LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Stocks Outperform Gold but not Stocks
By: Jordan Roy-Byrne CMT, MFTA

Market Bides Time Ahead of More Fed Twaddle
By: Rick Ackerman, Rick's Picks

Precious Metals Update Video: Gold waiting for FOMC tomorrow
By: Ira Epstein

Asian Metals Market Update: March-19-2019
By: Chintan Karnani, Insignia Consultants

Keynes Was a Vicious Bastard
By: Keith Weiner, Monetary Metals

SWOT Analysis: Goldcorp Chairman Ian Telferís $12 Million Retirement
By: Frank Holmes, US Funds

Gold and Silver Are Feeling Frisky
By: Dave Kranzler

Is The Stock Market Finally Topping?
By: Avi Gilburt

Why This Rally Smells Funny
By: Rick Ackerman, Rick's Picks

Technical Scoop: March-17-2019 -- Markets, Precious Metals & More
By: David Chapman

 
Search

GoldSeek Web

 
Markets Climb as World Faces Crisis

By: John Browne
Senior Market Strategist, Euro Pacific Capital, Inc.

 -- Published: Thursday, 4 September 2014 | Print  | Disqus 

On August 28th while the geographical area formerly known as Iraq descended further into chaos, President Obama announced to the world "We don't have a strategy, yet." A few days later, another brave American journalist was brutally beheaded by a slickly televised cockney-accented jihadist. Clearly things are not going well outside the bubbly confines of the S&P 500. 

 

Last week The Wall Street Journal published an extract from Henry Kissinger's forthcoming book, "World Order". In it, the former Secretary of State cited Libya, ISIL, Afghanistan and "a resurgence of tensions with Russia and a relationship with China" as developments of grave concern to the United States.  Kissinger went on to warn, "The concept of order that has underpinned the modern era is in crisis."

 

Kissinger noted that the era between 1948 and 2000 could be considered an "amalgam of American idealism and traditional European concepts of statehood and balance of power. But vast regions of the world have never shared and only acquiesced in the Western Anglosphere concept of order. These reservations are now becoming explicit, for example, in the Ukraine crisis and the South China Sea. The order established...by the West stands at a turning point."

 

In the 20th Century, the Anglosphere was unsuccessfully challenged by Germany and Russia. The first German challenge ended with the abdication of the Kaiser in 1918. But Allied negotiators failed in a crucial test and set the stage for a brutal outcome. Although Germany was left unoccupied, its citizens were saddled with a very heavy debt load. These conditions were mutually incompatible. Soon a strong man emerged in Germany to try to throw off the Anglo yolk. Similarly at the end of the Cold War, the Soviet Union never was occupied, but hadnegotiated a peace. Implicit in the voluntary dismantling of the Soviet Union was the Russian understanding that NATO would not extend its membership to the former Soviet satellite states in Eastern Europe. 

 

But fired with the heady feeling of apparent 'victory', the Anglosphere attempted to 'bend' the agreed Cold War peace terms by extending NATO membership to the Baltic States, Hungary, Slovakia, Romania, and Poland. It was no secret that the Ukraine was next on NATO's wish list. Such an outcome would have been very difficult for Russia to accept. 

 

Like the Germans, the Russians are a proud and tough people. While 'acquiescing', to use Kissinger's term, they resented deeply this seemingly covert aggression by the Anglosphere. Under a tough, patriotic and charismatic President Putin, Russia apparently now seeks to regain some of its lost regional sphere of influence or empire. In this very limited sense, the Putin/Hitler comparison is apt.

 

Amazingly, the Obama Administration failed to recognize the Crimea and the land bridge to it, as a vital Russian interest. As a result, the U.S. Administration badly bungled the diplomatic response to Russia's annexation of the territory. Far more serious is the probability that Anglo miscalculation can force greater cooperation between Russia and China and perhaps even Russia and Germany.

 

In his efforts to strike back at Putin, Obama's choice of weapons defies practical sense. The trade sanctions seem to offer little except discord among the NATO allies. It was recently revealed that Germany was forced to negotiate secretly with Russia to ensure the continuation of some 40 percent of its winter energy supplies. Sensing these divisions doubtless has increased Putin's ambitions. Now the entire Ukraine is in his sights. Over the weekend, news reports suggested a serious escalation of the conflict, which resulted in the Ukranian government shifting to a more defensive posture as Russian forces made serious territorial gains. More concerning, Obama's misjudgments may push Germany increasingly from the Anglosphere towards the Asian sphere of Russia and China.

 

At the upcoming NATO meetings it is likely that, underlying some bellicose speeches, the real politic will dictate an overriding need to find a face-saving 'off-ramp' or way of accepting Russia's territorial hegemony over its "back yard." 

 

In the short-term, the flow of fear-money to the U.S. likely will continue and, depending on NATO's decision, even increase. This could help drive the U.S. dollar, equities and Treasuries to new increasingly bloated highs. Over the medium term as anti-Russian trade sanctions bite harder, likely they will deepen the looming international recession. This may inspire central banks to enact still more aggressive monetary stimulation, taking financial markets yet higher.

 

In light of the increasing evidence that Keynesian monetary stimulation is failing to ignite meaningful improvement in the broad economy, central banks may be tempted to create even more synthetic money. However, given the failure of past QE strategies to do much good, some central banks may try novel approaches to liquidity injection. In late August, the Council on Foreign Relations published in its Foreign Affairs magazine an astonishing article entitled, 'Print Less But Transfer More: Why Central Banks Should Give Money Directly to the People'.

 

Such open signs of Keynesian desperation might magnify fears of economic recession combined with financial hyperinflation, or stagflation, and bring precious metals increasingly into play. Further, it may threaten the U.S. dollar's Reserve status.

 

In short, the order that has dominated global politics for much of the past century is facing a severe test on all fronts. Unfortunately, the current leadership in Washington is woefully lacking in strategic understanding and intestinal fortitude. This is exactly the wrong combination at the wrong time. The Anglosphere's ineptitude may even overcome the best efforts of Janet Yellen and succeed in pushing the stock market into a much needed correction. 

 

John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff. 

 

Subscribe to Euro Pacific's Weekly Digest: Receive all commentaries by Peter Schiff, John Browne, and other Euro Pacific commentators delivered to your inbox every Monday! 

 

Order a copy of Peter Schiff's updated illustrated economic parable he co-wrote with his brother Andrew, How an Economy Grows and Why It Crashes - Collector's Edition, and save yourself 32%


| Digg This Article
 -- Published: Thursday, 4 September 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus - John Browne Senior Market Strategist, Euro Pacific Capital, Inc.


John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc. Working from the firmís Boca Raton Office, Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with." A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

In addition to careers in British politics and the military, John has a significant background, spanning some 37 years, in finance and business. After graduating from the Harvard Business School, John joined the New York firm of Morgan Stanley & Co as an investment banker. He has also worked with such firms as Barclays Bank and Citigroup. During his career he has served on the boards of numerous banks and international corporations, with a special interest in venture capital. He is a frequent guest on CNBC's Kudlow & Co. and the former editor of NewsMax Media's Financial Intelligence Report and Moneynews.com.




 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.