By now, you will have been subjected to President Bush's speech given on January 10 and, if you so chose, to reams of analysis of the speech and everything it portends for the US in the remaining two years of the Bush Administration. The speech was a washout as far as content is concerned, everything in it was broadcast ahead of time. What was significant is the further exposure of the terrible "box" which the present US Administration has built around themselves.
Mr Bush and his Administration cannot politically afford to withdraw from Iraq. They are clearly at their wits end as to what they hope to "accomplish" by remaining there. They have lost the global propaganda battle long since, and they have now clearly lost it inside the US too. Their means, both in manpower and in materiel, are clearly insufficient to the task. And last but far from least, the sheer financial strain involved in their occupation of the Middle East is straining the US economy to the utmost.
In the Mid January 2007 issue of The Privateer (Number 569 - Published on January 14), we analyse the signals which prove conclusively that not only is the US economy already IN recession, but that the recession is worsening with ever increasing rapidity. It is not for nothing that Fed Chief Ben Bernanke chose the Fed's readiness to address any financial systemic crisis inside the US as the topic of his first major speech of the year on January 3. Nor is it any coincidence that over the short period since Christmas, the $US Gold price has become ever more "volatile".
Last weeek the spot future price plunged by $US 19.30 on Friday, January 5 and a fall over the week of $US 31.20. This week, the items which caused the Gold plunge did NOT go away. Indeed, they intensified. The slump in commodities in general and oil in particular worsened. The US Dollar continued to rise. Yet this week, Gold gained back two thirds ($US 20.00) of the losses it sustained over the first week of the year.
At the start of the year, the London Financial Times sported a headline warning that "inflation fears" were once again on the rise. Within a week, the oil price had plummeted and commodity prices including precious metals had plummeted across the board. This week, as if in a "delayed reaction" to what the Financial Times had published at the start of the year, the Bank of England surprised the entire financial world by RAISING their official rates by 0.25 percent to 5.25 percent. This was a TOTALLY unexpected move. It led directly to a reversal of the $US index (USDX) the following day and, of course, to a snap back in precious metals prices and a rebound in commodity prices in general.
Please remember, the Fed stopped raising controlling US rates, after two years of methodical 0.25 percent rises, in June 2006. The Fed stopped raising rates - BUT THE REST OF THE WORLD DID NOT! Clearly, they still have not stopped. It is very likely that Australia will raise rates when their Reserve Bank meets early next month and the European Central Bank is widely expected to tack on another rate rise by March at the latest.
Yet is it an article of faith - held tenaciously in two localities, Wall Street and Washington DC - that the Fed is FINISHED raising rates. The only item which has been seriously up for debate over the past three or four months is when the Fed will start LOWERING US rates again. In this discussion, there has not been the slightest "taint" of a query over what a renewed push to cut US interest rates might do to the exchange value of the US Dollar.
This is so because the US political AND financial establishment, not to mention the Republican Administration and newly-elected Democrat Congress, cannot afford to even contemplate the subject. It is clear to the US establishment that the they are facing the worst of all possible scenarios. The US economy is slowing with increasing speed. Since they are well aware that it is their ability to bring new "money" into existence out of thin air through credit creation which is the fuel behind economic "growth", they cannot afford to even contemplate further increasing US interest rates. That being the case, they don't. And they absolutely refuse to confront, let alone discuss, the repercussions for the US Dollar if the Fed holds rates steady or even starts to cut them again while the rest of the world continues to raise.
What is of even more concern to the US establishment is the growing shear between the financial actions of the rest of the world and the financial actions of the US. The Fed has stopped raising. The rest of the world hasn't. This is not something that is "supposed" to happen. For sixty years, the US establishment has yelled "jump" and the rest of the world has answered "how high?" That isn't happening anymore.
It isn't happening because the Bush Administration has tried, and now demonstrably failed, to almost literally take over the Middle East. The US Empire and its Empire Builders have come a cropper. The rest of the world knows it. Now, Americans themselves are waking up to it. The political POWER of the US establishment is now being threatened both from without and from WITHIN to an extent unparalelled in the past century - or more.
The underpinnings of that POWER was the currency of the US, and its global reserve currency status. With every new piece of evidence of the overstretch of the US, the currency and its pre-eminent status comes under more pressure. The vacuity and predictability of Mr Bush's January 10 speech has ratcheted up this pressure. This was billed to be, and WAS, the most important speech of his Presidency so far. It was a dismal failure. The "goals" put forward were fatuous, the means to achieve them taken for granted, and any exposition about HOW they were to be achieved entirely absent.
The Bush Administration is a spent force. If the Democrats who now control Congress do not rein in the Iraq/Afghanistan adventure by any means available, up to and including refusing the funds to continue it, then the entire US political setup comes under the microscope. Such a failure by the Democrats would conclusively demonstrate to ALL Americans a fact that has been obvious to discerning Americans for decades. There is no difference between the major political parties in the US. Voting is nothing more or less than a "sop to the peons". It is demonstrably clear that the will of the American people is being flouted by the Bush Administration. If the "opposition" does not enforce that will, then where in Washington DC is ANY political entity which can be said to represent the people.
The biggest and longest postponed political crisis in US history is getting ever closer. The US political establishment has been LYING to the American people - and getting away with it - for decades. The risk that these lies will soon be exposed for all to see has never been greater.
And the FIRST lie, the one that made all the others possible, was the one that the US needed an "elastic currency" to meet the needs of business. That one led to the political control of what the US and the world uses as its MONEY. Political control rests, always, on the control of the "currency". When that control slips because the control of the money has been abused beyond all measure, the power of the political establishment begins to slip with it. We have been watching that process unfold for years now. 2007 is the year when it is going to accelerate. If you don't own Gold, you don't have any protection at all.
Always remember - Gold is the POLITICAL metal! It's price is governed. When the politics slips, the control slips. And right now, the politics in the US is in potential chaos.