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THE belief that victory on the military battlefield is imminent is bringing out inner feelings that are often suppressed by gentility and the desire not to offend others. Things not commonly said before in public in recent years are now being said so publicly with victory believed to be in sight. This is not unique to Sri Lanka, nor is it new to us. When the Tamil militancy seemed to be on the winning track there were those who referred to the militants as their boys, much to chagrin of their ethnic counterparts.
   Now the opposite seems to be the case. Army commander Sarath Fonseka’s much-quoted public statement that Sri Lanka is a Sinhalese country and the ethnic minorities should not make undue demands is only one expression of Sinhalese nationalism. The army commander’s sense of national pride quite possibly has a wider Sinhalese consensus behind it. It is a Sinhalese construct. But it is not one owned or professed by either Tamils or Muslims, and in fact it has been denounced by the political leaders of those communities. It is not only the ethnic minorities who should not make undue demands of the state.
   When Fonseka speaks today there is a strong national and international inclination to listen to him. This is because he has promised much and also delivered much. He has given leadership to a resurgent Sri Lankan military and to the majority of Sinhalese who believe that a military victory over the LTTE is achievable. The LTTE’s strongholds that seemed impenetrable even a few months ago have been falling one after the other. Also the blame or credit for equating Sinhalese nationalism with Sri Lankan nationalism cannot be given to the army commander alone.
   The inability or the unwillingness of the political leadership of the government to contradict General Fonseka is revealing. It indicates that the dominant beliefs of the present government may be in conformity with those of Sinhalese nationalism. So General Fonseka is not speaking alone. He is speaking along with the government. But he is not only speaking for the government. He is also saying what government allies such as the JHU and opposition parties such as the JVP have also been saying.
   
   Sinhalese belief
   The opinion that Sri Lanka is a Sinhalese country is not a new one. It is also there in the ancient history of the Sinhalese, compiled in the historical chronicle, the Mahavamsa, more than 1500 years ago. The Mahavamsa records that Lord Buddha himself directed the Gods to protect Lanka and the Sinhalese with the duty of safeguarding Buddhism in the millennia to come. This thinking is deeply ingrained in the belief system of many Sinhalese including, it appears, the country’s political leaders.
   When I was a student doing research on the ethnic conflict many years ago, I stayed in a Sinhalese village in the North Western province. The farmer I stayed with was named ‘Ravul Dharme’ on account of his long beard. He explained to me that he had made a promise not to cut his beard until the government of the day was removed from power. As that government stayed in office for 17 years, his beard was exceedingly long. One day I asked him what was the cause of the ethnic conflict. He said it was easy to understand, and immediately launched into his explanation.
   Ravul Dharme had given me the front room of his house to stay in which was like an annex and could be separated from the rest of the house simply by closing the main door. He said, ‘You are my guest and I have given you the front room of my house to stay in for as long as you like.’ I thanked him. Then he went on to say, ‘Suppose that after staying here for six months you suddenly announced that this front room now belonged to you, would that not be unfair?’ I agreed with him. He replied that this was what the Tamils were trying to do to the Sinhalese.
   The relative absence of protest or dissent from members of the Sinhalese community to the words of the army commander either indicates that they also agree with him or they are not prepared to challenge him. Either way this would be a blow to the ethnic minorities who number about a quarter of the country’s population. They too are legally equal citizens of the country, with Sri Lankan identity cards and voting rights, and passports if they travel abroad. They are neither intruders nor outsiders. They too belong to the country, and the country belongs to them.
   
   Dissenting voice
   In the recent past there have been only a handful of prominent leaders from amongst the Sinhalese people who have been prepared to publicly challenge the forces of Sinhalese nationalism. One very special leader was former President Chandrika Kumaratunga.
   Unfortunately, she delayed too long to have a real and lasting impact on the people. It was only in her last years in office that she rose most magnificently to the great duty she had before her, to educate the country about its being a multiethnic and multi-religious one. She delivered speech after speech, but before she could convert words into deeds, her time at the top was up.
   At the time that President Kumaratunga left office, more than 70 per cent of those polled in public opinion polls expressed support for a political solution to the ethnic conflict rather than a military solution. But three years later, the good work that the former president did has been eroded by the nationalist propaganda of the present time, and the proportions are almost reversed amongst the majority Sinhalese component population. This support for militarism over political reform is also due to the LTTE’s intransigence and predictions of total victory over the LTTE that is said to be near at hand.
   Those who are in agreement with General Fonseka’s assessment that Sri Lanka is a Sinhalese country need to put his statement in context. In an earlier statement, General Fonseka said that even if the LTTE is militarily defeated and the territory under its control is got back, the ethnic conflict will not end. He predicted that a thousand cadres from the remnants of the LTTE could remain active to destabilise the country for another twenty years, and it was even possible that the ethnic conflict would continue indefinitely.
   Obtaining conditions of peace in a multiethnic, multi-religious and politically dynamic country requires a measure of consensus not only within the largest community, but also between the different communities. It is unlikely that the Tamil political consciousness that has sought power sharing, autonomy and equal rights for over seventy years, since the time of the Donoughmore Constitution of the pre-independence period, can be suppressed by military means. It is more likely that resentment will permeate the Tamil people in the absence of a negotiated political solution that they believe is just to them. In such a situation, even in defeat, the LTTE is likely to retain sufficient Tamil support both locally and from the expatriate Tamil community to continue to survive to fight, destabilise and impoverish Sri Lanka for the foreseeable future.
   Regardless of the battles to come, and to be won, there is a need for a political solution that will bring an end to the ethnic conflict. The willing consent of the ethnic minorities is necessary for such a lasting and stable solution. A political solution that is based on military victory and Sinhalese supremacy cannot be acceptable to any self respecting member of the ethnic minorities. This is the type of thinking that can lead to everlasting war. A viable political solution can only based on the position that Sri Lanka belongs equally to all its citizens, be they from the ethnic majority or minorities, and finding ways to accommodate all of their reasonable aspirations.
   Jehan Perera is media director of the National Peace Council in Colombo, Sri Lanka. jehanpc@sltnet.lk

WE IN India grew up with occasional eruptions of communal rioting. ‘Terror’ is a recent addition to our discourse. How did we arrive here?
   It is an extraordinary coincidence that Islam’s interaction with the west and with India started in the same year – 711 AD. Muslims, after an 800 years rule, were expelled from Spain in 1492. In India the world’s greatest experiment in multiculturalism has lasted to this day. That makes our attitude to Islam totally different from the West’s.
   The Indian experience has been marked with civilisational and cultural commerce on an unprecedented scale. Of course, along with interaction and assimilation, have been spells of discord, frayed tempers, even rioting. We would have had to be inanimate objects had we not declined occasionally to contention and discord.
   Clashes leading to riots had almost innocuous beginnings – Hindu girl runs away with a Muslim boy or the other way around, cow slaughter, pig’s meat thrown in mosques, routes of religious processions and so on. With vote bank politics, communal mobilisation was stepped up. It peaked in 1992 in the context of Mandalisation. That is when the Babari Masjid was demolished. If heightened communalism was a response to Mandal in 1992, what is the provocation now?
   Obviously, elections round the corner are one explanation for intemperate discourse. And yet politically inspired disharmony is being stoutly contested by robust Hindu commonsense. Witness, journalistic balance in such publications as the Mail Today or Hindustan among numerous others. Opposed to this is a quest for Hindu consolidation to obviate the chances of someone marching ahead of the two principal parties. It would be a mistake to ignore caste politics fuelling current tensions.
   What is new in the current surge of tensions is the currency given to the theme of ‘terror’. Of course, acts of terrorism are increasing but so are doubts on the identity of alleged terrorists.
   It is interesting that the only time an act of ‘terror’ affected electoral politics in India was the Godhra blaze. The Gujarat pogrom, which set the stage for Narendra Modi’s electoral victory, happened five months after 9/11. The US-led war on terror in Afghanistan was inaugurated a month later, in October 2001. Did the saturation coverage given by the global networks to terrorism elsewhere create space for copycats in India?
   At one stage, we found it galling that Pakistan, responsible for cross-border terrorism against us, had been accorded frontline status by the US in its war against terror. But now there is a sobering message for us in the way the US and NATO war on terror has progressed. The world’s greatest military power ever, along with history’s most powerful military alliance, is together entering the eighth year of their military campaign in Afghanistan. And with what results?
   The largest number of US soldiers was killed this year in Afghanistan. The figure exceeded US casualties over five years in Iraq. Ending poppy cultivation was a major war aim. There has been a bumper poppy crop in Helmand! The war on terror is nowhere near conclusion.
   And now the blowback from the war has resulted in Benazir Bhutto’s death, Pervez Musharraf’s removal from power and a widespread scare of Pakistan unravelling. When I voiced such fears months ago, friends thought I was being a trifle reckless. Now the same friends are citing the Times, London and New York Time expressing similar fears.
   There are two principal reasons why the US is coming a cropper in this war. First, Pakistan, for its own internal reasons, is fighting this war only half-heartedly. Secondly, and most important, the Americans are fighting this war with extremely poor intelligence. Collateral damage being caused is unprecedented – a principal reason why the war is being lost.
   As I mentioned at the outset, we have a 1,300-year-old experience of Muslims. In a population of a billion, there are 150 million Muslims. Alienate this lot and our intelligence on this score will be as abysmal as America’s. Win their trust and we shall be in a position to help countries unable to fight terror.
   In the seven hours that our national security adviser spent with the Homeland Security officials in Washington, what was the main theme? That India would join the US-led war on terror? Clearly, there is nothing the Americans can teach us in this sphere unless we turn to them for instruction in managing Guantanamo and Bagram. Yes, we can help them greatly in intelligence gathering if we refrain from alienating our own Muslims. For centuries we have managed communalism within our borders. Joining the US-led ‘global war on terror’ will take us on a spiral we cannot control. Just look at what is happening to Pakistan!
   Saeed Naqvi is a senior Indian journalist

AMERICA has become a pretty discouraging place. Americans, for the most part, will never know what happened to them, because they no longer have a free and responsible press. They have Big Brother’s press. For example, on September 28, 2008, a New York Times editorial blamed the current financial crisis on ‘antiregulation disciples of the Reagan Revolution’.
   What utter nonsense. Every example of deregulation that the New York Times editorial provides is located in the Clinton administration and the George W Bush administration. I was a member of the Reagan administration. We most certainly did not deregulate the financial system.
   The repeal of the Glass-Steagall Act, which separated commercial from investment banking, was the achievement of the Democratic Clinton administration. It happened in 1999, over a decade after Reagan left office.
   It was in 2000 that derivatives and credit default swaps were excluded from regulation.
   The greatest mistake was made in 2004, the year that Reagan died. That year the current secretary of the treasury, Henry M Paulson Jr, was head of the investment bank Goldman Sachs. In the spring of 2004, the investment banks, led by Paulson, met with the Securities and Exchange Commission. At this meeting with the New Deal regulatory agency tasked with regulating the US financial system, Paulson convinced the SEC commissioners to exempt the investment banks from maintaining reserves to cover losses on investments. The exemption granted by the SEC allowed the investment banks to leverage financial instruments beyond any bounds of prudence.
   In place of time-proven standards of prudence, computer models engineered by hot shots determined acceptable risk. As one result Bear Stearns, for example, pushed its leverage ratio to 33 to 1. For every one dollar in equity, the investment bank had $33 of debt!
   It was computer models that led to the failure of Long-Term Capital Management in 1998, the first systemic threat to the financial system. Why the SEC went along with Paulson and set aside capital requirements after the scare of Long-Term Capital Management is inexplicable.
   The blame is headed toward SEC chairman Christopher Cox. This is more of Big Brother’s disinformation. Cox, like so many others, was a victim of a free market ideology, itself a reaction to over-regulation, that was boosted by academic economic opinion, rewarded with Nobel prizes, that the market ‘always knows best.’
   The 20th century proves that the market is likely to know better than a central planning bureau. It was Soviet communism that collapsed, not American capitalism. However, the market has to be protected from greed. It was greed, not the market, that was unleashed by deregulation during the Clinton and George W Bush regimes.
   I remember when the deregulation of the financial sector began. One of the first inroads was the legislation, written by bankers, to permit national branch banking. George Champion, former chairman of Chase Manhattan Bank, testified against it. In columns I argued that national branch banking would focus banks away from local business needs.
   The deregulation of the financial sector was achieved by the Democratic Clinton administration and by the current secretary of the treasury, Henry Paulson, with the acquiescence of the Securities and Exchange Commission.
   The Paulson bailout saves his firm, Goldman Sachs. The Paulson bailout transfers the troubled financial instruments that the financial sector created from the books of the financial sector to the books of the taxpayers at the US Treasury.
   This is all the bailout does. It rescues the guilty.
   The Paulson bailout does not address the problem, which is the defaulting home mortgages.
   The defaults will continue, because the economy is sinking into recession. Homeowners are losing their jobs, and homeowners are being hit with rising mortgage payments resulting from adjustable rate mortgages and escalator interest rate clauses in their mortgages that make homeowners unable to service their debt.
   Shifting the troubled assets from the financial sectors’ books to the taxpayers’ books absolves the people who caused the problem from responsibility. As the economy declines and mortgage default rates rise, the US Treasury and the American taxpayers could end up with a $700 billion loss.
   Initially, the House, but not the Senate, resisted the bailout of the financial institutions, whose executives had received millions of dollars in bonuses for wrecking the US financial system. However, the people’s representatives could not withstand the spectre of martial law and Great Depression with which Paulson and the Bush administration threatened them. The people’s representatives succumbed as they did during the New Deal.
   The impotence of Congress traces to the Great Depression. As Theodore Lowi in his classic book, The End of Liberalism, makes clear, the New Deal stripped Congress of its law-making power and gave it to the executive agencies. Prior to the New Deal, Congress wrote the laws. After the New Deal a bill is merely an authorisation for executive agencies to create the law through regulations. The Paulson bailout has further diminished the legislative branch’s power.
   Since Paulson’s bailout of his firm and his financial friends does nothing to lessen the default rate on mortgages, how will the bailout play out?
   If the $700 billion bailout is based on an estimate of the current amount of bad mortgages, as the recession deepens and Americans lose their jobs, the default rate will rise. The $700 billion might not suffice. The Treasury will have to go hat in hand to its foreign creditors for more loans.
   As the US Treasury has not got $7, much less $700 billion, it must borrow the bailout money from foreign creditors, already overloaded with US paper. At what point do America’s foreign bankers decide that the additions to US debt exceed what can be repaid?
   This question was ignored by the bailout. There were no hearings. No one consulted China, America’s principal banker, or the Japanese, or the OPEC sovereign wealth funds, or Europe.
   Does the world have a blank check for America’s mistakes?
   This is the same world that is faced with American demands that countries support with money and lives America’s quest for world hegemony. Europeans are dying in Afghanistan for American hegemony. Do Europeans want their banks, which hold US dollars as their reserves, to fail so that Paulson can bail out his company and his friends?
   The US dollar is the world’s reserve currency. It comprises the reserves of foreign central banks. Bush’s wars and economic policies are destroying the basis of the US dollar as reserve currency. The day the dollar loses its reserve currency role, the US government cannot pay its bills in its own currency. The result will be a dramatic reduction in US living standards.
   Currently Treasuries are boosted by the habitual ‘flight to quality,’ but as Treasury debt deepens, will investors still see quality? At what point do America’s foreign creditors cease to lend? That is the point at which American power ends. It might be close at hand.
   The Paulson bailout is predicated on cleaning up financial institutions’ balance sheets and restoring the flow of credit. The assumption is that once lending resumes, the economy will pick up.
   This assumption is problematic. The expansion of consumer debt, which kept the economy going in the 21st century, has reached its limit. There are no more credit cards to max out, and no more home equity to refinance and spend. The Paulson bailout might restore trust among financial institutions and enable them to lend to one another, but it doesn’t provide a jolt to consumer demand.
   Moreover, there may be more shoes to drop. Credit card debt could be the next to threaten balance sheets of financial institutions. Apparently, credit card debt has been securitised and sold as well, and not all of the debt is good. In addition, the leasing programmes of the car manufacturers have turned sour. As a result of high gasoline prices and absence of growth in take-home pay, the residual values of big trucks and SUVs are less than the leasing programmes estimated them to be, thus creating more financial problems. Car manufacturers are cancelling their leasing programmes, and this will further cut into sales.
   According to statistician John Williams [ http ://www.shadowstats.com/ section/commentaries ] who measures inflation, unemployment, and GDP according to the methodology used prior to the Clinton regime’s corruption of these measures, the US unemployment rate is currently at 14.7 per cent and the inflation rate is 13.2 per cent. Consequently, real US GDP growth in the 21st century has been negative.
   This is not a picture of an economy that a bailout of financial institution balance sheets will revive. As the Paulson bailout does not address the mortgage problem per se, defaults and foreclosures are likely to rise, thus undermining the Treasury’s estimate that 90 per cent of the mortgages backing the troubled instruments are good.
   Moreover, one consequence of the ongoing financial crisis is financial concentration. It is not inconceivable that the US will end up with four giant banks: JP Morgan Chase, Citicorp, Bank of America, and Wachovia Wells Fargo. If defaulting credit card debt then assaults these banks’ balance sheets, who is there to take them over? Would the Treasury be able to borrow the money for another Paulson bailout?
   During the Great Depression of the 1930s, the Home Owners’ Loan Corporation refinanced one million home mortgages in order to prevent foreclosures. The refinancing apparently succeeded, and HOLC returned a profit. The problem then, as now, was not ‘deadbeats’ who wouldn’t pay their mortgages, and the HOLC refinancing did not discourage others from paying their mortgages. Market purists who claim the only solution is for housing prices to fall to prior levels overlook that rising inventories can push prices below prior levels, thus causing more distress. They also overlook the role of interest rates. If a worsening credit crisis dries up mortgage lending and pushes mortgage interest rates higher, the rise in interest rates could offset the fall in home prices, and mortgages would remain unaffordable even in a falling housing market.
   Some commentators are blaming the current mortgage problem on the pressure that the US government put on banks to lend to unqualified borrowers. However, whatever breaches of prudence there may have been only affected the earnings of individual institutions. They did not threaten the financial system. The current crisis required more than bad loans. It required securitisation and its leverage. It required Fed chairman Alan Greenspan’s inappropriate low interest rates, which created a real estate boom. Rapidly rising real estate prices quickly created home equity to justify 100 per cent mortgages. Wall Street analysts pushed financial companies to improve their bottom lines, which they did by extreme leveraging.
   An alternative to refinancing troubled mortgages would be to attempt to separate the bad mortgages from the good ones and revalue the mortgage-backed securities accordingly. If there are no further defaults, this approach would not require massive write-offs that threaten the solvency of financial institutions. However, if defaults continue, write-downs would be an ongoing enterprise.
   Clearly, all Secretary Paulson thought about was getting troubled assets off the books of financial institutions.
   The same reckless leadership that gave us expensive wars based on false premises has now concocted an expensive bailout that does not address the problem, which will fester and become worse.
   CounterPunch, October 6. Paul Craig Roberts was assistant secretary of the treasury in the Reagan administration.

Emergency and election

Not to withdraw emergency till the polls are over is a right decision of the government. It would help in controlling law and order during the election.
   Habibur Rashid Ismail,
   Jamea Rahmania Fadil Madrasa, Chittagong

---

I always have this feeling that Osama bin-Laden is a US-Israeli operative. Everybody in the US and Israel’s hit list has been eliminated except bin-Laden. Why is it so hard to find him out? Laden, as a matter fact, helps George Bush justify his crusade. The timing of Laden’s video also tells us that the US and Israel must have some new plans to expand its war on the Muslims. It is amazing how Laden from time to time disappears and reappears.
   Syed
   Old DOHS, Dhaka

The current caretaker government has talked much and done nothing about the price hike of necessities. The army and the caretaker government blame the politicians for everything. My question to them is: politicians are not in power now; why then are the prices still on the rise? Stop talking and start doing things that bears fruits. That will differentiate you from the politicians.
   Hasan
   Minnesota, USA

Bangladesh politics is fast becoming too confusing to follow these days. I give up! Could someone please tell me where we are heading? First, our esteemed Jonogoner Netris were going to be exiled. That didn’t happen. Then they were going to be jilted (which some say was shrewdly orchestrated by those in power) by fractions within their own parties. That didn’t happen either. Now both are out and the election date has been declared as well. What next?
   Fyyaz
   Via e-mail

Dialogue is the only sensible, logical and sane way to deal with Iran. Any military adventure will soon become misadventure as the Iranians are very sensitive about sovereignty. Then again, who isn’t?
   Sabbir
   On e-mail

The only dictator who intends a war appears to be George Bush. I cannot understand why he has not been prosecuted over the illegal invasion of Iraq and the murder of a sovereign head of state (Saddam Hussein).
   Ronnie
   London

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