Monthly Archives: July 2012

Is Global Trade About To Collapse? Where are Oil Prices Headed?

We received permission to reprint an interview by James Stafford of the news site Oilprice.com with Mike ‘Mish’ Shedlock. We follow Mish’s writings daily since he provides unique and insightful coverage of topics that we consider important but that no one else we know of covers consistently. James highlights the key topics of the interview:

  • Why global trade will collapse if Romney wins
  • Why investors should get out of stocks and commodities
  • Why we have been oversold on shale gas and renewable energy
  • Why oil prices will likely fall in the short-term
  • Why the Eurozone is doomed
  • Why there may soon be an oil war with China
  • How government interference is ruining the renewable energy sector
  • Why we need to get rid of fractional reserve lending

A transcript of the interview follows.

Stratfor Geopolitical Weekly: 20120731

The Election, the Presidency and Foreign Policy

July 31, 2012 | 0900 GMT

Stratfor

By George Friedman

The American presidency is designed to disappoint. Each candidate must promise things that are beyond his power to deliver. No candidate could expect to be elected by emphasizing how little power the office actually has and how voters should therefore expect little from him. So candidates promise great, transformative programs. What the winner actually can deliver depends upon what other institutions, nations and reality will allow him. Though the gap between promises and realities destroys immodest candidates, from the founding fathers’ point of view, it protects the republic. They distrusted government in general and the office of the president in particular.

Congress, the Supreme Court and the Federal Reserve Board all circumscribe the president’s power over domestic life. This and the authority of the states greatly limit the president’s power, just as the country’s founders intended. To achieve anything substantial, the president must create a coalition of political interests to shape decision-making in other branches of the government. Yet at the same time — and this is the main paradox of American political culture — the presidency is seen as a decisive institution and the person holding that office is seen as being of overriding importance.

What Is the US Treasury Up To?

In our weekly look at the Fed’s balance sheet, Tracking the Fed Balance Sheet, we noticed what we thought was anomalous behavior in the Treasury and the depository institutions’ reserve accounts. We believe we can show something is going on although the details of the implied transactions remain to be discovered. In short, the Treasury is borrowing money on a daily basis from the reserves that depository institutions have on deposit with the Fed. Our argument follows.

Comments on Gold for Currency Purposes

In a private communication with our friend JR we wrote

Again we go back to people with an agenda or bias – they don’t think. The article [http://www.theburningplatform.com/?p=37942] identifies the single advantage fiat currency has over a fixed base currency – the ability to create more on demand. Fiat currencies collapse when the multiplication gets out of control. Until that point they are fine. Gold-backed currencies collapse when the sovereign has a sudden need for more money and the fixed-base doesn’t have the flexibility to allow this. Look at the last hundred or so years of the so-called gold standard. Countries were forced off it when they needed a sudden expansion of the money supply to fight a war. Both the US and Europe have this in their past.

As we have observed before, every PM-based [precious metals] currency has collapsed because the sovereign has always found a way to expand the supply (debase it). This should give the advocates looking for a golden nirvana pause – but it doesn’t. They don’t think. The empirical evidence is that ALL currencies collapse. Some survive longer than others but they all go to that currency graveyard in the sky.

In this post we answer some of his subsequent questions and then move onto some current thoughts on PM-backed currencies.

Reality Check: 20120727

Here is Gary’s article,  The Monetization of Everything. For more by Gary, visit his website at http://www.garynorth.com/.

This essay is about what the Fed can do in terms of monetization and what it likely will not do. As he observes:

The Federal Reserve System can monetize anything. It can create digital money and buy any asset it chooses to buy. There are no legal restrictions on what it is allowed to monetize. If it were to do this, and it continued to do this, the dollar would fall to zero value. This would produce hyperinflation.

What’s the Future for Jobs?

There are a number of trends in the labour market that do not bode well for a prosperous future for North America and its citizens. We began to collect these from various sources to create a larger picture. Then came Chairman Bernanke’s Jackson Hole speech followed by the September FOMC meeting. Both had a focus on restoring employment and introduced QE3 which will continue until the unemployment rate is down, probably under 6%. The Fed’s premise is that unemployment is cyclical and their QE or LSAP policies are benefiting the economy.

We believe that the Fed’s premises are we wrong and were recently encouraged to advance this topic in the essay: Signs of a Structural Change in the US Economy. The latter followed in turn from other recent posts including our commentaries on the Jackson Hole speech and recent Fed policy announced in the September FOMC meeting. Altogether, we will show that the unemployment situation is structural and the Fed’s policy of QE will fail to restore employment to expected levels.

In this essay Click on any image to open in a new window to enlarge it. Our own research is courtesy of FRED® from the St. Louis Fed.

Stratfor Geopolitical Weekly: 20120724

Consequences of the Fall of the Syrian Regime

July 24, 2012 | 0900 GMT

Stratfor

By George Friedman

We have entered the endgame in Syria. That doesn’t mean that we have reached the end by any means, but it does mean that the precondition has been met for the fall of the regime of Syrian President Bashar al Assad. We have argued that so long as the military and security apparatus remain intact and effective, the regime could endure. Although they continue to function, neither appears intact any longer; their control of key areas such as Damascus and Aleppo is in doubt, and the reliability of their personnel, given defections, is no longer certain. We had thought that there was a reasonable chance of the al Assad regime surviving completely. That is no longer the case. At a certain point — in our view, after the defection of a Syrian pilot June 21 and then the defection of the Tlass clan — key members of the regime began to recalculate the probability of survival and their interests. The regime has not unraveled, but it is unraveling.

Watch Your Back in These Countries

Zero Hedge reproduced from Reuters a list of Mass Shooting Incidents In The Last Two Decades. Here is a quick summary of the dead including the shooter(s) if known. Data on numbers wounded was incomplete and not included.

Country Incidents Total Dead Dead/Incident
United States 5 87 17.4
UK 2 30 15.0
Germany 2 33 16.5
Finland 2 19 9.5
Norway 1 69 69.0
Australia 1 35 35.0
Nepal 1 10 10.0
Netherlands 1 6 6.0
Belgium 1 3 3.0

Who Leaves the Party First?

There has been a lot of speculation over the last several months as to which country would leave the eurozone and possibly the EU first. Majority opinion would probably hold Greece as the most likely candidate. Portugal is sometimes mentioned. Most recently, Spain and now Italy are being considered as good candidates. Another camp has suggested the Northern European countries leave and form a new northern currency block: the Netherlands, Germany and Austria with Finland as a tag-along.

It was then with a bit of surprise that we read from Stratfor this morning, Finland Re-Evaluates Its Eurozone Membership, that Finland is a good candidate for a voluntary departure.

Global Warming, Your Freedoms – and the Man Behind the Curtain

What follows is a guest post on climate issues by our friend JR.

Global Warming, Your Freedoms – and the Man Behind the Curtain

In the last article, we examined what was behind the frantic global warming push on a philosophical, macro level. In short, global warming is a witch’s brew of Malthusian theory conjoined with Fabian socialism, Margaret Sanger and Edward Bernays (the originator of modern advertising and public manipulation). I have demonstrated how global warming is the vehicle whereby the left would like to create a “USSR of the world” – all for our own good, of course.  Perhaps former Czech president Vaclav Klaus and leader of the Czech Velvet Revolution which overthrew the communists in his country summarized it best in Blue Planet in Green Shackles: Today’s debate about global warming is essentially a debate about freedom. The environmentalists would like to mastermind each and every possible (and impossible) aspect of our lives.Or, as Nancy Pelosi famously stated “Every aspect of our lives must be subjected to an inventory … of how we are taking responsibility.” No word, of course, to the age old question posed by the Roman satirist Juvenal, Quis custodiet ipsos custodes? (Who will watch the guards?), or the abuse and corruption that has characterized every socialist utopia from Robespierre to Eric Holder.

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