Monday, September 24, 2007

Gold Doesn't Care What the US Dollar Does

24 September 2007

There is a wide-ranging myth, popular in the gold community, that the US dollar has to fall in order for the price of gold to rise.

Ed Bugos, now with Agora Financial, demonstrated in a private communication, gold’s best historic gains have occurred during periods when the international value of the US dollar has been flat. Yes, you heard that right, gold does best not when the US dollar is falling, but when the US dollar is stable. We’re not talking about broad trends here, but the periods when gold surges.

Does that mean that the US dollar falls, and then the price of gold compensates by catching up? No, the evidence is to the contrary. The price of gold leads other markets, it does not follow them.

Think of it this way. When the US dollar falls against other currencies, the price of gold naturally climbs in US dollars. That is no surprise to anyone versed in monetary theory, particularly Austrian Economics. But gold climbs best when inflating currencies are temporarily stable. Why? Because all currencies are then falling against the true international and historic standard of value, the price of gold.

Sol Palha, in a
recent article on the Gold-Eagle website, argues that despite the US Dollar Index’s head-and-shoulders technical profile, despite popular sentiment to the contrary, and despite massive short positions against the US dollar, the currency of our southern neighbour is due for a bounce to the upside – possibly even a long recovery run of several years.

I'll discuss this problem only briefly.

In terms of purchasing power parity, the US dollar is now certainly very cheap internationally. It will cost you $5.00 to order a cup of coffee in London, and US vehicles sell for 70% of the price of their counterparts on the European continent. Certainly for Canadians, it has become ridiculously cheap to cross the border, and pay perhaps 30-50% less than we pay here for equivalent goods in the United States.

Further, though the United States is profligate and arguably asea in the midst of a perfect financial storm, and obviously navigating without a rudder, this situation is in fact little different than that of the world’s other major powers – as their currencies are – no differently than the US dollar – also on certain trajectories towards utter worthlessness.

Is the US currency situation then fundamentally different than that of other nations?

Perhaps, at least for now.

Of the major powers, it is only the Americans who insist on spending far beyond the funds they have on hand in order to purchase lower-priced goods and services overseas, now primarily from the Asian economies. Only the Americans run guns-and-butter economic policies at home, funded by the practice of running up unending government debts. And only the Americans are taking on mountains of personal debt, often financed through home equity extraction, that far exceed their rate of income growth.

In fact, American home equity, as a percentage of the value of the average American home, is in a downtrend according to the New York Times, perhaps the first time in US history that this has occurred when home values were rising - and of course the rising trend in US home valuations now seems to be committing a radical about-face, further squeezing already-declining levels of American home equity, and this at a time when mortgage rates are also turning upwards (recently prodded in this direction by pressure on long-term bond rates caused by increased inflationary expectations as a result of the Federal Reserve's surprise 50% Federal Funds rate cut at the short end of the debt market).

As a result, the Americans must sell about $¾ trillion of their currency each and every year in order to fund their profligacy. No other major nation is so deeply financially irresponsible at this time.

The US is presently playing in a league with such nations as Zimbabwe in terms of the quality of its broad fiscal policies. Argentina and Brazil – even Cuba – are presently far more fiscally conservative than the American government and its citizens. It is shocking but true, to contemplate how far the US has fallen in only a small number of years.

So it can be argued that there has been an epidemic of collective financial insanity in the US.

But bear in mind, the present economic madness in our neighbour to the south takes place against a backdrop of historic economic and technological innovation and long-term economic vigour which cannot easily be reversed even by many years of utterly ungrounded economic policies (consider Johnson’s Vietnam adventure in the 1960s, Reagan's military expenditures in the 1980s, and the almost two decades of irresponsible Federal Reserve economic policy under the loose-fingered Greenspan chairmanship – now succeeded by the present Bernanke Helicopter crew).

What then am I arguing?

Despite the above facts and arguments, I have no standard by which to value the pitiful and neglected US dollar against the world’s remaining currencies.

Living in Canada, we are presently blessed – and in some ways troubled – by what is currently the developed world’s strongest currency. The Canadian dollar reached parity with the US dollar last week for the first time in over 30 years.

Yet our nominal Canadian conservative government is staunchly confiscatory and anti-business (consider the perfidious reversal of income trust legislation, which has plunged the Canadian natural gas production business into a dire state – with the implication that Canada’s precious and irreplaceable natural gas reserves will soon be sold to the highest international bidders and removed from Canadian hands at the very time when natural gas prices are at their lowest point in a multi-decade uptrend).

I predict that Canadians will live to regret this short-sighted and mean-spirited policy in the not-too-distant future.

In Europe, the Euro partners cannot persuade France to abide by the requirements of responsible fiscal policy on which the Euro was necessarily founded. The Euro is presently one of the world’s strongest currencies, but it, too, is on shaky foundations.

The resource-driven Russian Ruble is being steered by a regressive government that is attempting to back-pedal as far as possible in the direction of the departed Soviet era when the KGB ruled supreme over all the land.

In the Middle East, some of the smaller and more independent states are diversifying into the tourism and financial management industries, and they are snapping up Western assets at a furious pace – but this region of the world continues to be hobbled by its now almost century-long inability to produce very much of abiding international economic value other than petroleum.

It is not that long ago that the entire Arabian peninsula could not match the economic value of the exports of tiny Finland (when the value of petroleum product exports was stripped out of the equation).

Yes, the US dollar could certainly collapse from its already compromised position against other international currencies.

Or the US dollar index could bounce from its present low level, which is equivalent to its 1992 record low, and soar upwards in a surprise uptrend for years to come.

I have no idea what will occur.

As Mr. Palha indicated in
his article, the game of currency investment is analogous to rats escaping one sinking ship to swim to another. All of the ships are going down. So what, exactly, does it really matter if the US dollar falls or rises against other global currencies?

It is in reality little more than a global shell game.

There is not one good international currency out there – no, not one (apart, perhaps from the Swiss Franc – a story for another day).

So, here is what I do know.

The US dollar is on a trajectory towards worthlessness.

So also is virtually every other currency of every other major global power.

The price of gold has its best runs (in US dollar terms) when the US dollar is stable, not falling.

And that is all I need to know.

Gold and silver are now easily available to the common person as investments. They have lasting value at all times and in all places.

So what are we doing arguing about the value of the US dollar relative to the Euro, the Canadian Loonie, the Pound Sterling, or the Australian dollar?

Who cares?

They are all fundamentally without lasting value.

It doesn't matter.

Gold and silver are of value, regardless of what becomes of the world’s currencies.

That is all any of us needs to know.

Let me close by borrowing a citation from Mr. Palha – who in this context is referring to the travails, and the uncertain prospects – of the US dollar:

“Experience has taught me this, that we undo ourselves by impatience. Misfortunes have their life and their limits, their sickness and their health.”

(Michel Eyquem De Montaigne 1533-1592, French Philosopher, Essayist)

Again, it truly does not matter how the international currency exchange value of the US dollar fares.

Nor does the exchange value of the Canadian dollar, nor the Euro, nor the Yen, nor the Pound Sterling, nor the Chinese Yuan – matter – one whit. They are each and every one in perpetual decline.

Gold and silver are of value. That is all that matters.

($9000 gold as the US dollar collapses? Click here.)


Tuesday, September 18, 2007

Constructing Stories About How Terrorism Might End

18 September 2007

This is yet another “essay” that will require much additional future work.

I have been contemplating recently how human change comes to pass. In essence, no emotional or behavioural change is possible without a change in thinking. This has led me to the following hierarchy with respect to how we humans can change our ways of thinking, feeling and behaving.

1. Ideas are strong.
2. Beliefs are powerful.
3. Stories are transformative.

That is, our best prospects for creating fundamental change in our response to adverse life events is through the re-telling of stories, in particular, stories of injury and loss.

Let’s think about the stories we tell ourselves about how terrorism might ultimately end –as one day it certainly will.

One storyline might proceed as follows: Terrorism will end when all the terrorists are jailed, killed or defeated. Interestingly, this story parallels the policy of Egypt, which has aggressively jailed and executed terrorists from the birth of the Muslim Brotherhood over a half century ago. The Egyptian policy, though often severe and brutal, has been relatively successful, when contrasted to the examples of, say, Saudi Arabia and Pakistan.

Saudi Arabia is a particular offender, as Saudi petrodollars have been funnelled into the support of terrorist causes to the tune of billions of dollars.

Recently, the Muslim Brotherhood has foresworn violence and entered electoral politics in Egypt. Now, is this an authentic change, or an expedient political strategy? That I do not know. It is certainly concerning that this longstanding terrorist organization has been able to garner 20% of the popular vote in recent Egyptian elections by donning the garb of moderation.

However, let’s imagine another storyline altogether: Terrorism will end when terrorists no longer desire to kill, and so lay down the arms voluntarily.

This is once again a very different kind of story, as it is about an inner transformation that might occur in the hearts of those who are presently committed to terrorism. Were we to desire to actualize this story, the implications would be quite different than those of the former story (based on the Egyptian policy model).

How might our own behaviour change so that we could become actors in this obviously more positive story? I cannot imagine any course of action that would not involve confrontation and face-to-face dialogue with individuals presently committed to terror as a lifestyle, policy and ideology.

Presumably the dialogue would focus initially on such questions as “What would we have to do to cause you to determine to bring your use of terrorist tactics to an end?”

Presumably, if our present adversaries were to agree to enter into such a discussion with us (I do not know if they would – but I also don't know that they won't), they might place some demands on us, and I presume that many of these demands would be unconscionable, as were the
recently-released statements of Mr. bin Laden.

We might then talk about what we could and could not do, and perhaps ask, if we did some of those things but not all of those things, would anything change about your commitment to the deployment of terror as a continuing strategy?

Perhaps simultaneously, we might intentionally cultivate relationships with moderate Islamists who oppose terror, and through our friendships with them, expect them to apply influence on our behalf with those who practice terrorism. I suppose that at the same time, we would presumably make some adjustments as well (I am not sure what these would be).

Yet another story line might proceed as follows: Terrorism will end when terrorism stops working.

Now, what would cause terrorism to stop working?

Well, from my own viewpoint, terrorism is already “not working,” but it is clear that its proponents see the matter differently. Such as bin Laden and al Zawahiri are presently riding a surge of strength as their violent gestures win them adherents in the angry and embattled Muslim world.

Certainly Westerners will not be won over to convert to Islam by being bombed and killed. In fact, our sympathies will be driven quite the other direction. Then again, we might come to ask, how will we win the hearts and minds of the Palestinians or the Iraqis while they are being bombed and killed by ourselves and/or our allies?

That is, in this third storyline, we might be influenced to desist from policies which we perceive to be unworkable for our adversaries, because they also are not working for us.

So perhaps through this third storyline, we might conclude that our military policy in the Islamic world is not working, so we must change it. This then might lead to the unfolding of a chain of events in which Islamic military policy also changes, and a possible twist is that the popular support which is presently sustaining Islamic terrorism might dwindle rather than grow.

So, to recapitulate: What if terrorism ended because it stopped working, and its proponents had a change of heart, no longer desiring to live and die by the sword and the bomb, laying down their arms and returning to peaceful ways?

If this were to come to pass, would we do the same?

Similarly, if we were to do exactly the same thing first, would that change anything on the other side?

I do not mean to suggest a policy of appeasement, but I have often thought that in Afghanistan, for example, the west should be sending perhaps three reconstruction workers for every soldier. And in the West Bank, we should perhaps be assisting unemployed Palestinians to develop businesses and assisting local communities to grow gardens and to build playgrounds for their children.

That is, when we being to imagine what terrorists might do differently, it becomes increasingly possible to imagine what we ourselves might do differently.

If this sounds overly idealistic – and I expect that it does – then consider that there is a well-supported example of exactly the kind of imaginative, positive story-telling response that I am presently discussing, in the book,
Three Cups of Tea, by Greg Mortenson.

Here is one reader’s review of the book from

Secular Sainthood: One Man's Road to Saving Humanity Through Education, Jun 30 2007

By Donald Mitchell (founder of the
400 Year Project to demonstrate how to make improvements 20 times faster in Boston)

"Do you like to read heroic tales of overcoming daunting odds to achieve great things? Do you believe that we are past the age of heroes? If you answered yes to either question, you need to read Three Cups of Tea immediately! Here's the overview of this book. Greg Mortenson was a determined mountain climber on his way back from challenging K2, one of the world's highest and most dangerous peaks in the Himalayas, when he lost his way. He was exhausted from just having helped in the all-but-impossible rescue of one of his fellow climbers. As a result of the second of his mistakes in leaving the so-called trail, Mortenson found himself needing help in a Balti village in Pakistan that he had never heard of, Korphe. The villagers nursed him back to health, and Mortenson began listening to their grievances against the Pakistan government which supported an on-going conflict with India over Kashmir, but did not provide a school for their children. The grateful Mortenson promised to build them a school. Many people make such promises, but few fulfill them. Mortenson headed back to California and raised the $12,000 he estimated it would take to build the school. With the money in hand, he flew back to Pakistan and started buying supplies. Arriving at the village, his new Balti friends reminded him that there was no bridge to transport the supplies to the village. Mortenson headed back to raise the money for the bridge. After many more trials, the school was built and a teacher installed. Mortenson had found his life work. He wanted to provide schools for all of the Pakistani children who didn't get an education, especially the girls, who were more likely to stay in their villages and improve living conditions. Everything was difficult. Pakistanis didn't trust him. Muslims thought it was all a plot to convert children to Christianity. Some wanted bribes. People in the United States were generally opposed to helping Muslims unless they had been climbers in that part of the Himalayas. Mortenson got hate mail. But he persevered. Eventually, his vision expanded to helping with water projects and to providing scholarships for higher education for those who graduated from the schools he built. Conditions in Afghanistan also called out to him, and he established a similar program there. But his slim efforts were being overwhelmed by madrassas funded with Saudi money that were often used to recruit and train terrorists. His life changed forever when in the aftermath of the U.S.-led invasion of Afghanistan Parade Magazine wrote an article about his efforts to secure a lasting peace in the region by supporting moderate Muslims with educational aid. This book is powerfully coauthored by Greg Mortenson and David Oliver Relin. I seldom recall reading such an excellent story about serving humanity in a selfless secular way that isn't tied to a religious vocation. The book's title refers to a story that Mortenson learned from those who wanted him to slow down and stop acting like an American: The local people wanted to ally with him, and he was trying to run everything. Results improved when he stepped back and became an ally instead of an authoritarian leader. Here's the basis of the reference: Haji Ali, his first Balti friend, told Mortenson that he had to respect Balti ways. "The first time you share tea with a Balti, you are a stranger." "The second time you take tea, you are an honored guest." "The third time you share tea, you are family, and for our family, we are prepared to do anything, even die." May God bless the authors, their families, and those who work with Mr. Mortenson to expand the light of education to those who wish to see with it."

So perhaps terrorism ended because the terrorists decided that terrorism doesn't work, and our own leaders also decided that militarism doesn't work - whereas friendships and alliances with moderate Muslims do.

There are other possible stories, and I do not oppose any story that will bring terrorism to an end. However, given that we presently have a choice of stories, I find this one to be more warming and affirming than the story of the terrorists’ military defeat alone.

Perhaps a combination of all of the stories – including stories other than these – is what will be required. I suspect that is the most likely outcome.

I know that all of my own stories are uncertain and possibly flawed, but I like the second and third stories better than the stories which solve this problem only militarily, so I'm sticking to it for now, and I'm going to try to figure out what other non-militaristic stories might be workable in some way so as to bring a joint end to militarism and terror.

Monday, September 17, 2007

We Choose Death Because We Love Life

17 September 2007

Susan and I watched Oliver Stone’s
World Trade Center together last night.

There is much that could be said for this well-made movie, but I wish only to comment on one point.

The terrorist suicide hijackers who commandeered the passenger jetliners into the

World Trade Center chose death for themselves and their innocent victims (from 87 countries around the world) because they chose to commit their lives to the hate-based principle that their distorted version of the Islamic faith must dominate not only the Muslim world, but all of the earth.

Thus the terrorists, who proclaimed their love of death in the name of their so-called faith, demonstrated to the world their power to increase chaos and suffering not only in their immediate environment, but in environments far removed from their homelands.

What struck me in watching this movie was the stark contrast between the means by which these hate-filled individuals chose death for themselves and their victims, and the courageous rescuers at ground zero of the attack site, who also chose death on September 11, 2001 – but for a profoundly different reason.

What is particularly exemplary about the movie is that it does not deign to tell the terrorists' story at all, even indirectly, making them entirely peripheral and thus unimportant to the storyline.

The volunteers and rescuers who sacrificed their lives on that fateful day to attempt to assure the evacuation of the towers did so because they loved life so much that they were willing to die so that others might live.

In contrast, the hijackers (never portrayed by Stone) chose to die so that others might die.

What utterly irreconcilable motives.

Terrorists choose death because they hate life and love death.

Heroes choose death because they love life.

Let us never forget the right and the wrong occasions to choose death. My side is with the heroes, every time, and always against the terrorists.

Thursday, September 13, 2007

Has Anyone Heard from Stephen Roach?

13 September 2007

Stephen Roach is the famously bearish Chief Economist at Morgan Stanley. Oh, did I say "is?" Let's correct that... "was."

Stephen Roach has disappeared. Yes, just as everything is getting very lively once again for the bearish community, the best-known bear of all has just vanished from sight.

Now the trail is not completely cold.

In his last column for Morgan Stanley, on

June 15, 2007, Mr. Roach made reference to going “off to Asia,” as follows:

“The world today is obviously a very different place than it was 25 years ago. But let me assure you that back in 1982 there was no inkling of what was to come. I have been privileged to bear witness to an utterly astonishing period in the transformation of the global economy. I have relished the financial-market debate that has arisen out of this transformation. I wouldn’t trade that experience for anything. And now it’s off to Asia – the epicenter of the Next Wave. My role will change, but I can assure you the lens won’t. Stay tuned.”

Mr. Roach did not leave entirely without a trace.
Wikipedia indicates that Mr. Roach “was promoted and named Chairman of Morgan Stanley's Asia operations in April 2007.”

OK, all well and good. But didn't Mr. Roach close his
June 15 column with the phrase “stay tuned?” As Morgan Stanley’s Chief Economist, presumably Mr. Roach’s (usually bearish) ideas were considered eminently publishable for many years. He was featured on Mondays and Fridays each week, with the exception of holidays. And, I might add, always at the top of the Morgan Stanley Global Economic Forum home page.

Also, to the right of the home page, always listed until this week, was Mr. Roach’s weekly podcast. Presumably, Mr. Roach was presenting Morgan Stanley's most important investment ideas. Well, the eminently competent but much more mainstream Richard Berner (a very good man, but not a bearish critic of the global economy) is now handling the
weekly podcast. I am pleased at Mr. Berner’s promotion.

Oh, and did I mention – a search of the entire Morgan Stanley site brings up no recent news of Mr. Roach whatsoever. The search results imply that Mr. Roach is 2006’s man. No news of his promotion, no links for his loyal readers to click on to follow his current thinking and his Asian discoveries, no indication that he is involved in any present activity with the company of any kind. (Which causes me to wonder – what exactly has become of Mr. Roach’s Asian promotion? Or was that Asian exile?)

Accordingly, something in me wonders why, at this particular time, with the global economic markets in turmoil over potentially trillions of dollars in bad commercial and private debt obligations, has Wall Street’s most famous bear just been relocated to Asia – and silenced on Morgan Stanley's Global Economic Forum?

Let me work my logic through a little bit further.

Mr. Roach told us to “stay tuned.”

He served as Chief Economist at Morgan Stanley from 1991 through 2007. No small commitment of his time – or statement of trust in his leadership capacities by his employer.

Mr. Roach’s move to Asia was described as a
promotion (though no details were given), and he himself seemed quite sanguine. (Mr. Roach, in his column, didn't state what he was doing in Asia – apart from “changing his role but not his lens.”)

So if Mr. Roach had something to say – and was obviously planning on continuing to say it, and was also promoted to a more senior (and presumably more influential position), how come Mr. Roach has disappeared entirely from the Morgan Stanley Global Economic Forum home page – and is in fact no longer even listed among
Morgan Stanley's columnists, not even in the Asia section?

Mr. Roach, my radio is tuned in to the Morgan Stanley site. I'm interested in what you're learning in Asia… but I'm only getting static on my receiver.

Now I have stated several times that I am not a conspiracy theorist. But I am a psychologist (though an amateur one in the field of economics).

It is the nature of financial markets, from their inception through to the present day, to shift at just the point when sentiment is preponderantly on “one side” of the analytical fence – and the opposite of where it will move in the next – and upcoming – major (secular) trend. That is, investors are most bearish at market lows, and most bullish at market highs. That has never changed and never will.

It is no secret that there are now very few bears on Wall Street. When Susan and I visited there in May 2006, we asked, where are the statues of the bull and the bear? Well – we were enlightened by the denizens of Wall Street’s steel-framed canyons…. There is, of course, the famous statue of the
Wall Street bull. But the bear? The Wall Street bear – there is no sculpture of a bear on Wall Street.

And now it seems, with Mr. Roach’s departure, there are few if any bears remaining, such as might be present to pose for the statue of the bear, when, as it ultimately must, the market turns, and the bear again comes to dominate market sentiment.

That is, Mr. Roach’s departure, at just this juncture, might be one of those singular indicators for a street where everyone is a bull (after 26 years of bull market psychology) and virtually no one is a bear.

Does Mr. Roach’s leaving signal the end for Wall Street’s 26-year bull market?

It seems a significant tell… an important clue… it is hard not to make something of it….

Perhaps, then, this may be one for
Sherlock Holmes, for whom solving this deepening puzzle might prove merely... “elementary.”

In the meanwhile, "stay tuned" (to borrow Mr. Roach's last words) for the next bear market on Wall Street, and for the inevitable statue of the bear that must at some point be constructed on the street.

11 October 2008: As I write today, Mr. Roach remains Chairman of Morgan Stanley Asia, but we are presently witnessing his employer in a tailspin, with its shares falling by 20% per day (any mathematician can tell you that a trend such as this can't persist for long).

Mr. Roach's bearish predictions for the overextended global economy have in essence all borne fruit. Had Morgan Stanley acted on Mr. Roach's advice years ago, rather than transferring him to Asia (apparently to keep him quiet), and joining in guilelessly in the game of international leverage, I am certain that Mr. Roach's employment position would now be considerably more secure than is presently the case. Nonetheless, while Mr. Roach's cautionary essays were literally wiped clean from the Morgan Stanley website (which I have not visited since he was banned from its pages), he has been publishing fairly regularly in the world's preeminent financial newspaper (The Financial Times).

As of today, and perhaps due in some part to his employer's dire straits, Mr. Roach has reversed his historic call for moderation in a Financial Times article, and instead stated that he favours massive liquidity injections, full percentage point interest rate cuts, government-sponsored rescue initiatives, and sweeping homeowner bailouts. In truth, our world's leaders, inspired by the cult of recklessness centred in the United States, have now created a situation so dire that their continued intervention is clearly now forced. They created it, and now they have to get us out of it!

So let's proceed. Let's rescue the last surviving former investment banks and keep Mr. Roach employed. My sentiment, if Morgan Stanley survives in its already drastically altered form - which I admit is unlikely at this juncture - is that it would be great to see Mr. Roach brought back to New York, where his more conservative approach might then be sufficiently valued to promote him to a true leadership position.

Let's proclaim 2008 the Year of the Bear, and bring Mr. Roach back to New York!

Economic Developments Underscore That Secular Change Is in Process

13 September 2007

While my attention has been taken up with other matters, the financial markets have been sending out powerful signals of continued change.

The Canadian dollar is at 30-year highs (though $36 US dollar books still retail at $58 on!); oil has traded to an all-time high near $80 per barrel (as Boone Pickens said it would); the Euro has moved to new highs; the US dollar index is flirting with unexplored depths, hovering below the critical .80 level; and gold is challenging its May 2006 high, remaining stronger than commodities generally, including its sister metal silver.

Further, the fundamentals are in place for essentially more of the same.

All of this adds up to the development of a new secular trend. Dictionaries define the term “secular trend” as “a shift in normative patterns of development,” or “the smooth long-term direction of a time series.” A secular change is in essence a change in direction of a secular trend. My regular readers will know that I've been drawing attention regularly to a secular change in global economic fundamental conditions, and the implication is that new secular trends will be the result. By their nature, secular trends exist over period of decades or longer, and so their emergence is rare, and often unique within a single generation.

The US president, Mr. Bush, is in my view oblivious to the present secular changes that are afoot, and so has been caught unaware. In fact, up to the present, Mr. Bush seems to have remained uninterested in the evidence of the emergence of new secular trends, and this has been to his detriment as a leader in a time of change. The effect, in essence, has been that Mr. Bush has increasingly governed from within a bubble, and I suspect that he will now remain insulated from developments around him through to the end of his undistinguished presidency.

While the present trends appear to indicate more that we are plateauing, rather than breaking out (to new highs or lows, as the case may be), the fact that we are skirting right on the edge of the breakdown of long-established and comfortable economic realities should certainly concern us. You can't skate on the edge of a cliff indefinitely without slipping or stumbling at some point.

The consequences are immediately perceptible to anyone who understands basic household financial management (you can't keep spending indefinitely without paying the bills).

When the time for change comes, whether sooner or later, its implications will be momentous. Be prepared. The price of gold will be the telltale indicator.

As is often the case, Richard Russell has summed it up well in his recent essay.

Wednesday, September 12, 2007

What Do You Love?

12 September 2007

What do you love?

I have been thinking about this topic, and have decided to blog about it soon.

I did an inventory of the things I love, and came up with an answer to the question of what I love best.

You might be surprised at how the question was resolved.

More later.

Monday, September 10, 2007

Bin Laden's Primary Strategic Error

10 September 2007

As Osama bin Laden has re-entered the news with a fresh communication following a 3-year hiatus, and on the eve of the anniversary of the reprehensible and needless 2001 terrorist attacks, I would like to comment briefly on what I consider to be Mr. bin Laden's single and primary strategic error.

Regular readers will recall that I have attributed the rise of Islamic extremism principally to a failure of imagination on the part of primarily privileged young Islamic males in response to new opportunities against a background of cultural dislocation and rapid change.

Further, I have asserted that despite his analytical brilliance, Mr. bin Laden is more a visionary than a strategist or tactician.

It is well known that in Mr. bin Laden’s view, an attack of “100 blows” to America's underpinnings will “bring down” the United States as the world’s dominant superpower. In his view, America is corpulent, soft and weak, and thus vulnerable to collapse.

Indeed, a lengthy essay could be composed on this topic, with the intention of countering Mr. bin Laden's ideological proposition.

However, let me make only a single primary and critical observation on this eve of the September 11, 2001 tragedy, though I will couch that in a bit of context.

I will start by acknowledging that there is much correct in Mr. bin Laden’s analysis. That is, I do not wish to denigrate Mr. bin Laden's intelligence. He is a shrewd and insightful man.

In my view, the US is indeed poorly led at many levels, and as a matter of fact, the country is spinning wildly out of control in a number of spheres simultaneously. The US is in decline, and no help from Mr. bin Laden is needed to further the process.

I will assert, along with Mr. bin Laden, that President Bush has proven a weak and uninsightful leader, with only a faint grasp of global realities. Before Mr. Bush, President Clinton and his bureaucratic infrastructure also proved woefully inadequate in response to Mr. bin Laden's earlier challenges to our free way of life.

Further, American economic policy is founded on the fragile and unsustainable underpinning of artificially-manufactured economic (excess) liquidity, giving the appearance of prosperity without the necessary underpinnings to assure its long-term preservation. Every political and economic challenge is answered with the now reflexive and therefore entirely unconsidered printing of yet more unbacked Federal Reserve Notes.

Politically, the US is relying upon military technology and wasting the lives of young soldiers, when strategic repositioning and cooperative problem-solving would address the great majority of our global problems far more effectively.

However correct Mr. bin Laden may be, therefore, in assessing the economic, political and (strategic) military weakness and ineptitude of the United States, he is missing a key point.

First, and most importantly, it has been my observation as a psychologist that it is our strengths that get us in trouble, and not our weaknesses.

Of this key principle in human affairs, Mr. bin Laden demonstrates no awareness whatsoever, and I assert here that eventually, this scotoma will prove the downfall of Mr. bin Laden and his twisted ideology, whether in the near future, or in generations hence.

Yes it is true that bin Laden and his committed followers are nearly fearless in their willingness to die for the cause of the destruction of the United States and Israel (and the other shifting targets of the so-called Islamic jihad) together with the values of freedom and openness that their chosen enemies represent.

Bin Laden and his men (women are by-and-large excluded from this male-dominated Islamic “counter-crusade,” except as instrumental helpmeets), are trained in the use of weapons of destruction, including the weapons of mass destruction that most attract bin Laden (a known proponent of nuclear terror).

While we laugh, love, sleep, dream and eat, bin Laden and his cohorts are in preparation day and night to attain mastery of the technologies of destruction with which they intend to defeat us with 100 blows. (While the Mujahideen once ridiculed bin Laden and his Arab followers for their amateurish and romanticized militarism, decades of devotion have hardened and sharpened the resolve of this prominent Sunni arm of the Islamic terrorist movement.)

By many objective criteria, therefore, and I will not attempt to enumerate them, for this is not my key concern, Mr. bin Laden and his cohorts are tough, strong and ready, whereas we are unfocused, disoriented, self-absorbed and weak.

To his credit, Mr. bin Laden perceives his strength and our weakness with clear, sharp and nearly-correct vision.

Unfortunately, however, this position of demonstrable relative strength is not the strategic edge that Mr. bin Laden imagines it to be.

Indeed, the Apostle Paul, a zealous Jew and then a Christian convert, and therefore a man representing everything hated by bin Laden, revelled in his acknowledgement that “strength is made perfect in weakness" (2 Corinthians 12:7-10).

I do not mean to sermonize by citing the Apostle Paul here, but rather to choose to cite the words of an articulate proponent of a key strategic principle which is necessary to understanding the processes of life at their deeper levels.

But what exactly am I referring to?

North Americans, in our relative weakness and vulnerability, and in stark contrast to Mr. bin Laden's severity, discipline and strength, have opened our lives to possibilities that are excluded from Mr. bin Laden's austere and ascetic worldview.

Let me name only a few of these possibilities and interests – the ability of men and women to relate equally, openly and freely with each other in many ways (including consensual sexual relations between adults); the freedom of citizens to voice their conflicting thoughts openly and in the absence of fear; the separation of church and state; the tolerance of variant – even disruptive – viewpoints among the populace; and the respect for individual autonomy in the resolution of personal and private moral issues.

There are in fact many, many more of these “fruits of our openness, weakness and vulnerability,” but I must now drive to my single primary point.

Mr. bin Laden, in his strength, boasts that he and his followers love death more than we love life.

In his love of death, I cannot dispute Mr. bin Laden. He is one of the world’s supreme proponents of the worship of death.

But there is something – not only life – that we North Americans – in fact free peoples all around the world – love more than he loves death – and that is liberty.

I cannot advance beyond Patrick Henry's luminous words here. To the present day, almost every North American continues to love liberty above all things, and we will accept death, indeed, fight to the death, to preserve it.

In our weakness, we have grown to love liberty. We have discovered liberty to be entrancing, captivating, gorgeous, deeply valuable and precious. It is, if you will, “to die for.”

I remain confident that, preserving a tradition of many centuries, there remain few among us who would not rather die than surrender liberty for a narrow and restrictive lifestyle of the kind that Mr. bin Laden advances – indeed – to which he recently called us (using threatening rather than invitational language) in his September 2007 videotape release.

Yes, we are weak, scattered, and various in our pursuits and our goals, whereas Mr. bin Laden and his minions are single-minded and strong.

But, for the single reason that we love liberty more than he and his converts love death, our weakness – under pressure to survive – will surely become our strength. Liberty shall not be vanquished in the name of the cause of death, terror and destruction.

Goaded by the love of liberty, when the eventuality arises that we must necessarily become strong – when there is no other alternative which would enable the preservation of liberty – we shall prove as strong as will be required in the defense of the liberty that we love.

Indeed, we are growing stronger now, because we are an open and not a closed society – and Mr. bin Laden is growing weaker, because without strength, he cannot move forward.

The tables are turning as I speak, and in this, Mr. bin Laden shall ultimately be the loser, no matter how much he imagines that death and destruction will further his cause. In his strength, Mr. bin Laden, and those who follow him, will surely die – and nothing lasting will be created through their heedless sacrifice of the precious gift of life in the absence of liberty.

Therefore, let me close by recalling the sentiments of Patrick Henry: Give me liberty, give all of us – every one of us – liberty, and give Mr. bin Laden that which he treasures above all else, which is death.


Postnote: What then is my strategic analysis of the means of Mr. bin Laden’s undoing? I believe that Islamic extremism will encounter mounting disunity with every victory – and that rivalry among these clashing advocates of death will be their ultimate undoing. That is, it is victory that these isolative denizens of the darkness are least able to tolerate. This is the precise mechanism by which strength will prove to be the undoing of the Islamic death cults of our historic era.

Friday, September 07, 2007

Mass Murderer Invites Americans to Convert to His Religion

7 September 2007

Osama bin Laden issued an altar call in a rare and recently released al Qaeda videotape.

In a not-so-appealing appeal, Mr. bin Laden, son of the master builder of most of Saudi Arabia's modern infrastructure, offered westerners two choices, as follows:

“One is from our side, and it is to escalate the fighting and killing against you. This is our duty, and our brothers are carrying it out," bin Laden said.

"The second solution is from your side. ... I invite you to embrace Islam," he said.

One result of that, bin Laden said, would be an end to the Iraq war. He said "warmongering owners of the major corporations" would rush to appease voters who showed they are looking for an alternative, "and this alternative is Islam."

While Mr. bin Laden's message can be read at many levels, I believe that a literal reading of his statements is in fact the most meaningful, as well as the most revealing, method of interpretation.

Bin Laden's words are a source of insight into the mind of a true believer for whom the slaughter of innocents is a glorious means to the celebration of his vision of a totalitarian God of death.

Interestingly, bin Laden repeatedly derided the capitalist system, the source of his and his father’s wealth – in fact, the source of essentially all the monies funding bin Laden’s intended worldwide terrorist crusade. Were it not for capitalism, bin Laden's father would have remained a migrant Yemeni worker in Saudi Arabia, and bin Laden certainly would not have enjoyed the opulent Saudi lifestyle that was laid at his feet from birth.

Yet, in spite of his twisted mental attitude – which insists that death is life, and that terror is the most blessed avenue to glory – bin Laden is quite astute in many aspects of his worldview.

He argues convincingly that the US presence in Iraq has created a haven for his movement, and in that statement, he is exactly correct. He argues that US president Bush is as weak a strategic thinker as was former
General Secretary of the Communist Party of the Soviet Union, Leonid Brezhnev. Once again, bin Laden's analysis is perceptive and accurate.

Much in bin Laden's words reveals that he is a smarter man than his nominal adversary, US president George W. Bush. Of course, intelligence alone has few ethical implications, and bin Laden's morality is as twisted and defective as any human worldview can possibly be.

In fact, bin Laden’s present position remains strategically weak, propaganda to the contrary, and that has been a recurring theme throughout his career as a terrorist ideologue. Bin Laden is a single-minded and viciously sincere individual who in this respect is very much like his nemesis, Mr. Bush.

But, no matter how much I disagree with Mr. Bush, bin Laden’s despised enemy, it is clear to me that Mr. Bush has, at least from his own perspective, a positive program that he is seeking to promote, however ineffective his means of achieving it may be, and no matter how flawed the program itself may ultimately prove in its final execution, should that ever come to pass.

Mr. bin Laden, on the other hand, is entirely devoid of a positive program. His interest is in destruction, and destruction alone. Unfortunately for the entire narrative of human history, destruction is all too easy to accomplish. It is quickly achieved, and lasting in its impact. Building anything positive is difficult, whereas destroying any arbitrarily-chosen target is deceptively simple.

There are no brilliant destroyers – only brilliant builders. And from this elite group, bin Laden will be permanently excluded by history, regardless of who, if there are survivors, ultimately writes the historic texts.

A destructive agenda serves only the intellectually lazy and the morally destitute, and Mr. bin Laden has confined himself forever to membership in this inferior assemblage.

Mr. bin Laden has chosen the easy but unproductive path by setting himself against not only the US, but in fact against modernity itself. An anti-modernist perspective on its own merits might be a valid ethical stance. But as we all know, bin Laden's next step is to impose his view of a purified Islamic
caliphate on all those who do not share his vision of a murderous, death-loving God.

I will close by returning to a theme I have developed earlier.

In my view, the rise of Islamic extremism represents, at its heart, a shrinking back in the face of opportunity. The tragic aspect of Islamic extremism is that, by and large, for the tribal peoples of the world, there is no road back. This is not specifically because subsistence is no longer practicable In the modern world, but in fact because those who have made the transition, however partial, from subsistence to modernity, do not choose to surrender everything modern – no matter how practically or ideologically irksome and difficult – to return to the rigors of a traditional subsistence lifestyle.

Bin Laden is a prime exemplar of this principle. While the man is wholly sincere in his desire to practice austerity and extreme self-denial for the sake of his twisted God, he is in fact entirely dependent upon the modern (capitalist) financial system to fund his terrorist project, and he is also a committed consumer in the globally-inter-connected technological marketplace.

Why then, is Mr. bin Laden inviting those of us in the west to convert to his phantasy of Islam?

Having no vision of how to live freely in a world far more complex than that which his ancestors inhabited, and privileged beyond the imagining of even his grandparents’ generation, he has found his salvation in rigid adherence to a totalitarian formula. Beyond that, he has discovered ultimate meaning and vindication in seeking to impose this crippling and inhuman program on others.

What then is Mr. bin Laden’s ultimate goal? Without exaggeration, I submit that his program is to liberate us from our humanity – a burden that he himself finds unmanageable. Unable to separate himself entirely from his own human qualities, Mr. bin Laden's efforts to maim and kill his fellow humans wholesale and indiscriminately are – from his perspective – an act of supreme blessedness and liberation – and this accounts for his liberal salting of his speech with “God” language.

Mr. bin Laden is neither a strategist nor a tactician, but a visionary. His aim is to bring to nonbelievers the blessing of death and the final liberation of ultimate destruction. It is to this glorious vision that bin Laden, the visionary sheikh, has called us in his recently released video.

What if we in the west were to take up Mr. bin Laden’s altar call? If I read the man correctly, he would embrace us, but he would also press us, cult-like, into his militarized, weaponized eternally warlike way of life. It would then be our role to convert our brethren in the west to the same violent religious vision, and through the same brutal and anti-human means, to spread the religion of death to every land of the globe.

Mr. bin Laden’s brilliant mind is fascinating to plumb, but the final barrenness of his crusade of death is frightening to confront. At his core, Mr. bin Laden is an entirely empty man. There is nothing there, nothing at all. It is tragic, terrifying and revealing to contemplate that this is who he is – in the final analysis – a non-person – the embodiment of a man without any shred of remaining humanity whatsoever.

Monday, September 03, 2007

Initial Victory in Iraq Now Takes on the Flavour of Defeat

3 September 2007

Upon reflection, I note that something more needs to be said with respect to George Friedman's plan for Iraq (available by free subscription only), about which I commented on August 27, 2007.

It goes without saying that Friedman's plan would be unnecessary now if US action had not destabilized the fertile crescent of Mesopotamia in the first place.

At face value, eliminating a ruthless dictator like Saddam Hussein seems eminently justifiable on ethical grounds at many levels. I will acknowledge that this was my own first impression upon learning of Mr. Bush's surprising plan to invade Iraq in 2003. However, the aftermath of the US invasion illustrates clearly how such appearances can be deceiving.

By eliminating Hussein, the US certainly removed an aggressive presence in the region, one that had threatened Kuwait and by implication Saudi Arabia, as well as persecuting Christian and Kurdish - not to mention Shi'a - minorities and sponsoring Palestinian terror (remember, Saddam financially rewarded the families of Palestinian suicide bombers).

But in ethics, the debate is not done until arguments "on the other hand" are considered. As a Sunni, Saddam served as a counterbalance to escalating Shi'a militancy in the region (think of the Iran-Syria-Hamas alliance). As a secularist, Saddam was actually a force against Islamic extremism - which, since Saddam's demise, has become our greatest concern throughout the Islamic world, and which is now resurgent in Iraq itself. Finally, as a pariah even amongst his peers, Saddam weakened rather than strengthened any move towards Sunni extremist unity (that is, Saddam's Sunni movement was hardly compatible with the Wahhabist Sunni elements of Saudi Arabia, for example).

Thus, the short lesson is that it is best not to intervene in uncertain situations, particularly those we do not understand in cultural milieus that are utterly foreign to our own. In striking off one head of the nine-headed hydra, two more grow back to replace that one which has been severed.

It now falls to the US to do the job that Saddam had done for us with no expenditure of our own precious and finite resources. With ample assets and consolidated political power in the region, counterbalancing Shi'a belligerence was something that Saddam was naturally predisposed to do. It is easy to forget how recently the US was itself a funder and backer of Saddam in his hostilities with newly fundamentalist Iran.

For the US, the task of resisting Shi'a militancy will now be much more difficult in Saddam's absence.

Islamic extremists view the US as Israel's primary sponsor in the region. Further, every value that is championed in the west is despised by the resurgent Islamic extremist movement. Tolerance, equality, secularism, free markets, consumerism, feminism, democracy, open public debate - all are disdained as immoral and apostate by the born-again Islamists who are riding a rising star in the Middle East and South Asia.

In my view, while the US may be able to contain Iranian aggression by stationing military bases at a relatively neutral location in the Iraqi hinterland, it will be apparent to all that the US has declining influence (and credibility) in urban/national politics, let alone the domain of broader security issues, in the Middle Eastern region.

It is also obvious that any western power that maintains military bases in the Middle East in the 21st century will inevitably be targeted by extremists, who can cite our presence as proof that we are heathen and meddlesome interlopers (
Kafir or Kufr in Arabic).

Thus, while the US may be able to introduce stopgap measures in Saddam's absence, US military bases in the Arabian peninsula will remain a highly vulnerable symbol and an ongoing target for Islamic extremists, and our unenviable role as provider of police services to the region will be undertaken from a standpoint of weakness rather than strength, indicating profound loss of face in this cultural milieu - albeit that this last ditch measure now appears to constitute our only remaining option.

Would that we could only turn back the clock to the era of the lesser evil that has passed. The evil that was - in the form of Hussein - has now been replaced by the fulminant evil of a destabilized Middle Eastern region - a reality which plays into the hands of the region's most unscrupulous and dangerous agonists, for whom the present hamstrung US tactical arrangement is in fact a central strategic objective.

Note (30 August 2008): A combination of the US troop surge and disastrous tactics on the part of Iraqi insurgents seem now to have turned the tide in the Iraq War in favour of stabilization. I admit that I was unprepared for this turn of events, but it is very pleasing now to report that my earlier pessimism appears to have been incompletely founded. Thanks to Michael Yon for being one of the first to report the favourable news - independently - from the front lines!