Connecting Dots In The Global Mosaic

Guest Post By James Rickards

The relationship between geopolitics and global finance has rarely been more densely connected and complex as it is today. Knowing how to invest and allocate assets among various classes requires understanding the strategic drivers of valuation and volatility. Here is an around-the-world tour of flashpoints and their implications for investors.

The disintegration of Iraq is far from over. The situation will deteriorate further putting upward pressure on oil prices. The ISIS-Sunni drive to Baghdad has been temporarily slowed due to the Shiite call to arms, and Iranian intervention on the side of Shiites and the al-Maliki government. ISIS sensibly is regrouping and consolidating gains while awaiting further aid form its Saudi sponsors. All of this is a prelude to much larger battles to come.

The war in Iraq has the potential to become a regional war. Turkey may be drawn in by the emergence of a Kurdish state in northern Iraq. Iran has already been drawn in to support al-Maliki. Syria and Iraq have effectively been partly merged because the border has been erased. Jordan is relatively weak and will be hurt by refugees and spillovers. Jordanian territory is used by both ISIS and the United States for base operations. None of these developments will be resolved soon, so the regionalization of the conflict will proceed with negative implications for regional energy supplies.

The relaxed reaction from the White House to the situation in Iraq is easily explained by the fact that Obama reached a detente with Iran last December when he announced a framework for agreement on Iran’s nuclear programs and removed some economic sanctions. Obama’s foreign policy vision is one where the United States withdraws from the world but leaves behind regional “cops on the beat” who keep order in their neighborhoods. Iran is Obama’s preferred cop on the beat in the Middle East so the United States is relying on it to restore order in Iraq without quite saying so.

Détente with Iran is a betrayal of Saudi Arabia. Since 1974, the United States dollar has been propped up by the original “petrodollar” deal whereby the United States acted as a guarantor of the security of the House of Saud in exchange for Saudi agreement to price oil in dollars. This requires countries to maintain dollar reserves in order to secure oil supplies whether they like the dollar or not. Now that the United States is reneging on its half of the deal, Saudi Arabia can abandon the petrodollar especially in its new energy dealings with China. This points to United States dollar weakness ahead, even if the dollar gets a temporary lift on flight to safety momentum.

Nor has the Ukrainian crisis abated. Putin made large gains in Crimea and eastern Ukraine in the early going. United States and European economic sanctions were tame, but the pushback was enough to cause Putin temporarily to relax tensions. As soon as the ISIS attacks in Iraq became a distraction for the White House, Putin seized the opportunity to go on the move again by putting Russian tanks in parts of Ukraine and tolerating the shoot-down of a Ukrainian troop transport plane. Putin is proving himself to be patient, nimble and focused compared to the White House, which is reactive, clumsy and easily distracted. This crisis is also not going away soon and will put upward pressure on the prices of oil and gold.

In Europe, the head of the European Central Bank, Mario Draghi, recently lowered two interest rates, including the creation of a negative rate of interest for the first time. Draghi has proved once again that he is the only central banker who understands central banking. He says little and does less, but it is all quite effective because he keeps dry powder and does not try to do more than he actually can. His recent moves show his dedication to price stability by fighting deflation, but also show that he will not print money or engage in quantitative easing, “QE,” for the purpose of stimulating growth. Draghi knows that money printing doesn’t work to create growth, nor will he join the currency wars by cheapening the euro. The euro has nearly bottomed for now and will trend higher as it becomes clear than Draghi separates himself from the easy money crowds at the Fed, the Bank of England, the People’s Bank of China, and the Bank of Japan.
China is in the midst of a massive credit and property bubble. Many expected this bubble would burst in 2015; however, recent evidence is that the bubble is bursting faster and these problems may come to the fore in 2014. China has enough reserves to bailout its banking system, but not without consequences. Chinese growth will slow sharply and there will be spillovers in other markets as Chinese banks sell good assets in developed economies to raise cash to meet demands at home. Angry mobs will storm banks to demand repayment of the Ponzi scheme “wealth management products” that have been sold by the banks. These money riots will spread.

The global situation resembles the 1970s. The Fed engaged in easy money policies in 1971 and 1972, in part to facilitate the reelection of Richard Nixon. High inflation did not emerge immediately. Money illusion prevailed and behavior was slow to change. But a series of geopolitical events in 1972-1973 culminating in the Yom Kippur War in October 1973 led to an oil embargo and sharply higher oil prices. In turn, that raised inflationary expectations.

Economists ever since have blamed the “oil shock” for the inflation of the later 1970s. But a proper understanding is that easy money before the embargo created dry wood and the oil embargo was a spark that lit the fire. You need both the wood and the spark to have the fire of inflation. The same is true today. The Fed and other central banks have printed trillions of dollars of money in the past four years. So far, inflation has been relatively tame. But the printed money is only the wood; a spark is still required. Events in the Middle East, Ukraine and China today may provide the spark.

The result may actually be the worst of all possible worlds — higher inflation and weaker growth, called “stagflation.” The Fed is between a rock and a hard place. If they withdraw ease by tapering the money printing, they will puncture asset bubbles. If they keep printing, inflation will gather strength. As weak data emerges over the rest of this year, the Fed will realize it has tapered into weakness. This will cause them to launch new money printing, or QE4, in 2015.

By then, a geopolitical witches’ brew will have emerged, and act as a spark for inflation that will race past the Fed’s expectations. Stock and property bubbles will burst, banks will be in distress, and the safest assets will be energy, gold, land, natural resources, agriculture and other hard assets.

James Rickards is portfolio manager for the West Shore Real Return Income Fund and the author of The Death of Money, a New York Times best seller from Penguin Random House. Follow on twitter @JamesGRickards.

The Three Stages of a Revolution

Guest Post By Dave Hodges thecommonsenseshow.com

Many believe that America is plunging head first into a civil war with the forces of the New World Order which have hijacked our government. Trust me, nobody reading these words wants live through the times that the globalists have planned for us and if you listen to people who advocate for a civil war, you need your head examined.

Part one of this series detailed how the economy is collapsing due the failure of the Petrodollar. The resulting instability will provide the pretext to institute a series of false flag attacks which will provide the federal government with a preemptive opportunity to impose one of the most draconian forms of martial law that the world has ever seen. There is a chance that the American people will shed their shackles and finally rise up and that is exactly what the globalists desire.
If the globalists can draw us into a civil war and crush the opposition, they can end all pretenses and their full blown tyranny will be fully exposed for all to see and experience firsthand.  How close is America to falling into a civil war?

 The Three Stages of a Revolution

Many believe that the revolution has already begun and I would agree with them. There are three distinct stages of revolution and we are moving down the path to civil war at a frightening pace. You may not realize this fact, but your government certainly does! When DHS purchases 2.2 billion rounds of ammunition and 2700 armored vehicles, it is clear that they are preparing to kill millions of uncooperative Americans.

Stage One of the Revolution

The first stage of a revolution, is a war of ideas and a campaign for the truth. This is what I am trying to accomplish on my website and on my talk show. Where I see the enemy at the gate, most of my friends and neighbors are sleeping through the unfolding attack. We are in a war of words and if we fail to use our words to awaken all of humanity, we are hopelessly lost and the globalists will carve us up for dinner. There is indeed strength in numbers and if we are unable to wake up our fellow countrymen, we will negate the only true tactical advantage we have, solidarity from a numerically superior force.
It should now make sense to you as to why 98% of the media is controlled by globalist controlled business interests, who in turn are controlled one way or another, by the members of the Federal Reserve. In order to win this fight, we need more people speaking out, making videos and calling MSM talk shows. We especially need to reach the police and the military in order to remind them of their constitutional duty to protect the people against a tyrannical government.
Our counter to the control of the MSM, is to exclusively support the alternative media. If Obama is successful in taking down the alternative media, then it will become necessary to enact a type of Committees of Correspondence  apparatus similar to what our Founding Fathers did in the pre-Revolutionary War period in our history. On the ground communication is timeless, effective and very difficult for a totalitarian government to negate.

Stage Two of the Revolution

Stage two of a revolution consists of civil disobedience or nonviolent resistance. Thanks to Obama, he has given Americans the perfect pretext to begin to resist our criminally controlled government and America is presently sitting on the edge of being immersed in stage two of a revolution. I am speaking specifically about gun control.
No matter what gun control laws that Obama brings to the American people, the people need to disobey.  Most readers already know what happens when a civilian population surrenders its guns. When, not if, but when Obama comes for our guns, all of us have a constitutional duty to disobey these unlawful policies. If this form of civil disobedience does not stem the tide of tyranny sweeping the country, then withhold your money from the globalist apparatus. Stop paying taxes as much as possible. Do not shop in the corporate chain stores controlled by Federal Reserve members such as Walmart or any other well known globalist entity. Shop local and begin to trade and barter with your neighbors and friends. Buy gold and silver and get of the corrupt Petrodollar as much as possible. In short, stop feeding the beast. Practiced en masse, these financial practices are often enough to bring a criminal government to its knees. However, you better store food and water because history shows the next step that a totalitarian regime would take would be to starve the people into submission. Further, we all need to realize that  if stage two does not bring the criminal banksters to their knees, stage three is unavoidable and that means all out war. If our resistance is forceful enough, we may force the globalist cowards to retreat and regroup. Their hesitation works to our advantage. We can use the time to solidify our positions and will be in a new position to make demands of the government. If our civil disobedience is forceful enough, we can make the globalists think twice about beginning a civil war.
With myself being a nonviolent person, I prefer this path of resistance. Although I may have been born at night, I was not born last night. The retreating globalists will eventually return with new methods and strategies to enslave humanity. We can only hope that we are united enough to resist being taken into stage three.

Stage Three: All Out War

Stage three is direct physical confrontation with the powers that be which involves a large number of citizens. In this case, our enemies will be comprised of whatever minions that the Federal Reserve can bring to the fight such as a well-armed DHS. If Americans have done their due diligence in stage one, the majority of the military and the police will defend the people. However, they must know that the people will stand with them. These objectives must be accomplished in Stage one.
A successful revolution cannot simply jump to stage three without having progressed through the first two stages. The first two stages are the necessary prerequisites that the globalists require to build the cohesiveness that they will need to begin the roundups, the murder, the mayhem and the total subjugation. False flag attacks are prominent part of the transition between stage two and stage three rebellion. False flag attacks also provide the justification and also galvanizes the pro-governmental forces to a point in which they begin to enslave the people.
When Stalin’s forces were dragging a third of the Russians out of their homes, it was too late for the Russians to fight back because the ideological base of resistance had not been built. The Russian people were defeated by Stalin because they did not win stage one of the revolution. We desperately need to heed this lesson from history and embark on a tireless crusade to wake up our country as to the dangers that lie ahead. Therefore, it is the duty of every awake American to educate their neighbors, family and friends, whether they want to hear the truth or not. Remember, any kind resistance to tyranny will not succeed unless there is an attitude of defiance towards the tyranny. Tyrants require minions to carry out their tyranny. Again, this is accomplished, again, in stage one.
If we are going to successfully fight back, it is now or never. Start an email distribution list. Talk to everyone  you know. Post short notices about the tyrannical government at your community mailboxes. Be creative, think of new ways to reach your neighbors. And by the way, buy guns and ammunition. Hide some of your guns. If possible, buy the guns off the books so there is not a government list with your name on it. When martial law is imposed, have a pre-designated meeting place for you and your family because cell phone communications may be down. Carry three days of needed resources in your cars because you cannot predict when you will experience trouble getting home. Form resource coalitions with your friends and coworkers. Store resources at differing safe houses, in your area, with friends and family that you trust. Turn off your television which only serves to condition people to accept defeat and to embrace the plans of the New World Order. Build backup plans for your contingency plans. Start preparing today like your life depends on it, because it does.

Analysis

I believe that Obama’s people will very soon begin to commence false flag attacks in order to hasten the implementation of martial law and force the real leadership of the opposition out in the open where they can be crushed in a brief civil war. I think the first false flag event will transpire with the collapse of the Petrodollar and this will constitute the countdown to an all-out civil war.
If we can keep the globalists mired in stages one and two, through some of the suggested actions that I list, we might be able to force a lengthy stalemate. Time is not on the globalists side because propaganda does not shield the truth from the masses forever. This is why the globalists have to resort to collapsing the dollar and initiating false flag attacks as a means to force this issue into the third stage.
If a high percentage of the people were prepared to sit out the collapse of the dollar, through being prepared, and to “roll with the punch of the imposition of martial law” as a result of false flag attacks, the globalists would eventually run out of steam. We also need to realize that individuals like George Soros would even go so far as to start revolutionary movements as a means to draw out public resistance that could be crushed. Do you remember when the globalists got caught funding the Occupy Wall Street movement? Same strategy, same result, and whatever happened to the Occupy Wall Street movement?  The Occupy movement is dead on arrival. The same will happen with any “underground” revolutionary movement. Do not be deceived. Prepare, pray and let the globalists run out of steam. To paraphrase the Bible, in Romans 12:2, it essentially commands its followers to not be an integral part of the world. Prepare to be outside the grid, outside the food supply system, outside the need for public services because they will be used to control the people in times of desperation.

One Caveat

One caveat that every American needs to be aware of is to securely hide at least one gun that is off the books. Because if passive resistance fails, we will need a collective means to defend ourselves. I believe we can forestall the globalists’ plans to such a degree that they will fall apart. The longer we can delay total subjugation, the more the globalist minions will see through their evil agenda and come to realize that they are working towards their own enslavement. This could lead to great attrition within the ranks of our captors. The globalists are much like the boxer in that if he cannot knock out his opponent by the third round, he will lose because he will run out of steam. However, if the globalist trump card is genocide and mass imprisonment, all bets are off.  If genocide and mass detentions were to begin to take place, then you will have had direct war declared upon you and your family and you will have to act accordingly. However, we would be very stupid to engage the enemy on the battlefield. Instead, we will need to engage our enemies in an asymmetrical form of warfare and that will be the topic of the next part of this series.