While addressing the "UNITY: Journalists Of Colour Convention" in Washington on August 6, President Bush took the opportunity to redefine what he and his Administration have been calling the "War On Terror" ever since 9/11. Are you sitting comfortably? Here's what he had to say:
"We actually misnamed the 'war on terror'. It ought to be 'the struggle against ideological extremists who do not believe in free societies and who happen to use terror as a weapon to try to shake the conscience of the free world'."
Damn, ain't that a mouthful? It would seem that the whole concept of a "war on terror", complete with the trampling of individual rights in the US and the "public services" (Mr Bush's description of the recent "terrorist alert" on Wall Street) provided by the "(anti?) terror warriors" is not going down too well any more in the US. Well, there's a time honoured government "fix" for these types of situation, one just changes the definitions to suit.
Remember Mr Greenspan's testimony to Congress in mid July, when he assured the nervous world (and the Congressmen and Senators too), that the present "soft spot" in the US economy was temporary, that price inflation was a fleeting phenomenon, and that the "recovery" in the economy was so well established that even a few trifling rate rises (such as the 0.25% rise of June 30) posed no danger to it?
Mr Bush is attempting to re-define" his "war on terror". It will be highly educational in coming weeks and months to watch Mr Greenspan and his cohorts in the Fed re-define almost every ephemeral "concept" which they have introduced over the past few years in an increasingly desperate attempt to deny the evidence of everyone's eyes.
The latest debacle hit Wall Street on Friday (August 6) with the announcement that the well-established US "recovery" managed to create 32,000 new jobs in July. The problem was that Wall Street was "expecting" 228,000 new jobs. Instantly, the US stock indices slumped to new 2004 lows and kept on falling, Gold spiked $US 7.00, the $US index swooned well over 1.00 points. On top of all that, Treasury bond yields dived dramatically, partly on a flight to "safety" out of the stock market but mostly on a kamikaze short-covering orgy by investors which had bet on the "expected" jobs growth putting the wind up everyone because of the prospect of more and maybe bigger Fed rate rises to come.
The rubbish coming out of the Fed is as ridiculous, as contemptible, and as venal as anything coming out of the Bush Administration or the "neocons". That goes double for the knee-jerk sycophancy shown by the financial "professionals" to this garbage. The result is that they are now getting "whipsawed" within an inch of their financial lives. It's easy to see, just take a look at the now almost daily swoops and dives in stock, bond, and currency markets.
The financial world in general, and the US financial world in particular, is once more attempting the impossible. They are basing their actions on what they WANT to be happening while trying to ignore, deride, obfuscate, or simply blind themselves to what IS happening.
What IS happening is perfectly obvious. It is shown by the government's own data, skewed as it is. It is inevitable by any rational economic theory. It is in perfect accord with ALL of economic history. It is unavoidable by anyone who ventures outside the "beltway" to any large or small town in the US and simply looks. To use part of the headline of the Early August issue of The Privateer (# 507 - published on August 8), the US is "Tapped Out"! The ability to issue and/or absorb more debt without upsetting the entire financial apple cart (up to and including the US Dollar itself) is teetering on the brink of coming to an end.
Yes, spot future Gold rose $US 7.50 on the Comex on August 6. No, this does not (yet) indicate a "resurgence" for Gold. In terms of the Euro, Gold was up 0.50 Euros on Friday. Gold simply performed a "mirror image" performance to the swan dive of the US Dollar on the day.
Mr Bush has just attempted to introduce an exceedingly maladroit (and wholly mendacious) "re-definition" of the core policy of his Administration - their "war against terror". Mr Greenspan has not yet attempted a similar stunt. Unlike Mr Bush, he has never been subject to "election" and does not face re-election in a few months time.
In the Late July issue of The Privateer (#506 - published on July 25), we said this:
"Everyone would like to live in Mr Greenspan's America too - a land of boundless opportunity with increasing prosperity an established fact and with increasing economic growth in prospect out into the benign future. The problem is that nobody lives there, because such a nation does not exist."
For all "potentates", whether of the political or financial variety, necessity is indeed the mother of invention. The more "necessary" they deem it to keep the REAL state of affairs hidden from their minions, the more outlandish become the "inventions" they come up with in an attempt to obscure and/or deny it. Take a look at Mr Greenspan's "testimony", Mr Kerry's acceptance speech at the Democratic convention, or Mr Bush's re-definition of the "war on terror". See what we mean?
Whether the financial mini-earthquake of August 6 is the start of the breakdown, or whether it is just another tremor on the way towards the breakdown, only time will tell. The breakdown is CERTAIN. The timing is not. That being the case, the situation with Gold is clear, as is the old admonition that it is better to be six months "early" than one day "late".