From The Market Ticker
I’ve received a few lovely pieces of “hate email” over my missives of late related to Muslim extremists and our foreign policy.
Perhaps we should take this morning and reflect a bit on where we are, where we’re headed in this regard, and why the policies and positions taken by our current administration, along with the ham-handed garbage coming from the Romney campaign, are so dangerous both to us and on a global scale.
I presume that we all know that we were “sponsors” of the “Arab Spring”, right? After years of funding and protecting the murderous bastard Hosni Mubarak we suddenly “decided” that we’d go along with a civilian uprising protesting (and reasonably so!) his behavior.
Ordinarily this would be an easy sale; after all, freedom is a good thing, right?
There’s only one problem — we had been funding and arming this thug for decades. When the crowd got a bit rowdy, as a consequence, the tear gas cannisters that started flying had Made In The USA emblazoned on their sides. This didn’t do anything for our international standing among these people, as you might imagine.
Mubarak, for his part, didn’t exactly go quietly. And who would blame him? Up-armed and up-armored with American funds he used them — on his own people. It was illegal for civilians to own a rifle in Egypt, but pistols were lawful. Soon rifle shots could be heard into the crowd; they were coming from the police shooting from the roofs, not the citizens.
Eventually Mubarak left, but not before the people basically shut down the country.
What wasn’t paid attention to was where the tinder came from to get the fire burning nice and hot — our own Fed and monetary policy were largely responsible by nearly doubling the cost of food commodities in a land linked to our dollar.
Hungry people are pretty easy to gin up into a riotous mob.
You might have thought these pressures had decreased and improved over the last year and change. You’d be wrong. Over the last week or so an emboldened Taliban and Al-Qaeda decided to “commemorate” the terrorist acts of 9/11 with a bit of trouble over in the Middle East and Afghanistan, what has been come to be known as “The Suck.” You’ve probably all heard of the sackings of our diplomatic missions in various countries around the Middle East, including the forcible sodomy and murder of one of our ambassadors. But you may have not heard much about an audacious raid on a NATO base in Southern Afghanistan.
We killed the attackers in the latter case, but not before they damaged or destroyed eight Harriers, causing $ 200 million in damage to material and killing two marines. This was a sophisticated assault, not the act of a “riotous mob.” Likewise, the attacks in Libya and elsewhere showed evidence of significant planning, command and control. None of these assaults were simple acts of an angry mob of people pissed off about some video; these were military operations taken against United States soil, men and material and they were coordinated by the parties undertaking them.
The Middle East has been a tinderbox for decades. But there’s a problem with our intervention in Afghanistan in particular, and that is the fact that both Pakistan and India, not far away, have nuclear weapons. India is reasonably stable but Pakistan is another matter entirely, and the last thing we need is for a conflict to spread into that country.
The worst of the unrest, however, isn’t there and isn’t being widely-reported. It’s in China.
China and Japan have had a long-running territorial dispute over some a handful of islands. Over the weekend what had been a simmering issue turned into a real problem with Chinese rising up and doing something extraordinary: They are demanding WAR with Japan.
These are not just people waving signs either. They are burning Japanese-linked stores and factories, from sushi places to car dealers. Automobile owners are being ejected from their vehicles on a forcible basis and their cars destroyed. And while I’m sure some official agitation is involved this appears to have caught a number of people by surprise, including officials from Japan and the United States.
Behind this, once again, is rapidly-deteriorating economic “progress” in China. Once again rapidly rising inflation in a nation that has a per-capita GDP of about $ 4,000, where what we would consider small changes in food and energy cost literally put people into a situation where they are now hungry, can severely-destabilize a society.
Not that the Chinese are innocent here, incidentally. Indeed China is not only complicit in their own destruction they’re at least as much to blame for this as we are, in that by running enormous trade surpluses and trying to game market forces they have set up the very situation both they and we now face. Capital drains from a deficit to surplus country naturally; this would ordinarily cut off such a trade imbalance automatically. Both our government and theirs have used that imbalance as an excuse to run huge federal deficits and attempt to replace the capital with credit — a pyramid scheme that cannot work over the long term. We thus exported our inflation to China and they thought they’d get away with it due to huge GDP increases. They were wrong, as neither they or we can maintain what we were doing forever and now our collective idiocy is folding back on both of us.
The damage thus far has impacted manufacturers such as Panasonic, which has factories in China. Economic disruption to Japan, which has a much-more precarious financial situation than many appreciate after trying to run huge structural deficits and QE-to-the-moon for the last two decades, has the potential to rapidly escalate into utterly impossible to fund deficits leaving the BOJ no realistic options. At the same time China’s economic situation is likely to deteriorate further with the disruption of trade, exacerbating their attempt to manage a “soft landing” after ridiculous credit pumping that has gone on there for the last several years.
Economic dislocation can rapidly escalate into military action, and a military act undertaken between China and Japan would be catastrophic for the global economic trade system.
I’m not particularly concerned about China’s military capability with regard to the United States. Japan, on the other hand, has something to be worried about, and these are people with very old grudges embedded into their national psyche.
All-in-all we had better stake out our ground and make sure that everyone involved knows exactly where our “Red Lines” are, and in my opinion we need to stake those lines at our national sovereignty and people. If we fail to do this we run the risk of being drawn into a conflict that is not of our design but which we have stoked the fires of with our insane Fed Chairman who ought to be in prison, but won’t be since Congress refuses to do its damn job and put a penalty clause into the Fed’s mandate and then enforce it.
Anyone who thinks this is going to remain contained or calm down in the short term has rocks in their head. It will not until the insane credit pumping games end and our nation decides to align government spending with tax revenues in the present tense, along with Europe.
There is no evidence that either will take place, and as such no matter where I look I see the risk of armed conflict, both of the skirmish and more-organized variety, is rising rapidly — and in the end analysis our Fed and Congress along with the ECB and European governments are the root causes of all of it.