Monthly Archives: September 2012

More Thoughts on a Gold Standard

The article The Long Wave Versus the Printing Press: Central Banks Go All-In posted on motivated us to test an idea. The author states (the emphasis is ours):

This time around the world’s central banks have a new set of tools. In past cycles money was mostly gold and silver, which is to say it was real and in limited supply. Credit might have been flexible because of fractional reserve banking, but the money at the base of the financial system couldn’t be created out of thin air. Today, in contrast, it can. Since the US broke the final link between national currencies and gold in 1971, everyone has been running fiat currencies that can be created in infinite quantities and depend for their value on the trust we place in the competence and honesty of our leaders.

Indeed, the primary reason proponents urge a return to a gold standard is to contain the money supply and indirectly, the credit market and the economy. The effect on the economy we will put aside, but we do want to consider the relationship between base money and the total money supply and the credit market.

From Gadhafi to Benghazi

From Gadhafi to Benghazi

September 18, 2012 | 0900 GMT


By George Friedman

Last week, four American diplomats were killed when armed men attacked the U.S. Consulate in Benghazi, Libya. The attackers’ apparent motivation was that someone, apparently American but with an uncertain identity, posted a video on YouTube several months ago that deliberately defamed the Prophet Mohammed. The attack in Benghazi was portrayed as retribution for the defamation, with the attackers holding all Americans equally guilty for the video, though it was likely a pretext for deeper grievances. The riots spread to other countries, including Egypt, Tunisia and Yemen, although no American casualties were reported in the other riots. The unrest appears to have subsided over the weekend.

Egypt’s Geographic Challenge

Egypt is plays a pivotal role in Middle eastern geopolitics. To enhance our understanding:

Flash Point: What You Won’t Get from the MSM

While there is so very much that you won’t get from the MSM (main stream media), we want to try and give a sense of how much of the Muslim world is wrapped up in fundamentalist theology as assessed by the extent of protests and riots over the current film crisis. From Stratfor, this morning, we have so far received these references:

That’s today’s new up to 10:00 AM; form your own conclusions.

Flash Point: Good Luck Or Good Planning?

Suppose you were a Muslim enemy of the US and you wanted to commemorate your great victory of 9/11. What would you do? Your thinking might go like this:

The continental US is buttoned down fairly well but its extensions through its foreign embassies are more accessible. Intelligence tells us that the Libyan embassy in particular is poorly secured because the fools think that they have created this wonderful democratic environment of peace and freedom.

Suppose we were to incite a riot – create a mob that would storm the embassy. We could then slip Commando Team A into the country and infiltrate the mob. We know the Americans have safe-houses for personnel for evacuation to during an attack. If we create enough confusion, we can hit the escape convoy as it emerges from the embassy’s back door.

But how do we create a good riot? Hey, you know that obscure YouTube video clip about the Prophet. Well what if we raised awareness of it in the Muslim world. That would dependably create a large response. After all, you never want a serious crisis to go to waste. But the timing is important. It will take a couple of days to get Imams up to speed on its contents. Another couple of days to incite populations. And another couple of days to organize the anger into actual riots.

Now who do we have that can dub in Arabic subtitles and how long will that take? OK, get Ahab working on it for a Sept. 4th release. Lets get our Imam in Benghazi briefed and ready to speak on the 8th. We’ll start the rumors on the 10th and get our operatives to form the mob on the 11th with a 2:45 objective in front of the embassy. That should catch all the personnel inside.

Everybody know what to do? Good. Let’s get on it.

Was it good luck or good planning?

(Note to any American intelligence officials reading this, our code name is not Condor)

Flash Point: Saudi Oil As Seen By Strafor

In Flash Point: The Implications of the End of Saudi Oil, we discussed a projection that Saudi Arabia would become a net importer around 2022 with severe social and geopolitical stresses emerging well before that point. Stratfor, experts in geopolitics and security issues, has just published Challenges for the Saudi Royal Family: Energy as part of a 3-part series. We review their note in the context of our original post.

Flash Point: The Fed Prints

(hat tip Metanoodle)

From the latest FOMC statement:

FOMC Redline Sept

Key points and our interpretation:

  • The Fed will continue its zero interest rate policy (ZIRP) through mid-2015 at least.
  • The Fed will continue and extend “Operation Twist” to the end of the year. This recycles funds and creates no new money.
  • The Fed will buy $40 billion of MBSs per month with no set end. This would appear to require new money since no source of funding was announced.
  • Principal and interest from existing GSE debt and MBSs are currently reinvested. This practice will continue, recycling funds while creating no new money.
  • Total investment will be $85 billion a month so we expect the Fed’s balance sheet to increase by $40 billion per month of unsterilized financing. We will watch to see where the liability goes on its balance sheet.

When Things Go Bad

When Things Go Bad

September 13, 2012 | 0901 GMT


By Scott Stewart

Over the past several weeks, we have discussed a number of different situations that can present a common problem to people caught up in them. First, we discussed how domestic terrorism remains a persistent threat in the United States, and that despite improvements in security measures since 2001, soft targets still remain vulnerable to attack by terrorist actors driven by a variety of motivations. Due to the devolution of the jihadist threat toward the grassroots, there is also a growing trend of jihadist actors using armed assaults instead of bombing attacks. We also discussed the continuing problem of workplace violence, and finally, we discussed last week evacuation plans for expatriates due to natural disaster, civil unrest or war.

People caught in any of these situations could find themselves either confronted by an armed assailant or actually coming under fire in an active shooter scenario. Of course, there are other situations where people can find themselves confronted by armed assailants, from street muggings and carjackings to bank robberies. Because of this, we thought it might be useful to our readers to discuss such situations and how to react when caught in one.

Flash Point: Libya In the Arab Summer

Remember how we (the West) went into Iraq and removed an evil dictator so freedom and democracy (Western style) could flourish? That worked well. Then we went into Afghanistan and destroyed the evil Taliban so freedom and democracy could flourish. That worked well too. Being on a roll and seeing the Middle East crying out for freedom and democracy in what we dubbed “the Arab Spring”, we cheered them on. It worked in Egypt, right, with the Muslim Brotherhood now the de facto government?

Libya took a bit of doing. We had to bomb the s**t out of them to get rid of an evil dictator but in the end it worked out well as we see their gratitude displayed in today’s news:

This just proves how deep our understanding is of other cultures, most of which we find need some assistance to become like ours. After all, it only takes a year or two of assistance from our bureaucrats and academics to erase several thousand years of native institutional thinking and sectarian and religious identity to create an entire new set of institutions which the populace will embrace with joy.

At the same time we are so thankful that we are  a democratic and free people not living under some dictator, because then, who would come to our aid?

War and Bluff: Iran, Israel and the United States

September 11, 2012


By George Friedman

For the past several months, the Israelis have been threatening to attack Iranian nuclear sites as the United States has pursued a complex policy of avoiding complete opposition to such strikes while making clear it doesn’t feel such strikes are necessary. At the same time, the United States has carried out maneuvers meant to demonstrate its ability to prevent the Iranian counter to an attack — namely blocking the Strait of Hormuz. While these maneuvers were under way, U.S. Secretary of State Hillary Clinton said no “redline” exists that once crossed by Iran would compel an attack on Iran’s nuclear facilities. The Israeli government has long contended that Tehran eventually will reach the point where it will be too costly for outsiders to stop the Iranian nuclear program.

The Israeli and American positions are intimately connected, but the precise nature of the connection is less clear. Israel publicly casts itself as eager to strike Iran but restrained by the United States, though unable to guarantee it will respect American wishes if Israel sees an existential threat emanating from Iran. The United States publicly decries Iran as a threat to Israel and to other countries in the region, particularly Saudi Arabia, but expresses reservations about military action out of fears that Iran would respond to a strike by destabilizing the region and because it does not believe the Iranian nuclear program is as advanced as the Israelis say it is.

The Israelis and the Americans publicly hold the same view of Iran. But their public views on how to proceed diverge. The Israelis have less tolerance for risk than the Americans, who have less tolerance for the global consequences of an attack. Their disagreement on the issue pivots around the status of the Iranian nuclear program. All of this lies on the surface; let us now examine the deeper structure of the issue.

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