If Israel attacks Iran, US Mid East bases will pay dear – Nasrallah

DEBKAfile Special Report

Cutting through the US-Israeli debate over where to put “red lines” for Iran, Hizballah leader Hassan Nasrallah said Monday night, Sept. 3 that Iran would hit US bases in the Middle East in response to any Israeli strike on its nuclear facilities, even if the Americans were not involved in the attack.

Earlier Monday, the New York Times reported on the debate in the White House over whether US President Barack Obama should declare “red lines” for Iran beyond which the US would act, in response to Israel’s complaint that he has been too vague about how far Iran will be allowed to go.

But even if Obama did set a clear red line now, the NYT admits its credibility would be questionable: “The US and its allies have allowed Iran to cross seven previous red lines in 18 years."

The statement by the top US soldier, Gen. Martin Dempsey, last Thursday that America did not “want to be complicit” in an Israeli attack on Iran was interpreted by the prime movers as meaning that US-Israeli discussions in the last two weeks on where to put the "red lines" were at an impasse.

In an attempt to contain the fallout from the Dempsey comment and put the dialogue back on track, the White House is sending CIA director David Petraeus to Jerusalem for more “red line” palaver with Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak.

debkafile, which first disclosed his mission Sunday, Sept. 2, voiced doubts about his chances of success. Both parties to the debate know that the sands on a nuclear Iran are running out faster than they can talk. Roughly by the end of this month or early October, Iran will have enough 20-percent enriched uranium for its first nuclear bomb, overtaking any “red lines” and making them irrelevant.

Feeling the approaching heat, Netanyahu called a special cabinet meeting for Tuesday, Sept. 4 with the participation of the heads of Israel’s clandestine services, Military Intelligence, the Mossad, the Shin Bet and the Foreign Office Research Division, to hear their annual report.

It is likely to go on all day with updates on the situation in Syria, Egypt and Jordan – all weighty topics. But the agenda will certainly be topped with a detailed rundown on the current state of Iran’s nuclear program.

After that rundown, the prime minister and defense minister will enter the final decision-making stage on war against Iran.

At this critical moment, wit calculated timing, Petraeus is due to land in Israel.

Although the opponents of Netanyahu and Barak are fond of painting them as irresponsible adventurers ready to gamble with Israeli lives, it is Iran’s Supreme Leader Ayatollah Ali Khamenei who has now raised the stakes in this game of dare and slapped down the highest cards.

The red line he instructed the head of Iran’s Lebanese surrogate Hizballah to lay down was unambiguous and designed to leap over the range of steps the US was planning short of war to “forestall an Israeli attack, while forcing the Iranians to take more seriously negotiations…”.

Nasrallah’s pitch took the scenario straight into stage one of the war to come: “If Israel targets Iran, America bears responsibility,” he told the Beirut-based Al Mayadeen TV Monday night.

“A decision has been taken in Tehran to respond and the response will be very great,” he said, citing “Iranian officials.”

Nasrallah carried a triple message from Tehran to Washington and Jerusalem:

1.  Iran believes an Israeli attack will take place before the US presidential election on Nov. 6;

2.  Tehran is drawing on a powerful deterrent: Lest anyone expected a low-key Iranian response to an attack on its nuclear facilities, the Hizballah leader put them right when he said, “the response will be very great” and “America bears responsibility.”

3. By putting Nasrallah out front as a leading Iranian spokesman, Khamenei signaled that Hizballah would take an active role in the coming conflict.

debkafile: The chatter about “red lines” in the last few days has therefore had the effect of stirring the Iranians into preempting them by a single sharp stroke.

Iranian leaders in Israel’s sights after calling for its destruction

by DEBKA file

President Barack Obama and Prime Minister Binyamin Netanyahu have bandied thousands of words in their dispute over an Israeli strike on Iran’s nuclear sites. For a time, their argument muffled the abiding ambition of the Islamic Republic to destroy Israel - come what may.

However, the message roared by Iranian leaders over last weekend - before and after Al Quds Day - was quite simply this: Israel must be destroyed, irrespective of whether or not it attacks the Islamic Republic

President Mahmoud Ahmadinejad was cheered by half a million demonstrators in Tehran shouting: Death to Israel! Death to America! when he declared Israel is a "cancerous tumor" that will soon be finished off in the new Middle East. He called “the Zionist regime’s existence an insult to all humanity.”

Ayatollah Ali Khamenei said:  “The fake Zionist (regime) will disappear from the landscape of geography,”

And although both were severely rebuked by world leaders for their violent invective, it continued to pour out of Tehran in a comment by Islamic Revolutionary Guard Corps Aerospace Force Chief, Brig. Gen. Amir Hajizadeh who said an Israeli attack would be welcome “as a pretext to get rid of Israel for good."

Israel’s new Home Defense Minister Avi Dichter laid it out in plain language: While Syria, Lebanon and Gaza confront Israel with a strategic threat, Iran imperils our very existence.”

Certain Western intelligence sources were reminded of a speech by Israeli Prime Minister Binyamin Netanyahu in 2006 when he quoted a Holocaust survivor as saying:  “My main lesson from the Holocaust is that if someone tells you he is going to exterminate you, believe him. And I add to that.

Believe him and stop him!”

Six years later, those sources now suggest, after America’s top soldier Gen. Martin Dempsey offered the opinion that Israel can no longer destroy Iran’s nuclear weapon capacity – only delay it , that Netanyahu may be willing to go further: Not only to stop them, but kill them.

They are quietly using the term “decapitation.”

They point to the Israeli Mossad’s long record of targeted covert operations for dealing with past and would-be annihilators: In the fifties, the Mossad captured the Nazi criminal Adolf Eichmann in Operational Finale.

In the seventies, Golda Meir ordered Operation Wrath of God to hunt down and pick off one by one the Palestinian Black September murderers of 11 Israeli sportsmen at the 1972 Munich Olympics.

In February 2008, Iran’s senior terrorist operations commander, Hizballah’s Imad Mughniyeh, was liquidated in Damascus, so ending a bloody career of assassinations, terrorism and abductions against US and other Western targets as well as Israel.

Hizballah’s chief Hassan Nasrallah knows the score: He has spent six years hunkered down in a fortified bunker, taking care never to  broadcast his inflammatory speeches calling for Israel’s destruction live, only by video.

It cannot be ruled out that this point, Israel may decide to disable Iran’s nuclear program by going for its leaders.

WATCH VIDEO HERE

Morsi's anti-terror ploy to root out pro-US influence in Cairo, cut Israel from Sinai

DEBKAfile Exclusive  

Israel willingly acceded to Cairo’s request for permission to deploy fighter planes and armored troop carriers in Sinai, which was ruled a demilitarized buffer zone under their 1979 peace treaty. It shared an interest in President Mohamed Morsi’s counter-terror offensive against lawless Islamist bands.

But when sensational reports started coming in from Cairo about non-existent Egyptian victories in which an improbable “60 gunmen killed,” they realized the “offensive” was largely bogus.

According to debkafile’s intelligence sources, Washington and Jerusalem strongly suspect that they should be worried about what the Muslim Brotherhood president is really up, especially after the sweep he conducted Wednesday, Aug. 8 of pro-Western military officers and other moves.

1.  Until then, President Morsi and the Muslim Brotherhood’s leadership were deemed two separate and competing power bases in Cairo, with the president ready to defy the Brotherhood by leaning on the supreme military council for support.

This perception broke down in the aftermath of the terrorist raid of Aug. 5 in which 17 Egyptian troops were murdered at their Mansoura base in northern Sinai. By his subsequent actions, Morsi put paid to the impression, which was supported by many high-ranking members of Israel’s security community, that the Egyptian president of two months had chosen an independent path and was ready to break ranks with the Brotherhood.

2.  Wednesday, Aug. 8, with considerable fanfare, Morsi sacked key military officials in an apparent purge of those responsible for the Sinai debacle.

Chief of intelligence Gen. Mourad Mowafi was sent into retirement and Maj. Gen. Mohamed Shahata given an interim appointment in his stead. The same bulletin announced that the head of the Supreme Military Council and defense minister, Field Marshal Tantawi, had fired the head of the military police, Maj. Gen. Hamdy Badeen.

Our sources disclose that Tantawi had no part in this or any other military dismissals, although they were his prerogative. Morsi quite simply seized the moment to appropriate the top military command’s authority for the first time by taking upon himself the firing and hiring of military officers.

The president furthermore sacked the head of the Republican Guard, the division responsible for safeguarding the president and members of his regime and replaced him with an officer loyal to the Muslim Brotherhood, Maj. Gen. Hamed Zaky.

Morsi’s highhanded actions, especially in the case of Gen. Mowafi, are seen in Washington and Jerusalem as the first steps in the Brotherhood’s takeover of the Egyptian army.

3.  Mowafi had to go because he stood in the way of Muslim Brotherhood objectives. It was he who raised the alarm for months about an impending terrorist attack on the Egyptian-Gaza-Israel border junction and urged the deployment of attack helicopters for preemptive missile attacks on their networks.

Instead of being commended, our sources report he was fired for two reasons: For what the MB thought of as his pro-western and pro-Israeli orientation; and for his efforts to broker a compromise deal for unifying the two Palestinian wings, the Hamas rulers of the Gaza Strip and the Palestinian Authority in Ramallah.

However, this not what the Brotherhood wants. Rather than Palestinian unity and compromise, the MB seeks a Hamas takeover of the Ramallah-based Fatah wing headed by Mahmoud Abbas.
Gen. Mowafi stood in the way of this goal.

At the same time, the new man, Gen. Shahata, had to be satisfied with an interim appointment as head of intelligence. The MB does not trust him to be loyal and regards him as pro-Western – albeit less well-connected than Mowafi. They will use him as a stopgap until they find an intelligence chief who understands where his allegiance belongs - and then drop him too.

In the “counter-terror offensive” charade, the MB assigned Hamas in Gaza a key role. According to the script, Cairo would give Hamas an ‘ultimatum” to surrender the Al Qaeda-linked Army of Islam operatives alleged to have carried out the raid on the Egyptian base. The Muslim Brotherhood regime in Cairo would then be able to close the books on the episode and avoid even the semblance of an offensive against Salafi terrorist networks in Sinai.

Israel’s diplomatic-security cabinet meeting in Jerusalem Friday, Aug. 10, freely approved the transfer of assault helicopters to Sinai “for a few days”- although it didn’t take a counter-terror expert to realize that there is no way a couple of helicopters could wipe out hidden terrorist networks in just days. But the ministers decided on advice from Washington to go along for now with the show Morsi and the Muslim Brothers were putting on, so as not to look obstructive. 

Bernanke gloomy on economic outlook

By Robin Harding in Washington

Ben Bernanke offered a gloomy outlook for the US economy but the Federal Reserve chairman offered no hint of further monetary easing in testimony to Congress.

“We are looking very carefully at the economy, trying to judge whether or not the loss of momentum we’ve seen recently is enduring, and whether or not the economy is likely to continue to make progress,” he said, warning that progress in reducing a 8.2 per cent unemployment rate “seems likely to be frustratingly slow”.

The testimony initially disappointed markets – which are on tenterhooks for a signal of further monetary easing from the Fed – with stocks falling and the dollar rising before turning around later in the day.

A run of weak reports on the economy, with net job creation falling to 80,000 in June, has led to speculation that the Fed could ease policy further as soon as its August meeting.

Mr Bernanke said that recent data points to annualised growth of less than 2 per cent in the second quarter of 2012. “Households remain concerned about their employment and income prospects and their overall level of confidence remains relatively low,” he said.

The Fed chairman set out a list of options for further easing but refused to say which he might prefer. “The logical range includes different types of purchase programs. That could include Treasuries or include Treasuries and mortgage-backed securities. Those are the two things we’re allowed to buy,” he said.

Asset purchases – also known as quantitative easing – are a way of driving down long-term interest rates to boost the economy when short-term rates are already at zero.

The Fed’s other options include lending via the Fed’s discount window, communications about future policy, or cutting the interest that the Fed pays banks on excess reserves, Mr Bernanke said. “We haven’t really come to a specific choice at this point, but we are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labour market.”

New data on Tuesday showed little sign of inflationary pressure – the overall consumer price index was up by 1.7 per cent on a year ago – and a rebound in industrial production, which was up 0.4 per cent in June after falling in May.

Mr Bernanke chided Congress for its failure to act on fiscal policy, citing it as one of two main risks to the economy alongside the eurozone crisis, and warning against a repeat of the market volatility and loss of economic confidence caused by last summer’s debacle over raising the debt ceiling.

The Fed chairman has ramped up his rhetoric on fiscal policy with each successive visit to Capitol Hill, but there is little sign that Congress is willing to compromise before the November election, even in order to boost growth.

“The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery,” said Mr Bernanke. “Doing so earlier rather than later would help to reduce uncertainty and boost household and business confidence.”

‘Enemies trying to create social crisis in Iran’

TEHRAN - Iranian Intelligence Minister Heydar Moslehi said on Sunday that the Western intelligence agencies that participated in the sedition of 2009 have carefully reviewed the factors behind their failure and are planning to create another type of instability, like a social crisis, in Iran. 
 
He said that the enemies of the Islamic Republic of Iran are conducting a propaganda campaign against the country in order to give the impression that Iran’s system is ineffective and inefficient.
 
He went on to say that the enemies who have a problem with the system of velayat-e faqih (rule by the supreme jurisprudent) in Iran want to convince Iranian citizens that the country’s system is inefficient because it is the velayat-e faqih system. 

One of the enemies’ objectives is to foment discontent among the Iranian people, he said, adding that the enemies are now training some youths to spark street clashes in the country.

“The enemies intend to sow discord between the Iranian nation and government… however, we should comprehensively counter their plots,” he stated.  

Commenting on the Islamic Awakening wave rolling across the region, Moslehi said that the enemies do not want Iran to be a role model for regional countries, and hence they have invented “the phenomenon of Iranophobia.”

Two more US carriers, dozens of mini-subs rushed to Hormuz

DEBKAfile Special Report
 
As Russia and NATO continued to boost their military strength in the eastern Mediterranean, debkafile's military sources report substantial US reinforcements, led by the USS Dwight D. Eisenhower aircraft carrier, are being rushed to the Persian Gulf opposite Iran, with dozens of unmanned underwater craft for destroying mines.

The USS John C. Stennis arrives in August, raising the number of American aircraft carriers in waters off Iran to four including the USS Enterprise and the USS Abraham Lincoln, with the French Charles de Gaulle due soon to make up a fifth.

The Eisenhower, which reached its new position in the first week of July, operates under the joint commands of the US Sixth (Mediterranean) and Fifth (Gulf) Fleets.

Thursday, July 12, American military officials announced that the US is also dispatching to the Persian Gulf dozens of tiny, unmanned SeaFox submersibles that can detect and destroy mines if strewn by Iran to block the strategic Strait of Hormuz, the chokepoint for transporting one-fifth of the world’s oil.

About 4 feet long, they each carry an underwater television camera, homing sonar and an explosive charge.

There are now additionally eight American minesweepers in the Persian Gulf as well as the USS Ponce, a platform for the special forces, helicopters and warships there to fight off Iranian marine units attempting to plant mines in the vital waterway.

debkafile's military sources say that Washington decided to expand its military deployment in the area after concluding, in consultation with French and British naval experts, that Iran is short of the military strength and sophisticated measure for completely sealing off the Strait of Hormuz to all sea traffic, especially oil tankers.

All the Iranians can do is plant enough underwater mines to impede traffic and slow it down.

The new, bolstered US deployment in the Persian Gulf, the Red Sea and the Mediterranean is on the ready for immediate action against any Iranian military threat. "If Iran starts spreading underwater mines in international waterways, i.e., the Strait of Hormuz, it will find American forces ready to dismantle them on the spot," said a Western military source.

In any case, said the source, a slowdown of oil traffic through Hormuz won’t have an immediate impact on the world oil market or prices. "The world has enough reserve oil in storage to supply its needs for six full months,” said the source. 

U.S. too weak to wage war against Iran: Washington ambassador

TEHRAN – U.S. Ambassador to Switzerland Donald Beyer has said that given the severe economic crisis in the United States the country’s military option against Tehran is beyond the realms of possibility.
 
The U.S. overall debt has exceeded $16 trillion and the country’s unemployment rate stands at 8.2 percent, Beyer said, according to Press TV.
 
The low-spending level in the U.S. budget over the past two years is unprecedented, the American envoy said, adding that there is a tacit consensus among Democrats and Republicans that the country’s military budget needs to be reduced.

With 900 military bases abroad, the U.S. has the highest military expenditure in the world, however the matter is no longer acceptable, he noted.
 
Under the prevailing circumstances, no one considers war with Iran as an option, Beyer stated.

The United States and the Zionist regime have frequently threatened threatened to use military force against Iran if Tehran does not stop its nuclear program.
 
As a signatory to the nuclear non-proliferation regime Iran is legally entitled to develop nuclear technology for peaceful purposes.

Saudis are buying nuclear-capable missiles from China

DEBKAfile  Exclusive Report 

debkafile’s military sources report that Saudi Arabia has set its feet on the path to a nuclear weapon capability and is negotiating in Beijng the purchase of Chinese nuclear-capable Dong-Fen 21 ((NATO-codenamed CSS-5) ballistic missile.

China, which has agreed to the transaction in principle, would also build a base of operations near Riyadh for the new Saudi purchases.

As we reported last year, Saudi Arabia has struck a deal with Pakistan for the availability on demand of a nuclear warhead from Islamabad’s arsenal for fitting onto a ballistic missile.

Riyadh owns a direct interest in the two most active Middle East issues: Iran and Syria.
Iran’s nuclear weapons program has been advancing for two decades regardless of countless attempts at restraint by every diplomatic tool under the sun and a rising scale of sanctions – to no avail.

Tehran marches on regardless of impediments. In Istanbul, Tuesday, July 3, the six powers and Iran failed the fourth attempt to reach an accommodation on Iran’s nuclear program.

The Syrian ruler Bashar Assad remains equally undeterred by international condemnation. Saturday, June 30, the US and Russia again failed to agree on a joint plan of action in Syria.

Saudi forces have been poised for action in Syria on the Jordanian and Iraqi borders since US Secretary of State Leon Panetta visited Riyadh in late June.

On July 1, they redoubled their military preparedness when the European Union clamped down an oil embargo on Iran. The Saudis, the US Fifth Fleet and the entire Gulf region are since braced for Iranian reprisals which could come in the form of closure by Tehran of the vital Straits of Hormuz to shipping or strikes against the Gulf emirates’ oil exporting facilities.

Tension shot up again when Iran’s Revolutionary Guards launched a three-day missile drill against simulated enemy bases in the region – expanding its threats to include US forces and bases in the region, Israel and Turkey.

WATCH VIDEO

US, EU fake Iran’s consent to discussing enrichment to fend off Israeli action

DEBKAfile Special Report

A spokesman for EU foreign executive Catherine Ashton, who heads the six-power group in nuclear negotiations with Iran, reported Monday night, June 11, that Tehran is now willing to discuss high-grade uranium enrichment in the next round of nuclear talks in Moscow on June 18-19.

The claim is false. Tehran consistently refuses to discuss its “right to enrichment” and threatened not to turn up for the Moscow session after US Secretary of State Hillary Clinton demanded last week that Iran come to the table with “concrete plans” for curbing uranium enrichment up to 20 percent purity.

Iran has not backtracked: Ashton got nothing new from an hour of tense conversation with senior negotiator Saeed Jalili and had to be satisfied with issuing the noncommittal statement, “The Iranians agreed on the need for Iran to engage on the (six powers') proposals, which address its concerns on the exclusively peaceful nature of the Iranian nuclear program."

Enrichment remained unmentioned – least of all, any reference to the international inspectors’ discovery that Iran was enriching uranium up to 27 percent - and the “exclusively peaceful nature” of Iran’s nuclear program was endorsed.

From the outset, the talks between the six powers (US, China, Russia, Germany, France and Britain) in Istanbul (April 14) and Baghdad (23.5) and Tehran were falsely presented by the US and the European Union as different from previous diplomacy in that Tehran was now prepared to discuss the controversial aspects of its nuclear program.

This sham presentation of Iran puts diplomacy on artificial life support. Admission of is demise would leave the powers face to face with the only remaining path, i.e., military action - to which President Barack Obama is committed if all other options failed - either by the United States or Israel with US support.

The International Atomic Energy Agency Director Yukiya Amano toed the line Monday, June 11, by denying that IAEA negotiations with Iran had broken down Friday, June 8, of IAEA on inspections of its suspect nuclear sites, particularly the Parchin military complex where nuclear-related explosives tests are believed to have been conducted.

It wasn’t the first time that Amano put a good face on a failure to get anywhere with Iran. On May 2, after coming away from a visit to Tehran empty-handed, he claimed a deal on inspections was clinched and close to signing. It never was. But the next day, the P5+1 were enabled to launch talks with Iran in Istanbul.

Still, Iran made sure that those talks got exactly nowhere. The next session in Baghdad was seriously stalled from the word go by a long-winded harangue by chief negotiator Jalili on the historical connotations of the 30-year old Khorrmanshahr battle, in which revolutionary Islamic Iran trounced Iraq although the world powers and Gulf states solidly backed Saddam Hussein.

Jalili did not mention Iran's nuclear program but, tacitly pointing at the delegations present, he commented: “The weapons that they provided to Saddam's Ba’athist regime included German Leopard tanks, British Chieftain tanks, French Exocet missiles and Super Etendard aircraft, Russian MIG fighter-planes and Scud-B missiles, German and British chemical weapons, American Sidewinder missiles and AWACS aircraft, Saudi, Kuwaiti, and Emirati dollars.

He concluded with a declaration that the Islamic republic would "never be bullied into surrendering" to “illegal and unjust demands.”

The tight lid kept on proceedings at the nuclear negotiations keeps embarrassing disclosures out of the public domain and supports the pretense of progress, when in fact Tehran has adamantly refused to open its nuclear program to real discussion.

Iran’s real attitude toward the current round of diplomacy is summed up by debkafile’s Iranian and intelligence sources in five points:

1. The US has run out of unilateral options for dismantling Iran’s nuclear weapons program and depends now on the cooperation of Moscow and Beijing to achieve any progress. Tehran infers this from Washington’s turn to the Russians for help in resolving the Syrian crisis.

2. The world powers facing Iran at the nuclear negotiations in Istanbul and Baghdad are not united as depicted by the Obama administration but split three ways between Russia, China and the West. It is therefore in Tehran’s interest to keep the talks dragging on for as long as possible and so widen the divisions and isolate America.

3. Tehran is aware of US plans to impose harsher sanctions very soon, including an air and marine blockade, and is not dismayed. In fact, Iranian strategists are busy figuring out ways to get around them. They also calculate that the tougher the sanctions, the higher the price they will exact for every nuclear concession. From this perspective, tougher sanctions will buy Iran more time and a faster route to a nuclear bomb.

4. Tehran regards the staging of the "P7 Talks" as part of a wider picture. A high-ranking Iranian source said: ‘If the negotiations were just about nuclear issues, why bring in the major powers? The talks could have been handled by the International Atomic Energy Agency in Vienna.

Iran’s leaders are nonetheless capitalizing on those talks as a short cut to broad global recognition of the Islamic Republic’s status as a major world power.

“We are already more than half way to achieving this,” they say in Tehran.

5. In view of the first four points, Tehran believes it is on a winning roll and can afford to stand fast against giving ground on a single one of its nuclear and technological advances.

The question asked by debkafile is why is Israel’s Prime Minister Binyamin Netanyahu keeping silent on this charade and even going along with it.

Americans’ wealth plummeted 40 percent from 2007 to 2010, Federal Reserve says

By Ylan Q. Mui

The recent recession wiped out nearly two decades of Americans’ wealth, according to government data released Monday, with middle-class families bearing the brunt of the decline.

The Federal Reserve said the median net worth of families plunged by 39 percent in just three years, from $126,400 in 2007 to $77,300 in 2010. That puts Americans roughly on par with where they were back in 1992.

The data represent one of the most detailed looks to date of how the economic downturn altered the landscape of family finance. Over a span of three years, Americans watched progress that took almost a generation to accumulate evaporate. The promise of retirement built on the inevitable rise of the stock market proved illusory for most. Homeownership, once heralded as a pathway to wealth, became an albatross.

Those findings underscore the depth of the wounds of the financial crisis and how far many families remain from healing. If the recession set Americans back 20 years, economists say, the road forward is sure to be a long one. And so far, the country has only seen a halting recovery.

“It’s hard to overstate how serious the collapse in the economy was,” said Mark Zandi, chief economist for Moody’s Analytics. “We were in free fall.”

The recession caused the greatest upheaval among the middle class. Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth — the value of assets such as homes, automobiles and stocks minus any debt — suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.

Americans have tried to rebalance the family budget but have found it difficult to reverse the damage.
The survey showed that fewer families are carrying credit card balances, and those who do have less debt. The median balance dropped 16 percent, from $3,100 in 2007 to $2,600 in 2010. The Fed also found that the percentage of Americans who have no debt rose to a quarter of families.

But that progress was undermined by other factors, leaving the median level of family debt unchanged. The report said more families reported taking out education loans. Nearly 11 percent said they were at least 60 days late paying a bill, up from 7 percent in 2007. And the percentage of families saddled with debts greater than 40 percent of their income stayed the same.

Not only were Americans still facing significant debts, but they were making less money. Median income fell nearly 8 percent to $45,800 in 2010. The median value of stock-market-based retirement accounts declined 7 percent to $44,000.

But it was the implosion of the housing market that inflicted much of the pain. The value of Americans’ stake in their homes fell by 42 percent between 2007 and 2010 to $55,000, according to the Fed.

The poorest families suffered the biggest loss of wealth from the drop in real estate prices. But middle-class Americans rely on housing for a larger part of their net worth. For some, it accounts for just more than half of their assets. That means every step downward is felt more acutely.

Rakesh Kochhar, associate director of research at the Pew Hispanic Center, calls this phenomenon the “reverse wealth effect.” As consumers watched the value of their homes rise during the boom, they felt more confident spending money, even if they did not actually cash in on the gains. Now, the moribund housing market has made many Americans wary of spending, even if their losses are just on paper.

According to the Fed survey, that paper wealth — or what is officially called unrealized capital gains — shrunk 11 percentage points to about a quarter of American’s assets.

The findings track research Kochhar released last year that showed a dramatic drop in household wealth during the recession, particularly among minorities. That study found record-high disparities between whites’ wealth and that of blacks and Hispanics.

“It was turning the clock back quite a bit,” Kochhar said.

The Fed’s survey is conducted every three years. Although there have been some signs that the recovery has picked up — housing prices have begun to stabilize and unemployment has fallen — Fed economists said those improvements largely do not change the survey results.

“Recovery from the so-called Great Recession has also been particularly slow,” the report said.

Obama speeds up limited air strike, no-fly zones preparations for Syria

DEBKAfile Exclusive Report

US President Barack Obama has ordered the US Navy and Air Force to accelerate preparations for a limited air offensive against the Assad regime and the imposition of no-fly zones over Syria, debkafile reports. Their mission will be to knock out Assad’s central regime and military command centers so as to shake regime stability and restrict Syrian army and air force activity for subduing rebel action and wreaking violence on civilian populations.

debkafile’s sources disclose that the US President decided on this step after hearing Russian officials stating repeatedly that “Moscow would support the departure of President Bashar al-Assad if Syrians agreed to it.” This position was interpreted as opening up two paths of action:

1. To go for Assad’s removal by stepping up arms supplies to the rebels and organizing their forces as a professional force able to take on the military units loyal to Assad. This process was already in evidence Friday, June 8, when for the first time a Syrian Free Army (which numbers some 600 men under arms) attacked a Syrian army battalion in Damascus. One of its targets was a bus carrying Russian specialists.

2. To select a group of high army officers who, under the pressure of the limited air offensive, would be ready to ease Assad out of power or stage a military coup to force him and his family to accept exile.
The US operation would be modulated according to the way political and military events unfolded.
Washington is not sure how Moscow would react aside from sharp condemnations or whether Russia would accept a process of regime change in Damascus and its replacement by military rule.

Global slump alert as world money contracts

Growth of the world money supply has dropped to the lowest level since the financial crisis of 2008-2009, heralding a severe economic slowdown later this year unless authorites rapidly take action.

By Ambrose Evans-Pritchard

The latest data show that the real M1 money supply – cash and overnight deposits – for China, the eurozone, Britain and the US has been contracting since the early Spring. Any further falls risk a full-blown global recession.

Clear signs of trouble are emerging in the US, until now the last bastion of strength. The New York Institute of Supply Management said its ISM business index – a proxy for business demand – flashed a "screeching halt" in May, crashing to 49.9 from 61.2 in April, where anything below 50 denotes contraction. Unemployment is rising again after grim jobs data for April and May, indicating that the economy may have fallen below stall speed.

Central bank governors and finance ministers from the G7 bloc are to hold an emergency teleconference call on Tuesday to grapple with Europe's escalating crisis. There is mounting anger in North America and Asia over the failure of the Europeans to use their vast resources to contain the brushfire in Spain.

The world money data collected by Simon Ward at Henderson Global Investors show that real M1 for the G7 economies and leading E7 emerging powers peaked at 5.1pc in November and has since plunged to 1.6pc in April. The data explain why commodity prices are falling hard, with Brent crude down to a 16-month low of under $97 a barrel.

China's money data are falling at the fastest pace since records began. The gauge – six-month real M1 – gives advance warning of economic output half a year ahead. "Europe needs to start quantitative easing [QE] immediately and China must ease policy," said Mr Ward.

The Americans may act first. Goldman Sachs expects Federal Reserve chair Ben Bernanke to open the door for QE in testimony on Thursday.

Stock markets rallied in Madrid and Milan led by bank shares on rumours of an EU plan to recapitalise banks directly with funds from the EU bail-out machinery.

Olli Rehn, the EU economics chief, said use of the European Stability Mechanism to bail out lenders was a "serious possibility", adding that it was imperative to "break the link between banks and sovereigns".

However, there is no sign yet that Germany will be willing to drop its veto on such action, viewed by Berlin as the start of debt mutualisation. Chancellor Angela Merkel crushed talk of an instant "banking union" after meeting commission president Jose Barroso, saying their could be no quick fix. She called instead for EU banking supervision as a "mid-term goal".

Her spokesman said any options that "resemble eurobonds" are for the distant future. "It's up to national governments to decide whether they want to avail themselves of aid. That also applies to Spain," he said.

Use of the ESM for bank bail-outs would meet fierce resistance in the German, Dutch and Finnish parliaments. A senior EU official said even Germany's Social Democrats are cooling on eurobonds. "They looked at the polling data and shivered. The German people are not willing to send money into a bottomless pit," he said.

German Researchers Reveal Date of Christ's Death

The U.S. and German geologists claim they had discovered the exact date when Christ was crucified, the International Geology Review reported.

According to the report, published in the academic journal this week, the scientists discovered that Christ had been crucified on Friday, April 3, 33 AD.

Jefferson Williams from the U.S. Supersonic Geophysical together with his German colleagues, Markus Schwab and Achim Brauer analyzed seismic activity near the Dead Sea and the earthquakes’ descriptions in the New Testament’s first book, Gospel of Matthew.

Matthew’s Chapter 27 says that as Jesus lay dying on the cross “the earth did quake, and the rocks rent.”

The scientists, who had detected the signs of two earthquakes in the soil samples from the Dead Sea, revealed that the latter earthquake had occurred between 26AD and 36AD, at the time when Pontius Pilate was procurator of Judea and when, as all four canonical gospels say, Jesus was crucified.

By putting together several clues from the Gospel of Matthew, combined with the Jewish calendar and astronomical data, the researchers revealed the date of the crucifixion with a fair degree of precision, the journal said.