One of the most fatuous headlines we've seen in a long time (and that's saying something) appeared on Reuters.com on July 14: "G8 to focus on Russian democracy". Apparently, George Dubya has decided that Russia under Vlad the Terrible (aka Russian President Vladimir Putin) has backslid in the area of "democratic reform". And what is "democratic reform"? Apparently, according to Mr Bush anyway, it is what Mr Putin has not being engaging in. "Democracy", in modern parlance, is a form of government in which the "people" have a choice between two or more sets of rulers instead of the one set of rulers which is the mark of a "dictatorship". It is certainly true that the Bush Administration has long accused Mr Putin of running and increasingly "dictatorial" government. Whether that is "true" or not, the Bush Administration certainly are experts in this field.
So, we are solemnly assured, the G-8 Heads of State summit in St Petersburg (Russia) this weekend is to focus on "democratic reform", according to the US mainstream media anyway. Will there be any sidelong glances cast at economic or financial reform? Possibly, but those are not in the preferred realm for public consumption.
Doldrums we certainly do NOT have this northern summer. To the unending quagmires in Iraq and Afghanistan, we must now add the outbreak of full-scale "hostilities" between Israel and Lebanon. These have the very real potential to escalate into a war engulfing the entire Middle East. Knowing this, the dividing lines within the G-8 are becoming ever sharper, with Mr Bush, predictably enough, defending Israel's right to "defend itself", while the European Union and Russia condemn Israel for a "disproportional" response to the kidnapping or two Israeli soldiers and the killing of eight others by Hezbollah operating out of Lebanon.
But while the political and military chaos ramps up, the underlying cause of it all is mentioned, if at all, behind very tightly closed doors. The financial powers that be, and these are precisely the parties which have gathered for the G-8 summit in St Petersburg, would have us believe that the econonomic state of the world is "just fine". They would contend that just because they have lost their grip on any semblance of a pretense towards the amicable interaction between nations does not mean that the global financial system is in any way involved.
Of course, nothing could be further from the truth
The fact of the matter is that the Bush Administration is attempting to control the world through political and stark military means because the means by which they HAVE been controlling it for the last 60 years is now proving insufficient to the task. Ever since the end of WWII, the primary means by which the US has controlled the world has been the simple fact that its currency, the US Dollar, was at the same time the RESERVE currency which "underpins" the financial system of every other nation on earth. Today, the US Dollar is a hollow shell stuffed with US IOUs which everyone, including those who issue them with such abandon from the Fed and the Treasury, knows will never be repaid.
As it has been for every G-7 or G-8 meeting since 1985 - the year that the US became an international net DEBTOR nation - this is the primary issue and the one which nobody will acknowledge.
This week, the spot future oil price reached new all time highs while stock markets throughout the world went into their second dive since mid May. As you undoubtedly know, Gold is rising inexorably, having reached a spot future close of $US 668.00 on July 14. This is well over $US 100 above the correction low it set exactly a month ago on June 14 and almost exactly two-thirds of the way back to the bull market high of $US 721.50 (spot future closing basis) it set just over two months ago on May 11.
Also on July 14, Japan ceased to be the last global holdout. For the first time in six years, the Bank of Japan actually HAS an official interest rate, having "raised" its official target rate from 0.00% to 0.25%. And while we are well aware that an 0.25% rate is just as farcical as an 0.00% rate for the nation whose government is the most indebted of any major government in the world (measured by its deficits as a proportion of GDP), the fact remains that now, the ENTIRE world is raising rates - on top of a debt load which simply cannot live with higher rates.
All of the major US stock indexes are on the verge of breaking down to new 2006 lows. One of them, the Nasdaq, has already done so. On July 13 and 14, 1.5% to 3.00% or higher losses were carved off every major stock market in the world. Of course, the "escalating tensions" in the Middle East took the blame. But the US has "escalated tensions" twice in the Middle East over the past 15 years - under Bush I and Bush II. On each of those occasions, global and especially US stock markets soared.
The real problem is that these "escalating" tensions were NOT directly precipitated by the US, or by any of the other participants at the G-8 Summit. The real problem is that the fear is growing that these are "tensions" over which the global powers that be have limited and decreasing control. The exact same fear is growing in global financial markets for the exact same reason.
Gold's inexorable rise over the past month certainly reflects this. A G-8 Summit which does not come up with anything which can reassure even the most credulous that they are in any semblance of control of the situation - be it political, military or financial - has the potential to increase the chaos much more quickly in all three areas. This year, there is little chance of global markets sleepwalking their way from the July 4 holiday to the Labor Day weekend as they have done so many times in the past.