two men on a country road. He said the men referred to the creationism course. Law enforcement officials were investigating.