Sunday, 1 September 2013

Pentagon Can’t Afford Syria Operation; Must Seek Additional Funds

“The U.S. military, struggling after defense cuts of tens of billions of dollars, will be unable to pay for attacks on Syria from current operating funds and must seek additional money from Congress, according to congressional aides.”

Fiscal madness, denial and the markets

This morning the Wall Street Journal ran a piece explaining that the Obama administration and Congressional Republicans are so far apart on the debt ceiling that Republicans see meeting with the White House on the matter an exercise in futility. So nothing is happening to move the sticks on the debt ceiling. Meanwhile, the Treasury Department has stopped the clock on the accumulation of federal debt through some machination no one fully understands, except possibly Jack Lew. As a result, for the past ninety days the official national debt has remained in neutral even as multi-billions have been borrowed by the Federal government. 

There is an interesting section in Dan Brown’s new book, Inferno, about denial — how much of it is simply a human default response to situations the mind cannot process. It cites a study at an Ivy League university which revealed that even highly intelligent internet users would quickly click off a depressing subject and go to something trivial rather than face something disagreeable. It sounds like the federal government — top to bottom — is in denial on the growing national debt and the debt ceiling confrontation coming up in October. Everyone wishes the problem would just go away; but it isn’t going to just go away.

That brings us back to the ever-present market preoccupation with tapering. Can the Fed really consider the shock of an actual start to the tapering process when the rest of Washington can’t get off the dime on how the national debt is going to be controlled? Picture for a moment the sheer madness of the Fed cutting back its purchases of U.S. government debt at a time when Congress is demonstrating its inability to deal with its spending addiction — and at a time when it appears to be ramping up for another costly Mid-East war. Any guesses as to how the bond market might react? Any guesses where private investors might decide to seek refuge? The last time the pols came to this impasse the United States lost its AAA bond rating; the stock market dropped about 15%; and gold went from roughly $1500 per ounce to $1900 per ounce — a record high — in two short months. Here’s what gold’s rise at the time looks like on a chart. . . . . . . . . . . . . . MK

India may be prepping gold for a bigger role

India may be considering a bigger role for gold.

The country is thinking about a plan to allow banks to buy gold GCZ3 -1.18% from the public and the nation’s Trade Minister Anand Sharma has said that India’s central bank should consider monetizing gold holdings, according to recent reports from Reuters.

The plan would allow banks to buy gold directly from the public, “cutting out the premiums that jewelers and pawn shops charge sellers,”
“We see this plan as a thinly-disguised plan to give the banking sector and government access to gold for the nation’s benefit,” he said.

…“While the word monetizing gold can be seen as another word for confiscating, it may not be initially seen as an outright confiscation of gold,” said Phillips. “But once in the government’s (through the banks) hands, it is a small move to hold it for as long as they want. ‘A rose by any other name smells as sweet’! I see it as confiscation but not one that makes owning gold illegal.”

Kerry Outlines Evidence of Chemical Attack by Syria

Secretary of State John Kerry declared on Friday there was “clear” and “compelling” evidence that the government of President Bashar al-Assad used poison gas against its citizens, as the Obama administration released an unclassified intelligence report on the use of chemical weapons in Syria.

“Read for yourselves the evidence from thousands of sources,” Mr. Kerry said in aggressively laying out the administration’s case for strikes on Syria. “This is the indiscriminate, inconceivable horror of chemical weapons. This is what Assad did to his own people.”

… Mr. Kerry acknowledged that the public in the United States was weary of war, saying that he, too, was tired after the years of military conflicts in Afghanistan and Iraq. But he said that should not be used as an excuse not to act.

“Fatigue does not absolve us of our responsibility,” he declared. “Just longing for peace does not necessarily bring it about.”