The Voice of the White House

Washington , D.C. , January 16, 2007 : “Bush has been running around the Arab countries trying in vain to act like an intelligent president and at home, the economy is collapsing. Yes, kids, you heard me, collapsing. A recession is for sure and a depression not so likely but not impossible. What has happened? Bush’s total lack of knowledge of basic economics, huge swindles being practiced, bubbles popping right and left. What’s doing all the damage is the utter and complete collapse of the crooked cheap mortgage system. This is based on outright swindles. It is not an accident. Huge hordes of shyster-like mortgage brokers deliberately let mortgages out to anybody who was above room temperature, even though they new for a certainty that when the banks and big lending agencies they sold them to, raised the rates, the mortgage holders would simply walk away. The institutions also knew these were fake but they readily bundled them and jammed them into anyone with money. Now, the small fry crooks have fled the country and the big banks and lending people are screwed right into the walls of their offices. It’s been all over the papers so there is no point in rehashing this but all the major banks, and I mean all of them, are taking it in the shorts and a number of the most prestigious ones are right on the edge of total bankruptcy. The government will cover all deposits up to $100,000 but not over that. And the hedge funds are another area about to cave in. They did a Ponzi with their suckers and when many try to cash out, they can’t because their ain’t no money, honey. They’ve been paying off the new customers with money from the old and once this one starts to cave in, there will be planes full of  frantic former billionaires heading for Aruba or a safer Israel to join the mortgage brokers. This is a huge, terrible problem but the useless Bush is having tea with the Saudi king and acting like the bumbling airhead he really is. He won’t do a thing because he is far too stupid to know what to do. At the present time I do not feel investing in anything in the United States is recommended, and neither would I recommend depositing any sum of money into any unit of our banking system. The reason for this? Our economy is now sliding down a slippery slope, gold and oil are rising in value, banks are crumbling as are major U.S. investment companies. Perhaps if an investor looks for security for their  funds, they might consider a Russian or Irish bank. I know that to be viable because  I have money in similar institutions. “

The next banking crisis on the way

Write-downs for high-risk, high-yield corporate debt, known as 'junk

January 18, 2008

by Jim Jubak

MoneyCentral MSN

Is this the quarter when banks finally admit all of their problems?

On Jan. 15, Citigroup (C, news, msgs) announced it would take an $18.1 billion write-down on its portfolio of subprime mortgages and other risky debt, and the bank cut its dividend 41%.

With other banks following suit -- Merrill Lynch (MER, news, msgs) reported $16 billion in write-downs and other charges two days later, and Wells Fargo (WFC, news, msgs) delivered similarly huge losses -- will they throw everything, including the kitchen sink, into their losses? That kind of quarter always marks the bottom in a crisis like this.

Nah. The banks and other financials have more losses from the subprime-mortgage mess on their books that they haven't yet confessed. Worse, the mortgage debacle has spread to other types of debt, with banks and other financial companies reporting mounting losses in their credit card and auto loan portfolios. And worst of all, the next big leg of the crisis -- the one I think will mark the true bottom -- has just started.

As the economy slows, the default rate is rising for corporate debt, especially for the high-risk, high-yield corporate debt called "junk" by many of us. That's opening a Pandora's box of potential write-downs that could dwarf the losses in the mortgage market.

·                     Talk back: Do you think we've seen the worst for financial stocks?

If that's true, it would push off the kitchen-sink bottom until the second or third quarter of 2008, depending on how bad the economy gets and how long it stays in the dumps. (See my Dec. 28 column, "Don't count on a 'normal' recession.")

A brief history of bubbles

It's not surprising that it will take so long to work through this mess, if you remember how it all began. The current crisis is yet another in a string of financial bubbles -- the tech bubble that burst in 2000, the housing bubble that burst in 2007 and the debt-market bubble that's bursting now. Behind each bubble stands a global flood of cheap money created by:

·                     Central banks running their printing presses to fend off economic slowdowns or financial-market crashes.

·                     A weak yen that let traders and speculators borrow for almost nothing in Japan in order to buy stocks and bonds in other markets.

·                     A huge surge of exports from countries such as China determined to hold down domestic consumption.

·                     Soaring oil prices that gave oil producers billions of dollars to invest somewhere.

All of those dollars chased a limited supply of real assets and traditional stocks and bonds, bringing down returns just as a falling dollar and signs of inflation lowered real returns more. Everyone wanted something as safe as U.S. Treasurys that paid more than Treasurys.

Everyone wants to believe in magic

Wall Street obliged by packaging and then slicing debt backed by mortgages, so that even the riskiest mortgages could earn a safe AA or AAA rating from Standard & Poor's, Moody's (MCO, news, msgs) or Fitch. It performed the same magic with credit card debt, with auto loans and finally with corporate debt -- even the riskiest kind, called high-yield because it pays out a higher dividend to compensate for its higher risk. It's known as junk because in hard economic times it can become worthless. (See my Aug. 10 column, "How Wall Street got into this mess.")

Everyone wanted to believe that Wall Street's magic worked. Investors from Citigroup to the Hillsborough County Public Schools in Florida (exposure: $573 million) bought in. The more investors who bought in, the more of these new products Wall Street could sell and the more money it was willing to lend to home builders, home mortgage lenders and credit card companies; to the savings and loans and banks that created the raw materials (mortgages, credit card debt, auto loans) that Wall Street needed to manufacture its products; and to the hedge funds and structured investment vehicles that bought what Wall Street produced.

It worked out just fine until reality stuck a pin in the bubble. It turns out that you can't lend more and more money to less- and less-qualified home buyers without driving up the number of borrowers who pay late or can't pay at all.

Comment: One of the best sources for economic news was the Wall Street Journal but ever since Rupert Murdoch bought it, I have totally disregarded it, cancelled my subscription and ignored any of its articles.

Murdoch is a lower-middle class slob and a merchant of sleaze who appeals to the population of trailer courts and has ruined a number of once-great newspapers, like the Times of London .

It does not take a Harvard don to realize that the Wall Street Journal, once a very good paper, soon will have half-naked starlets on the front page or, worse, pictures of his mixed-breed children.

If it is true that God afflicts us in order to make us stronger, the presence of the vile Murdoch along with his repulsive FOX television network will turn us all into giant Hercules

The second best public source for financial news is MSN so go to it and sit on this, Rupie!  Below is a sample from their site: BH

http://articles.moneycentral.msn.com/Investing/JubaksJournal/TheNextBankingCrisisOnTheWay.aspx

The Panic Starts

January 18, 2008

by Jim Sinclair

Rense.com

There is no doubt the Fed and the PPT [Plunge Protection Team] are meeting right now. A drop of over 300 points on the Dow after the Chairman of the Federal Reserve speaks publicly presages a 1000 point break in the Dow Jones Industrial Average coming quite quickly, if not tomorrow.

Unless the equity markets can be calmed, a panic is about to happen, making the statement "This is it" a horrible reality.

If the equity markets cannot be calmed then:

Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. Gold will rise to $1650 as an almost immediate effect of what will be done to attempt to fend off a total panic starting to take place in general equities, therein threatening to be followed by all credit markets of all kinds. The funds and hotshot short term traders in gold shares will be killed by the upward explosion of the gold price about to occur.

The PPT and the Fed will step out of gold's way because gold is one of the tools used in 1930 by Roosevelt and in 2000 by Bush. It will be used again now on the upside. Gold is the only insurance there is against what all this means because a panic in equities will blow the financial system, already coming apart, to smithereens. All country funds would shut down on any further investments in "at the wall" financial institutions. The rollover in credit and default derivatives would exceed the entire foreign debt of the USA . The rest of the $450 trillion dollar mountain of derivatives would start a disintegration like nothing you have every seen in your lifetime.

Consumer demand would slam shut. The auto industry might as well go into liquidation this coming Monday, avoiding the June 2008 rush. The US dollar would burn a hole in the floor going directly to .5200 or lower. As the dollar disintegrates gold would rocket to and through $1650 in days. The markets for general equities would all have to institute total trading halts every 100 points on the downside for 30 minutes each. All commercial call loans would be called. All debtors one day late on any payment, lacking grace period, would be liquidated. All debtors over one day of the grace period would be liquidated. It is clearly visible to anyone with eyes or a mind to think that the PPT has lost all semblance of control in the equity markets and will soon in all remaining markets. The commercial paper credit market which is almost dead will die totally. Should no emergency action take place soon, you will see an old fashioned panic of the 1929 variety. Just as emotional fools sell gold and gold shares, be assured that more emotional general equity fools will unload and bring the averages down more than ever in history in one day.

Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated. Emergency action will be all splash and theatrics but truthfully the cat is out of the bag. It buys some time but corrects nothing. It makes the Formula 100% correct. There now must be EMERGENCY ACTION because the Chairman of the Fed has BOMBED OUT PUBLICLY and a PANIC is about to occur. Expect EMERGENCY ACTION in days, not weeks.

If you have not protected yourself, you may only have days to do so now.

The corpse on the gurney

January 18, 2008

by Tom Engelhardt

Asia Times

The other day, as we reached the first anniversary of President George W Bush's announcement of his "surge" strategy, his "new way forward" in Iraq , I found myself thinking about the earliest paid book-editing work I ever did. An editor at a San Francisco textbook publisher hired me to "doctor" god-awful texts designed for audiences of captive kids. Each of these "books" was not only in a woeful state of disrepair, but essentially dead on arrival. I was nonetheless supposed to do a lively rewrite of the mess and add seductive "sidebars"; another technician then simplified the language to "grade level" and a designer provided a flashy layout and look. Zap! Pow! Kebang!

During the years that I freelanced for that company in the early 1970s, an image of what I was doing formed in my mind - and it suddenly came back to me this week. I used to describe it this way:

The little group of us - rewriter, grade-level reducer, designer - would be summoned to the publisher's office. There, our brave band of technicians would be ushered into a room in which there would be nothing but a gurney with a corpse on it in a state of advanced decomposition. The publisher's representative would then issue a simple request: make it look like it can get up and walk away.

And the truth was: that corpse of a book would be almost lifelike when we were done with it, but one thing was guaranteed - it would never actually get up and walk away.

That was in another century and a minor matter of bad books that no one wanted to call by their rightful name. But that image came to mind again more than three decades later because it's hard not to think of America 's Iraq in similar terms. Only this week, Abdul Qadir, the Iraqi defense minister, announced that "his nation would not be able to take full responsibility for its internal security until 2012, nor be able on its own to defend Iraq's borders from external threat until at least 2018". Pentagon officials, reported Thom Shanker of the New York Times, expressed no surprise at these dismal post-"surge" projections, although they were "even less optimistic than those [Qadir] made last year".

According to this guesstimate then, the US military occupation of Iraq won't end for, minimally, another 10 years. Bush confirmed this on his recent Mideast jaunt when, in response to a journalist's question, he said that the US 's stay in Iraq "could easily be" another decade or more.

Folks, our media may be filled with discussions about just how "successful" the president's "surge" plan has been, but really, Iraq is the corpse in the room.

'Success' as a mantra

Last January, after announcing his "surge" strategy, the president called in his technicians. As it turned out, General David Petraeus, "surge" commander in Iraq , has been quite impressive, as has new US ambassador to that country, Ryan Crocker. Think of them as "the undertakers", since they've been the ones who, applying their skills, have managed to give that Iraqi corpse the faint glow of life.

The president asked them to make Iraq look like it could get up and walk away - and the last year of "success", widely trumpeted in the media, has been the result. But just think about what the defense minister and Bush are promising: By 2018, the country will - supposedly - be able to control its own borders, one of the more basic acts of a sovereign state. That, by itself, tells you much of what you need to be know.

To achieve an image of lifelike quiescence in Iraq , involving a radical lowering of "violence" in that country, the general and ambassador did have to give up the ghost on a number of previous Bush administration passions. Rebellious al-Anbar province was, for instance, essentially turned over to members of the community (many of whom had, even according to the Department of Defense, been fighting Americans until recently). They were then armed and paid by the US not to make too much trouble.

In the Iraqi capital, on the other hand, the surging American military looked the other way as, in the first half of 2007, the Shi'ite "cleansing" of mixed Baghdad neighborhoods reached new heights, transforming it into a largely Shi'ite city. This may have been the real "surge" in Iraq and, if you look at new maps of the ethnic make-up of the capital, you can see the startling results - from which a certain quiescence followed.

Powerful Shi'ite cleric Muqtada al-Sadr, a longtime opponent of the Bush administration, called a "truce" during the surge months and went about purging and reorganizing his powerful militia, the Mahdi Army. In exchange, the US has given up, at least temporarily, its goal of wresting control of some of those neighborhoods from the Sadrists.

Despite hailing the recent passage of what might be called a modest re-Ba'athification law in the Iraqi Parliament (that may have little effect on actual government employment), the administration has also reportedly given up in large part on pushing its highly touted "benchmarks" for the Iraqis to accomplish. This was to be a crucial part of Iraqi political "reconciliation" (once described as the key to the success of the whole surge strategy). It has now been dumped for so-called Iraqi solutions.

All of this, including the lack of US patrolling in Anbar province, the heartland of the Sunni insurgency, plus the addition of almost 30,000 troops in Baghdad and environs, has indeed given Iraq a quieter look - especially in the United States, where Iraqi news has largely disappeared from front pages and slipped deep into prime-time TV news coverage just as the presidential campaign of 2008 heats up.

The "surge" was always, in a sense, a gamble for time, a pacification program directed at the "home front" in the president's "war on terror" as well as at Iraq itself. And if this is what you mean by "success" in Iraq , Bush has indeed succeeded admirably. As in the Vietnam era, when president Richard Nixon began "Vietnamizing" that war, a reduction of American casualties has had the effect of turning media attention elsewhere.

So another year has now passed in a country that we plunged into an unimaginable charnel-house state. Whether civilian dead between the invasion of 2003 and mid-2006 (before the worst year of civil-war level violence even hit) was in the range of 600,000 as a study in the British medical journal, The Lancet reported or 150,000 as a recent World Health Organization study suggests, whether two million or 2.5 million Iraqis have fled the country, whether 1.1 million or more than two million have been displaced internally, whether electricity blackouts and water shortages have marginally increased or decreased, whether the country's health-care system is beyond resuscitation or could still be revived, whether Iraqi oil production has nearly crept back to the low point of the Saddam Hussein-era or not, whether fields of opium poppies are, for the first time, spreading across the country's agricultural lands or still relatively localized, Iraq is a continuing disaster zone on a catastrophic scale hard to match in recent memory. What Bush has done with his "surge", however, is buy himself that year-plus of free time, while he negotiates with Iraq 's inside-the-Green-Zone government to cement in place an endless American presence there. In the process, he may create a sense of permanency that no future president will prove capable of tampering with - not without being known as the man (or woman) who "lost" Iraq .

Forget the Republican presidential candidates - Senator John McCain, for instance, has said that he doesn't care if the US is in Iraq for the next 100 years - and think about the leading Democratic candidates with their elongated (and partial) "withdrawal" plans. Barack Obama, for instance, is for guaranteeing a 16-month withdrawal schedule, and that's just for US "combat troops" which are only perhaps half of all American forces in the country. Hillary Clinton's plan is no more promising.

The president's gamble, so far "successful", has been that the look of returning life in Iraq will last at least long enough for him to turn a marginally "successful" war over to the next administration. If the Democrats sweep to power, he hopes to stick them with that war. As Michael Hirsh of Newsweek put the matter recently, while discussing the president's trip to the Middle East : "Far away in the Persian Gulf , Bush is creating facts on the ground that the next president may not be able to ignore." (Of course, this assumes that the Iraqis will comply.)

In that case, here would be another piece of potential Bush "success": nine months into any new presidential term and the Iraq War is yours. (Those of us old enough to remember have already lived through this scenario once with "Lyndon Johnson's war" in Vietnam , so how does "Barack Obama's war" sound?) Then, former Bush administration officials, Republicans of all stripes, neo-cons, and an array of pundits will turn on those uncelebratory Democrats who, they will claim, managed to snatch defeat from the jaws of "success," if not victory. Wait for it.

Victory laps and other celebrations

But folks, let's face it, despite the cosmetic acts of the president and his undertakers, America 's Iraq is still a corpse. And yet, in this "post-surge" moment, everybody is arguing over just how "successful" the "surge" has been. All agree it has "lowered violence" in Iraq . The Democrats insist that the plan's "success" is limited indeed, because its main goal, "political reconciliation", has not been reached.

On the other hand, Republicans, assorted neo-cons, and some in the administration are already doing modest victory dances. The newest New York Times columnist, William Kristol, a man previously known for being endlessly wrong on his Iraqi war of choice, just last week chided the Democrats in his typical way: "It's apparently impermissible for leading Democrats to acknowledge - let alone celebrate - progress in Iraq."

Let the celebrations begin! In the White House, anyway. After all, whatever Iraq news breaks out of the inside pages of the paper is now often framed by this ongoing dispute about the how much surge and post-surge success has happened, about how much to celebrate, and that is another sign of success for the President. No wonder, as Michael Abramowitz of the Washington Post put it, Bush's recent meeting in Kuwait with General Petraeus and ambassador Ryan Crocker, as well as his comments to a rally of 3,000 hoo-ahing US troops, "had the air of a victory lap for a president whose decision to raise the troop levels in Iraq last year was questioned not only by Democrats but also by many Republicans and even generals at the Pentagon".

But folks, Bush can lap the Middle East , the planet, the solar system and America 's Iraq is still never going to get up and walk away. Not even in 2018 or 2028. Don't forget, it's a corpse. (In fact, unlike the politicians and the media, recent opinion polls show that the American people generally have not forgotten this.)

In the meantime, the military in Iraq is preparing for something other than a simple victory lap, just in case the president's "surge" luck doesn't quite extend to 2009. Former brigadier general and Deputy Assistant Secretary of Defense for Middle Eastern Affairs Mark Kimmitt, for instance, recently suggested that there was "only a mild chance" that surge security gains would prove permanent: "[I]f I had to put a number to it, maybe it's three in 10, maybe it's 50-50, if we play our cards right."

In fact, Petraeus and the rest of the US military are faced with a relatively simple calculus for their exhausted, overstretched, overused forces among whom the rate of post-traumatic stress syndrome has tripled. Although the president recently insisted that he would be happy to slow down or halt an expected drawdown of 30,000 surge troops by July, the fact is that present military manpower levels there are literally unsustainable - especially since 3,200 Marines are now being committed to the ever-less-successful Afghan War.

Drawdowns are a must and "successful" Iraq , already experiencing signs of another uptick in violence and death (including of American troops) in the new year, is likely to need a dose of something else soon, if that faint glow of life is to be sustained.

One candidate for that, as American troop levels drop, is air power, a much under-reported subject in both Iraq and Afghanistan . In Iraq , according to a recent study by the Center for Strategic and International Studies, the use of air power took a striking leap forward in 2007. According to the study, the number of Close Air Support/Precision Strikes - sorties that used a major munition - in Iraq went up five-fold between 2006 and 2007 (not including December of that year), from 229 to 1,119 or, on average, from 19 per month to 102 per month.

This year started with a literal bang, as 40,000 pounds of explosives were dropped in ten minutes on 38 targets in a Sunni farming area on "the outskirts" of Baghdad . After 10 preceding days of intermittent air attacks, this was probably the largest display of air power since the 2003 invasion. It was also undoubtedly a harbinger of things to come and, of course, guaranteed to drive up the number of civilian dead.

Similarly, between January and October 2007, according to the Associated Press, the US military more than doubled its use of armed and unarmed drone aircraft, which clocked 500,000-plus hours in the air (mainly in Iraq ). This is undoubtedly a taste of what "success" means in the year to come.

Dancing on a corpse

So, here's a simple reality check: the whole discussion of, and argument about, "success" in Iraq is, in fact, obscene. Given what has already happened to that country - and will continue to happen as long as the US remains an occupying power there - the very category of "success" is an obscenity. If violence actually does stay down there, that may be a modest godsend for Iraqis, but it can hardly be considered a sign of American "success".

Every now and then, history comes in handy. In a previous moment, when the neo-cons and their allied pundits were feeling particularly triumphant, they began touting Bush's America as the planet's new Rome (only more so). That talk evaporated once Iraq went into full-scale insurgency mode (and Afghanistan followed). But perhaps Rome does remain a touchstone of a sort for administration Iraqi policies.

What comes to mind is the Roman historian Tacitus' description of the Roman way of war. He put his version of it into the mouth of Calgacus, a British chieftain who opposed the Romans, and it went, in part, like this:

They have plundered the world, stripping naked the land in their hunger, they loot even the ocean: they are driven by greed, if their enemy be rich; by ambition, if poor; neither the wealth of the east nor the west can satisfy them: they are the only people who behold wealth and indigence with equal passion to dominate. They ravage, they slaughter, they seize by false pretenses, and all of this they hail as the construction of empire. And when in their wake nothing remains but a desert, they call that peace.

Folks, it's obscene. We're doing victory laps around, and dancing on, a corpse.

Tom Engelhardt, who runs the Nation Institute's Tomdispatch.com, is the co-founder of the American Empire Project. His book, The End of Victory Culture ( University of Massachusetts Press ), has been thoroughly updated in a newly issued edition that deals with victory culture's crash-and-burn sequel in Iraq .

Canada Places US, Israel on Torture Watch List

January 18, 2008

by David Ljunggren

Reuters

Canada ’s foreign ministry has put the United States and Israel on a watch list of countries where prisoners risk being tortured and also classifies some U.S. interrogation techniques as torture, according to a document obtained by Reuters on Thursday

The revelation is likely to embarrass the minority Conservative government, which is a staunch ally of both the United States and Israel . Both nations denied they allowed torture in their jails.

The document — part of a training course on torture awareness given to diplomats — mentions the U.S. jail at Guantanamo Bay in Cuba where a Canadian man is being held.

The man, Omar Khadr, is the only Canadian in Guantanamo . His defenders said the document made a mockery of Ottawa ’s claims that Khadr was not being mistreated.

Under “definition of torture” the document lists U.S. interrogation techniques such as forced nudity, isolation, sleep deprivation and blindfolding prisoners.

“The United States does not permit, tolerate, or condone torture under any circumstances,” said a spokeswoman for the U.S. embassy in Ottawa .

A spokesman for Foreign Minister Maxime Bernier tried to distance Ottawa from the document.

“The training manual is not a policy document and does not reflect the views or policies of this government,” he said.

The government mistakenly provided the document to Amnesty International Canada as part of a court case the rights organization has launched against Ottawa over the treatment of detainees in Afghanistan .

Amnesty Secretary-General Alex Neve told Reuters his group had very clear evidence of abuse in U.S. and Israeli jails.

“It’s therefore reassuring and refreshing to see that … both of those countries have been listed and that foreign policy considerations didn’t trump the human rights concern and keep them off the list,” he said.

Khadr has been in Guantanamo Bay for five years. He is accused of killing a U.S. soldier during a clash in Afghanistan in 2002, when he was 15.

Rights groups say Khadr should be repatriated to Canada , an idea that Prime Minister Stephen Harper rejects on the grounds that the man faces serious charges.

“At some point in the course of Omar Khadr’s detention the Canadian government developed the suspicion he was being tortured,” said William Kuebler, Khadr’s U.S. lawyer.

“Yet it has not acted to obtain his release from Guantanamo Bay and protect his rights, unlike every other Western country that has had its nationals detained in Guantanamo Bay,” he told CTV television.

Other countries on the watch list include Syria , China , Iran , Afghanistan , Mexico and Saudi Arabia .

“If Israel is included in the list in question, the ambassador of Israel would expect its removal,” said Israeli embassy spokesman Michael Mendel.

The awareness course started after Ottawa was criticized for the way it handled the case of Canadian Maher Arar, who was deported from the United States to Syria in 2002.

Arar says he was tortured repeatedly during the year he spent in Damascus prisons. An inquiry into the case revealed that Canadian diplomats had not received any formal training into detecting whether detainees had been abused.

(Reporting by David Ljunggren; editing by Rob Wilson)

Bloody Reality Bears No Relation to the Delusions of This President

As a bomb explodes in Beirut and Israel kills 19 in Gaza raids, Bush takes his Middle East peace mission to Saudi Arabia (and signs off $20bn weapons deal with repressive regime)

January 18, 2008

by Robert Fisk

The Independent/UK

Twixt silken sheets - in a bedroom whose walls are also covered in silk - and in the very palace of King Abdullah of Saudi Arabia, President George Bush awakes this morning to confront a Middle East which bears no relation to the policies of his administration nor the warning which he has been relaying constantly to the kings and emirs and oligarchs of the Gulf: that Iran rather than Israel is their enemy.

The President sat chummily beside the all-too-friendly monarch yesterday, enthroned in what looked suspiciously like the kind of casual blue cardigan he might wear on his own Texan ranch; he had even received a jangling gold ” Order of Merit” - it looked a bit like the Lord Chancellor’s chain, though it was not disclosed which particular merit earned Mr Bush this kingly reward. Could it be the hypocritical merit of supplying yet more billions worth of weapons to the Kingdom, to be used against the Saudi regime’s imaginary enemies.

It was illusory, of course, like all the words that the Arabs have heard from the Americans these past seven days, ever since the fading President began his tourist jaunt around the Middle East .

You wouldn’t think it though, watching this preposterous man, prancing around arm-in-arm with the King, in what was presumably meant to be a dance, wielding a massive glinting curved Saudi sword, a latter-day Saladin, who would have appalled the Kurdish leader who once destroyed the Crusaders in what is now referred to by Mr Bush as “the disputed West Bank ”.

Is this how lame-duck American presidents are supposed to behave? Certainly, the denizens of the Middle East , watching this outrageous performance will all be asking this question. Ever since the 1979 Iranian revolution, a Muslim Cold War has been raging within the Middle East - but is this how Mr Bush thinks one should fight for the soul of Islam?

Already by dusk last night, the US President’s world was exploding in Beirut when a massive car bomb blew up next to a 4×4 vehicle carrying American embassy employees, killing four Lebanese and apparently badly wounding a US embassy driver. And while Mr Bush was relaxing in the Saudi royal ranch at Al Janadriyah, Israeli forces killed 19 Palestinians in the Gaza Strip, most of them members of Hamas, one of them the son of Mahmoud Zahar, a leader of the movement. He later claimed that Israel would not have staged the attack - on the day an Israeli was also killed by a Palestinian rocket - if it had not been encouraged to do so by George Bush.

The difference between reality and the dream-world of the US government could hardly have been more savagely illustrated. After promising the Palestinians a “sovereign and contiguous state” before the end of the year, and pledging “security” to Israel - though not, Arabs noted, security for “ Palestine ” - Mr Bush had arrived in the Gulf to terrify the kings and oligarchs of the oil-soaked kingdoms of the danger of Iranian aggression. As usual, he came armed with the usual American offers of vast weapons sales to protect these largely undemocratic and police state regimes from potentially the most powerful nation in the ” axis of evil”.

It was a potent - even weird - example of the US President’s perambulation of the Arab Middle East, a return to the “policy by fear” which Washington has regularly visited upon Gulf leaders. He agreed to furnish the Saudis with at least £41m of arms, a figure set to rise to more than £10bn in weaponry to the Gulf potentates under a deal announced last year - all of which is supposed to shield them from the supposed territorial ambitions of Iran ’s crackpot President, Mahmoud Ahmadinejad. As usual, Washington promised the Israelis that their “qualitative edge” in advanced weapons would be maintained, just in case the Saudis - who have never gone to war with anyone except Saddam Hussein after his 1990 invasion of Kuwait - decided to launch a suicidal attack on America ’s only real ally in the Middle East .

This, of course, was not how the whole shooting match was presented to the Arabs. Mr Bush could be seen ostentatiously kissing the cheeks of King Abdullah and holding hands with the autocratic monarch whose Wahhabi Muslim state had only recently showed its “mercy” to a Saudi woman who was charged with adultery after being raped seven times in the desert outside Riyadh . The Saudis, needless to say, are well aware that Mr Bush’s reign is ending amid chaos in Pakistan, a disastrous guerrilla war against Western forces in Afghanistan, fierce fighting in Gaza, near civil war in Lebanon and the hell-disaster of Iraq.

The bomb in Beirut, just before five in the evening, must still have come as a rude shock to the luxuriating President who has such close ties with the Saudi regime - despite the fact that the majority of hijackers in the crimes against humanity of 11 September 2001 came from the kingdom - that he allowed its junior princes to fly home from the United States immediately after the attacks. Two trips to Mr Bush’s Texas ranch by King Abdullah was apparently enough to earn the US President a night in the Saudi king’s palace-farm, surrounded by groomed lawns and grassy hills.

Heard across many miles of the Lebanese capital, the bomb devastated buildings in a narrow street in the east of the city through which the vehicle was passing, just as the US ambassador - on a different route into the city - was travelling to a central Beirut hotel reception before leaving for Washington . A State Department spokesman, however, insisted that no US citizens had been hurt. The American SUV had taken an obscure laneway close to the Karantina bridge to travel north of Beirut along the bank of the city’s only river when it was struck, leading local Lebanese military officials to ask themselves if the bomber had inside knowledge of the route they were taking.

There was talk that this was a “dummy” convoy staged to distract potential bombers from the journey which Ambassador Jeffrey Feltman was taking to a reception at a downtown hotel. A carpet manufacturer’s factory was smashed by the blast which tore down roofs and smashed windows more than half a mile from the scene.

For Arab leaders, Mr Bush’s message to the Gulf leaders was wearily familiar. In the 1980s, when the Reagan administration was supporting Saddam Hussein’s invasion of Iran , Washington spent its time warning Gulf leaders of the danger of Iranian aggression. Once Saddam invaded Kuwait , America ’s emphasis changed: It was now Iraq which posed the greatest danger to their kingdoms. But once the emirate was liberated, the oil-wealthy monarchs were told that - yet again - it was Iran that was their enemy.

Arabs are no more taken in by this topsy-turvy “good-versus-evil” narrative than they are by Washington ’s promises to help create a Palestinian state by the end of the year, scarcely a day before Israel publicly admitted to plans for yet more houses for settlers on Arab land amid Jewish colonies illegally built on Palestinian territory.

Yet to understand the nature of this extraordinary relationship with the Gulf monarchs, it is necessary to recall that ever since the President’s father promised a weapons-free “oasis of peace” in the Gulf, Washington - along with Britain, France and Russia - has been pouring arms into the region.

Over the past decade, the Gulf Arabs have squandered billions of their oil dollars on American weapons. The statistics tell their own story. In 1998 and 1999 alone, Gulf Arab military spending came to £40bn. Between 1997 and 2005, the sheikhs of the United Arab Emirates - Mr Bush’s hosts before he continued to Riyadh - signed arms contracts worth £9bn with Western nations. Between 1991 and 1993 - when Iraq was the “enemy” - the US Military Training Mission was administering more than £14bn in Saudi arms procurements and £12bn in new US weapons acquisitions. By this time, the Saudis already possessed 72 American F