The Economics of War
A number of people have written with the same question – why does war come into play now? The answer is very simple. One of the benefits of establishing the most comprehensive databases that extends back thousands of years is the fact you can run studies and correlate trends. What jumps out at you from the data concerning war is very simplistic – war does not unfold when everyone is fat and happy. Turn the economy down and war rises just as we are seeing wide-scale civil unrest. These trends go hand in hand.
Government often NEEDS war because when the people get angry, they go after government. In self-defense, government ALWAYS needs to blame some other country or group. This is how Hitler went after the Jews starting with the bankers.
US Pledges to Defend Japan – Winds of War
For as much as the Japanese Press immediately printed the clarification that Abe misspoke regarding the tensions between China and Japan rising, the USA has come out stating that they would defend Japan. This subtle statement demonstrates what is really going on Behind the Curtain – yes the rising tensions are great.
China remembers the Japanese invasion and their loss of territory to Japan previously. This brews resentment just as there is still some resentment in Russia believe it or not toward the West that goes back to Napoleon and Hitler.
In the case of the United States, why is there no resentment toward Great Britain since it invaded the USA twice and even burned Washington, DC during the War of 1812? The lack of resentment in the USA toward Britain is largely due to the fact that the USA is a melting-pot and the bulk of the population came to America after these events from many European countries that had no such resentment toward Britain.
In the case of China and Russia, the resentment still lingers and is unlikely to vanish any time soon. During the Balkan wars of the 1990s, I was in a conversation with people from that region discussing the prospects for economic development after the war, when a justifying comment was made that the Muslims had massacred 600 Serbs. I asked when, for I assumed I must have missed that news. The response was 600 years ago. Memories outside of the USA go back centuries.
Gold & the Upside
It does not appear that this is the final low for gold as yet. However, a daily closing ABOVE 1293.50 on the cash will signal a move to the upside is possible. The major resistance remains at 1455.00 on a weekly closing basis in cash. On a weekly closing basis in the nearest futures we need a closing ABOVE 1294.00 to also signal a rally near-term is likely.
This simply becomes possible because of the large degree of bearishness that exists. This needs to be cleaned out to some extent. There is no indication as of yet that we are dealing with a major change in trend. This could easily just prolong the final low into 2015.
We are preparing the Gold Report for this very issue.
Europe is a Basket Case – Just Turnout the Lights Now & Save Energy
The German high court has issued a stunning attack upon the European Central Bank, arguing that its rescue plan for the euro violates EU treaty law and exceeds the bank’s policy mandate. Anyone who studied just one semester of law understands that this decision is right on point. One of the primary reasons I disagree with conspiracies to rule the world as if someone was really in control, has been the fact that I have been Behind the Curtain since the 1980s. There is no all-powerful group who knows what the heck they are doing. Everything is purely ad hoc and it is far worse than anyone can even guess. Sure, there are conspiracies to manipulate a given market and make money short-term and then they troll for the next scheme. But to think someone is actually behind this mess mapping out the future for society as if this was part of a giant plan, well you are attributing the power of God to man. Sorry – you are so off base it isn’t even funny. This is total chaos and politicians simply respond to whatever event is immediately before their eyes without ANY concept of the long-term. This is one step at a time without any sense of where they are even headed.
When the European Commission was designing the Euro, they came to our London Seminar and took the entire back row of seating. I had conversations with the people Behind the Curtain and the German Central Bank use to provide us with details on the upcoming Euro because they could see it would fail. I KNOWwhat went on – this is not speculation or theory – I was there. I explained that theONE-SIZE-FITS-ALL would fail and that there had to be a consolidation of national debts consisting of ALL member states for the currency to become aRESERVE currency. The hype that the Euro would replace the dollar was total nonsense and all those who promoted such ideas were clueless prejudiced dollar haters – not analysts who let the facts speak for themselves.
The German high court has delivered very tough language leaving it questionable whether the ECB’s scheme for Spanish and Italian bonds can even be implemented when Europe’s debt crisis blows up again. The design of Europe is completely a disaster for it is a patch work just to grab power and then hold it without any long-term design other than retain control by the federalization of Europe. From the outset, the planners did not consolidate the debts because they did not think the people would vote for the union if there was any implication of a bailout for some countries. Therefore, they focused ONLY upon creating a single currency PRESUMING that this was why the US economy was what it was. Today, they just will not allow the people to vote and have eliminated democracy for what they see as the “greater good” that is always their self-interest.
I desperately tried to explain that you could not create a single currency to rival the dollar if major capital could not “park” in bonds of one major unified state. The planners assumed that leaving the debts spread-out among all states would work since they would be denominated in the new currency. They ignored individual credit risk that was the very fear that the people would not vote for their scheme if there was a debt consolidation. The planners tried to over-power the free markets by assuming one central bank interest rate would suffice ignoring credit risk. This was a COMPLETE and ABSOLUTE failure to understand how markets even function and Europe is now a total basket case using band aids to try to patch wounds that need surgery.
The German high court has read the treaty and is absolutely correct. The politicians are just trying to deal with the errors they originally made and refuse to reform the entire process leading to illegal acts just to try to hold this mess together. The German high court has to be commended for its honesty, for surely the US Supreme Court would never take such a step against its appointing politicians. This ruling by the German high court greatly complicates any future recourse to quantitative easing if needed to head off Japanese-style deflation.
The German high court did refrain from issuing a final ruling on the legality of the plan, that is now known as Outright Monetary Transactions (OMT). Instead, it referred the case to the European Court after providing a pre-judgment of the issue making it more difficult for the European Court to bless the politicians as would the US Supreme Court. However, in the middle of the next crisis, the ECB will still act and the European Court will bless the ECB seeing this as a no choice decision to save Europe. Nevertheless, the German high court has made it clear that it considers “the OMT decision incompatible with primary law”.
It is time to just turn out the lights and save energy. This design will not work and the very idea that a federalized Europe would eliminate war is in fact feeding the very seeds of war by the economic disaster they have created that leads to finger-pointing and old wounds.
Tensions for War Are Rising Globally
In Japan, Prime Minister Shinzo Abe bluntly spoke the truth that the current Sino-Japanese tensions and relations are similar to those between Britain and Germany on the eve of World War I. Indeed, the Financial Times reported that Abe said on Wednesday that Japan and China are in a “similar situation” to the two European powers in the lead-up to the Great War. While the government has since tried desperately to clarify that statement rewording it, the recharacterization put it: “The prime minister meant to say that something like WWI must never be allowed to happen,” according to the Chief Cabinet Secretary Yoshihide Suga, who is the government’s top spokesman.
Every now and again, politicians say what they truly mean. The comparison may need to be tweaked a bit. For the underlying resentment in China against Japan runs very deep and is not dissimilar from the resentment in Europe against Germany that resurfaces from time and time again. I China, it is very hard to find even a Japanese restaurant. If you ask directions to one, they are politely given, but it is always with a stunned look in the eyes that how dare you speak the word – Japanese.
As was laid out in the Cycles of War report, this border tension is precisely on time for China. It has regularly entered periods of conflict along its borders and this is a period concerning Japan that is precisely on par for the USA is really incapable of defending Japan on any conventional standard. In truth, Japan would draw in the USA, but the USA has no underlying strength to support Japan with troops on the ground as was the case with Korea.