posted Dec 26, 2004 at 12:28PM
(Editor's Note: Excerpted from Bullion Commentary posted 7 November)
Last week's election results represent an incredible conquest of illusion over reality. We will now get four years of unrestrained neo-conservatism. They control everything. The White House, Congress, the Supreme Court. They control the media, and thus, for the most part, control the information and "spin" that is fed to the populace, in much the same way that a farmer controls the feed that is given to domesticated cattle.
And it will be unrestrained. Self-restraint is a conservative virtue and is completely antiethical to the ideology now running America's affairs. True, there are conservative men within the Republican Party but theirs is a Faustian bargain. They may have the appearance, the illusion of being near the center of power, but the reality is that they have none. Indeed their reward for the visual trappings of power, has been to watch how neoconservatism has been systematically dismantling and destroying every thing that conservative generations have built over the past century. Not just destroy them... but to blow wads of money doing it. Even America's vaunted military will not be immune. The cracks and rifts are already there.
Neoconservatism is a mutated hybrid , incorporating some of the worst ideologies that have cursed world history. You have the reality defying, sadistic stupor of religious fundamentalism, the mindless linear logic of corporatism, and the hysterical paranoia of Dworkinite feminism. The latter a gift from the left. A extremist philosophy of late 70's feminism, (after all the heavy lifting had already been done) it has, in stripped form, been the predominant social dogma of the left wing for the past 20 years - a philosophy that has perfectly complemented Neoconservatism, and as required, an apt tool in their own hands. (Note: Dworkinite's basic premise that the world would only be safe for women if all men were eradicated)
All of them are narrow ideologies that are completely detached from any ethical principles. All reality must first be twisted to fit their ideology. They have no ability to adapt to circumstances and thus make events work in their favour. Invariably the results obtained are 180 degrees opposite of those promised. When the catastrophes become too great to ignore, their inevitable reaction is to simply narrow their ideology even further, and then, as if nothing has happened, present themselves as solutions to the problems they themselves have created.
They may have completely appropriated the rhetoric, but these are not the kind of men you see at the "beginning" of things: new centuries, new empires. These are the kind of men you see at the end of things. Their language may describe upcoming future glories, but their actions are those of vampires and vultures, rabidly trying suck the blood out of a carcass before it grows cold.
There has never been a case in history when any of these ideologies alone has not turned their societies into oppressive basket-cases, and America is proving it will be no exception. When the Neo-Conservatives took over complete control of America last term, they took over a country that was in pretty good shape. Budget surpluses, high employment, unprecedented international standing, interest rates above the rate of inflation and a highly valued currency. The second term starts with all those "credits" gone. ... spent with nothing but a bear market rally (with historic levels of insider selling) to show for it.. They start deep within a hole that they themselves have dug, and everything points to the fact that their plan is to dig even faster this time around.
In summary America is going to hell in a hand-basket. You will not even recognize her in four years.
Impact on Gold.
Markets do have a logic all their own, and it almost seems too obvious to say that the Bush re-election makes it certain that more value will be added to gold (and oil) investments. Just because it is obvious does not mean it is not true. Again gold bottomed at around the same time the neo-cons came into power, and has been in a steady uptrend since then.
The policy trends that powered that move will remain in place and indeed may very well accelerate. The government balance sheet will continue to deteriorate, and the triple deficits will continue to grow. Taxing less and borrowing more is an unsustainable policy. Exporting manufacturing and technology to other countries and then trying to sell those finished products back to displaced workers who can only buy on increasing debt is also unsustainable.
The bright lights feel that a 20% devaluation in the USD will solve their trade imbalances. It will certainly help the price of gold, but it will do nothing to alter the current account deficits. The oil environment is totally different. What would a 20% rise in oil do to US import numbers? Not to mention what it would do for foreign investment in US paper assets. Have you looked at the DOW in terms of foreign currency?
Would it not help US manufacturers? Sure..but again this is not 1980. Neoconservatives have spent the last 20 years dismantling and displacing US manufacturing capability...it is not the factor it was.
Again the results obtained will be inversely opposite to those promised. Due to oil costs and foreigners getting out of US markets the deficits could get worse, putting even more pressure on the dollar....real waterfall decline stuff.
Then there is "foreign policy". I had to smirk on John Mauldin's suggestion that the US should be out of Iraq by the 2008 elections. He needs to catch up on his reading. Policy papers (the neo-con version on Mein Kamp lite) written by Perle and Wolfowitz etc make it very clear that their agenda includes setting up a permanent military presence in the Middle East.. Which means the insurgency will also continue.
Not only will the war go on, it will be continue to be run in the most incompetent manner possible. If one gets a chance you should pick up a copy of Sun Tzu's "Art of War"....a quick 80 page read on the timeless principles for success in war. You'll quickly realize that the US is breaking nearly every principle there is to be broken. You could give Rumsfeld a trillion dollars and he couldn't win this war.
That is just the purely military side. There is a larger war which is against Islamic religious extremism...in other words an ideological war. Progress on that front can be checked by asking the simple question, " Is the Middle East becoming more and more like a liberal secular society? - or is the US becoming more and more like a right wing religious theocracy?"
Then there is Iran. One can only imagine the pucker factor of the people who are working in their nuclear facility. It doesn't matter if the Iranians have a nuclear weapon or not, or whether they have enriched uranium or not; to the neocons in Israel and the US the mere possibility that they may get one is too much to bear. So of course the facility will get bombed. And yes the world will be safer.
But now let us consider the blow-back One, the Russians, who are building the plant are going to be pissed. The Russians of course are major swing producers in oil. Will they retaliate by turning off the taps? Then of course there is Iran itself. Of course the reform movement that had been working to improve relations with the West and overthrow the power of the Mullahs will be finished. Hard to talk about rapprochement when those same people are bombing you. Iran will retaliate, and since they can do nothing militarily, they will do it with their oil weapon, and oh yes, more terrorism.
The entire Middle East will become even more radicalized. The regime in Saudi Arabia will be on very very shaky ground. One could very well be witness to the absurdist picture of American planes air-lifting the entire Saudi Royal Family to safety. Absurd because these are the very people who are financing the war in terror against the US.
And then we would be left with is about 130,000 well trained, well armed American troops surround by a hundred million ticked off Muslims whose ideas of combat tactics is to run through minefields waving Korans in the air. And remember, the whole purpose of this military presence was so that the US could have control and access to a large supply of low-cost oil for their economy.
Let freedom reign...Let freedom reign Let freedom reign
The above is written for educational/entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice. The commentary simply reflects the opinion of the authour on the current status of the market. It is prone to error and to change with no notice which itself is again prone to error.