“I’m in show business, why come to me?”

“War is show business, that’s why we’re here.”

– “Wag the Dog” (1997 film)

The first week of August 2008, Fannie Mae and Freddie Mac had just announced record losses, as had most reporting corporations. Unemployment was rising, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to soar. Oddly, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil got crushed. What happened?

It hardly took psychic powers to see that the dive protection team had come to the rescue. Formally known as the President’s Task Force on Financial Markets, the PPT once went undercover and denied its very existence as a matter of strict national security. But the PPT has already come out of the closet. What was once a legally questionable “manipulator” of the markets has become a sanctioned stabilizer and protector of the markets. The new tone was set in January 2008, when global markets suffered their worst decline since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:

“I think it’s imperative that the next step be taken. The president should have done it already and he should do it very quickly, convene the President’s Task Force on Financial Markets. That’s something you can ask the Secretary of the Treasury to do. This You have to coordinate across markets with regulators here and obviously with regulators and central banks around the world.”

The mystery of what was happening to the dollar in the first week of August was solved by James Turk, founder of GoldMoney, who wrote on August 7:

“[T]Banking problems in the United States continue to mount, while the federal government deficit continues to spiral out of control. So what happened to make the dollar rise over the last three weeks? In a word, intervention. Central banks have propped up the dollar, and here is the proof.

“When central banks intervene in the foreign exchange markets, they exchange their currency for dollars. The central banks then use the dollars they acquire to buy US government debt instruments so they can earn interest on their money. The instruments of debt that central banks purchase is held in escrow for them at the Federal Reserve, which reports this amount weekly.

“On July 16, 2008, the Federal Reserve reported that it had $2.349 billion in U.S. government paper in custody for central banks. In its report released today, this amount had increased over the past three weeks to $2.401 billion, an annual growth rate of 38.4% So central banks have been accumulating dollars over the past three weeks at a rate well above what would be expected as a result of the US trade deficit. The logical conclusion is that they were intervening in the currency markets, they were buying dollars in order to prop up, to prevent the dollar from going over the edge of the cliff and in doing so causing a short hedging rally, which was not it’s too hard to do given the leverage employed in the markets these days by hedge funds and others.”

Just as central banks manipulate currencies in concert, gold can be manipulated through the massive sale of central bank reserves. Oil and any other market can also be manipulated. But markets can be manipulated to a certain extent and for a limited time without solving the underlying problem. More bad news is coming, news of such magnitude that no amount of ordinary manipulation can hide it.

For one thing, roughly $400 billion in ARMs (adjustable-rate mortgages) were or will be reset between March and October of this year. Assuming 3-6 months for tied-up debtors to actually hit the limit on their payments, a big wave of defaults is about to hit, and will continue through March 2009, just in time for the next big wave of resets, in options ARM. Option ARMs are loans with the option to pay even less than just the loan interest each month, increasing the loan balance until the loan reaches a certain amount (usually 110% to 125% of the original loan balance), when is reset. The recently opened $800 billion line of credit to Fannie Mae and Freddie Mac can not only be tapped, but tapped, at taxpayer expense. The underlying problem is little discussed but impossible to fix: a quadrillion dollar derivatives scheme that is now imploding. Banks around the world are facing massive write-offs, bringing the entire banking system to the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

To do? Historically, war and threats of war have been used to distract the population and divert public scrutiny away from economic calamities. As the outline was summed up in the trailer for the 1997 movie “Wag the Dog”:

“There is a crisis in the White House, and to save the election, they would have to fake a war.”

Perhaps that explains the sudden outbreak of war in the Eurasian country of Georgia on August 8, just 3 months before the November elections. August 8 was the day the Olympics began in Beijing, a diversion that may have been timed to prevent China from intervening on Russia’s behalf. The mainstream media version of events is that Russia, the bully on the block, invaded its tiny neighbor Georgia; but not all commentators agree. Mikhail Gorbachev, writing in The Washington Post on August 12, observed:

“What happened on the night of August 7 is beyond comprehension. The Georgian army attacked the South Ossetian capital Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. Accuse it of aggression against the ‘ defenseless little Georgia” ‘is not only hypocritical, but shows a lack of humanity. The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force.”

Bruce Gagnon, coordinator of the Global Network Against Weapons and Nuclear Power, commented on OpEdNews on August 11:

“The United States has long been involved in supporting ‘freedom movements’ throughout this region that have attempted to replace Russian influence with American corporate control. The CIA, National Endowment for Democracy, and Freedom House (includes Zbigniew Brzezinski, former CIA director James Woolsey, and Obama foreign policy adviser Anthony Lake) have been key sponsors and supporters of putting politicians in power across Central Asia who would play ‘our side.’ this is about the good guys versus the bad guys It’s power bloc politics There’s a lot of money at stake. [B]he parties (Republican and Democratic) share a bipartisan history and an agenda of promoting corporate interests in this part of the world. Obama’s advisers, as well as McCain’s (one of his top advisers was recently a lobbyist for the current administration in Georgia) are in this stew.”

Brzezinski, who is now an adviser to Obama, was a foreign policy adviser to Jimmy Carter in the 1970s. He also served in the 1970s as head of the Trilateral Commission, which he co-founded with David Rockefeller Sr., considered by some to be the “master spider” of the Wall Street banking network. Brzezinski, who wrote a book called The Grand Chess Board, later boasted about leading Russia into war with Afghanistan in 1979, “giving the Soviet Union its Vietnam War.” Is the Georgia affair an attempted repeat of that coup? Mike Whitney, a popular Internet commentator, observed on August 11:

“Washington’s bloody fingerprints are all over the invasion of South Ossetia. Georgian President Mikhail Saakashvili would never dream of launching a massive military attack unless he received explicit orders from his bosses at 1600 Pennsylvania Ave. After After all, Saakashvili owes his entire political career to American power brokers and US intelligence agencies. If he disobeyed them, he would be gone in a fortnight. Furthermore, an operation like this takes months of planning and logistical support, especially if it’s perfectly timed to coincide with the start of the olympics. (another little neocon touch) That means Pentagon planners must have been working hand-in-hand with Georgian generals for months beforehand. Nothing was left to chance.”

Part of that careful planning may have been the unprecedented propping up of the dollar and the bombing of gold and oil the week before the curtain fell on the scene. Gold and oil had to be pushed down hard to give them room to rise before someone yelled “hyperinflation!” As we watch the curtain rise on the war in Eurasia, it is good to remember that things are not always what they seem. Markets are manipulated and wars are staged by Grand Chessmen behind the scenes.