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One technique for valuing fiat currencies is treating them as the common stock of issuing nation. Almost all empires end for financial and economic reasons. Gold’s two week moving average is over FRN$1,000. The United States is proving to be no exception.
On 17 September 2009 the United States formally announced the intent to abandon the plan for placing ballistic missile defense (BMD) armaments in the Czech Republic and Poland. While the stated purpose of these missiles is protection from Iranian intercontinental ballistic missiles (ICBM) the geo-political implications are mainly with Russia. As the United States has overextended itself as the policeman of the world the national debt has skyrocketed and the FRN$ is under intense pressure because it is destined like all other illusions before it for the fiat currency graveyard. Therefore, it is not surprising to see Poland and the Czech Republic feeling betrayed by being sacrificed on the altar of fiat currency.
REGIONAL POWER
Russia is the dominant regional power and is extremely pleased by this move. The BMD is likely not the key issue but instead the US presence on Poland’s land as the BMD will instead by operated from navy ships in the Mediterranean. Indeed, Poland has a deep history of tense relations with Russia and understandably their feeling of betrayal must lead to despair. If the US had BMD on Polish land then the US would feel more inclined to protect those assets and this would likely enhance Polish national security. Indeed, this implied security guarantee likely carries more weight than the explicit NATO one.
But now the Russians must be ecstatic at the US choosing to cut and run from the region on this issue. Russia wants, even needs, to be recognized as the ascendant power in the former Soviet Union. This will spill over into bilateral relations between both the United States and Europe with other former Soviet Union states, like Georgia, Abkhazia and South Ossetia, as well as Central Europe’s role as a base for US power declining. Additionally, Vladimir Putin is very upset at the Western media’s silence and the American Empire fanning the flames of ethnic strife:
I was in Beijing at the time. I looked through the world electronic media. Complete silence. As if absolutely nothing is going on. It was as if somebody ordered everyone to keep their mouth shut. To those who organized all this; I can only say congratulations. Congratulations. You did an excellent job. The only problem: your results were poor and this will always be the case because the work you do is unfair and immoral. In the long run immoral policies always lose.
IRAN AND ISRAEL
The US seems hell-bent on striking Iranian nuclear facilities. Any strike on Iran would likely require significant steps such as destroying the air support, navy, anti-aircraft weapons, the nuclear facilities, assess the damage and finish what was started along with any Iranian retaliation. The likely move would be blocking the Strait of Hormuz where significant amounts of worldwide oil production passes.
With each super oil tanker worth about $175M at current prices the owners and their insurance companies would likely not want their boats in the area should a conflict erupt. Without the black oxygen the worldwide economy would likely asphyxiate.
Understandably Israel is most concerned with Iran’s nuclear ambitions and could unilaterally entangle the US with its own airstrike on Iran. To prevent this the US has tried to impose sanctions on Iran, particularly with gasoline as despite having oil production Iran does not have much oil refinery capacity. On 24 September 2009 the G-8 will meet and all will need to be in agreement in order to disrupt the flow of gasoline. But Russia alone can both produce and transport not just Iran’s import deficiencies but its entire demand. And just a few weeks ago Russia opposed new Iranian sanctions.
GEORGIA, ABKHAZIA AND SOUTH OSSETIA
In August 2008 when the Kazakhstan currency, the tenge, went poof I also wrote about the implications of the Tbilisi pipeline in relation to the Georgian and Russian conflict. The 1,099 mile Baku-Tbilisi-Ceyhan crude oil pipeline from the Azeri-Chirag-Guneshli oil field in the Caspian Sea to the Mediterranean should begin transporting in 2009 with an initial transportation of 1 million barrels a day, about 1% of worldwide production, with a capacity of 10 million barrels a day. This is an incredibly important geo-strategic asset.
The tensions around Georgia, particularly in the capital Tbilisi, have gotten increasingly tense lately. For example, 20 August 2009 Georgia said it seized two cargo ships visiting Abkhazia. Georgia is attempting to forbid economic activities with Abkhazia from foreign ships in international waters without permission from Tbilisi.
Abkhazia and South Ossetia broke away from Georgia in the 1990’s. Georgia has significant US backing and about 90% of South Ossetia are Russian citizens. Russia has recognized both Abkhazia and South Ossetia as independent countries and has stationed thousands of troops in both regions.
As Reuter’s reported:
Georgian Interior Ministry spokesman Shota Utiashvili said Tbilisi would hold Russia, which controls Abkhazia’s borders and its coastline under a deal with the region, responsible for any attacks on its ships. Abkhazia’s navy does not exist,” he said. “There are no Abkhaz territorial waters, as these waters belong to Georgia. If there is an attack on Georgian ships, Russia would be responsible, not the separatist government.”
Clearly Georgia is willing to seize foreign ships in international waters only because they feel the safety provided by their alliance with the American Empire. But as Poland and the Czech Republic have found out when the interests of the Empire are no longer served the countries will be discharged.
GOLD TO OIL RATIO
The gold to oil ratio has been consolidating around 14.
This suggests that oil, priced in gold, is still fairly expensive and outside historical norms. The reason may be due to Peak Oil or the exacerbation of geopolitical tensions. This is a prime reason that physical gold is on the move and China is teaching its citizens how to buy silver.
CONCLUSION
The United States, a once great land of plenty, is now failing nation with empire abroad and tyranny at home. With millions marching on Washington DC the Bonus Army march in 1932 which included 43,000 and about 17,000 World War I veterans should be remembered where President Hoover ordered General McArthur to fire on former veterans. The worldwide Empire is beginning to retreat so the geo-politics and geo-strategy are changing. For the nearly a decade the FRN$ has been weakening at an extremely quick pace. The United States has quickly and willingly sacrificed this aspect of the Polish and Czech Republic relationships. Other nation states which think they have a deal with the United States should be wary as they will likely receive the same treatment.
Disclosures: Long physical gold and silver with no position in the problematic GLD and SLV ETFs.
United States Sacrifices Poland And The Czech RepublicRELATED POSTS:
- United States Treasuries Are The Biggest Bubble Of All
- Kazakhstan Currency Goes Poof
- Current Dollar Currency Controls
- The Case For A Rise In The FRN Dollar
- Resurgent Russia Discharging Dollars
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{ 4 comments… read them below or add one }
Good to see an American economist with balanced political views. I am used to seeing good financial advisors turning very pro-Israel and anti-Iran, anti-Russian when addressing the politics of that part o the world.
Very interesting analysis.
When we look back in a decade or two, this decision would probably be looked at as a silent but major step in the crumbling of the Empire’s influence.
On the other hand, the inevitable withdrawal from Afghanistan will not be an unnoticed one. It has never has for anyone.
there is nothing of substance in backing out of poland or the czech republic….those were excessive superfluous flare-ups of american
expansionsim….the usa has a huge base in romania….coupled with its
german presence the lock on the region remains.
it makes great theater for obama but does nothing to alter strategic configurations…..calling this a cut and run is naive at best and nothing more than imperial jingoism at worst….
to lament american withdrawal from these two areas is but a symptom of neo-con imperialism in its supernova stage….american imperialists can never have too bases or treaties….
trace. there never was anything called the american empire. its all about the jews and has been since the dawn of the FED era which they themselves pushed and inflicted on the united states. anything that we have done politically or in this world since that time has been not in our best interest, but the best interest of the jews. our withdrawal from poland and czechoslovakia whatever that means, does not necessarily mean we are “abandoning” them. heck trace, we should never had been there in the first place. like so many military conflicts that are going on now, our military invades these countries that have never had anything to do with 911. yet there we are killing their people and the people we face we call insurgents and terrorist. george III used to use the same terminology when describing american patriots who opposed him in the revolutionary war. who the hell cares what israel wants or needs? they are not our friend anyway and never were. if the truth be known, imho, we fought on the wrong side during ww2. we prayed to a Holy God to ask for His help in victory against the enemy when in fact we ourselves were the enemy then as we are now, because we are being used by the jewish military industrial complex as a mercenary nation to go around and destroy any and all who oppose their world mindset and beliefs and desires for the coming jewish new world order. during 911, it was mostly the mossad that orchestrated 911 and they tried to make it look like arab terrorist did it. but when you investigate arab terrorist, many times they are jews masquerading as arabs or they are arabs on the mossad payroll doing what they are paid for and when their usage is complete they are eliminated. any president who opposes the desires of the zionist jews, is either killed or removed from office to wit, lincoln, JFK and nixon. the only reason they didn’t kill nixon is because they figured it would look too suspicious even to the dumb stupid american goyim that two presidents were killed in office in such a short time period. nixon was attemtping to remove the jews in the government who were spying on him and this country and attempting to c0erce the foreign policies of this nation by any means necessary which still goes on in spades to this day. now the government is completely in deep capture. trafficant understand this. this is why he went to prison. but now he comes out swinging. when a man goes down and serves his time for you and never bitches or complains or rolls over on you, and comes out strongly speaking the truth, then that man is a champion and can be trusted. ron paul talks the talk but doesn’ walk the walk. if he did, he too would go to jail. that is how it is…….so are we to trust ron paul, a man who speaks nice words but nevertheless derives sustenance from this beast? besides he is a 33 degree free mason and anyone that is a member of that organization cannot in good faith be trusted. so in the beginning the jews for the longest time in the history of this world, worked in secret and in the shadows to accomplish their ages long dream of world domination through a myriad of secret organizations ,etc. but now they do it in the open in our faces and laugh at us because they have the power and the money and they care not what we think. the only way this will ever change is when we fight them in the streets and take back what is ours already if only we would believe and act on that belief. the time is short. by the way, trace they also control most of the gold and silver above ground and also the mines that produce the stuff so they will attempt at least to control prices on it. i am not sure what this means as far as future prices. they may well control it and declare it of no worth. i am a gold bug but i also am wary of these people who go around making prognostications about what it oculd be worth this year or next all the time, not taking into account just who it is that runs the financial systems of this world and who the hell they think they are dealing with. most people simply do not understand who they are dealing with and the depths they will go to , to achieve their aims. one only needs to examine eastern european history and talk to some older hungarians about this and they will most assuredly inform anyone within shouting distance what it is like to live under the jewish boot. this is my country. it is dying . i see it. most do not. i refuse to bow my knee to Baal nor kiss his ring or his feet. The days of the troubles are coming . May God grant victory to the American Insurgent.