Friday, November 27, 2009

What's going to happen

Well, I don't blog often, but I want to write something here for the record. We'll see what the future brings, and if I have any idea what's really happening in the world.

The US is in a pickle. 0% interest rate has reinflated the stock market and led to a USD-based carry trade that's helping fuel asset bubbles in the emerging markets. This isn't making the world happy, to say the least, but the measures are necessary to try and avoid that double-dip recession (or more properly, an extended recession). Ultimately, there's huge pressure on the USD right now, and gold is poised to break $1200 any time, and the markets are beginning to set up for high inflation in the US.

So to avoid the failing US dollar, the traditional method would be to raise interest rates in the US. However, that is next to impossible with unemployment at +10% and an economy struggling to grow. So the US is in a damned-if-you-do, damned-if-you-don't situation.

Webster Tarpley is proposing that the US is poised to engage in what he calls "Operation Safe Haven", where a dramatic world event will cause a flight to safety (i.e. buying of US dollar and exiting from risky markets) similar to what we saw during the height of the crisis. Of course, this risk event will be US orchestrated. He suggests three possible scenarios:

1. Israeli attack on Iran
Tarpley claims this is the least likely scenario because Israel lacks the ability to sustain a war with Iran, and thus the desired result will be unachievable.

2. Proxy War in Yemen
Turns out, the civil war brewing in Yemen serves nicely for a proxy war between Saudi Arabia and Iran, with the Saudis backing the government while the Iranians are backing the Houthi rebels. This would prove advantageous for the US, since it doesn't require any direct intervention on their part.

3. Proxy War in Pakistan
This might be the most likely event, particularly if the the Pakistani Taliban start to pose a real threat of gaining access to Pakistan's nuclear arsenal. However, this has the makings of a proxy war of economics between the US and China, and threatens China's oil imports. Make no mistake, there's a serious economic battle occurring between China and the US.

Further, it's a widely held belief in Pakistan that much of the terrorist attacks that have been blamed on Al Qaeda are actually the responsibility of the CIA. Not only does full out civil war in Pakistan provide the risk event to help drive a new 'flight to safety' and a strengthening of the US dollar, it also provides a the opportunity to gain extended US influence in Central Asia. This gives the US the ability to apply pressure on both China and India.

This is where we stand. Exciting times, huh? While this is all speculation at this point, I think it comes from a pretty educated viewpoint. For me personally, this is all sorta new, as I come to understand the mechanics of false-flag events and the geopolitical elements which create the economic atmosphere in which I trade.

Interestingly, Brazil and Taiwan have both put laws in place that limit the amount of speculative hot money coming into their countries in the form of USD-based carry trade. Brazil has also put controls on the Real-US Dollar exchange rate.

Lots of fun things to keep me thinking and busy for the future. Looking forward to our move back to Taiwan, this time for the long run!