December

The Laurel Comment

“We are in a race between cooperation and catastrophe, and the threat is outrunning our response”.
Sam Nunn

Commentary

The global warming issue has once again moved to center stage this month as representatives of 190 nations along with a goodly number of NGO’s initiated a new round of subject discussions in Bali Indonesia, the framework of which, when decided shall replace the Kyoto Protocol which expires in 2012. Once again it is America that has so far chosen to avoid taking a leadership position in this global movement and with the signing on of Australia’s new Prime Minister Rudd, it becomes the only non-aligned nation.

Although Kyoto, and what will soon be known as the “Bali” something, are not, nor have they been a panacea to global warming they do encourage both a constructive effort and a forum for discussion of the views, both pro and con the growth of carbon emissions.

Even though there remains much to be learned in this area, the debate continues to rage over what is bogus science and what the real threat to climate change may be. The question to be begged here concerns the pursuit of knowledge and not the ideological rejection of ideas that don’t fit the anti-progressive mold. Yes there have been questionable claims and hyperbole on either side of the issue but the activation of international caring and commitment should never be diminished or counted out. It is also kind of nice to see some of the world’s youth inspired by something more substantial than i-pods and x-boxes, even if there is little they can contribute to the general solution other than enthusiasm.

The problem, there always is one, that I see with this exciting venture is its relative importance to what may be a greater environmental problem…the nuclear bomb.

For most of the last 60 years the nuclear club had five members; the United States, the former Soviet Union, China, Britain and France; and amazingly with all of the fear and fuss of the Cold War, humanity managed to survive.

However, since the fall of the Berlin Wall and the end of the Gorbachev era, the “peace bonus” as it was once called has been squandered and the age of proliferation has arrived as India, Pakistan and North Korea now boast such capability. The view that nations such as these latter three hold little international threat due to their inconsequential delivery systems and fear of massive reprisal is a questionable one if we take the role of fanaticism and loose nukes into account.

Difficult as it is to fathom, the question of “loose nukes” and unprotected plutonium first surfaced during the breakup of the Soviet Union when in the pre-Putin, pre-oil price surge days, everything was for sale. The answer to this incredibly dire threat was the 1992 passing of the Sam Nunn – Richard Lugar legislation known as the Cooperative Threat Reduction Program. This important and sensible program helped to deactivate or destroy some 7000 nuclear warheads and nearly 700 ICBM’s among other things. Similar to most such intelligent initiatives it was and remains under-funded having spent some 10 billion dollars during its long lifespan, or the equivalent of 3 weeks in Iraq.

According to Michael Crowley of the “New Republic” Sam Nunn the former Democrat Senator from Georgia and co-creator of the “loose nukes” program has since enlisted the support of Ted Turner and Warren Buffett to fund his Washington-based foundation the “Nuclear Threat Initiative” or N.T.I. circa 2001. Please Google.

Alright, now let’s go back to that first number of 6000 nuclear warheads destroyed and understand for a moment that 3 times that many remain, as well as the plutonium to potentially create yet another 40,000 new ones.

The Bush Administration has now spent over 600 billion dollars and incurred future costs of another trillion fighting a war of choice in Iraq that was ostensibly begun in the pursuit of nuclear weaponry. Furthermore, these actions have further empowered the non-Arab Shiite community of Iran and the Sunni Pakistanis. The former, it has recently been revealed, possess no nuclear program despite Bush bombast, while the latter has been an unstable nuclear state for a decade.

The bottom line here is that the world is now relying upon a privately funded (or underfunded) 250 million dollar organization to seek out and destroy real threats while the administration spends trillions chasing neo-con phantoms as it simultaneously courts the newly emerged and potentially combative powers of Pakistan and India.

Does this policy make any sense at all…to anyone?

Markets

Markets successfully tested their August lows in late November before staging a massive 2 day rally that served to place the entire precept of financial rationality in doubt.

We have often noted in this space that markets have a proven tendency to overshoot fair value at both tops and bottoms and that such volatility usually expends itself in the form of a burst bubble or a throw in the towel bottom. It is our view that neither condition has yet been reached.

In previous letters we have described the growth of sovereign funds and their increasing investment importance. China, Russia, India and even Brazil have joined OPEC nations as major players in this realm of super wealth. The amount of money controlled by these “sovereign” nations along with that of the private hedge funds has proven to be enough to not only move financial and commodity markets but to control them. Aided and abetted by the U.S. Federal Reserve, these behemoths have taken a world awash in paper currency created by loose credit and the world’s “out of control” super power and turned its economic system into “casino world”.

Super wealth, not immigration or free trade, is in the process of destroying middle class America and with it, the stability that both the nation and the world require for their survival. Western Europe and our beloved Canada appear to stand alone as bastions of sanity in this nether world of uncaring greed.

Buy gold, it will do well no matter what the market or economic outcome of the coming year.

Remarkably

As has been the case throughout history, booms end in busts and the world goes on to bigger and better cycles. The final result of this the greatest period of world growth is of course yet unknown, and only a reasonable prognostication based on previous performance can be made.

The foundations for a better world are laid through cooperation and diplomacy, functions that are most successfully realized through strong and informed leadership among the major powers and through the growth and improvement of international institutions. Let us hope that such leadership will become the norm rather than the exception in future years as we cannot dodge the bullet of stupidity forever.

Note: Will Stephane Dion’s next dog be named Bali Hai?