Fed looses control on US interest rates and crisis reaches China and EU

GEAB N°16 is available! Global systemic crisis / Summer 2007 : Fed looses control on US interest rates and crisis reaches China and EU


This second quarter's fundamental event about to shove most players' anticipations over the coming months, is certainly the final and simultaneous failure of the two key-strategies defined by US leaders, i.e.:

. in the economic, financial and monetary fields, the Fed' policy initiated a year ago when M3 publishing was abandoned and aimed at substituting a financial and stock bubble to the bursting housing bubble in order to maintain US growth (and capital attractiveness) has now patently failed, thus entailing a historical loss of the Fed's control on US interest rates (for the first time since 1918, except in times of war or social/economic depression)

. in the military, strategic and diplomatic fields, the stability plan for Iraq is a complete failure taking place in the framework of Washington's growing political paralysis (which LEAP/E2020 plans to describe in GEAB N°17 - on subscription).

Spring 2007 indeed appears as the tipping point of the global systemic crisis: the US economy went into recession, US interest rates were restored, the bond market is in crisis, the subprime crisis begins to hit large US financial institutions such as Bear Stearns (1), Goldman Sachs (2) and Freddie Mac (3), the US housing crisis is speeding up (4), the paralysis of Washington's political power grows (5), the isolation of the US on the international arena increases, the security plan for Iraq proves to be a complete failure, the US is powerless against Iran, the relaunch of the Israelo-Arab peace process aborts, trade tensions between China and the US rise, a growing number of countries (Kuwait, Syria,…) flee from the US dollar, etc…

However, according to LEAP/E2020 researchers, it is undeniably this Fed's and White House's (Pentagon's) double simultaneous failure which affects most the unfolding of the global systemic crisis for the months to come, as it precipitates China and the EU into the « vacuum » thus created and thrusts the US into « recessflation ».

Rest of the world holdings of US financial assets / Source US Federal Reserve - PrudentBear

In this public announcement, LEAP/E2020 wishes to share publicly some of GEAB N°16 excerpts (on subscription) about the consequences of this failed attempt of economic relaunch conducted by Ben Bernanke and the Fed's loss of control over US interest rates, of historical dimension (6).

Today, the Fed's official stance pretends that the US economy will grow again in the coming months and reduces to a mere anecdote the collapse of US growth in the first quarter (down to 0.6 percent only), anticipating a 2.5 see 3 percent growth altogether in 2007 (7), knowing that recent economic previsions published by the UN place US growth around 0.5 percent in 2008 (8). As early as March 2007, LEAP/E2020 anticipated a growth below 1 percent in the third quarter of 2007 (in consideration of the first terms 0.6 percent, annual growth is very likely indeed to be at best below 2 percent, more likely negative in the end).

Nevertheless this official stance is contradicted by most available objective indicators (corporate performance, employment,...), even if it seems supported by a whole range of other indicators, either indicators carefully ‘cooked' by the Federal government or subjective indicators reflecting for instance the impact of official statements on public opinion. LEAP/E2020 already described in 2006 how opinion manipulations work; and in GEAB N°16 (on subscription), our team of researchers details a number of objective indicators that can help to anticipate precisely US economic trends in the next quarters (in particular: hidden unemployment rise, « phantom-GDP » mechanism of US growth overrating, or increasingly devastating impact of the housing and subprime crises).

A great lack of transparency reigned over the Fed's actions in terms of monetary mass and global assets in USD (such as the end of M3 publication at the end of March 2006) (9). Well this strategy proved to be a complete failure. The attempt to substitute a financial/stock bubble instead of the housing bubble, like Greenspan did when he turned the internet bubble into a housing bubble, in order to maintain US growth did not succeed. Federal Reserve Chairman Ben Bernanke can always flood the US economy with liquidities. The only result will be in increasing US inflation and the fleeing from US dollar and US dollar-denominated assets. Just like the US troops are stuck in an endless conflict in Iraq, the US consumer is exhausted and insolvent, as illustrated by the close correlation between retail sales and the fast growing consumer delinquency rates.




Compared retail sales & consumer delinquency rates in the US on one year - Source Moody's


As a result, the Fed will experience a central bank's absolute nightmare: stagflation, or more precisely « recessflation » (10). The crisis currently agitating financial markets, with interest rates' « natural » curve being restored and long-term rates back above short-term rates, clearly proves that the US debt and US Treasury bonds no longer find buyers (11).

If T-Bond yields rise today, it is not by fear of inflation but because nobody wants to buy them anymore (12) (a situation anticipated by LEAP/E2020 a year ago already). As a matter of fact, foreign investors (only 11 percent of the last T-Bond sell-off (13)) are now those who fix the rate, and the Fed can only follow the trend in long-term international interest rates. Simultaneously, the Fed will have to increase its repurchasing of the US debt, operating for instance via figureheads such as those large associated investment banks, as LEAP/E2020 described many times.

What is new in the current situation is that the Fed is being deprived from its last remaining instrument. The rest of world now determines US rates. Simultaneously systemic uncertainty is back on financial markets. Investors suddenly realise that in the medium- and long-term, they no longer have any guarantee on global system's trends (while only a few months ago, they were convinced that the current system was sustainable). This situation highlights the fact that it is outside the US that the country's future economically and financially speaking is being played, as illustrated on three occasions in the last six months by the impact on US markets of Chinese decisions (dollar and stocks). This is a totally new situation for the US ever since the end of WWI which clearly suggests that the world order created after 1945 has come to an end.

This double simultaneous failure creates a new situation, radically modifying everyone's perception of the future, and deeply affecting the dominant trends of the beginning of the phase of impact of the global systemic crisis (such as for instance the US capacity of action militarily and diplomatically speaking) while significantly reinforcing other trends (such as China and the EU being sucked into the systemic crisis as a result of the accelerating evolution in their respective status of emerging pillars of the new global system, a crisis-bearer phenomenon for both China and the EU).

Thus, in this Summer 2007 issue of the Global Europe Anticipation Bulletin (on subscription), LEAP/E2020 consider it useful to anticipate the four following trends that they consider will shape this year's second semester in terms of economy, finance and international policies:

1. Finance – Investor's shift away from US Treasury bonds, the Sovereign Wealth Funds, the Fed's loss of control over US interest rates and the great return of market volatility

2. US economy – The « phantom-GDP » invented by US statistics, aggravation of the US housing crisis and rise in real unemployment: the « 2007 Very Great Depression » is shaping

3. International trade – Fallout of US economic recession on the United States and China: enhanced trade conflict and Chinese financial system in crisis

4. Euroland – Eurozone in crisis with a bursting housing bubble in Spain and speculative currency bubbles in Eastern Europe

As LEAP/E2020 describes in GEAB N°16 (on subscription), during the summer 2007, these heavy trends will get organised to shape the rest of the year, taking from the rear the last three months' mainstream opinion. In this issue of GEAB, our team provides some advice for investors to avoid this coming summer's main risks.

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Notes:

(1) Bear Stearns opens the bal with second-quarter profits dropping by 10 percent, in relation to the subprime crisis. But this second quarter is probably the first of a long series to experience the full effect of a crisis that is only beginning (described in the previous issues of the Global Europe Anticipation Bulletin). Recent declarations by Bear Stearns leaders provide a clear picture of what large US investment banks outght to be expecting : after the subprime loans, Alt-A loans (less risky) are beginning to provoke corporate losses and hedge-funds liquidations for 4 billion worth of mortgage-backed bonds. Source : Bloomberg, 06/14/2007

(2) Source : MarketWatch/DowJones, 06/14/2007

(3) Source : MarketWatch/DowJones, 06/14/2007

(4) In June 2007, Harvard University released the yearly « Joint Center for Housing Studies » on housing trends in the US. The study clearly suggests that the housing crisis is only beginning as « prices only begin to fall, riskiest loans are only about to enter refinancing period, and credit restrictions only started ». The impact on the financial sphere, consumption and employment is still ahead and will materialize more and more roughly from this summer onward.

(5) President G.W. Bush's approval rating fell to 29 percent, with 66 percent of respondents disapproving of him (his lowest result ever). In the same Wall Street Journal/NBC poll, reported by MarketWatch/Dow Jones 06/13/2007, 68 percent of Americans consider that their country is headed in the wrong direction. 23 percent approve the performance of the 1-year long Democrat-controlled Congress. Iraq and the economy being key-factors of US public opinion today, the gap between the « official » figures and the optimistic statements we hear today on the US economy on the one hand, and the American opinion on the state of their country on the other hand, is clearly abyssal.

(6) The military and strategic aspects will be described in GEAB N°17 (on subscription).

(7) Source : GlobalInsight.

(8) Source : Rob Vos, Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA), UN, 05/30/2007

(9) In the second issue of GEAB (February 2006), LEAP/E2020 announced the discontinuance of M3 publication.

(10) Recent UN economic revised forecasts anticipate a 0.5 percent US growth in 2008, far from the 2 to 3 percent announced by the US authorities and largest banks and financial media. Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA), UN, 05/30/2007

(11) Source : MarketWatch/DowJones, 06/12/2007

(12) Source : Financial Times, 06/12/2007

(13) Source : MsnMoneyCentral / Financial Times, 06/12/2007

SOURCE :http://www.leap2020.eu/GEAB-N-16-is-available!-Global-systemic-crisis-Summer-2007-Fed-looses-control-on-US-interest-rates-and-crisis-reaches_a713.html

Putin’s Censored Press Conference:

The transcript you weren’t supposed to see

By Mike Whitney

06/10/07 "ICH" --- - On Tuesday, Russian President Vladimir Putin gave an hour and a half-long press conference which was attended by many members of the world media. The contents of that meeting---in which Putin answered all questions concerning nuclear proliferation, human rights, Kosovo, democracy and the present confrontation with the United States over missile defense in Europe---have been completely censored by the press. Apart from one brief excerpt which appeared in a Washington Post editorial, (and which was used to criticize Putin) the press conference has been scrubbed from the public record. It never happened. (Read the entire press conference archived here)
http://www.informationclearinghouse.info/article17855.htm

Putin’s performance was a tour de force. He fielded all of the questions however misleading or insulting. He was candid and statesmanlike and demonstrated a good understanding of all the main issues.

The meeting gave Putin a chance to give his side of the story in the growing debate over missile defense in Eastern Europe. He offered a brief account of the deteriorating state of US-Russian relations since the end of the Cold War, and particularly from 9-11 to present. Since September 11, the Bush administration has carried out an aggressive strategy to surround Russia with military bases, install missiles on its borders, topple allied regimes in Central Asia, and incite political upheaval in Moscow through US-backed “pro-democracy” groups. These openly hostile actions have convinced many Russian hard-liners that the administration is going forward with the neocon plan for “regime change” in Moscow and fragmentation of the Russian Federation. Putin’s testimony suggests that the hardliners are probably right.

The Bush administration’s belligerent foreign policy has backed the Kremlin into a corner and forced Putin to take retaliatory measures. He has no other choice.

If we want to understand why relations between Russia are quickly reaching the boiling-point; we only need to review the main developments since the end of the Cold War. Political analyst Pat Buchanan gives a good rundown of these in his article “Doesn’t Putin Have a Point?”
http://www.vdare.com/buchanan/070212_putin.htm



Buchanan says:

“Though the Red Army had picked up and gone home from Eastern Europe voluntarily, and Moscow felt it had an understanding we would not move NATO eastward, we exploited our moment. Not only did we bring Poland into NATO, we brought in Latvia, Lithuania, and Estonia, and virtually the whole Warsaw Pact, planting NATO right on Mother Russia's front porch. Now, there is a scheme afoot to bring in Ukraine and Georgia in the Caucasus, the birthplace of Stalin.

Second, America backed a pipeline to deliver Caspian Sea oil from Azerbaijan through Georgia to Turkey, to bypass Russia.

Third, though Putin gave us a green light to use bases in the old Soviet republics for the liberation of Afghanistan, we now seem hell-bent on making those bases in Central Asia permanent.

Fourth, though Bush sold missile defense as directed at rogue states like North Korea, we now learn we are going to put anti-missile systems into Eastern Europe. And against whom are they directed?

Fifth, through the National Endowment for Democracy, its GOP and Democratic auxiliaries, and tax-exempt think tanks, foundations, and "human rights" institutes such as Freedom House, headed by ex-CIA director James Woolsey, we have been fomenting regime change in Eastern Europe, the former Soviet republics, and Russia herself.

U.S.-backed revolutions have succeeded in Serbia, Ukraine, and Georgia, but failed in Belarus. Moscow has now legislated restrictions on the foreign agencies that it sees, not without justification, as subversive of pro-Moscow regimes.

Sixth, America conducted 78 days of bombing of Serbia for the crime of fighting to hold on to her rebellious province, Kosovo, and for refusing to grant NATO marching rights through her territory to take over that province. Mother Russia has always had a maternal interest in the Orthodox states of the Balkans.

These are Putin's grievances. Does he not have a small point?”

Yes--as Buchanan opines---Putin does have a point, which is why his press conference was suppressed. The media would rather demonize Putin, than allow him to make his case to the public. (The same is true of other world leaders who choose to use their vast resources to improve the lives of their own citizens rather that hand them over to the transnational oil giants; such as, Mahmud Ahmadinejad and Hugo Chavez) Even so, NATO has not yet endorsed the neocon missile defense plan and, according to recent surveys, public opinion in Poland and the Czech Republic is overwhelmingly against it.

Unsurprisingly, the Bush administration is going ahead regardless of the controversy.

Putin cannot allow the United States to deploy its missile defense system to Eastern Europe. The system poses a direct threat to Russia’s national security. If Putin planned to deploy a similar system in Cuba or Mexico, the Bush administration would immediately invoke the Monroe Doctrine and threaten to remove it by force. No one doubts this. And no one should doubt that Putin is equally determined to protect his own country’s interests in the same way. We can expect that Russia will now aim its missiles at European targets and rework its foreign policy in a way that compels the US to abandon its current plans.

The media has tried to minimize the dangers of the proposed system. The Washington Post even characterized it as “a small missile defense system” which has set off “waves of paranoia about domestic and foreign opponents”.

Nonsense. Nothing could be further from the truth.

As Putin said at the press conference, “Once the missile defense system is put in place IT WILL WORK AUTOMATICALLY WITH THE ENTIRE NUCLEAR CAPABILITY OF THE UNITED STATES. It will be an integral part of the US nuclear capability.

“For the first time in history---and I want to emphasize this---there are elements of the US nuclear capability on the European continent. It simply changes the whole configuration of international security…..Of course, we have to respond to that.”

Putin is right. The “so-called” defense system is actually an expansion (and integration) of America’s existing nuclear weapons system which will now function as one unit. The dangers of this should be obvious.

The Bush administration is maneuvering in a way that will allow it to achieve what Nuclear weapons specialist, Francis A. Boyle, calls the “longstanding US policy of nuclear first-strike against Russia”.

In Boyle’s article “US Missiles in Europe: Beyond Deterrence to First Strike Threat” he states:

“By means of a US first strike about 99%+ of Russian nuclear forces would be taken out. Namely, the United States Government believes that with the deployment of a facially successful first strike capability, they can move beyond deterrence and into "compellence."… This has been analyzed ad nauseam in the professional literature. But especially by one of Harvard's premier warmongers in chief, Thomas Schelling --winner of the Nobel Prize in Economics granted by the Bank of Sweden-- who developed the term "compellence" and distinguished it from "deterrence." …The USG is breaking out of a "deterrence" posture and moving into a "compellence" posture. (Global Research 6-6-07)

That’s right. The real goal is to force Moscow to conform to Washington’s “diktats” or face the prospect of “first-strike” annihilation. That’s why Putin has expressed growing concern over the administration’s dropping out of the ABM Treaty and the development of a new regime of low yield, bunker-busting nuclear weapons. The “hawks” who surround Bush have abandoned the “deterrence” policy of the past, and now believe that a nuclear war can be “won” by the United States. This is madness and it needs to be taken seriously.

The Bush administration sees itself as a main player in Central Asia and the Middle East---controlling vital resources and pipeline corridors throughout the region. That means Russia’s influence will have to be diminished. Boris Yeltsin was the perfect leader for the neoconservative master-plan (which is why the right-wingers Praised him when he died) Russia disintegrated under Yeltsin. He oversaw the dismantling of the state, the plundering of its resources and state-owned assets, and the restructuring of its economy according to the tenets of neoliberalism.

No wonder the neocons loved him.

Under Putin, Russia has regained its economic footing, its regional influence and its international prestige. The economy is booming, the ruble has stabilized, the standard of living has risen, and Moscow has strengthened alliances with its neighbors. This new-found Russian prosperity poses a real challenge to Bush’s plans.

Two actions in particular have changed the Russian-US relationship from tepid to openly hostile. The first was when Putin announced that Russia’s four largest oil fields would not be open to foreign development. (Russia has been consolidating its oil wealth under state-run Gazprom) And, second, when the Russian Treasury began to convert Russia’s dollar reserves into gold and rubles. Both of these are regarded as high-crimes by US corporate chieftains and western elites. Their response was swift.

John Edwards and Jack Kemp were appointed to lead a Council on Foreign Relations (CFR) task force which concocted the basic pretext for an all-out assault on the Putin. This is where the idea that Putin is “rolling back democracy” began; it’s a feeble excuse for political antagonism. In their article “Russia’s Wrong Direction”, Edwards and Kemp state that a “strategic partnership” with Russia is no longer possible. They note that the government has become increasingly “authoritarian” and that the society is growing less “open and pluralistic”. Blah, blah, blah. No one in the Washington really cares about democracy. (Just look at our “good friends” in Saudi Arabia, Azerbaijan, Uzbekistan, and Kazakhstan) What they’re afraid of is Putin ditching the dollar and controlling his own oil. That’s what counts. Bush also wants Putin to support sanctions against Iran and rubber stamp a Security Council resolution to separate Kosovo form Serbia. (Since when does the UN have the right to redraw national borders? Was the creation of Israel such a stunning success that the Security Council wants to try its luck again?)

Putin does not accept the “unipolar” world model. As he said in Munich, the unipolar world refers to “a world in which there is one master, one sovereign---- one centre of authority, one centre of force, one centre of decision-making. At the end of the day this is pernicious not only for all those within this system, but also for the sovereign itself because it destroys itself from within.… What is even more important is that the model itself is flawed because at its basis there is and can be no moral foundations for modern civilization.”

He added:

“Unilateral and frequently illegitimate actions have not resolved any problems. Moreover, they have caused new human tragedies and created new centers of tension. Judge for yourselves---wars as well as local and regional conflicts have not diminished. More are dying than before. Significantly more, significantly more!

Today we are witnessing an almost uncontained hyper use of force – military force – in international relations, force that is plunging the world into an abyss of permanent conflicts.

We are seeing a greater and greater disdain for the basic principles of international law. And independent legal norms are, as a matter of fact, coming increasingly closer to one state’s legal system. One state and, of course, first and foremost the United States, has overstepped its national borders in every way. This is visible in the economic, political, cultural and educational policies it imposes on other nations. Well, who likes this? Who is happy about this?

In international relations we increasingly see the desire to resolve a given question according to so-called issues of political expediency, based on the current political climate. And of course this is extremely dangerous. It results in the fact that no one feels safe. I want to emphasise this – no one feels safe! Because no one can feel that international law is like a stone wall that will protect them. Of course such a policy stimulates an arms race.

I am convinced that we have reached that decisive moment when we must seriously think about the architecture of global security.”

How can anyone dispute Putin’s analysis?

“Unilateral and illegitimate military actions”, the “uncontained hyper-use of force”, the “disdain for the basic principles of international law”, and most importantly; “No one feels safe!”

These are the irrefutable facts. Putin has simply summarized the Bush Doctrine better than anyone else.

The Bush administration has increased its frontline American bases to five thousand men on Russia’s perimeter. Is this conduct of a “trustworthy ally”?

Also, NATO has deployed forces on Russia’s borders even while Putin has continued to fulfill his treaty obligations and move troops and military equipment hundreds of miles away.

As Putin said on Tuesday: “We have removed all of our heavy weapons from the European part of Russia and put them behind the Urals” and “reduced our Armed Forces by 300,000. We have taken several other steps required by the Adapted Conventional Armed Forces Treaty in Europe (ACAF). But what have we seen in response? Eastern Europe is receiving new weapons, two new military bases are being set up in Romania and in Bulgaria, and there are two new missile launch areas -- a radar in Czech republic and missile systems in Poland. And we are asking ourselves the question: what is going on? Russia is disarming unilaterally. But if we disarm unilaterally then we would like to see our partners be willing to do the same thing in Europe. On the contrary, Europe is being pumped full of new weapons systems. And of course we cannot help but be concerned.”

(This is why Putin’s comments did not appear in the western media! They would have been too damaging to the Bush administration and their expansionist plans)

Who Destroyed the ABM?

Putin said:

“We did not initiate the withdrawal from the Anti-Ballistic Missile Treaty. But what response did we give when we discussed this issue with our American partners? We said that we do not have the resources and desire to establish such a system. But as professionals we both understand that a missile defense system for one side and no such a system for the other creates an illusion of security and increases the possibility of a nuclear conflict. The defense system WILL DESTROY THE STRATEGIC EQUILIBRIUM IN THE WORLD. In order to restore that balance without setting up a missile defense system we will have to create a system to overcome missile defense, which is what we are doing now.”

Putin: “AN ARMS RACE IS UNFOLDING. Was it we who withdrew from the ABM Treaty? We must react to what our partners do. We already told them two years ago, “don’t do this, you don’t need to do this. What are you doing? YOU ARE DESTROYING THE SYSTEM OF INTERNATIONAL SECURITY. You must understand that you are forcing us to take retaliatory steps.” …we warned them. No, they did not listen to us. Then we heard about them developing low-yield nuclear weapons and they are continuing to develop these weapons.” We told them that “it would be better to look for other ways to fight terrorism than create low-yield nuclear weapons and lower the threshold for using nuclear weapons, and thereby put humankind on the brink of nuclear catastrophe. But they don’t listen to us. They are not looking for compromise. Their entire point of view can be summed-up in one sentence: ‘Whoever is not with us is against us.’”

Putin asks, “So what should we do?” The present predicament has brought us “the brink of disaster”.

Putin: “Some people have the illusion that you can do everything just as you want, regardless of the interests of other people. Of course it is for precisely this reason that the international situation gets worse and eventually results in an arms race as you pointed out. But we are not the instigators. We do not want it. Why would we want to divert resources to this? And we are not jeopardizing our relations with anyone. But we must respond.

Name even one step that we have taken or one action of ours designed to worsen the situation. There are none. We are not interested in that. We are interested in having a good atmosphere, environment and energy dialogue around Russia”.

So, what should Putin do? And how else can he meet his responsibilities to the Russian people without taking defensive “retaliatory” action to Bush’s act of war. By expanding its nuclear capability to Europe, all of Russia is in imminent danger, and so, Putin must decide “precisely which means will be used to destroy the installations that our experts believe represent a potential threat for the Russian Federation”. (Note that Putin NEVER THREATENS TO AIM HIS MISSILES AT EUROPEAN CITIES AS WAS REPORTED IN THE WESTERN MEDIA)

Putin has made great strides in improving life for the Russian people. That is why his public approval rating is soaring at 75%. The Russian economy has been growing by 7% a year. He’s lowered the number of people living beneath the poverty-line by more than half and will bring it down to European levels by 2010. Real incomes are growing by an astonishing 12% per year. As Putin says, “Combating poverty is one of our top priorities and we still have to do a lot to improve our pension system too because the correlation between pensions and the average wage is still lower here than in Europe.”

If only that was true in America!

Russia now has the ninth largest economy in the world and has amassed enormous gold and currency reserves--the third largest in the world. It is also one of the leading players in international energy policy with a daily-oil output which now exceeds Saudi Arabia. It is also the largest producer of natural gas in the world. Russia will only get stronger as we get deeper into the century and energy resources become scarcer.

Putin strongly objects to the idea that he is not committed to human rights or is “rolling back democracy”. He points out how truncheon-wielding police in Europe routinely use tear gas, electric-shock devices and water cannons to disperse demonstrators. Is that how the West honors human rights and civil liberties?

As for the Bush administration---Putin produced a copy of Amnesty International’s yearly report condemning the United States conduct in the war on terror. “I have a copy of Amnesty International’s report here, which includes a section on the United States,” he said. “The organization has concluded that the United States IS NOW THE PRINCIPLE VIOLATOR OF HUMAN RIGHTS AND FREEDOMS WORLDWIDE.”

He added, “We have a proverb in Russian, ‘Don’t blame the mirror if your face is crooked.’”

Putin is fiercely nationalistic. He has helped to restore Russia’s self-confidence and rebuild the economy. He’s demonstrated a willingness to compromise with the Bush administration on every substantive issue, but he has been repeatedly rebuffed. The last thing he wants is a nuclear standoff with the United States. But he will do what he must to defend his people from the threat of foreign attack. The deployment of the missile defense system will require that Russia develop its own new weapons systems and change its thinking about trusting the United States. Friendship is not possible in the present climate.

As for “democracy”; Putin said it best himself:

“Am I a ‘pure democrat’? (laughs) Of course I am, absolutely. The problem is that I’m all alone---the only one of my kind in the whole wide world. Just look at what’s happening in North America, it’s simply awful---torture, homeless people, Guantanamo, people detained without trial and investigation. Just look at what’s happening in Europe---harsh treatment of demonstrators, rubber bullets and tear gas used first in one capital then in another, demonstrators killed on the streets….. I have no one to talk to since Mahatma Gandhi died.”

Well said, Vladimir.

http://www.informationclearinghouse.info/article17856.htm