Global Monetary Policy gone wild

U.S. attempts to control multiple political outcomes and a global geo-political/military order rests on the ability to finance and control that order.  The key word is “finance” at this point.  Egypt is disintegrating before our eyes on TV.  The U.S. aid to Egypt has been running $1.4 Billion on an annual basis with most of that going to the military.  Inflation around the globe created by Federal Reserve monetary policy is shrinking the middle class at an alarming rate.  Interviews with Egyptian college graduates that can’t find jobs reveal how bad it is in Egypt.  As we saw in the early 70’s during the Vietnam era, students are the initiators of the protests.  Once they have taken actions, others follow.

The masses are only controlled until they become unified against the status quo.  The police in Egypt found that out.  You can’t kill everyone.  The Egyptian military rolled into Cairo to protect the national treasures but appear to side with the protestors at an individual level.  Populations reach a tipping point where they just won’t take it anymore.  Government leaders are watching closely and taking notes on the Egyptian crisis.  Things had better change or other countries will suffer the same revolt.  You can’t buy food with rhetoric and once people get desperate, the rule of law is no longer the driving force, hunger is.

The wealthy are leaving Egypt and the threat of looting behind.  Most of the private jets are heading to Dubai.  Those who can’t afford to leave are guarding their houses with guns and bats.  Would you want to have all you money in Egyptian currency right now?  In one week, things can change drastically.

The OTC derivative crisis of 2008 caused banks to shrink lending and curb global economic growth.  The Fed threw trillions of dollars at the issue to maintain the current financial paradigm.  It did not work.  The large financial institutions being guarded from failure came at a cost to the global population.  Ireland, Spain, Portugal, Italy, and now Egypt are hanging in the balance.  If these dominos fall, the whole system is at risk.

“Peak Oil” will not go away!

A $3.79 increase in oil on Friday accentuates the sensitivity of global oil concerns.  Naysayers point to deposits such as the Canadian Oil Sands with its huge deposits.  The problem is “flow rate”.  You can have a huge asset but if you can’t quickly convert it to cash, you have a challenge.  The annual output of the oil sands is low compared to the reserves and increasing output is not an inexpensive affair.

Right now, Brent Crude Oil is priced 99.42 whereas NYMEX Crude closed at 89.34 and this $10 difference will be reconciled.  Most of the globe is buying at the Brent Crude price.  Why would sellers take $10 less per barrel.

The next 24 months will be historic to say the least.  The Chinese do not want to experience an uprising like Egypt.  They will throw the U.S. under the bus if necessary to keep their own house from crumbling.  Until peace breaks out around the globe, gold and silver should provide “insurance” against currency debasement and global crisis.  $1,300 gold is now looking pretty cheap!

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