Plights of Iraqi Refugees and US Iraq Veterans

This is the essence of letters to my senators and congressman prompted by an international conference on Iraqi refugees held on July 26 in Amman, Jordan.

I am distressed that by starting a war that it has now virtually lost, the United States has created a hell on earth in Iraq. According to the New York Times, 750,000 Iraqi refugees now live in Jordan, and 1.5 million live in Syria. Another 50,000 leave Iraq every month. Craig Johnstone, the UN deputy high commissioner for refugees, told the BBC, "The international community, I think, has neglected the plight of the refugees from Iraq so far, but they are beginning to act."

On a related issue, we need to help Iraqis who have worked for the US leave Iraq if their life is threatened. As a retired Foreign Service officer who worked frequently with “foreign service nationals” (FSNs) at embassies abroad, I feel particularly strongly that we should help them. I am distressed that we seem to be allowing only a handful of Iraqis to seek refuge in the US, when we should be helping thousands. It’s nothing compared to the number of Vietnamese who came to the US as a result of the Vietnam war.

I do not think immediate withdrawal from Iraq is the best course of action to bring closure to the Iraq war. I think we need to reinstate the draft and increase the number of troops in Iraq to 500,000 to 1 million until we can stop the terror there and bring enough peace for Iraqis to live in their own country. However, if we are unwilling to make the sacrifices necessary to bring peace to Iraq, then we should leave and let the Iraqis end the civil war as soon as possible with their own internecine bloodletting. As an American I am dismayed that we have brought upon ourselves this choice between two horrible alternatives.

I was a draftee who went to Vietnam, unlike Presidents Bush and Clinton, and Vice President Cheney. I was the Science Counselor at the American Embassy in Warsaw, Poland, in the mid-1990s when then Vice President Gore visited for an anniversary marking the end of World War II. Former National Security Adviser Zbigniew Brzezinski introduced Gore to the audience of Polish war veterans at the Ambassador’s residence in Warsaw by noting Gore’s service in Vietnam. The Poles applauded loudly, but many Americans murmured, “Doesn’t he know Clinton didn’t serve?” As a Vietnam veteran, I will probably never forget the American hostility towards Gore for being a veteran and the difference in attitudes between the Poles and the Americans. I’ve seen it all my life; when I returned from Vietnam to the relatively conservative University of Alabama, all anybody wanted to hear about Vietnam was how many atrocities you committed or saw. I was grateful to have served along the DMZ where, unlike farther south, anybody you saw outside your perimeter was almost certainly a bad guy. For many in Vietnam telling the good guys from the bad guys was difficult, but it seems much more difficult in Iraq.
I realize that Americans are now trying to make up for their former open prejudice against veterans by praising those who fight in Iraq. But news reports make it clear that those fighting are a relatively small group of mostly white Christians from small towns in the mid-American heartland. Upper class and upper middle class citizens from comfortable cities and suburbs applaud them so that the wealthy don’t have to go. Until the last few days, Wall Street celebrated the carnage in Iraq by hitting new highs of the Dow Jones average.

Unless the US beefs up its military presence in Iraq, which unfortunately I doubt because of the unwillingness of most Americans to make any sacrifice for the “war on terror,” I pity the poor Iraqi war veterans. Because of the shoddy treatment of these vets by Walter Reed Hospital and the Veterans Administration, President Bush set up a commission led by former Senator Dole and former Secretary Shalala to help improve their treatment. This is a good start, but the problem for the future is that there will be so few Iraqi vets. Because they are being sent back again and again, the total number of vets is small, especially when compared to World War II or even Vietnam, where most soldiers served one tour. Thus, in the years to come they will have a very small political constituency to fight for the benefits they need. Once the war is off the front pages, they are unlikely to get much from the government.

I don’t know what happened, but the recent resignation announced by Coloradan Jim Nicholson as Secretary of Veterans Affairs is discouraging. I am guessing that, perhaps in private, the Dole-Shalala panel had some tough words for the VA because of its failure to meet Iraq war veterans’ needs.

Why Do We Encourage Troops To Leave the Military?

We don't have enough troops to maintain order in Iraq, but by paying contractors two, three, maybe five times as much as soldiers make, we encourage the best troops to leave the military and return to Iraq as civilian contractors carrying guns. There are almost as many US government contractors in Iraq as there are soldiers, although many of them are Iraqis working for us. But many are also former soldiers who left the military to make more money as mercenaries. Recent press reports have pointed out the downside for contractors if they get hurt, but if they don't get hurt, they get rich. It's a gamble that many make.

We should have enough troops to do what we need done in Iraq. I think this even includes Halliburton's jobs of running mess halls and driving trucks. Of course, we could never do this with the small Army and Marine Corps that we have, but that means that we need a bigger military until this war is won, not that we go hire a bunch of South African thugs to act as body guards for senior Americans.

While military salaries and bonuses are growing to keep some semblance of parity with the contractors, the country will be bankrupted if we take it too far. Of course, Bush is oblivious to the financial cost of the war. He's aiming for a trillion dollar war.

Why Don't Republicans Support the Troops

If the Republicans really cared about our troops in Iraq they would get them some help, not just send the same troops back to Iraq again and again. No doubt a lot of the troops believe in what they are doing in Iraq, but I doubt that many of them want to do it 52 weeks a year, year in and year out. They want and deserve a break. But with the current Army and Marine Corps, there are not enough of them to hold down Iraq and have sufficient stateside downtime. Actually there are not enough of them to hold down Iraq as it is; that's why Iraq is descending into chaos and anarchy. We ought to have 500,000 to 1,000,000 troops there for a while, maybe a year, to re-establish order.

It's clear now that we lost the war when we allowed looting to break out after the US troops first took Baghdad. Ministries were destroyed; key records were lost; key personnel disappeared; archaeological treasures were stolen. The country was disintegrating before our eyes, and we did nothing. Now we reap what we sowed then.

So, if we're serious about Iraq, we must re-establish the draft. But I don't think we are serious; so, if not, then it's time to leave. We can try to leave gracefully and leave as many Iraqi police and army troops in place as possible, but it's likely to be a bloodbath.

As an American, I feel awful every time I see or read about a suicide bombing, or a beheading, or an assassination. As Colin Powell told Bush, the Pottery Barn principle applies, "If you break, it you bought it." We bought it big time. Terrible things happened before we invaded, but then it was Saddam Hussein's fault; now it's our fault. We are not murdering too many people (although a few according to press reports), but we are failing to maintain order and a civil society. George Bush blames Maliki, but Bush is responsible. It's his war. He failed. America failed. Why would he start a war, and then lose it? It's total incompetence and cowardice.

Iranian Invasion When We Pull Out of Iraq

One possibility, of many, is that when the US leaves Iraq, Iran will step in and annex Iraq either formally or de facto. Iran and Iraq have already fought a bitter war in which Iraq used chemical weapons and we, under Reagan's guidance, sided with Saddam Hussein. If Iraq descends into chaos after we leave, can we expect Iran to keep hands off? If the Shiites are unquestionably in power when we leave, Iran might stay out. On the other hand, if there is the least chance of the Sunnis taking over again, why should Iran risk it. It would be foolish for Iran to take that risk. The US intervened strongly in Central America during Reagan's presidency when we thought the Communists were coming to power there. There is likely to be an Iranian Ollie North who will push for invasion, maybe using some weapons supplied by the real Ollie North.

Should that possibility keep us from leaving? Maybe, but only if staying could change that outcome. If staying just keeps the lid on anarchy until we finally leave, what's the point? Iran could take over in 2008 or 2010 or 2020; it still takes over. We could hope for some kind of revolution in Iran, but it's unlikely to happen.


I think that we need to beef up the troops and re-establish order in Iraq, but Bush and the Republicans are too cowardly to do it. They won't re-establish the draft, which would be the only way to raise a sufficient number of troops to do the job. They'll just keep sending the same troops over there again and again for longer and longer tours with shorter and shorter stateside tours.

New Gilded Age and the Military

The New York Times says this is the new gilded age, and it looks like it is. The are a lot of similarities to the beginning of the 20th century. Why didn't the US move into a new gilded age after World War II. Financially we were in even better shape than we are today, because almost every other industrialized country around the world was in shambles. The article asks why now instead of the 1960s or 1970s. One answer that keeps coming up is changes in regulatory and tax structure. Taxes today are lower; Glass-Steagall was removed from the books, allowing nationwide banking, etc.

Something the article doesn't mention is World War II. WW II is so far unique in our history in pulling the country together. Unlike Vietnam and Iraq, almost everybody served in the military and fought. Men from the upper classes and the Ivy League spent years with men from the farms and factories. There was a brotherhood and a sense of shared responsibility. Today there is none of that. The privileged classes don't fight in Iraq. There is less social mobility within American society.

After WW II men who served as officers and returned to run the business world felt a kinship for and obligation toward the less fortunate enlisted men they had fought with. Some of the elite, rather than going into business, went into politics and ended up passing some of the laws leveling American society, making taxes more progressing, limiting monopolistic practices, etc., the kinds of things that have been undone in the last 20 years.

While these men ran America, we had a somewhat golden (as opposed gilded) age where management and labor worked more or less together to make life better for everyone. Today there is very little of that. The head of FedEx is a Vietnam veteran, and while Vietnam was a very different war, FedEx probably espouses more social responsibility than most other corporations whose managers only know the brotherhood of business school at Harvard or some other elite university.

Checking Wikipedia for military service by some big business names, I found:

• Bill Gates (Microsoft) - No service
• Warren Buffet (Berkshire Hathaway) - No service
• Sandy Weill (Citicorp) - Did Air Force ROTC; wanted to be a pilot, but apparently could not qualify and did not serve in the active military.
• Leo Hindery (AT&T) - No mention of service, but less than complete biographies.
• Sumner Redstone (Viacom) - Worked in the predecessor to NSA during WW II.
• Kenneth Griffin (Citadel hedge fund) - No mention of military service; sounds like he went straight from Harvard into managing hedge funds.
• Lew Frankfort (Coach) - No mention of military service in Business Week bio.
• Sheldon Adelson (Gambling/Las Vegas) - No mention of service in Forbes bio.
• Larry Ellison (Oracle) - No mention of service in Forbes bio.
• Paul Allen (Microsoft) - No mention of service in Forbes.
• Jim Walton (Wal-Mart) - No mention of service in Forbes.
• Robson Walton (Wal-Mart) - No mention of service.
• Sergay Brin (Google) - No mention of service.
• Larry Page (Google) - No mention of service
• Michael Dell (Dell) - No mention of service.
• Steve Ballmer (Microsoft) - No mention of service.

Enough!

Condi Rice Is Paris Hilton of State Department

Condi Rice is supposed to be a foreign policy professional, but things have gone to hell in hand basket on her watch as Secretary of State. Arguably things have not gone as badly 0n her watch as they did on Colin Powell's. We haven't gotten into any new wars. We've reached an agreement with North Korea on nuclear issues, rather than breaching one. But Condi was in the White House fighting against Colin Powell on these issues during Bush's first term.

Condi has turned out to be a light weight when it comes to foreign policy. She basically lets herself be pushed around by whomever she's with. At the White House, it was the war mongering neo-cons, and she backed them. Now, at State, she to her credit is taking a more statesman-like position, but due to the people around her, not to any good sense of her own.

She dresses nicely and is telegenic, but like Paris Hilton, there's not much "there" there, unlike Robert Gates who appears to be personally moving the Defense Department in a more reasonable direction.

Military Service Unimportant in Election

Reuters reports that few of the candidates for President have served in the military, and says that is no problem, because the general populace also has avoided serving and doesn't care about military service. All people care about today is money, not service. That's reflected in the makeup of the candidates, most of whom are millionaires, or billionaires, if you include Bloomberg.

This country has changed a lot. I think it's sad, but maybe when history looks back on it, it won't be so bad. Who it is bad for are the troops fighting in Iraq and Afghanistan. This report shows more clearly that average Americans won't fight for their country. They let somebody else, probably somebody poorer who needs the money, do it. Families of New Yorkers in particular got millions from the government if they were killed in 9/11; now they party and profit from the stock market, while their poorer fellow citizens from southern and western states that New Yorkers spit on, die in Iraq and Afghanistan. Families of soldiers who die in combat, and families of victims killed in the Oklahoma City bombing, have gotten nothing close to the millions that New Yorkers got for 9/11.

US Not Serious about Iraq

The Washington Post article about the unwillingness of the government to staff the embassy in Baghdad adequately is to me the nail in the coffin for the future of Iraq. The US just does not care enough to try hard to win the war in Iraq. They send Crocker to be Ambassador and then they don't support him. Instead, when he gives his best judgment of what the embassy needs, he gets characterized as a panicky crybaby. What he is asking for is does not sound ideal for the State Department; it sounds like every Arabist and Arab speaker would be in Iraq, putting a hardship on other posts in the Middle East, but hey, is this a war we want to win or not? Not, apparently.

It convinces me that America got the government it deserved, a bunch of cowardly, inept, greedy SOBs. The best and the brightest declined to serve in Vietnam, as George Bush, Bill Clinton, and Dick Cheney did. Al Gore went to Vietnam, and had the election stolen from him as a reward. Now the best and the brightest refuse to go to Iraq. Hey, they can stay here and make billions in the hedge fund or private equity business. Look at Mitt Romney; he didn't serve in the military (apparently his Mormon missionary service exempted him), and when he made his millions in private equity, he avoided a large share of his taxes by taking much of his income as capital gains rather than salary, unlike the families of the ordinary people who died in his place in Vietnam, and now in Iraq.

This is a government that knows how to make OTHER people sacrifice, and like it. However, whatever they have been doing is now working in Iraq. It's a huge mess, but they will just walk away from it. The Republicans who are so concerned about saving babies from abortion are responsible for the deaths of many more thousands of babies in Iraq. They don't care, as long as they get their money.

Wall Street Despises Troops

I am increasingly upset that Wall Street's bull rally continues to set new records, while US military deaths in Iraq continue to set new records. Does Wall Street know we are fighting a war and losing? Do stocks keep going up because the war is irrelevant? Because they are confident that we will soon be leaving Iraq? Because they think we are going to win? I don't get it. Losing a war is bad for a country, but apparently not bad for Wall Street.

The odd thing is that according to George Bush, the boys and girls in Iraq are fighting for them. Bush says this war is in response to Saddam Hussein's attacking the World Trade Center in the New York City financial district. These soldiers are dying to get revenge for the deaths of New Yorkers, and New Yorkers don't give a damn. Of course, neither does Bush, the US Congress, or the American people in general. The soldiers and their families care, but in general the soldiers need the money and don't have other options, or they would probably be out of there, too.

Maybe those rich Wall Streeters could do something about providing jobs for soldiers leaving the military. They they wouldn't have to keep fighting in Iraq until they die.

Hooray for Jimmy Carter

Former President Jimmy Carter's criticism of President Bush was completely justified, even if he toned down some of it later, as the Washington Post reports. Maybe it's debatable whether Bush is the worst president ever, but he is certainly one of the worst ones.

With all his talk about fighting the war in Iraq or the war on terror, Bush is a coward. He dodged the draft during Vietnam, and when the US was attacked on 9/11 he went missing. He quit reading My Pet Goat and started flying around the country, to Louisana, Nebraska, and who knows where else. A real man would have returned to Washington, stepped before the TV cameras and said "I'm in charge; I will protect you." He showed up in New York several days later and did the PR thing long after the all clear had sounded.

His position on the Iraq war was, "I'm right, and everybody else (the UN, old Europe, etc.) is wrong." It turned out that Bush was wrong. There were no WMD; we were not greeted as liberators. What really irks me is that Bush did not attempt to be polite or work with other countries. He basically stuck his finger in the eye of anybody who didn't agree with him. So, he and Tony Blair went to war together with a few token troops from some little countries trying to curry favor with the US for whatever reason, in most cases having nothing to do with the war on terror.

In the process, Bush turned his back on US (and British) legal protections like habeas corpus, and instituted torture as an instrument of the US government. He turned the US into one of those outlaw states that we had criticized for the last 50 years. Why? Because he was scared. Many bullies are cowards, and Bush seems to belong to that group. He's a bad, bad man.

Diego Garcia Cigar

The BBC is reporting that US occupation of the island of Diego Garcia is being challenged in British courts. I remember when the US was planning to set up a base on Diego Garcia and sent a cable to all embassies around the world asking what their host governments thought of Diego Garcia. In a classic cable, one of the embassies replied that its government thought Diego Garcia was a cigar.

Lt. Col. Accuses Generals of Failure in Iraq

The Washington Post reports that a scathing attack on military leadership in Iraq will be published in the Armed Forces Journal. This is what happens when you have a war started by two cowardly Vietnam War draft dodgers, Bush and Cheney, who pick yes-men as their generals. Chairmen of the Joint Chiefs Myers and Pace were picked by Rumsfeld because they did as they were told and did not talk back. And look what they got us into! The one general who was brave enough to speak his mind, Shinseki, got fired for his efforts.

Ironically, the author of the article, Lt. Col. Paul Yingling, got a masters degree from the University of Chicago, the home of the neo-cons.

Russia, Neo-Cons and Jews

Chrystia Freeland writes in the Financial Times today that Russia needs the neo-cons, because it needs someone to help fight for its liberty, but that the neo-cons have been reigned in by their failures in Iraq. Then she goes on to say, "Most damaging [in Russia] was the creation of the oligarchs - an act based partly on an extreme, Chicago-school-inspired faith in the power of private ownership, no matter who the owner was or how the property was acquired." What she doesn't say is that most of the neo-cons were Jews, and that most of the Russian oligarchs were Jews. Furthermore, many of the neo-cons came out of the University of Chicago, where they studied politics under Leo Strauss, rather than economics under Milton Friedman. I think it's a good thing for the US and Russia that the neo-cons' wings have been clipped. Democracy is in much better shape in Europe than in America, where George Bush is following some sort of Stalinist model embracing torture, restrictions on civil liberties, and other un-American attacks on the Constitution; let Europe help the Russians.

Greedy Bush

I've had it with Bush. I now believe that Bush and Cheney were put into the job by the "powers that be" to reduce taxes and otherwise make it easy on the rich. I don't really know who the "powers that be" are, but they are rich. There is a columnist in the Denver Post, Ed Quillen, who writes humorously about the "Committee that Really Runs America," which is I'm sure connected to the "powers that be."

Bush's job was to reduce taxes and give government subsidies to the rich who elected him. He got thrown off his agenda, however, when the terrorists attacked the US. As a cowardly draft dodger, responding to terrorists was not in his nature. So, he and Cheney, on the advice of a bunch of Jews at the upper levels of the administration, decided to invade Iraq to show how brave and resolute they were. The problem was that they were neither brave nor resolute and walked into a giant tar pit that threatens to keep America mired in combat for years.

Meanwhile, though, they have continued to carry out the task for which they were elected (or almost elected and then selected by the Supreme Court, which also usually answers to the "powers that be"). So, there is no sacrifice called for to support the war in Iraq, because Bush was elected to reduce sacrifice, not increase it. He has betrayed America for money. I think a lot of it is Jew money, but who knows. Certainly a lot of it is gentile money -- the Wal-Mart and Mars candy people, who want to get rid of the estate tax, for example. A lot of the gentile money, however, does not support this effort -- Bill Gates, Warren Buffet, and a lot of old money, like the Rockefellers, for example. Some Jews don't either, like George Soros and some of the other big Jewish contributors to the Democratic party.

But George Bush has stuck to his guns, giving tax cuts despite the terrorist attacks, and America is the worse for it. I'm sure that Bush expects in return to be cared for by these fat cats for the rest of his life, but it seems like you don't really have to sell your soul for money after being President. Clinton and Bush I have made plenty of money from speaking engagements, and Bush II could, too. Maybe he is worried that he is so stupid that even the fat cats wouldn't pay to hear him speak. Basically, as President he only speaks to people in uniform who are ordered to go listen to him, and they don't make much money.

Bush's Hypocrisy

Bush is going to call up more National Guard troops and send them back to Iraq. The hypocrisy in doing this is so gross that it's almost unbearable.

Bush, in theory, was in the National Guard. For him, during the Vietnam War, it was his hiding hole, like the one he found Saddam Hussein in. It kept him out of combat. Now he, as commander in chief, takes people in the same position he was and instead of exempting them, sends them into combat. It's so unfair that it boggles the mind.

It really rankles me as a Vietnam veteran who was in effect drafted, although not actually, because once I became 1-A under the draft, I volunteered, rather than wait to be drafted.

Bush's partner in crime is Dick Cheney, who also avoided the draft. And what about most of the Republican candidates. Except for John McCain, did they serve? Particularly what about Rudy Giuliani, who is running on his heroism on 9/11? Was he heroic during the Vietnam War? And what about the veteran who ran last time? John Kerry may not have been the best candidate, but he did not deserve to be Swift-boated and dragged through the mud because he actually served in Vietnam.

This country hates its veterans. The current Iraq veterans will find this out in a few years, after this war is over one way or another. John McCain has not experienced this because he came back as a POW under extraordinary circumstances, and gets a lot of bowing and scraping now because he is a Senator. Chuck Hagel seems more like a real veteran, a fact that will probably be used against him if he ever really gets into the public spotlight.

Impact of Paliament Blast in Iraq

The blast in the Iraqi Parliament building inside the Green Zone in Baghdad was intended to be a propaganda blow against the US, and it was. So much for George Bush's surge, and for John McCain's run for President. I'm also surprised that the stock market went up after the blast. Clearly New Yorkers have forgotten about 9/11 and don't care about the American troops threatened daily in Iraq, much less about the poor Iraqis who have suffered many more casualties than New Yorkers did on 9/11 or since. They don't care! New Yorkers got their millions from the government after 9/11, unlike the Oklahoma City victims. And what about the Iraqis? They can't even get visas for the US when they are threatened with death because they helped Americans in some way.

Holocaust Survivor Favors Starving Children

A story in the New York Times about the US slowing delivery of food aid, reverses the usual cast of characters. Republican President Bush wants to liberalize laws regarding food aid to allow purchasing food overseas near where it would be delivered. Democratic Holocaust survivor Congressman Tom Lantos opposes the idea. He wants to retain the current system in which all food aid comes from the US and is delivered by US carriers. If we continue to use Lantos' old, slow way, the Times article says tens or hundreds of thousands of children in Africa may die.

Wolfowitz Problems at World Bank

According to the Financial Times, Paul Wolfowitz is being criticized by World Bank officials for his handling of his "partner's" job at the World Bank. It's not explained, but apparently Shaha Riza is living with him, but not married to him. When he took over the World Bank, she could not work under his supervision and thus was seconded to the State Department, where she works for Dick Cheney's daughter. Reports are that Wolfowitz influenced her getting a promotion and raise at the World Bank.

Maybe he'll get canned, but it's unlikely until Bush gets the boot in the next US election. Scandal couldn't happen to a more deserving person -- the failed architect of the Iraq war, the butcher of Baghdad!

Jews Profit from Holocaust

The NYT reports that Israel Singer, the head of the World Jewish Congress, which got billions for Holocaust victims, improperly used money from the fund for his personal benefit. The Jews tell everybody else that they have to fall down and worship the Holocaust and speak of it only in hushed whispers, but for the Jews themselves its just a big moneymaker, a way to shake down the gentiles. While what Singer did was apparently illegal, or improper if not illegal, many Jews have benefited in less questionable ways. As I've said before, Jewish lawyers for Holocaust reparations have taken huge fees, Jewish big shots who headed up these groups (Former Secretary of State Eagleburger) have taken huge fees, etc.

I can't find anything on the Internet that says Eagleburger is Jewish, either ethnically or religiously, but he certainly seems to be with his close connections to Kissinger, his appointment as one of the chief Holocaust restitution bosses, etc.

Is There a Correction in Our Future?

The New York Times and the Financial Times have both warned recently of a possible stock market (and economic?) correction in our future.

The NYT said on March 24, "Investors who fail to take a hard look at the vulnerability of the American economy are courting tremendous risk. The fact that after years of profligacy the federal government is fiscally ill prepared to respond to a destabilizing downturn only increases those risks."

William Rhodes, CEO of Citibank, wrote in the Financial Times on March 29:

The low spreads, the tremendous build-up of liquidity, the reach for yield and the lack of differentiation among borrowers have stimulated both dynamic growth and some real concerns....

As lenders and investors inevitably become more discriminating, liquidity will recede and a number of problems will surface....

I believe that over the next 12 months a market correction will occur and this time it will be a real correction....

Today, hedge funds, private equity and those involved in credit derivatives play important, and as yet largely untested, roles. The primary worry of many who make or regulate the market is not inflation or growth or interest rates, but instead the coming adjustment and the possible destabilising effect these new players could have on the functioning of international markets as liquidity recedes. It is also possible that they could provide relief for markets that face shortages of liquidity.

Either way, this clearly is the time to exercise greater prudence in lending and in investing and to resist any temptation to relax standards.

My own view of what's going on is that interest rates price both inflation and risk. When inflation was higher and interest rates were higher, they more or less incorporated the risk factor, i.e., it was relatively small in comparison to the inflation factor. As inflation fell and interest rates fell with it, the risk portion shrank in tandem. However, if anything the risk has been going up, not down, as hedge funds, private equity, and derivatives have played a more and more important role. In addition, the entry into the world economy of new major players such as China and India, who have kept inflation artificially low by depressing wage costs, has also kept the risk factor artificially low while actually increasing risk.

As Rhodes said, someday investors will begin to notice this underpricing of risk, maybe not until something happens to highlight the risk factor. The sub-prime mortgage sector is probably not big enough in itself to do this, but if some other bump comes along while sub-primes are still a problem, that might do it.

Politically, it should be noted that while interest rates have fallen for big investors, they have risen for small consumers. In addition to the sub-prime mortgage scandal, which came to light because the interest rates on these mortgages increased dramatically, credit card issuers are raising rates far above the prime rates they charge wealthy individuals, as well as adding all kinds of fees and penalties. This doesn't represent risk pricing so much as it does hucksterism and usury. Lenders are taking advantage of people who have gotten themselves in trouble by borrowing too much. This is illustrated by the fact that people in credit trouble often get more offers from lenders ("loan sharks," even if they are big, fancy banks) than people with good credit histories.