.
Hard
Landing... a geopolitical and financial reality
check
Craig
Harris
President:
Harris
Capital Management, Inc.
CTA
March 22, 2003
I'd
like to try to unravel the current state of the world and
the financial markets the way I see it. I'm going to
start by highlighting what I think were the significant
events of an historic week this past week.
The
Japanese have been fairly open regarding the intervention
that has been occurring in the NIKKEI for a long time
now. I'd like to note also that this intervention has not
worked other than in the short term. That's not my point
tonight however. My point is this... US financial market
participants have debated whether or not we have been
seeing intervention in the US markets for years now.
Anyone who agreed with the possibility was stamped on the
forehead with the "conspiracy theorist" label.
This past week however, the Japanese inadvertently let
the cat out of the bag. They probably did that because
they didn't realize the degree of secrecy this sort of
thing commands in the US. The original story link is here
from our friends at the BBC:
http://news.bbc.co.uk/1/hi/business/2863051.stm
and
here are some of the important quotes:
"Just
days ahead of a war, the United States and Japan are
prepared to co-operate to support the financial markets
if there is a crisis."
(there
most certainly is)
"A
deal was struck last week in the United States between a
former Japanese finance minister and the head of the U.S.
central bank, the Federal Reserve's Alan Greenspan."
(you
can assume this same deal was struck with the rest of the
G8)
"There
was an agreement between Japan and the United States to
take action co-operatively in foreign exchange, stocks,
and other markets if the markets face a crisis,"
Chief Cabinet Secretary Yasuo Fukuda said. "
(lets
just call it any market where it is deemed necessary)
"The
move came as Japan's key Nikkei 225 index dropped to
another 20-year low, falling about 1.5% to hit 7,824.82,
before rebounding. "
(and
it went up all last week... )
"Finance
and economics minister Heizo Takenaka said the Bank of
Japan and stock exchanges would be watching the markets
closely during the current Iraq crisis. "
(watching
closely is a euphemism for having their hands in them)
"We
will follow the prime minister's instructions, co-operate
with the Bank of Japan and exchanges, and respond
appropriately," he said.
(respond
appropriately is a euphemism for intervene)
So,
there you have it... why did Japan and the US share
markets have a long successive string of UP days? Because
the governments were buying shares. Why did gold open in
the US virtually unchanged Tuesday through Friday during
one of the most uncertain weeks in the past 50 years?
Because gold would fall into the "other
markets" category of those comments and was being
micromanaged to prevent panic and a loss of confidence...
and so far it's working.
 This was
clearly a psy-ops move in the markets... get them going
in the direction you want on the onset of war so the
participants think that what's happening is good and the
moves should continue in those directions. So, it's
important to understand this whether you're using
technical analysis or a fundamentally based approach.
This is not a completely free market environment, I'd
call it a managed free market environment. it's a
controlled environment, with the controller having
unlimited funds in the short term. That's my take. I
mean... they told me so.
Now;
what I'd like to point out is that in terms of the
economy... in terms of earnings... in terms of anything
that really matters quantitatively, there was nothing
that happened last week to indicate that going forward
there is reason to be optimistic. Even forgetting
completely about this war and its implications, the US
economy is in trouble. With the war factored in,
tremendous damage was done last week... most investors
realize that, and that's why the g8 is intervening. they
are using the Soros axiom of "markets influence
events they anticipate" to its fullest. The markets
are telling us there will be stability and optimism and
therefore the hope of the financial engineers is that
will be the case... and it's no longer a conspiracy
theory... they told us that's what they're doing (maybe
by mistake but they did tell us).
The
biggest damage last week was not in Baghdad. The biggest
damage centers around the US split with its most
important allies (and both neighbors to the north and
south I might add) and launched a non UN sanctioned pre
emptive attack on a sovereign state. The first in modern
history I might add unless you consider Germany's attack
on Poland a pre-emptive strike. Russia, Germany, France,
China, Mexico, Canada, South Africa and many others
called it a violation of international law at one time or
another last week. The bottom line? There is no more
international law. How's that you say? Because with the
UN left in tatters and stripped of any authority,
"international law" is now in the eyes of the
beholder. As a
sovereign state, international law is now what you think
it is... and if someone disagrees then they either live
with it or if they think you may represent a threat, they
bomb you preemptively. That's what the US told everyone
last week by its actions. I think a lot of people don't
get that yet. The UN is gone except as a humanitarian aid
outlet... think of it as a politicized Red Cross. Look
for a lot of diplomats to be looking for work. There is
now currently no serious framework to resolve disputes
among countries except war... setting us back oh I'd say
50-70 years... and the US has indicated to the world that
if you feel threatened, it's ok to bomb your neighbor and
take it over. That's the reality people. A reasonable
person might conclude that this will point to... more
war. That's certainly where I think it points.
In
the US, we had over 1000 people arrested in San Francisco
in one day... so many that the jails weren't big enough
to hold them all and they had to take them to temporary
holding facilities. We had police checkpoints across the
country and random searches and seizures last week. We
learned that the entity that monopolizes the US radio
airwaves is for some reason staunchly pro war, paying for
pro war rallies and banishing the likes of the Dixie
Chicks from the airwaves with a "no play" order
because of an anti war comment. The message is clear to
all high profile individuals. Oppose the war and your
career is over. The US has entered a state of decline,
let there be no doubt about that. Freedom of speech and
the right to dissent is on the wane as the power brokers
attempt to hold things together.
The
problem is that as I've been saying, this war on IRAQ is
just the opening salvo, and I expect things to continue
to get worse. By "worse," I mean a continued
trend towards less ability to dissent and more control
over your "reality." One important point I have
to make is that all of this control costs money...
and lots of it. Worse than that, as control is
transferred from the citizens to the government,
productivity goes down. In my mind it is very much like
the reverse of what happened in the Soviet Union. The
free markets and capitalism are now being constrained by
increased government control in all areas. This is a blow
to free markets and capitalism in general. This seizure
and subsequent occupation of IRAQ is going to be
incredibly expensive. This will probably cause more civil
unrest at some point going forward because many Americans
already know what's up and don't like what they see. That
combined with more and more people being unable to pay
their bills is a toxic mix. We saw a preview of that with
the arrests this week. You can tell from the interviews
with protesters if you're lucky enough to see one.
The
San Francisco protest and mass arrest of over 1000 people
barely made the news on CNN. It was covered more by
foreign news services. What does that tell you? It's an
indicator of the extent of the control over your reality.
I have been watching the war coverage almost completely
from non US media outlets and I can tell you that the
coverage is dramatically different than it is here in the
US... it's almost like they're covering two different
events. That in itself is worthy of comment. The main
reason my opinion is different from many in the US is
because I have more information tools to shape my
thinking. I'm not held hostage to a few outlets who all
say the same thing. That's telling because when you look
to places like the former Soviet Union, their population
was controlled in this manner until it couldn't work any
longer. In many ways, I see the US becoming much more
like the Soviet Union or China in terms of Government
control of information and the rights of the Citizens.
It's happening before our eyes. I can see a day not too
far off in the future when people like myself are not
free to express their opinion to others as censorship
takes hold. I hope we don't get to that point, but the
mere prospect is truly frightening (and stifling for a
democracy I might add).
The
US had to close or fortify its embassies around the world
during the week because the angry mobs in many countries
were threatening violence. You didn't see any of those
protests on US TV or read about it in the US media, but
the foreign outlets had a lot of coverage of it.
I
don't know what a prelude to WWIII would look like for
certain, but I have a feeling it could certainly look
about like things do now. I'm not saying I'm convinced
that it's coming, mainly for the reason that I think most
world leaders desperately, sincerely, want things to get
back to "normal." They want the US to be the
"good guy" again. They want peace and economic
growth. I want to live in Mayberry RFD but  it's not
going to happen. Do you get my point? The rest of the
world is still clinging to a balloon that has already
burst. If they continue to cling, they'll have a
"hard landing."
On
the positive side, during the week IRAN said they
wouldn't get involved in the war, and Israel has stayed
out. Those were all very reassuring elements as the war
broke out. So, for the mean while, the US actions in IRAQ
have not caused an escalation. That's good news... very
good news... but the prospect of it happening in the
future has increased.
The
problem is that I don't think "getting back to
normal" fits with the US agenda of "securing
the realm." I wish I had the exact quote, but at one
time last week GWB confirmed what I've been thinking...
that US troops would be in Bagdad for the foreseeable
future.  Then, as soon as IRAQ falls, they
will turn their sights to IRAN and Syria, and at some
point have to deal with North Korea. So... the people
that have the idea that this is a "gulf war"
kind of over and done with cloud lifted I think are
completely wrong... and that's the only legitimate reason
I could see for financial market optimism. Steven Roach,
a guy who I find is usually writing things that fit with
my thinking, was saying similar things last week about
the market... so I think there's a group that understands
this, while the government and wall street are trying to
sucker the public back into the market (again). If I
bought shares now, I'd think of it as a charitable
contribution to the government... because those dollars
go in, the US spends it to buy shares, the market goes
down ... you lose it and presto changeo... your money was
converted into temporary market fuel... but don't worry
they'll make some more. The problem is it won't be yours.
Isn't this fiat system convenient?
I
think a more sophisticated analysis might be that
countries that feel they have been dissed by the US
realize that they cannot challenge the military might and
yet they do not want to be subservient to the US and its
enveloping empire and world domination aspirations. So...
a natural function would be for them to seek new
alliances and strength in numbers. In the long run I
actually think this is beneficial because it will
preserve a balance of power and fairness. I suspect in
many foreign leaders minds, their reality has shifted
significantly in the last week... sort of like their
world got rocked... I know it has for Putin, whose head
has been reshaped over this. He went from munching
cheeseburgers at the ranch to being back on the verge of
a cold war.  World
leaders now know can no longer count on a monopolar
superpower model for world security because it's
inevitable that the superpower will be like a black hole,
sucking in more and more power at the expense of other
countries. Think of the amount of global power as a pie.
If you take more, you take some away from someone else.
Russia, France and Germany have just had some of their
pie eaten... and they're finding themselves hungry and
unsatisfied. The Us will try to pacify them by giving
them some pie. I don't think they want leftovers out of
the dumpster though. Third world countries are happy to
eat leftovers out of the Dumpster. Russia, France,
Germany and China are not. Look for an economic power
struggle to emerge among the EU and the g8.
Look
for a Russia/Franco/German alliance to emerge from this.
Look for a US/UK/Japan alliance. Look for the EU to have
serious problems. NATO and the UN are goners. The UK and
France are having a war of words... a friend just told me
they removed French wines from the wine lists at many of
the high profile restaurants in my area... we haven't
seen the end of this divisive split... not by a long
shot. On Friday the EU had a divisive meeting. The
economic impact? All negative.
So...
what's my short term market outlook? I think I could give
you an accurate one if the G8 governments weren't in the
market. In the short term, the markets are going to go
where they want them to go. In the longer term, I am not
optimistic. Even if half of the US citizens were paying
more than the minimums on their credit cards I wouldn't
be optimistic. Even if
many of the states weren't bankrupt. Even if the US
deficit wasn't about to spiral out of control. Even if
the share markets were fairly valued. It's a time to be
very careful with your money. Personally, I like real
things... things whose reality I am certain of.
I
think that next week we can look forward to a siege of
Baghdad with Hussein going up in flames. Then we can sit
in our duct taped rooms and wait for the Arab backlash
and the "hard landing" to begin.
March 22, 2003
Craig Harris
President
Harris Capital Management, Inc. CTA
http://www.harriscapitalmanagement.com/
bcharris@gate.net
Economic spoils of
war
By Mazin
B. Qumsiyeh©
IF YOU really want to
understand the war on Iraq and the dissonance between the
public and our government, just follow the money trail.
Since George Bush came into office, a projected
government budget surplus of $1.8 trillion over 10 years
changed to projected deficit of $5 trillion. If Bush
manages to push tax cuts through, our economy will be
further devastated. Yes, some of the extra money now
slated for war will come from increased deficits, but
also a big chunk will come by having to cut other
programmes like social services and healthcare.
There are enough pieces of
military contracts in enough congressional  districts guaranteeing a continuation of
this pork barrel system. In Connecticut, Sikorsky
Helicopters ensures that elected officials do not rock
the ship of death. Special interests ensure that the
couple of thousand of highly paid jobs at Sikorsky are
more relevant to the reelection campaigns of senators
Lieberman and Dodd than budget deficits and layoffs of
thousands of state employees.
What will happen in Iraq?
According to The Washington Post, the US government has
suspended its usual procedures of open bids to solicit
emergency offers from select US companies for post-war
Iraq development. The companies solicited for the
“initial” $900 million in contracts include
Haliburton, run until 2000 by none other than Vice
President Dick Cheney. But Iraq has estimated oil
reserves valued at not millions or even billions, but at
over $1 trillion. Iraq also has rich agricultural land
and an educated population that can provide excellent
cheap labour to very rich and powerful multinational
corporations. The possibilities are endless for making
money under a pliable government controlled by the new
rulers of the “New American Century” and not
concerned with the environment or minimum wage.
Richard Perle, chief
advocate for a war on Iraq, was chairman of the  committee that in 1996 presented a study to
the Israeli prime minister, titled “Securing the
realm”, calling for regime change in Iraq and
redrawing the geopolitical map of the area. Perle is now
chair of the Defence Advisory Board(he resigned as of
March 27 but is still an advisory member, ed.), an
unelected group of neoconservatives (many of them
previous or current lobbyists for Israel) that wields
significant influence on US policy. Perle is also founder
and chief benefactor of a little known company called
Tritreme. Tritreme foresees unlimited “business
opportunities” for its “security business”
as terrorism will become the biggest threat to countries
and individuals.
What if the US really will
establish a democracy in Iraq, give its natural resources
to its people, and set in motion a wave of democracy in
the Middle East? Well, how many of the 50 countries we
bombed since the end of World War II are now functioning
democracies? Furthermore, how many elected democracies
did we topple since the CIA toppled the Mosaddak secular
democracy in Iran to reinstall the Shah in 1956? Our
latest was the bombing of Afghanistan, which killed
3,000-5,000 civilians to leave a ravaged country run by
warlords. Karzai is able to leave his palace in Kabul
only thanks to his US special forces bodyguards. Torture
and corruption are rampant and, while women can go to
school, there will be no jobs for men or women. Our major
accomplishment was revealed a couple of months ago when
American companies signed the deal to build the gas
pipeline from Kazakhstan to the gulf via Afghanistan and
Pakistan, a project that will generate billions in
corporate profit. Had the Taleban signed this contract
earlier, they would have still been in power with or
without Ben Laden. Talking about Ben Laden, his top
lieutenants were captured by classic police work, not by
the so-called war on terrorism.
Our government's refusal
to support the International Criminal Court and its
dogged support for Israeli apartheid and hegemony over
the Arab world, all add fuel to this fire. Why would the
world believe our complaint about an upcoming veto by
France or Russia when the US is the one country that
vetoed most UN resolutions? Even if we look at
resolutions passed and not vetoed, Israel is in material
breach of over 70 Security Council resolutions. Why are
the media in the US not talking about the hypocrisy of
the US foreign policy?
Again, the answer is
money. Ten mega-corporations own 95 per cent of our media
outlets, making millions for their CEOs, and many of them
(like GE, owner of NBC) also do a lot of the military
contracts.
The only thing left
between a world of corporate greed and police states
sustained by spreading fear remains the tens of millions
protesting. Their growth and their actions are beginning
to get louder against globalisation and against war.
The writer is associate
professor at Yale University and co-founder of the
Palestine Right to Return Coalition (http://Al-awda.org).
He contributed this article to The Jordan Times.
Islamic Countries switching
to Real GOLD !
Courtesy of Janet Zeravica: jzeravica@hotmail.com
I strongly suspect that this one of the main
reasons why we are going to war with the Arab
world. Also, because Iraq now refuses to
accept dollars for oil. They only take
Euros. The international bankers cannot
allow the Arabs to get off the dollar based
"plantation." Tom.
Islamic gold dinar will minimize dependency on US dollar
2003-01-08 13:48:14
By Khaled Hanafi for IslamOnline 8 January 2003
Malaysia will start using the Islamic gold dinar starting
mid 2003 in its foreign trade section with some
countries replacing the U.S. dollar in a first step
move toward unifying the currency used in
commercial dealings between Islamic countries. The
success of this idea, according to several western
newspapers, may lead to minimizing the U.S. dollar
hegemony as an intermediate tool in commercial dealings
in the world. The idea was adopted by Malaysian Prime
Minister Mahathir Mohamad who conducted bilateral
talks during the year 2002 with several Islamic
countries, including Bahrain, Libya, Morocco and Iran,
to convince them of using the Islamic dinar as a
way of payment in their commercial dealings with
Malaysia. This move is considered from one side a way to
recall a currency related to the history of Muslims
and their monetary heritage since the time of
Prophet Muhammad (peace be upon him), and from the other
side, the ability to find the Islamic alternative
to the dollar at a time the calls to boycott all what is
labelled as American starting from goods to
currency, are intensified. The idea of the Islamic gold dinar
belongs to Professor Omar Ibrahim Fadillo, founder
of the Morabeteen International Organization
founded in 1983 in South Africa where it is widely known
as well as in Europe. The organization believes
that the unity of the Islamic world can not be achieved
except through the unification on the economic
level. It also calls for the establishment of a
united Islamic market using one currency which is the
gold Islamic dinar used by the Morabeteen members,
hoping it will replace the U.S. dollar. "The idea of
the Islamic gold dinar aims at minimizing the
hegemony of the U.S. dollar and to use the gold once
again as an international currency because the value of
the paper currencies is in continuous fluctuation unlike
the stable gold currency which preserve its value
through the value of the metal itself. The
system is built on the idea that the Islamic
governments keep the gold in a central bank and use
it in settling their commercial dealings instead of
depending on foreign fund markets and foreign
financial corporations. The first Islamic gold dinar,
equivalent to 4.25 grams of 22- karat gold, was issued in
1992 on a very limited scale between the member of
the Morabeteen. In 1997, the idea developed to be
implemented into an exchange framework through
launching what was called the electronic dinar, a
system based on using the gold as fund through
transactions made on the internet. According
to the e-dinar limited company based in the Malaysian
island of Lapoine, electronic transactions using the gold
Islamic dinar have currently reached what is
equivalent to 4 tons of gold and that the users are
increasing at a rate of 10% monthly. The number of users
through the electronic dinar website www.e-dinar.com,
launched in 1999 after 7 years of issuing the Islamic
gold dinar, reached 600,000 and that number is
increasing, the company announced. Several
countries around the world are currently dealing
directly with 100,000 Islamic gold dinars and 250,000
silver dirhams issued by the company, hoping that
one day it will replace the U.S. dollar in the
dealings of the 1.3 billion citizens of the Islamic
countries. The success of the gold dinar as a
united Islamic currency will depend on the level of
demand of the countries that want to deal with it
as the primary currency in the international commercial
dealings. Islamic countries will benefit if they
implement this new currency in many ways, the most
important of which is that these countries will not
need reserve of foreign currencies to finish commercial
trading, Dr. Mohamed Sherif Beshir said.
"Consequently, the gold dinar will be the ideal
currency to facilitate and increase international
trade and minimizing speculation in paper currency
that led to the Asian currency crisis in 1997," he
said. The existence of a fund unity between the countries
of the Muslim world will increase the amount of
trade between them and will help in increasing the
economic development if the conditions for the
success of the gold dinar were provided, he
added. Copyright © ummahnews.com 2003
Tony Lee
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