Sunday, November 22, 2009

The Second Wave of The Financial Tsunami

The Wave Is gathering force & could hit between the first & second quarter of 2010
http://www.globalresearch.ca/index.p...t=va&aid=16218

November 22, 2009

by Matthias Chang
Many of my friends who have been receiving my e-mail alerts over the last two years have lamented that in recent weeks I have not commented on the state of the global economy. I appreciate their anxiety but they forget that I am not a stock market analyst who is paid to write articles to lure investors back into the market. My website is free and I do not sell a financial newsletter so there is no need for me to churn out daily forecasts or analysis.


However, when the data is compelling and supports an inevitable trend, it is time for another review. This Red Alert is to enable visitors to my website to take appropriate actions to safeguard their wealth and welfare of their families in the coming months.


Since the last quarter of 2008, unrelenting currency warfare has been waged by the key global economies and while this competition thus far has been non-antagonistic, it will soon be antagonistic because the inherent differences are irreconcilable. The consequences to the global economy will be devastating and for the ordinary people, massive unemployment and social unrest are assured.


The policy-makers of these countries faced with the total collapse of the international financial architecture have concluded that the solution, the only solution is quantitative easing (i.e. massive injection of liquidity) to salvage the “too big to fail” banks and reflate their depressed economies. This is best reflected in Bernanke’s candid remark that, “the US government has a technology, called the printing press (or today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost”.


This is the crux of the problem!

The Irreconcilable Differences

Some two decades ago, it was decided by the global financial elites that the framework for the global economy shall consist of:
1) A global derivative-based financial system, controlled by the US Federal Reserve Bank and its associate global banks in the developed countries.

2) The re-location from the West to the East in the production of goods, principally to China and India to “feed” the developed economies.

The entire system was built on a simple principle, that of a FED-controlled global reserve currency which will be the engine for growth for the global economy. It is essentially an imperialist economic principle.

Once we grasp this fundamental truth, Bernanke’s boast that the “US can produce as many US dollars as it wishes at no cost” takes on a different dimension.

I have talked to so many economists and when asked what is the crux of the present financial problem, they all respond in unison, “it is the global imbalances… the West consumes too much while the East saves too much and consumes not enough”. This is exemplified by the huge US trade deficits on the one part and China’s massive surpluses on the other.

Incredible wisdom and almost everyone echoes this mantra. The recent concluded APEC Summit was no different. This mantra was repeated as well as the call for freer trade between trading nations.

This is a grand hoax. All the current leaders on the world’s stage are corrupted to the rotten core and as such have no interest to call a spade a spade and expose the inherent contradictions within the existing financial system.

The call for a multi-polar world is meaningless when the entire global financial system is based on the unipolar US dollar reserve currency. This is the inherent contradiction within the present system and the problems associated with it cannot be resolved by another global reserve currency based on the IMF’s Special Drawing Rights as advocated by some countries. It was stillborn, the very moment it was conceived!

The leaders of China, Japan and the oil producing countries of the Middle East are all cursing and pissing about the current situation, but they don’t have the courage of their convictions to spell it out to their countrymen that they have been conned by the financial spin masters from the Fed acting on the instructions from Goldman Sachs.

Tell me which leader would dare admit that they have exchanged the nation’s wealth for toilet papers?

The toilet paper currency pantomime continues.

We have now reached a stalemate in the current currency war, not unlike the situation of the Cold War between the NATO pact countries and the Warsaw pact countries. Both sides were deterred by the MAD (Mutually Assured Destruction) doctrine of nuclear wars. The costs to both sides were horrendous and it was only when the Soviet Union could not continue with the pace and cost of maintaining a nuclear deterrent and was forced into bankruptcy that the balance tilted in favour of the NATO alliance.

But it was a pyrrhic victory for the US and it allies. What kept the ability of the US to maintain its military might and outspend the Soviet Union was the right to print toilet paper currency and the acceptance of the US dollar by her allies as the world’s reserve currency.

But why did the countries allied to the US during the Cold War accepted the status quo?

Simple! They were all conned into believing that without the protection of Big Brother and its military outreach, they would be swallowed up by the communist menace. They agreed to march to the tune of the US Pied-Piper.

The next big question – why did the so-called “liberated” former communist allies of the Soviet bloc jump on the bandwagon?

Simple! They all believed in the illusion that was fostered by the global banks, led by Goldman Sachs that trading and selling their goods and services for the toilet paper US reserve currency would ensure untold wealth and prosperity.

But the biggest game in town was the Asia gambit. Japan, after a decade of recession following the burst of her property bubble did not have the means and the capacity to bring the game to the next level as envisaged by the financial architects in Goldman Sachs.

And China was the biggest beneficiary. The senior management of Goldman Sachs brokered a secret pact with China’s leaders that in exchange for orchestrating the most massive injection of US dollar capital and wholesale re-location of manufacturing capacity in the history of the global economy, China would recycle their hard-earned US toilet paper reserve currency wealth into US treasuries and other US debt instruments.

This was the necessary condition precedent for the global financial casino to rise to the next level of play.

Why?

The New Game

The financial architects at Goldman Sachs had a master plan – to dominate the global financial system. The means to achieve this financial power was the Shadow Banking System, the lynchpin being the derivative market and the securitization of assets, real and synthetic. The stakes would be huge, in the hundreds of US$ trillions and the way to transform the market was through massive leverage at all levels of the financial game.

But there was an inherent weakness in the overall scheme – the threat of inflation, more precisely hyperinflation. Such huge amounts of liquidity in the system would invariably trigger the depreciation of the reserve currency and the confidence in the system.

Hence the need for a system to keep in check price inflation and the illusion that the purchasing power of the toilet paper reserve currency could be maintained.

This is where China came in. Once China became the world’s factory, the problem would be resolved. When a suit which previously cost US$600 could be had for less than US$100, and a pair of shoes for less than US$5, the scam masterminds concluded that there would be no foreseeable threat to the largest casino operation in history.

China agreed to the exchange as it has over a billion mouths to feed and jobs for hundreds of millions needed to be secured, without which the system could not be maintained. But China was pragmatic enough to have two “economic systems” – a Yuan based domestic economy and a US$ based export economy, in the hope that the profits and benefits of the export economy would enable China to transform and establish a viable and dynamic domestic market which in time would replace the export dependent economy. It was a deal made with the devil, but there were no viable alternative options at the material time, more so after the collapse of the Soviet Union.

The Next Level of the Game

The next level of the game was reached when the toilet paper reserve currency literally went virtual – through the simple operation of a click of the mouse in the computers of the global banks.

The big boys at Goldman Sachs and other global banks were more than content to leave Las Vegas for the mafia and their miserable billions in turnover. The profits were considered dimes when compared to the hundreds of trillions generated by the virtual casino. It was a financial conquest beyond their wildest dreams. They even called themselves, “Master of the Universe”. Creating massive debts was the new game, and the big boys could even leverage more than 40 times capital! Asset values soared with so much liquidity chasing so few good assets.

However, the financial wizards failed to appreciate and or underestimate the amount of financial products that were needed to keep the game in play. They resorted to financial engineering – the securitization of assets. And when real assets were insufficient for securitization, synthetic assets were created. Soon enough, toxic waste was even considered as legitimate instruments for the game so long as it could be unloaded to greedy suckers with no recourse to the originators of these so-called investments.

For a time, it looked as if the financial wizards have solved the problem of how to feed the global casino monster.

Unfortunately, the music stopped and the bubble burst! And as they say the rest is history.



The Goldman Sachs Remedy



When losses are in the US$ trillions and whatever assets / capital remaining are in the US$ billions, we have a huge problem – a financial black-hole.



The preferred remedy by the financial masterminds at Goldman Sachs was to create another hoax – that if the big global banks were to fail triggering a systemic collapse, there would be Armageddon. These “too big to fail” banks must be injected with massive amount of virtual monies to recapitalize and get rid of the toxic assets on their balance sheet. The major central banks in the developed countries in cahoots with Goldman Sachs sang the same tune. All sorts of schemes were conjured to legitimize this bailout.



In essence, what transpired was the mere transfer of monies from the left pocket to the right pocket, with the twist that the banks were in fact helping the Government to overcome the financial crisis.



The Fed and key central banks agreed to lend “virtual monies” to the “too big to fail” global banks at zero or near zero interest rate and these banks in turn would “deposit” these monies with the Fed and other central banks at agreed interest rates. These transactions are all mere book entries. Other “loans” from the Fed and central banks (again at zero or near zero interest rates) are used to purchase government debts, these debts being the stimulus monies needed to revive the real economy and create jobs for the growing unemployed. So in essence, these banks are given “free money” to lend to the government at prior agreed interest rates with no risks at all. It is a hoax!



These “monies” are not even the dollar bills, but mere book entries created out of thin air.



So when the Fed injects US$ trillions into the banking system, it merely credits the amount in the accounts of the “too big to fail” banks at the Fed.



When the system is applied to international trade, the same modus operandi is used to pay for the goods imported from China, Japan etc.



For the rest of world, when buying goods denominated in US$, these countries must produce goods and services, sell them for dollars in order to purchase goods needed in their country. Simply put, they have to earn an income to purchase whatever goods and services needed. In contrast, all that the US needs to do is to create monies out of thin air and use them to pay for their imports!



The US can get away with this scam because it has the military muscle to compel and enforce this hoax. As stated earlier, this status quo was accepted especially during the Cold War and with some reluctance post the collapse of the Soviet Union, but with a proviso – that the US agrees to be the consumer of last resort. This arrangement provided some comfort because countries which have sold their goods to the US, can now use the dollars to buy goods from other countries as more than 80 per cent of world trade is denominated in dollars especially crude oil, the lifeline of the global economy.



But with the US in full bankruptcy and its citizens (the largest consumers in the world) being unable to borrow further monies to buy fancy goods from China, Japan and the rest of the world, the demand for dollar has evaporated. The dollar status as a reserve currency and its usefulness is being questioned more vocally.



The End Game



The present fallout can be summarized in simple terms:



Should a bankrupt country (the US) be allowed to use money created out of thin air to pay for goods produced with the sweat and tears of hardworking citizens of exporting countries? Adding insult to injury, the same dollars are now purchasing a lot less than before. So what is the use of being paid in a currency that is losing rapidly its value?



On the other hand, the US is telling the whole world, especially the Chinese that if they are not happy with the status quo, there is nothing to stop them from selling to the other countries and accepting their currencies. But if they want to sell to the mighty USA, they must accept US toilet paper reserve currency and its right to create monies out of thin air!



This is the ultimate poker game and whosoever blinks first loses and will suffer irreparable financial consequences. But who has the winning hand?



The US does not have the winning hand. Neither has China the winning hand.



This state of affairs cannot continue for long, for whatever cards the US or China may be contemplating to throw at the table to gain strategic advantage, any short term gains will be pyrrhic, for it will not be able to address the underlying antagonistic contradictions.



When the survival of the system is dependent on the availability of credit (i.e. accumulating more debts) it is only a matter of time before both the debtor and creditor come to the inevitable conclusion that the debt will never be paid. And unless the creditor is willing to write off the debt, resorting to drastic means to collect the outstanding debt is inevitable.



It would be naïve to think that the US would quietly allow itself to be foreclosed! When we reach that stage, war will be inevitable. It will be the US-UK-Israel Axis against the rest of the world.



The Prelude to the End Game



The US economy will be spiraling out of control in the coming months and will reach critical point by the end of the 1st quarter 2010 and implode by the 2nd quarter.



The massive US$ trillions of dollars stimulus has failed to turn the economy around. The massive blood transfusion may have kept the patient alive, but there are numerous signs of multi-organ failure.



There will be another wave of foreclosures of residential and more importantly commercial properties by end December and early 2010. And the foreclosed properties in 2009 will lead to depressed prices once they come through the pipeline. Home and commercial property values will plunge. Banks’ balance sheets will turn ugly and whatever “record profits” in the last two quarters of 2009 will not cover the additional red ink.



Given the above situation, will the Fed continue to buy mortgage-backed securities to prop up the markets? The Fed has already spent trillions buying Fannie Mae and Freddie Mac mortgages with no potential substitute buyer in sight. Therefore, the Fed’s balance sheet is as toxic as the “too big to fail” banks that it rescued.



In the circumstances, it makes no sense for anyone to assert that the worst is over and that the global economy is on the road to recovery.



And the surest sign that all is not well with the big banks is the recent speech by the President of the Federal Reserve Bank of New York, William Dudley at Princeton, New Jersey when he said that the Fed would curtail the risk of future liquidity crisis by providing a “backstop” to solvent firms with sufficient collateral.



This warning and assurance deserves further consideration. Firstly, it is a contradiction to state that a solvent firm with sufficient collateral would in fact encounter a liquidity crisis to warrant the need for a fall back on the Fed. It is in fact an admission that banks are not sufficiently capitalized and when the second wave of the tsunami hits them again, confidence will be sorely lacking.



Dudley actually said that, “the central bank could commit to being the lender of last resort… [and this would reduce] the risk of panics sparked by uncertainty among lenders about what other creditors think”.



To put it bluntly what he is saying is that the Fed will endeavour to avoid the repeat of the collapse of Bear Stearns, Lehman Bros and AIG. It is also an indication that the remaining big banks are in trouble.



It is interesting to note that a Bloomberg report in early November revealed that Citigroup Inc and JP Morgan Chase have been hoarding cash. The former has almost doubled its cash holdings to US$244.2 billion. In the case of the latter, the cash hoard amounted to US$453.6 billion. Yet, given this hoarding by the leading banks, the New York Federal Reserve Bank had to reassure the financial community that it is ready to inject massive liquidity to prop up the system.



It should come as no surprise that the value of the dollar is heading south.



When currencies are being debased, volatility in the stock market increases. But the gains are not worth the risks and if anyone is still in the market, they will be wiped out by the 1st quarter of 2010. The S&P may have shot up since the beginning of the year by over 25 per cent but it has been out-performed by gold. The gains have also lagged behind the official US inflation rate. It has in fact delivered a total return after inflation of approximately minus 25 per cent. When Meredith Whitney remarked that, “I don’t know what’s going on in the market right now, because it makes no sense to me”, it is time to get out of the market fast.



In a report to its clients, Société Générale warned that public debt would be massive in the next two years – 105 per cent of GDP in the UK, 125 per cent in the US and in Europe and 270 per cent in Japan. Global debt would reach US$45 trillion.



At some point in time, all these debts must be repaid. How will these debts be repaid?



If we go by what Bernanke has been preaching and practising, it means more toilet paper currency will be created to repay the debts.



As a result, debasement of currencies will continue and this will further aggravate existing tensions between the competing economies. And when creditors have enough of this toilet paper scam, expect violent reactions!

__________________

Wednesday, November 11, 2009

The Perilous Future of U.S. Strategic Forces

The Perilous Future of U.S. Strategic Forces

Bradley A. Thayer &
Thomas M. Skypek



Today, the United States finds itself in a curious position in international politics. While its conventional military power remains unparalleled, its once-formidable strategic deterrent—encapsulated in its nuclear forces and infrastructure—is atrophying.



It is painfully clear that Washington’s interest in its strategic forces has waned greatly since the collapse of the Soviet Union. The United States has not produced a new nuclear warhead in almost two decades, and its Intercontinental Ballistic Missile (ICBM) force and nuclear infrastructure are stretched to the point of exhaustion with their current missions. Problems that would have been unthinkable during the Cold War now seem to be commonplace. Such a decline is unprecedented, and will have grand strategic consequences for American power in the years ahead.



Understanding this state of affairs is important for several reasons. First, conventional wisdom has it that the strategic forces and infrastructure of the United States are strong and will remain so into the future. In fact, however, quite the opposite is true. America’s nuclear capabilities are sufficient at present, but are decaying in every aspect—from the nuclear warheads themselves to the missiles that deliver them to the specialized scientists and engineers who build them. There are serious weaknesses in the nuclear arsenal that will manifest themselves in the years ahead, and cause U.S. strategic forces to fail to meet future mission requirements.



Second, if this problem is not addressed, the credibility of the U.S. extended deterrent will be doubted by both allies and adversaries. A weak extended deterrent capability will make aggression more likely, and further hinder Washington’s ability to advance U.S. interests against foes who—for the first time in history—may be better-armed with nuclear weapons than the United States.



Third, if the credibility of America’s strategic deterrent is in question, the United States will have created an incentive to proliferate. Under those conditions, it is reasonable to expect that many states now covered by U.S. extended deterrent commitments, such as Japan, Saudi Arabia, and South Korea, would themselves be driven to acquire nuclear forces.



The bear is back



While the United States faces substantial problems in its strategic force posture, and is, indeed, the only nuclear country that cannot manufacture a new nuclear weapon, other nuclear states—China, France, Great Britain, India, Israel, North Korea, Pakistan, and Russia—have not taken a similar “nuclear holiday.” As we noted not long ago in The National Interest, the strategic nuclear balance has changed appreciably in recent years, and not in Washington’s favor.1



While Chinese nuclear modernization is important, and will become ever more so, it is salient for our discussion to acknowledge what Moscow is accomplishing. This is because, first, Chinese strategic modernization continues slowly and steadily but is still modest. China’s Xia SSBN, for example, has never conducted a deterrent patrol; second, and more important, is the inescapable conclusion that the strategic torch has been passed from Washington to Moscow.



Quite simply, Russia is building a twenty-first-century nuclear arsenal, while the United States is not. If the United States does not change course and take the necessary steps to modernize its arsenal, Russia will secure strategic dominance, with the accompanying political benefits accruing to Moscow.



This is not to argue that the Russian nuclear enterprise is flawless. It is not. Moscow’s nuclear command and control suffers from serious deficiencies, particularly in the realm of Intelligence, Surveillance and Reconnaissance (ISR) capabilities. In time, however these deficiencies will be resolved. Indeed, the Russians are moving to solve them already, through improvements to both their strategic and conventional forces.



Since 1999, the Russians have conducted annual strategic exercises, the scale of which matches what was typical during the Cold War, and far beyond what the United States has undertaken. Russian exercises also involve the highest echelons of their government. In August 2005, during a major exercise, President Vladimir Putin himself flew in a Blackjack bomber that launched four Kh-555 land attack cruise missiles. The commitment of the Russian leadership to building and maintaining a modernized nuclear arsenal is unquestionable. The most convincing evidence is the depth and breadth of their modernization efforts.









Russian strategic modernization began in earnest this decade. Unlike the United States, Russia is modernizing each leg of its triad, has significantly reformed its nuclear doctrine, and continues to build new nuclear weapons. The Russian strategic hiatus of the 1990s, in other words, ended with the ascension of Vladimir Putin to the Russian presidency roughly a decade ago. It continues today under the leadership of Putin’s handpicked protégé, Dmitry Medvedev.



While it has never been the cornerstone of the Russian triad, Moscow’s modernization of its strategic bomber fleet nevertheless continues steadily. Two strategic bombers will be commissioned into the Russian Air Force every three years, according to General Vladimir Mikhailov, the commander of the Russian Air Force.2 Russia has three types of bombers in its fleet, the Tu-160 “Blackjack,” Tu-22 “Blinder,” and Tu-95 “Bear.” The new bombers will be Tu-160s.



Like bombers, submarines have always played second fiddle to the Russian ICBM force. Still, there is significant modernization under way to this leg as well. This modernization began by eliminating the vestiges of the Soviet ballistic missile submarine fleet. By the start of 2007, Russia had decommissioned 148 out of 197 Soviet-era submarines. Russia dismantles eighteen nuclear submarines annually, and Moscow expects to have decommissioned all Soviet-era submarines by 2010.3



Russia is also making progress on its sea-launched ballistic missile capabilities. In June 2007, it successfully tested its new Bulava SLBM, following a series of failed tests throughout 2006. Russia’s leadership remains committed to the system, despite the failure of the Bulava’s most recent (December 2008) test. Colonel General Anatoly Nogovitsyn, deputy chief of the Russian General Staff, announced in January 2009 that tests of the Bulava will continue.4 Once operational, the Bulava—a slightly modified version of the new Topol-M ICBM—will equip Russia’s three new Borei-class nuclear submarines. It carries a single 500 kiloton nuclear weapon, plus decoys, and has a maneuvering capability of unknown effectiveness intended to defeat U.S. missile defenses.



As was the case with the Soviet Union in its day, the backbone of Russia’s strategic nuclear forces lies with its ICBMs. The SS-18 will stay in service until 2016. In addition, Russia has developed the silo-based SS-27, of which it has 40 now, and will add 34 more. A road mobile derivative is also under development, and Russia is expected to have 50 by 2015.5 Additionally, in May and December 2007, Russia tested a new MIRVed ICBM, the RS-24. This missile, which has not yet been given a NATO designation, will replace the old SS-18 and SS-19 ICBMs by 2050.



There are also reports that Russia is working on a new liquid-fueled ICBM which will carry ten warheads with a throw-weight of four tons.6 This would far outclass its closest U.S. counterparts, the Minuteman and Trident II. Also in the realm of potential weapons, the Russians have discussed the development of a hypersonic glide vehicle that would reach distant continents quickly and would be able to penetrate U.S. missile defenses.7



The Russians are also modernizing their low-yield nuclear warheads, which may be used for tactical or strategic purposes. Moscow is developing a precision, low-yield nuclear weapon, on the order of several tens of tons to 100 tons of TNT, and a “clean” nuclear earth penetrator, even as Congress has canceled new low-yield programs such as the Robust Nuclear Earth Penetrator (RNEP).8



Moscow is also interested in EMP weapons, and is believed to possess a robust capability that could give it the capacity to target the U.S.’ dependency on insufficiently hardened electronics for its military and key civilian sectors. Such a scenario may sound far-fetched, but it is plausible—and potentially catastrophic. As Brian Kennedy of the Claremont Institute recently outlined in the Wall Street Journal:



Gamma rays from the explosion, through the Compton Effect, generate three classes of disruptive electromagnetic pulses, which permanently destroy consumer electronics, the electronics in some automobiles and, most importantly, the hundreds of large transformers that distribute power throughout the U.S. All of our lights, refrigerators, water-pumping stations, TVs and radios stop running. We have no communication and no ability to provide food and water to 300 million Americans.9

Russia has the world’s largest nuclear weapons production complex, with two plants for nuclear weapons assembly and one plant for plutonium and uranium pit production. Russia has the stated capacity to disassemble 2,000 warheads a year, which equals the technical capability to produce about the same number of warheads. The United States, meanwhile, is not developing or producing any new warheads, and has not since 1989. In an emergency, the U.S. might be able to produce about 40 warheads a year at the TA-55 facility at Los Alamos. Not until 2023, under present plans, will the U.S. have large scale pit production capability. Russia’s nuclear testing facilities require minimal lead time in order to conduct a nuclear test, and Russia has admitted to conducting a robust program of hydrodynamic experiments, or “sub-critical” tests, that produce a very small yield, the equivalent of 0.1 gram of TNT.



From the above survey, it is abundantly clear that the Russian leadership has made the modernization of its strategic nuclear weapons a priority. While other states may not, Russia recognizes that nuclear weapons remain a major source of strategic power, and for that reason it will continue to produce the most advanced nuclear forces in the world. Their nuclear infrastructure is also the most advanced and capable in the world. Given these capabilities, and its conventional weakness, it is no surprise that Russia has the lowest declared threshold for nuclear use of any of the major nuclear powers. In January 2008, Yury Baluyevsky, then the Chief of the General Staff of the Russian Armed Forces, detailed publicly exactly how low that threshold actually is:



We do not intend to attack anyone, but we consider it necessary for all our partners in the world community to understand clearly... that to defend the sovereignty and territorial integrity of Russia and its allies, military forces will be used, including preventively, including with the use of nuclear weapons.10

Baluyevsky’s remarks about the preventive use of nuclear weapons underscore the value Russia places on its nuclear capabilities. Nuclear weapons and strategic strike capabilities will remain the highest force maintenance and procurement priority of the Russian Federation for decades to come.



An agenda for renewal



In Washington, by contrast, nuclear weapons have become an afterthought for policymakers and military leadership alike. If U.S. nuclear forces were a stock, its price would have collapsed in the 1990s, and its value would remain near an all-time low. Yet nuclear modernization is a non-negotiable imperative if the United States wishes to achieve its grand strategic goals into the future, including credible extended deterrence commitments to allies like Japan and South Korea. Given the time required to develop these complicated systems, and the period needed to integrate them into the force, modernization must begin immediately.



Using 2009 as a baseline, the ages of the current systems of the nuclear triad are 39 years for the Minuteman III, 19 years for the Trident II D-5 SLBM, 48 years for the B-52H, 12 years for the B-2, and 28 years for the Ohio Class SSBNs. The startling age of these strategic systems and the increasing costs to deploy and maintain them accounts in large part for the rapid reductions in the nuclear forces of the United States that have taken place since 2001—including an 18 percent reduction in ICBMs, a 63 percent decline in the number of bombers in service, and a constriction of nearly a quarter in the size of the SSBN fleet.11



The first step toward reversing this decline is to modernize the U.S. ICBM force. Today, ICBMs serve as the anchor of the United States’ strategic deterrent, for good reason. ICBMs possess a robust payload capacity and are survivable against would-be first strikes initiated by any current likely adversaries. In addition, ICBMs have the power to hold a spectrum of targets at prompt risk, whether using nuclear or conventional warheads.



However, drastic reductions in the size of the ICBM force—due to Minuteman II, Minuteman III, and Peacekeeper retirements, and the lack of a replacement ICBM for the Minuteman III—will raise doubts about the capabilities of the United States in the years ahead. America’s ICBM force may be robust now, but it will not be in the future.



A second area of focus must be the development of robust defenses against ballistic and cruise missiles. The global proliferation of ballistic and cruise missile technologies has left the U.S. homeland vulnerable. Ballistic missiles are capable of delivering WMD as well as large conventional payloads, and the technologies needed to build them are widely available, often indigenously or on the global market. At present, there are 25 states armed with ballistic missiles. Many, like Iran and North Korea, not only produce ballistic missiles but export them as well, and share critical missile technologies with other states. For example, Pakistan’s Ghauri medium-range ballistic missile (MRBM) is based on the North Korean No Dong, and was produced with North Korean assistance. Iran’s Shahab-3 MRBM is a version of the No Dong that has been improved with Russian assistance. Even ICBMs are no longer a monopoly of the superpowers. In the next eight to ten years, North Korea and Iran are expected to develop an ICBM capability, which would allow them to target the United States, as well as its allies.



To combat the growing threat of ballistic missiles, the Bush administration deployed a limited defense during its time in office. Key components of this system are the ground-based interceptors based at Fort Greely in Alaska and Vandenberg Air Force Base in California. A third interceptor site, which would give the United States and NATO the capability for limited defense against the Iranian Shahab family of missiles, is currently planned for Poland and the Czech Republic.



It is unclear, as of yet, how the Obama administration plans to approach the issue of missile defense. Early signs, however, are not encouraging. In November 2008, the Obama transition team released the following statement after a telephone call with Polish President Lech Kaczynski: “President-elect Obama made no commitment on it [placing interceptors in Poland]. His position is as it was throughout the campaign—that he supports deploying a missile defense system when the technology is proved to be workable.”12 This ambiguity is troubling, since a robust missile defense capability not only strengthens Washington’s deterrence posture but also hedges against a failure of deterrence.



The technologies in question, moreover, are mature. The Pentagon’s successful shoot-down of a damaged U.S. satellite with a Standard Missile-3 in February 2008 demonstrated the versatility of hit-to-kill technology. The operation also highlighted why further investments are warranted. It is important that the leadership in Beijing, Moscow, Pyongyang, and Tehran knows that U.S. missile defense technologies work.



But significant work remains. Cruise missiles, for example, pre-sent as serious a danger to the United States as ballistic missiles, and yet this threat currently receives almost no attention from policymakers or the popular media. Cruise missiles may be launched from any location: the ground, on or under the sea, or in the air. They are very difficult to detect because they fly at low altitudes, at relatively high speeds, and have a low radar cross section with a modest infrared signature.



Cruise missiles are ideal platforms for countries like China, Iran, or North Korea to attack the United States because they are proven weapons systems, easily affordable, easier to maintain and deploy, hard to defeat, and can be delivered by several different weapons platforms. The United States is deeply vulnerable; seventy-five percent of the U.S. population and 80 percent of the wealth of the U.S. lie within 200 miles of the coast. Cruise missiles are even more widely distributed than ballistic missiles, moreover. About 75 countries are estimated to possess cruise missiles, and by 2015, at least 24 states are expected to pose a serious cruise missile threat to the United States due to the proliferation of sophisticated systems. With effective missile defenses, the United States could not only defend itself against ballistic or cruise missile attack, but also assure allies that they will be protected as well.



Another, seldom analyzed, problem for the strategic forces of the United States is an aging workforce—one created by our long national procurement holiday for strategic systems. No other nuclear country faces this problem, since all others are modernizing their strategic forces. And this “critical skills” gap is only widening. The Defense Science Board Task Force on Future Strategic Strike Skills convened in 2006 evaluated the critical skills of the United States in six categories: development capabilities and skills; production capabilities and skills; sustainment capabilities and skills; material availability; critical suppliers; and special facilities, such as for nuclear testing. The DSB report is shocking in its assessments. It found that the United States faces great dangers in the reliability of the guidance, re-entry systems, and propulsion of the ICBM force.13 The state of the U.S. SLBM and SSBN force is better, at least for the moment. But, as the DSB study made clear, current demographics do not favor the maintenance of critical skills over the next ten years.14



With respect to nuclear command and control issues, there are two areas of concern. The first is access to space, upon which many U.S. military capabilities rely. The shrinking launch schedules due to commercial satellite providers, decreasing military and NASA missile launches, and an aging workforce mean that fewer individuals have participated in a successful launch and know the difficulties that may be encountered and how to solve them. Second, the aging workforce also hinders the government’s ability to gauge nuclear weapons effects on systems. As the DSB recognizes:



Today, the number of individuals working on the various C4ISR [Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance] programs who have worried about system or subsystem vulnerabilities to EMP [Electromagnetic Pulse]—including black-out, red-out, or other nuclear weapon-induced effects—continues to decline, and the people with these skill sets are not being replaced.15

These vulnerabilities, moreover, will almost certainly increase if they are not addressed immediately, because many of the people who addressed EMP vulnerability during the Cold War are retiring.



When it comes to strategic forces—including warheads and delivery systems—the United States is faring even worse, for three major reasons. First, spending on nuclear weapons systems has declined significantly in the post-Cold War period, and is now the smallest share of the defense budget since the 1940s. The decline has been greatest in nuclear offensive strike systems. For these systems, funding has fallen to 4 percent of DoD’s total current budget. In 1991, the United States funded the last SSBN and the last Peacekeeper ICBM; and, in 1993, it bought the last B-2 of its fleet. So, funding has declined, while each component of the triad has aged.



The second major problem is the nuclear warheads themselves. At the present time, the key challenge for the United States is ensuring the reliability of its strategic arsenal. The Bush administration opposed the Comprehensive Test Ban Treaty, but did not break our country’s nearly twenty-year moratorium on nuclear testing. As a result, the nuclear weapons labs are confronted with the momentous challenge of ensuring reliability without the scientific evidence that only testing can provide.



Congress, meanwhile, has consistently reduced and/or eliminated funding for nuclear modernization programs, including the Reliable Replacement Warhead (RRW) program. In September 2008, Congress refused once again to fund RRW. Opposition on Capitol Hill has been bipartisan. Only a handful of members, such as Senators Jon Kyl (R-AZ) and Jeff Sessions (R-AL), and Representative Terry Everett (R-AL), have consistently voted to fund critical modernization efforts such as RRW. Fortunately, the Obama administration shows signs that it could spur greater attention to this issue. Writing in the January/February 2009 issue of Foreign Affairs, Secretary of Defense Robert Gates indicated as much when he challenged congressional inaction on the RRW, stating that “Congress needs to do its part by funding the Reliable Replacement Warhead Program—for safety, for security, and for a more reliable deterrent.”16



Toward a nuclear renaissance



In the post-Cold War world, the United States will continue to depend on its strategic nuclear forces to accomplish its grand strategic goals. That will become increasingly difficult if it does not act—and act now—to redress the key vulnerabilities in its arsenal. While these vulnerabilities may not receive significant attention in the press, they are noticed by the allies and foes of the United States. Nuclear weapons remain a tremendous source of power in the international system. Quite simply, states with nuclear weapons are treated differently than those without them.



America currently shows few signs of understanding this reality. There are no new ICBMs or SLBMs under development, and the U.S. targets no states with its missiles. B-2 production has halted, and no U.S. bombers are on alert. Many strategic and tactical nuclear weapons programs have been canceled. U.S. Army, Marines, and Navy surface and air components are out of the nuclear weapons business. There has been a reduction of over 85 percent in the number of NATO sub-strategic nuclear weapons in Europe as their delivery systems have dropped from eleven to one.



The upcoming Quadrennial Defense Review (QDR) and Nuclear Posture Review (NPR)—both of which will be gearing up in the coming months—present a major opportunity for the Obama administration to ameliorate America’s deteriorating nuclear weapons enterprise. Modernization of the entire nuclear enterprise should be the chief priority of these strategic policy documents.



The stakes could not be higher. The overwhelming military superiority of the United States is not guaranteed into perpetuity. Eventually, as its nuclear capabilities and skills atrophy, the United States will lose the great advantages it now possesses, because other nuclear states will continue to modernize their arsenals and maintain robust nuclear infrastructure. And, once lost, recapturing a credible extended deterrent capability will be increasingly difficult for America to accomplish.



Bradley A. Thayer is an Associate Professor of Defense and Strategic Studies at Missouri State University, located in Fairfax, Virginia. Thomas M. Skypek is a Washington-based defense policy analyst. The views expressed herein are exclusively those of the authors.



Bradley A. Thayer and Thomas M. Skypek, “Russia Goes Ballistic,” The National Interest, no. 97 (September/October 2008), 61-68.

“Russian Air Force to Get Two Strategic Bombers Every Three Years,” RIA Novosti, January 19, 2007, http://www.defencetalk.com/news/publish/airforce/Russian_Air_Force_To_Get_Strategic_Bombers100010013.php.

“Russia Scraps 148 out of 197 Decommissioned Nuclear Submarines,” RIA Novosti, December 27, 2006, http://en.rian.ru/russia/20061227/57958170.html.

“Russia not to Give up Bulava Missile Test Launches,” RIA Novosti, January 4, 2009, http://en.rian.ru/russia/20090104/119365579.html.

Vladimir Isachenkov, “Weapons Plan Strives to Beat Soviet Readiness,” Washington Times, February 8, 2007, http://www.washtimes.com/world/20070207-104140-3775r.htm.

Mark B. Schneider, “The Strategic Nuclear Forces and Doctrine of the Russian Federation,” in Bradley A. Thayer, ed., American National Security Policy: Essays in Honor of William R. Van Cleave (Fairfax, VA: National Institute Press, 2007), 148.

“Arms Control and Proliferation Profile: Russia,” Arms Control Association, November 2007, http://www.armscontrol.org/factsheets/russiaprofile.

Schneider, “The Strategic Nuclear Forces and Doctrine of the Russian Federation,” 148.

Brian T. Kennedy, “What a Single Nuclear Warhead Could Do,” Wall Street Journal, November 24, 2008, http://online.wsj.com/article_email/SB122748923919852015-lMyQjAxMDI4MjI3MzQyODM5Wj.html.

Steve Gutterman, “Baluyevsky Warns of Nuclear Defense,” Moscow Times, January 21, 2008, http://www.themoscowtimes.com/stories/2008/01/21/017.html.

These percentages are based on nuclear force reductions in the U.S. arsenal from 2001 to 2007.

Christina Bellantoni, “Obama, Polish President at Odds on Call,” Washington Times, November 9, 2008, http://www.washingtontimes.com/news/2008/nov/09/obama-polish-president-at-odds-on-call/.

Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics, Report of the Defense Science Board Task Force on Future Strategic Strike Skills, March 2006, 24-26.

Ibid., 32-34.

Ibidem, 43.

Robert Gates, “How to Reprogram the Pentagon,” Foreign Affairs, January/February 2009.



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Wednesday, November 4, 2009

FASCIST STYLE BRAIN WASHING IN OUR SCHOOLS!

Check this website out and decide for yourselves. This is why my children will not attend public schools.
http://bighollywood.breitbart.com/jjmnolte/2009/11/04/elementary-epidemic-11-uncovered-videos-show-school-children-performing-praises-to-obama/

Welcome to the Socialist states of America.,