Making Sense of the Events in The Middle East

MSM tends to report the events in Egypt, Yemen, Tunsia, Bahrain, Syria, and Libya as if they were all the same.  The same MSM, both western and Arab tend to paint the involvement of the EU, UK, and the US as purely self interests related to oil.  In both cases to do so does not create an understanding of the real complex and in all cases, country specific issues.  Nor does these same western countries relate the events in the region to events at home in their own countries.

Let’s address the “oil” issue first. The truth is that the entire global economy, including the side-liners like Russia, China, and India economies,  must have a SECURE supply of oil.  If anyone of these nations were really “after the oil”, Kuwait would be a US territory as well as Iraq.  That is not the case in either country and the US pays MARKET price to these countries for their oil, just like everyone else.  The same could be said of the european countries as related to Libya.  So from my perspective and vantage point, the oil imperialism argument, primarily kept in the mainstream by Iran, is just a red herring argument.

When we look at the divisions within the Arab countries, Iran is the nation, fomenting the issues.  What most Westerners fail to grasp is the fact that while Iran is primarily a Shia nation, they are NOT Arabs!  Iran is Persian.  One only has to look deeply at how Iran has constantly be meddling in the affairs of Iraq to understand why there is more concern in the Arab world over the activities of Iran than there are concerns about Western interference.

That is not to say that the Arab countries are all that secure with their relationships with the US and EU, but these concerns are more related to the consistency that may be demonstrated by the US and the EU and NATO related to assisting in the security and protection of Arab countries in relationship to Iran.  these concerns are well founded and have resulted from the fickle manner in which both the US and NATO have acted in the past.  These concerns were voiced again when US Secretary Gates visited Saudi Arabia last week.

The GCC countries are especially worried about the Iranians , their aggressiveness in the region, and their ability to disrupt the flow of oil to the world.  GCC foreign ministers on Sunday condemned Iran’s “blatant” interference in the State of Kuwait’s internal affairs, accusing Iran of “planting espionage networks on [Kuwait's] territory” to undermine the country’s security and stability and the interests of its citizens. In a statement issued at the conclusion of their extraordinary one-day meeting, the foreign ministers commended Kuwait’s security bodies for uncovering the sleeper cell of spies believed to be working covertly on Iran’s behalf. The ministers also affirmed their support for all the measures taken by the State of Kuwait to protect its national security.

The statement further noted that the senior government officials had expressed concern at what they called “continuous Iranian interference in the domestic affairs of the GCC countries, by conspiring against those nations’ national security … and instigating sectarian sedition between their GCC countries’ citizens, independence, principles of good neighborliness, international laws, the Charter of the UN and OIC.” The foreign ministers also welcomed the return of calm and stability to the Kingdom of Bahrain, praising the spirit of the Bahraini people who it said had sought the country’s higher interests.

Bahrain has the capabilities and wisdom to dealing with its internal affairs, said the ministers, whilst stressing that they “strongly condemn the Iranian interference” in Bahrain’s affairs. The senior government officials also stressed the legitimacy of the deployment of Peninsula Shield forces in Bahrain, which they indicated was compliant with an earlier defense agreement binding the six GCC countries – Kuwait, Saudi Arabia, Bahrain, Oman, Qatar and UAE.

The GCC ministers further condemned the Iranian Shura Council’s national security and foreign affairs committee’s statement which claimed that Saudi Arabia’s policy was “playing with fire.” The Iranian statement, which also called on Saudi Arabia to pull out forces from Bahrain, “is a hostile position and is a provocative interference in the internal affairs of the GCC countries,” the ministers warned.

On Yemen, the foreign ministers voiced great concern over the deterioration of security and the growing divisions in the country, a matter that would undermine interests of citizens and economy as a whole. They called on all parties in Yemen to launch dialogue to ultimately reach reform and bring about social stability. The ministers said they respected the wishes and choices of the Yemeni people, adding that they would be establishing contact with the Yemeni government and opposition to address the conflict

Also on Sunday, the UAE’s Foreign Minister Sheikh Abdullah bin Zayed Al-Nuhayyan said that there is a “huge contradiction” between Iran’s words and its deeds towards the GCC countries. “The espionage networks that were arrested in the State of Kuwait are strange [things to] happen from a neighboring country that always claims to have good neighborly relations with us,” Sheikh Abdullah told a joint news conference with GCC Secretary General Abdullatif Al-Zayyani that followed the ministers’ meeting.

The Gulf Cooperation Council (GCC) countries are firmly behind the Bahraini King’s request to send Peninsula Shield forces to the Kingdom, he reiterated. Concerning events in Yemen, meanwhile, Sheikh Abdullah said the GCC countries would be contacting the government and opposition parties there in a bid to resolve their conflict. Al-Zayyani on his part said that there are currently numerous challenges facing the GCC countries, further reiterating the member states demand for “other countries not to interfere in the GCC countries’ affairs.

Meanwhile, Kuwait’s caretaker foreign minister Sheikh Dr. Mohammad Al-Sabah told a Kuwaiti daily Al-Qabas via phone following the meeting that the talks, as well as the concluding statement, “reflect the collective spirit of the GCC,” indicating that “GCC Foreign Ministers insisted on the common united fate of GCC countries,” whilst also noting that the Bahraini subject and current events in Kuwait were equally addressed during the meeting and stressing the cohesion of the GCC as a single unit. “The GCC proved to be capable of meeting its responsibilities, and showed that to the security of member states…meaning a threat to any GCC state is regarded as a threat to all countries of the region”.

Meanwhile, in the same article, Al-Qabas, also quoted GCC insiders as saying that the foreign ministers had agreed during the meeting that all the member states’ capabilities would be utilized to confront any potential threats against any member state. The sources further indicated that the senior government officials agreed on the principal measures that should be taken to face any Iranian threats, adding that an agreement was also reached to hold further top-level GCC meetings featuring senior security and defense personalities within the next couple of days to discuss the type of measures to be taken and the strategies to be utilized for their implementation.  The insiders further asserted that the GCC foreign ministers were unanimous in stressing the importance of eliminating “suspicious individuals” in member states, while ensuring that this process is not based on group identity. Other sources also revealed that an agreement was reached to “reinforce internal fronts” in the member states in order to confront any attempts to incite sectarianism.

Given these issues and the economic situations in each of the countries now experiencing internal conflicts it is crucial for the US, the EU, and NATO to develop a consistent and strong policy to support it’s vital Arab partners.  Players like Russia, China, and India are sitting on the sidelines looking for opportunities to exploit the failures of the US and EU policy in the region.  So far, their decision to remain on the sidelines, and even tacitily support Iran seems to have traction.  The politicians in the US and EU better get their act together before oil goes to $200 or $300 per barrel.  Commit to their Arab partners and support them unconditionally.

Global Revolution Must Occur

Some are looking the phenomena occurring in the Middle East as if somehow it is unique to that region and we would like to believe it is related to monarchies or religion.  I assure you nothing would be further from the truth and the facts.  I just returned from the region.  I was in fact in the streets the night Mubarak stepped down.  It is about a dignified living.

Now, in the US we have stirrings in Wisconsin, Indiana, New York, and Ohio.  We witnessed the “in-your-face” fake David Koch call to Governor Walker of Wisconsin.  What is happening in Wisconsin will spread everywhere.  Governors are meeting in Washington today to discuss the overwhelming $175 Billion budget shortfalls collectively facing the states.

However, attempting to bust unions and collective bargaining in the face of the enormous tax cuts given to the ultra wealthy is just not going to sit here as it has not been accepted globally.  There is a moment when the masses do their own math and guess what doesn’t add up?  Distribution of wealth in the society is the problem.  It is that simple and it has reached the event horizon.

The PTB and their political hacks actually still believe they can maintain their power structure and as a result they move forward with the methodical destruction of the world’s middle class as the “cost” to maintain their position.  Their solution: just print more money everywhere! Consider this great reporting by Michael Snyder – BLN Contributing Writer.

“If the U.S. dollar is being devalued so rapidly, then why does it sometimes increase in value against other global currencies?  Well, it is because everybody is recklessly printing money now.  The 6 charts which you are about to see below prove this.  The truth is that it is not just the U.S. Federal Reserve which has been printing money like there is no tomorrow.  Out of control money printing has also been happening in the UK, in the EU, in Japan, in China and in India.  There are times when one particular global currency will fall faster than the others, but the reality is that they are all being rapidly devalued.  Unfortunately, this is a recipe for a global economic nightmare.

Right now you can almost smell the panic as it rises in global financial markets.  Investors all over the world are racing to get out of paper and to get into hard assets.  Just about anything that is “real” and “tangible” is hot right now.  Gold hit a record high last year and it is on the rise again.  In fact, it just hit a new five-week high.  Demand for silver is becoming absolutely ridiculous right now.  Oil is marching up towards $100 a barrel again.  Agricultural commodities have exploded in price over the past year.  Many investors are even gobbling up art and other collectibles.

Paper money is no longer considered to be safe.  All over the globe investors are watching all of the reckless money printing that has been going on and they are becoming alarmed.  An increasing number of investors and financial institutions are putting their wealth into hard assets that are real and tangible in an effort to preserve their wealth.

The other day, a reader of this column named James sent me some charts that he had put together.  I thought they were so good that I asked him if I could include them in an article.  These charts show how central banks all over the globe have been recklessly printing money.  Over the last 30 years virtually the entire world has developed a great love affair with fiat currency….

So is everyone printing money?

The U.S. is printing lots of money…..

Source, The St. Louis Fed

The Bank of England is printing lots of money…..

Source: The BoE

The EU is printing lots of money….

Source: The ECB

Japan is printing lots of money…..

Source: The BoJ

China is printing lots of money…..

Source: The People’s Bank of China

India is printing lots of money…..

Source: Reserve Bank of India

Of course anyone with half a brain can see where all of this is ultimately headed.  In the end, inflation is going to spiral out of control and we are going to witness financial implosion on a global scale. So why don’t these nations just adopt sound money?

Well, it turns out that if you are a member of the IMF, you are specifically prohibited from having gold-backed currency.  Yes, you read that correctly.

In fact, U.S. Representative Ron Paul once sent an open letter to the U.S. Treasury and the Federal Reserve asking about this and he received no response.  The following is the content of that letter….

Dear Sirs:

I am writing regarding Article 4, Section 2b of the International Monetary Fund (IMF)’s Articles of Agreement. As you may be aware, this language prohibits countries who are members of the IMF from linking their currency to gold. Thus, the IMF is forbidding countries suffering from an erratic monetary policy from adopting the most effective means of stabilizing their currency. This policy could delay a country’s recovery from an economic crisis and retard economic growth, thus furthering economic and political instability.

I would greatly appreciate an explanation from both the Treasury and the Federal Reserve of the reasons the United States has continued to acquiesce in this misguided policy. Please contact Mr. Norman Singleton, my legislative director, if you require any further information regarding this request. Thank you for your cooperation in this matter.

Ron Paul
U.S. House of Representatives

Sadly, the truth is that the global elite don’t want nations to start adopting gold-backed currencies.  They want countries to use fiat currencies that they can openly manipulate for their own benefit.

At this point, every nation on earth (to the best of my knowledge) uses a fiat currency.  All of the major global currencies are being continually devalued.  In fact, there are times when counties will purposely devalue their currencies even more rapidly in order to gain a competitive advantage in world trade.

This is why so many investors now have such an aversion to paper currency.  It starts losing value the moment you take possession of it.  In some areas of the world, “gold fever” is absolutely exploding.  For example, China imported five times as much gold in 2010 as it did in 2009.  On the Shanghai Gold Exchange, trading volume soared 43 percent during the first 10 months of 2010.

And while these reckless monetary policies continue, consider the fact that NOT ONE individual has faced any kind of criminal charges in the 2008 collapse, NOT ONE.  However, the “Baby Ruth” always floats to the top of the pool.  Consider this just out over at the Huffington Post.

Source: Huffington Post

Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.

The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account–as opposed to those of its clients or business partners– has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.

The details underscore the degree to which Goldman–the most profitable securities firm in Wall Street history–benefited directly from the massive emergency bailout of the nation’s financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.

“If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders,” said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. “The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public.”

Goldman and AIG both declined to comment.

When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world’s largest insurance company, AIG’s inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.

Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.

Many times in past posts, I have both predicted and worried over what a violent reaction would look like in say the US or the UK.  Now more than ever, I see the kindling for such a fire is about to be lit.  I only hope that the people, when they do stand up, do so peacefully.  If there is any lesson we can learn from Tahrir Square was the dignified and resolute manner in which the people imposed their will.

Is Hyperinflation Just Around the Corner? Update from the Currency Wars

As I have provided many times in this blog, one of the key factors to preventing a full economic collapse in the US has been the fact that the US Dollar has been the world’s reserve currency.  The impacts of the dollar NOT being the world’s reserve currency has impacts world-wide, but nowhere more significant than in the US itself.

This fact (dollar is world’s reserve currency) has allowed the FED to continue with its “quantitative easing” (QE) policies unabated (read print more money).   Indeed the Fed has ignored warnings from financial experts world-wide that if the FED continued these policies, they would be jeopardizing the entire financial stability of global trade and could set off hyperinflation which could kill any hopes of recovery.

This QE policy combined with the US government’s lack of control of the deficit spending (now over $14 Trillion) could trigger a global collapse.  Both the FED and the US Congress have down played the impacts of the QE1,2,3 citing the very fact that the Dollar was the world’s reserve currency and therefore, the impacts of both spending and printing money was not going to significantly impact world economics and in fact, they contend that getting the US Economy going was the most import element of stabilizing the world’s economy.

This may be reasonable IF the US Dollar remains the world’s reserve currency, but I also have stated that recent efforts by both Russia and China to push the dollar off the world reserve status could have a disastrous effect both in the US and the world.  My concerns centered on the hyperinflation effect that would be created both domestically in the US and the effects on most of the world’s economy as well.

It appears that my fears for a world-wide push to “bump” the US Dollar as the world’s reserve currency are now being manifested in fact and ahead of the timeline I though it may happen. Consider this article that appeared in CNN Money yesterday.

NEW YORK (CNNMoney) — The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world’s reserve currency. The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system.

SDRs represent potential claims on the currencies of IMF members. They were created by the IMF in 1969 and can be converted into whatever currency a borrower requires at exchange rates based on a weighted basket of international currencies. The IMF typically lends countries funds denominated in SDRs

While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.  Dominique Strauss-Kahn, managing director of the IMF, acknowledged there are some “technical hurdles” involved with SDRs, but he believes they could help correct global imbalances and shore up the global financial system. “Over time, there may also be a role for the SDR to contribute to a more stable international monetary system,” he said.

The goal is to have a reserve asset for central banks that better reflects the global economy since the dollar is vulnerable to swings in the domestic economy and changes in U.S. policy.  In addition to serving as a reserve currency, the IMF also proposed creating SDR-denominated bonds, which could reduce central banks’ dependence on U.S. Treasuries. The Fund also suggested that certain assets, such as oil and gold, which are traded in U.S. dollars, could be priced using SDRs.

Oil prices usually go up when the dollar depreciates. Supporters say using SDRs to price oil on the global market could help prevent spikes in energy prices that often occur when the dollar weakens significantly.

The dollar alternatives

Fred Bergsten, director of the Peterson Institute for International Economics, said at a conference in Washington that IMF member nations should agree to create $2 trillion worth of SDRs over the next few years.  SDRs, he said, “will further diversify the system.”

Dollar firms after starting 2011 weak

The dollar has been drifting lower so far this year as the global economy improves and investors regain their appetite for more risky assets such as stocks and commodities.  After rising above 81 in early January, the dollar index, which measures the U.S. currency against a basket of other international currencies, eased below 77 earlier this week.

However, the dollar was higher Thursday against the euro, pound and yen as disappointing corporate results weighed on stock prices following several days of gains on Wall Street. The rally in the commodities market also cooled, with the price of oil and metals backing off recent highs.

0:00 /4:40Bernanke vs. Ryan: Inflation wars

In addition, renewed concerns about the debt problems facing troubled European economies put pressure on the euro and supported the dollar. The yield on Portugal’s benchmark bond rose to a record high Wednesday, and borrowing costs for Ireland, Spain and Greece remain elevated.

“The market is shedding risk, with equities and commodities weakening and the U.S. dollar broadly stronger” said Camilla Sutton, currency strategist at Scotia Capital.

Traders were also digesting comments from Federal Reserve chairman Ben Bernanke, who told Congress Wednesday that despite a strengthening economic recovery, the unemployment rate remains high while inflation is “still quite low.”

Those remarks reaffirmed the view that “the Fed would be very slow to tighten policy given its dual mandate of price stability and employment,” analysts at Sucden Financial wrote in a research report.  Bernanke also urged lawmakers to come up with a “credible plan” to bring down “unsustainable” federal budget deficits.

“We expect that the outlook for the U.S. fiscal position will weigh heavily on the U.S. dollar in the quarters ahead,” said Sutton. In the near-term, however, she said “a strengthening growth profile” could help provide “a temporary period of dollar strength.”

As we have watched middle eastern  governments implode over the last few weeks, primarily due to inflation of basic commodity prices and large percentages of unemployment, we see the harbinger of days to come in the EU, Russia, and yes the US.  If we stay on this same course the effects of hyperinflation, followed by significant deflation would end the world’s economic system as we know it. Does that sound like an over reaction?  We will see, we will see.  How’s your food stocks?  Judging from Egypt, it looks like you need a minimum of 18 days, no?

Why 2011 Could Be the Year of Economic Collapse

What could cause an economic collapse in 2011? Well, unfortunately there are quite a few “nightmare scenarios” that could plunge the entire globe into another massive financial crisis.  The United States, Japan and most of the nations in Europe are absolutely drowning in debt.  The Federal Reserve continues to play reckless games with the U.S. dollar.  The price of oil is skyrocketing and the global price of food just hit a new record high.  Food riots are already breaking out all over the world.  Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time.  Most Americans have no idea that a horrific economic collapse could happen at literally any time.  There is no way that all of this debt and all of this financial corruption is sustainable.  At some point we are going to reach a moment of “total system failure”.

The whole system is currently standing on one wobbly leg, China’s willingness to buy paper.  If we do not consider the lesson we were just exposed to of when is big too big, then we are doomed to repeat the lesson.  China has become too big of a financial partner.  Consider this:

Source: BBC

Two Chinese state controlled banks have lent more to developing countries than the World Bank, according to a report.

The China Development Bank and the China Export Import Bank offered loans of at least $110 bn (£69.2 bn) to governments and firms in developing countries in 2009 and 2010.  The research was undertaken by the Financial Times newspaper.  Between mid-2008 and mid-2010, the World Bank’s lending arm issued loans of just over $100bn (£63bn).

The two Chinese banks do not publish a detailed breakdown of their overseas loans, so this research is based on public announcements about specific deals from them, their borrowers or the Chinese government. That means the figure arrived at for the amount of Chinese lending is more likely an underestimate than an overestimate because some – more sensitive – loans will not have been made public.

The Chinese lenders are so-called policy banks – they have a mandate to further whatever Beijing sees as its national interest. One of China Development Bank’s specific tasks is to try to alleviate and, where possible, eliminate bottlenecks in supplies of raw materials or land for China’s economy.

It also tries to open up foreign markets for Chinese companies. The period looked at by the researchers included the worst of the global financial crisis. Chinese banks were offering loans to producers of raw materials at a time when it was hard for them to attract financing from elsewhere.

That helped secure long-term energy deals, including oil supplies from Russia, Venezuela and Brazil. The Chinese government, which is sitting on $2 trillion (£1.26 trillion) of foreign exchange reserves, has ample amounts of cash to fund loans which help promote its strategic objectives.

But what is interesting is that in the private sector, it is a different story.  Outward Foreign Direct Investment (FDI) by Chinese companies (not including banks) was around $50bn (£31.5bn) last year – around half the FDI that flowed from foreign companies into China.

As Niall Ferguson, MA, D.Phil., who is Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor of Business Administration at Harvard Business School warned us.  The collapse of an empire can come suddenly and is almost always related to financial crises that occur when debt service exceeds 50% of tax revenue.

Consider this report by  Emily Flitter of Reuters.

NEW YORK (Reuters) – When borrowing money it’s always good to have a Plan B in case a big creditor pulls the plug. That should be true whether the sum is a few thousand dollars or about a trillion, the size of the United States government’s debt to China.

China is officially the United States’ biggest foreign creditor, with roughly $900 billion in Treasury holdings — or over $1 trillion with Hong Kong’s holdings included.  That means it could do severe damage to U.S. debt markets if it suddenly started selling large amounts.

Most experts say if there were signs of this happening, the U.S. government would go for a combination of persuading Americans to buy more U.S. debt, the same way they did in World War II, and finding friendly foreign governments to make additional purchases.

Banks could be called on to increase their holdings of treasuries, and as a last resort, the Federal Reserve could also be called on to fill the gap, though this could risk turning any dollar weakness into a slump.

“The U.S. government should have and maybe still could call on the people of the U.S. to invest in U.S. debt,” said David Walker, a former U.S. comptroller general who heads an advocacy group calling on the government to curb the U.S. budget deficit and borrowings.

To be sure, the idea that China would suddenly sell its U.S. debt holdings is almost unimaginable to some.  After all, any weakening in the U.S. debt markets and the resulting global markets turmoil, including likely weakness in the dollar, would bounce back on China and could hurt its economy badly, especially as the United States is such a huge Chinese export market.

It likely would take something like a massive rise in tensions over an issue like Taiwan or oil exploration in disputed areas of the South China Sea, including possible military confrontation between the two nations. Such a confrontation would also make it easier for Washington to appeal to the American public to buy its debt for patriotic reasons.

But Beijing could also justify pulling back sharply from U.S. Treasuries if the dollar were to plunge, perhaps because of Washington’s failure to curb its budget deficit and debt. “I worry that we could be at a tipping point,” said Eswar Prasad, a Brookings Institution economist and former International Monetary Fund official with responsibility for China.

“If the Chinese say ‘We’re not buying any more Treasuries,’ this could act as a trigger around which nervous market sentiment coalesces,” he said. “People could start wondering how the U.S. is going to finance its deficit.”

So we had all better be getting prepared for hard times.  The following are 12 economic collapse scenarios that we could potentially see in 2011….

Source: The Economic Collapse

#1 U.S. debt could become a massive crisis at any moment.  China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated.  Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates.  If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.

#2 Speaking of threats to the global financial system, it turns out that “quantitative easing 2″ has had the exact opposite effect that Ben Bernanke planned for it to have.  Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially.  Is Bernanke this incompetent or is he trying to mess everything up on purpose?

#3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos.  According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009.  The WEF says that now the world is going to need another $100 trillion in credit to support projected “economic growth” over the next decade.  So is this how the new “global economy” works?  We just keep doubling the total amount of debt every decade?

#4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time.  The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke.  According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of “hospital, nursing-home and adult-day-care services” rose 269% during those same two decades.  All of this happened during a period of supposedly “low” inflation.  So what are price increases going to look like when we actually have “high” inflation?

#5 One of the primary drivers of global inflation during 2011 could be the price of oil.  A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011.  If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy.  In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline.

#6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria.  In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are.  So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011?

#7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages.  Demand for precious metals has never been higher.  So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals?  What is going to happen when the fact that far, far, far more “paper gold” and “paper silver” has been sold than has ever actually physically existed in the history of the planet starts to come out?  What would that do to the price of gold and silver?

#8 The U.S. housing industry could plunge the U.S. economy into another recession at any time.  The real estate market is absolutely flooded with homes and virtually nobody is buying.  This massive oversupply of homes means that the construction of new homes has fallen off a cliff.  In 2010, only 703,000 single family, multi-family and manufactured homes were completed.  This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009.

#9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers.  This winter we have already seen thousands of new cold weather and snowfall records set across the United States.  Now there is some very disturbing news emerging out of Florida of an “incurable bacteria” that is ravaging citrus crops all over Florida.  Is there a reason why so many bad things are happening all of a sudden?

#10 The municipal bond crisis could go “supernova” at any time.  Already, investors are bailing out of bonds at a frightening pace.  State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP.  According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system….

“It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy.”

Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years.

So do not buy the “Happy Talk” that is flying around.  The financial facts and realities simply do not support it.  In fact, it already appears that 2011 is going to be much worse than 2010.  In the US I think this will primarily be set off by the financial crisis facing municipalities, counties, and states.  The reality is the collapse will be caused by some small event that creates a panic perception in the financial markets or the social condition.

I am not saying this is inevitable, in 2011, but I am suggesting you might want to go over those survival plans one more time to make sure everything is up to snuff.

Chinese Yuan; A new world reserve currency? , China making its moves.

From the currency war front, we are watching the major assault on the dollar.  We have anticipated this move for several months now and it appears the major push by China has now been launched.  The first signals was China NOT buying all of the US T-Bills at the last few auctions. Then they shifted their paper buying to the Euro bills.   Now according to Graham Sharkey, only a mere twelve days into the New Year (2011) and China has already set the wheels in motion to use their most powerful weapon, the Yuan, in order to combat inflation. This may well be the first decision of many that will result in the Yuan being phased in as the new world reserve currency.

A stronger exchange rate will be the tool that China will use in order to tame their inflationary problems at present. The biggest increases being felt as a result of inflation at this time are; the Chinese housing market, which was most dramatically affected in the southern industrial hub of Guangzhou, where home prices soared by 38 percent in the past year.  Another sector heavily affected was Chinese groceries, with the cost of some foods increasing by 50 percent.

In an attempt to address the loose lending policies being adopted by Chinese banks, China’s government have ordered their banks to increase the amount of money that each bank holds in reserves with a reduction in the availability of lending.  The strengthening Yuan will essentially result in two ways; 1, their imports will become substantially cheaper. 2, their exports will be more expensive.

This is a move that the US have not wanted the Chinese to take as most of the consumer goods that are stocking up US stores are Chinese-made products and the longer the Chinese allowed their currency to be held at a relatively low-level (compared to its purchasing power potential) the longer the shopaholics’ in America could continue to buy their products at a price that they could afford (or a level that they could get credit for).  So, with the world outside China continually devaluing their currencies and China increasing theirs who is going to pick up the export market? And how do they intend to do this?

Before hand, the countries that were importing goods from China were benefiting from a manipulated Yuan price which gave the illusion of cheap imports. But now, that is not an option. The only way that I can see that will enable countries to bridge the export gap will be, further devaluation of their paper currency, which as any respecting economist knows is only an extremely short-term solution (if it can even be called that) and will only result in long-term high inflation for that economy.

This currency policy decision by the Chinese government will help to add to the increasing confidence in the Yuan as a world reserve currency contender to replace the failure that is, the US Dollar.  Aside from the measures taken to combat inflation in China, there have been many other recent events that all point to the strengthening of the Yuan and the growing popularity of the currency.

In the last two weeks, the World Bank issued their very first Yuan bonds; they will release the amount of 500 million Yuan, which is around $70 million in US Dollars. The bank has said that, these actions are an act of confidence in the Renminbi and will give investors around the globe the opportunity to diversify and help the exposure of the Yuan in global markets. The bonds were offered from January 14th, 2010 and will mature after two years in 2013.

In July of last year (2010) China began allowing cross-border exchange with the renminbi, however, there were caps on exactly how much currency was allowed to be exchanged. That was the closest China had come to allowing the renminbi to be a top currency on a global scale, until now.

Now marks the beginning of the renminbi being allowed to be traded in the U.S, China have identified that the global economy has become too reliant on the Dollar and wants to provide an opportunity to move away from that.  China have already implemented strategies that will allow for sustained appreciation for the Yuan against the US Dollar, a prediction in the rate of appreciation was projected at 6% in 2011 by Robert Minikin, who is a currency strategist at Standard Chartered based in Hong Kong.

The reason that there hasn’t been a replacement of the US Dollar as the world reserve currency as of yet is the fact that there was no currency that was ready to take on that mantle, however, given the performance of the Yuan in the last two years, it has shown its power and reliance as a solid currency, not only that, but China have also helped their cause by not relying on a paper, fiat currency but actually using the strengthening Yuan in which to buy up gold and other major assets, something that every single country in the so-called ‘advanced’ world has not done.  All of these factors are now helping to shape the Yuan into tomorrow’s new world reserve currency and once this transformation occurs, it really will spell the end for the down but not yet out, Dollar.

What to watch now is the so-called “summit meeting between President Obama and Hu Jintao of China this week.  In preparation for that meeting, President Hu Jintao said Sunday the international currency system was “a product of the past,” but it would be a long time before the yuan is accepted as an international currency.

Hu’s comments, which came ahead of a state visit to Washington on Wednesday, reflected the continuing tensions over the dollar’s role as the major reserve currency in the aftermath of the US financial crisis in 2008.

“The current international currency system is the product of the past,” Hu said in written answers to questions posed by The Wall Street Journal and the Washington Post.  Highlighting the dollar’s importance to global trade, Hu implicitly criticized the Federal Reserve’s recent decision to pump 600 billion dollars into the US economy, a move criticized as weakening the dollar at the expense of other countries’ exports.

“The monetary policy of the United States has a major impact on global liquidity and capital flows and therefore, the liquidity of the US dollar should be kept at a reasonable and stable level,” Hu said.

China’s own currency, the yuan or renminbi (RMB), is also expected to be a bone of contention in Hu’s talks with Obama, with the United States complaining that it is artificially overvalued to boost Chinese exports.  Asked about the view that appreciation of the yuan would curb inflation in China, Hu suggested that was too simplistic a formula.  ”Changes in exchange rate are a result of multiple factors, including the balance of international payment and market supply and demand,” he said.  ”In this sense, inflation can hardly be the main factor in determining the exchange rate policy,” he said.

At the same time, Hu signalled no imminent move away from the dollar as a reserve currency, saying it would be a long time before the yuan, or renminbi (RMB), is widely accepted as an international currency.  ”China has made important contribution to the world economy in terms of total economic output and trade, and the RMB has played a role in the world economic development,” he said.  ”But making the RMB an international currency will be a fairly long process.”

Nevertheless, Hu noted that China has launched pilot programs using the yuan, or renminbi, in settlements of international trade and investment transactions.  ”They fit in well with market demand as evidenced by the rapidly expanding scale of these transactions,” he said.

As we have chronicled in this blog, these moves are demonstrating how short the fuse really is on the Dollar remaining the world’s transactional currency.  With the European Central Bank(ECB) denying the crisis of the Euro and the US simply printing more money to cover the mess in the financial markets in the US, it is just a matter of time before China drops the hammer and we will be living in a very new economic paradigm.  Watching the currency transaction markets, it seems it is a lot closer than anyone is admitting publically.

Further Updates from the Currency War Front

Well, folks, it’s official – mark November 22, 2010 in your calendars.  With yesterday’s $8.3 billion POMO monetization, the Fed’s official holdings of US Treasury securities now amount to $891.3 billion, which is higher than the second largest holder of US debt: China, which as of September 30 held $884 billion, and Japan, with $864 billion.  The Fed is now buying about $30 billion per week, or about $120 billion per month, for the foreseeable future and beyond, it would mean that China would need to buy a comparable amount to be in the standing. It won’t. In other words, the Ponzi operation is now complete, and the Fed’s monetization of US debt has made it not only the largest holder of such debt, but made external funding checks and balances in the guise of indirect auction bidding, irrelevant. China is now not the one having the most to lose on a DV01 basis on that day when the inevitable surge in interest rates finally happens. That honor is now strictly reserved for America’s taxpayers.

In addition, Tuesday China and Russia sent a loud message to the FED.

Source: Asia One – Su Qiang and Li Xiaokun

St. Petersburg, Russia – China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.  Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

“About trade settlement, we have decided to use our own currencies,” Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities. The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

“That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries,” he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.  The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communique. Details of the documents have yet to be released.

Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a “fair and reasonable new order” in international politics and the economy.

Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.

Pang Zhongying, who specializes in international politics at Renmin University of China, said the proposal is not challenging the dollar, but aimed at avoiding the risks the dollar represents.  Wen arrived in the northern Russian city on Monday evening for a regular meeting between Chinese and Russian heads of government.

In related news on the situation in the EU comes the grim but expected news that the Spanish 3-month bill auction failed.  The debt agency sold only €3.26bn of the €4-5bn that was offered, at average yield of 1.743% vs 0.951% prior. What people must understand is that is nearly double the interest rate.  This debt service is the back breaker to the economy.  Tensions are surely going to start boiling over on the Emerald Isle.  If Greece was a big bomb to the EU and ECB stability, and Ireland was Greece’s big brother, then the Spanish economy is their bigger brother Bubba.  These three countries WILL require further bailouts and quite frankly more than the ECB can handle.  The death of the EU is like watching a shot buffalo go down in a Sam Peckinpah movie.

Finally, back in the US, in addition to the impacts of QE2, the mortgage situation as related to the big banks is far from going away.  To put things in clear perspective, the banks bundled, and sold to investors, junk paper consisting of bundled questionable mortgages.  In most cases, those same banks kept the seconds on those mortgages.  However, now the investors do have recourse.  These bundled packages required the banks to “buy back” any equity that was in default or foreclosure.  The bottom line to this is that the top five banks, between the bad second mortgages and the default clauses on the crap they dumped on investors, are on the hook for nearly $400 Billion, which is more than the equity value of those top five banks.

In view of the fact the currency wars have unquestionably erupted, these elements represent the perfect storm.  As a side, the “fear” index on Wall Street today was the highest recorded since 1987.  These events are moving along the worst case scenario lines.  Watch very carefully.

Be Prepared For a Crash Landing!

As some of you are aware there is something large looming in the predictive linguistics concerning the first few weeks in November.  For those of you who don’t understand what I am talking about, let me give you a brief explanation.  Predictive linguistics can predict near future events with some accuracy based on analyzing different language sets appearing on the internet and the variation in frequency of these appearing “in the cloud”.

The effects of the predicted events in November have impacts never seen before in the project.  To put it in prospective to September 11^th, it is about 5-6 times larger in predicted global impact.  Well that is enough to sit up and take notice.

The mid-term elections in the US will conclude, more or less, today.  This is significant because of what the Fed has been planning to initiate later this week.  The Federal Reserve is likely to start a fresh round of unorthodox stimulus tomorrow by announcing a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News.

Policy makers meeting today and tomorrow will restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed last week. Twenty-nine estimated the Fed will pledge to buy $500 billion or more, while another seven predicted $50 billion to $100 billion in monthly purchases without a specified total. The remainder said the Fed would buy up to $500 billion or didn’t quantify their forecast.

The varied responses reflect differences among Fed officials over the total amount of purchases needed to bolster the recovery. Policy makers, pursuing unprecedented stimulus, have cut the benchmark rate almost to zero and bought $1.7 trillion in securities without generating growth fast enough to bring down unemployment from near a 26-year high.

The Fed has put intense effort into judging what it should signal and how. The FOMC has at least three broad options. First, it could be neutral, pledging to adjust the size of QE2 depending on the data. Second, it could signal a clear bias towards continuing to buy assets unless the economic data have improved. Third, it could pledge to keep buying assets until it is on track to achieve its inflation objective.

However, opponents of the QE2 have very critical opinions that these actions will take the global economy over the cliff. This outflow from the dollar is not the kind of capital that takes the form of tangible investment in plant and equipment, buildings, research and development. It is not a creation of assets as much as the creation of debt, and its multiplication by mirroring, credit insurance, default swaps and an array of computerized forward trades. The global financial system has decoupled from trade and investment, taking on a life of its own.

In fact, financial conquest is seeking today what military conquest did in times past: control of land and basic infrastructure, industry and mining, banking systems and even government finances to extract the economic surplus as interest and tollbooth-type economic rent charges. U.S. officials euphemize this policy as “quantitative easing.” The Federal Reserve is flooding the banking system with so much liquidity that Treasury bills now yield less than 1%, and banks can draw freely on Fed credit. Japanese banks have seen yen borrowing rates fall to 0.25%.

This policy is based on the wrong-headed idea that if the Fed provides liquidity, banks will take the opportunity to lend out credit at a markup, “earning their way out of debt” – inflating the economy in the process. And when the Fed talks about “the economy,” it means asset markets – above all for real estate, as some 80% of bank loans in the United States are mortgage loans.

The currency impacts can be significant and immediate.  By forcing up targeted currencies against the dollar, this U.S. outflow into foreign exchange speculation and asset buy-outs is financial aggression. And to add insult to injury, Mr. Geithner is accusing China of “competitive non-appreciation.” This is a euphemistic term of invective for economies seeking to maintain currency stability. It makes about as much sense as to say “aggressive self-defense.” China’s interest, of course, is to avoid taking a loss on its dollar holdings and export contracts denominated in dollars (as valued in its own domestic renminbi).

Countries on the receiving end of this U.S. financial conquest (“restoring stability” is how U.S. officials characterize it) understandably are seeking to protect themselves. Ultimately, the only serious way to do this is to erect a wall of capital controls to block foreign speculators from deranging currency and financial markets. Changing the international financial system is by no means easy. How much of alternative do countries have, Martin Wolf recently asked. “To put it crudely,” he wrote:

“The US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create. What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world.”

An eerie calm has descended upon world financial markets as they await perhaps the two most important financial events of the year this week.  On Tuesday, investors will be eagerly awaiting the results of one of the most anticipated midterm elections in U.S. history.  On Wednesday, the Federal Reserve is expected to end months of speculation by formally announcing the details of a new round of quantitative easing.  If either the election or the meeting of the Federal Reserve open market committee delivers a highly unexpected result, it could have a dramatic impact on world financial markets.  In fact, many are looking at this week as a potential turning point for the U.S. economy.  The decisions that are made or not made this week could set us down a road from which the U.S. economy may never recover.

This is probably the most significant move of the current economic crisis and the results of the FED’s action will literally affect every family in the world and that is not an exaggeration.  To put this in real simple terms, the US has declared war on the world’s currency.  Now the question is how will the world react to this move.  What effect could the FED’s actions have on the fragile EU economy?  How will China, especially, respond.  China being the biggest holder of US securities, the FED printing $500 Billion in “new money” grossly devalues China’s investment.  Does China take that sitting down?  I don’t think so.

So, let’s go over the procedures for a crash landing.  In the event of…….

Update from the Currency War Front

The war has begun that I voiced concern about early last month.  It appears that the first salvos have been fired and the battle lines are being drawn.  I suspect some may raise their eyebrows when I say that this is the most dangerous war the world has ever dealt with in its history.  What is so dangerous about this war?

First, it is a war that very few people understand.  Politicians have no clue and the average person cannot make the connection between this war and their personal lives.  That is until the war swings into full combat mode.  Then they will understand too late.  Let’s just say when you have to take a truck load of money to the grocery store to buy a loaf of bread everyone will understand then.  What we really need now is intervention to prevent this war from escalating.  This is the job for international economic agencies like the International Monetary Fund (IMF), the G20, or the World Bank to step in!

Well…. According to the Telegraph today, it looks like we have had our first opportunity to see these diligent and social responsible agencies in action on the war front.

The IMF policy committee, which has been struggling to agree a consensus on easing currency tensions among key economies including China and the US, said the organisation should instead keep the issue under watch.  Pressure has been piling on China to speed up the pace of economic reform by dropping its policy of using a weak currency and reserve accumulation to boost exports. Finance ministers at the 187-strong lending agency have accused China of imperiling the global recovery by fostering the imbalances that are preventing deficit countries like the US and UK from returning to economic health.

IMF officials argue that if China let its currency appreciate, Chinese imports would become more expensive, potentially sparking demand for US goods. The US is facing crippling levels of unemployment despite returning to growth, which has raised fears of a “jobless recovery” that could trigger political and social unrest.

European Central Bank president Jean-Claude Trichet last night pointedly reminded China of its commitment last June to “engage in exchange rate flexibility”, adding: “There is no need for [emerging economies] to continue to accumulate immense amount of reserve assets.”

Earlier, US Treasury Secretary Timothy Geithner told the committee that the IMF had to speak more forcefully about how countries manage their currencies. He called on the IMF to “increase the candour of its surveillance” and said that “meaningful reform of IMF surveillance is a core challenge of the institution”.

Despite calls for tougher action, the IMF could only pledge to “work towards a more balanced pattern of global growth, recognising the responsibilities of deficit and surplus countries”.

Mr Trichet added that while “we have a consensus on imbalances, the problem is implementation – as always”. China on Friday hit back at calls for it to let the currency rise, saying it rejected such “shock therapy” but is committed to a more “flexible” currency regime.

George Soros, the respected hedge fund manager, also weighed into the debate. Speaking in London, he said a global “currency war” pitting China versus the rest of the world could lead to the collapse of the world economy. Mr Soros said the China had created a “lopsided currency” system and suggested it allow the yuan to appreciate by 10pc a year – far more than the Chinese will contemplate.

The IMF Committee’s chairman Youssef Boutros-Ghali said at the conclusion of talks at the agency’s Washington headquarters that “frictions” did exist. “These are being addressed. We have come to the conclusion that the IMF is the place to deal with these issues,” he said.

IMF managing director Dominique Strauss-Kahn, when asked about the failure to come up with a stronger statement, said that “there is only one obstacle, and that is an agreement of the members”, before adding that the line was a joke. He added that “I don’t believe action can be done in a way other than in a co-operative way.”

Recent IMF figures showed Beijing had currency reserves of $2.447 trillion, the largest in the world and nearly 30pc of the global total.

So maybe bankers will step in and save the day.  Well… maybe not.  Consider this:

The Institute of International Finance, a group that represents 420 of the world’s largest banks and finance houses, has issued yet another call for a one-world global currency, Jerome Corsi’s Red Alert reports.

“A core group of the world’s leading economies need to come together and hammer out an understanding,” Charles Dallara, the Institute of International Finance’s managing director, told the Financial Times.  An IIF policy letter authored by Dallara and dated Oct. 4 made clear that global currency coordination was needed, in the group’s view, to prevent a looming currency war.

“The narrowly focused unilateral and bilateral policy actions seen in recent months – including many proposed and actual measures on trade, currency intervention and monetary policy – have contributed to worsening underlying macroeconomic imbalances,” Dallara wrote. “They have also led to growing protectionist pressures as countries scramble for export markets as a source of growth.”

Dallard encouraged a return to the G-20 commitment to utilize International Monetary Fund special drawing rights to create an international one-world currency alternative to the U.S. dollar as a new standard of foreign-exchange reserves.

Likewise, a July United Nations report called for the replacement of the dollar as the standard for holding foreign-exchange reserves in international trade with a new one-world currency issued by the International Monetary Fund.

The 176-page report, titled “United Nations World Economic and Social Survey 2010,” was issued at a high-level meeting of the U.N. Economic and Social Council and published in its entirety on the U.N. website.

What is obvious is that no agency or governmental body in the world, no matter its size or scope has either the courage or the power to stop the escalation.  The major governments involved, US, EU, China, and India cannot muster the political strength within their respective regions to implement the policies that must be put in place to correct the existing imbalances.

I am certain that if the general public understood that this is a war in which every home, every family on the planet will be victims and causalities of the war, maybe we can rally our weak-kneed and greedy politicians and bankers to implement the policies now to stop this insane war.  You know, a Godfather like discussion.  An offer they can’t refuse.

War in the Winds

When you look at events combining in the model space, the winds of war are starting to blow in earnest.  We have known for a number of months that a military option was going to be played against Iran.  It was only a matter of time and quietly negotiating consent from allies and other interested partners.  Interestingly in achieving that consensus, the players calling for action include quietly a number of GCC countries.  This is to me one of the strongest indicators that the military option is being moved forward is  when Israel and GCC nations are silent partners in calling for military options to be exercised.  However, it is not the only indicator. There are several others, including the inability of OPEC to stabilize oil prices above $75/BBL.

In addition, the financial crisis seems recalcitrant in nature and the EU is threatening to precipitate the second leg down in D2.  G7 nations are facing crushing deficits and shrinking revenues, coupled with persistent high unemployment and decreased consumer spending.  Remember the rhythms between D1 and D2.  War was the final answer for D1 and it looks stronger every day that it is the solution to D2. Below are two more reasons that I will go on record that the military activities will be initiated against Iran between July 11 to August 1^st. By who? How? I can’t really say, but as I said the winds of war are starting to blow.  First two months ago, a ship load of bunker buster bombs were shipped to Diego Garcia, remember, now below:

By fleet diplomatic footwork, US Secretary of State Hillary Clinton assembled a sanctions package for submitting to the UN Security Council Tuesday, May 19, which Western diplomats admitted contained few new measures, but gained the reluctant assent of Russia and China, as well as the UK, France and Germany. She achieved this by heavily diluting the original draft. That too will be further revised and watered down in the weeks of haggling ahead before it is approved.
The Obama administration gave ground on severity in order to salvage the last vestige of its sanctions strategy from the disastrous impact of the deal Brazil and Turkey brokered with Iran the day before, whereby half of Iran’s low-enriched uranium would be deposited in Turkey to be swapped for 19.5 percent processed material within a year.

That deal was regarded in Washington as a maneuver to delay the fourth round of sanctions. The secretary of state responded with a package of measures without the teeth for deterring Iran from driving forward toward a nuclear weapon but, as she admitted, it was the best possible in the circumstances.  The measures fall short of a total arms embargo against Tehran, although some additional arms are banned, or blacklisting Iran’s central bank. Iranian ships will be watched for contraband but only boarded in the territorial waters of UN member-states, not on the high seas.States are asked to take appropriate, though not mandatory, measures, exercise vigilance against Iranian bank transactions and “be wary” of dealing with the Revolutionary Guards Corps and the companies it controls.

debkafile http://www.debka.com reported on Tuesday, May 18 in the wake of the Brazilian-brokered deal in Tehran:

The US-led Six-Power bloc, known also as the Vienna Group, was given the sole option of endorsing the deal even though Tehran bluntly declared its intention to continue to enrich uranium up to 20 percent inside the country, in defiance of all previous UN Security Council resolutions. Turkish foreign minister Ahmed Davutoglu said supportively that he saw no need for further sanctions against Iran. As an administration official admitted to debkafile early Tuesday, “the international climate manufactured in Tehran had tossed harsh sanctions against Iran on the rubbish heap because there are no takers.”
The Israeli Prime Minister Benyamin Netanyahu convened his inner cabinet in Jerusalem Tuesday, May 18, to decide how to handle the crisis created by the Brazilian-Turkish-Iranian uranium enrichment accord.

But the fact is that sanctions with real bite had never been more than a will-o’-the wisp in the first place.
For months, President Obama chased the unreachable goal of unanimous UN Security Council approval of sanctions as empowerment for tough, unilateral US and European penalties against Iran. Russia and China had circled around the draft but never climbed aboard. So when Vice President Joe Biden declared in the last week of April that a fourth round of tough sanctions would be in place by the end of the month – or in early May, at latest, he knew they were off the table and hoped only to calm Israel and Iran’s Arab Gulf neighbors and fend off their clamor for tangible action to stop Iran’s nuclear progress.

And US Secretary of State Hillary Clinton was whistling in the dark when she warned the foreign ministers of Brazil and Turkey Thursday night May 13 that they were wasting their time if they hoped their mediation bid would have any practical impact on Tehran’s nuclear aspirations. Both knew that Washington was being relentlessly driven back by Beijing and Moscow on a sanctions draft: US negotiators had more or less agreed on the quiet to draw its teeth by giving up on a total embargo on the sale of sophisticated weapons systems to Iran and energy export restrictions.
The same US official admitted that restrictions on arms sales had been watered down to “very moderate” and provided no real bar to the sale of warplanes and missiles to Iran. The final blow was delivered in Tehran Monday by two non-permanent Security Council members, Brazil and Turkey, dropping out.  In Jerusalem, Prime Minister Benyamin Netanyahu convened his inner cabinet of 7 ministers on the crisis. Both he and defense minister Ehud Barak have come in for extreme criticism in military circles for allowing Israel’s hand to be held by the false prospect of painful sanctions stopping Iran’s development of a nuclear bomb in its tracks.

Barak in particular was accused of misleading the public by his constant assurances that it was up to the United States to deal with a nuclear-armed Iran and the issue was well in hand. Both knew the truth, namely that the Obama administration’s efforts to gather a coalition of world powers for the imposition of effective sanctions had never realistically got off the ground.

debkafile’s military sources report a decision by the Obama administration to boost US military strength in the Mediterranean and Persian [Arabian]Gulf regions in the short-term with an extra air and naval strike forces and 6,000 Marine and sea combatants. Carrier Strike Group 10, headed by the USS Harry S. Truman aircraft carrier, sails out of the US Navy base at Norfolk, Virginia Friday, May 21. On arrival, it will raise the number of US carriers off Iranian shores to two. Up until now, President Barack Obama kept just one aircraft carrier stationed off the coast of Iran, the USS Dwight D. Eisenhower in the Arabian Sea, in pursuit of his policy of diplomatic engagement with Tehran.
For the first time, too, the US force opposite Iran will be joined by a German warship, the frigate FGS Hessen, operating under American command. It is also the first time that Obama, since taking office 14 months ago, is sending military reinforcements to the Persian Gulf. Our military sources have learned that the USS Truman is just the first element of the new buildup of US resources around Iran. It will take place over the next three months, reaching peak level in late July and early August. By then, the Pentagon plans to have at least 4 or 5 US aircraft carriers visible from Iranian shores.
The USS Truman’s accompanying Strike Group includes Carrier Air Wing Three (Battle Axe) – which has 7 squadrons – 4 of F/A-18 Super Hornet and F/A-18 Hornet bomber jets, as well as spy planes and early warning E-2 Hawkeyes that can operate in all weather conditions; the Electronic Attack Squadron 130 for disrupting enemy radar systems; and Squadron 7 of helicopters for anti-submarine combat (In its big naval exercise last week, Iran exhibited the Velayat 89 long-range missile for striking US aircraft carriers and Israel warships from Iranian submarines.)
Another four US warships will be making their way to the region to join the USS Truman and its Strike Group. They are the guided-missile cruiser USS Normandy and guided missile destroyers USS Winston S. Churchill, USS Oscar Austin and USS Ross.

debkafile’s military sources disclose that the 6,000 Marines and sailors aboard the Truman Strike Group come from four months of extensive and thorough training to prepare them for anticipated missions in the Persian Gulf and the Mediterranean.

So keep your attention focused to the Gulf.  Will the storm dissipate or will the winds of war blow harder?  I am opined to support the later as most likely.