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Recipe For Disaster-Economic Isolation

By Roger Wiegand      Printer Friendly Version
Jul 11 2008 9:36AM

www.webeatthestreet.com

Watching this word-wide drama unfold compares with having a front row movie seat to the 1930’s Great Depression

New York bankers cooked up rotten derivatives dumping those ingredients into an economic international stewpot of trading meat containing bulls, wolves, bears, dogs, deer, and a variety of other spoiled UGO’s (unidentified Growing Objects). No wonder central banks have a tummy ache.

They have a belly full of CDO’s and who knows what else.

We’ve entered a new phase of global economics as key nation-players are seriously squeezed. The low hanging fruit of credit, finance, and years of lackadaisical easy terms has ended. Those too friendly, almost total freebie credits are all picked over. Now it’s time for market controllers to play hardball. Beggar thy neighbor policies are coming to the fore creating non-cooperative international markets’ destruction. Nobody will talk about it but economic isolationism is the new, in-thing. Me first; you last.

Just last week, the European Central Bank in remarks about its 25 basis point rate increase told Ireland and Spain in so many words you will just have to eat the fallout, which is crushing those fragile economies. Italy is next in the grinder with German exports falling. The small and the weak are stepped on in a grab for me-first policies; squashing little nations into the credit dirt. Ireland had the gall to vote against those 300 pages of unintelligible EU unification proposals and must now pay the price.

We say proponents of the EU’s grandiose scheme will eventually pay a worse price in their attempt to corral several nations’ cultures, languages, customs and policies under one tent. It simply cannot work. That tent is in total collapse, just like America’s hollowed out economy so dependent upon the good will, cash and credit of others. Those countries electing to be non-members of the United States of Europe should survive better in the long run in our view. Last we heard, over 2/3rds of the European population would vote against this idea anyway-if they were given the chance to do so. In 2003, we did forecast the eventual demise of the Euroland experiment with a return to the old ways including independent economies and currencies.

Nothing New In Psychology, Psychos And Economics

Watching this word-wide drama unfold compares with having a front row movie seat to the 1930’s Great Depression

Tyrants, dictators and others in Iran, Venezuela, and Zimbabwe provide first-hand views on how not to manage a nation. Those committing lesser crimes of mere rampant inflation within the US, Russia, Vietnam, and several South American countries prefer to impose economic death by a thousand cuts; slowly but surely diminishing currency values. Instead of using brutality, the latter group just steals it using inflation. Observers can define various grades of these acts by watching for something emerging beyond street demonstrations say; pitchforks, torches and a really naughty escalation of not so nice remarks about their leaders.

This is why we predict recession, hyperinflation, depression and finally world war to realign the public’s thinking away from their idiot leaders instilling phony war-rabid patriotism while blaming outsiders and others.

With a real recession in full swing and a laundry list of stats and numbers only liars could utter, we have a good idea where this is headed. The shock and awe of our current speedy bank collapse has caught the full attention of Washington and Tel Aviv. Get ready folks for $200 oil and $8 gasoline as the world’s El Supremo commanders load their guns for an attack on Iran. It’s all about oil and all about retaining power and dominance of the money supply. Israel knows how to fight. They are a small nation with a big heart and lots of brains. The unwashed vertically challenged little Iranian freak with an unpronouncable-unspellable name, that would prefer Israel be erased from the earth, will never even see it coming. Time and time again tin-pot dictators whether they would impose their religion or will upon others at the point of gun suddenly discover the barrel is bent backwards pointing toward them.

“Tensions over Iran increased, helping push the price of oil to a record, after a New York Times report that Israeli military maneuvers in the eastern Mediterranean last month were in preparation for a possible strike on Iran's nuclear facilities. Threats and comments came as Iran conducted military exercises designed to strengthen the combat capacity of its missile and Navy units.”- Bloomberg.com

In a following response also reported on Bloomberg.com by Ladane Nasseri, “Iran Says It Will Hit U.S. Ships and Israel, if attacked. (Editor: We would suggest this eventuality will be managed without problems). Ms. Nasseri further reported, “Iran would strike Israel and the U.S. Navy in the Persian Gulf as a first response to any American attack on its nuclear program, an aide to Supreme Leader Ayataollah Ali Khamenei said. Israel wants the U.S. “to prepare a military aggression against Iran,” the state-run Fars News agency today cited Ali Shirazi, Khamenei's representative in the Revolutionary Guards' naval division, as telling military personnel. "If they resort to such a silly undertaking, Tel Aviv and the U.S. fleet in the Persian Gulf will be the first targets" of Iran's response.”

In a follow-up note, Iran fired more missiles today, the 10th of July. This child-like response reminds us of “mine is bigger than yours” and you better watch out. However, one gigantic Iran power failure and they are rendered helpless. Further, what do you suppose happens to their communications systems? Game, set, match.

Its unfortunate the world must endure fallout from this monster mess but, that’s the way it goes. Our most important point today in this discussion is these events are forcing isolationist policies. With internationally interlocked banking, credit and trade interwoven with lightening fast computer power, the world is not the same as 80 years ago although today’s political and economic faulty concepts can produce nearly identical results.

Analysts studying the 1920’s, and reflecting on the 1930’s damage, so they claim, was instigated by America’s Smoot-Hawley Act, which supposedly induced restraint of trade and further encouraged negative fiscal events of the Depression. Smoot-Hawley did not help but there were earlier events contributing to the Big Depression. We say the 1930’s were produced by three primary factors. (1) The terribly cruel and one-sided Treaty of Versailles after WW I against Germany that made it impossible for them to pay war reparations imposed by that agreement. (2) Germany was in awful shape after the war anyway. When those impossible repayment terms were mandated, hyperinflation was induced wrecking an already fragile German internal economy. Thousands of Germans were starving during the war’s aftermath, and in fact America was in a short depression during 1920-1921 for about 18 months.

Thankfully, USA politicians let it run its course staying out of the way; not interfering. Consequently, this down turn cured itself in a short time.  (3) Germany was badly hurt from war and the following years from 1914-1923, and didn’t fully recover. In the early 1930’s their economic and political landscape was still in disarray as Hitler and the Nazi Party emerged to fill the void. Adolph actually did some positive things early on, ordering road construction and other matters beneficial to the German nation in the early 1930’s. Gradually, as Hitler gained more power, the really nasty stuff appeared as he embarked upon a series of tragic, power-hungry criminal events.

In America, raising interest rates forced the 1930’s depression deeper and Roosevelt prolonged it even more with his wide-spread, convoluted, socialism foolishness. Finally, in 1939-1941 the “always final solution” world war began. In our view, the stock markets of 1937-1938 are being replicated today in 2007-2008. USA market interventionists prevented the comparative 1929-1930/ 1999-2000 stock market downdraft (with the exception of the Nasdaq) using Sir Alan Greenspan’s shower of free consumer cash for new housing. He obviously blew another bubble prolonging the agony. In 2006 this new housing bubble was completed. Then housing tipped over along with the carry-over year 2000 stock market bubble, remaining incomplete and unsatisfied until now.

In 1937, the USA stock market dropped over -45% roughly duplicating its huge skid in 1929-1931. This is where are today. The -45% re-run copycat crash lies just ahead for our Dow despite USA interventionists’ best efforts. We see one more upside stock bubble between now and November 4. After that, Bush skitters back to Texas and our 2009 political newbies are left holding this bag of manure. Consumers, retirees, working people and anyone in the way of this freight train had better prepare for it. Investments in gold and silver trades and shares provide the best way out.

Daily Gold Rallies After Mild Selling Of Commodities Baskets By Funds.

Gold and silver traders, shares’ investors and those with enough foresight to prepare, will endure this mayhem without too much disruption and can in fact be handsomely rewarded.

Late Summer Buying Cycle Arrives Near August 15, 2008

Watch for new rallies in most all commodities markets in late August after an interim shorter term rally and profit-taking event. We should see channelized mini-rallies in gold and silver this summer. The bloom is off the rose and our off-schedule, nasty “Sell-in-May-And-Go-Away” arrived on June 26, 2008. However, our later summer forecast is a mild haircut in most stock shares including precious metals. The only action to prevent selling is our stunningly time-worthy Plunge Protection Team who had multiple recent failures propping shares. Will they win during the summer push-‘em-up event? We think with all the other market dangers they will prop their little hearts out and not permit the Dow and S&P 500 to get out of control.  In our newsletter, Trader Tracks, we provide weekly guidance and extra e-mail alerts to report our best new trades and offer suggestions for trade management. Visit our website at webeatthestreet.com for more information on our spectacular futures and commodities trading record.

Whatever you do, make a concerted effort to stay with the trend and hang onto your core holdings of preferred shares, cash, and coins. Physical gold should never be sold or, traded but rather accumulated steadily on a monthly savings plan and squirreled away. Big traders are always ready to buy on the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy. - Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com

 

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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares and futures- commodities trading with specifics for individual trades.  See www.webeatthestreet.com for more information.

Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a modestly priced trial subscription 718-457-1426 Monday through Friday, 9:30am to 5pm or, e-mail Claudio at cbassi@miningstocks.com