The USS Harry Truman carrier group, along with an Israeli corvette, has arrived off of Iran's shores. The Saudi's have granted the Israelis overfly permission, and rumors (likely true) that Israeli and/or US forces are in both Georgia and Azerbaidjan have ratched up the war rumors that Israel and/or the US is readying an attack on Iran's nuclear sites. But my impression here is that war is unlikely. First, Obama is a peace loving liberal intent on peace, healthcare and crushing taxes for all. Second, he undoubtedly understands that this is a war that could get very messy in a large number of places (neighboring Iraq and Afghanistan) and ways we won't like. Third, wars are expensive propositions.. both in terms of outright military expenditures as well as in the rise in crude prices this would set off.. and remember that $140 crude was the final nail in the coffin in the 2008 financial crisis. War with the US is not necessarily in Iran's interest either.. primarily because Iran itself is likely to wind up with it's infrastructure in rubble and would certainly lose anyways. Even Ahma-need-a-jihad isn't quite that suicidal. Now we get to the tricky part here.. war, especially if the US is involved, actually is in the interests of Israel.. and possibly Saudi Arabia. For Israel, it eliminates the only nuclear threat to their existance.. and any effort expended would be very much well worth the effort. For the Al Saud monarchy, the same thing.. elimination of a nuclear armed jihadi state next door. For them to give permission for the hated Zionists to fly over and attack a fellow Muslim nation is really quite a big step. There also remains the threat of an "accidental" war.. when large, hostile fleets and air armadas warily circle and test each other, one mistake could lead to.. but it's my impression that all of this is simply a show of the flag intented to intimidate Iran rather than attack. So far, it does'nt appear to be working.. nor will it. They will continue on their nuclear program until it is blown up, and I seriously doubt Obama has the stomach for it, despite Netanyahu's attempts to draw him in.
Today Paul "prints-a-lot" Krugman of the NY Times came out with an article declaring the beginning of the Third Depression because governments worldwide are refusing to print and/or borrow their way out of their crushing debts. He specifically hit at the Republicans who nixed an attempt to yet again extend unemployment benefits. Zerohedge today came out and said that this will result in the immediate termination of benefits for 1.3 million people, sending the unemployment rate up past 10.5% again as these workers will now be job seekers instead of those counted as "discouraged workers". The unemployment rate as it's calculated now is a joke. The old measurement, called the U6 measurement, is much more accurate.. and currently stands at around 18%. Nonetheless, Krugman's hypothesis isn't inaccurate.. what he (and Bernanke) fear is a deflationary depression, and several examples can be found of late.. the ugliest one is in Latvia, where deflation has ravaged the nation and a full blown Depression is in play. But his answer.. print, borrow, spend.. is exactly how Greece, Ireland and the rest of southern Europe came to collapse. The overall truth here is that these nations, and in most industrialized nations including the US, are vastly overindebted. There are but three ways out: deflationary depression, inflationary depression, or default. None of these ways will avoid a depression; it's only the flavor it takes that differs. Make no mistake.. this is coming to our shores. But before it arrives here, Europe and likely Japan will taste the misery of Depression. Between 1935 and 1980, the Debt-GDP ratio of the US was a steady 150%.. that is to say our total debts equaled one and a half year's total production. Today the figure stands at about 375%.. and this does not include the promises we've made to our seniors for Social Security and Medicare. Then we come to ObamaCare, which I predict will never ever actually happen.
July 1st is going to be an interesting day in Europe.. it's on that day that the Euro Central Bank ends their "Long Term Refinancing Operation", or LTRO. It has allowed EU banks to borrow from the ECB, thus providing liquidity to these banks. It was a €442 billion operation.. ie.. very large. Unfortunately for some.. ie Spanish, Greek and Portugese banks.. it's end comes at a time when pretty much no other banks are willing to lend to them. As losses pile up and liquidity drys up, these banks could be in real trouble, leading to yet more problems in the Eurozone and a further rise in the LIBOR (this is the interest rate that banks charge each other for loans; the higher the rate, the less they trust each other. At some point they simply stop answering each other's calls.. this is what nearly crashed our own system in Sept '08). Here's a link to ZH's article on this dangerous trend: http://www.zerohedge.com/article/t-minus-7-days-libor-induced-liquidity-crunch