Tuesday, September 9, 2008

The 300 Pound Gorillas

There are a couple of huge gorillas loose in the current environment, threatening to do serious damage to global financial markets. (No, I don't think we have seen the worst yet...).
  1. US - Russia relationships are deteriorating fast. The Georgia flash point did not come as a surprise to anyone who has been following energy/geopolitical developments. Simply put, the West's reliance on imported oil and gas is exacting a heavy price, with a resurgent Russia demanding to reclaim its global player role.
  2. The Fannie and Freddie nationalization is the clearest sign yet that the global financial construct, based as it is upon huge piles of debt, is bankrupt and that we haven't yet figured out what to replace it with. Those who should know better are still beating a dead horse .

37 comments:

t said...

Yea! He's back.

Thai said...

What does Russia want in Georgia?

What is the US trying to contain?

It certainly isn't communism, nor does it seem to be democracy, nor (at least to me) does it really seeem to be oil (or pipelines)?

Might it all just be about pride on BOTH sides?

Thai said...

Oh,

welcome back :-)

Anonymous said...

Good to have you back. I hope that you'll have a bit more to say on the consequences of this bail-out.

BTW, I think that you may have underestimated the size of gorillas. According to wikipedia:

"Adult males range in height from 165-175 cm (5 ft 5 in – 5 ft 9 in), and in weight from 140–204.5 kg (310–450 lb). Adult females are often half the size of a silverback, averaging about 140 cm (4 ft 7 in) tall and 100 kg (220 lb). Occasionally, a silverback of over 183 cm (6 ft) and 225 kg (500 lb) has been recorded in the wild."


So a 300lb gorilla would be a small problem ;-)


Peter.

Anonymous said...

hello have a good day (and others ) from France .

Spyware said...

Hel baby! Great to have you back. Look after yourself now, ya hear--

yoyomo said...

Those who should know better are still beating a dead horse .

Appropriately vague observation, guess the fog in the crystal ball hasn't sufficiently lifted yet.

Pride? Good Lord Thai, pay attention to what's going on the world. The question is not what Russia wants but what it doesn't want and that is to be surrounded by an American missile shield that renders it vulnerable to a first strike w/o the ability to respond. Energy is a huge component of the conflict but it is subsidiary to the goal of full spectrum dominance and unchallenged hegemony by the US. At that point the US can begin to demand (and if necessary, violently extract) tribute. If you think that sounds stupid, remember the first Gulf War when BushSr conned everybody at the UN to vote for war giving them the impression that it would be strictly an Anglo/American affair not involving them but as soon as he secured their votes he billed them ~$50B, several billion more than the operation cost.

Edwardo said...

Thai, you might want to read the writings of William Engdahl on the subject of U.S. and Russian relations.
http://321energy.com/editorials/engdahl/engdahl090708.html

I'm not saying his word is The Word, but he's erudite and interesting.

Camabron said...

Georgia was Russia's payback for Kosovo plain and simple. The US supported Kosovo's independence from a Russian ally (Serbia) against Russian desires, so now Russia pays the favour back supporting S. Ossettia's and Abkhazia's away from a US ally (Georgia).

François said...

As one said during Internet times, "it's has been years". ... Years since your last post, hel.

Welcome back and kind regards for your support to the sane few on this crazy planet.

This Fannie stuff is a corner stone IMHO. Treasuries will never taste the same afterwards.

Arnould said...
This comment has been removed by the author.
Marcus said...

What Yoyomo said plus:


"Those who should know better are still beating a dead horse."


This is pushing the problem down the road however they can. The emperor has his legacy to continue.

You are not cynical enough for the new Rovian Bush world. They will mug and rob you and blame it on libruls--and it works.

I said it before and you said it was too massive but they will try to put all of this on the taxpayers.

Arnould said...

.
Welcome back!

As you were away, a few days ago I bookmarked this site which contains some interesting texts even if they are very much oriented.

This one states that a very big western armada, with 5 US aircraft carriers (and 1 french submarine!!!), is cruising right now in the Persian Gulf/Red Sea ready to start new hostilities soon.

And this one argues that in our times wars happen where it is good for the dollar because the dollar wants to be the only currency in use for oil trading.

Apparently Iraq had begun to sell its oil in other currencies than the dollar. Now Iran may want to do the same, as well as perhaps Russia..
.

dmsteidl said...

First and foremost, welcome back Hell.

As others have stated, I hope you will post your thoughts about the Freddie/Fannie bailout.

Anonymous said...

welcome back! I have been a lurker for a long time now, and didnt realize how much I would miss you till you started fading out! I love this site..

- Lone Gunman

yoyomo said...

Arnould,
Thanks for the Rockwell link on the $. The build up of military power is for the day when the $ is no longer willingly accepted as payment for resources except at the point of a gun, Iraq was only an example to any considering independence from US domination.

Consider that the navy is reviving its Caribbean fleet for the first time since WW2; I wonder if any U-boats have been spotted in the vicinity lately? Absent that the natives must be getting uppity and must be put back in their place before they start to get the wrong ideas about who really owns them.

Dave said...

Welcome back Hel. I hope you will continue your blogging. Your thoughts have been missed. They don't all need to be weighty, intense treatise of your own origin.

For example, your thoughts about Rogoff's recent comments, http://www.guardian.co.uk/commentisfree/2008/sep/08/creditcrunch.economics
would still be appreciated...

Thai said...

Thanks Edwardo. I read your Engdahl link: very interesting.

Though it only further reinforces my opinion that this is all about pride on BOTH sides of the conflict... But don't get me wrong either, pride can be VERY dangerous (If Niall Ferguson is to be believed, it was one of the primary proximate causes of the first World War).

And 'yes' yoyomo, I do know about our intention to place a missle shield in Georgia, and Russia's desire to avoid this.

Why do we continue to tolerate generals fighting their last battle?

That whole 'black swan-problem with inductive reasoning thing' (really just the fundamental problem of information itself) which Taleb warned us about really can be quite dangerous.

Avl Guy said...

What of Hell's other major point: "the global financial construct, based as it is upon huge piles of debt, is bankrupt and that we haven't yet figured out what to replace it with."
Touché'.
A nation whose GDP is 70% driven by consumer spending sees its workhorse consumers choking on debt. Merrill Lynch's Chief N.A. Economist,'Rosey' says to the UK Telegraph: “US consumers need to ramp their savings rate up to 8% AND improve their balance sheets by $2 trillion.” before the economy can recover.
And pigs will sprout wings...nice pretty fluffy ones, not scaley ones.
And so the debt-fueled models were good for only 25 years? What can the 'free market' captains-of-bailouts from the socialist USA pull out of their arses as a replacement engine for the next 25 years?

Edwardo said...

Some words on the after effects of the Phony and Fraudie, as some have dubbed the two failed GSEs, bailout. Karl Denninger, who ideologically I have little in common with, has some very useful things to say on the effects of the government's latest move. I suggest everyone read today's (Tuesday's) ticker so you can begin to get your heads around just how bad the government has screwed up.

I'd say an all out stock market crash into the autumn, think '29 and '87 but likely exponentially worse is a certainty. They may hold it up until after OPEX, but whether they can or not, it's going to fall harder than Joe Frazier at the hands of George Foreman.

But as hideous as the action in the share market may be, the bond market may be even uglier when the government is forced to out and out monetize to deal with all the pending bank and investment house collapses. Lehman is next up, and WaMu isn't far behind. The dollar may be rising now as cash is hoarded out of borrower's fear that they may not, as Ty Andros puts it, "be able to roll", but if
the government literally starts doing the money print boogie to cope with cascading failures, the recent spike up in the Greenback may look like a blip on the radar as the dollar goes Weimar in record time.

I imagine that if the Russians and Chinese suspect that we are about to do something militarily, they will fight back, not just with arms, but with economic warfare like we have never seen. It's what I would do. I would take the pain, and dump the dollar in anvil laden bags from the tallest building I could find, turning us into Argentina overnight. They'd have to send the entire military home just to quell the riots.

Anonymous said...

Isreal was going to launch the bombing of Iran from Georgia over the Caspian and into Tehran.

Russia put a stop to it.

Thanks Putin.

Never thought I would thank Putin in my life and never imaged a russian president acting more sane then the US president.

Anonymous said...

Looks like Mccain-Palin is going to win.
4 more years of republican mismanagement.
4 more years of misery to the world.

You Yanks asked for it.

Anonymous said...

If these are 300 pound gorillas, what's the 800 pound gorilla look like?

Anonymous said...

Welcome back!!

Greenie said...

Happy new year, Hell !! (assuming that your next post will come after new year :) ).

Any thoughts on falling oil price? Are we still tracking peak oil? Any thought on this peak commodity chart that turned wrong way from what the hacks were expecting?

http://tonto.eia.doe.gov/energy_in_brief/images/charts/Nat-Gas-Production.jpg

Spyware said...

Anon:
"Looks like Mccain-Palin is going to win. 4 more years of republican mismanagement.4 more years of misery to the world.dYou Yanks asked for it."

I wouldn't bet on it. The Yanks are dumb, but they're not that dumb.
__________________
Edwardo:

"I imagine that if the Russians and Chinese suspect that we are about to do something militarily, they will fight back, not just with arms, but with economic warfare like we have never seen. It's what I would do. I would take the pain, and dump the dollar in anvil laden bags from the tallest building I could find, turning us into Argentina overnight. They'd have to send the entire military home just to quell the riots."

I would bet on it--big time.

dearieme said...

"What is the US trying to contain?" A return to normal international political life, after the twentieth century's socialist aberrations.

Drake said...

Finally back, we were getting worried. You were missed.

@Edwardo; about the financial warfare; exactly! The Russians have a lovely opportunity to pay back the time presiding the collapse of the communism, and the China is, and always has been, planning things with a 100 year horizon at least.

Janne said...

Many have already said it - but: Welcome back!

I have read every post on your blog since I found it back in April 2007. Back then I printed all your posts back to the very first one. After that I checked the RSS everyday.

Want you to know that mainly because of your writings (after checking some facts like CDS, CDO and other things I, and back then, most of the world had never heard of) I sold all my BRIC and other stock funds in my retirement plans and changed to money market funds (and made sure they only invested in government papers).

In my stock market account I sold most of my stocks during summer and in November I started to buy bear ETF:s.

I don't expect you to give me the first bull signals - but I sure would like to keep tracking your views on current events.

Anyway - many thanks for invaluable insights into things main stream financial media never would have provided me - until way to late!

Regards,
Reader from Sweden

lijialefw said...
This comment has been removed by a blog administrator.
wkwillis said...

yoyoma
We need ammonium nitrate fertiliser from Trinidad and Tobago far more than we need oil from the Persian Gulf. No fertiliser, no food.
You would be surprised at how many people think we grow our own corn instead of just sharecropping for Russian, Trinidadian, and Saudi fertiliser plants.

Anonymous said...

Intrade shows McCain 50, Obama 49.

Looks like Obama have 2 months to find a cure for stupidity before this blog is renamed to "Perma Debt" come Nov.

yoyomo said...

WkWillis,
Interesting article about phosphorus depletion and the devastation to agriculture this will cause:

www.energybulletin.net/node/46386

lalitha said...

We have to know what is happening around us. Russia and us relationship is not good.
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