Tuesday, February 06, 2007

Financing the Never Ending War on Terror

EUR/USD 1.3016 Hi 1.3025 Low 1.2971
120.65 Hi 120.80 Low 119.99
AUD/USD 0.7782 Hi 0.7791 Low 0.7759
EUR/JPY 157.06 Hi 157.16 Low 155.80

As George W. continues with his plans to militarize the U.S. economy entirely, and hence make WAR a way of life, if not simply one of the few ways open for an American citizen to access education and health care, it appears that the rest of the world is somewhat less than enthusiastic about financing this escalation. So the USD is under pressure. AGAIN. The pressure is not huge thus far. But so far the USD downtrend has resisted all the concerted attempts to arrest the slide. There are whispers that Central Banks were in again in EUR/USD above 1.3000. Certainly following the release of the NFP numbers Friday there was "intervention" of some kind. The NFP seems to be a favourite with these guys. It's not like it's this hugely significant number. It fluctuates, it's revised to the point that it is meaningless and it is a LAGGING indicator of economic activity. Which means that by the time the data gets released the game has moved on. And still the market gets excited. Or at least whip-sawed.

At any rate George W. plans to shift more and more resources toward the American military machine and he and his buddies are assuming that the American people can be frightened into believing that more militarisation is not only necessary but patriotic. They may need another TERROR type incident for that. But where there is a will there is a way. And there is no doubt that George W. and his buddies have the will. So an incident can be created if necessary. After all it's happened before.

It's fair to assume that the American public will go with the plan. After all Mr. Joe Average is either ill-informed or drowning under a barrage of FOX NEWS propaganda. The U.S. Congress is unlikely to make too much trouble. U.S. politicians are too busy trying to work out how to explain why they voted for the Iraqi invasion in the first place while they keep their wages coming in. Hypocrisy and double dealing is everywhere. But the offshore investor, with perhaps the exception of the Saudis, may not come to the party. So that makes financing "escalation" something of a problem.

The PPT can't be everywhere. They are trying to stop the USD from falling down a black hole, trying to keep GOLD from emerging as THE global world reserve, trying to support the U.S. Treasury market (and that could be a real problem going forward) while all the while remaining very low-key about the whole deal. To the point where they even try and deny their very existence. This is so in tune with the zeitgeist.

OIL 58.83
GOLD 659.80

The attempt to strike fear into the heart of the GOLD market appears to have been less than successful. These people (the powers-that-be, the PPT, the market manipulators) are not going to go away. They will though continue to have trouble with the ongoing GLOBAL search for an alternative to the USD as a global reserve currency. And that trend is NOT going to go away anytime soon.

So buying GOLD on dips is still the recommended medium to long term strategy. The market manipulators have derivative markets to play with and the possibility of unleashing selling by the IMF and other proto-Government organisations but they have to contend with a wall of money looking for an alternative to the USD. So on the one hand we have the Tricky-Dickies and on the other we have the world. The world, ultimately, will win.

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