June 1 2007

The Laurel Comment
“The connection between God and man seems not to be so much a theological question as it does a Republican obsession/possession”.
-Bill Copp

Commentary

Last month’s Republican Presidential candidate debate brought forth an unexpected but healthy dose of shock and awe to both party minions and concerned Americans of all stripes.

Common sense policy views have earned short shrift among the party’s neo con ideologues and religious fundamentalists in recent years making the views of the Texas Republican Representative and one time Libertarian Party candidate Ron Paul’s particularly refreshing. What was even better were the silly attack platitudes put forth by FOX news reporters and Paul’s fellow candidates, the most embarrassing of whom was Rudy Giuliani.

In response to Mr. Paul’s suggestion that the 9/11 attacks may have been blow back from a long history of U.S. foreign policy decisions, the erstwhile Mayor of New York and traveling empty suit proclaimed that such a view was absolute nonsense while inferring that these thoughts bordered upon sedition.

Well Rudy, what do you think caused the attacks…serendipity; or as Dr. Paul responded, why did the terrorists attack New York and not Switzerland?

The point here is that there is nothing wrong with trying to understand the enemy’s motives or by questioning certain facets of what appears to be a failed 50 year Middle East policy. Rudy’s wartime record and that of his buddy George Bush appear to consist of their standing atop a pile of rubble in New York on September 14 2001 which at the time was among the safest places in the world.

The maligned Dr. Paul on the other hand served as a flight surgeon in both the USAF and Texas National Guard.

Markets

Markets continue to be driven by excess liquidity, a dangerous but so far manageable situation that has inspired terror among many economists over the past several years.

This letter and its predecessor written by Bill Copp have noted over the years that markets, driven by momentum in their final bull stages, will always exceed expectation by degrees both unknown and unpredictable. We are, with the aid of enormous China growth, at such a juncture. The concept of fair value is a relative term that applies only in periods of stable monetary policy and modest demand. At this time and place companies and large private investment pools are using the massive liquidity surge to purchase hard assets with diminishing dollars. This has produced a drive to convert ever more worthless US dollars into commodities or company held assets, thereby pushing world equity markets beyond the norms of technical or fundamental analysis. In the words of Marc Faber of the DoomGloomBoom report the Dow Jones could rise to 25,000 but if it did, gold might well trade at $25,000 per ounce. Liquidity, it is said, will drive markets higher…until it doesn’t.

Remarkably

The first test of Quebec’s minority government was resolved in favour of the people as the PQ decided that an early election was not in their interest. It would appear that wiser heads within the separatiste party prevailed over their more aggressive members to allow Mario Dumont and the ADQ the time to self destruct through public exposure. Before federalists get too excited however, the rule of 15 should be remembered. That’s the one by which self flagellating Quebecois enjoy submitting themselves to a referendum every 15 years. So mark 2010 on your calendar for the next attempt at destabilizing Quebec’s economy and social structures.

Meanwhile the Iraq beat goes on without cessation or moderation as politicians in both parties stubbornly refuse to face reality. The last 50 years of failed Middle Eastern policy may be explained by two factors; the battle over who controls the oil and the unresolved Palestinian diaspora.

Troubling as these issues may have been in the past what has occurred since 9/11 has exacerbated these problems to a degree of difficulty far beyond that known previously.

Two direct results of the Bush response to 9/11 have been the dramatic increase in the price of oil (aided by China demand) and a new diaspora of Iraqis, one that far exceeds the original number of displaced Palestinians.

Oil has always been a valuable commodity, one over which many wars have been waged. As that value increases it is only natural to assume that powerful interests will accelerate their quest for control over the commodity. These price hikes have been great for producing countries such as Canada and Russia while becoming negative for all in the Middle East but the very wealthy “royalty. As for the Iraqi refugees, think for a moment of what 2 million homeless people newly arrived in Canada or even the United States would mean, then apply that the thought to much smaller countries such as Syria and Jordan. Further to this Bush policy inspired disaster are the additional 2 million Iraqis who are refugees within their own borders.

Unresolved humanitarian crises constitute the material from which future folly is wrought and disaster is the fruit of shame.

Geoffrey Ryan
June 1 2007