By George Friedman
CEO, Strategic Forecasting

The latest National Intelligence Estimate (NIE) summarizing the U.S. intelligence community’s view of Iraq contains two critical findings: First, the Iraqi government is not jelling into an effective entity. Iraq’s leaders, according to the NIE, neither can nor want to create an effective coalition government. Second, U.S. military operations under the surge have improved security in some areas, but on the whole have failed to change the underlying strategic situation. Both Sunni insurgents and Shiite militias remain armed, motivated and operational.

Since the Iraq insurgency began in 2003, the United States has had a clear strategic goal: to create a pro-American coalition government in Baghdad. The means for achieving this was the creation of a degree of security through the use of U.S. troops. In this more secure environment, then, a government would form, create its own security and military forces, with the aid of the United States, and prosecute the war with diminishing American support. This government would complete the defeat of the insurgents and would then govern Iraq democratically.

First, we hear that Nicole Ritche spent exactly 82 minutes of a three-day DUI sentence in a Los Angeles County jail because of “overcrowding”; then we find out that Lindsay Lohan was sentenced to a whopping one-day jail sentence for her second DUI.

Strange, but last seen, Nicole Ritchie weighed about 22 pounds, so I’m not sure how she could overcrowd any gathering.

As for Ms. Lohan, ask yourself how far they would throw away the key if that were you standing before the judge and not she.

The rich may not get richer all the time, but they certainly get freer quicker and live longer than the rest of us.

By George Friedman
CEO of Strategic Forecasting

All U.S. presidents eventually become lame ducks, though the lameness of any particular duck depends on the amount of power he has left to wield. It not only is an issue of the president’s popularity, but also of the opposition’s unity and clarity. In the international context, the power of a lame duck president depends on the options he has militarily. Foreign powers do not mess with American presidents, no matter how lame one might be, as long as the president retains military options.

The core of the American presidency is in its role as commander in chief. With all of the other presidential powers deeply intersecting with those of Congress and the courts, the president has the greatest autonomous power when he is acting as supreme commander of the armed forces. There is a remarkable lot he can do if he wishes to, and relatively little Congress can do to stop him — unless it is uniquely united. Therefore, foreign nations remain wary of the American president’s military power long after they have stopped taking him seriously in other aspects of foreign relations.

There is a school of thought that argues that President George W. Bush is likely to strike at Iran before he leaves office.

By Bart Mongoven

The International Financial Corp. (IFC) announced recently it is joining forces with the United Nations’ top expert on the business/human rights issue to study the impact of investment agreements on citizens in the developing world. The study suggests the United Nations is at least considering taking a powerful position regarding standards for Western multinational corporations operating in developing countries. It also suggests a tool might be coming to limit the degree to which state-owned enterprises can undo the efforts of these multinationals to protect citizens.

At issue are investment contracts that put a corporation’s rights — to water, for example — above those of the people who live in the vicinity of a major development project. The study could recommend that such contracts include clauses that allow a government to break the deal in order to avoid human rights violations. If the recommendation is implemented, then, governments that might put their citizens’ need for water second to the desire to maintain a lucrative contract no longer would have the excuse that their hands are tied. Such a clause would not directly force changes in what governments do — ultimately governments will do what they are going to do — but it would clarify state and corporate complicity in human rights problems.

By Fred Burton and Scott Stewart

U.S. counterterrorism sources remain concerned that an attack against the U.S. homeland will occur within the next two to three weeks. This is not surprising, considering that the drums have been beating loudly in Washington this summer about a potential attack — first from Homeland Security Secretary Michael Chertoff and then in the form of a National Intelligence Estimate. More recently, several other reports have appeared concerning an impending attack, including an alert over the weekend in New York triggered by an alleged dirty bomb plot.

One of the reasons for the heightened concern is that most everyone, including Stratfor, is surprised that no major jihadist attack has occurred on U.S. soil since 9/11. Many plots have been disrupted, and it is only a matter of time before one of them succeeds. Simply put, attacks are not difficult to conduct and the government cannot stop them all.

Stratfor’s assessment of the jihadist threat to the U.S. homeland is that al Qaeda and jihadists retain the ability to conduct tactical strikes against the United States, but lack the ability to pose a strategic threat. While this may be reassuring on one level, people can and will be killed in a tactical strike. The fact that an attack is not strategically significant will provide no immediate solace to those near the carnage and confusion of a tactical attack. Additionally, as we saw in Hurricane Katrina or the recent bridge collapse in Minneapolis, other disasters also can lead to chaos and disruption.

Given the current threat environment, this is an opportune time to examine again ways to avoid — or at least mitigate — the impact of that chaos and panic. The set of tools designed to do that is called personal contingency planning.

Stratfor.com Analysis

The subprime crisis is worth analysis in its own right, though it also gives us the opportunity to discuss our own approach to economic issues. Stratfor views the world through the prism of geopolitics. In geopolitics, there is no such thing as separating a country’s economy from its national security or its political interests. A nation is a nation. Academic departments divide themselves nicely into areas of study. In the real world, things are much too intertwined and sloppy for that. Geopolitics views the international system and nations as consisting of a single fabric of relationships, with economics being one of the elements.

Not all events have geopolitical significance. To rise to a level of significance, an event — economic, political or military — must result in a decisive change in the international system, or at least a fundamental change in the behavior of a nation. The Japanese banking crisis of the early 1990s was a geopolitically significant event. Japan, the second-largest economy in the world, changed its behavior in important ways, leaving room for another power — China — to move into the niche Japan had previously owned as the world’s export dynamo. The dot-com meltdown was not geopolitically significant. The U.S. economy had been expanding for about nine years — a remarkably long time — and was due for a recession. Inefficiencies had become rampant in the system, nowhere more so than in the dot-com bubble. The sector was demolished and life went on. Lives might have been shattered, but geopolitics is unsentimental about such matters.

Just as the U.S. military establishment is always fighting the last war and unprepared for the current one, the Federal Reserve is always fighting yesterday’s economic woes and thus creating new ones of its own.

Ever since Jimmy Carter and his malaise–i.e., complete incompetence in everything governance–the Fed has been fighting inflation.  It fought inflation the last time when the problem was a bubble in the emerging Internet economy; for the past two years it’s been again fighting inflation when the real problem was to sustain the affordability of money.  When it raised interest rates and priced people out of their mortgages–duh–guess what happened?

You’ve seen the results of it for the past two days in the worldwide stock markets.  Crash, boom, bang.

The answer is simple, stupid.  Just lower the rates that you should never have raised in the first place.  A Fed rate of 2.5 to 3 percent would work just fine, but we won’t see it again until 10 million more people are suddenly out of work.

Will the powers ever learn?