Holy smokes! Gold was up $US 9.00 in one day this week. And Oil is almost $US 67.00 a barrel. And the US trade deficit just hit yet another record. And the US Dollar is definitely on the skids again, having now given up more than one-third (36%) of its January - July 2005 gains over the past five weeks.
The world in general and the US in particular is stuck in a bubbling cauldron the ingredients of which are a combination of political barbarity and the resultant economic insanity. We are all stewing in "political economy" and the noxious mixture is giving every indication of an imminent eruption.
Politically, the reaction to the Bush Administration's "policies" have come full circle. It began with fear of real or imagined enemies in the immediate aftermath of 9/11 in 2001. That progressed to outright horror in 2002 as US markets collapsed and the US Dollar keeled over. Then came defiance as the Bush Administration lied their way past the UN and into Iraq. That was followed by euphoria as the invasion was successful. Then came complacency as the markets boomed and real estate took off in 2003 and 2004.
Through all of this, there was little questioning of exactly what the Bush Administration was doing. Enforced ignorance was the order of the day. Americans (and many others) forced themselves to ignore the ballooning debts, the draconian legislation, the complete collapse of the PRODUCTIVE portion of the US economy, and the complete dependence of that same economy on foreigners buying the debt it emitted in an ever swelling tide. Had they not done so, the complacency mentioned above could never have held - and the Bush Administration could never have been re-elected, as they were in late 2004. Neither could Mr Bush's major allies, Mr Blair in the UK and Mr Howard here in Australia where the same evidence was freely available.
Complacency is based on a SELF ENFORCED ignorance - not a genuine lack of knowledge but a refusal to know. As such it is a brittle state of mind, and in 2005, it has been steadily splintering. That process is now speeding up, fast.
What was, in the US and elsewhere, a quite understandable and rational fear of real foreign enemies in the immediate aftermath of 9/11 is now, not quite four years later, a growing fear in the minds of many of those same people of their own governments. There is nobody left whose mind is capable of reason who is not aware of the fact that the entire rationale for the US invasion and occupation of Iraq was fabricated. There are few people left who are not aware of the design to deceive them.
The last refuge of complacency was the housing bubble. It has now been firmly burst in Australia. In the UK, the most certain indicator that it is about to burst was the decision by the Bank of England to lower official rates last week. And in the US, it is clearly on its last legs as the number of houses for sale (but not selling) is growing fast. On top of that, there has been a sudden and steep dive in US consumer confidence.
Complacency is hard to maintain when one winces every time one pulls into a gas station. It is even harder to maintain when one contemplates a situation where the amount owed on a house is now more than the house is "worth".
On a political level, complacency is being rocked to its core in the US by the single act of the mother of one of the almost 1900 Americans who have now been killed in Iraq. Cindy Sheehan is camping outside President Bush's Crawford Ranch. She wants an answer to the simple question of what exactly is it that her son died for in Iraq. She wants Mr Bush to answer her, face to face. He refuses to do so.
Mrs Sheehan's vigil has attracted worldwide attention. She is being praised by many and villified by many others. What she has forced into the awareness of those who have refused to see by their own choice is a simple and inescapable truth. There is only one answer to her question. Her son died to defend and protect a corrupt political and economic system which is rapidly turning into a tyranny. We don't know whether her son knew this. There is no doubt that Cindy Sheehan knows it.
As this knowledge widens, or to be more precise, as more and more people get off the increasingly painful fence they have been sitting on and finally face what is REALLY happening, the situation will become more and more volatile. This is certain to be the case in the policital realm. It is even more certain to be the case in the economic and financial realm.
If you want a connection between political and economic events, consider the vigil of Mrs Sheehan and the "sudden" gyrations of both commodity and currency markets this week. The vigil in Crawford has placed a political time bomb under the Bush Administration. Her particular action may not set it off, but it has shortened the period before it does go off. The issue she has raised cuts to the heart of the entire situation. It is as difficult to ignore as it is to answer. If the question is not answered by the White House, and there is no chance of an honest answer from that quarter, then it will remain open for each individual to answer for him or herself.
Those who answer it will find that it leads to a host of other questions, each of which will follow the same theme: "What has our government done to our country?" Neither markets, nor finance, nor government policies, nor even politics as usual can stand up to that one. They couldn't in the late stages of and after the fiasco that was Vietnam. They won't this time either.
It is conceivable, though VERY highly unlikely, that the action of Mrs Sheehan (and the inaction of Mr Bush) might galvanise enough outrage amongst her fellow Americans to force the Bush Administration to "blink" at their now obvious plans to invade Iran (and/or Syria) in order to perpetuate their power and re-inforce the now tattered external distraction that is Iraq. But if the Bush Administration does now compound their incalculable folly by taking such an action, it is far more likely that Americans will see it for what it is. It is also far more likely that having done so, they will not be so eager to impose another episode of self-enforced delusion.
In the financial realm, there is no way back from the havoc which has already been wrought by an insanely profligate government and by the brittle complacency of too much self-enforced delusion by too many Americans. This week, the facade slipped and Gold bolted $US 9.00 higher in one day. Gold is now just over $US 10.00 below its bull market highs set way back in December 2004. It will be kept below that $US 456 high as long as the mechanations of the financial system and the political imperatives of the political system can keep it there. We do not think that will be for too much longer.
Modern politics and economics is a cesspool which cannot be drained by a Gold "price", no matter how high that "price" might get as expressed in modern paper currency. The task can only be accomplished when the words of James Madison (see the mid August Privateer - #533 - published on August 14) are heeded and understood: "If tyranny and oppression ever come to this land, it will be in the guise of fighting a foreign enemy."
How's THAT for being far sighted?