I have received quite a few emails and messages over the last week or so. I know that many people are quite worried about the situation in Syria – in regard to how it may or may not fit into my model. It’s true that the timeline of the model suggests that we are almost dead-center of the transition from economic upheaval to war but there are many things that need to be taken into consideration. Syria alone is not the issue and Syria alone will not thrust the world into war. It’s going to be everything surrounding it.
Going back to my very first book (An American Warning), I wrote of the entanglements of Syria, Iran, China and Russia. I wrote about how Israelis’ found North Korean nuclear workers and materials in Syria and how Russia, China, Iran, Syria, North Korea, Venezuela and Cuba all had an interest in seeing the United States collapse. Believe me, I understand the concern. But I need you to understand that it is the entanglements that we should be looking for, not a singularity.
In my second book, RELOADED: An American Warning, I wrote about Russia, China, Iran, North Korea, Syria, and so on and how oil, the petrodollar, terrorism, global economics, and the UN would all play their part in ensuring the coming war would happen. These are all elements that we should be reviewing because what is happening with each of these elements is not happening in a bubble (though some wish they were). Furthermore, as this whole situation comes to a head, it is going to get harder and harder to tell who the real good/bad guys are.
I believe his words are still very much accurate in the idea that the only nations left on Gen. Wesley Clark’s list are Iran and Syria and that the powers that be are aggressively engaging in sanctions and/or destabilization operations within the region. That is something to really think about and consider because when think about the death of the fallen… was the ground that killed him or the push?
Only recently has the world really begun to see the relationships forged between the parties I have listed. Granted, I haven’t spent much time listing out the Western side because I feel it would be a bit more obvious for my readers. Regardless, we are beginning to see other elements of the book come to life as well. Just this week it was reported that Estonia, Latvia and Lithuania (Baltics) are seeking extra US aid to ward off any Russian moves against them. Or just consider our support to nations like Japan, South Korea, and Taiwan and what could very well come of those promises.
This week, the New York Times ran a story saying “China carried out live-fire military drills in the Taiwan Strait on Wednesday, its state news media reported, an exercise intended to show the growing strength of its navy and deliver a message to self-governed Taiwan, which China claims as its territory.” It was reported in Aljazeera that Japan has “activated its first marine unit since World War II trained to counter invaders occupying Japanese islands along the edge of the East China Sea that Tokyo fears are vulnerable to attack by China.” And of course, North Korea remains in the headlines as Western Navy’s continue their attempt to enforce international sanctions.
What is important to understand is that the stage is merely being set. In fact, these are just a few of the more pressing headlines I could share, but the truth is that there are dozens more that I could. Regardless, when and where the next war breaks out is anyone’s guess. We have a strong clue of where some of this will occur and spread to but the start is very much a mystery. Still, we must remember that the war comes AFTER or perhaps even as a result of the economic upheaval. Of course, we are not hearing too much about our economic problems on the news here lately. One has to wonder why not, because there are some serious problems to consider.
The first problem would be our record deficits. CNSNews reported that the Feds collected record individual income taxes through March but still ran a $599.7B deficit. This is on-going trend but it’s getting worse. The New York Times reported that the “federal government’s annual budget deficit is set to widen significantly in the next few years, and is expected to top $1 trillion in 2020..”.
Everyone is pretty pumped about the tax cuts but those are more than likely just going to disappear. If we consider what I wrote about in RELOADED concerning the Petrodollar, things might start to make a little more sense. This week, Deutsche Bank analysts said that they “expect rising gas prices to wipe out tax benefits sometime this year for lower-income groups, as the rise in disposable income gets eclipsed by rising oil prices.” CNBC reported that “Prices at the pump are expected to top $3 a gallon for unleaded gasoline in many parts of the country in coming weeks.” Summer norm? Perhaps, but some papers are predicting $4 a gallon in the near future as well. Remember the last time gas prices got that high? Could our fragile economy handle it?
Speaking of our fragile economy, few are really talking about the retail tsunami that continues to the point that we are about to break another record. Or how about inflation? The 10-year breakeven inflation rate has climbed to more than a three-year high of 2.19%; which seems crazy to me. In fact, Torsten Slok, Deutsche Bank’s chief international economist said that inflation is the ‘mother of all risks‘ to the market now. It might be, but it’s made worse by our dying dollar. Our dollar’s value continues to fall as hidden devaluation efforts continue.
Let me explain this. The Fed has a very deliberate macroeconomic target of 2% average inflation. The way they achieve this target is by increasing the money supply more quickly than the increase in money demand. The problem with this is that it ends up taking more dollars to buy fewer products because the value of the dollar decreases the more money they pump into the system. The way I see it… it’s a form of theft because you still work the same hours for what is essentially less buying power.
That’s probably a moot point anyway because the cracks in the market are beginning to widen. In fact, investor Jim Rogers says market participants should enjoy the rally in stocks while it lasts and says that “the worst correction of his lifetime” is coming.
In an interview with Kitco News, Rogers said “Soon something’s going to happen that will make everyone happy again and the market will go up one more time, and that will probably be the last hoorah. Next year will be not a lot of fun.” He added, “It’s been 10 years since we have had a bear market. That is very, very unusual, so the next bear market is going to be the worst in my lifetime.” When promoted to quantify the correction, Rogers said it would easily be over 50%.
But he’s not the only one saying such things. Mark Mobius, another seasoned investment guru, believes the US market is set for at least a 30% correction that would essentially wipe out the gains of the last two years.
And it goes on and on. Now let’s factor in robots, AI and so on. I would say we have definitely begun an economic upheaval and change in the way the world does business is underway. I don’t know if it’s going to be a good change or not; I just see that change is upon us. Unfortunately, with every change on this level, a war follows. Or… maybe I’m wrong and I’m just looking at everything twisted. I doubt that though.
Is Syria a big deal? Sure it is, but it’s not what we should be basing our thoughts on. They may very well be involved in what happens next but that is not the big one we should be worried about right now. Keep an eye on your assets and spend responsibly; hold on to that tax return if you got it and stick to your budgets. If you’re going to spend that money, spend it investing in yourself… not on junk. That’s probably the best advice I have right now. It’s not a matter of if… it’s a matter of when.