February 2003

We Need the Bomb - Part II

The Brazilian government is finally on the right track,
regarding its defense strategy. It is time for Brazil to unsign
the Nuclear Non-proliferation Treaty. North Korea just
announced that they are unsigning from that treaty.
In 90 days, it is a done deal!

Ricardo C. Amaral

Mr. Roberto Amaral, Brazil's new Minister of Science and Technology, told a reporter of the BBC on January 5, 2003 that it will be a priority of the new administration for Brazil to get the expertise in the areas of space and nuclear technology. He also said that Brazil will get the knowledge necessary to build nuclear weapons.

On March 10, 2002 The New York Times had a front page article outlining the new American nuclear weapons strategy. The Times reported that the American government is in the process of "a broad overhaul of American nuclear policy; a secret Pentagon report calls for developing new types of nuclear weapons that would be better suited for striking targets in Iraq, Iran, North Korea, Syria and Libya.

The New York Times obtained a full copy of the report. It calls for the development of new earth-penetrating nuclear weapons to destroy heavily fortified underground bunkers, including those that are used to store chemical and biological weapons. It argues that the United States may need to resume nuclear testing. One of the most sensitive portions of the report is a secret discussion of contingencies in which the United States might need to use its "nuclear strike capabilities" against a foe.

The Bush administration seems to see a new role for nuclear weapons against the `Axis of Evil' and other problem states.... Among Iraq, Iran, Syria, or Libya, none has nuclear weapons... Significantly, all of them have signed the Nuclear Non-proliferation Treaty. Washington has promised that it will not use nuclear weapons against non-nuclear weapon states that have signed the Nuclear Non-proliferation Treaty unless those countries attack the United States or its allies "in alliance with a nuclear weapon state."

When the United States made public its new nuclear weapons policy as described in The New York Times article, the result was that the Nuclear Non-proliferation Treaty, in force since 1970, became obsolete overnight in 2002. The United States started a new nuclear weapons arms race with the other countries of the world.

Today, the Bush administration is suggesting to the world that in the future the U.S. will use nuclear weapons in pre-emptive nuclear strikes. The U.S. government will treat, in the future, the use of nuclear weapons as just one more instrument or tool that it has available in its arsenal. The entire world knows that the U.S. means business when it comes to using arms of mass destruction. We all know that when the U.S. government implies that it will use nuclear weapons, you can count on it.

Year 2002 - The Turning Point

Since the attack on Nagasaki in 1945, there has been an international understanding that the ultimate weapons of terror (nuclear weapons) would remain weapons of last resort, as they were up to now. There was also an understanding that a nuclear weapons country would never use such a weapon against a non-nuclear weapons country.

Since the breakup of the Soviet Union in 1989, the world became a much more dangerous place in terms of the proliferation of nuclear weapon states—the Soviet Union split into various nuclear weapon states. The other problem is that since the 1960's, many other states became nuclear weapon states such as France, China, South Africa, Israel, India and Pakistan. These are some of the states that have been reported in the press as the new states that have been able to acquire nuclear weapons capabilities since 1960. How about the states which we don't know!

Now, we all know that North Korea also has nuclear weapons. The next countries to acquire such a capability should be Brazil and probably Argentina. The truth is the nuclear weapons genie is out of the bottle, and many countries around the world will adjust to the new U.S. change in policy and strategy. In 2003, there is a new nuclear weapons reality around the world. That's why Brazil needs nuclear weapons to protect its claim of absolute sovereignty over its territory and population.

Today, the more a state has the capability to use violence at will, the greater is its contempt for sovereignty, that is, for the sovereignty of other states. We can see all over the world this contempt for sovereignty and international law.

In 2002 the United States, recognized by the world community as the only surviving super power, started the trend of unsigning international treaties.

For example, in May 2002, the United States decided to renounce formally any involvement in a treaty creating an international criminal court and has officially "unsigned" the document signed by the Clinton administration. As reported in the New York Times on May 5, 2002, "in doing so the U.S. simultaneously "unsigned" the Vienna Convention on the Law of Treaties, a 1969 pact that outlines the obligations of nations to obey other international treaties. Article 18 of the Vienna Convention requires signatory nations like the United States to refrain from taking steps to undermine treaties they signed, even if they do not ratify them."

I was surprised to find out how simple the process is to repudiate a treaty which a country has signed. How easy it was for the United States to withdraw from the International Criminal Court Treaty—the Bush administration officials just notified the United Nations Secretary-General Kofi Annan on May 6, 2002 that the United States is withdrawing from the International Criminal Court Treaty.

The United States, as one of the leading countries in the world, set the example to everyone how simple and easy it is to "unsign a treaty" which is no longer wanted by that country. The United States actions make it clear to the world that treaties are made to be broken and that treaties just have a certain useful purpose. After any treaty ends its useful life it becomes obsolete and has to be scrapped—as in the case of the Non-Proliferation of Nuclear Weapons Treaty.

The world has changed drastically in a very short period of time. Today we live in a much more dangerous world, and many of the old international rules have changed since September 11, 2001.

Brazil's Nuclear Program

As a sovereign country, Brazil does not need authorization from any other country, if Brazil decides to develop chemical, biological and nuclear weapons for defense purposes. If there is any obstacle, such a treaty, it is easy to "unsign" such a document, or change the Brazilian Constitution to accommodate the new rules of the game.

Brazil needs to be self sufficient in terms of defense. Brazil can't count on other countries to come to its rescue if that case ever arises in the future. Brazil has to develop nuclear weapons today to protect the future Brazilian generations. Most people are short-sighted and they believe that the world will stay the way which is familiar to them.

The world is changing very fast, and we have to prepare Brazil for the future and adapt Brazil to the new world reality. I would tell my fellow Brazilians: "Please, wake up and look around the world; even poor countries such as India, Pakistan, South Africa, and North Korea have nuclear weapons".

Maybe we should also add "Cuba" to this list. On November 22, 2002, I was watching a television program on PBS called "Now with Bill Moyers," Mr. Moyers was interviewing a historian, James Blight—he wrote a book about the 1962 Cuban Nuclear Missile Crisis. It was an enlightening interview. The professor was saying that only recently, (in the last ten years) the U. S. learned a lot of new information about the Cuban missile crisis that the United States did not know at the time.

He said that the U. S. intelligence thought that Fidel Castro had no nuclear warheads on his island in 1962. Since 1992 the U. S. learned that, in fact, the Soviets had put 162 nuclear weapons in Cuba. Fidel Castro had been cleared and had all the authorization necessary from the Soviets to use the weapons.

If the United States had attacked Cuba in 1962, the invading force would have been annihilated by these weapons. I am glad that that crisis was resolved with diplomacy. I know that we don't learn lessons from past history, but that particular crisis is a very good example of what we don't know can hurt us in a big way.

Usually when I see lists of countries that have nuclear weapons in the newspapers, the lists never list Cuba as being a nuclear weapons country. Since the U. S. was not aware that Cuba had such a large number of nuclear weapons on the island in 1962, is it possible that Fidel Castro still has many of these weapons in Cuba? Why should Castro return any of his 162 nuclear weapons to the Soviet Union at that time, when the United States was not aware that he had all these weapons? I will not be surprised in the future when we find out that Cuba had all these weapons on that island during all these years.

The New Iraq War

The world should take a good look at what is happening in Iraq and North Korea today, and I hope they learn an important lesson. It is simple—if your country doesn't have nuclear weapons to defend it, then your country doesn't have actual sovereignty.

I can't see the United Nations sending inspectors to go around and doing anything they want, and spying everywhere on countries that have nuclear weapons such as the United States, UK, France, China, Russia, Israel, Cuba or even North Korea.

If anything, the events of the last few months show to most countries around the world the necessity of a country having a strong nuclear weapons program.

As I wrote in prior articles, the decision to go to war with Iraq has been made long ago. It is pathetic the BS that we see on the news every day regarding the inspectors, the UN and everything else related to Iraq. Are we all so stupid and naive?

We know that Sadam is not going to walk away into the sunset and retire into a country that would give him a safe place to stay. It is childish to even consider such an option. We all know that as soon as he gives up his power, Sadam and his generals would be tried by the international court for crimes against humanity (after Sadam was demonized in the press for so long this is the only option left).

Sadam's generals will do everything that they can to protect him, because most of his generals know that they also are going to end up in the same place as Sadam—in prison. Sadam and his generals don't have an alternative option other than fight a war as hard as they can. It does not matter what information they give to the inspectors; all the information and findings will be irrelevant! The decision to wage war on Iraq has been made long ago.

This war on Iraq by the U. S. serves two major purposes: 1) the obvious one is the U. S, will control the oil reserves of Iraq, and 2) this war will serve as a diversion to the major economic problems facing the U. S. economy, the coming deflationary spiral and a new economic depression.

The Coming Economic Depression

We are in the beginning of a deflationary cycle; that means that prices will decline. The economies of Japan and Germany are already suffering because of this deflationary spiral. Today, various sectors of the U. S. economy are beginning to be affected by deflationary pressures as well.

The truth is the world is overdue for a new economic depression. Historically we had a depression in the world once every 55 to 60 years. The last world depression was over 60 years ago.

As the stock market is collapsing, a number of corporate scandals emerge such as Enron, WorldCom, Global Crossing, Adelphia Communications, Conseco, UAL (the second largest airline in the U. S.), Arthur Anderson and many others. As the debt load reaches new highs in the economy, the result is a record-breaking number of personal and corporate bankruptcies, as is the case in the U. S. today.

Reuters news services, on December 30, 2002, had an article "Companies set record bankruptcies." The article said: "U. S. public companies have shattered bankruptcy records for a second straight year as accounting fraud and the last decade's debt spree brought down corporate giants, and experts are bracing for more such woes.

"All told, 186 public companies with a staggering $368 billion in debt filed for bankruptcy in 2002.... That is the largest asset total ever, sweeping past last year's record $259 billion. The wreckage included five of the 10 largest bankruptcies ever....Bankruptcy experts are bracing for a new crop of failures by companies that depended on companies that went bust.

"...The downfall of so many once-mighty companies has eroded investor confidence around the globe...the biggest fallout is the difficulty caused to companies that do business with large companies in Chapter 11, whether vendors, suppliers, landlords or lenders. The larger the Chapter 11 case, the larger the domino effect".

Remember that on the other side of these Chapter 11 cases are companies that will not receive the moneys, which are due to them in the amount of over $630 billion dollars just in the last two years alone. Many of these companies in turn also will land in trouble themselves as a result of this money predicament. As an example, to just mention one case, think of the economic ramifications of the United Airline Chapter 11 filing—the impact that UAL will have on their vendors from airplane leasing companies all the way down the line.

As deflation gets under way in the United States even more companies will have trouble paying their debts. This bankruptcy record is only the beginning of a very rough economic ride which is around the corner for the U. S. economy.

On January 7, 2003, Reuters had another article entitled "Record Home Foreclosures," which said : "A record level of U. S. mortgage holders lost their homes to foreclosure in the third quarter of 2002...U. S. home loans in foreclosure edged up to a new high in the third quarter last year as job losses due to the weak economy squeezed more mortgage holders out of their homes."

How can anyone be optimistic about the U. S. economy when personal and corporate bankruptcies and mortgage foreclosures are all breaking new records and there is no light at the end of the tunnel?

There are many countries around the world whose economies are in a state of deep economic depression such as Argentina, Brazil, Bolivia, Colombia, Paraguay, Venezuela, Uruguay, and also most African countries. This is just a small list of countries in deep economic distress.

We can add to this list of economies in distress, not only the U. S. economy with its $8 trillion dollars of cumulative government debt (and continuing to grow), but also the local economies of most states in the United States. The most important states in the U. S. economy are California and New York, and their economies are in shambles.

It is estimated that the states in the United States will have a combined budget deficit between 70 to 85 billion dollars during the year 2003.

Most states are required by law to balance their yearly budgets. Most states will have only bad options to balance their budgets including: increase taxes, increase all kind of fees, layoff state employees and reduce services.

California is the state with the largest budget deficit in the U. S.. I have no idea how Californians will correct their budget predicament. To put it in perspective, today if California was an independent country, its economy would be collapsing in the same manner as the Argentinean economy.

There are signs that deflation is already affecting various areas of the U. S. economy. Many articles have been published in newspapers and magazines regarding this issue. In Business Week magazine dated February 3, 2003 the cover story article asks: "Is Your Job Next?" White-collar work is moving overseas. How worried should Americans be? Can America lose these upscale jobs and continue to prosper? This is an article about disappearing jobs in America and deflation.

The article says: a new round of globalization is sending upscale jobs offshore. They include chip design, engineering, basic research, accounting and even financial analysis. Business Week estimates that over 3.3 million upscale jobs are being transferred overseas.

The article gives an idea of the possible salary savings to the major corporations if they transfer American jobs overseas, the savings by area of expertise are as follows: Aerospace Engineer—offshore salary $650/month and U. S. counterpart $ 6,000/month, Chip Design—offshore salary $1,000/month and U. S. counterpart $7,000/month, Architect—offshore salary $250/month and U. S. counterpart $3,000/month, Accountant—offshore salary $300/month and U. S. counterpart $5,000/month, Info-Tech Support—offshore salary $500/month and U. S. counterpart $10,000/month, Financial Analyst—offshore salary $1,000/month and U. S. counterpart $7,000/month.

The article also said: "In 2000, senior software engineers were offered up to $130,000 a year, says Matt Milano, New York sales manager for placement firm Atlantis Partners. The same job now pays up to $ 100,000. Entry-level computer help-desk staffers would fetch about $55,000 then. Now they get as little as $ 35,000.

In the U. S. a project manager for software can earn $100,000 per year. In India, "Gaurav Daga's $11,000 salary per year is a pricely sum in a nation with a per capita annual income of $500, where a two-bedroom flat goes for $125 per month.

This major deflation in American salaries which is under way will have a major economic impact on the U. S. economy. Lower salaries means lower tax collections for the federal and state governments. It also means a large loss in purchasing power in the American economy, because people can't afford to buy things as before. It will affect the entire economic structure of the things that people spend their money and credit on, such as rent, mortgage, buying a car, and everything else that people spend money on.

These trends will drag all kinds of prices down in the American economy—from rent to property values, from corporate income to stock prices; in other words, it is called first deflation and later an economic depression. Even as the prices and values are going down we turn to the media and the hype will be there such as; this is the right time to buy stock, property and everything else. That is a given and part of the game—buy, buy, buy! It is always a good time to buy. It is your last chance! Don't miss this opportunity of a life time. Blah, blah, blah.

I have been right about my prior predictions such as in October 1999 when I wrote that the stock market was going to collapse. I was off by a few months, but the prediction was right on the money. In November 2001 when gold was trading at $295/oz and the Euro was trading at $.85 cents to US$ 1.00 dollar, I predicted that both gold and the Euro would gain in value in terms of US dollars. Today, gold is trading at $ 372/oz that translates into a gain of 26 percent, and the Euro is trading at US$ 1.09 to Euro$ 1.00, that translates into a gain of 29 percent so far.

The Silver Bullet Program

As I mentioned in a prior month's article, the problem with the pension system in the U. S. is a very serious problem. The pension under funding is so great that many of the most prestigious American corporations have no other alternative than to cut the benefits that they promised their employees in the past. This will have a deflationary effect on the income of many retirees.

It is worthwhile mentioning one more time, The Silver Bullet program because of its impact on the future of the United States. The number one New York Times bestseller, "Rich Dad, Poor Dad" by Robert T. Kiyosaki, was published in 1997. Some information in this book regarding pension caught my attention; from page 137 of the book, I quote the following:

"Cyril Brickfield, the former executive director of the American Association of Retired People, reports that private pensions are in a state of chaos. First of all, 50 percent of the workforce today has no pension. That alone should be of great concern. And 75 to 80 percent of the other 50 percent have ineffective pensions that pay US$ 55 or US$ 150 or US$ 300 a month."

The book also mentions that, "In his book The Retirement Myth, Craig S. Karpel writes: " I visited the headquarters of a major national pension consulting firm and met with a managing director who specializes in designing lush retirement plans for top management. When I asked her what people who don't have corner offices will be able to expect in the way of pension income, she said with a confident smile:

"The Silver Bullet."

"What", I asked, "is The Silver Bullet?"

"She shrugged, if baby boomers discover they don't have enough money to live on when they're older, they can always blow their brains out."

The above information about pensions describes a very serious problem that will have a very negative effect on the American economy. I hope that "The Silver Bullet" program does not become the major US government program designed to take care of the baby boomer generation; when Social Security and Medicare run out of money.

I am not surprised that George W. Bush's economic proposal of 2003 left over 1.5 million unemployed Americans out in the cold. This is the worst job market in the U. S. in the last 50 years—but George Bush did not care about his own people and cared enough to give them a new extension of unemployment. These people most needed the help at this time. These 1.5 million Americans are hurting very badly and they need U. S. government help to be able to survive this very bad storm. If the U. S. government doesn't give a damn about its own people, would it be realistic for anyone around the world to expect any better treatment from the U. S. government? The only option George W. Bush has to offer for these 1.5 million unemployed Americans is: The Silver Bullet program.

George W. Bush's current economic policy is a sure bet to lead the U. S. economy to a new depression. If you want another indication that we are headed for a new economic depression in the U. S.—I want to remind you that the Republican Party controlled the Senate, the U. S. House of Representatives and the White House from 1921 to 1931, the result was the Great Depression of the 1930's.

Today, once again the Republican Party controls the House of Representatives, the Senate and the White House. Is this another recipe for disaster? Have we learned anything from the past, or does history just repeat itself?

In the past, a major war was the way out of a economic depression. Maybe that solution will be used by the U. S. one more time to restart its economy—a major war contributes to ending the depression phase, and leads the economy to the first phase of the cycle once again. The major war has to be started somewhere—even in Iraq.

Ricardo C. Amaral is author and economist and can be reached at

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