Gold and silver market update: "the plain, unvarnished truth is that most investors are idiots"

By: Clive Maund

Goldseek, 19 September 2010   | Source: GoldSeek.com In recent days many commentators proclaimed that gold and silver have "broken out", but THIS IS NOT TRUE, so what is the current situation? In the last update we looked at both the bullish and bearish case for gold and silver, what you might otherwise call the best and worst case scenarios. Some interpreted this as fence sitting, but it was no such thing - it was dispassionate pragmatic analysis the result of which is that we won't get caught by surprise whatever happens. However, whilst we have defined what will constitute a breakdown and know in advance what action to take should breakdown occur, we are now in the bullish camp and have been buying a range of selected stocks in expectation of an upside breakout which should lead to a powerful broad based advance. We require 3 conditions to be be met to be sure that we have an upside sector breakout, which are expected to be synchronously fulfilled. First gold has to break out upside from its current potentially bearish Rising Wedge - new highs are NOT GOOD ENOUGH and to claim they are is amateurish. Second, while silver has undeniably broken out upside from a Triangle, IT HAS NOT BROKEN OUT YET TO CLEAR NEW HIGHS. Thirdly, as more ordinary investors are well aware, Precious Metals stocks indices HAVE NOT YET BROKEN OUT to new highs, although there is strong evidence is that they will do before long. Let's be clear - we are not trying to "rain on anyone's parade" by making the above observations, we are simply "keeping one foot on the ground". Our outlook for the sector is now strongly bullish for the reasons which we will now set out. Fundamentally the outlook for gold and silver is rosy. There is an unstoppable global trend of competitive currency devaluation underway which is driven by balance of trade considerations and given that governments have this powerful core motivation to devalue their currencies, what better way to do it than simply to print more of the stuff, which means that you can avoid liquidity problems within your economy and placate grumbling workers unsettled by rising inflation by giving them pay rises, using massaged statistics to make sure that their pay rises don't keep up with inflation. The US is the "maestro" of both money creation, which is now absolutely necessary to service runaway debt and government spending, and fiddling statistics, like the CPI and the unemployment figures, the former to cheat people on fixed incomes out of fair cost of living increases and the latter to make things look better than they really are. Another major development of recent weeks in the PM sector is the dawn of a new era of takeover fever, as exemplified by Kinross's takeover of Red Back for a handsome sum and Goldcorp's purchase of Andean Resources for a cool $3 billion. We don't wish to sound uncharitable but the plain, unvarnished truth is that most investors are idiots. Deep down you know that - most of you reading this have been big enough idiots in your time, as has the writer - if we are honest with ourselves we must own up to it. If aliens from another planet landed on earth and took a look at the long-term charts for junior mining stocks they would fairly conclude that earthlings are drunken lunatics, as a result of seeing the wild, insane gyrations of junior stock prices. They probably have alcohol on other planets, and if they are lucky, something resembling Jack Daniels, although of course it might be green in color. Want down to earth proof of how stupid investors can be? - you don't have to look far to find it. Three years ago silver in the ground was valued at $5, now it is valued at about 50 cents? - get the picture? - is the penny starting to drop? Now you understand why the majors are starting to go after the quality juniors - and what do you think is going to happen if gold accelerates to the upside and silver and PM stock indices break out to new highs and go on a tear? That's right - there will be a scramble by the majors to gobble up the quality juniors and also mid-cap companies with reserves already defined to add their grossly undervalued assets to their depleted inventories. This is why the charts of many junior mining stocks, which have been trampled into the dust in recent months, are now looking so bullish - they have MASSIVE upside potential, and are unlikely to drop even if gold and silver now correct back.  On its 3-year chart we can see that although gold has been rising to successive new highs in recent months, it has been losing upside momentum, as shown by the declining line of peaks in the MACD indicator. A potentially bearish Rising Wedge has been devoloping, breakdown from which would be expected to lead to a drop perhaps back as far as the major support level shown. Whilst acknowledging this reality, however, we are expecting the opposite to occur - gold is expected to negate the bearish implications of the Rising Wedge by the simple expedient of accelerating and busting out of the top of it. If it succeeds in doing this it should run quickly to the parallel return line shown, quickly meaning over the space of several months, which gives us an upside target for the move at about $1500. In addition, there is the possibility, particularly if the prospect of hyperinflation looms, that gold will continue to accelerate beyond the first parallel line towards or to the second, which would see it approach $2000, which given what is going on in the world is not an unreasonable valuation.  A few months back, with the deflation threat very real, it had looked like silver and the main PM sector stock indices were forming a Double Top with their highs of early 2008. Now, however, we can see on the 4-year chart for the HUI index that the pattern forming has morphed into a bullish Ascending Triangle, and that we are now VERY CLOSE TO A BIG MOVE. The Ascending Triangle is a bullish pattern that portends an imminent upside breakout - buyers are having to steadily raise their bids to get stock, hence the rising lower line of the Triangle, and the big overhanging supply resulting from trapped buyers in the large Head-and-Shoulders top reversal of late 2007 and early 2008 has now been almost totally exhausted. This zone of supply, the major resistance shown which is only the top part of the broad band of supply, is of immense technical importance made clear by the fact that the market has been hammering against the top of it for nearly a year now. Thousands of traders are waiting to see which way this breaks. Thus it is obvious that a clear break to the upside will bring traders and investors down off the fence in droves, and drive a huge rally. Likewise a breakdown would be expected to trigger a plunge, although this is considered much less likely on account of the Triangle being of the bullish Ascending type. If the PM sector breaks out upside soon as expected how does this square with what is going on in the broad stockmarket? After all, it is hardly likely that the PM sector will rise strongly while the broad market is tanking, is it not? This is very true, and the conclusion that the PM sector is about to break out upside must surely mean that, at the least, the broad stockmarket will hold up. So let's now see what is going on the broad market be looking at a chart for the S&P500 index.  As many of you will recall we have been bearish on the broad market for months, with very good reason as it had looked like a Head-and-Shoulders top was forming, but it now looks like if we don't change our tune on this, and soon, we are going to be forced to "eat crow". On the 4-year chart for the S&P500 index we can clearly see the Head-and-Shoulders top, and while there is still the possibility that it will fulfill its earlier promise and lead to a breakdown and plunge, there are subtle but definite technical signs that the pattern is about to abort, which would lead initially to a run at this year's highs in the 1220. This fits with the fundamentals in the US, as while things may be increasingly grim for the guy on the street, the government has the printing press and can carry on doing what it finds easiest and has grown accustomed to in the recent past, which is solve any and all problems by the simple expedient of printing ever more money, what is graciously called Quantitative Easing, abbreviated to QE.  Even though it now looks like the US stockmarkets are going to abort their H&S top and break out upside soon, short-term charts show that with the market having arriving at a key resistance level, we could see a reaction back first, although any such reaction is expected to be minor. As we can see on our 6-month chart for the S&P500 index, although a bullish looking Head-and Shoulders bottom has formed since May (within the larger H&S top already described), the market has risen quite swiftly to the very clear line of resistance at the 1130 level and is now short-term overbought, with a couple of doji candlesticks in recent days indicating indecision and traders bailing out just because the market has arrived at this resistance, which is of course fair enough. So we shouldn't be surprised to see either consolidation or some reaction here in coming days, before the market turns up again and busts out upside. Quite clearly, if US stock indices do soon abort their Head-and-Shoulders top, which on the S&P500 index would be signalled by a breakout above the Left Shoulder high at 1150, it will be a big green light for the PM sector to stage a major breakout to embark on a sustained and substantial uptrend. This is hardly surprising as the underlying drivers for such an advance will be more competitive devaluation and more QE, not just in the US but worldwide, which will lead to robust inflation down the road and ballooning commodity prices. If the low interest rate environment persists for much longer, the Precious Metals will have the ideal growth environment of rampant inflation and low rates, and even if rates do start to accelerate to the upside, which must happen sometime, this will crash the bloated and fragile US Treasury market, and hot money will then only have one place left to flee, and that is the commodity markets, especially the Precious Metals.

$2,500 Gold Could Easily Result in $178.50 Silver – Here’s Why

By: Lorimer Wilson
Silverseek 19 September, 2010

More than 95 respected economists, academics, analysts and market commentators are of the firm opinion that gold will go to $2,500 and beyond before the parabolic peak is reached. In fact, the majority (55) think a price of $5,000 or more - even as high as $15,000 – is actually more likely! As such, just imagine what is in store for silver given its historical price relationship with gold!

Precious metal bull markets have 3 distinct demand-driven stages and we are now quickly approaching or perhaps even in the very early part of the last stage which occurs when the general public around the world starts investing in gold and this deluge of capital into gold causes it to escalate dramatically (i.e. go parabolic) in price.

Gold
Gold went up 24% in 2009 and is up 16% YTD and, as such, there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a $216.55 closing price on Jan. 1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from $1275 would put gold at $4,960. (More on what that might mean for the future price of silver is analyzed below.) That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched. (For a complete list of the economists, academics, market analysts and financial commentators who maintain that gold will go parabolic to $2,500 -$15,000 in the near future please see: http://www.munknee.com/2010/09/5000-gold-bandwagon-now-includes-these-55-analysts-got-gold/

Silver
Silver has proven itself, time and again, to be a safe haven for investors during times of economic uncertainty and, as such, with the current economy in difficulty the silver market has become a flight to quality investment vehicle along with gold. The 49% increase in silver in 2009 (and 23% YTD) attests to that in spades. During the last parabolic phase for silver in 1979/80 it went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in early January, 1980 which represented an increase of 732.5% in just over one year. Such a percentage increase from the current price of almost $21 would represent a future parabolic top price of $175. (For what that might mean for the future price of gold see the analysis below.) Frankly, such prices seem impossible in practical terms but that is what the numbers tell us.

Gold:Silver Ratio
The current gold:silver ratio has been range-bound between 70:1 and 60:1 for quite some time which is way out of whack with the historical relationship between the two precious metals. It begs the question: “Is now the perfect time to buy silver instead of the much more expensive gold metal?”

How both gold and silver perform, in and of themselves, does not tell the complete picture by a long shot, however. More important is the price relationship – the correlation – of one to the other over time which is called the gold:silver ratio. Based on silver’s historical correlation r-square with gold of approximately 90 – 95% silver’s daily trading action almost always mirrors, and usually amplifies, underlying moves in gold. With significant increases in the price of gold expected over the next few years even greater increases are anticipated in silver’s price movement in the months and years to come because silver is currently seriously undervalued relative to gold as the following historical relationships attest.

Let’s look at the gold:silver ratio from several different perspectives:
- Over the past 125 years the mean gold:silver ratio (i.e. 50% above and 50% below) has been 45.69 ounces of silver to 1 ounce of gold.
- In the last 25 years (since 1985) the mean gold:silver ratio has increased to 45.69:1
- The present gold:silver ratio has been range-bound between 60:1 and 70:1 (61.3:1 as of September 17/10).
- Interestingly, during the build-up to the parabolic blow-off in 1979/80 silver outpaced gold going up 732.5% vs. gold’s 289.3% causing the ratio to drop from 38:1 in January 1979 to 13.99:1 at the parabolic peak for both metals in January,1980.

Let’s now look at the various price levels for gold and the various silver:gold ratios mentioned above one by one and see what conclusions we can draw.

First let’s use the Sept. 17, 2010 price of $1276.50 for gold and apply the various gold:silver ratios mentioned above and see what they do for the potential % increase in, and price of, silver.

Gold @ $1276.50 using the current 61.3:1 gold:silver ratio puts silver at $20.82 (Sept. 17/10)
Gold @ $1276.50 using the above 45.69:1 gold:silver ratio puts silver at $27.94 (i.e. +34.2%)
Gold @ $1276.50 using the above 13.99:1 gold:silver ratio puts silver at $91.24 (i.e. +338.2%)

Now let’s apply the projected potential parabolic peaks of $2,500, $5,000 and $10,000 to the various gold:silver ratios and see what they suggest is the parabolic top for silver.

@ $2,500 Gold
Gold @ $2,500 using the gold:silver ratio of 61:1 puts silver at $41
Gold @ $2,500 using the gold:silver ratio of 45:1 puts silver at $55.50
Gold @ $2,500 using the gold:silver ratio of 14:1 puts silver at $178.50

Before we go any further the above analyses bears closer scrutiny. In paragraph four above it was noted that “During the last parabolic phase for silver in 1979/80 it went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in early January, 1980 which represented an increase of 732.5% in just over one year.” Such a percentage increase from the current price of almost $21 would represent a future parabolic top price of $175.

It is interesting to note that the above $175 is almost identical to the $178.50 that would result from a reversion to the mean in the gold:silver ratio with gold at $2,500. For the gold bugs who believe that gold is going to go even higher it can only mean a very much higher price for silver as the analyses below suggest.

@ $5,000 Gold
Gold @ $5,000 using the gold:silver ratio of 61.1 puts silver at $82
Gold @ $5,000 using the gold:silver ratio of 45:1 puts silver at $111
Gold @ $5,000 using the gold:silver ratio of 14:1 puts silver at $357

@ $10,000 Gold
Gold @ $10,000 using the gold:silver ratio of 61:1 puts silver at $164
Gold @ $10,000 using the gold:silver ratio of 45:1 puts silver at $222
Gold @ $10,000 using the gold:silver ratio of 14:1 puts silver at $714!!

From the above it seems that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns than investing in gold bullion.

Summary
History will look back at the artificially high gold:silver ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they are all an illusion. This fiat currency experiment will end badly in a currency crisis and when that happens, as it surely will, gold will go parabolic and silver along with it but even more so as the gold:silver ratio adjusts itself to a more historical correlation. The wealthiest people in the future will be those who put 10% to 15% (or perhaps more – much more!) of their portfolio dollars into physical silver today and were smart enough to research and pick the best silver mining/royalty stocks and warrants to maximize their returns.

Indeed, while gold’s meteoric rise still has room to run, silver’s run is yet to get started. As such, it certainly appears evident that now is the time to buy all things silver.

Please Note:
- This is a one-of-a-kind article which no doubt will get a great deal of attention and be posted on a large number of other financial sites and blogs. This is encouraged but to avoid copyright infringement the author’s name must be included with a hyperlink to the original article.

Lorimer Wilson is the Editor of both www.FinancialArticleSummariesToday.com(a sight/site for sore eyes and inquisitive minds) and www.munKNEE.com (a site consisting of edited excerpts of the internet’s most informative articles on money matters).  He can be reached at editor@munknee.com

Israeli-linked organ dealers busted

PressTV, Saturday Sep 18, 2010

The biggest health care firm in South Africa has been charged with cooperating with an Israeli-linked organ trafficking syndicate.

The South African government said that the head of the Netcare company and a director of the St. Augustine's Hospital in Durban, Richard Friedland, had been aware of illegal kidney trade at the hospital, but "nevertheless permitted these operations" to take place, South African daily The Timesreported on Wednesday. 

The police said that wealthy Israelis paid organ dealers between 2001 and 2003, the year when the ring was exposed, the German Press Agency (DPA) reported. 

"Israeli citizens in need of kidney transplants would be brought to South Africa for transplants at St. Augustine's Hospital," read the charge sheet. 

"They paid kidney suppliers for these operations. [The kidneys] were initially sourced from Israeli citizens, but later Romanian and Brazilian citizens were recruited as their kidneys were obtainable at a much lower cost than those of the Israeli suppliers," it added. 

An Israeli middleman, named Ilan Perry, received between USD 97,676 and USD 118,607 to arrange for the operations. 

This is while, those who provided the kidneys were paid approximately between USD 6,000 and USD 20,000. 

Five notable South African physicians, working in Durban have also been charged in the illegal organ-trafficking case. 

The report also said that Netcare is being charged with setting up the syndicate with the assistance of prominent kidney specialist Jeffrey Kallmeyer and Perry. 

The report comes as earlier last year, another report surfaced about an Israeli plot to kidnap children and harvest their organs. 

According to the report, some 25,000 Ukrainian children had been brought into Israel over the past two years to be used by Israeli medical centers for their "spare parts." 

The Israeli military is also accused of stealing the organs of Palestinian prisoners. 

HN/CS/MMN

MORE OF CHOMSKY’S JIBBERISH RESPONDED TO

From Desertpeace:
September 18, 2010 at 18:17 (Book Review, Israel) 

Jeff Blankfort commented:

This is a brilliant dissection of the contradictions that Chomsky has been allowed to get away with for decades. Regardless of his motives, Chomsky’s faulty reading of the Israel-US relationship has well served the Zionist cause immobilzing any serious resistance against it in the US and abroad.. Knott’s article should be required reading for every activist concerned not only with justice for the Palestinians but actually doing something it about beyond holding conferences and shouting useless and ineffective slogans.

Faithful Circle – A response to Noam Chomsky’s book ‘Fateful Triangle’

Hypotheses and Tests

“Israel has never fired a shot in the defense of American interests”
By Jay Knott

1. Hypotheses

“Dear Mr. President: We write to affirm our support for our strategic partnership with Israel, and encourage you to continue to do before international organizations such as the United Nations. The United States has traditionally stood with Israel because it is in our national security interest and must continue to do so. Israel is our strongest ally in the Middle East and a vibrant democracy. Israel is also a partner to the United States on military and intelligence issues in this critical region. That is why it is our national interest to support Israel at a moment when Israel faces multiple threats from Hamas in Gaza, Hezbollah in Lebanon, and the current regime in Iran.” – Jewish Virtual Library [1].

This is the beginning of the resolution passed by the US Senate on June 21 2010, supporting Israel’s attack on a convoy of unarmed aid ships headed toward Gaza, which killed nine people.

It begins with four sentences, each one of which asserts that Israel is a strategic asset of the USA. But if Israel is such an ally, why the need to emphasise it? It’s as if the senators are arguing with someone who says that Israel is NOT as useful as we tend to believe. Whoever that is, it’s not Noam Chomsky. Both left-wing thinkers like Chomsky and establishment politicians reinforce the idea that US interests coincide with those of Israel, though they differ on how good US interests are. Sometimes, when people say something too stridently, it is because they secretly know that it is false.

This review was sparked off by an online critique of Noam Chomsky’s views on the Middle East by Jeff Blankfort, a reply to it, and the internet discussions around them [2], [3]. Several contributors to these discussions come from traditional anti-racist left-wing backgrounds, but, unlike most of the left, have taken it to its logical conclusion, opposing Jewish power as the most important form of ethnically-based oppression in the West today.

Chomsky fan Hammond [3] urges Blankfort’s supporters to read Chomsky’s “Fateful Triangle” [4]. So I did. I am not impressed by Chomsky’s fame nor by the book’s approximately two thousand references. I look at the arguments.

Professor Chomsky made one of the greatest discoveries in twentieth-century science, the language instinct, in a 1959 critique of psychologist B. F. Skinner [5]. Because he’s a genius, we expect more of him than unsubstantiated platitudes. But everyone makes mistakes. Einstein spent the better part of his career trying to explain why the universe is not expanding, and Chomsky didn’t figure out that there are genes for grammar [6].

He flayed Skinner on the vagueness of his terms, and for changing the meaning of words when convenient. Chomsky therefore knows that vagueness makes a hypothesis untestable, and therefore unscientific.

Chomsky brought clarity to the science of language development, but he is surprisingly contradictory on the politics of the Middle East, for a man with such a scientific, logical brain. For example, on the one hand, he denies the importance of the Israel Lobby. After all, if Israel is helping US ‘elites’ maintain their ‘hegemony’ in the ‘region’, they would hardly need a lobby to remind them of it. Universities and co-operatives are tentatively discussing a boycott of Israel. Chomsky argues against a boycott of Israeli produce, because the Lobby would call us ‘hypocrites’, unless we boycott the US too [7]. So he thinks this ‘unimportant’ Lobby could undermine a boycott of Israel by mere accusations.

By page 4, Chomsky already makes it clear that he defends the Jewish State. He criticizes its current policies, which he says are caused by American Zionists, who cause its “moral degeneration and ultimate destruction”. In my pamphlet “The Mass Psychology of Anti-Fascism” [8], I sarcastically cited Stephen Zunes [9] for claiming America was responsible for pushing poor little Israel into Lebanon in 2006. I didn’t realize how close Zunes’s attempt to make excuses for Jewish murderers was to Chomsky’s position until I read ‘Fateful Triangle’. Chomsky and his followers want us to believe that Israeli ethnic cleansing has ‘degenerated’ since 1948 because of American influence. This means the Deir Yassin massacre of 1948 was morally superior to those in Lebanon in 1982, but the Hannukah slaughter of 2008-9 was worse.

He says US ‘support’ has blocked Israel trying more moral policies, to the ‘despair’ of progressive Israeli Jews, on page 442. There is a cruder version of this ‘corruption’ narrative. It is part of the almost universally believed story of Jews as eternal vicitims. It enables Jewish Americans to support apartheid whilst thinking of themselves as liberals. They blackmail the left into accepting a much softer attitude toward Jewish supremacy than toward white identity.

Chomsky is by no means the worst example of chutzpah in the left. He is contradictory rather than duplicious. He exposes Jewish emotional blackmail. He is contemptuous of professional Holocaust survivors like Elie Wiesel. He is fearless and merciless at ridiculing the hypocrisy and hysteria for which American Jewish organizations are notorious, who claim that critics of the Lobby are anti-semitic. Some on the left also harrass and slander pro-Palestinian peace activists. Since Israel is the only beneficiary of these divisive tactics, we call them ‘crypto-Zionists’.

But Chomsky’s main weakness is his failure to scientifically test his assertion that Israel is an ally of the USA. On page 3, without evidence, he says that US policy favors “a Greater Israel that will dominate the region in the interests of American power”.

To this end, Chomsky assumes that Arab nationalism is anti-West, whereas Jewish nationalism is pro-West. The former was allied to the Soviet Union. But this is at root a circular argument – the US supports Israel because it is an ally, and Israel is an ally because the US supports it. The reason some Arab leaders temporarily turned to Russia is because they were rejected by America, and the main reason for that is the influence of Israel. Chomsky confuses cause and effect.

The phrase ‘control of the oil’ is thrown around by Chomsky and his circle as liberally as the word ‘region’. It’s a vague leftist feel-good dumbing-down designed to prevent us from thinking through exactly what ‘control’ means, why precisely cruise missiles are useful to oil companies, and if killing Palestinian children helps US interests.

At this point, I should define ‘US interests’. I mean the interests of the US capitalist class. Unconditional support for Israel is obviously against the interests of the majority of Americans, who belong to the proletariat. But in that respect, it doesn’t differ from other unethical US foreign policies. What differentiates Zionism is that it is opposed to the interests of most of the ruling class too.

I used a Marxist phrase there. Chomsky prefers saying ‘elites’ rather than ‘bourgeoisie’ in his bestselling books. Even if the ‘elites’ really do ‘perceive’ it is in US interests to throw seven million dollars a day into a black hole, they are mistaken, and Palestine Solidarity has the task of explaining that to them and to those who work and vote for them.

Chomsky claims that the US supports Israel because Israel supports US war crimes – “Israel showed how to treat third-world upstarts properly” (page 29). This puts the cart before the horse. Right after World War II, Zionists were third-world upstarts themselves, engaged in terrorism in Palestine against an imperialist power. President Truman supported these upstarts, and later, when they were no longer upstarts, president Eisenhower supported upstarts against them.

This shows two things:
1. America doesn’t automatically oppose upstarts, and
2. Israel persuaded America to support its fight against upstarts which threaten Israel, rather than America supporting Israel because it combats upstarts which oppose America.

Israel has never fired a shot in the defense of American interests. But its friends in the media make it look as if the two countries’ enemies are the same, by amalgamating very different Arab and Muslim causes and parties. Most of these oppose Israel in principle – only a very small subset are inherently anti-American. It is in America’s interests to divide them. It is in Israel’s interests to prevent this. And it is in humanity’s interest to divorce America and Israel.

Chomsky’s claim to be a Zionist means a binational state, with the right of ‘self-determination’ of the two nations within Palestine. It’s clear which of the nations would dominate the other, but Chomsky appears to be unaware of this.

To his credit, on page 442 of his book, Chomsky predicted the defeat of the Israeli Defense Forces, which didn’t happen until seven years later, in Lebanon, in 2006. The Gaza flotilla massacre of 2010 was another disastrous error for Israel, leading to a split with Turkey, formerly its most important ally in the ‘region’. There is an opportunity to start to undermine Zionism, the only remaining example of serious racial oppression in the Western world. Is Chomsky on board?

Contradicting his view that Israel obeys America, Chomsky refers to the normal state of politics in the USA as ‘complete obedience’ to Zionist opposition to freedom of speech, on page 337, under the heading ‘The West Falls Into Line’. He also says how the allegation of ‘anti-semitism’ is used to blackmail the elite political spectrum in Western countries into supporting Jewish supremacy in the Middle East, but then he drops the ball, reiterating hackneyed rhetoric about US policy. It’s not really US policy. It is the policy of supporters of a foreign power pretending to be pro-American.

Note that my argument does not imply promoting patriotism. It means saying, in effect, IF you are a patriotic American, you should oppose your country’s ardent support for Israel. Neither does it imply anti-semitism. It means recognizing that the interests of most of the inhabitants of the USA would be served by reducing support to Israel. The interests of the Jewish minority would be served by increasing it. This should not be controversial. In particular, the American left, with its keen awareness of ‘privilege’, should be able to listen to this argument. But mostly, it cannot.

At one point, Chomsky discusses the hypocrisy of the Israeli leaders in using pogroms against Jews in Russia in the nineteenth century as an excuse for doing the same thing in Lebanon in 1982. But he doesn’t try to question the view that Jews have always been victims, wherever they have wandered. This myth was reiterated by Republican president George Bush Senior when he was trying to defend himself against the ‘anti-semitism’ slur by groveling to the Lobby in 1991.

On page 446, Chomsky describes young American Jews, raised on the handouts of the Anti-Defamation League, having a ‘corrupting’ effect on Israel. He must also be very aware of the corruption of Israeli teenagers effected by taking them to the ruins of German concentration camps and teaching them to hate [10], or the Hillel Jewish campus organization which teaches young American Jews that Israel is their homeland. He doesn’t go far enough in criticizing the obsession with ‘the’ Holocaust which gets more intense the further it recedes into history.

After complaining about Israel’s rape of Lebanon in the nineteen-eighties for a few hundred pages, Chomsky resorts to the ‘region’ trick to try to explain it. Page 442:

“The US has been more than pleased to acquire a militarized dependency, technologically advanced and ready to undertake tasks that few are willing to endure – support for the Guatemalan genocide, for example – while helping to contain threats to American dominance in the most critical region in the world, where ‘one of the greatest material prizes in world history’ [the Saudi oilfields] must be firmly held”.

On page 462, he regrets Israel’s “dependence on the US with the concomitant pressure to serve US interests”. One would expect that the USA would not give a country $7 million a day, more than all other countries combined – without demanding that it serves its interests. But the predictions of this hypothesis fail. Israel feels no pressure at all to serve US interests, and Israeli politicians boast of American subservience, whilst their American accomplices harrass those who state this simple truth. This is true whether you are a media mogul, a movie star, a politician, or an anti-war activist.

At the beginning of his book, Chomsky claims that Israel helps the US by protecting the Saudi oilfields. At the end, he says it blackmails the US by threatening to launch a nuclear attack on this great material prize. Iran could also greatly harm the Western world by blocking the Strait of Hormuz through which fleets of oil tankers pass – but somehow, America stands up to Iran. Why can’t it stand up to Israel? Because it’s an asset?

Chomsky expounds a deal of effort showing how the US media is biased in favor of Israel and against Palestinians, but he doesn’t call a spade a spade: the only serious racial prejudice left in America is pro-Jewish bias. That is why Israeli children’s deaths are reported at a rate seven times higher than those of Palestinian’s [11].

2. Tests

I propose testing Chomsky’s views using the time-honored methods of asking

- what does the theory predict will happen, and does it actually happen?

- is the theory the simplest explanation of what happens?

- what would we expect to happen if the theory was not true, and does it actually happen?

- is there an alternative theory which better explains what happens?

There are two rival hypotheses:

1. The main reason for the USA’s unconditional support for Israel’s unique persistence in imposing apartheid is that it is in US capitalist interests

2. The main reason for this support is the power of American Jewish organizations

Chomsky defends, with contradictions, the first hypothesis. Mearsheimer and Walt defend the second.

Let’s test each theory using scientific methods. Politics is not an exact science like physics, but we can at least try.

1. The basic principle of science: does Chomsky’s hypothesis [4] lead to a simpler explanation of events than Mearsheimer and Walt’s Israel Lobby theory [12]?

2. An abstract test. ‘Abstract’ does not mean ‘vague’, but is scientifically respectable. Without any concrete examples, one can test the Chomsky hypothesis as follows: it is reasonable to say that, for any two nations, they have areas where their interests coincide, and areas where they clash. The USA never acts against Israel’s interests, with some very minor exceptions. This means that, without giving any examples, we can say that America always supports Israel’s interests when their interests collide.

3. Falsificacion: ask what would be the case if Chomsky’s hypothesis is wrong. What would poor little Israel do if it were NOT serving US interests, if Americans ceased to corrupt it? Would it let the Palestinians back, decommision its nuclear weapons, and abandon its racial definition of citizenship?

4. Which of the arguments depends on the scientific methods outlined above, and which on vague, shifting definitions?

Chomsky makes, without argument, the assertion that if it were not for Israel’s ‘perceived geopolitical role’, a trite, content-free phrase, the Israel Lobby would ‘probably’ be unable to persuade the ‘elite’ to support Israel (page 22). So why do they bother, then? Why do Jews rant and rave in the media about ‘anti-semitic incidents’ whenever anyone in the US makes timid criticism of their country? It’s not that politicians perceive that Israel is an asset, it’s just that they know what happens to those who perceive otherwise – the Lobby makes some calls, and they lose their jobs [13]. Chomsky’s theory that Israel is an ally would predict the Israel Lobby would barely exist – real allies of the US like Japan don’t have energetic, well-funded lobbies in Washington DC, ready to call on hordes of faithful followers to phone politicians and write letters to newspapers defending their nations’ interests. They don’t need them. Chomsky’s theory fails the test.

There is more to it than just rich Jewish organizations like the ADL and AIPAC. There is social pressure not to mention the Lobby. Whereas no-one accuses Chomsky of racism for claiming that Jews suffer for the interests of other Western peoples, in complete defiance of the evidence, those of us who point out that the reverse is true, with the facts on our side, are accused of anti-semitism. If Israel were an asset, there would be no need for this manipulation of our Western European culture, which has a unique record of abandoning racism, despite what the left tells us.

The ‘Israeli Sparta’ argument put forward in the Wall Street Journal etc. by Jewish neo-conservatives posing as classical scholars can easily be disposed of. Sparta defended Greece. Israel does not defend America. On page 21, ignoring the evidence, Chomsky agrees with the pseudo-Hellenists, saying that the Israeli Defence Forces provides a backup for the US armed forces. In fact Israel has never been able to supply soldiers for any US operation in the region. In the Iraq crisis of 1990, Syria gave military support to the US, but not Israel. Israel was unable to respond even when Iraqi missiles landed on Tel Aviv, because it would have split the coalition invading Iraq. Chomsky’s argument fails the test.

Chomsky reviewed ‘The Israel Lobby’ [12] when it broke through the censors of the US liberal left [14]. “Another problem that Mearsheimer and Walt do not address is the role of the energy corporations. They are hardly marginal in US political life… How can they be so impotent in the face of the Lobby?” he asks [15]. Chomsky’s review of ‘The Israel Lobby’ implies the oil companies CANNOT be powerless in the face of a mere lobby. But the assumptions behind Chomsky’s question don’t stand up.  Mearsheimer and Walt DO address the role of these companies, explaining how, if they had their way, US policy in the Middle East would change. Leftists in America half-adopt Karl Marx’s ‘materialist conception of history’ without naming it (they say ‘corporate greed’ instead). It is one of the few aspects of Marxism which can be tested, and it fails miserably to explain the US position on the Israel/Palestine question. The interests of big corporations do not lead to invading Lebanon, persecuting Palestine, and stirring up Islamic extremism.

Why has the US consistently supported Israel, and inconsistently supported Arab nationalists? Egypt’s Nasser, Iraq’s Hussein and Syria’s al-Assad all had a pretty good record of keeping down ‘upstarts’, particularly radical Islamic ones, so why not, according to Chomsky’s logic, ally with the radical Arab nationalist states? The US has allied with various Middle Eastern states at various times, but only its support for Israel is invariant. Again, these questions constitute a test of Chomsky’s hypothesis. You try to figure out what the hypothesis would predict, then try to find counter-examples, where the actual events are incompatible with the predicted ones. It isn’t difficult, particularly in this case.

Chomsky claims that one reason America supports Israel is because it is a ‘laboratory’ for US military and surveillance technology. This is easily tested by asking if any other country would be eager to take Israel’s place.

The argument that oil is the main reason for US support for Israel is too trivial to waste time on. When America attacks a Middle Eastern country, the left chants ‘no war for oil’. If the policy causes the price of oil to drop, capitalism benefits. If the price rises, the oil companies benefit. Either way, the left trumpets the evidence. The ‘oil’ explanation cannot be falsified. It is not wrong – it is not even a valid hypothesis.

In a similar violation of scientific methodology, Chomsky tries to use the fact that the USA approves of Israeli war crimes as evidence that the dog wags the tail, that Israel serves Uncle Sam. In fact, this ‘evidence’ contributes nothing at all to our understanding of the relationship between the two states. It is equally compatible with the two opposing arguments, so it is not a test which selects which of them are true. Chomsky does give some of the same examples of American subservience as Mearsheimer and Walt in ‘The Israel Lobby’ [12]

- US presidents mildly criticize Israel building settlements on Palestinian land

- Israeli politicians express open contempt for the supposedly most powerful man in the world, bragging of how ‘The Jewish Lobby’ (their words) will bring this uppity goy into line

- And so it comes to pass

but Chomsky doesn’t ask the obvious question – is this all

1. an elaborate charade to make it look as if the Lobby can determine US policy regarding Israel in order to cover up for white/US/capitalist hegemony, by diverting attention to the Jews, or

2. is the most elegant/economical/likely explanation that Jewish power trumps Western European interests in the USA?

By means of the Lobby, the tail wags the dog. Its the simplest, clearest, and most economical explanation of the facts. This is how science progresses. A good example of why simpler is better can be found in a recent paper on the evolution of social insects such as ants and bees [16]. We should try to use the same criterion in the study of human societies.

Like everything else, the question of Jewish control of the media can be approached emotionally. I prefer the scientific approach. I approach the argument about Jewish control of the press, etc., on its merits, not on how much it reminds people of ancient Tsarist calumnies. Surely the most simple explanation of the fact that

“Israel has been granted a unique immunity from criticism in mainstream journalism and scholarship” (page 31)

is because Jews are overrepresented in mainstream journalism and sholarship, and quite a few of these Jews defend Jewish interests. This kind of statement is acceptable in Israel, whose inhabitants are mostly proud of what they call ‘the Jewish Lobby’ in America. It is acceptable in countries like Malaysia. Why is it so difficult for us?

The answer is obvious. We are afraid of being anti-semitic. I found a solution to this problem. I stopped caring about it.

1. – US Senate Resolution,http://www.jewishvirtuallibrary.org/jsource/US-Israel/ussen062110.html

2. – Jeff Blankfort,http://palestinethinktank.com/2010/07/21/jeff-blankfort-chomsky-and-palestine-asset-or-liability

3. – Jeremy Hammond,http://dissidentvoice.org/2010/07/rejoinder-to-criticism-of-chomsky-asset-or-liability

4. – ‘Fateful Triangle’, Noam Chomsky, South End Press, 1999

5. – “A Review of B. F. Skinner’s Verbal Behavior”, Noam Chomsky, http://cogprints.org/1148/1/chomsky.htm

6. – ‘The Language Instinct’, Steven Pinker, Harper Perennial Modern Classics, November 2000

7. – Alison Weir, radio interview with Noam Chomsky –http://www.wsradio.com/internet-talk-radio.cfm/shows/CNI:-Jerusalem-Calling/archives/date/selected/07-08-2010.html

8. – ‘The Mass Psychology of Anti-Fascism’, Jay Knott, 2008,http://pacificaforum.org/mass

9. – ‘How Washington Goaded Israel Into War’, Stephen Zunes, http://www.antiwar.com/orig/zunes.php?articleid=9605, August 2006

10. – ‘Defamation’ – a movie about the Anti-Defamation League –http://ishare.rediff.com/video/others/defamation-movie-trailer/888451

11. – ‘If Americans Knew’ media analyses,http://www.ifamericansknew.org/media/

12. – ‘The Israel Lobby’, John Mearsheimer and Stephen Walt, Farrar, Straus and Giroux, August 2007

13. – “They Dare to Speak Out: People and Institutions Confront Israel’s Lobby”, Paul Findlay, Lawrence Hill Books, 1989

14. – ‘The Atlantic’ magazine rejected the original ‘Israel Lobby’ paper, on the transparently false grounds of ‘poor scholarship’. When it came out as a book, the authors toured the USA to promote it, but found that local papers didn’t send reporters to cover it. The Lobby demonstrated the authors’ hypothesis by trying to suppress it.

15. – ‘The Israel Lobby?’ – Noam Chomsky, 2006,http://www.zcommunications.org/the-israel-lobby-by-noam-chomsky

16. – “Natural selection alone can explain eusociality”, Nowak, Tarnita and Wilson –http://www.physorg.com/news201957206.html

Source and worthwhile comments found AT PalestineThinkTank

Disaster capitalism running wild in Haiti

By Siddhartha Mahanta

MotherJones, September 18, 2010 Refugee evictions, private land grabs, disaster capitalism—you can't tell the story of Haiti without all this. Eight months after the earthquake, many of the 1.7 million Haitians living under tattered tarps in squalid squatter camps around Port-au-Prince are being forced to abandon the tent cities they've set up on privately owned land. Meanwhile, businesses—eager to slurp up the spoils of disaster—are swooping in to score major paydays by moving the refugees to new camps, some set to operate as industrial work zones. And there's no one stopping it. In March, Haitian landowners and police authorities began kicking displaced Haitians out of their makeshift cities at the behest of the owners of the land on which the camps sat. International Action Ties, a grassroots community development agency working in Haiti, says authorities are regularly flushing out the camps. The International Organization for Migration, which heads up the international aid response to the quake, has been unable to prevent expulsions and has been relegated to playing mediator between landowners and camp occupants. A recent IAT report provides a vivid blow-by-blow of expulsions by Haitian police in the communes of Delmas and Cité Soleil: bulldozers demolishing flimsy shelters, policemen swinging batons and shooting their guns in the air, and several cases of sexual assault. IAT skewers the Haitian government and UN system, and blasts the aid community for not defending the refugees (for more, read this report from July). And there's a twist: It's not even clear these landowners officially own the property that the displaced people are being expelled from. Murky titling laws have plagued Haiti since its early days, clouding landowners' claims with ambiguity and contributing to the country's current catastrophe. Post-colonial Haiti's first ruler, Jean-Jacques Dessaline, imposed dramatic land reforms in the early 1800s, apportioning plantation land among freed slaves. But after his assassination, subsequent efforts at reform failed, and military leaders appropriated old plantation land. Land titling gradually became more and more muddled as one dictator gave way to another. In the 1950s and '60s, François "Papa Doc" Duvalier meted out land to members of his death squads, or left property up for grabs. In the '80s, another attempt to formalize land holdings failed. On January 11, 2010, the day before the quake, around 85 percent of Port-au-Prince's residents lived on property of dubious ownership. "There's no real registry to show who owns the land," says Oxfam's Julie Schindall. "On any given plot, there may be three people asserting themselves as landowners for any given reason." IAT estimates that some 70 percent of landowners don't bear title to the property they claim, and it demands a moratorium on evictions until the ownership chaos can be sorted out. In the interim, it's the responsibility of the United Nations Stabilization Mission in Haiti to protect the human rights of Haitians, according to its mandate. That includes the right to shelter and housing. Haitian law, Schindall adds, clearly bars forced evictions. The reasonable course would seem obvious: Sort out the legalities and the who-owns-what before ripping down tents and moving the stricken, the sick, and the dying out of the camps. But in March, President René Préval, under pressure from landowners and business elites, ordered aid groups to discontinue food services (though some limited distribution to pregnant women and children continued). This was seen as a move designed to put pressure on camps to disband. In the absence of government leadership on this issue, businesses and NGOs are filling the gaps—and exploiting the situation. For instance, Nabatec, a consortium owned by some of Haiti's most powerful families, and World Vision, a Christian humanitarian organization, plan to build a new city of 300,000 displaced Haitians, complete with garment factories, homes, stores, and restaurants. This new business zone will be in Corail Cesselesse, about nine miles from Port-au-Prince. Nabatec owns the land where the refugees will live, and stands to gain a chunk of the $7 million dollars the Haitian government plans to pay landowners who've given up property for the site. "After I take people to Corail [Cesselesse], they don't sleep well anymore," says Melinda Miles, director of the aid group KONPAY. "It's 40,000 people living in the middle of the desert." She says that Corail Cesselesse, like other camps, has been without proper food distribution for the past two months; children in the camp have orange hair, a symptom of malnutrition. And Nabatec has positioned itself to make a killing as the commercial gatekeeper for private companies seeking to set up shop in Corail, including a South Korean garmet firm and a Vietnamese cell phone company. With most NGOs not addressing the expulsion issue, many displaced Haitians remain at the mercy of landowners anxious to reclaim their property. They're caught between an incapable government and a rush of foreign investment looking capitalize on a ruined country—just as hurricane season kicks up. Siddhartha Mahanta is an editorial intern at Mother Jones. Got story ideas? Email him at smahanta (at) motherjones (dot) com. _________ More: Life in Devastated Haiti by Stephen Lendman September 18, 2010