Arrogance of empire Paul Foot Wednesday August 20, 2003 The Guardian

In hospital last month for a (literally) nerve-wracking operation on my back, I was lucky enough to have with me an advance copy of Robert Harris’s novel Pompeii. At one level, the book is a thriller that kept me going through the entire sleepless night before the operation. At another, it is a thinly disguised satire on the arrogance of an empire that extended itself by force of arms so far across the world that it ignored elementary social and environmental problems at home. The fact that Pompeii before the eruption of Vesuvius was home to the richest Roman exploiters adds to the irony.

At the beginning of the book, Harris quotes, quite irrelevantly so it seems, the statistic that ancient Rome provided itself with more water than New York City did in 1995. Whether he chose this city by chance I do not know, but over last weekend, just a week before Pompeii was published, millions of citizens of New York and other US cities were plunged into darkness and chaos. They were obliged to suffer at least a tiny fragment of the agony of the people of Iraq, similarly cut off from electricity.

The Iraqi mess is the direct result of old fashioned US/British imperialism. The misery in New York and surrounding cities was caused not by terrorism – as many people there hastily assumed – but by capitalism, in particular its historic failure sufficiently to invest in unprofitable services that most people need. For a fleeting moment, likely to be repeated in the future, the citizens of Iraq and the US simultaneously became victims of the reckless greed of corporate America.

Thank heaven such horrors could not happen here. More than half a century ago, a Labour government nationalised gas, coal and electricity. Doggedly the Labour ministers responsible, led by a wild-eyed revolutionary called Hugh Gaitskell, staved off the Tory attacks on these measures. It was, those ministers argued, nonsense to talk of competition and “free enterprise” in the field of fuel and power, on whose regular supply the entire nation depended – and which were more efficiently and fairly run by publicly accountable monopolies.

Such arguments were denounced in the US as communist, and the supply of power there stayed in the hands of free enterprise. Some of the results of that were on show at the weekend in New York, Ohio and even in poor old semi-social democratic Ontario.

Is this just a North American problem? Among the harassed electricity company executives who stammered in front of television cameras on the night of the power cuts was Bill Edwards, president of Niagara Mohawk. His company supplies electricity to more than a million people in upstate New York. For six awful hours, many of them were cut off from power. Mr Edwards said he couldn’t comment on the suggestion that Niagara Mohawk had caused the blackout, at least until after a full investigation. In the meantime he warned his customers to turn down the air-conditioning and turn off unnecessary lights.

Now you might think that Niagara Mohawk is an American or a Canadian company. But you’d be wrong. Niagara Mohawk was bought in January last year for £2bn by the National Grid company, a private firm in Britain. National Grid plc merged last October with the Transco/Lattice Group, thus forming a monopoly that provides everyone in England and Wales with all their gas and electricity. More and more of the efforts of the new monopoly have been devoted to buying up power companies abroad – it has spent nearly three times as much on buying companies in the US as on capital investment in power in Britain.

How did the stale old socialist power monopoly created in the late 1940s to provide British people with gas and electricity become a brand new dynamic capitalist monopoly snapping up not altogether successful power companies abroad? Simple. Among the first and, for the City of London anyway, the most profitable of the great Thatcher privatisations were gas (don’t tell Sid) and electricity. At a stroke, parliamentary responsibility for these crucial areas of public concern was transferred to private boardrooms, whose jumped-up executives, revelling in their new power, awarded themselves fantastic salaries and bonuses.

The Labour party was outraged at the proposal, and threw itself into furious opposition. In December 1988, Labour’s young frontbench energy spokesman denounced electricity privatisation. “We are proud that we took the industry into public ownership,” he said. “When we come to power, it will be reinstated as a public service for the people of this country, and will not be run for private profit.” The young man’s name

-Ian.

—— http://story.news.yahoo.com/news?tmpl=story&cidR8&ncidR8&e=2&u=/ap/ 20030819/ap_on_hi_te/blackout_ham_radio Ham Radios Came to Rescue in Blackout Tue Aug 19, 1:14 PM ET By STEPHEN SINGER, Associated Press Writer

HARTFORD, Conn. – When technology failed on a massive scale last week, some old-fashioned broadcasting stepped into the breach as ham radio operators took to the airwaves to reach emergency workers.

For millions of people in the Northeast and Midwest, the Aug. 14 outage took access to e-mail and the Internet with it. Landline and cellular telephones were jammed by a crush of calls.

But the ham radio, which came into being in the World War I era, connected firefighters and police departments, Red Cross workers and other emergency personnel during the most extensive blackout in the Northeast since 1977.

Ham operators are not dependent on a server or cell tower, and with battery backups can operate when grids can’t.

“When everything else fails, the ham radio is still there,” said Allen Pitts, a ham operator in New Britain. “You can’t knock out that system.”

The radios are operated by a network of volunteers organized by the Newington-based American Radio Relay League.

Ham radio’s importance won renewed recognition after the Sept. 11, 2001, attacks. ARRL won a federal Homeland Security grant of nearly $182,000 to train amateur radio operators in emergency operations to help during terrorist attacks.

“It’s incredible the differences you’re seeing, the large cadre of people who know what they’re doing,” Pitts said. “It’s making a major difference.”

Tom Carrubba, a coordinator for ARRL in New York City’s five boroughs and two counties on Long Island, said volunteers went to work immediately after power went down Thursday afternoon.

“In five minutes guys were on the air with the Red Cross and Office of Emergency Management,” he said.

During other disasters, such as severe weather, ARRL volunteers and coordinators activate telephone trees, Carrubba said. On Thursday, they instead hit their assigned frequency or staffed an emergency operations center.

In the New York-Long Island region, with a population of nearly 10 million, about 100 ham radio operators handled the situation, Carrubba said. Some volunteers headed to a Red Cross headquarters or shelter, fire department, or hospital, he said. One hospital was temporarily out of power and ARRL volunteers provided communications to ambulances until electricity was restored.

Carrubba estimated that operators handled 800 to 1,000 communications from Thursday afternoon until early Friday.

___

On the Net:

http://www.arrl.org

By surrounding his military with a human shield, Saddam has effectively neutralized the ability for the US to use their Airpower to soften Baghdad. Killing civilians is bad — it has two effects; making Iraq harder to occupy and contain, and increasing the likelihood of a confrontation with Muslims worldwide. Coalition aircraft cannot effectively attack any targets in Baghdad without collateral damage. Even precision bombs cannot effectively soften the forces within and around Baghdad; not without civilian casualties anyway.

And the anti-aircraft guns have stopped firing in the city; presumably for two reasons — to conceal their positions, and to save ammunition for incoming Blackhawks and Apaches. They did fire three days ago at a flight of 30 Apaches, damaging all of them and downing one, however.

The US Army and Marines are faced with the prospect of entering into an Urban Guerilla War with no ability to use strategic bombing or artillery , and very risky close air support. They will have to walk and drive their way into an uncertain battleground in Baghdad, and even then there will be collateral damage, which will propagate to Al Jazeera, which will further incense the Arab world.

Iraqis are firing at citizens leaving their cities because they are the key to the defensive strategy. If the civilians abandon the cities of Iraq, then one can presume that all of those left will be combatants. This makes the US task vastly simpler.

All of which makes this situation eerily similar to a small country called Vietnam. The difference is Vietnam was a jungle, not a dense city; and the Viet Cong didn’t have Al Jazeera on their side.

But as the article I forwarded earlier today says, the Bush team’s strategy is self-perpetuating. There is no going back.

The only practicable option from my standpoint is to strip Saddam of his human shield. This tactic would involve laying siege to Baghdad and Basra, effectively starving out the citizenry. It will be up to the Iraqi citizenry to choose whether to die from lack of water, food, electricity, and medical supplies; or to risk death by their own soldiers as they flee the cities. If you can get the populace to leave the cities, then perhaps you can lay waste to anything that remains…. though that leaves a lot of rebuilding to do, may take months, and may result in Arab revolt anyway. I also doubt the UN and Red Cross would tolerate this.

I suspect that Arab Revolt is what the coalition really wants.

-Ian.

On Friday, March 28, 2003, at 04:33 PM, Daniel Berninger wrote:

> FoIBer’s,
>
> It seems this list has some strategic thinkers. Does anyone have
> suggestions for Mr. Rumsfeld?
>
> The article below (and others) note the current dilemma. Vulnerable
> supply
> line and insufficient troops in Iraq to get the job done regarding
> Bagdad
> (and no northern front) while reinforcements one month away.
>
> Option A. Press ahead and see what happens.
> Problem – troops exhausted, outnumbered, technology vulnerable,
> supply
> line unreliable
>
> Option B. Wait for reinforcements.
> Problem – troops vulnerable to continued Iraqi attacks. Likely
> worn
> down by the time reinforcements arrive.
>
> I don’t see anything that works except a retreat back into Kuwait to
> regroup. Anyone else?
>
> Dan
>
>>>>>>>>>>>>>>>>>>
>
> http://www.smh.com.au/articles/2003/03/27/1048653806667.html
>
> Months to victory, US warns
> By Marian Wilkinson in Washington, Christopher Kremmer and agencies
> March 28 2003
>
> A radio transmission operator from Weapons company-2nd Battalion/8th
> Regiment receives information on the radio about Iraqi movements at
> the east
> and west of their camp in the southern Iraqi town of Nasiriyah. Photo:
> AFP
>
> Senior Pentagon officials believe the Iraq war could take months, not
> weeks,
> to win amid indications that the assault on Baghdad may have to be
> delayed.
>
> The United States Secretary of State, Colin Powell, said in a radio
> interview yesterday the war “may take a little bit longer, [we] don’t
> know
> how long”.
>
> His comments came as the Pentagon ordered another 30,000 troops to
> Kuwait
> for eventual deployment in Iraq.
>
> As the US President, George Bush, met Britain’s Prime Minister, Tony
> Blair,
> at Camp David, the Washington Post reported that a debate was raging
> in the
> Pentagon over the future course of the campaign.
>
> Vital to their deliberations was whether to delay the final assault on
> Baghdad until reinforcements arrive to bolster units within 60
> kilometres of
> the capital.
>
>
>
> advertisement
>
> advertisement
>
> Some elements already in Kuwait, such as the 82nd Airborne Division,
> could
> be deployed within days, but others – including the 4th infantry –
> could
> take a month or more to arrive.
>
> Unexpectedly strong resistance and appalling weather have stalled the
> rapid
> advance that marked the early days of the campaign.
>
> US officials say Iraq has adopted a defence strategy that combines
> guerilla
> strikes, regular military assaults and suicide attacks using fuel
> tankers
> and buses carrying civilians.
>
> Nervous Baghdad residents were kept awake by more than 30 big
> explosions on
> Wednesday night, with the bombardment continuing after daybreak.
>
> US Army officers have been reported as saying that Iraqi forces
> continue to
> stream south from Baghdad to confront the coalition, apparently trying
> to
> exploit the vulnerability of advance units because of their insecure,
> 400-kilometre supply lines.
>
> US forces near Najaf and Karbala have run low on water and food, army
> sources said.
>
> In one move, several hundred vehicles believed to be carrying
> Republican
> Guards approached the US Army’s 3rd Infantry Division near Karbala,
> about 90
> kilometres south of Baghdad, prompting US commanders to call in air
> strikes,
> which they said wiped out much of the convoy.
>
> Another contingent of 2000 guards moved south-east from Baghdad towards
> elements of the 1st Marine Expeditionary Force advancing toward Kut.
>
> Fearing a suicide attack, marines fired on a bus that sped towards
> them on
> Highway Seven, killing 20 Iraqis. They were wearing what were
> described as
> makeshift uniforms and had two pistols between them.
>
> Washington and Baghdad have accused each other over the deaths of up
> to 15
> Iraqi civilians when a bomb or missile hit the city’s Al Sha’ab market
> district, the worst civilian casualties in the capital since the war
> began.
>
> Rejecting responsibility for the mounting civilian toll, the Pentagon
> is
> blaming all civilians casualties on Saddam Hussein.
>
> But the United Nations Secretary-General, Kofi Annan, rejected this and
> voiced increasing concern about the casualties.
>
> President Bush, during a visit to Central Command headquarters in
> Florida,
> pointedly praised the commander of the coalition forces, General Tommy
> Franks, and the military strategy.
>
> He also praised the role of allies, including Australia, which he said
> was
> providing “naval gunfire support and special forces and fighter
> aircraft on
> missions deep in Iraq”.
>
> But Mr Bush dropped a line that said the military plan “is ahead of
> schedule”, saying instead that he could not forecast the final day of
> the
> Iraqi regime, but “that day is drawing near”.
>
> Despite the obstacles elsewhere, about 1000 US paratroopers were
> dropped
> into Kurdish-dominated northern Iraq, opening a new front the coalition
> hopes will force the regime to redeploy some forces now defending
> approaches
> to Baghdad. They may also deter Turkey from carrying out its threat to
> occupy parts of the area.
>
> In the south, US and British commanders said they had destroyed much
> of a
> column of up to 120 Iraqi vehicles moving south from Basra.
>
> Iraq fired a missile at Kuwait, but it was intercepted by a Patriot
> battery,
> a Kuwaiti Defence Ministry spokesman said.
>
>
>
>

November 25, 2002 Top SciTech Gifts 2002

Still haven’t found presents for the science fans on your list? Before you brave the cold and the holiday crowds again, take a look at our favorite geek gifts to give and get this year.

That time has come once again when Scientific American editors wrap up their holiday shopping. Okay, actually we’re far from done. We admit it. But in our annual mad dash for this season’s best science and technology presents, we have turned up quite a few terrific gifts–from pet tornadoes and weather stations to million-year-old fossils and ancient pyramid kits.

Grouped into five categories below–wearables, novelties, toys, gizmos and other stuff–this collection has something for the geek in all of us. How would Dad like a watch with a built-in universal remote control? How about a chemistry set of delicious bath soaps for Mom? Have a nutty relative who, so far as you can tell, lives in a cave? Give him a bona fide bat detector. Or a lump of coal–from the Titanic. Happy browsing! –the Editors

Wearables

Tied to Science When you have to tie one on, it might as well be scientifically stylish. Josh Bach offers several options among its offerings of colorful silk ties for $39 apiece, including cartoons of atoms, moon phases and rocket ships. http://www.joshbach.com

Double Helix Bracelet Wear your feelings about science on your sleeve–and at the same time commemorate the upcoming (March 2003) 50th anniversary of the discovery of the structure of DNA by Watson and Crick. The bracelets are fashioned from spring steel and then silver plated. They come in three sizes and prices ($6, $10 or $15). There are also “hematite” and multi-color finishes available. http://www.carolynforsman.com/product.cfm?item_id

Smart (Alec) T-shirts Want to advertise your smarts before you even open your mouth? Some of these T-shirts should do the trick. The Bell Curve shirt shows the simple graph used so often for grading—and nicely points out the wearer’s superior spot at the far end of the scale. Another T, in a lovely shade of turquoise, conveniently shows more digits of Pi than you will ever need. http://store.thecoop.com/cgi-bin/coopstore.storefront /3dde42fa048dda74273fc0a814660702/Catalog/1343

Space Station Crew Cap Is someone on your gift list out of this world in one way or another? Give them this black baseball cap, identifying them as a crew member on the space station. The back of the hat features the IMAX logo. http://store.thetech.org/spacstatcrew.html

Midas Remote Controlled Watch Think of it—a universal remote control attached to your wrist at all times. No TV will ever again escape your will, at least not if it’s within 20 feet. This watch’s database covers every make/model of TV and cable receiver imaginable. What does such power cost, you ask? Only $39.99. http://www.thinkgeek.com/gadgets/watches/5a7b/ Novelties

Aged Well Fossils, skulls, and large insects are among the offerings at Maxilla and Mandible online. When we looked, for instance, the 350 million-year-old fossil trilobite was a steal at $56. Also available was a modern wildebeast skull with graceful black horns ($360), and an impressive specimen of a giant scorpion ($100). Prices and offerings vary. http://www.maxillaandmandible.com/

Titanic Coal Need to fill stockings for bad children, large and small? Well, for a mere $21.95 you can give them a piece of coal from the engine room of the most famous shipwreck, the sinking of the Titanic. Each lump comes with a certificate of authenticity. http://shop.store.yahoo.com/scimall-usa/titaniccoal.html

Test-tube Spice Rack For the chemist-cum-cook, this set of glass test tubes in a matching silver rack makes it easy to brew up just about anything in the kitchen. Cork stoppers keep spices fresh. http://www.gourmetbistro.com/glastestubsp.html

Bath Science Fill your tub with a variety of potions and lotions from chemistryset.net this season and keep the beakers and vials for later use. The delicious soaps, bath bombs, mineral salts, aromatherapy beads and candles from this site are all you need to dissolve holiday stress. http://www.chemistryset.net/

MC2 Frame Hand-made, hand-painted and cast in bonded porcelain, this beautiful frame is a nice way to display your photos of Einstein—or anyone else you hold near and dear. http://store.yahoo.com/msichicago/16-538.html

Surveyors’ Bearings Antique scientific instruments can be very pricey. But there are some high quality, accurate reproductions available that will put less of a dent in the pocketbook. The classic surveying compass, for example, was patented by Colorado mining engineer D.W Brunton in 1894. It quickly became the standard instrument for explorers mapping new lands and territories and charting coastlines. This faithful replica has a solid polished brass casing that opens to reveal folding peep sights; on the inside of the lid is a mirror with a centre line. The case is heavily constructed from a machined casting, with brass screws and hinges. It comes in a leather case with stitched seams and brass strap fastening. www.simplysuperbgifts.com

Signed by Chuck Yeager In 1947, Charles E. “Chuck” Yeager, flew into history when he became the first person to fly faster than the speed of sound. The Bell X-1 Rocket Research plane he piloted. You can’t give someone the original X-1–its at the Smithsonian Institution’s National Air and Space Museum but you can give them a 1:32 scale model autographed by Yeager. The model is handcrafted of mahogany and presented on a wooden display stand. www.smithsonianstore.com

Astronaut Autographs The moonwalker astronauts are now in their 60s and 70s–and most will likely be gone before humans return to the moon. But space buffs can still get the gift of a living remembrance of those heroic journeys in the form of NASA photographs autographed by the astronauts. For example, a signed and authenticated 16-by-20 copy of the famous photo of Neil Armstrong reflected in the faceplate of Buzz Aldrin’s helmet can be purchased for $299; framed for $459. www.novaspace.com Toys

Rocket Car Forget the run-of-the-mill remote-controlled models from Radio Shack. This two-foot long speed machine runs on pure vinegar and baking soda. You might want to send Fido outside before you fire ‘er up. http://store.thecoop.com/cgi-bin/coopstore.storefront/ 3dde42fa048dda74273fc0a814660702/Product/View/5029

Pet Tornado Speaking of pets, why not keep your very own storm around for a, well, sunny day? No need for walks, bones, scratching posts, flea collars or pigs ears. Just spin the cage and watch a baby tornado form. At $4.50, it makes a great stocking stuffer. http://store.yahoo.com/msichicago/pettornado.html

Cat-A-Pults Watch mechanics in action as Newton the foam cat flies from one catapult to the next. This set contains five catapults, each with 25 adjustment settings to control the cat’s trajectory up to distances of eight feet, and 10 actual Newtons, for a total of 90 feline lives. http://store.yahoo.com/ explo/catapults.html

Pyramid Building Blocks Reconstruct Tut’s tomb with this 67-piece block set. These hardwood blocks come in 18 different shapes, making it far easier for you to engineer a pyramid than it was for the ancient Egyptians. http://www.smithsonianstore.com/ product_detail.asp?styleg301&catid001814&dptidP2

Talking Globe Learn geography plus national anthems and songs. This globe asks more than 10,000 questions and grades your answers. You can create custom quizzes at different skill levels and track scores for up to four players. http://www.smithsonianstore.com/ product_detail.asp?style`26&catid#9&dptid#5

Ant-omology Like chemistry sets, the holidays wouldn’t be the same without some budding entomologist getting an ant farm. This escape-proof set up allows kids to watch these industrious arthropods through the walls of a round-walled clear container with a snap on magnifier for closer viewing. “Sugar Cement” puts nutrients into the sand while making it cave-in resistant and spurs the ants to greater activity. A mail-in coupon brings the ants to their new abode within 2 to 4 weeks. It also gives parents a chance to reconsider. www.scientificsonline.com

Designer Molecules Molecular models may be the Tinker Toys of the 21st century. Here’s a kit that contains an extensive assortment of 480 atoms molded in polypropylene. Three hundred flexible vinyl connectors represent the bond “linkages.” Double and triple bonds are easily constructed. Anything from an acid to an enzyme is easily fabricated. And even if its not the next blockbuster designer drug, the models are nice to look at. gallery.bcentral.com

Unraveling DNA It’s been 50 years since Watson and Crick figured out that the DNA packed in all living cells was coiled in the form of a double helix. But few people have actually seen this stuff of life. Here’s a kit that can give amateur experimenters a look by extracting the DNA from onion cells. By following simple instructions users can see the DNA precipitate from solution and lift it out of the test tube. In the process, they learn about cell lysis, denaturation, precipitation, super coiling, high molecular mass, and the double stranded helix. www.books4kids.com Gadgets

Portable Solar Array If the batteries in your CD player or cell phone run dry on a clear, sunny day, just plug the little gadget into iSun, a portable solar charger offered by ICP Global Technologies. The size of a small book, one iSun generates about two Watts of electricity, enough to power a Walkman, cell phone or PD. Each unit costs $79.99 a piece, and they can be linked together like a daisy chain to power hungrier devices. www.icpglobal.com

Backyard Weather Station Dreaming of a white Christmas? Go one step farther and make your own forecast. These professional weather stations feature anemometers to measure wind speed and direction, rain collectors to track daily and accumulated rainfall amounts, temperature and humidity sensors and much more. They transmit their readings to remote LCD console/receivers that can be placed up to 400 feet away. http://www.weathershop.com/davis_wireless.htm

Bat Detectors No, this isn’t a giant bat-shaped spotlight you project into the night sky. This palm-held gizmo is the bat-hunter’s equivalent to a fish finder. For beginners, Bat Conservation International, Inc., which brings you the Swedish-made devices, suggests the E-5 Microbat model, with high/low frequency capabilities for detecting most bats through a speaker or headphones. For around $89, it comes with belt clip, battery and instructions. http://www.batcon.org/catalog/catp3.html

Time Flows By Here’s new twist on the time-honored hourglass egg timer. The Bubble Timer is a polished two-inch acrylic cube that reckons the minutes by the lazy ascent of a bubble through a tube. Depending on the face the cube is set on, the tube has three inclinations–and hence counts out three different times: ten seconds, one minute or five minutes. Invert the cube to repeat the measurement. bubbletimer.com/

Don’t Party Without It No need to fear the consequences of overzealous holiday celebrating is you are carrying this Digital Alcohol Detector. This compact personal breathalyzer uses advanced semiconductor gas sensor technology to approximate the percent of blood alcohol concentration (BAC) from your breath. Blow into the mouth vent and within 10 seconds a precise reading, in increments of 0.01 percent, ranging from 0.00 to 0.19 percent BAC.appears on the LCD display. www.scientificsonline.com

Atomic Time With the ExactSet clock there is no reason to call the phone company for the correct time. This compact travel clock sets itself automatically to the radio signal from the US Atomic Clock in Colorado. In addition, the clock incorporates two alarms, time/day/date display, indoor temperature, and low battery indicator. It even has an eight minute snooze for an indisputable wakeup call. www.weathertools.com

Solar Observer Here’s a safe way to look at the surface of the sun. The Sunspotter is a wooden, folded-Keplerian telescope that uses a system of mirrors and a powerful 62millimeter objective lens to project a brilliant three-inch solar image onto a white viewing screen. Sunspots can be easily tracked as they appear and move across the solar disk. Tracing the images provides an hour-by-hour or day-by-day record of the solar cycle. www.scientificsonline.com

Bright Beam Almost everyone has a flashlight–or too many–but the X5 LED Long Distance Flashlight adds a new dimension. Its powerful beam reaches 120 feet but, unlike conventional flashlights, it illuminates that darkness in full spectrum color by combining the light from five LED bulbs. The distinctive blue beam can be seen more than two miles away at dusk or dark. Its aircraft-grade aluminum case is virtually unbreakable, completely waterproof (up to 150 feet), and shock proof. shopping.discovery.com

Digital Microscope Another old standby children’s gift–the optical microscope–is going digital. The C2D Microscope connects to a PC and can magnify objects up to 220 times their actual size. The software can record both stills and video. Like its mechanical forebears, the kit also contains dissecting tools and prepared slides. store.yahoo.com Other

Adopt a Whale For only $54 dollars, you can help support research on killer whales and claim one for your very own or for a friend. The killer whale adoption program from the Vancouver Aquarium Marine Science Center sends you an ID photo and biography of your whale, an adoption certificate, a CD featuring the sounds of British Columbia’s killer whales and newsletter about the research program. You choose your whale from a pull-down menu: Balaklava, Clio, Echo, Izumi, Nimpkish, Whisky and pals are waiting. http://www.clamshell.org/

Sponsor a Big Cat For only $25, you can sponsor a jaguar, snow leopard or Siberian Tiger and get a bunch of great goodies as well. The Wildlife Conservation Society will send you a limited edition T-shirt, one year of their magazine, a brief history of your cat and information about what WCS is doing in its habitat to help protect wildlife. For $35 or more, you’ll also receive a quarterly newsletter. http://wcs.org/bigcats/#whichcat

Blue Planet This hauntingly beautiful journey beneath the sea made documentary history. From giant whales to tiny coral polyps and the strange organisms that live in the abyssal deep, it contains scenes never before captured on camera. Narrated by Sir David Attenborough, it stands as a definitive exploration of the ocean’s most breathtaking habitats, from its deepest recesses to its frozen deserts. The entire series is available in a boxed gift set of four DVDs. DVD extras include behind-the-scenes featurettes, interviews, photo galleries, fact files and a Blue Planet music video. shopping.discovery.com

———–

Oliver Burkeman in New York Thursday November 14, 2002 The Guardian

The midwestern United States, equally devout in its worship of God as in its worship of gas-guzzling four-wheel-drive vehicles, is about to be asked to choose between the two.

“What Would Jesus Drive?” is the slogan dominating a television advertising campaign about to blanket cities in Iowa, Indiana and Missouri, along with the southern state of North Carolina.

The question presumably did not arise in first-century Galilee, but the Christian group behind the ads believes the answer would not include sports utility vehicles, the fuel-inefficient, environmentally unfriendly monsters that rule America’s roads.

“We have confessed Christ to be our saviour and Lord, and for us, that includes our transportation choices,” the Rev Jim Ball, of the Washington-based Evangelical Environmental Network, said.

“Most folks don’t think of transportation as a moral issue, but we’re called to care for kids and for the poor, and filling their lungs with pollution is the opposite of caring for them.”

The campaign’s slogan is inspired by What Would Jesus Do?, a phrase ubiquitous among young Christians in the US who sport it on bracelets, clothing and customised Bible covers.

“We take seriously the question What Would Jesus Do?”, Mr Ball said. “What Would Jesus Drive? is just a more specific version. What would he want me to do as a Christian? Would he want me to use public transportation?”

A coalition of religious groups, led by Christians and Jews, are due to launch a related campaign later this month in Detroit, America’s car capital, where they have called for a meeting with representatives from the big three manufacturers, Ford, General Motors and DaimlerChrysler.

Though all three companies have begun to launch hybrid cars powered partly by electricity, SUVs, vans and pickups still account for half the new vehicles sold in the US. TV ads abound declaring them “professional grade” and built “like a rock”.

Car companies say they are only responding to demand.

“If people would be demanding tailfins on cars, we’d be making tailfins on cars,” said Eron Shosteck, of the Alliance of Automobile Manufacturers.

At least one car maker is fighting on the same territory as Mr Ball: Chevrolet has been touring a series of nationwide evangelical rock concerts entitled Chevrolet Presents: Come Together and Worship, prompting condemnation from non-Christian groups.

“This may be a sign of the times,” Rabbi James Rudin, spokesman for the American Jewish Committee, said recently. “But it’s not a good sign.”

———–

When George W Bush arrived in the White House, it was hardly surprising that he looked after Enron – the company had been looking after him for years. In the final extract of his book, Robert Bryce describes how the firm bought its way into Washington’s corridors of power

Wednesday November 6, 2002 The Guardian

Pipe Dreams Buy Pipe Dreams at Amazon.co.uk

Surely it’s just a coincidence. What else would explain why Enron Oil and Gas, a subsidiary of Enron Corp, would have been in business with George W Bush back in 1986? Bush the Younger was many things, including the eldest son of the vice president of the United States. A successful oilman he was not. Bush’s forays into the energy business had been nothing short of disastrous. In 1984, Bush had no choice but to merge his faltering firm, Bush Exploration Company, with another company, Spectrum 7. But by mid-1986, Bush had done his magic on the privately owned Spectrum 7. The company wasn’t producing much energy of any kind, and Bush was actively trying to sell again. Despite Spectrum 7’s lousy record, it somehow got into business with Enron Oil and Gas. And on October 16, 1986, Enron Oil and Gas announced that it had completed a well a few miles outside of Midland, Texas, that was producing 24,000 cubic feet of natural gas and 411 barrels of oil per day. Enron owned 52% of the well; 10% belonged to Spectrum 7.

Now, the oil and gas business is full of speculators, and wells are often drilled with multiple investors with varying backgrounds. But the early Bush-Enron connection points out just how small the energy business is. Lay’s ties to George W Bush go back to 1980, when Bush made his first bid for the White House. Bush, who had recently served as director of the Central Intelligence Agency, needed campaign funds after his surprise win in the Iowa caucuses. So Lay, who had probably met Bush through mutual friends in the energy business in Houston, gave money to Bush’s campaign. Though Bush didn’t win, Ronald Reagan made him vice president. Bush went on to chair the panel that pushed Reagan’s task force on deregulation. One of Reagan’s biggest moves in deregulation involved the lifting of federal controls on natural gas markets, a move that Lay had long favoured.

When the elder Bush got to the White House, he didn’t forget Lay. Bush rewarded Lay during his presidency with one of the most coveted perks of being a presidential pal, a sleep-over at the White House.

When Bush the Younger decided to run for governor of Texas in fall 1993, one of his first stops on the campaign trail was Houston. During his visit, George W Bush asked Lay to be the finance chairman of his campaign in Harris County, which includes Houston. Lay didn’t take the job. He preferred to give George W Bush a $12,500 (£8,000 at today’s rates) cheque and work behind the scenes. In his stead, Bush’s campaign in the county was headed by Lay’s second in command at Enron, Rich Kinder. In all, Lay, Kinder, and other Enron executives donated $146,500 to George W Bush, almost seven times more than the amount they gave to the incumbent candidate, Democrat Ann Richards. The donations by the execs, combined with money from Enron’s political action committee, made the Houston company Bush’s biggest campaign contributor.

After George W Bush defeated Richards, Enron gave $50,000 to Bush’s inaugural committee. Lay began lobbying Bush almost immediately. In December 1994, before Bush moved into the Governor’s mansion in downtown Austin, Lay began sending him regular letters on energy policy, tax issues, lawsuit reform and other matters. That month, Lay asked Bush to appoint Pat Wood, who supported the deregulation of electric utilities, to the state’s public utility commission. Bush complied with Lay’s request. And later on, Bush would appoint Wood – again at Lay’s recommendation – to the federal energy regulatory commission.

And while Lay maintained close ties to the Bush family throughout George W Bush’s stint as governor of Texas, those connections would be even more valuable to him and to Enron if Bush the Younger could throw the Democrats out of the White House. In December 1999, while Bush was pounding the campaign trail, Lay again wrote to his friend, addressing it to “George and Laura” [Bush’s wife]. “Linda and I are so proud of both of you and look forward to seeing both of you in the White House.”

Lay had been one of Bush’s first “pioneers”, each of whom pledged to raise $100,000 for Bush. He had also made Enron’s fleet of aircraft available to his campaign. The Bush campaign used Enron’s jets to fly to different events on eight different occasions – more than any other corporation. During the 2000 election cycle, Lay contributed more than $275,000 to the Republican National Committee. Enron’s total donations to the party exceeded $1.1million. When the outcome of the election was in doubt after the polls closed in November 2000, Lay and his wife, Linda, gave $10,000 to help finance the Bush campaign’s Florida operation during the recount after the election.

After Bush prevailed in the election (thanks to assistance by the US supreme court) Ken and Linda Lay gave another $100,000 to help finance Bush’s inaugural gala. In all, Enron and its top execs kicked in $300,000 for the inauguration festivities. Naturally enough, the day after the inauguration, Lay went to a private lunch party at the White House, where he got to schmooze with the new president one on one. A few weeks later, Lay had dinner with the president.

It wasn’t long before Enron’s bet on George W Bush was paying off in more important ways, too. Although the California energy crisis was raging throughout his first few months in office in 2001, the president refused – for nearly six months – to consider the possibility that the golden state’s power markets were being manipulated. In some parts of the state, electricity rates had gone from $30 per megawatt hour to an alarming $1,500 per megawatt hour. Rolling blackouts – and threats of blackouts – had the state in a near constant uproar. By the time Bush had spent about 180 days in the White House, the state of California had spent nearly $8 billion buying power on the open market just to keep the lights on.

Despite the crisis, Dianne Feinstein, a senator from California – the most populous state in the union – couldn’t get an appointment with Bush. The White House had plenty of time for Enron, though. On April 17 2001, Vice President Cheney had a private meeting with Enron chairman Ken Lay. During the meeting, Lay offered suggestions for Cheney’s energy task force and lobbied Cheney against price caps in California. Cheney quickly adopted Lay’s argument. The day after his meeting with Lay, Cheney mocked the idea of price caps. He told the Los Angeles Times that caps would only provide “short-term political relief for the politicians.” In late May, Bush visited California and, like Cheney, attacked the idea that price caps – something the California governor, Gray Davis, and Feinstein had been begging for – might help the state restore order to its electricity system.

Bush and Cheney were wrong. Enron and several other power companies had been manipulating the California energy market for months and collecting huge revenues for their efforts. Using strategies with colourful names like Death Star, Get Shorty, Fat Boy, and Ricochet, Enron had apparently figured out ways to play the state’s power system and drive up prices. Finally, on June 18 2001, after weeks of rising intrigue, the federal energy regulatory commission approved limited price caps for California. The move quickly settled the state’s power markets.

Enron’s connections in the White House went much further than George W Bush. The new president’s chief economic adviser, Larry Lindsey, was on Enron’s payroll before going to the White House, earning $100,000 in consulting fees from the Houston company. Marc Racicot, the former governor of Montana, lobbied for Enron before Bush named him to lead the Republican national committee. Robert Zoellick, Bush’s choice for US trade representative, served on an Enron advisory council. Thomas White, Bush’s secretary of the army, was the vice chairman of Enron Energy Services, a money-losing charade of a company. Nevertheless, when White left Enron, he owned more than $25 million in the company’s stock. Bush’s chief strategist and political guru, Karl Rove, owned more than $100,000 of Enron stock when Bush took office.

Bush’s White House provided Lay and Enron with unprecedented access. In addition to the meeting with Lay, Enron officials met with Cheney’s task force (the national energy policy development group) five times and talked to it by phone on at least six other occasions about the measure. Their effort shows. The national energy policy development group’s final report – Reliable, Affordable and Environmentally Sound Energy for America’s Future – released in mid-May 2001, contains a number of provisions very favourable to Enron. For instance, the report recommends the creation of a national electricity grid, a move that could allow Enron to trade electric power more readily in all regions of the country.

The report says permitting for gas pipelines should be expedited, a factor that would help Enron, already one of the largest pipeline companies in the world, build more capacity more quickly. The report talks about the California crisis, the need for energy efficiency, increased domestic natural gas production and, of course, India. Didn’t you know that the cost of butane in Bombay is critical to soccer moms in Seattle? Cheney’s group recommended that “the president direct the secretaries of state and energy to work with India’s ministry of petroleum and natural gas to help India maximise its domestic oil and gas production”.

Not only could Lay get Bush’s ear on appointments, he could get federal reports to mention countries like India, where Enron, with the Dabhol electricity and liquefied natural gas project (also mentioned in Cheney’s report), was a major investor.

To be fair, the energy report also discusses America’s growing reliance on energy from Mexico and Canada. But the state department, which participated in the writing of the energy report, didn’t add the India section; the White House did. Ken Lay’s money on George W Bush had been well spent.

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Its testosterone-fuelled traders were fixtures in Houston’s strip clubs. One division of the company spent $2m a year on flowers alone. And its executives used the firm’s corporate jets as taxis. In the first extract from his remarkable new book on the rise and fall of Enron, Robert Bryce describes the heady mix of greed, sex and arrogance that produced America’s most spectacular financial scandal

Monday November 4, 2002 The Guardian

J R Ewing never talked about pipelines. Jett Rink was interested in drilling for oil, not shipping it through a maze of unseen steel tubes. Real men – particularly fictional ones like Ewing and Rink – find oil and gas. Lesser mortals navigate the maze of engineering, metallurgical and legal wrangles that are needed to get those hydrocarbons delivered to the nearest refinery or storage terminal. Face it, there’s no sex in laying pipe.

Yet pipelines are the conduit for the American Dream. Every year, pipelines carry some 550 billion gallons of crude and petroleum products to refineries, airports, rail yards and other locations. Trillions of cubic feet of natural gas are moved through some 2 million miles of interstate, intrastate and local pipelines. Pipelines are the largely invisible, sometimes dangerous, infrastructure that allows America to consume more energy than any country on earth. By the early 1990s, when Jeff Skilling, a former McKinsey consultant, began his rise to power within Enron, the company and its leaders were, says one veteran gas man, “the kings of the American pipeline business”. Enron owned the greatest collection of tubular steel infrastructure ever assembled in one company. It was transporting or selling 17.5% of all the gas consumed in the United States.

Those pipelines were profitable but they were, and still are, heavily regulated by federal authorities. With all of the federal regulations on pricing, the pipeline business is more akin to the utility business than the energy business. Pipelines carry a product from one spot to another, and the owner of the pipe gets paid a fee for the service. It’s a straightforward, profitable business. As one former Houston Natural Gas executive said of pipelines: “All they do is make money. It’s boring, but it’s dependable.”

Perhaps that’s why Skilling hated them so much. Skilling’s brain was too big for pipelines. He was always thinking big thoughts. And big thoughts have no place in the pipeline business. Pipeline companies demand solid managerial skills from people who show up every day and stick to their business. Skilling was not a manager, he was a deal-maker. Exotic financing schemes and the deals that came with them excited Skilling. Collecting nickels, dimes and quarters from what was essentially a new-fangled toll road that no one could even see, did not. The only thing that mattered to Skilling about Enron’s pipelines was that they kept providing him with cash that he could use elsewhere.

For Skilling, elsewhere meant only one place: the trading business. Skilling may have disliked pipelines, but he was an absolute genius at figuring out how to trade the precious commodity that moved inside them.

As soon as Skilling moved on to the 50th floor, he began a hiring binge that didn’t stop until the company went bankrupt. But give him credit: he attracted the best and the brightest. Harvard, West Point, Rice, University of Chicago – every prestigious school in the country began feeding their best MBAs, engineers and maths wonks to Enron. At the same time, Skilling began raiding Wall Street, stealing traders, investment bankers, information technology whizz kids, programmers and every other skill-set that Enron needed.

The fleet of newly hired hotshots were never short of confidence or the belief that they were working at the best, smartest, fastest-moving company in the world. One longtime Enron employee (who held a PhD from the University of Maryland) said: “There’s no question that Enron people arrogantly thought they were smarter than everybody else. There’s no excuse for that. But they were smarter than everybody else.”

By mid-2000, Skilling had achieved his goal: almost all vestiges of the old Enron, the stodgy, slow-growing pipeline-based entity that transported gas and generated a bit of electricity, were gone. In its place, Enron had become a trading company. And with that change came a rock-’em, sock-’em, fast-paced trading culture in which deals and “deal flow” became the driving forces behind everything Enron did.

Traders ran the place. All of the company’s top executives – particularly those close to Skilling – were either traders or had helped run trading operations. And all of them believed in Skilling’s vision of Enron as a trading company. Chief financial officer Andy Fastow (who was last week charged with 78 counts of fraud and money-laundering) had learned the trading business while in Skilling’s group in the early 90s. Greg Whalley, the president of Enron Wholesale Services, the entity that ran the company’s trading operations, had worked in Europe as one of Enron’s chief power marketers. Mark Frevert, the chairman and CEO of Enron Europe, had overseen the company’s European trading operations. Other top execs, such as Lou Pai, had been involved in trading for years.

Pai, who owned a 14,000ft mountain in Colorado, had two passions in life: money and watching young women take their clothes off – but not necessarily in that order. At Enron, he was able to gorge on both. Stories of Pai’s fascination with strippers were legion. One executive recalled getting an expense report from Pai in 1990, shortly after Pai began working for him. “It was $757 [£484] for one lunch. He and two or three co-workers had gone to Rick’s [a Houston strip club]. I said, ‘I’m not approving this. You are going to have to take care of this yourself.’ You just don’t do that in business.”

But Pai’s attitude to women and sex was far from exceptional at Enron. Several women who worked at Enron said that Skilling and the young traders who dominated the company viewed women as a commodity that could be bought and sold just like gas, electricity, or any of the other products Enron was trading. And since Houston’s strip clubs are among the best in the country, it was only natural that Enron’s boy geniuses visited them regularly.

Sex and extramarital affairs are not, by themselves, a problem for companies. But at Enron, the sexual misconduct happened at such high levels that it became a part of the company’s culture. The sex, said one executive, “set the tone for the rest of the company. And you couldn’t get away from it. It was like a humidifier. It was in the air.”

Enron’s massive new edifice to itself, a 40-storey, 1.2 million sq ft building was going to be a monument to trading. The building, designed by acclaimed architect Cesar Pelli, would have four trading floors – each big enough for 500 “transaction desks” – with state-of-the-art communications systems. Chairman Ken Lay and Skilling would move their offices from the 50th floor of the old building down to the seventh floor of the new one. Instead of overlooking all of Houston, their new offices would be on a balcony overlooking the new trading floors. And they wouldn’t have to take elevators to get to the traders: two snazzy, curved stairways were going to connect their floor with the trading area.

The new tower had been under construction for nearly a year and was costing Enron a fortune. Pelli’s design, which would mimic the glass-sheathed oval tower Enron already occupied, was going to give Enron the most expensive building in downtown Houston. The final bill would be about $300m.

Enron was wasting even more money in Europe. The company’s European trading operations were located in an impressive new building named Enron House, located at 40 Grosvenor Place, in the heart of London, on land owned by the Duke of Westminster. Although the building cost $74m to construct, Enron spent another $30m in bringing it up to the company’s lofty standards. When it moved into Enron House in November 1999, the top executives, including Frevert, could sit in their top-floor offices and look down on rear gardens of Buckingham Palace. The rent for the new digs? A bargain at a mere £8m a year.

And if the Pelli-designed building was going to make a statement, it had to be decorated. It needed art. Expensive, trendy art. And Andy Fastow and his wife Lea – modern-day de Medicis – were just the ones to make sure Enron made the right decisions. Beginning in the summer of 2000 and continuing right through until the autumn of 2001, as Enron began to spiral downward, the Fastows were the driving force behind an amazing art-buying binge. They spent $575,000 on a soft sculpture by Claes Oldenburg. They paid $690,000 for a wooden sculpture by Martin Puryear, a record amount for his work sold at auction. The committee also bought works by the sculptor Donald Judd, the painter-printmaker Vic Muniz, the video artist Nam June Paik, the photographer Julie Moos and the painter Bridget Riley. By August and September 2001, the company had spent about $4m on 20 different pieces.

Extravagantly appointed offices were far from the company’s only indulgence. In 1997, Skilling’s gas and power trading group, Enron Capital and Trade, spent about $2m on flowers, according to an auditor who worked for the division. “Oh yeah, we had secretaries sending their bosses flowers, bosses sending their secretaries flowers. For a while, we were the biggest customer for about five florists all over Houston,” said the auditor. “We found out some secretaries were sending flowers to their friends so that the secretaries could get the pretty vases the flowers came in.”

Flowers, first-class airfares, first-class hotels, limousines, new computers, new Palm Pilots, new desks – Enron employees began to expect the best of everything, all the time.

But cost-control was never a consideration for Skilling and Lay. After all, EnronOnline, the company’s new website, was the toast of cyberspace. In the few months since it had been launched in November 1999, it had quickly become the biggest e-commerce site the internet had ever seen. The trading site had been the brainchild of a trader, of course, named Louise Kitchen, a brash young Brit who had been Enron’s head natural gas trader in Europe. Cocky and impatient, Kitchen was emblematic of Skilling’s new version of Enron. At just 31 years old, she was young, rich (in 2001, her total pay from Enron was $3.47m), and she believed that there was no end to what she – and Enron – might do.

While she and her team were developing the site, Kitchen said: “I didn’t need a pat on the back from Ken Lay or Jeff Skilling. It was obvious that we should have been doing this ages ago.”

Kitchen’s attitude was typical among the traders. They were the über-Enroners, the ultimate masters of the universe. Kitchen, along with another thirtysomething trader, a Canadian named John Lavorato, was rapidly consolidating her power within Enron. And within a few months of EnronOnline’s debut, the pair were heading all of Enron’s North American trading operations. There were hundreds of traders, lined up with banks of computer screens, keyboards, telephones – and adrenaline. In the first five months of 2000 alone, the website did 110,000 transactions with a total value exceeding $45bn. Deals could be done in seconds, rather than minutes or hours.

Electricity, natural gas, coal, oil, refined products, bandwidth, paper, plastics, petrochemicals, and even clean-air credits were for sale on Enron’s website. Within a few weeks of its launch in November 1999, EnronOnline was the biggest e-commerce entity in the world. In all, the company was selling over 800 different products.

EnronOnline was the logical outgrowth of Enron’s gas trading business. What had been done by phone and fax was now being done on the web. The company’s trading business surged, in large part, because of tremendous increases in gas consumption in the United States. Between 1983 and 2000, demand for natural gas in America rose by nearly 30%, to 22.5 trillion cubic ft per year.

Enron transferred what it learned in gas to the electricity business. Once confined to trading among utilities, Enron elbowed its way into electricity trading in the mid-1990s. It was selling gas and power, but all the while it was collecting still more information that provided a constant feedback loop. Enron owned pipelines and power plants, and with EnronOnline, it could instantly tell in which direction the market was going. It could also tell who was buying, who was selling, and where it should be placing its own bets in the marketplace.

In a very short time, Enron had remade itself from pipeline company to the largest energy marketer in the country. But Skilling wasn’t satisfied. He wanted more. So in May 2000, Enron announced that it would buy the London-based MG plc, one of the biggest metals traders in the world, for $446m. Lay said that the deal would allow Enron to claim a major role in the $120bn-per-year metals market. “Our business model, which we have proven in the natural gas and electricity markets, will give us a tremendous advantage in an industry that is undergoing fundamental change.”

There it was again: Enron knew how to trade gas; it knew how to trade electricity; now it would apply those lessons to the metals business.

Surely, Enron would succeed. The company owned pipelines and power plants, valuable assets that gave it visibility in the gas and electricity markets in North America, South America, Europe and Asia. It had a big trading operation in Europe. EnronOnline was becoming the de facto standard for traders all over the world. Commodity traders on Wall Street relied on EnronOnline for pricing on dozens of different products and invariably had one of their computer screens tuned to the website. And Enron had one of the most sophisticated trading platforms ever developed. The company’s traders could assess the risk on any deal almost instantaneously. Any deal they made was instantly processed and accounted for in the company’s massive data centre. Almost any position Enron took in the commodities market was quickly hedged with a countervailing position. Furthermore, it had a battalion of traders who were among the sharpest in the business. They made more money, had bigger egos, and drove faster cars than just about anybody.

Skilling became convinced that Enron simply couldn’t lose. In the lingo of his predecessor, Rich Kinder, Skilling began “smoking his own dope”. Skilling had made Enron into the trading company that everyone was talking about. Enron had become the 900lb gorilla in the marketplace. It didn’t just own the casino. On any given deal, Enron could be the house, the dealer, the oddsmaker and the guy across the table you’re trying to beat in diesel-fuel futures, gas futures, or the California electricity market. With all of those advantages, Enron’s trading business must have been a cash machine. Right?

Wrong.

Like every business Skilling created while he was piloting Enron, the trading business was a loser. Sure, trading was glamorous and sexy, but it generated virtually no cash for Enron. And that was a problem. Instead, Enron’s trading operation had an insatiable appetite for cash. Unlike other online energy marketplaces such as Altra or the consumer-goods auction site, eBay – which matches buyers and sellers for a fee – EnronOnline was the principal in every transaction. That’s a very expensive place to be.

If a seller agreed on Enron’s posted price for, say, natural gas to be delivered on a certain date, that seller could sell it immediately to Enron. The company would then take title to the gas and try to sell it to another party. That may not sound like a big deal, but by mid-2000, Enron was doing several billion dollars’ worth of trades every day. And because it was in the middle of every transaction, Enron would have to hold some of those commodities for days or even weeks before it could get the price that it wanted on its trades. That meant Enron had to have billions of dollars in cash at the ready. The sort of ready cash needed to clear and fund each sale and purchase – often called a company’s “float” – can be enormously expensive. And the bigger the float, the bigger the expense.

Every day that Enron held on to a big position in a commodity, it had to pay interest on the money it borrowed to take that position. For instance, one of Enron’s gas traders might be betting that gas prices would rise and therefore go “long” on gas contracts in the amount of 500 million cubic feet of gas. At $3 per 1,000 cubic feet, the gas could be worth $1.5m. That might not sound like much. But Enron had hundreds of traders, some going long, others going short in gas and dozens of other commodities. Supporting all of those positions required huge amounts of capital. And as the number of transactions handled by Enron-Online grew, so did its appetite for capital. The new operation had to have enough cash to keep a liquid market in 800 different products, each of which was seeing a big surge in volume.

In the first six months of 2000, Enron borrowed more than $3.4bn to finance its operations. The company’s cash flow from operations was a negative $547m. Enron was losing money – real money, cash money – hand over fist by just being in business. Interest expenses were surging.

By the end of June 2000, Enron was paying about $2m per day in interest to banks and other lenders. The $376m in interest charges for the first half of 2000 was more than it paid in all of 1996. Despite EnronOnline’s voracious appetite for capital, Skilling was able to convince a nearly constant parade of reporters that Enron’s trading business was the golden goose. Other companies were going to explode as Enron figured out how to buy and sell every part of an individual company’s traditional business. Enron was going to intermediate everything, commoditise everything. Just as the Ford Motor Company didn’t have to own the steel mill to build cars, Enron was going to speed the breakup of every business in the world into its individual parts.

“We believe that markets are the best way to order or organise an industrial enterprise,” Skilling told the Financial Times in June 2000. “You are going to see the deintegration of the business systems we have all grown up with.”

If Enron was going to help that “deintegration”, its trading business was going to keep growing. And that meant Enron would need more capital, lots more capital. But there was a problem: Enron could not raise capital by adding more debt. More debt on its balance sheet might lower the company’s credit rating, which would further increase the company’s already high interest costs. Skilling needed more cash but no more debt. Some smart “financial engineering” was required.

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> From: “Mises Daily Article”