The military adventurers of the George W Bush administration have much in common with the corporate leaders of the defunct energy company Enron. Both groups of men thought that they were the “smartest guys in the room”, the title of Alex Gibney’s prize-winning film on what went wrong at Enron. The neo-conservatives in the White House and the Pentagon outsmarted themselves. They failed even to address the problem of how to finance their schemes of imperialist wars and global domination.

As a result, going into 2008, the United States finds itself in the anomalous position of being unable to pay for its own elevated living standards or its wasteful, overly large military establishment. Its government no longer even attempts to reduce the ruinous

expenses of maintaining huge standing armies, replacing the equipment that seven years of wars have destroyed or worn out, or preparing for a war in outer space against unknown adversaries.

Instead, the Bush administration puts off these costs for future generations to pay - or repudiate. This utter fiscal irresponsibility has been disguised through many manipulative financial schemes (such as causing poorer countries to lend us unprecedented sums of money), but the time of reckoning is fast approaching.

There are three broad aspects to our debt crisis. First, in the current fiscal year (2008) we are spending insane amounts of money on “defense” projects that bear no relationship to the national security of the United States. Simultaneously, we are keeping the income tax burdens on the richest segments of the American population at strikingly low levels.

Second, we continue to believe that we can compensate for the accelerating erosion of our manufacturing base and our loss of jobs to foreign countries through massive military expenditures - so-called “military Keynesianism”, which I discuss in detail in my book Nemesis: The Last Days of the American Republic. By military Keynesianism, I mean the mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy. The opposite is actually true.

Third, in our devotion to militarism (despite our limited resources), we are failing to invest in our social infrastructure and other requirements for the long-term health of our country. These are what economists call “opportunity costs”, things not done because we spent our money on something else. Our public education system has deteriorated alarmingly. We have failed to provide health care to all our citizens and neglected our responsibilities as the world’s number one polluter. Most important, we have lost our competitiveness as a manufacturer for civilian needs - an infinitely more efficient use of scarce resources than arms manufacturing. Let me discuss each of these.

The current fiscal disaster
It is virtually impossible to overstate the profligacy of what our government spends on the military. The Department of Defense’s planned expenditures for fiscal year 2008 are larger than all other nations’ military budgets combined. The supplementary budget to pay for the current wars in Iraq and Afghanistan, not part of the official defense budget, is itself larger than the combined military budgets of Russia and China. Defense-related spending for fiscal 2008 will exceed $1 trillion for the first time in history. The United States has become the largest single salesman of arms and munitions to other nations on Earth. Leaving out of account Bush’s two on-going wars, defense spending has doubled since the mid-1990s. The defense budget for fiscal 2008 is the largest since World War II.

Before we try to break down and analyze this gargantuan sum, there is one important caveat. Figures on defense spending are notoriously unreliable. The numbers released by the Congressional Reference Service and the Congressional Budget Office do not agree with each other. Robert Higgs, senior fellow for political economy at the Independent Institute, says, “A well-founded rule of thumb is to take the Pentagon’s (always well publicized) basic budget total and double it.”

Even a cursory reading of newspaper articles about the Department of Defense will turn up major differences in statistics about its expenses. Some 30-40% of the defense budget is “black”, meaning that these sections contain hidden expenditures for classified projects. There is no possible way to know what they include or whether their total amounts are accurate.

There are many reasons for this budgetary sleight-of-hand - including a desire for secrecy on the part of the president, the secretary of defense and the military-industrial complex - but the chief one is that members of Congress, who profit enormously from defense jobs and pork-barrel projects in their districts, have a political interest in supporting the Department of Defense.

In 1996, in an attempt to bring accounting standards within the executive branch somewhat closer to those of the civilian economy, Congress passed the Federal Financial Management Improvement Act. It required all federal agencies to hire outside auditors to review their books and release the results to the public. Neither the Department of Defense, nor the Department of Homeland Security, has ever complied. Congress has complained, but not penalized either department for ignoring the law. The result is that all numbers released by the Pentagon should be regarded as suspect.

In discussing the fiscal 2008 defense budget, as released to the press on February 7, 2007, I have been guided by two experienced and reliable analysts: William D Hartung of the New America Foundation’s Arms and Security Initiative and Fred Kaplan, defense correspondent for Slate.org. They agree that the Department of Defense requested $481.4 billion for salaries, operations (except in Iraq and Afghanistan), and equipment.

They also agree on a figure of $141.7 billion for the “supplemental” budget to fight the global “war on terror” - that is, the two on-going wars that the general public may think are actually covered by the basic Pentagon budget. The Department of Defense also asked for an extra $93.4 billion to pay for hitherto unmentioned war costs in the remainder of 2007 and, most creatively, an additional “allowance” (a new term in defense budget documents) of $50 billion to be charged to fiscal year 2009. This comes to a total spending request by the Department of Defense of $766.5 billion.

But there is much more. In an attempt to disguise the true size of the American military empire, the government has long hidden major military-related expenditures in departments other than Defense. For example, $23.4 billion for the Department of Energy goes toward developing and maintaining nuclear warheads; and $25.3 billion in the Department of State budget is spent on foreign military assistance (primarily for Israel, Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Republic, Egypt, and Pakistan).

Another $1.03 billion outside the official Department of Defense budget is now needed for recruitment and reenlistment incentives for the overstretched US military itself, up from a mere $174 million in 2003, the year the war in Iraq began. The Department of Veterans Affairs currently gets at least $75.7 billion, 50% of which goes for the long-term care of the grievously injured among the at least 28,870 soldiers so far wounded in Iraq and another 1,708 in Afghanistan. The amount is universally derided as inadequate. Another $46.4 billion goes to the Department of Homeland Security.

Missing as well from this compilation is $1.9 billion to the Department of Justice for the paramilitary activities of the Federal Bureau of Investigation; $38.5 billion to the Department of the Treasury for the Military Retirement Fund; $7.6 billion for the military-related activities of the National Aeronautics and Space Administration; and well over $200 billion in interest for past debt-financed defense outlays. This brings US spending for its military establishment during the current fiscal year (2008), conservatively calculated, to at least $1.1 trillion.

Military Keynesianism
Such expenditures are not only morally obscene, they are fiscally unsustainable. Many neo-conservatives and poorly informed patriotic Americans believe that, even though our defense budget is huge, we can afford it because we are the richest country on Earth.

Unfortunately, that statement is no longer true. The world’s richest political entity, according to the Central Intelligence Agency’s World Factbook, is the European Union. The EU’s 2006 GDP (gross domestic product - all goods and services produced domestically) was estimated to be slightly larger than that of the US However, China’s 2006 GDP was only slightly smaller than that of the US, and Japan was the world’s fourth-richest nation.

A more telling comparison that reveals just how much worse we’re doing can be found among the “current accounts” of various nations. The current account measures the net trade surplus or deficit of a country plus cross-border payments of interest, royalties, dividends, capital gains, foreign aid, and other income.

For example, for Japan to manufacture anything, it must import all required raw materials. Even after this incredible expense is met, it still has an $88 billion per year trade surplus with the United States and enjoys the world’s second-highest current account balance. (China is number one.) The United States, by contrast, is number 163 - dead last on the list, worse than countries like Australia and the United Kingdom that also have large trade deficits. Its 2006 current account deficit was $811.5 billion; second worst was Spain at $106.4 billion. This is what is unsustainable.

It’s not just that our tastes for foreign goods, including imported oil, vastly exceed our ability to pay for them. We are financing them through massive borrowing. On November 7, 2007, the US Treasury announced that the national debt had breached $9 trillion for the first time ever. This was just five weeks after Congress raised the so-called debt ceiling to $9.815 trillion. If you begin in 1789, at the moment the constitution became the supreme law of the land, the debt accumulated by the federal government did not top $1 trillion until 1981. When Bush became president in January 2001, it stood at approximately $5.7 trillion. Since then, it has increased by 45%. This huge debt can be largely explained by our defense expenditures in comparison with the rest of the world.

The world’s top 10 military spenders and the approximate amounts each country currently budgets for its military establishment are:

1. United States (FY08 budget), $623 billion
2. China (2004), $65 billion
3. Russia, $50 billion
4. France (2005), $45 billion
5. Japan (2007), $41.75 billion
6. Germany (2003), $35.1 billion
7. Italy (2003), $28.2 billion
8. South Korea (2003), $21.1 billion
9. India (2005 est.), $19 billion
10. Saudi Arabia (2005 est.), $18 billion

World total military expenditures (2004 est.), $1,100 billion
World total (minus the United States), $500 billion.

Our excessive military expenditures did not occur over just a few short years or simply because of the Bush administration’s policies. They have been going on for a very long time in accordance with a superficially plausible ideology and have now become entrenched in our democratic political system where they are starting to wreak havoc. This ideology I call “military Keynesianism” - the determination to maintain a permanent war economy and to treat military output as an ordinary economic product, even though it makes no contribution to either production or consumption.

This ideology goes back to the first years of the Cold War. During the late 1940s, the US was haunted by economic anxieties. The Great Depression of the 1930s had been overcome only by the war production boom of World War II. With peace and demobilization, there was a pervasive fear that the Depression would return.

During 1949, alarmed by the Soviet Union’s detonation of an atomic bomb, the looming communist victory in the Chinese civil war, a domestic recession, and the lowering of the Iron Curtain around the USSR’s European satellites, the US sought to draft basic strategy for the emerging Cold War. The result was the militaristic National Security Council Report 68 (NSC-68) drafted under the supervision of Paul Nitze, then head of the Policy Planning Staff in the State Department. Dated April 14, 1950, and signed by president Harry S Truman on September 30, 1950, it laid out the basic public economic policies that the United States pursues to the present day.

In its conclusions, NSC-68 asserted: “One of the most significant lessons of our World War II experience was that the American economy, when it operates at a level approaching full efficiency, can provide enormous resources for purposes other than civilian consumption while simultaneously providing a high standard of living.”

With this understanding, American strategists began to build up a massive munitions industry, both to counter the military might of the Soviet Union (which they consistently overstated) and also to maintain full employment as well as ward off a possible return of the Depression. The result was that, under Pentagon leadership, entire new industries were created to manufacture large aircraft, nuclear-powered submarines, nuclear warheads, intercontinental ballistic missiles, and surveillance and communications satellites. This led to what president Dwight D Eisenhower warned against in his farewell address of February 6, 1961: “The conjunction of an immense military establishment and a large arms industry is new in the American experience.” That is, the military-industrial complex.

By 1990, the value of the weapons, equipment, and factories devoted to the Department of Defense was 83% of the value of all plants and equipment in American manufacturing. From 1947 to 1990, the combined US military budgets amounted to $8.7 trillion. Even though the Soviet Union no longer exists, US reliance on military Keynesianism has, if anything, ratcheted up, thanks to the massive vested interests that have become entrenched around the military establishment. Over time, a commitment to both guns and butter has proven an unstable configuration. Military industries crowd out the civilian economy and lead to severe economic weaknesses. Devotion to military Keynesianism is, in fact, a form of slow economic suicide.

On May 1, 2007, the Center for Economic and Policy Research of Washington, DC, released a study prepared by the global forecasting company Global Insight on the long-term economic impact of increased military spending. Guided by economist Dean Baker, this research showed that, after an initial demand stimulus, by about the sixth year the effect of increased military spending turns negative. Needless to say, the US economy has had to cope with growing defense spending for more than 60 years. He found that, after 10 years of higher defense spending, there would be 464,000 fewer jobs than in a baseline scenario that involved lower defense spending.

Baker concluded:
It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment.
These are only some of the many deleterious effects of military Keynesianism.

Hollowing out the American economy
It was believed that the US could afford both a massive military establishment and a high standard of living, and that it needed both to maintain full employment. But it did not work out that way. By the 1960s, it was becoming apparent that turning over the nation’s largest manufacturing enterprises to the Department of Defense and producing goods without any investment or consumption value was starting to crowd out civilian economic activities.

Historian Thomas E Woods Jr observes that, during the 1950s and 1960s, between one-third and two-thirds of all American research talent was siphoned off into the military sector. It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles.

Nuclear weapons furnish a striking illustration of these anomalies. Between the 1940s and 1996, the United States spent at least $5.8 trillion on the development, testing and construction of nuclear bombs. By 1967, the peak year of its nuclear stockpile, the US possessed some 32,500 deliverable atomic and hydrogen bombs, none of which, thankfully, was ever used.

They perfectly illustrate the Keynesian principle that the government can provide make-work jobs to keep people employed. Nuclear weapons were not just America’s secret weapon, but also its secret economic weapon. As of 2006, we still had 9,960 of them. There is today no sane use for them, while the trillions spent on them could have been used to solve the problems of social security and health care, quality education and access to higher education for all, not to speak of the retention of highly skilled jobs within the American economy.

The pioneer in analyzing what has been lost as a result of military Keynesianism was the late Seymour Melman (1917-2004), a professor of industrial engineering and operations research at Columbia University. His 1970 book, Pentagon Capitalism: The Political Economy of War, was a prescient analysis of the unintended consequences of the American preoccupation with its armed forces and their weaponry since the onset of the Cold War. Melman wrote (pages. 2-3):
From 1946 to 1969, the United States government spent over $1,000 billion on the military, more than half of this under the Kennedy and Johnson administrations - the period during which the [Pentagon-dominated] state management was established as a formal institution. This sum of staggering size (try to visualize a billion of something) does not express the cost of the military establishment to the nation as a whole. The true cost is measured by what has been foregone, by the accumulated deterioration in many facets of life by the inability to alleviate human wretchedness of long duration.
In an important exegesis on Melman’s relevance to the current American economic situation, Thomas Woods writes:
According to the US Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation’s plant and equipment, and infrastructure, at just over $7.29 trillion. In other words, the amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock.
The fact that we did not modernize or replace our capital assets is one of the main reasons why, by the turn of the 21st century, our manufacturing base had all but evaporated. Machine tools - an industry on which Melman was an authority - are a particularly important symptom.

In November 1968, a five-year inventory disclosed (page 186) “that 64% of the metalworking machine tools used in US industry were 10 years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end of World War II. This deterioration at the base of the industrial system certifies to the continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.
Nothing has been done in the period since 1968 to reverse these trends and it shows today in our massive imports of equipment - from medical machines like proton accelerators for radiological therapy (made primarily in Belgium, Germany and Japan) to cars and trucks.

Our short tenure as the world’s “lone superpower” has come to an end. As Harvard economics professor Benjamin Friedman has written:
Again and again it has always been the world’s leading lending country that has been the premier country in terms of political influence, diplomatic influence, and cultural influence. It’s no accident that we took over the role from the British at the same time that we took over … the job of being the world’s leading lending country. Today we are no longer the world’s leading lending country. In fact we are now the world’s biggest debtor country, and we are continuing to wield influence on the basis of military prowess alone.
Some of the damage done can never be rectified. There are, however, some steps that this country urgently needs to take. These include reversing Bush’s 2001 and 2003 tax cuts for the wealthy, beginning to liquidate our global empire of over 800 military bases, cutting from the defense budget all projects that bear no relationship to the national security of the United States, and ceasing to use the defense budget as a Keynesian jobs program. If we do these things we have a chance of squeaking by. If we don’t, we face probable national insolvency and a long depression.

Chalmers Johnson is the author of Nemesis: The Last Days of the American Republic, just published in paperback. It is the final volume of his Blowback Trilogy, which also includes Blowback (2000) and The Sorrows of Empire (2004).

(For those interested, click here to view a clip from a new film, Chalmers Johnson on American Hegemony, in Cinema Libre Studios’ Speaking Freely series in which he discusses “military Keynesianism” and imperial bankruptcy.)

Shell smashed all-time British company profit records today, posting 2007 earnings of $27.5billion (£13.9billion), and immediately ran into a storm with union leaders, who are demanding the Government hits the oil giant with a windfall tax.

Shell’s profit surge - it is now making a staggering $75million (£38million) a day - on the back of a booming oil price that touched $100 a barrel this winter, was labelled as “obscene” by Tony Woodley of Unite, the UK’s largest trade union, as Britons struggle with soaring energy costs.

“Shell shareholders are doing very nicely while the rest of us are paying the price and struggling,” said Woodley.

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“There are no problems with profits, but consumers should question the excessive mega-profits of the oil companies in light of UK companies and hauliers saying they are being pressed on high fuel and energy costs, pensioners struggling to pay energy bills and motorists struggling to fill their petrol tanks.”

Shell angrily rejected the claims, arguing that a windfall tax in Britain would be illogical because the vast amount of its business is done around the world.

Shell’s Chief Executive Jeroen van der Veer called the profits “satisfactory” as production levels fell for the fifth consecutive year.

Responding to Mr Woodley’s attack Mr van der Veer said that in the UK taxes accounted for more than half the cost of petrol at the pumps. “We have no influence over that,” he said.

The company also claimed it is as good as matching its annual profits with huge investments - between $24 billion and $25 billion of capital expenditure this year - to find new energy sources.

“We are investing a lot of money to have the energy production to satisfy the energy demand of the world,” said finance director Peter Voser.

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“We are investing for the future of society so that people can live the life they want. That is our job.”

Despite the surge in full-year profits, up 9 per cent from 2006, there was disappointment with the figures in the City.

Analysts had been pencilling in underlying “clean” profits for the fourth quarter of more than $5.8billion, but the figure came in at $5.7 billion.

Upstream production, which accounts for more than half of profits, averaged out at 3.315 million barrels of oil or their gas equivalent a day, just squeezing in to the forecast of between 3.3 million and 3.5 million.

That itself had been a major downgrade from the 3.8 million Shell had previously predicted. The company today said it expected production levels to fall again in 2008.

The biggest issue for Shell is the shutout from wells it has been co-producing in Nigeria - potentially 800,000 barrels a day - where local militia continue to demand that the world’s major companies quit the Niger Delta.

Jeroen van der Veer, the chief executive of Royal Dutch Shell, said: “These are satisfactory results. We have made good progress in 2007, launched new projects upstream and downstream, and achieved exploration success.”

The fourth-quarter dividend is up 11 per cent at 36 US cents, and the company said it would be increasing this year’s first-quarter payout by a similar amount to 40 cents.

In the nation’s first-ever $3 trillion budget, President Bush seeks to seal his legacy of promoting a strong defense to fight terrorism and tax cuts to spur the economy. Democrats, who control Congress, are pledging fierce opposition to Bush’s final spending plan — perhaps even until the next president takes office.

The 2009 spending plan sent to Congress on Monday will project huge budget deficits, around $400 billion for this year and next and more than double the 2007 deficit of $163 billion. But even those estimates could prove too low given the rapidly weakening economy and the total costs of the wars in Iraq and Afghanistan, which Bush does not include in his request for the budget year beginning Oct. 1.

Last year, when Democrats were newly in the majority, there were drawn-out veto struggles. This year’s fights could be worse because it is an election year.

As in past years, Bush’s biggest proposed increases are in national security. Defense spending is projected to rise by about 7 percent to $515 billion and homeland security money by almost 11 percent, with a big gain for border security. Details on the budget were obtained through interviews with administration officials, who spoke on condition of anonymity until the budget’s release.

The bulk of government programs for which Congress sets annual spending levels would remain essentially frozen at current levels. The president does shower extra money on some favored programs in education and to bolster inspections of imported food.

Bush’s spending proposal would achieve sizable savings by slowing the growth in the major health programs — Medicare for retirees and Medicaid for the poor. There the president will be asking for almost $200 billion in cuts over five years, about three times the savings he proposed last year.

There is no indication Congress is more inclined to go along with this year’s bigger cuts; savings would come by freezing payment rates for most health-care providers for three years.

In advance, Democrats attacked the plan as a continuation of failed policies that have seen the national debt explode under Bush; projected surpluses of $5.6 trillion wiped out; and huge deficits take their place, reflecting weaker revenues from the 2001 recession, the terrorism fight, and, Democrats contend, Bush’s costly $1.3 trillion first-term tax cuts.

“This administration is going to hand the next president a fiscal meltdown,” Senate Budget Committee Chairman Kent Conrad, D-N.D., said Sunday in an interview with The Associated Press. “This is a budget that sticks it to the middle class, comforts the wealthy and has a set of priorities that are not the priorities of the American people.”

Bush’s budget reflects the outlines of a $145 billion stimulus plan that the president is urging Congress to pass quickly to combat the growing threat of a recession.

While the House passed a stimulus bill close to the president’s outline, Senate Democrats are trying to expand the measure to include cash relief for older people and extended unemployment benefits.

Bush’s five-year blueprint makes his first-term tax cuts permanent while still claiming to get the budget into balance by 2012, three years after he leaves office.

Republicans are pledging to protect those first-term tax cuts. But Democrats, including the party’s presidential candidates, want to retain the tax cuts that benefit lower and middle-income taxpayers while rolling back the tax cuts for the wealthy.

Democrats say Bush’s budget is built on flawed math. Beyond 2009, the budget plan does not include any money to keep the alternative minimum tax, which was aimed at the wealthy, from ensnaring millions of middle-income people. It also includes only $70 billion to fight the wars in Iraq and Afghanistan in 2009, just a fraction of the $200 billion they are expected to cost this year.

Reflecting strong lobbying by Secretary of State Condoleezza Rice, Bush’s budget includes a request to hire nearly 1,100 new diplomats to address severe staffing shortages and put the State Department on track to meet an ambitious call to double its size over the next decade.

In a change from last year, the administration is also seeking to increase spending on the State Children’s Health Insurance Program by $19.7 billion over the next five years. That request is midway between the $5 billion increase requested by Bush last year and the $35 billion increase in bills passed by Congress but vetoed by Bush in October and December.

Bush also proposes boosting spending in some areas of education such as Title I grants, the main source of federal support for poor students. But at the same time, Bush seeks to eliminate 47 other education programs that are seen as unnecessary including programs to encourage art in the schools, bring low-income students on trips to Washington and provide mental health services.

Deficits in the range of $400 billion would be very close to the all-time high imbalance, in dollar terms, of $413 billion set in 2004 during Bush’s first term. Many private economists are forecasting that the deficits this year and next will surpass the 2004 record in large part because they believe the country is heading into a recession.

Stanley Collender, a budget expert with Qorvis Communications, a Washington consulting firm, said it is very likely that the next budget year will begin with the government operating on a short-term spending measure. In that scenario, Democrats, unable to enact their spending priorities over Bush’s vetoes, would mark their time hoping the country will elect a Democrat to succeed Bush.

The $3 trillion Bush’s proposes spending in 2009 would be the first time that milestone has been reached. Bush also presided over the first budget to hit $2 trillion, in 2002. It took the government nearly 200 years to reach the first $1 trillion budget, which occurred in 1987 during the Reagan administration.

By now, any news junkie is probably aware there was a mysterious set of events that all but brought Internet access in some countries to a halt. You can breathe a sigh of relief if you live in North America, Australia, UK, Israel, Iraq and most English speaking countries you are untouched. The brunt of the virtual shutdown slowed Internet access in large areas of Asia, the Middle East and North Africa. Egypt, Saudi Arabia, Qatar, the United Arab Emirates, Kuwait, Bahrain, Pakistan and India. Many of these countries were able to redirect their Internet traffic through alternative routes.

Although one country is publicly announcing they are having no problems and “everything is fine”, 3rd party reports show quite a different story. The Iranian embassy in Abu Dhabi told ArabianBusiness.com that “everything is fine”, but Internet connectivity reports on the web, citing a router in Tehran, appear to indicate that there is currently no connection to the outside world. You can view the 3rd party Internet traffic report here for Iran, Asia and the world.

While conspiracy theories are spinning around the Internet that this is a planned strike by Israel and the US to break Iran off from the world, we’re not looking to get into that mess. What is very interesting to take a close look at is how closely our world is tied to the Internet for our business and personal lives. Financial transactions from bank transfers to stock trades are transmitted through these intercontinental cables connecting our countries.

Most of the countries effected by the most recent Internet blackout were only effected for around a 24 hour period. Smart engineers were able to reroute Internet traffic to other parts of the countries and the only result was heavy traffic on certain intercontinental cables. This produced slow access for most, putting countries like India at 60% of capacity. In particular, Delhi which is the second largest city in India with 11.5 million people has had an almost complete shutdown. While the reports state the city is at 50% capacity, users at Internet cafes are telling others they’re having no luck getting access. ”We are unable to access any website. Customers are disappointed by this. The Internet is really very slow,” said Sahil, a Net user in Delhi.

At this point in time only four intercontinental cables were cut within a few days period of time. Reports were first released that it was likely ships anchors had cut the cables. On February 3rd, 2008 Egypt’s Ministry of Communications said no ships were present when the two cables were present. “A marine transport committee investigated the traffic of ships in the area, 12 hours before and after the malfunction, where the cables are located to figure out the possibility of being cut by a passing vessel and found out there were no passing ships at that time,” said the statement. More information the Ministry’s report can be found here. If these cables were not cut by ship’s anchors then it’s easy to conclude that someone cut the cables with intent.

With a small number of four cables being cut, it was easy for the world’s telecommunications engineers to reroute Internet traffic and recover some access, albeit Iran’s reported consistent blackout. With the world’s business communications and transactions becoming almost dependent on these cables, we need to find alternative solutions to grow the ability to reroute our data whether it be through more redundant Internet sea cables or by satellite. If a clandestine operation were to target these cables in great numbers it could bring the entire world economy to a standstill for weeks. Financial kickbacks could be established easily by shorting the markets and knowing certain sectors would take quite a hit. Hopefully our government is hard at work preparing for a possible attack on our communications that lie outside of our country. Since we all participate in a worldwide economy which has been more apparent with the recent sub-prime crisis, it’s of a serious consequence that we protect others access to the Internet as much as ours. How long will we let the world’s economies hang by an Internet thread?

We want to know what you think about the Internet blackout. Do you think this was planned or just a coincidence that 4 major intercontinental cables were cut within days of each other? Talk back with us through comments or at or form if you want to be on the radio show.

NEW YORK (Reuters) — In the latest example that the U.S. dollar ain’t what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.
“We had decided that money is money and we’ll take it and just do the exchange whenever we can with our bank,” Robert Chu, owner of East Village Wines, told Reuters television.

The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates.

“We didn’t realize we would take so much in and there were that many people traveling or having euros to bring in. But some days, you’d be surprised at how many euros you get,” Chu said.

“Now we have to get familiar with other currencies and the (British) pound and the Canadian dollars we take,” he said.

FIND MORE STORIES IN: Reuters | European | Canadian dollars | US dollar
While shops in many U.S. towns on the Canadian border have long accepted Canadian currency and some stores on the Texas-Mexico border take pesos, the acceptance of foreign money in Manhattan was unheard of until recently.

Not far from Chu’s downtown wine emporium, Billy Leroy of Billy’s Antiques & Props said the vast numbers of Europeans shopping in the neighborhood got him thinking, “My God, I should take euros in at the store.”

Leroy doesn’t even bother to exchange them.

“I’m happy if I take in 200 euros, because what I do is keep them,” he said. “So when I go back to Paris, I don’t have to go through the nightmare of going to an exchange place.”

ANAHEIM, Calif. — VISIT Disney’s California Adventure — a 55-acre theme park next door to the fabled progenitor of the modern amusement Mecca, Disneyland — and you will find a noisy reminder of what happens when a company loses its focus and cuts corners.

Disney Is Upbeat Despite Economy’s Troubles (February 6, 2008)
Enlarge The Walt Disney Company built the park on the cheap in 2001, and many rides are copies of familiar carnival workhorses like the Ferris wheel. A lack of landscaping can leave guests sweltering. Outdoor shows were borrowed from other Disney properties. And the theme, built around tributes to California, is modest except for an occasionally unintentional ghost-town atmosphere: The park draws about 6 million visitors a year, a trickle compared with the 15 million who swarm Disneyland.

Now, Disney is embarking on a $1.1 billion, five-year effort to get California Adventure on track. The blueprints call for ripping out ho-hum rides and adding elaborate new ones, rebuilding the park’s entrance — a hodgepodge of turnstiles, a miniature Golden Gate Bridge and pastel tile murals — to shift the focus to Disney iconography.

In June, Disney will unveil a glimpse of the shoot-for-the-moon bet it is making on California Adventure’s makeover, with the introduction of a ride called Toy Story Mania. More than three years in the making, and estimated to cost about $80 million, the attraction essentially puts guests inside a video game.

Riders, wearing 3-D glasses, board vehicles that career through an old-fashioned carnival midway, operated by characters from the popular “Toy Story” film franchise. Vehicles stop at game booths — 56 giant screens programmed with 3-D animation from Pixar — and riders play virtual-reality versions of classic carnival games.

But much more is riding on the attraction than a complex turnaround of just one theme park. Toy Story Mania, which Disney is also installing in Florida, reflects the larger pressures and challenges facing the company’s $10.6 billion parks and resorts business. To stay relevant to younger, digitally savvy visitors while also delivering growth to investors, Disney, the company that invented the modern theme park, knows that it has to devise a new era of spectacular attractions rooted in technology.

One-upmanship increasingly drives this intensely competitive business, and Disney’s rivals are also trying harder to gain market share. Universal Studios, part of NBC Universal, has more than quadrupled its spending on new rides, introducing attractions in California and Florida that are based on “The Simpsons.” Universal is teaming up with Warner Brothers to bring a small Harry Potter-theme park to Florida in late 2009. Niche players like SeaWorld and Legoland are also muscling in on Disney’s territory.

At its core, however, Toy Story Mania represents an effort to solve a puzzle that poses a much larger threat to Disney and the broader amusement park business. The quickening pace of daily living, advances in personal technology and the rapidly changing media landscape are combining to reshape what consumers expect out of a theme park, Disney executives say.

Toy Story Mania, which carries a modest price tag compared with some other Disney efforts, demonstrates one way that the company is fighting back, said Jay Rasulo, the chairman of Walt Disney Parks and Resorts.

“Bigger and more expensive is not necessarily the answer,” Mr. Rasulo said. “You want people leaving thinking, ‘Wow, only Disney could do that.’ ”

Consumers’ fixation on instant gratification and personalization has been reshaping the entertainment industry for some time, but it has finally caught up to the theme park business in visible ways. For instance, Disney has spent much more effort — and money — developing ways to entertain people as they stand in line for Toy Story Mania.

An animatronic figure with an estimated $1 million price tag will sing songs and interact with guests as they wait. Employees dressed as “Toy Story” characters will stroll among the crowds.

“There’s an erosion of patience,” said Bruce Vaughn, the chief creative executive for Walt Disney Imagineering, the company’s development group. “People’s tolerance for lines is decreasing at a rapid rate.”

Mr. Rasulo said that younger visitors, in particular, expect customized entertainment. So Toy Story Mania’s computers will accommodate riders of various skill levels.

“Guests are pretty much no longer interested in being passive viewers,” Mr. Rasulo said.

To address shifting tastes, the broader amusement park industry will have to rewrite its operating rules, said Jerry Aldrich, the founder of Amusement Industry Consulting. “Disney is already there, but a lot of parks are just waking up to this,” he said.

The health of the parks and resorts unit is crucial to Disney’s overall performance. Its lucrative sports unit, ESPN, makes more money, and its movie studio basks in Hollywood glamour. But the parks, where people interact with Mickey and his pals, are the reason that the Disney brand is so powerful, analysts say. As the theme parks go, so goes Disney.

Lately, Wall Street has been sounding alarm bells about the unit — and not just about California Adventure. While Disneyland and the cluster of Florida parks that make up Disney World have been churning out record profits on strong increases in attendance, some investors worry that the troubled domestic economy will tear a hole in the business. In late January, a Citigroup analyst downgraded Disney’s stock to a sell, citing concern about lower demand for hotel rooms at the resorts.

DISNEY strongly rejects the skepticism, and some other analysts agree. Disney’s chief financial officer, Thomas O. Staggs, said the company saw no indication that consumers were cutting back. “We are pleased with the current pace of business at our parks, particularly given the record attendance we achieved last year,” he told analysts on Tuesday during a conference call, held as the company released fiscal first-quarter earnings.

Vacationers from Europe and Asia, benefiting from a weak dollar, could pick up some of the slack in the event of an economic downturn, but that could lead to cannibalization — Disney needs those same visitors to patronize theme parks in Paris, Hong Kong and Tokyo.

Although its performance has drastically improved from its early days, Disneyland Resort Paris is still struggling after 10 years of changes and heavy capital investment. The park in Japan is cruising right along, but attendance at nearby Hong Kong Disneyland, the company’s newest park, has fallen more than 25 percent since its 2005 opening. Disney told analysts on Tuesday that attendance in Hong Kong has recently “improved significantly” because of new promotions.

To make certain that Toy Story Mania is a hit — part of a strategic effort to keep mining revenue from the 13-year-old “Toy Story” franchise — Disney is pulling every lever in its vast arsenal.

Pixar, the Disney-owned studio working on “Toy Story 3” for a 2010 release, contributed animation and general creative advice. Disney VR Studios, the company’s video game unit, customized software, while the parks and resorts unit handled the heavy lifting of design and construction. The media networks division, which includes ABC, will help publicize the ride once it opens — along with hundreds of other promotional partners.

“We have an incredible number of engines at this company, and every one is firing around this franchise,” Mr. Rasulo said.

WORK on Toy Story Mania got under way on a stiflingly hot September day in 2005, when a team of Disney creative developers went to the Los Angeles County Fair. The goal was to research how carnival games operate.

Two developers, Kevin Rafferty and Robert Coltrin, had devised an idea for a new California Adventure ride that would juxtapose the old-fashioned romance of a carnival midway with high-tech video game elements. They had a hunch that “Toy Story” and “Toy Story 2,” the Pixar films about toys coming to life, would provide a good theme. But they didn’t know much about carnival games.

“We looked at each other and said, ‘Are the games we remember from our childhoods even relevant anymore?’ ” Mr. Coltrin said.

At the fair, the two were thrilled as they walked through rows of game booths — wooden structures that carnival operators call “stick joints” — to find crowds enjoying classic games like the ring toss and water guns. “We were like, ‘Score!’ and gave each other a high-five,” Mr. Coltrin recalled.

Using digital cameras, members of the development team documented details, from the colors of the canvas covering each booth — red and yellow — to how far apart the games were spaced. They quickly ruled out some games as options for the ride. “Toss a coin in a cup didn’t really do it for us,” said Chrissie Allen, a senior show producer.

But other games, like one in which customers threw darts at balloons, piqued their interest. “We thought, ‘This just might work,’ ” Ms. Allen said.

Reassembling at Disney’s offices in Glendale, Calif., the team worked on the concept that would become Toy Story Mania. Because carnivals sell commotion, there would be lots of flashing lights, barkers trying to capture riders’ attention, buzzers and bells.

Mr. Rafferty and Mr. Coltrin dreamed up a fanciful story: The classic toys in “Toy Story” had come to life and staged a carnival under their owner’s bed while he was away at dinner. Little Bo Peep would operate the balloon darts; Ham, the talking piggy bank, would cheer riders as they tossed virtual eggs at barn animals. The culmination would be “Woody’s Rootin’ Tootin’ Gallery,” a twist on old-fashioned shooting galleries.

They would use full-scale 3-D animation, a first for a Disney ride. That, Mr. Vaughn said, would make riders feel as if they were inside a video game or a virtual world. “We look at it as gaming meets immersive storytelling,” he said.

While Mr. Vaughn and his colleagues were cogitating in the fall of 2005, Disney had its hands full. Robert A. Iger had just taken over the company after the exit of Michael D. Eisner and was working to extend Disney’s partnership with Pixar, an effort that would result in a $7.4 billion acquisition.

When Mr. Rasulo and his team presented Mr. Iger with plans for Toy Story Mania, Mr. Iger was interested but cautious. Would that dovetail with much larger efforts to overhaul the entire park? The ride could handle up to 1,500 riders an hour. Was that enough? An improved relationship with Pixar looked promising, but what if a deal couldn’t be reached? Would that hinder plans to build a lavish ride around Pixar’s core creative property?

But Mr. Iger liked a couple of the important parts of the proposal. Imagineers (Disney’s term for creative developers) suggested building versions of the ride at the same time in California and Florida — a Disney first — to leverage the development costs. Another component involved the ease with which the ride could be rethemed every season.

“The chance to take simple games that people have loved playing for generations and pairing them with cutting-edge technology just sounded exhilarating to everybody,” Ms. Allen said.

BUILDING elaborate models is among the first formal steps in creating a Disney attraction. Engineers, paying attention to scale and sight lines, want to find out how a planned addition would affect the existing park.

Models are built on large tables equipped with wheels. The company keeps room-size models of entire parks, and engineers will eventually wheel the new model into that area to see how it looks.

To give birth to Toy Story Mania, Mr. Rafferty and Mr. Coltrin went to work turning drawings of the ride into foam models, toiling in the same 1950s-era building in suburban Los Angeles where Walt Disney himself once tinkered.

Tweaks started to happen. The team added turrets to the top of the ride for a more dramatic flair. They shifted the direction of the facade by a few degrees to make it more visible from the park entrance. “And we knew at this stage that we wanted a little piece of magic out in front as a tease to people as they waited in line,” Mr. Coltrin said.

Upstairs, designers entered blueprints for the ride into a computer program. This would allow them to start building and refining the entire project, which is made up of 150 computers, with 90 of them moving around on the ride vehicles and communicating with one another via a secured wireless network. With a click of a mouse, developers could jump to any spot inside in the vehicles for a virtual dip into how the experience might look to someone on the ride.

“We don’t want anybody to be able to see multiple versions of Woody at the same time, and seconds make a difference,” said Mark Mine, the technical concept designer. “Every part of the ride has to be magical.

“It is much easier and less expensive to do this before the concrete has been poured,” he added. “As rides become more complicated, your ability to tweak in the field gets harder and much more expensive.”

Across the street, in a cold, unmarked garage, Ms. Allen helped to conduct “play tests” on rudimentary versions of the ride. More than 400 people of all ages — all had signed strict nondisclosure agreements — sat on a plywood vehicle set up in front of a projection screen and played various versions of the games. Disney workers studied their reactions and interviewed them afterward.

“We were looking to see if some effects were too scary,” Ms. Allen said, “or if there wasn’t enough laughing happening during certain sequences.”

Among the discoveries: People wanted to be able to compare scores after they were finished playing, while some children had a hard time reaching the cannonlike firing controller, christened by Disney as a “spring action shooter.” Engineers added a computer screen to vehicles to display scores and installed the controls on movable lap bars.

“We were trying to find out things we didn’t even know to ask about,” said Sue Bryan, a senior show producer.

The ride’s psychological components started to take shape during this phase. Disney decided that riders were happier when they got a bigger visual payoff. (One of Little Bo Peep’s balloons now pops with greater force when hit with a virtual dart and a blast of air shoots into a rider’s face.) A game involving shooting at a paper target was dropped. (“It was hard to make paper interesting,” Ms. Bryan said.) And developers decided that the last game before the exit needed to be the easiest, so riders would feel that they were coming out as winners, even if they weren’t very good.

After Disney closed the Pixar deal, in January 2006, Toy Story Mania became more elaborate. Mr. Iger wanted Pixar — and particularly one of its co-founders, John Lasseter, who had worked as a skipper on the Jungle Cruise ride at Disneyland after college — to contribute to creative advances in the parks. Disney had incorporated Pixar movies into its theme parks before, but Pixar’s involvement in those efforts was modest, Mr. Vaughn said.

“The minute Pixar became 100 percent part of the family, it could go whole hog and dive in,” he said.

One of Mr. Lasseter’s major concerns about Toy Story Mania centered on the animation, various developers said. Disney had hired an outside contractor to handle it, but Mr. Lasseter insisted that Pixar staff members who were involved in creating the films should also work on the ride.

The Disney team had also decided to leave out Buzz Lightyear, the modern spaceman toy in the films, because he was already showcased in an older ride called Astro Blasters. But Pixar felt that the character was essential to the “Toy Story” franchise. Buzz will now be a host of a game, and he shares top billing on the ride’s marquee.

Creating what Mr. Coltrin had called “a little piece of magic” was another area of special attention for Mr. Lasseter and his lieutenants. To entertain people as they waited in line, the developers decided to place one of Disney’s signature animatronic figures outside. It would draw attention like a carnival barker, but also be sophisticated enough to interact one on one with guests, adding another element of customization.

Only one “Toy Story” figure was considered for the role: Mr. Potato Head.

WORK on Mr. Potato Head started last year in a heavily guarded Disney research plant a few miles from the company’s headquarters in Burbank, Calif. Developers had to make a five-foot-tall plastic potato sing, dance and seemingly hold conversations with people at random. The robot also had to be able to remove his ear and put it back on.

“It’s all in the math,” said Jimmy A. Thomas, the lead mechanical designer.

When Walt Disney introduced animatronics in the 1960s, coining the word in the process, his creations moved in simple ways through the use of pneumatic valves and hydraulic pumps. The children in the It’s a Small World attraction wowed patrons simply by blinking their eyes and bowing.

Modern visitors expect much more. Mr. Potato Head — with help from a dozen video cameras, several computers, an unseen ride operator and a $1 million budget — will be able to make his mouth form words, a first for Disney animatronics.

The comedian Don Rickles, whose gravelly voice brought the character to life in the films, was hired to record 750 words and four songs. The hidden ride operator, armed with a computer and cameras that scan the crowd, will then choose phrases based on the actions and appearance of people standing in front of it. (“Hey, you in the red baseball hat.”)

The goal was to make the character so perfect that it looked as if it had just stepped out of the movies. Pixar executives tightly monitored every detail and helped direct Mr. Rickles. At a recent taping, the Pixar team put him through his paces.

“Let’s put a little more chuckle in that line,” said Roger Gould, Pixar’s creative director, sitting in a recording studio as 10 other executives and engineers took notes and adjusted instruments.

Mr. Rickles complied, repeating a line that would play if the ride stopped unexpectedly. “Folks, we’re having a little delay here,” he said. “For your safety, please stay seated inside the game tram.”

Among Disneyphiles, at least, the wait for Toy Story Mania to open is unbearable. Blogs like Blue Sky Disney and Mice Age, which are not affiliated with the company, have been chronicling minute details of the construction. (“The first ride vehicles have just arrived in California from their production facility in Osaka, Japan!”)

Al Lutz, the publisher of Mice Age and a critic of what he calls California Adventure’s “cheap strip-mall stucco” aesthetic, says fans are keen to see the ride’s over-the-top details. Disney is, after all, a company that studied how the sun struck the earth differently in various locations to determine the color of paint to use on the fairy-tale castle at the center of each resort.

“Young people are going to be fighting to be first in line,” he said.

CARACAS, Venezuela (AP) — President Hugo Chavez on Sunday threatened to cut off oil sales to the United States if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.

“If you end up freezing (Venezuelan assets) and it harms us, we’re going to harm you,” Chavez said. “Do you know how? We aren’t going to send oil to the United States. Take note, Mr. Bush, Mr. Danger.”

Exxon Mobil has gone after the assets of state oil company Petroleos de Venezuela SA in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez’s government.

A British court has issued an injunction “freezing” as much as $12 billion in assets.

“I speak to the U.S. empire, because that’s the master: continue and you will see that we won’t sent one drop of oil to the empire of the United States,” Chavez said during his weekly radio and television program, “Hello, President.”

“The outlaws of Exxon Mobil will never again rob us,” Chavez said, accusing the Irving, Texas-based oil company of acting in concert with Washington.

Chavez has repeatedly threatened to cut off oil shipments to the United States, which is Venezuela’s No. 1 client, if Washington tries to oust him. Chavez’s warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government’s nationalization drive in courts internationally.

“If the economic war continues against Venezuela, the price of oil is going to reach $200 (a barrel) and Venezuela will join the economic war,” Chavez said. “And more than one country is willing to accompany us in the economic war.”

MEXICO CITY (AFP) — Mexican president Felipe Calderon was to arrive in the United States Sunday for a working visit amid a fiery US election-year debate over illegal immigrants from Latin America, according to an official announcement.

Calderon will not be meeting with his US counterpart George W. Bush, despite it being his first visit since he became president in December 2006.

Nor will he meet with any of the leading candidates for the US presidency, whose campaign has highlighted the debate over the US handling of millions of illegal immigrants, including an estimated five million Mexicans, and efforts to build a wall along much of the two neighbors’ 3,000 kilometer (1,600 mile) border.

Instead, Calderon will travel to New York, Boston, Chicago, Sacramento and Los Angeles to meet with expatriate Mexican community leaders and academic and financial sector figures.

Calderon told the New York Times in an interview Thursday that the heightened furor over illegal immigrants was threatening the close relationship between Mexico and the United States.

“I’m very worried because this has generated an atmosphere full of prejudice, an anti-immigrant atmosphere with certain themes that are also anti-Mexican, that benefits no one,” he told the Times.

“It seems to me the worst thing the two countries could do is make our people think our enemy is our neighbor.”

He was also critical of the US approach to Latin America in general.

“What is clear to me is that in Latin America, and in the world, for some reason the United States has been losing friends, and it seems to me it should do everything possible to reach out to the few friends it has left.”

Calderon will be accompanied on the trip by his finance and economic ministers, Agustin Carstens and Eduardo Sojo, Foreign Minister Patricia Espinoza, and governors of three states which are the source of many of the Mexicans who have crossed illegally into the United States.

In New York their meetings will include financier David Rockefeller, New York Governor Eliot Spitzer, New York Federal Reserve president Timothy Geithner, and UN Secretary General Ban Ki-moon.

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