Obama's Bow to Tampa's Mayor

I thought it was weird when Obama bowed to a Saudi prince. Now he's bowed to Pam Iorio, mayor of Tampa.

Terresa Monroe-Hamilton of Noisy Room.net (h/t Larwyn) asks the question pro-Wall Street news sources like MSNBC won't:

"What is Obama going to do, bow to every person in America who is part Asian? How about fist-bumping anyone who is African American? I thought his bowing was reserved for totalitarian dictators and groveling before foreign leaders whatever their stature…"

Me too.

$980 or $1200 Gold?

Jon Nadler of Kitco argues the bear case:

"On the technical side of things, as was expected, the break below the $1,015 (he means $1,115) price marker elicited a fairly heavy subsequent decline in values. At this time, near-term support has held up at the $1,073-1,075 levels, despite such support being fairly moderate in terms of bargain hunting. Thus, a deeper decline towards the $1,055 and ultimately the $980 level now appears more plausible, even if we can expect a bounce from current levels in upcoming sessions. Overhead resistance appears to be in the $1,095-1,097 area, and the metal needs to rise to above the $1,117 mark to get the bulls excited again."

Also of Kitco, Frank Holmes argues:

We believe that the secular bull market for commodities and natural resources stocks that began in 2000 is far from over. The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.

"The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.

"History shows that commodity supercycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend."

"To favor the bear case long term you need to believe in the competence of the Fed and the US Congress. Also, you need to overlook the long term trend of dollar depreciation over the past century. To favor the bull case short term you need to overlook the power of the central banks and Wall Street and the dollar mythology.

Obama Outsources the Presidency

Doug Ross's Larwyn's Lynx (see icon to right) carries a piece by Frank Miehle of northwest Montana's Daily Inter Lake in which Miehle argues that Obama's aim has been to radically transform America in a globalist and fascistic direction. Miehle writes:

>"With little fanfare and virtually no explanation, President Obama issued an executive order on Dec. 17 granting Interpol, the international police force, full diplomatic immunity to operate in the United States without accountability to our laws and courts. Why would he do so?...

>"Then there was the attempted Christmas Day bombing incident aboard a jet bound for Detroit. We discovered, as a result of the Justice Department’s handling of this case, that foreign combatants have the right to remain silent...

>"This month, it was announced that the president had signed another executive order creating yet another “new idea” in governance. This one has gotten very little attention. According to the official press release on Jan. 11, “The President today signed an Executive Order establishing a Council of Governors to strengthen further the partnership between the Federal Government and State Governments to protect our Nation against all types of hazards. When appointed, the Council will be reviewing such matters as involving the National Guard..."

Obama's position that there needs to be a brown shirt-style civilian para-military force is familiar. To understand this and the internationalist proposals we need to refer to the liberal (in the Enlightenment sense) philosopher Karl Popper. Popper argued that totalitarian socialism, in both its left wing (communist) and right wing (Nazi) forms is a reversion to tribalism. In other words, socialism is profoundly conservative and reactionary. In comparison, most members of the Tea Parties, whose ideas derive from the 17th and 18th centuries, are radicals. The first intellectual tribalist reactionary was, in Popper's view, Plato. He was reacting to the rule of law, democracy and freedom that the Athenians had created and resulted in the creation of western civilization. The most recent is, of course, Obama and his brown shirt-style youth cult. In the first month of the Obama presidency his aide, Rahm Emanuel, was talking about adoption of compulsory youth service, much like the Red Guard under Mao.

Obama is part of the tribalist camp. Today's tribalists argue not for a forgotten, pre-historic past that Plato remembered in part because nearby Sparta had retained many of the socialist elements of tribalism, but for a reconstituted medieval world order which they term "progressive". The medieval world order retained elements of the primitive tribalism because it reflected barbarians' conquest of the Roman empire, which had retained some elements of the Athenian culture. The barbarians envied Rome but were largely illiterate. They did their best to copy Rome (the Habsburgs called their core holdings "the holy Roman Empire", for example) but inevitably re-instituted elements of the tribalism that they had continued to practice. This included the common field. Each member of the medieval social order had an appropriate place under feudalism, and in many instances serfdom. Those who did not fit, like Jews, might be tolerated and harassed, but were mostly on the fringes. Crucial to the medieval world order was the world government, the Church, which oversaw welfare programs in each locality through local parishes.

In the Occident there were three major world governments, all of which were associated with religion: the eastern Christianity of Greece and Turkey (then Constantinople); the Islamic world; and western Christianity. Today's tribalists aim to replace the religious world government of medieval times with a secular humanist world government governed by financial power and a university-based priesthood.

Bob Robbins forwarded the above cartoon that appeared on Steady John's Steady Habits blog. Lockean liberals need to redouble their efforts to forestall Obama's socialist reaction. This will be a pitched battle for three more years. We need to destabilize the administration until the forces of freedom can triumph.

Thirty Year Bear Market

An economic forecaster once told a class I attended that he loved to make thirty year forecasts because no one would remember his forecast when the events actually occurred. So he could collect his fee without fear of request for a refund. I will make a thirty year forecast, nonetheless. We are in for soft and declining markets for the rest of my life.

The unfolding of the banking problems in the past two years and the ongoing subsidization of the housing and stock markets via low-to-negative real interest rates will have predictable effects. The current situation is complicated by the de facto pegging of the dollar by international central banks. The real effects of the subsidization are wealth transfers from productive to unproductive factors of production. The chief beneficiaries of the transfers are beneficiaries of government (both employees and welfare recipients), investors and speculators in assets, including stocks, currency, bonds, commodities and real estate. The chief losers are savers in cash and productive workers.

The debt of the US government is growing in absolute numbers to an extent unparalleled in history. Generally, large government debt increases have been associated with monetary expansion and inflation. This time, central bank dollar pegging has limited inflation in the US. The pegging is a form of international inflation. That is, the nations that are supporting the dollar are making their citizens poorer in order to keep them working.

Ultimately, the complex deception becomes untenable. The public starts to question why harder work is met with ever lower rewards. Larger and larger transfers to asset holders are required to keep markets steady, and workers will become poorer and poorer, driving increasing numbers out of the labor market. Democrats and collectivist altruists will say that the deprivation of the productive is in the public interest.

It has become apparent that the US government will not allow the stock and real estate markets to fall. As well, it cannot afford to pay off its massive, ever-increasing debts. So it will depreciate the dollar.

The alternative to stock markets that are soft and retain value only because of government subsidy and dollar holdings that are vulnerable to hyper inflation is commodities. But there is no reason to trust the stability of commodity markets. The pegging system coupled with carry trade and hedge fund activity ensures support for the dollar when it weakens.

The forces for inflation and dollar (and international currency) depreciation are far more powerful than the forces for stability, for the debt is growing too quickly to ever be repaid; the Fed is creating a bubble in US Treasury debt; and the Fed has shown that it will not permit real estate or stock markets to fall. So in the long run, over thirty years, commodities will be better than dollars. But it will be a bumpy road.

Given the uncertainty, firms cannot think long term in the new world socialist order and so sustainable economic growth is out of the question for the foreseeable future. Likewise, the growth absorbing power of government will ensure a declining economy. Innovation in the US once powered the world's advancement, but unless the Asian nations more aggressively permit entrepreneurship, there is no longer a growth engine. It certainly is not the United Socialist States of America. As George Soros pushes for an American society ever more closed and totalitarian, opportunities for shorting and going long on commodities and currency become greater.

Do not expect the highs of the early 2000s to be significantly surpassed in real dollars. But there will be plenty of inflation to confuse everyone.