Rising Star Writings

The Fix is in …

Video here discussing the CFTC and broader markets.

Anyone that still believes that the White House is not beholden to Wall Street interest is not paying attention.

POP goes the bubbles?

The discussions in Jackson Hole are continuing and while the results are not yet being published or sent out publicly there are disturbing elements arising from those sources who have spoken about the events taking place in Wyoming.

The issues in the Middle East continue to dominate the stability of the world now, Iran has re-emerged onto the discussion larger than ever before.

Libyan forces continue their actions, with NATO support … yet the NATO nations are tipping over financially and may not be able to keep their forces in the field, certainly not with any ground forces of appreciable size.  Something that taking a 2 million inhabitant city would require.

All of these items and events point to MORE VOLATILITY in the marketplace as the uncertainty or CHAOS grow.

Who will be popping the bubbles?  Could it be a malevolent spirit, known to delight in such CHAOS?

Are the horsemen far behind?

Arab Spring or ‘wishful thinking’? ~ STRATFOR

By George Friedman

On Dec. 17, 2010, Mohammed Bouazizi, a Tunisian street vendor, set himself on fire in a show of public protest. The self-immolation triggered unrest in Tunisia and ultimately the resignation of President Zine El Abidine Ben Ali. This was followed by unrest in a number of Arab countries that the global press dubbed the “Arab Spring.” The standard analysis of the situation was that oppressive regimes had been sitting on a volcano of liberal democratic discontent. The belief was that the Arab Spring was a political uprising by masses demanding liberal democratic reform and that this uprising, supported by Western democracies, would generate sweeping political change across the Arab world.

It is now more than six months since the beginning of the Arab Spring, and it is important to take stock of what has happened and what has not happened. The reasons for the widespread unrest go beyond the Arab world, although, obviously, the dynamics within that world are important in and of themselves. However, the belief in an Arab Spring helped shape European and American policies in the region and the world. If the assumptions of this past January and February prove insufficient or even wrong, then there will be regional and global consequences.

It is important to begin with the fact that, to this point, no regime has fallen in the Arab world. Individuals such as Tunisia’s Ben Ali and Egyptian President Hosni Mubarak have been replaced, but the regimes themselves, which represent the manner of governing, have not changed. Some regimes have come under massive attack but have not fallen, as in Libya, Syria and Yemen. And in many countries, such as Jordan, the unrest never amounted to a real threat to the regime. The kind of rapid and complete collapse that we saw in Eastern Europe in 1989 with the fall of communism has not happened in the Arab world. More important, what regime changes that might come of the civil wars in Libya and Syria are not going to be clearly victorious, those that are victorious are not going to be clearly democratic and those that are democratic are obviously not going to be liberal. The myth that beneath every Libyan is a French republican yearning to breathe free is dubious in the extreme.

Consider the case of Mubarak, who was forced from office and put on trial, although the regime — a mode of governing in which the military remains the main arbiter of the state — remains intact. Egypt is now governed by a committee of military commanders, all of whom had been part of Mubarak’s regime. Elections are coming, but the opposition is deeply divided between Islamists and secularists, and personalities and ideological divisions in turn divide these factions. The probability of a powerful democratic president emerging who controls the sprawling ministries in Cairo and the country’s security and military apparatus is slim, and the Egyptian military junta is already acting to suppress elements that are too radical and too unpredictable.

The important question is why these regimes have been able to survive. In a genuine revolution, the regime loses power. The anti-communist forces overwhelmed the Polish Communist government in 1989 regardless of the divisions within the opposition. The sitting regimes were not in a position to determine their own futures, let alone the futures of their countries. There was a transition, but they were not in control of it. Similarly, in 1979, when the Shah of Iran was overthrown, his military and security people were not the ones managing the transition after the shah left the country. They were the ones on trial. There was unrest in Egypt in January and February 2011, but the idea that it amounted to a revolution flew in the face of the reality of Egypt and of what revolutions actually look like.

Shaping the Western Narrative

There were three principles shaping the Western narrative on the Arab Spring. The first was that these regimes were overwhelmingly unpopular. The second was that the opposition represented the overwhelming will of the people. The third was that once the unrest began it was unstoppable. Add to all that the notion that social media facilitated the organization of the revolution and the belief that the region was in the midst of a radical transformation can be easily understood.

It was in Libya that these propositions created the most serious problems. Tunisia and Egypt were not subject to very much outside influence. Libya became the focus of a significant Western intervention. Moammar Gadhafi had ruled Libya for nearly 42 years. He could not have ruled for that long without substantial support. That didn’t mean he had majority support (or that he didn’t). It simply meant that the survival of his regime did not interest only a handful of people, but that a large network of Libyans benefitted from Gadhafi’s rule and stood to lose a great deal if he fell. They were prepared to fight for his regime.

The opposition to him was real, but its claim to represent the overwhelming majority of Libyan people was dubious. Many of the leaders had been part of the Gadhafi regime, and it is doubtful they were selected for their government posts because of their personal popularity. Others were members of tribes that were opposed to the regime but not particularly friendly to each other. Under the mythology of the Arab Spring, the eastern coalition represented the united rage of the Libyan people against Gadhafi’s oppression. Gadhafi was weak and isolated, wielding an army that was still loyal and could inflict terrible vengeance on the Libyan people. But if the West would demonstrate its ability to prevent slaughter in Benghazi, the military would realize its own isolation and defect to the rebels.

It didn’t happen that way. First, Gadhafi’s regime was more than simply a handful of people terrorizing the population. It was certainly a brutal regime, but it hadn’t survived for 42 years on that alone. It had substantial support in the military and among key tribes. Whether this was a majority is as unclear as whether the eastern coalition was a majority. But it was certainly a substantial group with much to fight for and a great deal to lose if the regime fell. So, contrary to expectations in the West, the regime has continued to fight and to retain the loyalty of a substantial number of people. Meanwhile, the eastern alliance has continued to survive under the protection of NATO but has been unable to form a united government or topple Gadhafi. Most important, it has always been a dubious assertion that what would emerge if the rebels did defeat Gadhafi would be a democratic regime, let alone a liberal democracy, and this has become increasingly obvious as the war has worn on. Whoever would replace Gadhafi would not clearly be superior to him, which is saying quite a lot.

A very similar process is taking place in Syria. There, the minority Alawite government of the Assad family, which has ruled Syria for 41 years, is facing an uprising led by the majority Sunnis, or at least some segment of them. Again, the assumption was that the regime was illegitimate and therefore weak and would crumble in the face of concerted resistance. That assumption proved wrong. The Assad regime may be running a minority government, but it has substantial support from a military of mostly Alawite officers leading a largely Sunni conscript force. The military has benefited tremendously from the Assad regime — indeed, it brought it to power. The one thing the Assads were careful to do was to make it beneficial to the military and security services to remain loyal to the regime. So far, they largely have. The danger for the regime looking forward is if the growing strain on the Alawite-dominated army divisions leads to fissures within the Alawite community and in the army itself, raising the potential for a military coup.

In part, these Arab leaders have nowhere to go. The senior leadership of the military could be tried in The Hague, and the lower ranks are subject to rebel retribution. There is a rule in war, which is that you should always give your enemy room to retreat. The Assad supporters, like the Gadhafi supporters and the supporters of Yemen’s Ali Abdullah Saleh, have no room to retreat. So they have fought on for months, and it is not clear they will capitulate anytime soon.

Foreign governments, from the United States to Turkey, have expressed their exasperation with the Syrians, but none has seriously contemplated an intervention. There are two reasons for this: First, following the Libyan intervention, everyone became more wary of assuming the weakness of Arab regimes, and no one wants a showdown on the ground with a desperate Syrian military. Second, observers have become cautious in asserting that widespread unrest constitutes a popular revolution or that the revolutionaries necessarily want to create a liberal democracy. The Sunnis in Syria might well want a democracy, but they might well be interested in creating a Sunni “Islamic” state. Knowing that it is important to be careful what you wish for, everyone seems to be issuing stern warnings to Damascus without doing very much.

Syria is an interesting case because it is, perhaps, the only current issue that Iran and Israel agree on. Iran is deeply invested in the Assad regime and wary of increased Sunni power in Syria. Israel is just as deeply concerned that the Assad regime — a known and manageable devil from the Israeli point of view — could collapse and be replaced by a Sunni Islamist regime with close ties to Hamas and what is left of al Qaeda in the Levant. These are fears, not certainties, but the fears make for interesting bedfellows.

Geopolitical Significance

Since late 2010, we have seen three kinds of uprisings in the Arab world. The first are those that merely brushed by the regime. The second are those that created a change in leaders but not in the way the country was run. The third are those that turned into civil wars, such as Libya and Yemen. There is also the interesting case of Bahrain, where the regime was saved by the intervention of Saudi Arabia, but while the rising there conformed to the basic model of the Arab Spring — failed hopes — it lies in a different class, caught between Saudi and Iranian power.

The three examples do not mean that there is not discontent in the Arab world or a desire for change. They do not mean that change will not happen, or that discontent will not assume sufficient force to overthrow regimes. They also do not mean that whatever emerges will be liberal democratic states pleasing to Americans and Europeans.

This becomes the geopolitically significant part of the story. Among Europeans and within the U.S. State Department and the Obama administration is an ideology of human rights — the idea that one of the major commitments of Western countries should be supporting the creation of regimes resembling their own. This assumes all the things that we have discussed: that there is powerful discontent in oppressive states, that the discontent is powerful enough to overthrow regimes, and that what follows would be the sort of regime that the West would be able to work with.

The issue isn’t whether human rights are important but whether supporting unrest in repressive states automatically strengthens human rights. An important example was Iran in 1979, when opposition to the oppression of the shah’s government was perceived as a movement toward liberal democracy. What followed might have been democratic but it was hardly liberal. Indeed, many of the myths of the Arab Spring had their roots both in the 1979 Iranian Revolution and later in Iran’s 2009 Green Movement, when a narrow uprising readily crushed by the regime was widely viewed as massive opposition and widespread support for liberalization.

The world is more complicated and more varied than that. As we saw in the Arab Spring, oppressive regimes are not always faced with massed risings, and unrest does not necessarily mean mass support. Nor are the alternatives necessarily more palatable than what went before or the displeasure of the West nearly as fearsome as Westerners like to think. Libya is a case study on the consequences of starting a war with insufficient force. Syria makes a strong case on the limits of soft power. Egypt and Tunisia represent a textbook lesson on the importance of not deluding yourself.

The pursuit of human rights requires ruthless clarity as to whom you are supporting and what their chances are. It is important to remember that it is not Western supporters of human rights who suffer the consequences of failed risings, civil wars or revolutionary regimes that are committed to causes other than liberal democracy.

The misreading of the situation can also create unnecessary geopolitical problems. The fall of the Egyptian regime, unlikely as it is at this point, would be just as likely to generate an Islamist regime as a liberal democracy. The survival of the Assad regime could lead to more slaughter than we have seen and a much firmer base for Iran. No regimes have fallen since the Arab Spring, but when they do it will be important to remember 1979 and the conviction that nothing could be worse than the shah’s Iran, morally or geopolitically. Neither was quite the case.

This doesn’t mean that there aren’t people in the Arab world who want liberal democracy. It simply means that they are not powerful enough to topple regimes or maintain control of new regimes even if they did succeed. The Arab Spring is, above all, a primer on wishful thinking in the face of the real world.

Re-Examining the Arab Spring is republished with permission of STRATFOR.

$1764 for Gold is the Parabolic number

Great Interview from GoldMoney Foundation.

Gold Foundation Interview

If you are seeking bullion I have solutions for you.

Contact me directly at: info@rsreal.com

GOLD GOING Ballistic?

   By Andrea Hotter 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)–JP Morgan (JPM) has become the latest bank to up its forecast for spot gold prices, hiking its estimates by a whopping 39% and predicting the precious metal to reach at least $2,500 a troy ounce by the end of the year.

This is almost $800/oz higher than current levels, which represent an all-time high.

The U.S. bank had previously expected spot gold to be at $1,800/oz by year-end.

The move will come amid very high volatility, the bank’s Colin Fenton said, and is being driven by “rising probability of a reflaring of financial crisis.”

Earlier Monday, Goldman Sachs (GS) raised its forecast for gold, saying its economists now place a one-in-three chance of a U.S. recession that would most likely occur within the next six months. But its prices are significantly lower than JP Morgan’s, with Goldman predicting a spot prices of $1,645/oz in three months and $1,730/oz by six months.

Gold soared higher overnight and has become an investor favorite amid deteriorating economic conditions in the euro zone and the U.S.

Friday’s downgrade of the U.S. credit rating from AAA to AA-plus by ratings agency S&P triggered the most recent strength in gold, which leapt over $70 from Friday’s low to peak at $1,715.29/oz earlier Monday.

Morgan Stanley, ANZ, UBS, MF Global and Barclays Capital last week all upgraded their gold price forecasts, while producers like Barrick Gold (ABX), AngloGold Ashanti (AU) and Randgold Resources (GOLD) have been making bullish statement in support of further rises in recent days.

But JP Morgan said it isn’t just gold that will benefit from the financial malaise. Commodities geared toward Asia, investment, and inflation will outperform commodities anchored more to the growth prospects and local supply chains of the U.S.

“The bullish basket includes Brent crude oil, gasoil, gold, raw sugar, copper, corn, and wheat,” said JP Morgan’s Fenton. “The bearish basket includes WTI crude oil, RBOB gasoline, aluminum, zinc, and North American natural gas.”

He singled out sugar, noting that dollar weakness and rising inflation expectations open the upside for raw sugar prices to surge far higher than would otherwise be likely, perhaps doubling or more in a spike. But he cautioned that “sugar rallies tend to be brief, violent, and difficult to time.”

Where do we go from here?

“After a six-year run when the world saw the Dow Jones Industrial Average increase in value fivefold, prices peaked at 381.17 on September 3, 1929.^[10] The market then fell sharply for a month, losing 17% of its value on the initial leg down.”

Since then we have seen another Kondratieff Wave Full Season of Spring, Summer and Autumn, Winter is now here.

Read more in my current newsletter about this downdraft and where the forces of change are really coming from.

THIS DOWN LEG is going to be deeper than anyone can currently imagine, unless we really make some drastic changes.

ENJOY THE RIDE!

As I write the DJI drops through 11,000 having lost more than 4% today. The roller coaster ride has begun its wild sessions … Asian markets started down over the weekend and it is my view that there will be an acceleration DOWN on all indexes this week. The economic war drums are beating louder now, loud enough that we could all hear the sound of the US credit rating dropping one notch to AA+, with only the one agency S&P.  All this while S&P leadership is facing federal indictment charges from New York District Attorneys.  What are we likely to see were other ‘real’ crimes and criminals to start facing the music ‘from the people’? Pentagon and other military advisers will speak of asymmetrical lines of battle … could it be that a new ‘line’ has been arranged?