Osama Bin Laden UNARMED When Killed; Phone call led US to Osama; Corpse Pics will be Malware!

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Phone call by Kuwaiti courier led to bin Laden 
Associated Press

WASHINGTON - When one of Osama bin Laden's most trusted aides picked up the phone last year, he unknowingly led U.S. pursuers to the doorstep of his boss, the world's most wanted terrorist.

That monitored phone call, recounted Monday by a U.S. official, ended a years-long search for bin Laden's personal courier, the key break in a worldwide manhunt. The courier, in turn, led U.S. intelligence to a walled compound in northeast Pakistan, where a team of Navy SEALs shot bin Laden to death.

The violent final minutes were the culmination of years of intelligence work. Inside the CIA team hunting bin Laden, it always was clear that bin Laden's vulnerability was his couriers. He was too smart to let al-Qaida foot soldiers, or even his senior commanders, know his hideout. But if he wanted to get his messages out, somebody had to carry them, someone bin Laden trusted with his life.

Shortly after the Sept. 11, 2001, terrorist attacks, detainees in the CIA's secret prison network told interrogators about an important courier with the nom de guerre Abu Ahmed al-Kuwaiti who was close to bin Laden. After the CIA captured al-Qaida's No. 3 leader, Khalid Sheikh Mohammed, he confirmed knowing al-Kuwaiti but denied he had anything to do with al-Qaida.

Then in 2004, top al-Qaida operative Hassan Ghul was captured in Iraq. Ghul told the CIA that al-Kuwaiti was a courier, someone crucial to the terrorist organization. In particular, Ghul said, the courier was close to Faraj al-Libi, who replaced Mohammed as al-Qaida's operational commander. It was a key break in the hunt for in bin Laden's personal courier.

"Hassan Ghul was the linchpin," a U.S. official said.

Finally, in May 2005, al-Libi was captured. Under CIA interrogation, al-Libi admitted that when he was promoted to succeed Mohammed, he received the word through a courier. But he made up a name for the courier and denied knowing al-Kuwaiti, a denial that was so adamant and unbelievable that the CIA took it as confirmation that he and Mohammed were protecting the courier. It only reinforced the idea that al-Kuwaiti was very important to al-Qaida.

If they could find the man known as al-Kuwaiti, they'd find bin Laden.

The revelation that intelligence gleaned from the CIA's so-called black sites helped kill bin Laden was seen as vindication for many intelligence officials who have been repeatedly investigated and criticized for their involvement in a program that involved the harshest interrogation methods in U.S. history.

"We got beat up for it, but those efforts led to this great day," said Marty Martin, a retired CIA officer who for years led the hunt for bin Laden.

Mohammed did not discuss al-Kuwaiti while being subjected to the simulated drowning technique known as waterboarding, former officials said. He acknowledged knowing him many months later under standard interrogation, they said, leaving it once again up for debate as to whether the harsh technique was a valuable tool or an unnecessarily violent tactic.

It took years of work before the CIA identified the courier's real name: Sheikh Abu Ahmed, a Pakistani man born in Kuwait. When they did identify him, he was nowhere to be found. The CIA's sources didn't know where he was hiding. Bin Laden was famously insistent that no phones or computers be used near him, so the eavesdroppers at the National Security Agency kept coming up cold.

Ahmed was identified by detainees as a mid-level operative who helped al-Qaida members and their families find safe havens. But his whereabouts were such a mystery to U.S. intelligence that, according to Guantanamo Bay documents, one detainee said Ahmed was wounded while fleeing U.S. forces during the invasion of Afghanistan and later died in the arms of the detainee.

But in the middle of last year, Ahmed had a telephone conversation with someone being monitored by U.S. intelligence, according to an American official, who like others interviewed for this story spoke only on condition of anonymity to discuss the sensitive operation. Ahmed was located somewhere away from bin Laden's hideout when he had the discussion, but it was enough to help intelligence officials locate and watch Ahmed.

In August 2010, Ahmed unknowingly led authorities to a compound in the northeast Pakistani town of Abbottabad, where al-Libi had once lived. The walls surrounding the property were as high as 18 feet and topped with barbed wire. Intelligence officials had known about the house for years, but they always suspected that bin Laden would be surrounded by heavily armed security guards. Nobody patrolled the compound in Abbottabad.

In fact, nobody came or went. And no telephone or Internet lines ran from the compound. The CIA soon believed that bin Laden was hiding in plain sight, in a hideout especially built to go unnoticed. But since bin Laden never traveled and nobody could get onto the compound without passing through two security gates, there was no way to be sure.

Despite that uncertainty, intelligence officials.



Team Six headshot headshots unlikely to appear in email

By Lewis Page, The Register

This just in from the FBI's department of the bleedin' obvious: if someone emails you with pictures of Osama bin Laden's bullet-riddled corpse*, this is probably an attempt to compromise your computer rather than a public-spirited effort intended to confirm that he really is dead.

According to the FBI announcement, which seems to be pitched very much at the sort of people who would need such advice:

This content could be a virus that could damage your computer. This malicious software, or "malware", can embed itself in computers and spread to users’ contact lists, thereby infecting the systems of associates, friends, and family members. These viruses are often programmed to steal your personally identifiable information.

As of publication the US says it has photos of bin Laden's body, but describes them as "gruesome" – he was apparently shot in the head** – and none have been publicly released.

There are Geneva Convention prohibitions on exhibiting images of dead enemy service personnel; that is, uniformed national troops belonging to a an enemy nation which has also signed the Convention. Such prohibitions would not apply to bin Laden, but nonetheless there would doubtless be criticism for the US should pictures of his body be published. On the other hand, not publishing them appears to be stoking conspiracy theories to the effect that the al-Qaeda mastermind is not actually dead.

Practically speaking, bin Laden had been effectively dead for years: he was almost totally cut off from communication in order to evade US tracking (his villa had no phone or internet connections) and what limited control he could exert was confined to the remnant central al-Qaeda operation, a few scores of fighters lurking deep in the Afghan-Pakistan border mountains.

Nonetheless his death is a terrifically powerful event, both for Americans who have so long sought vengeance for 9/11 and for jihadis worldwide who saw bin Laden as a symbol if not as a useful operational commander. The latter seem about as likely to be convinced that their idol is really dead as diehard Elvis spotters, so the US would be unlikely to convince them by releasing pictures – and malware artists will no doubt continue to exploit the knowledge that such pictures exist.

In an effort to placate Muslim sentiment, the US forces – having recovered bin Laden's body to an aircraft carrier offshore, avoiding any chance that the Pakistanis might demand custody of it – buried it swiftly, as is required by Muslim custom: in this case at sea. This will probably draw more criticism and stoke conspiracy theories further, but (the US planners hope) will result in less anger than would have resulted from keeping the body unburied. ®

Bootnotes

*Just in case you have actually been in a cave since last Friday – as it turns out Mr bin Laden was, in fact, not – the United States finally caught up with the fugitive terrorist kingpin at his capacious villa outside Islamabad at the weekend. He was shot dead at the scene by elite "Tier One" special-forces operatives from the unit known officially as the Naval Special Warfare Development Group (DEVGRU) or under its former name SEAL Team Six (it was renamed some time back following apparent irregularities with the unit accounts).

Team Six may have been chosen as it has been loosely assigned as the "Tier One" spec-ops cover for Afghanistan while the rival Delta Force (drawing its recruits mainly from the US Army Rangers, while Team Six recruits from the Navy SEAL teams) covers Iraq.

Alternatively Team Six may have been selected on the grounds that, if they are sent in, one can be fairly sure that the target of the operation will wind up dead even if nobody has specified that this should be the case – or indeed, sometimes even if the SEALs have been specifically told not to kill their primary target.

**Rumour suggests that in recent times spec-ops troops have modified their standard oldtime gunfighting tactic of the "double tap", which called for two shots to an enemy's "centre of mass" – ie the lower chest – to be repeated if necessary until the target goes down.

Nowadays, on some operations anyway, the initial central double-tap – which remains the fastest and surest way to incapacitate an enemy – is apparently followed by a headshot as a standard drill. This can be justified tactically as it allows an operative to then move on more swiftly to another target, being sure that his enemy is dead, as compared to continuing with body shots. The difficulty of actually hitting someone in the head – which would probably be too high in the case of an enemy still untouched, active and moving – is reduced to acceptable levels, at least in the case of an intensively trained specwar operative, by the initial double-tap, which incapacitates though it may not kill outright.

Such tactics are also thought to be in use by the British special forces on occasion, including the Special Boat Service (SBS), which left Taliban commander Mullah Dadullah dead in 2007 with two bullets through the body and one through the head in much the same fashion as Team Six seems to have despatched bin Laden.

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The root causes of terrorism; Osama's death just a 'bloody noise', Jihadists vow to carry on!

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Find the root cause of terrorism, says Anifah

KUALA LUMPUR: The international community must look into the root causes of terrorism, extremism and militancy and come up with a plan to tackle these issues.

Malaysia believes that terrorism could be dealt with effectively by addressing the conditions that bred it, said Foreign Minister Datuk Seri Anifah Aman in a press statement yesterday.

“To do so, it is important to emphasise on education in order to overcome ignorance, backwardness and illiteracy and also to provide the opportunity to escape poverty,” he said.

He added that the death of Osama bin Laden served as a lesson that violence was not the right way to achieve one’s aims.

“It is our hope that the world would be a more peaceful, safer and just place following the demise of Osama.”

Anifah said Malaysia had always maintained that measures against international terrorism should not infringe upon the sovereignty and territorial integrity of states.

“Terrorism should also not be associated with any race, culture or religion as this will only heighten the possibility of a world being polarised along religious or ethnic lines, which in turn would propagate further unrest and violence,” he said.

He added that the Malaysian government was against all forms of extremist acts as they were against Islamic principles, while killing of civilians was strictly denounced under the Islamic faith.

“Muslims should use their intelligence, practise wasatiyyah (moderation) and reject violence,” he said. — Bernama

S. E. Asian jihadis vow to fight without bin Laden

AFP/File – File photo shows a woman during a protest outside the US embassy in Manila. Southeast Asia jihadist movements …

by Stephen Coates – Mon May 2, 10:06 pm ET

JAKARTA (AFP) – Southeast Asian terror networks appear to believe the killing of Osama bin Laden by US special forces in Pakistan is the equivalent of a bloody nose, rather than a body blow, to their jihadist cause.

"If the news is true, we should all be happy," read the reaction to the news on an Indonesian website run by a convicted terrorist accomplice known as the "Prince of Jihad".

"It was his dream to die as a martyr in the way of Allah," it continued. "Muslims need not worry. With or without Sheikh Osama, jihad will continue and God-willing, other Sheikh Osamas will emerge to replace him."

Southeast Asia jihadist movements such as Indonesia-based Jemaah Islamiyah and Abu Sayyaf in the Philippines have cooperated with and been inspired by Al-Qaeda, but their aims and means are independent, experts said.

Said Aqil Siradj, chairman of Indonesia's largest Muslim organisation, the moderate Nahdlatul Ulama, which claims 60 million members, said bin Laden's demise "won't automatically eradicate radicalism from the earth".

"We have to be continuously vigilant as radicalism has existed for a long time and it will always remain. Our consistent commitment to act against radicalism must not fade," he said.

The region's best-known Al-Qaeda-linked groups, Jemaah Islamiyah (JI) and Abu Sayyaf, have murdered hundreds of people across Southeast Asia since well before the 9/11 attacks on the United States.

In the worst atrocity, more than 200 people, mainly Westerners, were killed in 2002 when JI bombers set off their homemade devices at packed tourist nightspots on the Indonesian resort island of Bali.

Classified US documents recently released by the whistleblowing website WikiLeaks reveal that Indonesian JI militant Hambali, now in Guantanamo Bay, "facilitated money, personnel and supplies to Al-Qaeda and JI terrorist operations".

They said he spent three days with bin Laden in Afghanistan in 1996, was involved in Al-Qaeda?s anthrax programme and facilitated plots and attacks in Indonesia, the Philippines, Singapore, Malaysia, and Cambodia.

Another top Indonesian JI militant accused of masterminding the Bali bombings, Umar Patek, was arrested last month in Abbottabad, the same Pakistani town where bin Laden was found hiding in a massive walled compound.

But while some of Al-Qaeda's links to Southeast Asia were deep and long-lasting, analysts say bin Laden's global network never controlled regional outfits and his death would not hamper their operations.

"I think there are limited implications for Indonesia because Al-Qaeda has lost its foothold in Southeast Asia," regional security analyst Adam Dolnik, of the University of Wollongong in Australia, told AFP.
"Bin Laden himself hasn't played much of a role for a number of years. Al-Qaeda has separated from Jemaah Islamiyah which has separated from the actual people who go about the terrorist attacks on the ground.

"There are so many degrees of separation."

An April report by the International Crisis Group, a Brussels-based think tank, said the terror threat facing Indonesia was no longer in the form of large, Al-Qaeda-linked networks such as JI but small, independent groups.

A suicide attack at a mosque in an Indonesian police station last month fits a pattern of "individual jihad" aimed at local targets by small groups of extremists, it said.

A trend was emerging that favoured targeted killings -- particularly police and religious minorities -- over indiscriminate bombings, local over foreign targets and small group action over more hierarchical organisations.

"Information about these groups is only available because their members were caught. This raises the question of how many similar small groups... exist across Indonesia," the report said.

University of Indonesia security analyst Andi Widjajanto said bin Laden's death might even galvanise Southeast Asian militants into action.

"Osama's death doesn't mean their struggle will end because Al-Qaeda's power is not centralised on its leader but on its jihadist ideology," he said.

Another University of Indonesia analyst, Sri Yunanto, said Southeast Asian militants did not even need Al-Qaeda as an ideological inspiration.

"In terms of ideology, there are many other independent extremist movements which existed here well before bin Laden," he said.

"Terrorism and religious extremism will continue to thrive here."

Osama bin Laden killed! World safer without Osama?

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US president to visit New York to honour 9/11 victims Obama says world safer without Bin Laden - Americas - Al Jazeera English The US President has said the world is better and safer after the death of al-Qaeda leader Osama bin Laden. Speaking at the White House on Monday, Barack Obama said bin Laden's death shows that the US has kept its commitment to seeing that justice is done. Obama also praised the people gathered spontaneously at the White House and in New York to celebrate bin Laden's death, saying that embodied the true spirit and patriotism of America. He plans to visit New York on Thursday to honour victims of the September 11, 2001 attack on the city and meet with the families of those killed. Bin Laden claimed responsibility for planning the September 11 attacks on New York and Washington. Osama bin Laden, the most-wanted fugitive on the US list, was killed in a firefight with American forces in Pakistan and quickly buried at sea. Long believed to be hiding in the mountainous tribal region between Pakistan and Afghanistan, Bin Laden was tracked down to a custom-built mansion in the town of Abbottabad, 61km north of the capital Islamabad. Confronted by US special forces who were dropped by helicopter into the compound, Bin Laden was shot dead in a 40-minute operation under the cover of night, US officials said. Crowds gathered to celebrate outside the White House in Washington, DC, as well as in New York City - one of the sites of the September 11 attacks. http://newscri.be/link/1441279  A resident of Abbottabad recounts witnessing the US raid on bin Laden's mansion in the Pakistani city But celebrations over the operation were tempered by fears of retaliation, and the US quickly issued security warnings to Americans worldwide. "A small team of Americans carried out the operation with extraordinary courage and capability," Obama said.   "After a firefight, they killed Osama bin Laden and took custody of his body." Four people, including one of bin Laden's sons, were also killed in the operation, US officials said. After the firefight, US officials said they used "multiple methods" to positively identify Bin Laden's remains. US officials said later on Monday that DNA tests confirmed the death, providing a match with 99.9 per cent confidence. The US is believed to have collected DNA samples from bin Laden family members in the years since the September 11, 2001, attacks that triggered the US-led invasion of Afghanistan. Buried at sea Officials said Bin Laden's body was quickly buried at sea, adhering to Islamic procedures including washing the corpse. It was placed in a "weighted bag," an officer made some religious remarks and the remains were put on a flat board and tipped into the North Arabian Sea off the aircraft carrier USS Carl Vinson, Pentagon officials said. "We wanted to avoid a situation where it would become a shrine," the AFP news agency quoted one official as saying. Dr Ahmed El-Tayeb, the head of al-Azhar, Egypt's seat of Sunni Muslim learning, said the disposal of the body at sea was an affront to religious and human values. Muslims set great store by interment in permanent graves on land and accept burial at sea only in cases where the body cannot be preserved intact aboard ship until it reaches shore. A prominent Egyptian Islamist lawyer said Bin Laden should have been buried in his native Saudi Arabia. "Isn't it enough that they killed him and displayed their joy to the world?" Montasser al-Zayat told Al Jazeera. "The Kingdom of Saudi Arabia has a moral obligation to demand that it bury Osama on its land." John Brennan, the White House counterterrorism chief, said Obama had monitored the raid from the White House and expressed relief that US forces had finally caught Bin Laden without losing any more American lives. He said US officials are weighing whether to release photographs of bin Laden's body amid calls from US lawmakers to prove the al-Qaeda leader is dead. "We are going to do everything we can to make sure that nobody has any basis to try to deny that we got Osama bin Laden," Brennan told reporters on Monday. "And so, therefore, the releasing of information, and whether that includes photographs - this is something to be determined." Pakistan's role According to Al Jazeera's Rosiland Jordan in Washington, the operation had been in the making for the last nine or 10 months. "The fact that it happened inside Pakistan, there have been suggestions that Pakistani intelligence may have been protecting them," she said. Patty Culhane, another Al Jazeera correspondent, said US authorities received intelligence last September and were able to track Bin Laden down through his couriers. They followed them to the compound, which was reported to be worth over a million dollars. US officials said bin Laden was tracked down to his mansion in Pakistan through his couriers [AFP] Brennan said it is inconceivable that Bin Laden did not have some support in Pakistan. He said the White House is talking with the Pakistani government and pledged to pursue all leads to find out what type of support system or benefactors Bin Laden might have had. In his announcement, Obama said: "The death of bin Laden marks the most significant achievement to date against al-Qaeda." He said the "United States is not and will never be at war against Islam. Bin Laden was not a Muslim leader, in fact, he slaughtered many Muslims". Just hours after the announcement, a senior al-Qaeda ideologue promised revenge. The commentator, going by the online name Assad al-Jihad2, posted on websites a long eulogy for Bin Laden and promised to "avenge the killing of the Sheik of Islam". The Pakistani Taliban also threatened attacks against government leaders, including Asif Ali Zardari, the Pakistani president, the Pakistan army and the US. Elsewhere, the announcement of Bin Laden's death was met with varied responses. Ban Ki-moon, the secretary-general of the UN, called the death a "watershed moment". "This is a day to remember the victims of terrorism here in the United States and everywhere in the world," he said at UN headquarters. Earlier, George W Bush, Obama's predecessor, called the operation a "momentous achievement". "The fight against terror goes on, but tonight America has sent an unmistakable message: No matter how long it takes, justice will be done," he said in a statement. 'Symbolic victory' In Afghanistan, Qais Azimy, Al Jazeera's correspondent in Kabul, said Afghan officials described bin Laden's killing as a "symbolic victory", since he was no longer directly connected to the group's field operations. Mark Kimmit, a US military analyst, said bin Laden's death "was not the end of terrorism, but an end of a chapter." Brother of anti-Taliban resistance leader killed in an al-Qaeda bombing 'relieved' at news of bin Laden's death "Capturing or killing bin Laden has more iconic value. It will have symbolic value, because it has been a number of years since bin Laden has exercised day to day control over operations. We still have an al-Qaeda threat out there and that will be there for a number of years. It is, however, a major accomplishment for Obama and his national security team. Bush had repeatedly vowed to bring to justice the mastermind of the September 11 attacks on New York and Washington, but never did before leaving office in early 2009. Bin Laden had been the subject of a search since he eluded US soldiers and Afghan militia forces in a large-scale assault on the Tora Bora mountains in 2001. The trail quickly went cold after he disappeared and many intelligence officials believed he had been hiding in Pakistan. While in hiding, bin Laden had taunted the West and advocated his views in videotapes spirited from his hideaway. Besides September 11, the US has also linked bin Laden to a string of attacks - including the 1998 bombings of American embassies in Kenya and Tanzania and the 2000 bombing of the warship USS Cole in Yemen. Newscribe : get free news in real time

Internet documentary Treasure Unearthed

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Unearthed: A Documentary Treasure on the History of the Internet 

Technology Review by  Christopher Mims published by MIT

15 minutes of a rarely-seen BBC documentary demolish the myth that ARPAnet was inspired by nuclear war, and explain the far more intriguing truth.

The impending deletion of content from Google Video has inspired quite a few uploaders to port their content to Youtube, unearthing a trove of pre-YouTube-era gems like this one. It's a BBC documentary from 1997 called Inside the Internet, and features interviews with the scientists who actually built the infrastructure on which the Internet is based.

It's full of details that are not common knowledge among the billions who now rely on the Internet:

• Leonard Kleinrock, the computer scientist who helped set up the very first piece of hardware to comprise the Internet, an "Interface Message Processor," demolishes the myth that the ARPAnet, the precursor to today's Internet, was set up as a communications network that would be able to continue to pass message even after some of its nodes were knocked out by nuclear war.



Instead, it was simply a means for engineers to give themselves access to the capabilities of remote computers that their systems might not possess.

• The Internet was -- and still is -- based on sending tiny packets of information back and forth (aka "packet switching") because the mathematical theory known as Queueing Theory suggested that the best way to avoid congestion on a communications network was to send small, individually addressed packets of information that could be routed one at a time, so as to find the shortest route.

• UNIX, the basis of Linux (essential to web servers), Mac OS X and countless open-source OSes was born at Bell Labs, and was a product of the frustration of Bell Labs computer scientists with the software they had been forced to use up to that point. It was an internal project that was licensed to academic institutions for only a nominal fee, which helped it go viral.

• The combination of old-style modems operating through telephone lines and the Unix program UUCP allowed the first network of machines that was not part of the officially sanctioned ARPAnet. Called Usenet, it forwarded message from one machine to the next, whenever they happened to connect to the next machine in the chain via modem.

By connecting the edges of the blooming Internet, it helped to create a system in which there was no central node. This made the network immune to censorship, whether intentional or accidental. This, in turn, helped feed the rumor that the network had originally been conceived as one that would be invulnerable to the loss of any central communication hubs(s).

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The US's reckless money-printing could put the world back into crisis!

By Liam Halligan
 
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Last week, Ben Bernanke suggested that the US base interest rate will stay close to zero for an "extended period". It's been there since December 2008. 

The US currency has also been falling pretty steadily since the summer of 2010, after Ben Bernanke gave the first inklings he would launch QE2. Photo: AP

 

Traders took these words to mean that the Federal Reserve won't hike rates until the first few months of 2012 at the earliest.

Bernanke also pledged to do whatever is required to keep America's economic recovery on track – confirming that the second programme of "quantitative easing", or QE2, would be completed. These two related announcements – the "reprieve" and the "sugar rush" – sent Wall Street into renewed spasms of synthetic joy.

In the real world, US growth is slowing sharply. Annualised GDP rose just 1.8pc during the first three months of 2011, down from 3.1pc the quarter before. America remains mired in sovereign, commercial and household debt.

Yet as the Fed chairman spoke, US stocks hit their highest level since before the sub-prime crisis. The tech-heavy Nasdaq, incredibly, closed at a 10-year peak.

So the Fed will keep on "printing" virtual money – at least for now. By the end of June, it will have purchased $600bn (£363bn) of longer-term Treasuries, with the US government effectively buying its own debt from funds created ex nihilo. That's on top of the original $1,750bn (£1,048bn) QE scheme, launched in late 2008.

America's base money supply – the bedrock of the world's reserve currency – has doubled in little more than two years. Despite consternation among many US voters, and dismay – rapidly turning to anger – across the world, most of America's political elite refuse even to debate QE. Such is the state of democracy in the "land of the free and the home of the brave". And America is not alone.

Plunging dollar

Bernanke's utterances caused gold to jump another 2pc. Silver – known as "poor man's gold", another "inflation hedge" – spiked 6.5pc. But the real story was the plunging dollar. Against a basket of five major global currencies, the US currency fell sharply and is now at its weakest since July 2008. The Fed's "real broad dollar index", a 26-currency composite and adjusted for inflation, is testing levels not seen since 1979.

Yet still Tim Geithner puffed-out his chest and reaffirmed America's "strong dollar" commitment. "Our policy has been, and will always be, as long as I'm in this job, that a strong dollar is in America's interest," the US treasury secretary said.

That's total nonsense, of course – seeing as a weaker currency boosts US exports and lowers the value of America's external debt. Geithner's words are not only disingenuous, but insulting to America's creditors and trading partners. In fact, Washington's constant berating of Beijing for "currency manipulation" is looking more and more like a diversion tactic.

 Big statement

That's a big statement, I know. But it's based on a dispassionate analysis of the facts. I have no personal beef with America. I've spent a sizeable chunk of my life in America and much of my family is American. I love America! I feel the need to write this as quite a few US economists, even those boasting Nobel prizes, have recently accused analysts who don't toe the "Washington line" of being "America-haters".

Such ad hominem tactics are pathetic – the last refuge of intellectual cowards who know they're losing the argument. For the "Washington line" – inflation isn't a problem, we don't need to raise rates and the Fed can print willy-nilly – is not only looking increasingly untenable, but is having a severe negative impact on much of the rest of the world.



 Damaging relationships

The way the Obama administration is running America's economy – continued fiscal expansionism, QE2 and "dollar benign neglect" – is not only damaging US relationships abroad, but will ultimately lead to greater pain for domestic voters too. I say this not because I hate America but because, as a citizen of the world, I care about the fate of the largest economy on earth.

This latest dollar weakness is part of a longer-term trend. From the start of 2002 until the middle of 2008, the greenback lost 30pc on a trade-weighted basis. The start of the "sub-prime" crisis proper then sent shock waves around the world. For six months or so, Western investors piled into what they knew, liquidating complex positions and buying "Uncle Sam". The dollar surged, spiralling upward during the so-called "safe haven rally".

Then the Fed began QE, apparently to tackle "deflation". The more pressing need was to bail out Wall Street and rein in the real value of America's burgeoning government debt – which happened as the dollar then fell. The US currency has also been falling pretty steadily since the summer of 2010, after Bernanke gave the first inklings he would launch QE2.

Massive problem

America's currency weakness is based on fundamentals including its vast, and upward-spiralling, $14,000bn debt – and that's just what's "on the books". Nothing material is being done to address this massive problem. The unspoken assumption among politicians on both sides of the aisle is that America can just "monetise" its liabilities by continuing to debase the currency.

So the Fed's actions are undermining the dollar precisely because that's what the White House wants. At the same time, sophisticated investors are exploiting ultra-low US rates by borrowing cheaply in dollars and switching the proceeds to currencies where returns are higher. This "carry trade" is flooding foreign exchange markets with US currency – weakening the dollar further.

Benign neglect

Yet "dollar benign neglect" is fraught with economic risks. A weak dollar makes commodities more expensive. It was when the greenback hit it's last trough of $1.60 against the euro in mid-2008 that oil soared to $147 a barrel. Expensive crude damages the world's biggest oil user. And as the dollar falls, America's huge commodity imports cost more, making the trade deficit even worse.

America's currency depreciation trick could also backfire badly if "the rope slips" and, far from a steady decline, the world's pivotal currency goes into free fall. That would plunge America back into recession, or worse – as inflation ballooned amid soaring import costs, forcing the Fed to raise rates in the teeth of shuddering slowdown.

A plummeting US currency would also spark broader chaos as central banks sought to protect the value of their reserves. And after the inevitable downward overshoot, the dollar would snap back, causing the carry trade to "unwind" as dollar borrowers suddenly owed more. The danger then would be that major losses at financial institutions posed renewed systemic threats. Financial markets might then go into a tailspin, reigniting concerns of a fully-blown global slump.

Waning power

Bernanke's comments last week were made to the press – with the Fed now agreeing to regularly scheduled news conferences for the first time in its 98-year history. Some say this decision to submit to demands for transparency indicates that the power of the US central bank, it's global influence, is on the wane.

I'd suggest that, on the contrary, the Fed's global impact may soon reach an all-time high. And that impact won't be pretty. For far from being a "safe haven", an increasingly debased dollar could be the cause of the next global financial crisis.

Reading between the lines of Bernanke's statement, I don't think that last week's Fed missive, as most concluded, confirmed the end of QE2. In my view – and I write this with a sense of trepidation – the Fed's inaugural "meet the press" moment was in fact preparing the ground for the start of QE3.

Liam Halligan is chief economist at Prosperity Capital Management.

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The West going down, rest of the world up!

Comment by Heather Stewart

The west may be declining, but the rest of the world looks ready for a 40-year boom

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While post-industrial economies stumble out of recession, some unlikely developing nations are poised for a period of 'catch-up' reminiscent of China's rapid industrialisation

America's recovery is petering out, the UK economy is flatlining and euroland's crisis rolls on. There's scant cause for optimism in the Old World. But outside the credit-crunched post-industrial countries, the next few years – and decades – could see the blossoming of a whole new group of super-economies.

We all know about the extraordinary rise of China and India; but new research by Willem Buiter, former MPC member and now chief economist at Citigroup, argues that 2011 is an auspicious moment for the emergence of new economic powers, too.

In fact, unlikely as it may seem, Buiter and his colleagues believe the period between now and 2040 could turn out to be one of the best in the whole of human history for spreading the benefits of economic growth.

The fastest-growing economies during this supercharged period, they claim, will include China and India; but also, among others, Mongolia – currently better known for miles of featureless steppe than for economic dynamism – Indonesia, Nigeria, Bangladesh and Vietnam.

And what will bring about this new economic miracle? It's a tale of the mighty power of catch-up: unlike the days of the industrial revolution, when radical new technology – steam-powered mills, trains, threshing machines – transformed people's lives, these countries could achieve extraordinary growth largely by adopting the pre-existing methods, inventions, and sometimes institutions, of richer rivals.

Using the peerless research of Angus Maddison on the economic history of mankind, Buiter reminds us that for the first millennium or so, GDP growth was almost certainly negligible. Nothing changed. Peasant farmers scratched a living – just – from their little patch of land, year after year, century after century. In fact, not much changed until the industrial revolution, when technological improvements and mass urbanisation led to huge growth in productivity. Postwar reconstruction helped generate another jump in growth, as western European countries and Japan rebuilt and played catch-up with the US; and there was a further jump from the 1990s on, as the opening up of former communist countries to trade with the west, and later the integration of China in the global trading system, brought rapid improvements in living standards for millions.

Today, Buiter and his colleagues claim, there is an auspicious combination of large numbers of countries with big populations that are a long way behind their peers in the rest of the world, but are revving up for takeoff.
Of course it's not that simple – a range of factors are significant in what economists call the "convergence" of living standards towards the levels of the wealthiest countries.



High investment is important – and the capital to fund it, often from high levels of domestic saving. A young and relatively well-educated population is handy – recent research has shown that investment in schooling has been critical to China's success. And some openness to international trade and investment (though not to the pernicious credit booms of the 2000s) is important. Bad government, armed conflict or just very bad luck (such as a spate of natural disasters) can set a country's progress back by decades.

Venezuela was richer than many western European nations in 1957, for example, with income per head at two-thirds the US level; but decades of poor policies have seen it falling farther behind instead of catching up, with GDP per capita now barely a fifth that of the US. Zimbabwe provides an even starker example of the catastrophic consequences of bad government.

It could all go wrong at the level of international diplomacy, too: failure to make progress in the Doha round of trade talks, as evidenced yet again in Geneva on Friday, shows how little political will remains, in Washington especially, for further dismantling of trade barriers, and raises the spectre that protectionism could reverse some of the gains of the past decade.

But even without an ambitious World Trade Organisation deal, there is much to be won by, for example, freeing trade between emerging economies. A recent report by the Asian Development Bank urged the countries of "the south" – a catch-all term embracing Africa and Latin America as well as Asia – to burnish their trade and investment links and reduce their dependence on the US and Europe. The bank's research suggested they could almost double their share of world exports – from 33% in 2004 to 55% in 2030 – by waking up to the potential of markets closer to home.

None of this is good news if you're concerned about Britain's status as a mighty world economic power; but there hasn't been much good news on that front for decades. It could be great news, though, for many millions of people who have so far missed out on the benefits of a century or more of economic development.

There's a new drive to assess "happiness" and other alternative measures of success, prompted by the puzzle that after a certain point, rising GDP doesn't seem to make people feel any better. But if you don't have food to eat and you can't send your children to school, the benefits of extra income are blindingly obvious. Let's hope as many as possible of the countries preparing to harness the power of catch-up in the coming decades follow Buiter's key piece of advice – "don't blow it".

Super-hawk's final chance to raise rates has taken a dive

Andrew Sentance, the Bank of England's super-hawk, will have one last chance this week to win fellow policymakers to his cause.

The news isn't going his way. The official GDP figures, released on 27 April, showed the economy stagnant, with 0.5% growth merely taking us back to where we were in the autumn. High street sales are soggy, and retailers are squealing about lost margins as they struggle to avoid passing cost increases on to shoppers. And, so far, there's no sign of wage growth running out of control. Consumer confidence has slumped to levels last seen in the recession.

Instead of stoking an uncontrollable wage-price spiral, inflation is eating into profit margins, gobbling up the spending power of pressurised consumers, and making businesses even more nervous about investment plans. And that's before the bulk of the government's fiscal squeeze has fed through to job and public service cuts.

Backed by the hawks in the City, Sentance has become increasingly strident in his insistence that the Bank has been "selling England by the pound" (quoting 1970s rock band Genesis).

Will fellow hawks Spencer Dale and Martin Weale – who have only demanded a quarter-point rate rise instead of the half Sentance wants – continue the campaign when he goes? If inflation falls again, they may admit it's time for a full stop. - Guardian

Malaysian economist extraordinaire, Zainal Aznam

By SOO EWE JIN ewejin@thestar.com.my



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He was frank and forthright with his assessment of many current issues which recently came under fire from certain groups after he pointed out the problems faced by the NEAC in formulating the New Economic Model (NEM)

PETALING JAYA: The last article Datuk Dr Zainal Aznam Yusof wrote for The Star was entitled “Secret Lives of Statistics” which was published on April 18, 2009, as part of Star BizWeek's cover feature on numbers.

He began his article this way, “Alcoholics and economists have something in common. Both have problems of addictions. Alcoholics have a soft spot for alcohol while economists have a fetish for hard statistics.”

Zainal not only had a way with numbers. He certainly had a way with words.

On November 14 the same year, Zainal opened up a bit more on his life to our readers when he was featured in the 10 Questions column.

Giving readers an account of his extraordinary life beyond economics, Zainal revealed how he trekked in the Himalayas to the Annapurna base camp, attempted two Langkawi Ironman events, completed Olympic length triathlons and duathlons and even had time to go sailing.

Datuk Dr Zainal Aznam Yusof

To the public at large, they are probably more familiar with seeing Zainal expound on the economic issues of the day through his columns and watching him anchor many of the Budget discussions on TV.

But Zainal certainly had a life beyond economics. He was a film critic for The Edge, a voracious reader, played the drums and even had a YouTube channel Yowassupproduction on satirical and comedy skits which involved the whole family.

And he loved to cycle. He was a familiar sight riding along the roads of Taman Tun Dr Ismail where he lived.
Through all the years I have known Zainal, the one thing that truly stands out is how he made numbers come to life that can be easily understood by the common man.

As a member of the National Economic Advisory Council, this gift was much needed since he was not just talking to fellow economists but people of different disciplines, including politicians, who can sometimes be befuddled by statistics.

Zainal made immense contribution to our understanding of the economic issues in the country. And his views were also much sought after abroad.

With a doctorate in economics from the University of Oxford, he served in various capacities at Harvard University, Keio University and at the Korea Institute for International Economic Policy. He was also a consultant at the World Bank in charge of political economy of poverty, equity and growth. Because of his wide experience and his ability to convey information to the common man, Zainal was a favourite panelist for the many economic roundtables hosted by various publications.

When he was deputy director of the Malaysian Institute for Economic Research, he started the brown bag lunch talks where serious issues were discussed over lunchtime.

But he faded from public view after he ventured into the private sector and worked for a spell as the South East Asia Regional Economist at Kleinwort Benson Research (Malaysia).

He returned to public policy work after that when he joined ISIS as deputy director-general and became a regular voice in all the various media.

Zainal crunched numbers with ease. For discussions on the Economic Report and the Budget, he needed just a few key numbers. I recall the times when he would call in once he knew we had the Economic Report and asked for certain statistics.

He was so familiar with the document, from his years at Bank Negara, that he could even tell us which page to go to.

I have always enjoyed the non-formal conversations with Zainal. We often bumped into each other at the Bank Negara canteen during the time I was working ISIS Malaysia, which was nearby.

I found it heartwarming that a man in his position was so at ease among the ordinary people who ate at that canteen.

Although he was always seen as an economist on the establishment side, because of his positions in the various government institutions, Zainal was frank and forthright with his assessment of many current issues.



As he wrote in “Secret Lives of Statistics” on what had been the most seminal and outstanding statistics that have appeared so far,

“Over the past 38 years, I think that the statistics on the incidence of absolute poverty, the inter-ethnic income disparity, overall income inequality and the ownership of share capital of bumiputras have been the most outstanding statistics because of their wide repercussions. And controversial too.”

It sounds prophetic now because it was only quite recently that he came under fire from certain groups after he pointed out the problems faced by the NEAC in formulating the New Economic Model.

His frank views put him in the middle of a controversy. I was running through some e-mail exchange we had when I was trying to get him to be a regular columnist for The Star.

In response to a question from a reader about his alter-ego, Zainal said it would be a hard choice between Woody Allen and Juliette Binoche.

He loved Woody Allen for his humourous films and writings, making neurosis a necessity and passe, and for defining modern man as those born after Nietzsche's edict that “God Is Dead” but before the recording of the Beatles “I Wanna Hold Your Hand”.

I offered him the loan of my full collection of Woody Allen DVDs which a friend from the United States had given to me.

He wrote back, “You have a fantastic Woody Allen collection. A treasure. I will be in touch soon.” He never did.

Zainal passed away on Saturday, aged 66. He leaves wife Datuk Kaziah Abdul Kadir and children Irwan Shahrizal, 33, Shazalina, 30, and Juliana, 23.

Certainly the world of statistics will feel the loss of this one illustrious person of numbers. And Malaysia, one of its most outstanding economists.

Reversing the brain drain, innovate to compete!

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Reversing the brain drain

By P. GUNASEGARAM

Unless Malaysia succeeds in developing, retaining and attracting talent, its cherished dream of attaining high income by 2020 may be dashed to bits.

PROBABLY for the first time ever we have had substantial facts and figures on Malaysia’s brain drain – and it has taken the World Bank to come out with this (see our cover story this issue).

The World Bank simply defines brain drain as the migration of talent across borders. It is instructive what it says.

“For Malaysia to stand (sic) success in its journey to high income, it will need to develop, attract and retain talent. Brain drain does not appear to square with this objective: Malaysia needs talent but talent seems to be leaving,” the World Bank said in its report on Malaysia. Let’s look at some of the figures as a gauge of the seriousness of the problem. The worldwide Malaysian diaspora is conservatively estimated at one million in 2010, quadrupling over the last three decades.

Singapore alone accounts for 57% of this with the rest dispersed mainly through Australia, Brunei, Britain and the United States. Ethnic Chinese account for nearly 90% of the diaspora in Singapore and are similarly over-represented in other developed countries. And here’s one frightening statistic: “One out of 10 Malaysians with a tertiary degree migrated in 2000 to an OECD (the club of rich countries, but which does not include Singapore) country – this is twice the world average and including Singapore would make this two out of 10.

”In other words, it is very likely that 20% of our best graduates end up in other countries. The reasons why they leave are also instructive: 66% cited career prospects, 60% social injustice and 54% compensation.



The situation is serious and as Malaysia is wont to do under such circumstances, it is resorting to ad hoc measures such as tax rebates on those returning and a corporation to attract talent into the country.

These will only chip away at the massive outcrops of declining educational standards, a badly implemented social restructuring policy, a poor system of rewards and the unwillingness to move away from low labour costs to high value-added manufacturing and services amongst others. The changes that are needed are deeply structural. First, everything possible has to be put into raising educational standards to improve the quality of those entering the workforce. South Korea had one third Malaysia’s per capita income in 1970 but now it is three times Malaysia’s. Such change would not have been possible without a super educational system at every level.

Developing talent at every level simply has to start with education and we have to put the best talents, facilities and other resources into this. Right now only the most dedicated or those who don’t have other choices go into teaching because it is neither rewarding nor respected as a profession.

Next we need social re-engineering to gear towards giving equal opportunities for advancement instead of a premature equalisation of outcomes whether in terms of wealth ownership or employment creation.

Otherwise the ultimate result might be plain mediocrity and creating a small class of privileged wealthy who have done little or nothing to deserve their wealth. Otherwise too, the talented who get little or nothing face despair and look elsewhere for their rewards.

Then we need too the unfettered opportunities, entrepreneurship and incentive for talent to flourish and to be adequately rewarded. We can’t continue to base our competitiveness on low wages and costs. In this respect, a weak currency and its attendant poor purchasing power is a sure way to chase talent out of the country.

That’s how we can retain talent and attract it too, realising that we must be open and free to import the best the world has to offer in terms of people, goods and services at the best prices. For these things to happen and be sustained what we need is honest policy and implementation untainted by corruption so that the most can be done with the resources at our disposal instead of frittering these away through all sorts of leakages in the system. It is no accident that the least corrupt countries are often the most developed and have the highest income.

If there is a lesson from the World Bank report, it is that we must return to the basics and work ourselves up from there. There is no shortcut, but once critical mass is reached progress grows in leaps and bounds.

Managing editor P Gunasegaram believes that an uncompromising stand towards excellent and quality education bereft of political and other pressures will do more towards a high income Malaysia than almost anything else.

Related Stories:
How can Malaysia stem the tide of talent migration?
The big picture on skilled labour market
Can Malaysia reform fast enough to meet challenges?
Talent Corp CEO: Need to change business model
The ‘vicious cycle’ of brain drain



PM: Innovate to compete

By LESTER KONG  lester@thestar.com.my

PUTRAJAYA: The country's economic competitiveness will continue to be threatened if Malaysia relies on cheap foreign labour and is reluctant to innovate, said Prime Minister Datuk Seri Najib Tun Razak.

He said the country's labour productivity also needed a large jump for local small and medium enterprises to compete well in the increasingly globalised and liberalised markets.

Najib said Malaysia's labour productivity was valued at RM15,000 per employee per year compared to RM103,000 for each American employee.

“According to this benchmark and compared to other countries, we are still very low.

“We must change in the next few years to raise productivity by 100%,” he said after chairing the 11th National Small and Medium Enterprise Development Council (SMEDC) meeting here yesterday.

Let’s talk business: Najib with International Trade and Industry Minister Datuk Seri Mustapa Mohamed (third from right) and Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz (right) at a press conference after chairing the SMEDC meeting in Putrajaya Friday.
 

Najib, who is also the Finance Minister, said lack of funding was the least of the SMEs' weaknesses as RM6bil had been allocated for SME development this year through various ministries and agencies.

He said the key weaknesses are weak managerial and entrepreneurial skills, reluctance to innovate and use technology and reliance on human-intensive labour to generate output.

“We find that many problems do not stem from funding but rather from the need to boost (SMEs') capacity,” he said.

Regarding a World Bank report on Thursday, Najib admitted that businesses were hampered by the slew of licences and permits required to start and conduct business and that this could encourage “elements of corruption”.

“The council (SMEDC) has decided that more radical steps are needed to relax permit requirements as a whole. This is related to our competitive policy to make it easier for companies to enter a market,” he said.

“A green lane policy has been established where the Govern-ment will give opportunities through contracts to use their products or services.

“We are looking at what other help we can give to enable these companies to enter the global market,” Najib said.

On foreign direct investments, Najib said FDIs into Malaysia had increased four-fold since 2009, rising from US$1.4bil (RM4.2bil) in 2009 to US$9bil (RM27bil) last year.

“I am confident that we will be able to ensure a very healthy growth in FDIs. But don't forget, it's not only about FDI, it's also about domestic investment as 73% of our development plans involves these,” he said.
Najib admitted that brain drain remained a major obstacle to Malaysia's plans to achieve a high-income developed status by 2020.

“We have identified (brain drain) as one of the problems that we need to find solutions to. That's why we set up Talent Corp.

“We will try to overcome (brain drain) through Talent Corp and other policy measures,” he said.

“It (brain drain) is not something that is happening now. It is a problem that has been happening for some time.”

He said the ringgit's gain over the US dollar will not affect Malaysia's exports.
“Local companies should use our stronger ringgit to strengthen processes in their companies, such as buying equipment and ensuring their supply chains are more efficient,” he said.