Friday, September 12, 2008

The Key to Wedded Bliss? Money Matters

By TARA SIEGEL BERNARD

IF you ask married people why their marriage works, they are probably not going to say it’s because they found their financial soul mate.

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Robert Stolarik for The New York Times

But if they are lucky, they have. Marrying a person who shares your attitudes about money might just be the smartest financial decision you will ever make. In fact, when it comes to finances, your marriage is likely to be your most valuable asset — or your largest liability.

Marrying for love is a relatively recent phenomenon. For centuries, marriages were arranged affairs, aligning families for economic or political purposes or simply pooling the resources of those scraping by.

Today, while most of us marry for romantic reasons, marriage at its core is still a financial union. So much of what we want — or don’t want — out of life boils down to dollars and cents, whether it’s how hard we choose to work, how much we consume or how much we save. For some people, it’s working 80-hour weeks to finance a third home and country club membership; for others, it means cutting back on office hours to spend more time with the family.

“A lot of the debates people have about money are code for how we want to live our lives,” said Betsey Stevenson, assistant professor of business and public policy at the University of Pennsylvania’s Wharton School, who researches the economics of marriage and divorce. “A lot of the choices we make in how we want to live our lives involve how we spend our money.”

Making those choices as a team is one of the most important ways to preserve your marital assets, and your union, experts say. But it’s that much easier when you already share similar outlooks on money matters — or when you can, at the very least, find some middle ground.

The economies achieved by pairing up are fairly obvious. However, the costs of divorce can be financially devastating, especially when children are involved. And, not surprisingly, money manages to force a wide wedge between many couples.

“Most people think people break up over sex issues and children issues — and those are issues — but money is a huge factor in breaking up marriages,” said Susan Reach Winters, a divorce lawyer in Short Hills, N.J.

Not everyone is married to a financial twin, and that’s not necessarily a problem. There are several ways that you and your significant other can become more compatible, and ultimately more prosperous, when it comes to money.

These guidelines are compiled from the successfully married and from experts on psychology, divorce and finance:

TALK AND SHARE GOALS Before walking down the aisle, couples should have a talk about their financial health and goals. They should ask each other tough questions: Do we want children? When? Who will care for them? Will they go to public or private school? What kind of life do we want? When will we retire?

“In my ideal plan for couples, they would have a meeting every week on their finances,” said Karen Altfest, a financial planner who runs the New York firm L. J. Altfest & Company, with her husband, Lewis. “That way, they are in sync with each other’s goals.”

Set those goals together. Jerry Ballard, 58, a former insurance executive in Houston, said that he and his wife of 36 years, Susan, also 58, managed to avoid money clashes because they share a savings philosophy. “The cardinal rule was that we don’t interrupt our savings,” he said, adding that they saved between 10 and 20 percent of their salaries each year. As long as they did that, they were less likely to disagree about spending.

Eric Gundlach, 53, of Owings Mills, Md., who has been married for 29 years, said he and his wife, Ann-Michele, “made our expectations explicit.” These included sending their son to private school and having big experiences, like traveling, in lieu of purchasing things.

RUN A HOME LIKE A BUSINESS Make a budget and keep track of earnings, expenses and debts. And structure your business as a partnership; when it comes to making big financial decisions and setting goals, do it together. “When they are making the decisions together, they really have ownership of those decisions and any results of those decisions,” said Mary Ann Sisco, national wealth adviser at JPMorgan’s private wealth management division. “Even if you have negative results, you tend to weather the storm better.”

Share responsibilities, too. Though one partner tends to control the finances, advisers recommend rotating tasks. One person should handle investments for a certain period, while the other pays the bills; rotate and repeat.

BE SUPPORTIVE OF CAREERS Having a supportive partner helps you professionally, which should trickle down to your mutual bottom line. “Marrying the right person helps you succeed in your career through encouragement and support, the only kind of support that comes through a supportive, intimate relationship,” said Mr. Gundlach, whose wife backed his decision to start a management consulting practice after 22 years as a human resources executive.

ENJOY, BUT WITHIN REASON Create a cash cushion, and live a lifestyle you can sustain. Many people who were working at hedge funds that went bust or financial firms like Bear Stearns are learning these lessons now. Ms. Sisco, of JPMorgan, said that because her younger clients haven’t experienced a downturn, they assumed the money would keep pouring in.

She said she is working with one couple in their early 30s who have two young children. Right before the husband lost his job on Wall Street, the couple had ordered $35,000 drapes. They had to move to a smaller apartment in Manhattan and had to sell their vacation home.

USE A MEDIATOR Perhaps both of you have strong yet divergent opinions about how to invest. Or maybe you are a saver while your spouse prefers to hand over a big piece of earnings to Bavarian Motor Works. An independent third party, whether a financial planner or a therapist, can help you find a middle ground.

Marc B. Schindler, a financial planner at Pivot Point Advisors in Bellaire, Tex., recently did this for a client who complained that his wife spent a thousand dollars a month on her wardrobe. Mr. Schindler then contacted the wife, who said her husband spent just as much on dinner with his buddies. So the husband asked Mr. Schindler to show how much they would save if they invested the $12,000 she spent each year. Mr. Schindler — careful to title the report “Clothing, Dinner or Invested?” — ran an analysis and found that the couple would have $1.6 million after 28 years, assuming a 9 percent rate of return. “They are going to try and compromise,” he said.

MAINTAIN SOME INDEPENDENCE Pooling resources is important, but so is maintaining a degree of financial independence. Carve out some money for both partners to spend on things that make them happy. And when paring back, it’s essential that each person make sacrifices.

INVEST IN YOUR MARRIAGE Spend it — time and money — together. Go on dates. “What that does is enliven the marital foundation,” said Gary S. Shunk, a Chicago therapist who specializes in wealth issues. “It’s a kind of investment into the heart and soul of the relationship.”

Think of it as dollar-cost averaging your marriage, where you make small investments over time. If you wait until retirement, it could be too late.

Melanie Schnoll-Begun, a managing director in the Citigroup Family Office, worked with a couple that waited too long. The husband had amassed great wealth for the family, and his wife kept a beautiful home. But once the husband retired, “they found out that over the years they grew so far apart that they didn’t have enough in common,” she said.

“They had this magnificent wealth, and it was the building of this wealth that ultimately led to their divorce.”

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Oil settles below $101

By Catherine Clifford, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Oil prices fell to a 5 1/2 month low Thursday, testing the $100-a-barrel mark, as the market remained focused on slumping demand and the stronger dollar while watching the threat Hurricane Ike poses to the Texas Gulf Coast.

U.S. crude for October delivery settled down $1.71 to $100.87 a barrel as floor trading ended in New York. It was the lowest settle price since March 24, when oil ended the day at $100.86.

Oil fell as low as $100.10 during trading.

Demand: Crude prices have fallen $45 from the record-high of $147.27 a barrel, set July 11, as the weakening global economy crippled demand for pricey energy. "The market has a very weak undertone. It is worried about global demand coupled with ample inventories," said Andrew Lebow, a broker at MF Global in New York.

There is "concern over the near-term economic outlook and the intermediate economic outlook," said Lebow. "If the economy struggles, obviously, demand for petroleum will be negatively impacted."

The concern over falling demand is not limited to the U.S. "Traders are worried about falling demand in Europe, South America and even Asia," said Lebow. "And Asia has really been the engine of any demand growth." With demand in a free fall, oil producers decided to curb overproduction.

On Wednesday, the Organization of the Petroleum Exporting Countries announced that it would return to oil production levels from last September, about 28.8 million barrels of oil a day. Given that OPEC member countries have been overproducing, ignoring established quotas, the move by OPEC to adhere to those allotments means a decline of roughly 520,000 barrels of oil per day.

On Wednesday, U.S. light sweet crude for October delivery settled down 68 cents to $102.58 a barrel, the lowest closing price since April 1.

Tipping point: One analyst said the $45 drop in crude prices, coupled with fresh concerns over the financial sector, could invite investors back into the oil market. "Demand has continued to fall, but the price has continued to fall, too," said Tom Orr, director of research at Weeden & Co. "You reach some point when that starts to even out."

Given that oil "has gone from $147 to $102, you may be at a position to get a little bounce back," said Orr. The $100 mark is a "tipping point" for the psychology of the oil market, he said.

Lehman Brothers (LEH, Fortune 500) reported a third-quarter loss of close to $4 billion and Goldman Sachs (GS, Fortune 500) downgraded the beleaguered stock to "neutral" from "buy." The bank's problems added fresh worries to market's financial sector concerns, and weighed on stocks Thursday.

"Some of the people that piled into the financials are probably getting back out of them and looking at the commodity trade," said Orr.

Hurricane Ike: Ike was upgraded to a Category 2 storm, according to the National Hurricane Center, and "is forecast to become a major hurricane prior to reaching the coastline," the Center said. The oil market watches storms in the Gulf closely because production facilities in the region account for about a quarter of U.S. crude oil production.

The Center said that with Ike moving over central and western Gulf of Mexico waters Thursday and Friday, the storm's center will approach the northwest Gulf of Mexico coast late Friday. Forecasters say the storm is on track to hit the Texas coast, south of Galveston.

However, oil prices did not spike as Ike swirled in the Gulf, because Ike was not headed for Gulf crude oil rigs. "We are missing the crude production areas and aiming for Refinery Row along the Texas Gulf Coast," said Lebow.

Texas is home to 26 refineries, which can process almost 4.8 million barrels of crude per day, or one-quarter of the nation's total refining capacity, according to the Department of Energy. Most of Texas' refineries are along the Texas Gulf Coast ports - Houston, Port Arthur, and Corpus Christi.

The region was working to restart production after Hurricane Gustav slammed Louisiana on Labor Day. However, with Ike approaching and gaining strength, oil and natural gas producers in the Gulf of Mexico have stopped sending workers back to the platforms, according to the Minerals Management Service (MMS).

The government agency, which tracks offshore operations, estimated that 562 of the 717 manned production platforms - about 78.4% - remained evacuated in the wake of Gustav and in advance of Hurricane Ike.

"It does not appear that [Ike] will be particularly damaging to production facilities," said Orr. "Unless you get really a direct center hit, there isn't much meaningful damage. There may be some supply disruption."

As of Thursday at noon ET, 95.9% of crude oil production and 73% of natural gas production in the Gulf of Mexico was shuttered, according to the Department of Energy.

Shell said that plans to shut down its Deer Park refining operations ahead of Ike, but it also said that it will maintain utilities to allow a "quick restart when weather conditions are safe to resume operations," according to a written statement on the company's Web site. The company's Motiva refinery will keep working, but at reduced rates.

Special trading session: In anticipation that Ike will rock the oil futures market, the Chicago Mercantile Exchange announced that it would hold a special, additional electronic trading session.

Globex trading for oil will begin on Sunday at 10 a.m. ET with a 9:30 a.m. pre-open. Typically, electronic trading on Sunday begins at 6 p.m. in time for early trading in Asia.

Retail gas prices: Even as crude oil prices ticked lower, gas prices at the pump increased for the second consecutive day, according to the Web site for motor advocacy group AAA. In some states where gas supplies depend on Gulf coast crude supplies, gas prices increased by more than they did nationwide.

The average price of regular unleaded gasoline increased 0.3 cent to $3.671 a gallon on a national level. In Texas, the projected landfall for Ike, gas prices jumped 0.5 cent to $3.537 a gallon. In Alabama, gas prices jumped 0.7 cent to $3.628 a gallon. In Arkansas, gas jumped 0.5 cents to $3.577 a gallon.

Robert Calmus from Marathon Oil (MRO, Fortune 500) said several of its Midwest refineries, which process crude oil into gas, were working on partial capacity because Gulf Coast crude delivery has not recovered to pre-Gustav levels.

While retail gas prices ticked up slightly, wholesale gas prices - the prices paid by gas station operators to suppliers - jumped $1.50 a gallon on the Gulf Coast wholesale market.

The price rose to $4.75 a gallon Thursday afternoon from $3.25 Wednesday, according to Tom Kloza, the chief oil analyst for Oil Price Information Service, an independent publisher that follows wholesale and retail fuel prices in North America.

The spike in wholesale prices will mean more pain at the pump for consumers, especially for those regions served by the Gulf Coast wholesale market. But Kloza said that given the oddity of the current situation, he does not expect prices at the pump to jump nearly as drastically as wholesale prices.

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Interior employees accused in sex, gift scandal

By Dina Cappiello
Associated Press Writer

WASHINGTON—Government brokers responsible for collecting billions of dollars in federal oil royalties operated in a "culture of substance abuse and promiscuity" that included having sex with energy company employees, accepting lavish gifts and rigging contracts to favored firms, investigators said Wednesday.

The alleged transgressions involve 13 former and current Interior Department employees in Denver and Washington. Their alleged improprieties include influencing contracts, working part-time as private oil consultants and having sexual relationships with -- and accepting golf and ski trips, snowboarding lessons and concert tickets from -- oil company employees, according to three reports released Wednesday by the Interior Department's inspector general.

The investigations expose a small group of individuals "wholly lacking in acceptance of or adherence to government ethical standards," wrote Inspector General Earl E. Devaney, whose office spent more than two years and $5.3 million on the investigation.

"Sexual relationships with prohibited sources cannot, by definition, be arms-length," Devaney said.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing oil and natural gas that energy companies barter to the government in lieu of cash royalty payments for drilling on federal lands. The government received $4.3 billion in such royalty-in-kind payments last year. The oil and gas is then resold to energy companies or put in the nation's emergency stockpile.

"During the course of our investigation, we learned that some RIK employees frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relationships with oil and gas company representatives," the report said. Two government employees who had to spend the night after a daytime industry function because they were too intoxicated to drive home were commonly referred to by energy traders as the "MMS Chicks."

Between 2002 and 2006, 19 oil marketers -- nearly a third of the 55-person staff in the Denver office -- received gifts and gratuities from oil and gas companies, including Chevron Corp., Shell, Hess Corp. and Denver-based Gary-Williams Energy Corp., the investigators found. The investigation focuses on nine employees -- all but one of whom received ethics training -- who attended meals, parties, paintball games and concerts whose value exceeded the $20-per-gift limit or $50-a-year thresholds on outside gifts. In the case of two marketers, gifts were accepted on at least 135 occasions. The report identifies eight of the employees by name and a ninth only by job description.

One worker admitted having a one-night-stand with a Shell employee. That same individual allegedly passed out business cards for her sex toy business, Passion Parties Inc., at work, and bragged that her income from that business exceeded her salary at the Interior Department. The employee was authorized to conduct such outside employment, and denied to investigators that she advertised for it during work hours, the report said. She admitted selling products to several of her subordinates.

Devaney said the investigations took so long because Chevron refused to cooperate. An Interior Department official said Chevron would not allow investigators to interview its employees.

Don Campbell, a Chevron spokesman, said Wednesday that the company "produced all of the documents that the government requested months ago." A Shell spokeswoman said it would be premature for the company to comment on the report until it had time to review it.

Maripat Sexton, a spokeswoman for Hess Corp., said the company's investigations "indicated no wrongdoing on our employee's part."

"We do not believe we are the focus of the investigation," she said.

One of the reports claims that the former head of the Denver royalty-in-kind office, Gregory W. Smith, purchased cocaine from a co-worker, and one occasion had it delivered to the office. He also allegedly had oral sex with subordinates. The report also said Smith steered government contracts to Geomatrix Consultants Inc. and used government databases and e-mail accounts to conduct business for the company, which paid him $30,000 for his work from April 2002 through June 2003. Smith retired from the office in May 2007.

Smith's attorney, Steve Peters, called the claims "sheer fantasy."

"Greg Smith was a loyal, dedicated employee of the federal government for more than 28 years," Peters said Wednesday. "His efforts in running the royalty-in-kind program resulted in one of the most profitable government programs in American history."

MMS Director Randall Luthi, in an interview, said the agency was taking the report "extremely seriously" and would review the allegations and weigh taking appropriate action in coming months. Luthi said four of the employees were transferred to other departments last year. The inspector general is recommending that current employees implicated be fired and be barred for life from working within the royalty program.

House Natural Resources Chairman Nick Rahall, D-W.Va., said "this whole IG report reads like a script from a television miniseries and one that cannot air during family viewing time. It is no wonder that the office was doing such a lousy job of overseeing the RIK program; clearly the employees had 'other' priorities in that office."

One of the employees named in the investigation, Jimmy Mayberry, already has pleaded guilty in U.S. District Court in Washington to violations of conflict-of-interest laws. The Justice Department declined to prosecute Smith and former Associate Director of the Minerals Revenue Management program Lucy Querques Denett, who the report says manipulated contracts to ensure they were awarded to former Interior employees.

The findings are the latest sign of trouble at the Minerals Management Service, which already has been accused of mismanaging the collection of fees from oil companies and writing faulty contracts for drilling on government land and offshore. The charges also come as Congress and both presidential candidates are debating whether to open up more federal offshore waters to oil and natural gas drilling.

"This all shows the oil industry holds shocking sway over the administration and even key federal employees," said Sen. Bill Nelson, D-Fla. "This is why we must not allow Big Oil's agenda to be jammed through Congress."

Rep. Darrell Issa, R-Calif., urged Democrats to reopen a House investigation of the Minerals Management Service that was initiated in 2006 by House Republicans. "Looking into and fixing these problems would have meant highlighting the enormous revenues that domestic oil and natural gas production contributes to our treasury. This just didn't fit into their anti-drilling campaign," he said.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, announced late Wednesday that he would hold a hearing on the investigations next week.

While most government royalties for drilling on federal lands are paid in cash, the government in recent years has been receiving a greater share of its oil and gas royalties in the actual product. More of that oil is also being sold on the open market, versus being deposited in the Strategic Petroleum Reserve, the nation's emergency oil stockpile. Congress earlier this year passed a law halting deposits of oil to the reserve to help alleviate high gasoline prices.

The investigation was prompted by a 2006 phone call from an employee in the Denver office who reported ethical lapses.

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Ike Goes to Gitmo

Wet Gitmo. Click image to expand.

Hurricane Ike—which is expected to hit Texas on Friday or Saturday—has already taken its toll on Cuba, reportedly killing four people and damaging more than 200,000 homes. Like Hurricane Gustav two weeks ago, Ike also hit the U.S. naval base at Guantanamo Bay. What happens to detainees at Gitmo when a hurricane hits?

Unless it gets really bad, they stay put. In the words of a camp spokesman, "safe and humane care and custody" of detainees—a stated mission of the camp's commanders—requires protecting them from "the elements of inclement weather." The military maintains that the facilities currently housing the prisoners are capable of withstanding anything up to a Category 2 hurricane, according to the Miami Herald. As early as February 2002, camp officials also said that in the event of a catastrophic storm, detainees could be housed temporarily in old ammunition bunkers. (In 1994—when the base was housing thousands of Cuban refugees—the Department of Defense said bunkers at Guantanamo could hold as many as 14,000 people.)

That's not to say it's business as usual at Guantanamo during a hurricane. Aside from the detainees, regular residents of the base—mostly military personnel, contractors, and their families—follow a weather warning system that ranges in severity from Readiness Condition V (which is in effect for the entire hurricane season and requires that residents be generally prepared) to Readiness Condition I (which comes into play when a severe storm is less than 12 hours away). During the approach of Ike, the high-alert Condition I applied—all base leave and liberty were canceled, and nonessential personnel had to stay at home or take cover in hurricane shelters. (Most homes at the base are hurricane-resistant, but residents can take shelter in large buildings like the gym, elementary school, or bowling alley.) On Sunday, the hurricane preparations also meant a planned outdoor showing of Tropic Thunder was canceled, as the space was used to park bulldozers and other heavy machinery instead.

While Cuba is often hit by hurricanes, Guantanamo has never suffered extensive damage from storms; one possible reason is that the nearby island of Hispaniola acts as a buffer. By contrast, the treatment of prisoners during hurricanes has been far more controversial in Louisiana. In 2005, inmates from Orleans Parish Prison were not evacuated as Hurricane Katrina approached. As a result, prisoners were allegedly left in their cells as they flooded, many without food or clean water. (In some cases, the inmates weren't removed for as many as five days.) Orleans Parish used a different approach on the eve of Hurricane Gustav last month: Two thousand one hundred prisoners were bused to facilities located farther inland, and 171 inmates who had been either sentenced or were awaiting trial on nonviolent municipal charges were released. (Those who hadn't yet been tried were still required to report to court after the storm.)

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Town prints its own pound notes in bid to boost local economy

By James Mills

Manager of Bill's produce store in Lewes, with a Lewes pound note

Aly Ridley, Manager of Bill's produce store in the East Sussex town, with a Lewes pound note

The Royal Mint had better take note, for there's a new currency on the Monopoly board.

The town of Lewes in East Sussex has printed £10,000 of its own pound notes to be used as an alternative to sterling.

The idea is to boost the local economy by keeping cash circulating among local traders and suppliers rather than leaking out to the wider economy via national chains.

But it was easier to purchase a fistful of Lewes pounds today than it was to spend them.

Flashing the cash around the town didn't seem to impress many shop assistants.

In Martin's newsagents in the high street, the assistant on duty politely declined the new tender when it was offered as payment for a Snickers bar.

He said: 'We're not taking the Lewes pounds. We asked head office about it, but they said no. We've got 1,600 stores around the country, so we're not exactly what you'd call a local firm and I think it's all about local traders, so we're not really involved in it.'

Across the road at the Crown Inn, the staff were equally reluctant.

'Sorry, love, I can't take those here,' said the lady behind the bar. 'I'm not sure that anyone's taking them, to be honest.'

As one of the notes was passed around the bar for customers to take a look, one old gent nursing a pint of bitter announced: 'I don't want anything to do with it.'

Others were more open-minded.

John Pullman, a 28-year-old decorator, suggested he might start photocopying them, but then wondered where on earth, or in Lewes, he'd be able to spend them.

He said: 'It looks like Mickey Mouse money to me. I reckon you'd struggle to get anyone to take them.'

In fact, about 70 local traders - from butchers to greengrocers, cafes, restaurants and florists - have all signed up to the scheme and agreed to accept the new notes, which have the same value as sterling.

And copying the notes would not be easy for any would-be fraudsters. They are made from the same type of paper use by the Royal Mint and have watermarks and UV-sensitive fibres for extra security.

The new currency is the brainchild of a local group called Transition Town Lewes.

They want to the town to become less dependent on the global economy so that, when the world's fossil fuel supplies are finally depleted, the town will be better able to fall back on its own resources.

Adrienne Campbell, a microbiologist and mother of four, said local communities needed to save themselves from the looming global crisis rather than wait for governments and big business to act on their behalf.

Hard currency: A fistful of Lewes pound notes

Mrs Campbell, 47 - who launched the group with several like-minded friends - added: 'Towns like Lewes need to become more resilient to the problems the world is facing.

'We need to strengthen local economies so that we can obtain our food and energy needs locally rather than relying on goods being flown in from around the world.

'This new currency encourages people to buy from local producers and raises awareness of the need to do so.'

The group's ideas were inspired by a similar scheme set up in Totnes in Devon ago by college lecturer Rob Hopkins.

Totnes was the first town in the UK to launch its own currency in March last year. Mr Hopkins has written a book called The Transition Handbook, which describes how local communities can adapt their economies to cope with climate change and dwindling supplies of oil and gas.

His ideas have led to about 100 'transition groups' being set up around the UK and abroad.

The movement has even been discussed by the residents of Ambridge on The Archers.

Up until the late 19th century, it was quite common for local towns to have their own currency. Lewes itself had its own banknotes up until 1895.

The new Lewes pound has a portrait of Thomas Paine instead of the Queen. Paine lived briefly in Lewes in the 1770s before moving to the US, where he wrote the Rights of Man and inspired the American War of Independence.

The scheme works in a similar way to book tokens in that the notes can be bought from designated outlets with ordinary cash and then used at shops that are part of the scheme.

Customers can change them back into sterling if they want.

One of the outlets involved in the scheme is Bill's Produce, a grocery and cafe.

One customer spending Lewes pounds there today was John Ransom, a 42-year-old publisher, who was with his eight-year-old son, Harry.

Mr Ransom said: 'I think it's great. It's good for the local economy and, at the very least, my son thinks it's funny, so that can only be a good thing.'

But Melanie Tucker, a 37-year-old housewife, said: 'It seems like a bit of a gimmick to me. I'm not really sure what the point of it is really. I don't think it's going to change anything. It's still just money at the end of the day.'

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U.S. policy post 9/11 has increased terrorism: Syria

By Robin Pomeroy

ROME (Reuters) - The "war on terror" declared by U.S. President George W. Bush after the September 11, 2001 attacks has caused more terrorism than it prevented, Syria's foreign minister said on Thursday.

On the seventh anniversary of the attacks on the United States, Walid al-Moualem said Washington had ignored Syria's advice not to rely on force to stop terrorism.

"As we said to President Bush shortly after the tragic events on September 11, the fight against terrorism must begin at the roots, at the cause of terrorism," al-Moualem told a news conference in Rome, where he was meeting Italy's foreign minister.

"The last thing we should use if that fails is the use of force, as a last resort. Unfortunately they have made the use of force the beginning and the end of the fight against terrorism and thus terrorism is much more widespread today than before."

Syria is viewed with suspicion and hostility by Washington for its closeness to Iran and its support of Lebanese militant group Hezbollah, classified as a terrorist organization by the United States.

"Hezbollah and (Palestinian group) Hamas are not terrorists, they are national resistance movements against occupation," al-Moualem said. "Whilst there is occupation there will be national resistance movements."

With the mediation of Turkey, Syria is in indirect peace talks with Israel in which one of its key demands is that Israel return all of the Golan Heights it seized during the Six-Day War in 1967.

Nearly 3,000 people were killed on September 11, 2001, when four hijacked airliners crashed into the World Trade Center in New York, the Pentagon in Washington and a field in Pennsylvania.

The attacks spurred the United States to oust the Taliban government in Afghanistan which was hosting al Qaeda leader Osama bin Laden and to invade Iraq, which it suspected of creating weapons of mass destruction.

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US 'must target Pakistan havens'



US troops in Afghanistan
America is beefing up its troops in Afghanistan

The chairman of the US Joint Chiefs of Staff has called for a new strategy in Afghanistan to deny militants bases across the border in Pakistan.

Speaking on the eve of the anniversary of the 9/11 attacks, Admiral Mike Mullen called for a military strategy that covered both sides of the border.

The US must work closely with Pakistan to "eliminate [the enemy's] safe havens", he told Congress.

But Pakistan insists it will not allow foreign forces onto its territory.

"There is no question of any agreement or understanding with the coalition forces whereby they are allowed to conduct operations on our side of the border," Pakistan's Chief of Army Staff, Gen Ashfaq Parvez Kayani, said.


Pakistan's top military commanders are meeting in Rawalpindi, and high on the agenda is thought to be a ground assault by coalition forces in South Waziristan on 4 September, which Pakistan says killed more than a dozen civilians.

In an interview with the BBC, Pakistan's Foreign Minister Makhdoom Shah Mahmood Qureshi said such attacks were unproductive and alienated the local population.

'Inextricably linked'

Adm Mullen's call for a new strategy came a day after US President George Bush announced that about 4,500 extra US troops would be sent to Afghanistan by February 2009, bolstering the 33,000 currently stationed in the country.

Adm Mike Mullen testifying at the US House of Representatives
Until we work more closely with the Pakistani government to eliminate the safe havens from which they operate, the enemy will only keep coming
Adm Mike Mullen

Adm Mullen told the House Armed Services Committee he was not convinced the US was winning in Afghanistan and that a new strategy was needed to address the issue of militants in Pakistan.

"In my view, these two nations are inextricably linked in a common insurgency that crosses the border between them," he said.

"We can hunt down and kill extremists as they cross over the border from Pakistan... but until we work more closely with the Pakistani government to eliminate the safe havens from which they operate, the enemy will only keep coming."

Adm Mullen conceded the challenge was great, pointing to Afghanistan's drugs and economic problems, and the "significant political uncertainty" in Pakistan.

James Glassman, a senior US diplomat, told the BBC's HardTALK programme the US was "trying to help to fight these forces that threaten the very existence of a democratic country in Pakistan".

"I think the world would be a much, much less safe place… if we were simply to abandon Pakistan and stop helping the Pakistanis defend themselves," he said.

Afghan President Hamid Karzai has supported this stance, saying Pakistan needs international help to tackle the problem of Taleban enclaves in its tribal areas.

Mr Karzai told the BBC that Afghanistan had asked for help from the international community to combat terrorism, and said Pakistan should do the same.

'More assertive'

The New York Times newspaper reported on Wednesday that President George Bush had approved orders in July to allow US Special Operations forces to carry out ground assaults inside Pakistan without Pakistani approval.

"The situation in the tribal areas is not tolerable," an unnamed senior US official told the newspaper. "We have to be more assertive. Orders have been given."

graph showing military casualties in Afghanistan and Iraq

But a surge of US attacks in Pakistan's border region over the past week has prompted outrage from Pakistan's government and army.

Now stating it as a strategy will only add to the pressure on Pakistan's new President, Asif Ali Zardari, as he grapples with the militants, the BBC's James Coomarasamy reports from Washington.

The White House said on Wednesday that the failure to capture al-Qaeda leader Osama Bin Laden showed the limitations of US military and intelligence operations.

On the eve of the seventh anniversary of 9/11, White House spokeswoman Dana Perino said President Bush would have liked to see the al-Qaeda leader brought to justice, but that the US authorities did not have "super-powers".

In another development, Canada confirmed its troops would leave Afghanistan by 2011.

Prime Minister Stephen Harper said on Wednesday that his nation - which suffered significant losses in Afghanistan in recent years - had no appetite for keeping its troops on in Afghanistan past a 2011 deadline imposed in March by parliament.

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