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STORM WARNING: GLOBAL FINANCIAL MARKETS ARE SPINNING OUT OF CONTROL
posted: Tue, 02 Oct 2007
by Jim Deeds, mcalvany.com

"America will never be destroyed from outside. If we falter and lose our freedoms, it will be because we destroyed ourselves." - Abraham Lincoln

"A nation which does not remember what it was yesterday does not know where it is today." - Robert E. Lee

"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell

"When we lose the right to be different, we lose the right to be free." - Charles Evans Hughes

"Make yourselves sheep and the wolves will eat you." - Benjamin Franklin

INTRODUCTION

The little boy tending his flock of sheep thought he heard a strange noise in the dark, and so he called "Wolf!" And the townspeople came to his help. The nights became dark and scary with lots of new noises, so the little boy repeated his cry many times in the nights that followed. And always, after they found no wolf in sight, the townspeople went back home to bed.

Then one night the small boy could even see the wolf‚s gleaming eyes and the silhouette of his ears in the moonlight. He shouted "Wolf," but the townspeople had heard this call too many times before as a false alarm.

So no one came - except the wolf!

Today, world events in financial markets are running ahead of our ability to recognize the breathtaking speed in the reevaluation of both assets and debt. All at once, "perception is reality" is a two-edged sword. The days when the word "risk" conjured up visions of new instant riches are gone. Now, when an investment banker or investor hears the word "risk," it conjures up "fear" in the pit of their stomach. The never-ending "liquidity" and "excess savings" that became the cornerstone of Alan Greenspan and Bernanke‚s "new economy" just went poof! - at least in their future availability to American borrowers.

Real money is something you can feel and touch and see. Debt is only a promise to pay back in the future, and is only as good as the man who made the promise. The world has always been overloaded with good intentions and broken promises! And an electron impulse on a computer screen or bank statement representing a trillion dollars in "sub prime" debt, commercial paper, or an unimaginable 400 trillion dollars worth of an imaginary financial safety net called "derivatives" may not survive the very next financial storm. Power off ! Game over!!

But in America, it feels so good (even today) to dream of future riches - and it is better yet to be the world‚s "financial engine." Borrowing one‚s way to prosperity is fun, and really, really easy. "Just takes a signature!" So, up until August 2007, "good times never seemed so good," (Neil Diamond).

Then - something called "sub prime" happened. But most Americans thought, "Just a tiny blip on the radar screen." And as Southwest Art magazine for October reported, "Coeur d‚Alene Art Auction Tops $35 Million! "The Coeur d‚Alene Art Auction (held in Reno, NV) brought in an astounding $35,402,640, the highest total ever for an auction of western art. With over 850 bidders present, a 1905 watercolor by Charles M. Russell sold for nearly double the pre-show estimate - for $2,912,000. And a painting by Paul Signac also sold for $2,912,000, while a 1918 painting called "Joshing Moon," estimated to sell for $300,000, soared to a final bid of $1,680,000."

Obviously, someone forgot to tell bidders of Western Art in Reno that "times have changed." But, did August 2007 signal a new deflationary depression arriving in America, or a rapid acceleration in our living costs toward hyperinflation? (A clue: figures don‚t lie.)

A. THE END OF THE EASIEST TRADE EVER - DEBT FOR TRUST

In 1987, Alfred L. Malabrae, Jr., economics editor and columnist for the Wall Street Journal, wrote a highly readable and urgent book, Beyond Our Means. The subtitle is: "How America‚s Long Years of Debt, Deficits, and Reckless Borrowing Now Threaten To Overwhelm Us." Al Malabrae was only one of many, many conservative thinkers over the past 30 years that have warned of America‚s addiction to "demon debt." Lots of people have been crying "wolf" for a long, long time! Is the wolf finally at our door?

1. JIM SINCLAIR, maybe one of the best informed and most successful gold traders ever (I met Jim Sinclair at several gold seminars in San Francisco and New Orleans in the late Œ70s), was a well-recognized gold and conservative financial expert even back then with a well-earned financial reputation - and a very sharp mind. Recently he wrote the following on his web site (www.jsmineset.com) that gives daily and often hourly comments on the gold markets and financial affairs.

My Dear Friends, It is not coming - it is already here. I am convinced that all that has been anticipated since 1968 has now occurred. I see the mountain of interest rate/mortgage related over-the-counter derivatives which, when including all types, exceeds USD $30 trillion. It is shaking quite badly.

The situation now resembles the Weimar Republic in the sense that the Weimar case study is predicated on planned currency destruction to avoid war reparations that got out of control. The present situation is based on the ultimate sin of greed called over the counter derivatives. This mountain of unfunded special performance contracts is shaking and will, as a product of declining US business activity and profits, fall.

Before the fall of the unimaginably big mountain of garbage paper, ALL world central banks will in concert prime the pump any way they can figure out how to. Priming for this purpose has no practical way of being drained. What is going to get out of control now is monetary inflation to offset the shaking mountain of over the counter derivatives. The process of the fall is in progress and will be history by 2012 or SOONER.

Simply stated this is it, today, now! Think the best, but protect yourself under a worst case scenario.

There is no more "if this happens, that will happen" scenario. It has already happened, and the Formula applied internationally is going to bull all commodities to a level that even the wildest (rational) bull cannot not even verbalize. The dollar is headed below the estimates of the biggest (rational) bear.

I take what is said here very seriously. What I have just said I have never said before!

The over the counter shaking mountain of derivatives can‚t be fixed by trying to hide it. The problems cannot be fixed by any interest rate action. The problem will not even be fixed by a monetary inflation of unprecedented amounts. The problem is coming home by 2012 or much SOONER.

Keep in mind that over the counter derivatives generally have the following characteristics:

1. Without regulation.
2. Without listing on public exchanges.
3. Without standards.
4. Therefore not in the least bit transparent.
5. Therefore without an open market of the bid/ask type.
6. Dealt in by private treaty negotiations.
7. Without a clearinghouse.
8. Unfunded without financial guarantee of any kind.
9. Functioning as contracts of specific performance.
10. Financial character or ability to perform is totally dependent on the balance sheet of the loser in the arrangement.
11. Evaluated by computer assumptions made by geek, non-market experienced mathematicians who assume religiously that all markets return to their normal relationships regardless of disruptions.
12. Now in the credit and default category alone considered by accepted authorities as totaling more than USD $30 trillion in notional value.
13. Notional value becomes real value when the agreement is forced to find a real market for ending the obligation which is how one says sell it.

Interestingly, some of us who have lived through the past 40 years of America‚s financial dominance came to the same conclusion at about the same moment - it‚s finally over.

The last week in August it became apparent that America finally crossed a line of no return. The odds today must be 50 to 1 or better that defaulted debt, a rapidly declining dollar, a new flood of both Fed credit and foreign central bank money overwhelming all physical markets worldwide, and a future hyperinflationary run and then collapse seem certain in our immediate future.

B. BYE, BYE, MISS AMERICAN PIE

In August 2007, it became obvious to all who cared to look, that American financial leaders have destroyed our country‚s small remaining credibility and honest reputation with the concluding lies and deception climaxing the greatest dollar Ponzi scheme ever! Alfred Malabre‚s Beyond Our Means finally caught up with us. Living the lie of borrowing ourselves to everlasting prosperity is over.

1. THE LAST "BIG TRICK" - Like Pinocchio‚s nose, the fanciful schemes of America‚s investment banking industry just grew and grew as our increasing demands for more debt grew. With lots of "leverage" and a little imagination, everything is possible. The final scheme in American finance required a move from reality to illusion that involved five players:

a) INVESTMENT BANKERS - Greenspan‚s "Fed" had to give up its previous control of money and credit "standards and creation" to a gang of thieves. Wall Street‚s investment bankers have always cut corners when under pressure - to make an extra buck. The only love greater than "the game" for most Wall Streeters is the love of money. So, with Greenspan‚s blessings, converting debt into instant cash became easy - every Wall Streeter‚s greatest challenge. And unbelievable leverage built into our financial system became every investment banker‚s sure road to success. So, we needed Wall Street (and London) investment bankers to "fabricate the new money game" of debt.

b) DERIVATIVES/"QUANTS" - "Old fashioned" balance sheets had to be modernized. Leaving the real world of 1+1 = 2 was required for open-ended leveraged success. Today‚s balance sheets for leading investment bankers, like the leader Goldman Sachs, quickly reflect the "new math." The asset side of Goldman‚s balance sheet, to a trained eye, reflects three categories of "hard assets":

1) ASSETS "MARKED TO THE MARKET" - meaning the last recent trade on a market of that particular asset sets its balance sheet price.

2) ASSETS "MARKED TO THE MODEL" - which means the assigned value of that asset is derived by a mathematical formula dreamed up by a former Princeton, Harvard, or MIT math teacher (now employed on Wall Street as a highly paid "quant" by leading brokers).

3) ASSETS "MARKED TO MAKE BELIEVE" - you know the value of this one?

The most amazing part of this is that it is delusional. Americans, from Wall Street‚s brightest analysts to the SEC to John Q. Public all buy this baloney. Why? Everyone just wants one more day to make 10 million more (worthless) dollars!

c) FANNIE MAE & FREDDIE MAC - THE TWO GSE‚S (GOVERNMENT SPONSORED ENTERPRISES) - that have dominated the mortgage creation and underwriting market for the past decade, added total credibility (the trillions of dollars of "paper" they issued were implicitly believed to be backed by the credit of the U.S. government). This all remains "believable" up to this day, in spite of the fact that Congressional sub-committees have found "cooked books" at Fannie and Freddie where imaginary derivative bets protected illusionary profits each of the past four years. Fannie Mae (FNM) is allowed to break New York Stock Exchange rules that require up-to-date audits and annual reports - and is still two years behind in its fiscal reporting. In the meantime, Congressional sub-committee investigators talk on.

d) DEBT INSURERS - By "rating" a new bond offering, Standard and Poors and Moody‚s can change a package of "hodge-podge" lowest quality mortgage loans into AAA paper! Then, investment banking industry "quants" create new interest rate derivatives that are packaged with these junk mortgage bonds "to insure" buyers against any future negative interest rate swings in the market. Hence, Moody‚s and S&P create a prince out of a frog. The only problem? "Make believe" or "mark-to-the-model" derivatives, a $30 trillion block of debt insurance, have no market, are not traded, and are only as good as "the word" of the issuer of the derivative.

QUESTION: What issuer can back up the $30 trillion derivative guarantee on future interest rates if they‚re wrong?

e) INSURERS - Junk mortgage bonds and the lowest rated mortgage-backed commercial paper (short-term business loans) become triple A "paper" when rating agencies Moody‚s and Standard and Poors earn a fee from their customers (the investment banking industry) in rating a pile of junk (junk bonds theoretically protected by make-believe derivatives) as AAA - the best!

QUESTION: Can bond ratings be compromised when the rating agency earns all its income from the bond underwriter paying for the bond rating? Is this an unconscionable conflict of interest?

2. ANALYSIS/CONCLUSION OF THE LAST BIG TRICK - The discrediting or failure of any one of the five lines above in the daisy-chain of the issuance of supposedly triple A rated bonds will destroy the credibility and the secondary market for many trillions of dollars of "supposed" U.S. triple "A" paper. Most of these bonds are held by retirement funds or foreign central banks outside of the United States. This is what the sub-prime debt mess is all about.

C. THE SOLUTION

The "lender of last resort" has to be the only solution to this worldwide freeze-up in secondary debt markets. Overnight, when it was discovered that a $440 trillion derivative "market" wasn‚t really a market at all - but was only the theoretical "insurance scheme" dreamed up by mathematical genius "quants" who had no "real market" experience at all - all mortgage backed securities markets and theoretical valuation of insuring interest rate derivatives came to a screeching halt.

Overnight, European central banks created over $300 billion in newly created credit (money) to try and liquefy near bankrupt hedge funds and banks. Ditto Japan! And Bernanke and the U.S.‚s newly minted credit that "lenders of last resort" admitted to creating may only be a small part of what they really did in "combined secrecy" - under the table.

D. CONCLUSION

On September 18, the reduction of the discount rate by one-half of one percent by the "Bernanke Fed" told three separate stories:

1) The response indicates the worldwide liquidity crisis (and loss of faith in dollar-denominated debt) is serious. (It is gigantic and out of control!)

2) Today‚s "fragility" of the worldwide money game is the greatest ever - with a dollar-debt debacle now a very real threat to American dominance in a fast-changing world.

3) Everyone still wants to play! As soon as central banks and the "fed" create hundreds of billions of dollars in credit to bail out the greed and mistakes of banks, investment bankers, and highly-leveraged hedge funds, the "new money" (credit) is channeled into new more highly leveraged "plays" by the maestros of Wall Street.

E. THE DAY AFTER

If you give your three-year old another stick of candy every time he cries, you may someday see a 21-year old adult (with no teeth) still sucking on a candy. The same goes for ever-expanding supplies of monetary credit provided by "papa." Net result? Hyperinflation soon!

[ED. NOTE: As time passes between the time this written and when it is published, more huge "disconnects" in the world‚s financial network will occur. We have not only cried "wolf" for many years - but "hyperinflation" for the past decade. Odds of American hyperinflation are now at least 10 to 1. The handwriting is on the wall! Send this MIA to a friend. Call 1-800-525-9556 to order more copies.

As this goes to press, gold is skyrocketing along with oil and global commodities; the dollar is plunging; the public is still in the dark and sleeping - due to history‚s most effective-ever Wall Street propaganda machine; and the seeds of a U.S. hyperinflation are being sown by the financial powers that be. The global financial crisis which MIA has written about for decades is no longer coming! It is here! Prepare your personal finances accordingly!
(yahoo.group)

Attack on Iran Imminent
posted: Wed, 03 Oct 2007

NOTE: At the Sept 30, 2007 Sunday night conference call on the Kennebunkport Warning, the issue of seeking immediate Impeachment as a way to avoid the outbreak of war with Iran (and a wider WWIII) was discussed. Rep Dennis Kucinich has indicated he may take Res 333 for the impeachment of Cheney for a vote on the floor of the House of Representatives under HIgh Constitutional Privilege. This is a strategy favoured by the Kennebunkport Warning (See below), which was issued on Aug 24, 2007, 6 days in advance of the leak by constitutionally loyal US Air Force personnel on Aug 30, 2007 that six nukes were missing on a Minot, ND USAF - LA. USAF flight. Rep. Robert F. Drinan in March 1973 used this Privilege to bring a Resolution of Impeachment against Nixon. By Oct, 1973, there were 84 such Impeachment Resolutions.

If Kucinich follows through and exercises Constitutional Privilege, this could help the forces trying to avert WW III (Read article below).

Kucinich to force impeachment vote on House Floor.
http://mparent7777-2.blogspot.com/2007/09/kucinich-to-force-impeachment-vote-on.html

You can send Kucinich a personal email at DKucinich@aol.com urging him to use HIgh Constitutional Privilege to seek a vote on the House floor for Res 333 to impeach VP Richard B Cheney. Or you can call Rep. Dennis Kucinich office Toll free : 866-340-9281 (Ask the Capitol operator for Rep Kucinich's office. Then ask for Dennis' Legislative Assistant). Please register your opinion with Dennis' office. It's free and you might help stop the war. Thank you.

THE KENNEBUNKPORT WARNING
To the American people, and to peace loving individuals everywhere:
Massive evidence has come to our attention which shows that the backers, controllers, and allies of Vice President Dick Cheney are determined to orchestrate and manufacture a new 9/11 terror incident, and/or a new Gulf of Tonkin war provocation over the coming weeks and months. Such events would be used by the Bush administration as a pretext for launching an aggressive war against Iran, quite possibly with nuclear weapons, and for imposing a regime of martial law here in the United States. We call on the House of Representatives to proceed immediately to the impeachment of Cheney, as an urgent measure for avoiding a wider and more catastrophic war. Once impeachment has begun, it will be easier for loyal and patriotic military officers to refuse illegal orders coming from the Cheney faction. We solemnly warn the people of the world that any terrorist attack with weapons of mass destruction taking place inside the United States or elsewhere in the immediate future must be considered the prima facie responsibility of the Cheney faction. We urge responsible political leaders everywhere to begin at once to inoculate the public opinion of their countries against such a threatened false flag terror operation.

List implications to prevent nuclear war. EIR view.
Forwarded with permission:

Electronic Intelligence Review Oct. 5th 2007

Cheney's Ouster May Be Last Chance to Stop World War III.
By Jeffrey Steinberg.

The latest word from the Democratic chicken-coop on Capitol Hill is that, if President Bush orders military strikes against Iran, both he and Vice President Dick Cheney will be immediately impeached. This is the newest prize-winning excuse of- the-week being circulated by a number of leading Democratic lawmakers to their key constituents, who remain fit-to-be-tied over the Dems' capitulation to Speaker of the House Nancy Pelosi (D-Calif.), who has declared, for months, that impeachment is "off the table."

Just when you thought that things couldn't get worse, Congressional Democrats, having failed to support Rep. Dennis Kucinich's (D-Ohio) H.R. 333, calling for the impeachment of Cheney, have now gone one step further towards capitulating to another devastating Cheney-Bush war, through legislative acts of treachery that have given the White House a green light to bomb Iran back to the Stone Age˜even as internal political developments in Iran suggest that the war party in Tehran has been weakened.

On Sept. 26, by a vote of 76-22, the U.S. Senate approved an amendment to the defense authorization bill, calling on President Bush to list Iran's Revolutionary Guard Corps (IRGC) as a "foreign terrorist organization," subject to a wide range of economic sanctions. Military experts consulted by EIR confirmed that, while the designation principally authorizes economic measures, the ambiguities of the Bush Administration's so-called "Global War on Terror" makes the Senate vote a de facto endorsement of military action.

As the result of the amendment, which was introduced by two of Cheney's leading Senate allies˜Joe Lieberman (I-Ct.) and Jon Kyl (R-Ariz.)˜President Bush can order a bombing campaign against Iran at any time, without having to go to Congress for further authorization, according to a number of constitutional scholars and military analysts.

While two particularly egregious sections of the amendment were removed after protests by Sen. James Webb (DVa.), prompting some Senators to claim that the vote was not a de facto authorization to go to war, it remains to be seen whether the White House, particularly Cheney, will abide by that strict "interpretation."

The same day that the Senate was providing Bush and Cheney with their backhanded authorization for war, the House of Representatives was caving in similarly. By an overwhelming vote of 408-6, the House passed the Iran Sanctions Enabling Act, which would impose sanctions against any foreign or American companies investing more than $20 million in Iran's energy sector. According to Inter-Press Services' Jim Lobe, the Iran Sanctions Enabling Act has been the numberone legislative priority of the Israeli Lobby since the beginning of the year.

Once again, the stage has been set for a Bush-Cheney preemptive war. As Lyndon LaRouche has been warning for months, the only sure-fire war avoidance option left is the immediate ouster of Dick Cheney from office.

Scenario for World War III

On Sept. 25, retired CIA officer Philip Giraldi penned a frightening piece for antiwar.com, which took up the potential consequences of a U.S. military confrontation with Iran. Under the provocative title "What World War III May Look Like," Giraldi spelled out an unfortunately realistic scenario for an escalation of military conflict between the United States and Iran, triggered by a low-level skirmish between U.S. and Iranian soldiers along the Iraq border. Under Giraldi's scenario, a full-scale war erupts between the United States and Iran, which soon spreads to Iraq, where Shi'ite insurgents engage in large-scale asymmetric combat with American soldiers, who finally have to shoot their way out of the country, at tremendous loss of life. Ultimately, the conflict spreads to the Eastern Mediterranean, Central Asia, and the Indian subcontinent; it sparks a war between India and Pakistan, a violent coup in Afghanistan, a war between Israel and Syria/Lebanon, rioting
throughout the Muslim nations of the Asia Pacific region, and, ultimately, U.S. use of nuclear weapons, which draws both Russia and China to the brink of intervention. As Giraldi concludes, "World War III has begun."

While we are hopefully some distance away from such an Armageddon nightmare, the onrushing global financial meltdown, and the tensions and war-moves throughout Southwest Asia make it a most appropriate time to take seriously the warnings offered by the former CIA officer.

Furthermore, according to a variety of Washington military sources, the U.S. Air Force is stepping up war plans against Iran through a planning unit called Project Checkmate. Created in the 1970s to plan out strategic warfare against the Soviet Union, Project Checkmate was revived in the early 1990s, as the air-war planning unit for Operation Desert Storm. In June of this year, Project Checkmate was reactivated, to plan for future wars, targetted immediately at Iran, and, in the longer term, against North Korea and China. According to a Sept. 23, report in Rupert Murdoch's London Sunday Times, Project Checkmate is the Air Force's primo planning agency. Col. John Warden (USAF), who ran Project Checkmate in the 1990s, told the Times that the unit is vastly better situated to plan out the next war than the staff at the Central Command. "The Centcoms of this world are executional˜ they don't have the staff, the expertise, or the responsibility to do the thinking that is needed
before a country makes the decision to go to war. War planning is not just about bombs, airplanes and sailing boats," he told the Times' Sarah Baxter.

A wide array of Washington insiders interviewed by EIR confirm that there is a humongous faction fight inside the Bush Administration, over war on Iran. Vice President Cheney remains the chief proponent of preventive war, and Defense Secretary Robert Gates, with the backing of the Joint Chiefs of Staff and the CIA, opposes it, arguing instead for robust diplomacy. One centerpiece of the fight is the still-pending National Intelligence Estimate on Iran's nuclear program. The report was, according to several sources, completed in February and submitted in draft to the White House; but it has been sent back to the intelligence community at least four times. The reason? The report concludes that Iran will not have the capacity to build a nuclear bomb until sometime in the next decade˜after Bush-Cheney have left office.

Giving Ahmadinejad the Saddam Treatment

One of the more clearcut indications that the war party is still pressing for an attack on Iran came during the visit of Iranian President Mahmoud Ahmadinejad to New York City, to address the United Nations General Assembly. U.S. intelligence sources have confirmed that Ahmadinejad was sent to the United States, under orders from the Supreme Leader Ayatollah Ali Kamenei, to signal that Iran is prepared to compromise and avoid war. In appearances at Columbia University, on CBS-TV's "Sixty Minutes," and in a closed-circuit broadcast into the National Press Club in Washington, the Iranian President was repeatedly insulted and ridiculed. As one longtime Middle East observer put it, "Ahmadinejad was given the Saddam Hussein treatment," referring to an early 1990s Diane Sawyer interview with Saddam, in which he was publicly trashed, as a signal that the United States was turning towards war.

Just hours after Columbia University President Lee Bollinger delivered a 30-minute "bill of indictment" against the Iranian leader, in introducing him to a university audience, a group of scholars and journalists gathered at the Washington, D.C. campus of Johns Hopkins School of Advanced International Studies (SAIS), to discuss the Iranian situation. One speaker, M.J. Rosenberg of the Israel Policy Forum, an organization created after the 1993 Oslo Accords to promote a two-state solution to the Israel-Palestine conflict, lamented that Dr. Bollinger's behavior had reminded him of "the Soviet Union."

The forum was convened to release a new book by SAIS graduate Dr. Trita Parsi, on the complex and treacherous relationship among Israel, Iran, and the United States. Dr. Parsi and the other speakers highlighted the recent signals by the government in Tehran, that it wishes to resolve all the issues of conflict with Washington, through diplomacy and compromise, not military conflict. The re-emergence of Ayatollah Akbar Hashemi Rafsanjani, as a counterweight to President Ahmadinejad; the recent progress in Iranian negotiations with the International Atomic Energy Agency (IAEA) over Iran's nuclear energy program; and the Iranian government's release of a number of Iranian-American dual citizens from custody, were all cited as evidence of a turn in Iranian diplomacy towards the United States. Furthermore, Dr. Parsi cited the May 2003 communiqué between then- Iranian President Seyyed Mohammad Khatami and then- U.S. Secretary of State Colin Powell, offering comprehensive
bilateral talks "with no preconditions," as evidence that Iran has been seeking a diplomatic rapprochement with Washington for a long time. That May 2003 offer was flat out rejected by the Bush White House, with Cheney and then-Defense Secretary Donald Rumsfeld most aggressively opposing any talk with Iran.

EIR's own sources emphasize that Iran's top leadership has woken up to the fact that at least some factions inside the Bush White House are intent on a military confrontation with Iran, before leaving office, and that the Iranians are attempting to demonstrate that they are prepared to negotiate.

It is in this context that LaRouche has again warned Congress that its failure to force Dick Cheney's ouster from office could go down as the fatal act of cowardice that destroyed the American Republic.
(yahoo.group)

I hate all Iranians, US aide tells MPs
By SIMON WALTERS
29th September 2007

Britsh MPs visiting the Pentagon to discuss America's stance on Iran and Iraq were shocked to be told by one of President Bush's senior women officials: "I hate all Iranians."

And she also accused Britain of "dismantling" the Anglo-US-led coalition in Iraq by pulling troops out of Basra too soon.

The all-party group of MPs say Debra Cagan, Deputy Assistant Secretary for Coalition Affairs to Defence Secretary Robert Gates, made the comments this month.

The six MPs were taken aback by the hardline approach of the Pentagon and in particular Ms Cagan, one of Mr Bush's foreign policy advisers.

She made it clear that although the US had no plans to attack Iran, it did not rule out doing so if the Iranians ignored warnings not to develop a nuclear bomb.

It was her tone when they met her on September 11 that shocked them most.

The MPs say that at one point she said: "In any case, I hate all Iranians."

Although it was an aside, it was not out of keeping with her general demeanour.

"She seemed more keen on saying she didn't like Iranians than that the US had no plans to attack Iran," said one MP. "She did say there were no plans for an attack but the tone did not fit the words."

Another MP said: "I formed the impression that some in America are looking for an excuse to attack Iran. It was very alarming."

Tory Stuart Graham, who was on the ten-day trip, would not discuss Ms Cagan but said: "It was very sobering to hear from the horse's mouth how the US sees the situation."

Ms Cagan, whose job involves keeping the coalition in Iraq together, also criticised Britain for pulling out troops.

"She said if we leave the south of Iraq, the Iranians will take it over," said one MP.

Another said: "She is very forceful and some of my colleagues were intimidated by her muscular style."

The MPs also saw Henry Worcester, Deputy Director of the Office of Iranian Affairs, who said he favoured talks with Iran.

The Pentagon denied Ms Cagan said she "hated" Iranians.

"She doesn't speak that way," said an official.

But when The Mail on Sunday spoke to four of the six MPs, three confirmed privately that she made the remark and one declined to comment. The other two could not be contacted.
http://tinyurl.com/2uycb9

HILLARY'S $30,000 FANS ARE HER 'CULT' FOLLOWING
By CHARLES HURT and JEANE MacINTOSH
October 1, 2007

A purported pyramid-scheme operator who was run out of Arkansas when Bill Clinton was governor has reinvented himself as the head of an upstate group accused of being a "cult" - and his devotees have pumped thousands into Hillary Rodham Clinton's presidential run.

Executives and top associates of the Albany-based NXIVM group - along with their family members - donated $29,900 to Clinton's presidential campaign, according to federal records.

On March 14 and April 13, records show, more than a dozen contributions poured into Clinton's coffers from NXIVM, an executive and group-awareness training organization led by Brooklyn-born Keith Raniere, 47.

Most were from first-time political donors, each giving the $2,300 maximum.

The revelation comes on the heels of the arrest of Norman Hsu, who raised $1.5 million in campaign contributions for the Clintons and other Democrats, even though he was technically a fugitive from fraud charges in California.

Hsu jumped bail in early September but was nabbed and is currently locked up in California.

In his previous incarnation, the Svengali-like Raniere ran a $30 million multilevel marketing business that imploded after federal agencies and regulators in 23 states alleged it was an illegal pyramid scheme.

He has managed to attract famous names to NXIVM.

Three of the March and April Clinton pledges came from Raniere's most high-profile followers: Seagram heiresses Clare and Sara Bronfman, and Pamela Cafritz, daughter of D.C. A-listers Buffy and Bill Cafritz.

Cafritz shares a condo with Raniere.

The Bronfman sisters are also deeply involved with NXIVM and, according to a 2003 article in Forbes magazine, have loaned millions to the group and provided use of their jet.

Their father, Edgar Bronfman Sr., once took NXIVM classes but soon severed ties, telling Forbes, "It's a cult."

The Clinton campaign downplayed the significance of the NXIVM-related contributions.

"Over 100,000 people from across the country have contributed to Sen. Clinton's campaign for change, and regardless of who supports her, she will always continue to stand up for what she feels is right," said campaign spokesman Blake Zeff.

Hillary isn't the only Clinton NXIVM officials are attracted to.

At least three of them - group President Nancy Salzman and the Bronfman sisters - are members of Bill's charitable organization, the Clinton Global Initiative. Membership is by invitation only and requires at least a $15,000 donation per person for one year.

NXIVM spokesman Frank Roberts told The Post the organization doesn't have a presidential candidate it is officially backing.

Last month, the Albany Times Union reported that NXIVM associates gave $31,600 to the state Republican Senate Campaign Committee and provided $34,763 worth of air transportation.

The recent campaign contributions led one close observer of NXIVM to speculate that the group is trying to curry favor for its effort to expand training centers upstate.

In the 1990s, several states investigated the Raniere-run Consumer Buyline Inc., a marketing firm in which members were paid commissions for recruiting new members.

A 1992 Arkansas lawsuit filed by Bill Clinton's then-attorney general, Winston Bryant, charged Raniere, Cafritz and two others with fraud and business deception. Soon after, then-New York AG Robert Abrams sued CBI, branding it "illegal."

Raniere didn't admit wrongdoing, but agreed to pay hefty fines in both states.

After closing the Albany-based CBI, he became involved in a health-food and vitamin venture that led him to Salzman. Sharing a passion for motivational training, the pair launched NXIVM.

At NXIVM - according to court papers, cult watchdogs and relatives of members - Raniere has defrauded devotees, shattered families and drove at least one person to suicide.

After four months attending NXIVM's expensive, "intensive" studies, Alaska resident Kristin Marie Snyder grew angry, depressed and irrational.

In winter 2003, she disappeared. Her family believes she drowned herself. Her body was not recovered. Snyder was last seen leaving a NXIVM course, and police released a note she left behind.

"I was brainwashed and my emotional center of the brain was killed/turned off," Snyder scrawled in a spiral notebook.
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