Forget Global Warming… It’s Global Warning!

by Adam Crum

Considering these downright frightening economic times‚ the last thing most of us want to think about are the global challenges facing us as well. Yet‚ no matter how overwhelming the times are‚ it doesn’t help to live in denial. And‚ while predicting the future is risky at best‚ if we don’t attempt to ascertain at least some of the trends for the future in light of the past and the present‚ there is no doubt we will be caught entirely off guard…not just somewhat off guard. Somewhat is certainly better than entirely. Still‚ there’s no getting around it‚ as Margo Channing so aptly put it in All About Eve‚ “Fasten your seatbelts. It’s going to be a bumpy ride.”

World shift towards multi-polar system with a less dominant United States

Like it or not‚ according to the report Global Trends 2025 generated by The National Intelligence Council (NIC)‚ “the world is shifting towards a multi-polar system with a less dominant United States and a more powerful China and India.” This shift includes an “historic” transfer of wealth from west to east.

The National Intelligence Council analysis concluded that while the U.S. will remain the most powerful country in 2025‚ it “would be ever more constricted by scientific advances in other countries‚ the expansion of irregular

warfare by state and non-state actors‚ the proliferation of long-range precision weapons and the growing frequency of cyber warfare. The multiplicity of influential actors and distrust of vast power means less room for the U.S. to call the shots without the support of strong partnerships.” It would appear that this scenario has already begun to unfold.

The NIC analysis warned “such multi-polar systems have historically been more unstable than bipolar or unipolar ones.” It added that while there were “likely to be strategic rivalries over trade‚ investment‚ technological innovation and acquisition‚ it could not rule out a 19th century-like scenario of arms races‚ territorial expansion and military rivalries.”

The Middle East…the gift that keeps on giving

The United States is already burdened with Afghanistan and Iraq. Pakistan‚ with an estimated 100-200 nuclear weapons (no one really knows for sure)‚ has been pushed to the brink and Gaza has erupted yet again after Israel decided enough was enough. Muslim extremists continue to want our western way of life eradicated as Iran moves ever closer towards military nuclear capability.

• The U.S. and NATO troops in Afghanistan can probably prevent the Taliban from taking the cities‚ but to accomplish more‚ Pakistan must deny the Taliban sanctuary and cut its supply lines. Pakistan‚ however‚ has moved many of its troops to the border of Kashmir because of the Mumbai incident. In addition‚ the United States must develop effective relationships with anti-Taliban tribal groups and that involves Iran. And‚ it must convince these tribal groups that it will remain in Afghanistan indefinitely‚ which will require the support of the American public and the new administration. If you remember‚ 120‚000 or so Russian troops were unable to bring Afghanistan under control. In all reality then‚ while more troops will make the job easier‚ it is extremely unlikely that 60‚000 troops or even more will get the U.S. even close to ending the mission. Afghanistan is a great deal more complex than Iraq due to the Taliban’s low opinion of U.S. capabilities‚ a more challenging terrain and lack of Pakistani cooperation.
• Unlike North Korea‚ the Iranians continue a very public nuclear program despite threats from other countries. While some believe Iran does not possess the complex technical knowledge to explode a nuclear device‚ the country is enriching uranium‚ which ultimately can be used for that purpose. Of course‚ Iran’s real objective is Iraq‚ and its nuclear program is a bargaining chip. The seemingly insurmountable challenge is that the United States needs Iran to commit to a neutral Iraq for it to withdraw even some of its forces. More significantly‚ the U.S. cannot afford for Iran to enter into an agreement with the new‚ assertive Russia‚ although there are those who believe that Russia and Iran have already formed an alliance and have entered into some sort of clandestine agreement. Frankly‚ that almost seems a fait accompli.
• Then there is the complicated situation between the United States and Turkey. A long-time U.S. ally‚ Turkey has participated in the occupation of Iraq‚ although not necessarily enthusiastically. Turkey’s military is substantial and its influence is expanding. So it is not difficult to understand why Turkey is concerned about being caught between Russia and the United States‚ a position that will be difficult to avoid. Turkey will be critical as the U.S. deals with the Islamic world and the Russians.
• Finally‚ there is the issue of oil. As this article is being written‚ “storage tanks are filling up onshore‚ so private and national oil companies‚ refiners and trading companies are storing another 80 million barrels aboard 35 supertankers and a handful of smaller tankers‚ the most in 20 years‚” according to Frontline Ltd.‚ the world’s largest owner of supertankers. Iran alone is reportedly storing crude oil in as many as 15 tankers believing that higher prices will prop up its economy‚ which is dependent on oil exports. While Goldman Sachs has predicted the slumping global economy will soon drive the price of oil down to $30‚ a top Kuwaiti oil official predicted recently that big production cuts by the Organization of the Petroleum Exporting Countries would soon push oil prices back up. Considering the sharp swings in recent days‚ both will be right. Analysts foresee prices staying volatile. Just get ready for the higher price swings.

Ladies and gentlemen‚ meet the “new-old” Russian Empire…

While Islamic terrorism continues to be a threat‚ the newly-evolving Russian Empire strikes an ominous chord as it reasserts its influence. Russian Prime Minister Vladimir Putin now calls the collapse of the Soviet Union a geopolitical catastrophe and has made it clear that he intends to reassert his influence in the former Soviet Union.

• In addition to what you already know about the invasion of Georgia‚ Israel halted weapon sales to Georgia the week before the war as the Russians met with Syrian President Bashar al Assad letting the Israelis know that Moscow would support Syria if Israel supported Georgia.
• According to Bill Wilson in The Daily Jot‚ “there are plenty of protests around the world against the Israeli defense of its citizens from terrorists in Gaza‚ but relatively nothing has been said about Russia’s move to cut heating and cooking gas supplies to 20% of Europe during the coldest part of winter.” The annual haggling over the gas that passes through a pipeline in Ukraine carries 80% of European gas from Russia. Shutdowns on the part of Russia affect a whole host of countries. Austria‚ for example‚ is getting only 10% of its usual supply. Other countries are using their energy stockpiles and encouraging conservation practices. Three years ago Russia interpreted Ukraine’s turning to the West as unwelcome meddling in its own sphere of influence.
• Apparently‚ in the court of world opinion‚ according to Wilson‚ “it is more inhumane to snuff out terrorists that kill innocent civilians and use their families as shields against attack then it is to purposely try to freeze people in mid-winter to gain a financial advantage…” In fact‚ those AK-47s and Qassum rocket materials used by the terrorists must originate somewhere. Wilson also suggests that “perhaps Russia is the one that the UN Security Council should be dealing with for world unrest.”
• Then there’s Russia’s $5.43 billion loan to Iceland. The combination of Iceland’s current economic collapse and geographical location offers Russia an opportunity to simultaneously make friends with Reykjavik and challenge the West. If nothing else‚ the United States may be sorry that it abandoned its military base in Iceland.
• On top of that‚ Prime Minister Putin has vowed to make relations with Latin America a top foreign policy priority‚ a pledge backed by arms sales to Venezuelan President Hugo Chavez and the first Russian naval deployment to the Caribbean since the Cold War. This would appear to be a pointed response to what Putin perceives as U.S. encroachment near the borders of his own country.

It is fairly obvious where this is leading. You don’t need a BRIC (the new acronym for up and comers Brazil‚ Russia‚ India and China) wall to fall on you.

South of the border down Mexico (and Central America) way

The situation in Mexico continues to deteriorate and it is impossible to understand why our government seems to be in denial. In fact‚ Mexico is one of two countries that “bear consideration for a rapid and sudden collapse‚” according to a report by the U.S. Joint Forces Command on worldwide security threats. The U.S. Joint Forces Command‚ based in Norfolk‚ Virginia‚ is one of the Defense Department’s combat commands comprised of members of the different branches of the military‚ active and reserves‚ as well as civilian and contract employees.

The command’s “Joint Operating Environment (JOE 2008)” report‚ which contains projections of global threats and potential wars‚ states that “two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.” The report goes on to say that the Mexican “government‚ its politicians‚ police and judicial infrastructure are all under sustained assault…by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone.”

The report is one in a series focusing on Mexico’s internal security problems‚ mostly stemming from drug violence and drug corruption. The Department of Homeland Security and former U.S. drug czar Barry McCaffrey have also issued similar alerts about Mexico.

China…now the world’s third largest economy

Surpassing Germany‚ China became the world’s third-largest economy after China’s National Bureau of Statistics revised growth figures for 2007’s GDP for the second time‚ reporting their economy expanded by 13 per cent‚ a dramatic increase over the 11.9 per cent growth rate that had been originally reported. (Some suspect the Chinese exaggerate growth when conditions are tough‚ underestimating it when the economy is booming. And‚ it is important to note that Germany’s economy has also slowed sharply.)

Despite rapid growth and hundreds of millions of people lifted out of poverty‚ China remains relatively poor. In the World Bank’s rankings of GDP per capita for 2007‚ using purchasing power parity‚ China was 122nd at $5‚370‚ behind Egypt‚ El Salvador and Armenia. While this is partially attributable to a rapidly aging population and the costs of environmental damage‚ with only the U.S. and Japan larger than China‚ the new figures underscore the dramatic transformation the Chinese economy has undergone during the past 30 years since Mao-era controls were eased and in spite of the present global financial crisis. “It is symbolically significant that China is now bigger than Germany and it will not be too long before its economy overtakes [that of] Japan‚” said Mark Williams at Capital Economics in London. This only reinforces the prediction that China and other large emerging economies will be given and/or take a bigger role in financial decision-making process globally. The report by the U.S. Joint Forces Command states that China has already increased its influence in places where oil fields are present.

Contrary to the perceptions of many‚ by the way‚ while China is certainly an economic power‚ it is not a global military power. Its army‚ though substantial‚ is essentially confined by geography and its navy is not an effective force‚ although China‚ along with India‚ is taking steps to rectify that. Of course‚ there will continue to be economic and political issues with China‚ but in the end‚ China will continue to sell to the United States‚ and the United States will continue to buy.

Have we covered it all? Hardly!

If nothing else‚ we have seen what a volatile and challenging place the world is right now and will be in the future. Of course‚ it always has been that way. There is nothing new under the sun. Just check the history books.

With the mountain of new debt‚ the continuation of the credit crisis‚ involvement in additional conflicts around the globe (a conceivable scenario after reviewing the geopolitical situation)‚ the possibility of radicals testing a new president‚ the dollar going even lower when the U.S. cannot meet its obligations‚ sliding equity values‚ rising mortgage failures‚ the threat of “inflation holocaust” when the truth sets in that our debt has ballooned to Twilight Zone proportions‚ entitlements sending deficits higher and higher‚ outsourcing and the growing economic power of Asia…the future for the U.S. looks grim indeed‚ especially if we are not growing our economy and creating jobs.

The bottom line for the astute investor is that gold should be one of the foundational elements of any portfolio to reduce overall risk and create the ultimate hedge against inflation and economic hard times. You will never see the government having to bail out gold. And‚ while past performance is no guarantee of future results‚ it is well documented that gold in its various forms has generated strong long-term increases in value.

The case for gold coins is stronger than ever. Precious metals and commodities specialist Jim Sinclair agrees that the dollar will decline since it is no different than any other commodity. As the dollar falls‚ gold will skyrocket. If you do nothing else‚ Monaco Rare Coins encourages you to make sure your portfolio is appropriately diversified…and Monaco welcomes the opportunity to provide you with the assistance you may need.