It is now obvious the invasion of Iraq and the trillion-dollar effort that followed were huge distractions from the main event in Afghanistan that now requires -- but isn't getting -- our allies' undivided attention. At an early stage of the Iraq war, 60 percent of Americans believed Saddam Hussein was behind the Sept. 11, 2001, attacks, a disinformation feat both Hitler and Stalin would have been proud of.

Globalization has turned out to be mostly globaloney. What began as criminal predatory mortgage lending in the United States tipped the world into the first global recession since World War II. The global economy, says the World Bank, will shrink this year for the first time since the 1940s, dragged down by falling demand in the West. Trade is forecast to drop to its lowest point in 80 years. Poor countries are hardest hit; 129 countries face a 2009 shortfall of at least $270 billion, possibly as high as $700 billion.

This week's The Economist, the prestigious weekly of the global elites, ran a cover showing the storming of the Bastille in Paris in 1789, with the bare-breasted Marianne leading the charge, bayoneted rifle in one hand and "GET THE RICH" placard held high in the other. Inside was a 14-page special report on "the rise and fall of the wealthy."

Democratic capitalism has steadily deteriorated since the end of the Cold War, morphing first into the fixed roulette wheel of a crooked casino and more recently into the heads-I-win-tails-you-lose bandit capitalism -- symbolized by a record $65 billion Ponzi scheme -- that brought the world economy to its knees and revealed the Masters of the Universe to be non-productive creators of worthless financial instruments that added zilch to America's productive capacity.

The cynicism of the American voter reached new peaks as President Barack Obama appealed for a "new era of responsibility" only to be confronted with fresh stories of corporate greed that undermined the seriousness of the cleanup. The bonus cornucopia, whether for retention of "irreplaceable" employees or rewards for the sale of toxic assets, made it possible for Freddie Mac and Fannie Mae, each covered with $200 billion in treasury guarantees, to distribute $210 million in taxpayer money as retention bonuses to its employees.

Bloomberg data now shows the government and Federal Reserve "have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s."

There is a rising populist anger, according to The Economist, and not only against the robber barons Teddy Roosevelt inveighed against a century ago. This time, politicians, central bankers and immigrants are part of the cabal. Rising inequality is the leitmotif. The top 0.1 percent of Americans earned 20 times the income of the bottom 90 percent in 1979, which rose to 77 times in 2006. There is a sixth sense that those who travel in private jets and summer cruise in mega yachts have cheated decent working folks of "their rightful share of the piece," writes The Economist.

Is The Economist catching up with the left-wing The Nation? The latter writes, "The financial elites are ideologically bankrupt, intellectually discredited and morally debased. They have no reputational capital and inspire no confidence. And yet, just as the deftly named 'legacy assets' continue to pollute the balance sheets of the major financial institutions, so too do these legacy elites continue to lurk on one side of the balance sheet of democracy. In other words, even if they aren't worth listening to, they still wield power. They can still bring the whole thing down. (That) is why the White House has softened its tone toward Wall Street of late."

Unlike the "deserving" rich entrepreneurs who set up Microsoft and Google, said The Economist, the "undeserving" traders and brokers "just shuffled money around the system to nobody's profit but their own. The faster the money went round, the larger the financial sector loomed in the rich countries' economies. At its peak, it contributed 41 percent of domestic American corporate profits, more than double the rate two decades ago. As finance grew, the banks got even bigger -- too big to fail, eventually, so when they tottered taxpayers had to prop them up. Far from epitomizing capitalism, the undeserving rich undermined it: It was socialism for the wealthy."

"Even a newspaper as inherently pro-business as this one," The Economist added, "has to admit that there is something rotten in finance: The basic capitalist bargain, under which genuine risk-takers are allowed to garner huge rewards, seems a poor one if taxpayers are landed with a huge bill for it all. Hence the anger."

But let us not forget the self-correcting mechanism that is the genius of capitalism -- "its ability to adjust to disruption from within and attacks from without," The Economist said. The special report also notes that "the rich are not as rich as they were: Some $10 trillion, around a quarter of the wealthy's assets, has been lost. Inequality will decline. Investment banks and hedge funds are shrinking; private equity groups are struggling to finance takeovers."

Higher taxes are also on the way -- though not right away, as what's needed in the immediate future is fiscal stimulus. "Squeeze the rich until the pips squeak, and the juice goes out of the economy," The Economist said. But regulation to curb what had become the law of the jungle to make capitalism work more efficiently is what 19 out of 20 nations at last week's G20 summit in London demanded -- and what Obama will now attempt gradually. "Such measures will not provide the lyrics to revolutionary anthems," The Economist concluded. "But they are going to be better than (bashing) the wealthy ... (when) you usually end up punching yourself in the nose."

Peering beyond the G20 horizon, another gathering storm is on the Middle East barometer. The new hard-line Israeli Cabinet has quietly dismissed any plan that would facilitate the emergence of a Palestinian state in the West Bank. And plans for bombing Iran's nuclear facilities are moving from the back burner to the front burner.

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