In a videoconference with Hong Kong investors, former Federal Reserve chairman Alan Greenspan said that America might sink into recession by year’s end; a frenzied worldwide sell-off ensued. The Shanghai Composite lost 8.8 percent of its value in a day, and the Dow Jones Industrial Average lost 3.3 percent, its worst drop since September 17, 2001. “Alan Greenspan really needs to sit down,” said one economist, “and be quiet.” Others marveled at the ability of “the Maestro” to cause upheavals even in retirement; Greenspan later held another videoconference, for which he charges fees of $150,000, and said that a recession …

War erupted between Hezbollah and Israel after the Lebanese militia launched Operation Truthful Promise against Israel by crossing the border and capturing two Israeli soldiers. The operation was staged in response to Operation Summer Rains, in which Israel occupied Gaza and destroyed a large portion of the civilian infrastructure. Israel countered Operation Truthful Promise by staging Operation Just Reward against Lebanon, bombing roads, bridges, power stations, fuel depots, ports, and airports, and killing numerous civilians. Hezbollah bombed Haifa, surprising Israel with the range of its rockets and killing at least eight civilians. “You wanted an open war,” said Hezbollah leader …

A bovine idyll. The New York Times finally published an account of reporter Judith Miller’s involvement in the Valerie Plame Wilson case. At issue in the case is a notebook in which Miller had written the name “Valerie Flame”; Miller said she could not recall the source of the name, even though she had used the same notebook to interview I. Lewis “Scooter” Libby, Dick Cheney’s chief of staff. “We have everything to be proud of,” said Miller. It was reported that both Libby and Karl Rove would probably resign if indicted,The New York TimesTimeand Lynne Cheney said that her …

A Christian martyr. In Iraq, the director of the al-Furat hospital in Baghdad was shot dead. A roadside bomb went off in Basra, killing a policeman, and two Sudanese drivers who work with U.S. forces were taken hostage.BBC NewsA gunman opened fire on a minibus filled with people working for a Kuwaiti company, killing one and wounding three, and a garbage-truck suicide bomb killed three people and injured more than twenty.BBC NewsThirty-nine dead bodies were found west and south of Baghdad; some had been beheaded, and others had been handcuffed before they were shot. Many were members of the Iraqi …

The World Health Organization warned that outbreaks of cholera and dysentery resulting from a lack of clean drinking water could easily double the number of people killed by the Indian Ocean tsunami.ReutersNearly 150,000 people were confirmed dead in the disaster and far more were badly injured. Estimates of the homeless ran to five million.Associated PressUnited Nations secretary general Kofi Annan cut his Christmas holiday short to meet with world leaders about providing relief and announced that he would fly to affected countries to help organize the effort from the ground.Agence France-PressePresident George W. Bush stayed on vacation down at the …

Caught in the Web. The Labor Department reported that the economy created a mere 96,000 jobs last month, thus failing to keep pace with the expansion of the nation’s work force and confirming that George W. Bush has the worst job creation record of any president since Herbert Hoover. The White House reacted to the bad news by declaring that the poor job numbers prove that the president’s tax cuts have been working.New York TimesThe Iraq Survey Group issued its final report and concluded that Saddam Hussein dismantled his nuclear weapons program in 1991 and did not attempt to revive …

Chechen militants took more than 1,000 children and adults hostage at a school in southern Russia, though the Russian government lied at first and claimed that there were only 354 hostages; at least 338 died, half of whom were children, when security forces stormed the school.Washington Post, ReutersA suicide bomber blew herself up in a Moscow subway station, killing at least 10 people.Associated PressPalestinian suicide bombers blew up two buses in Beersheba, killing 16 and wounding at least 80.Associated PressIraqi insurgents blew up another oil pipeline, and aAssociated Presscar bomb killed seven American marines and three Iraqi soldiers near Falluja.ReutersTwelve …

Two government reports, one civilian and one military, were issued on the Abu Ghraib torture scandal. The Army reported that military intelligence officers and civilian contractors were deeply involved in the abuse; the civilian report went to great lengths to avoid the logical conclusion that the Bush White House had created the conditions (legal, operational, and military) that directly led to the Abu Ghraib horrors. Both reports found that many of the techniques employed at Abu Ghraib originated in CIA torture chambers in Afghanistan.New York TimesArmy investigators discovered that military police dogs were used to terrify teenage Iraqi prisoners as …

The Senate Intelligence Committee released a scathing report on the CIA’s unfounded, unjustified, and unreasonable claims about Iraq’s purported weapons of mass destruction; the report was oddly silent, however, about the Bush Administration’s well-documented and apparently successful campaign to intimidate the CIA into coming up with justifications for the President’s fraudulent case for the invasion.New York TimesSenator Trent Lott was outraged by the CIA’s “totally ridiculous, uncalled for, and counterproductive” redactions of the report and called for an independent commission to oversee the classification of government information.New York TimesJapan’s defense ministry said that it will issue its annual defense whitepaper …

Lost Souls in Hell, 1875. Secretary of Defense Donald Rumsfeld apologized for the torture of Iraqi prisoners and said that there are “many more photographs and indeed some videos” of American soldiers engaging in “blatantly sadistic, cruel, and inhuman” behavior; Rumsfeld took “full responsibility” for the abuse but still refused to resign. “It’s going to get a good deal more terrible, I’m afraid.” Specialist Sabrina Harman, who faces court martial because of her role in the torture, said in an email that she never even saw a copy of the Geneva Conventions until recently. “I read the entire thing,” she …

President George W. Bush held a prime-time press conference and refused several times to apologize or accept responsibility for his government’s failure to prevent the September 11 attacks; theNew York Timespresident defended his decision to conquer Iraq and said that the Iraqis were “deceptive at hiding things. We knew they were hiding things. A country that hides things is a country that is afraid of getting caught. And that was part of our calculation.”New York TimesBush also said that “freedom is the Almighty’s gift to every man and woman in this world. And as the greatest power on the face …

L. Paul Bremer, the new American overseer of Iraq, informed Iraqi leaders that the United States and Britain had changed their minds about setting up an interim government made up of Iraqis and that he would remain in control until further notice. Bremer toured Mosul and praised it as “a great example of embryonic democracy”; elsewhere in the city a crowd chanted “America is the enemy of God.”New York Times Kurdish leaders, who have been running their own affairs for about 12 years, were particularly irritated, and there were widespread accusations that the United States was now revealing its true …

The World Health Organization warned travelers to avoid Hong Kong and the Guangdong province in China because of the SARS outbreak; it was the first such travel alert in the organization’s history. China finally permitted international health inspectors to visit Guangdong, where the disease originated, and inspectors discovered that the outbreak began in November, although China failed to report it to the WHO until February 9, by which time it was already being spread around the world by travelers. Hong Kong hospitals were having a hard time coping with the increasing number of SARS patients, and doctors and nurses continued …

Yugoslavia established a truth and reconciliation commission to investigate the causes of the wars in its former territories and to help the country achieve “social catharsis.” President Vojislav Kostunica said that Slobodan Milosevic should never be extradicted to the Hague. Japan approved a new history textbook that, according to critics in China and elsewhere, fails adequately to criticize Japanese conduct in World War II. A Palestinian man who was suspected of collaborating with Israel was assassinated by three men wearing hoods. Jewish settlers in Hebron blew up several Arab shops. Israeli soldiers shot an 18-month-old Palestinian girl in the head …