Great question! I'm glad you asked. Let's try and put it into perspective:

 

For better or for worse, a nation is defined by it's military and it's ability to control same. Take for example Russia. Even when Russia was in the process of ceasing to be the Soviet Union, there was never any question that it's military was not only very powerful, but well controlled. The risk of a "rogue general" breaking off and starting his own empire was relatively small. Sure, some equipment "went missing", padding some senior officers' swiss bank accounts, but control over the military machine was solidly located in Moscow.

 

What about Mexico? Surely they are in full control of their own military, right? It doesn't look like it.

 

 

There are 2 possibilities, and neither of them are good:

 

1) They were not active members of the Mexican army. If this is the case, it's further evidence that the drug cartels have sufficient access to the Mexican army to be able to recruit members of the army away, and equip them with army equipment.

 

2) They really are active members of the Mexican army, illegally engaging in operations on foriegn soil. This is either at the unofficial behest of the Mexican government, or they are acting alone.

 

At this point, it appears as though the Mexican government has completely lost control over it's military. They are engaging in illegal cross-border assasinations. Whether or not they are on active duty is moot.

All the extra traffic lately is killing my photo galleries! Sorry for the lame performance, everyone.

Here's a picture of a bread line 2500 people long. Try and guess where it is:

 

 

Zimbabwe? Turkey? Argentina?

 

Wrong, wrong, wrong.

 

This was taken in Milwaukee yesterday, as people lined up for free FEMA food vouchers. Apparently, there was a little rain or something in the area and knocked out power for a few hours. Yup, a power failure. A few hours without electricity, and these people are without food.

Not any more, you're not.

 

Ever heard of the "Heroes Earning Assistance and Relief Tax (HEART) Act"? God, I love those acronyms! Well apparently, there's a provision in the act that says "if you expatriate, you owe Uncle Sam some money".

 

Read about it here. You can also find the text of the law here.

 

My personal favorite provision of the bill is this one, found in Section 877(A), Subsection 'g':

 

(B) EXCEPTIONS- An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if--

(i) the individual--

    (I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country

I wonder which country a citizen might hold a dual citizenship in. I mean, the list of countries who are entitled to that right is so long...

Yesterday was a red-letter day in Quebec.

 

No, there was no miracle alternative energy breakthrough. And sadly no, Lucien Bouchard did not die of rectal cancer. But it was a great day nonetheless. Let me start at the beginning:

 

On March 5, 2007, Basil Parasiris of Lavalle, Quebec was awoken at 5 a.m. by the sound of his wife and two children screaming. When he opened his eyes, he noticed the hulking shadow of a man standing in the doorway to his bedroom. Normally, when someone's home is invaded in the pre-dawn hours, the residents are stricken with panic. Often, fear and hesitation will result in the victim's death. But not this time. Parasiris should be applauded for his composure. Instead of panicking, he calmly reached to his bedside table, picked up his loaded weapon, and fired at least twice at the intruder, fatally wounding him. By every measure, this man is a hero for defending his family. There's just one small problem:

 

The intruder was a police officer.

 

As it turns out, the police were attempting to execute a search warrant. It appears the police felt Parasiris was involved with drugs. Unfortunately, this does not appear to be the case. The police lacked evidence to execute a "dynamic entry" search. In fact, there does not appear to be any evidence that Parasiris was involved in anything more severe than improper storage of a firearm. Of course, that didn't stop the officers from returning fire...120 times.

 

 

Anyway, fast forward to yesterday. Parasiris was on trial for the first-degree murder of a police officer as well as 8 weapons charges, resisting arrest and attempted murder (he wounded another officer). Well it turns out that the jury weren't overly impressed with the home invasion, either. While Parasiris will probably have to serve time for the weapons violations, he was aquitted of murder and attempted murder.

 

Now, before anyone goes climbing up my anus about cheering for a cop killer, that is not my intention here. If the police had actual evidence, my position might be a little different. My concern here is the seemingly non-existent standards for issuing these "dynamic entry" searches. The way things are these days, if someone sees you doing anything as innocent as buying a bottle of cough syrup, you too can have the goon squad busting down your front door. The police are given far too much latitude, and then when they do screw up (as they did in this case) and get themselves killed, they want to blame the victim. This is a problem.

 

The moral of the story? Next time, try knocking.

AOL Time Warner, that is.

 

You see, in between the hustle and bustle of chaos in Iraq, the "will they, won't they" dance with Iran, the fuel strikes all over Europe and the outright hunger riots everywhere else in the world, everyone has taken thier eyes off of a little landlocked dirtpile in the middle of Eurasia - Afghanistan.

 

It's really a shame too, because it's been a very eventful week. But rather than gorge ourselves on the real carnage right away, let's get warmed up with an aparatif first. Check this out. Oh, and big shock here, you won't find it on CNN:

 

 

Apparently, 2 dozen guys on motorcycles and 2 suicide bombers rolled up to one of the most heavily fortified prisons in all of Afghanistan, (right in the heart of the capital city, no less) and busted out 80% of the population - nearly 800 people, including some 350 members of the Taliban. Apparently, the only people who didn't escape were people who were either injured in the attack, or were too old to run. Who the hell is in charge of security over there, the Keystone Kops?

 

As if that wasn't bad enough, I present you with an appitizer:

 

 

It looks like the last horse, the RAND corporation, has finally crossed the finish line. And just think - these clowns hoover up millions of dollars per year at the federal trough to poop out reports like this, which basically say what we I have been saying for years...FOR FREE. Check out this little snippet:

 

Wow, it sure is a good thing those folks at RAND are on top of these things, or we might have a problem... Specifically, we might have a problem digesting the main course:

Pakistan: Pro-Taliban chief ready to fight Americans

That's right. Powerful tribal elders like Baitullah Mehsud are threatening to use nuclear weapons on UN forces in Afghanistan. This comes at a time when yet another of Musharraf's political enemies are literally calling for his head. And this isn't even some radical from outside Islamabad like Mehsud, either. Nawaz Sharif is a member of Musharraf's own party.

As predicted right here on this blog, Afghanistan (and more specifically, it's relationship with Pakistan) are the sleeper hit of the summer. It's like a dystopian "American Pie". Oh, and speaking of pie, here's your dessert:

Pakistan: Taliban Claims to Have Foiled NATO Attack

"Pakistani security forces were under siege and were almost forced to evacuate the military post by the NATO troops, when we opened fire on them from multiple positions," Mujahid told AKI. "Our attack was so unexpected for NATO that they had to retreat."

Yes you read that right. Our enemies are stepping up to defend our allies from attacks perpetrated by us.

Bon apitite.

Just when you thought things couldn't get any worse, someone comes along and drops this cinder block on your head:

 

 

Anyone who actually knows what to look for in the newspapers would have seen this coming for quite some time. It seems that Indonesia has finally been booted out of OPEC.

 

"Why?" you might ask?

 

Well you see, in order to be a member of the Organization of Petroleum Exporting Countries, you have to be an EXPORTER. And since Indonesia's oil numbers inverted last year, they no longer meet that criteria. Indonesia is Export Land.

Since a picture is worth a thousand words, I added a new photo album. This should be good for a small novel.

In the world of oil, the top 5 producers are (in order) Saudi Arabia, Russia, America, Iran and Mexico. Now, America's production peaked some time in the 1970's. Mexico peaked about 2 years ago, to catastrophic effect. That just leaves Saudi Arabia, Russia and Iran.

 

 

"Given the historic record price of oil last week touching near $117 and the admission by Russia that its own oil fields have peaked, the decision by the Saudi's and other Middle East producers to essentially cap production at its current level for future generations should have been important news. As the authors point out, it went largely ignored by the media. Here is what a number of oil industry experts think."

 

Bad news right there, kiddies. Did you notice anything else in that little passage?

 

 

"We now see production peaked last year," Mikhail Kroutikhin, editor in chief of the Russian Petroleum Investor told the BBC.  "I believe the decline will continue for quite a number of years."

 

So we can cross Russia off that list as well. So that just leaves Iran. Funny how everything keeps coming back to Iran, isn't it?

Talk about being in the wrong place at the wrong time.

 

 

Now, before we cast judgement on these "corrupt tin-horn dictator" Mexicans, let's step back for a second and look at the situation. This guy is chief of police in a border town. His options were never all that good, but now is really a bad time to have his job. Here are his choices:

 

1) He could have refused to protect the drug cartels. Considering the life expectancy of your average honest cop in Mexico right now, that's a life-choice.

2) He could cooperate with the cartels, risking being caught, tried and probably executed by the government.

3) He could have quit, putting himself and his family at the tender mercies of the tortilla lines.

4) He could have fled the country.

 

Not a great set of options, if you ask me.

 

But this is just a symptom of the larger problem. The Mexican government can't pay the bills any more. 17,000 soldiers deserted last year, probably taking jobs with the cartels just so they can feed their families. The cartels are actively recruiting active and ex-military and police with promises of food. They actually have the gall to put up flyers and posters around the city, complete with contact numbers for recruiters. The situation is completely out of control.

 

And not a single peep in the mainstream media.

Haiti is only one example. There are food riots in Mexico, Burkina Faso, Cameroon, Ivory Coast, Mauritania, Morocco, Egypt, and Senegal. India is threatening to put food hoarders in jail. The World Food Program is facing a $500 million shortfall this year. Countries all over the world who aren't yet facing famine are curtailing food exports. In Thailand, farmers are forced to sleep in their fields because thieves are stealing rice right out of the patties.

 

And why is this happening?

 

Well the core problem is obviously over-population. But in this case, the proximate cause is the diversion of farmland to producing ethanol. In the United States alone (I use this example because they are so very proud of their "green" program) diverts 25%* of it's farmland to ethanol production. 3.7 billion bushels in 2007! 

I'm actually running out of ways to say "Guess what? I'm right again." Check it out:

 

 

Granted, it's not the Treasury department, but we're talking about a very significant move. This amounts to approximately 1 year's worth of gold trades from one source. It won't be the last such trade, either. A lot of financial institutions will have to mirror this move, or end up as the next Bear Stearns.

 

The crash is almost upon us, friends.

Gold closed at $1004/oz today. Looks like I was right again. And lookie here! Bear Stearns, the world's 7th largest investment bank, vanished. Bought up by JP Morgan Chase (on a Sunday, no less. Certainly can't let the common investor get a chance to get out) for what amounts to the cost of the building Bear Stearns was housed in. Paid for (naturally) by a loan from the Federal Reserve. Translation: paid for by everyone who holds $USD.

 

To put things into perspective, consider these facts:

 

-The minimum buy in for Bear Stearns stock was 5,000 shares

-Bear Stearns closed at $27/share on Friday

-The JP Morgan offer is $2/share

 

That's a $25 loss per share, or a minimum loss of $25 * 5000 = $125,000. And that's if you happened to be lucky enough to buy on Friday. I can think of one guy who lost over a billion!

 

To add insult to injury, it looks like Lehman Brothers, MF Global and Washington Mutual are next.

 

Well, it happened today, and it happened even faster than I would have predicted.

 

 

 

As I write this, gold is trading at about $998 in overseas markets and at this rate, will likely close above $1000/oz either Friday or Monday.

 

I know many of my readers find all of this financial stuff to be dull and dry, but it's an important piece of the puzzle that should not be ignored. This is big, bad and ugly. Everyone who holds US dollar positions are getting the hell out of Dodge while they can. How ugly is it? Well it's so bad that even Carlyle Capital is taking huge losses. You folks remember the Carlyle Group, right? Well if even the war profiteers are losing their shirts, it can't be good.

 

What's next?

 

My guess, is that the US treasury is soon going to have a firesale. They are going to dump the last of their gold reserves on the open market "as a profit-taking measure". Of course, anyone who understands how fiat economies work will see this for what it really is - a last-ditch effort to pay off some of their debts before the economy collapses.

 

But I digress. What this selloff will do is temporarily suppress gold prices. How far depends on exactly how much gold is still sitting in the vaults. (My guess is "far less than we think"). We might see prices temporarily fall as low as $650/oz, some time in Q2. However, (and I can't stress this enough) the correction will be temporary. The real players out there, the ones who already own 80% of the gold in the world, will step into the feeding frenzy created by the correction and scoop up every last ounce (paid for in $USD, of course). Naturally, seeing the Buffets and Forbeses of the world picking out the gold fillings from the festering corpse that is the US economy will bid the price way up. Billions of extra greenbacks being dumped into the global market will bid the price up even more. but neither of these things alone will be the final nail in the coffin. The final nail in the coffin will come when the common investor discovers what the "gold carry trade" is - all of that paper gold doesn't really exist, and the smart investors took physical posession long ago.

 

I foresee $2500/oz before Q3 2009, at which point it will stop being priced in $USD, because $USD will be completely worthless.

My readers may remember a couple of years ago (Almost 2 years to the day, actually) I published a blog entry which described what might happen in the event of a major economic catastrophe. You may find the entry here.

 

Well I think the current clusterfuck going on right now (ie the collapse of the US dollar and housing markets at the same time) would qualify as an economic catastrophe, and lo and behold! This article appears on Yahoo.  Here's an excerpt from the article:

 

People thought I was...a little off my rocker when i described a world in which roving packs of feral housepets silently drift through the abandoned suburbs and pick at the bones of our prosperity. So I ask you "What happens to these forclosure pets when the humane society loses it's funding and closes it's doors forever?" They are already losing a hold on the situation, and the crisis has only just begun. I give it a year tops, before we start getting flooded with reports of children being mauled by "stray dogs".

 

When will people listen to me? When?

Granted, I've been given to hyperbole in the past, but there really is no other way to describe the markets today.

 

After last night's emergency phone meeting at the fed, they slashed interest rate by 75 basis points. A full week ahead of schedule. They may do another cut at the meeting, it's hard to say. Cuts this deep are unprecidented since 1991. But what's not hard to say is the result - an image of rats on a sinking ship comes to mind.

 

The idea behind the rate cut is thus: "If we cut rates, people will spend money and that will make the economy move again." The problem with this line of thinking, is that people would have to borrow money for that to happen. And as we all know, everyone's credit cards are already maxed out. They could cut the rate to 0.0% and still nobody would borrow. If the US consumer is the engine that drives the global economy, then what we have here is vapour lock.

 

If you aren't long on gold yet, do so now.

 

"But gold is already topped out. It has nowhere to go but down." Thus spake the conventional wisdom, anyway. Need I remind you that the conventional wisdom also thought mortgage backed securities were a good idea? Go ask those brain trusts at Merril Lynch and Citigroup how that all worked out for them. That's if you can find anyone in their offices who hasn't jumped out of their windows yet.

 

Mark my words, Gold will see $1000 before it sees $500.

 

 

This is from the 2002 album "The View from Battery Park", by Shadow Government.