Monday, March 28, 2011

NATO Take Over in Libya? Déjà Vu in Syria, the FED to lose an Inflation Hawk in October – Will the Dollar still exist?

3/28/2011 Portland, Oregon – Pop in your mints…
Something big is definitely afoot.  There is just too much chaos erupting at once for there to be a logical explanation.  Maybe the Mayans where right to stop their calendar at 2012, if the current pace of change continues, the world we grew up in will be no more, and that may not be such a bad thing.
Change is good, it is healthy, but it is rarely pleasant.  Just ask Mubarak, Ghadaffi, and now al-Assad.  Yes, like a broken record, it appears that Syria is about to join the list of Middle Eastern  "Nations" (we use the imperialist term loosely) to experience a regime change.  Apparently the protestors want something known as "Democracy," which we loosely define here at The Mint as the ability to vote entitlements for oneself at the expense of others.  Somebody should warn the Syrians to keep the receipt along with their change.
Whether they want Democracy or not, the mere mention should be enough reason for the US to entangle itself militarily at some point.  Now that the President of the Americans can unilaterally decide to engage the nation in open ended warfare (let's call the US role in Libya what it really is), we should probably expect more of it.
But doesn't the President of the US need authorization from the People to engage in such nonsense?  Four short years ago, two congressmen with aspirations of occupying the nation's Executive role seemed to think so:

How things change once one is in power!
President Obama seemed to forget that He is not in Illinois, and the US Military is not the Chicago Police Department.  To launch a military strike, there is a certain protocol to be followed.  He, um, didn't follow it. 
The situation in Libya gets more complex by the day.  Perhaps realizing that He "forgot" to ask for permission to launch military exercises against a country that does not pose a direct threat to anyone but themselves, the President was all to eager to pass off the hot potato to NATO.  Once NATO is in command, the US is simply "assisting its allies."  Problem solved, right?  Not so fast.  Turkey is a member of NATO, and they are not exactly on board with the mission.  Ditto for Germany, who called back two of their naval vessels from a NATO exercise in the Mediterranean.
So the potato is now stuck being passed from the US, to France, to Britain, and so on until they can get the other members to play along.  Will Obama's oversight be the end of NATO?  With so much changing, anything is possible.
Against this backdrop, Thomas Hoenig, one of the few FED Heads who seemed genuinely concerned about inflation and protecting the value of the dollar, will be retiring in October.  Apparently the man has hit the FED's mandatory retirement age.  Who will replace him?  It will probably be another stuffy academic like William Dudley, who was deservedly heckled at a recent speech in Queens for citing the price of the IPad2 as proof that there was no inflation.
With another defender of the dollar out of the picture, one has to wonder if the dollar as we know it will even exist in October.  Like a man wearing his bathrobe to work on a Casual Friday*, the FED has lost all restraint.  As we have said in this space before, the FED has no choice but to mercilessly devalue the dollar and hope for the best.  In our Casual Friday metaphor, the dollar is moments away from being fired as the world's reserve currency.  If there was ever a time or a reason to sell dollars and buy, well, anything tangible, it is upon us.
As if to underscore our point, Silver, one of our favorite tangible things, is up 12.5% in the past month alone.
March Madness, Indeed!
Stay Fresh!
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*(for non-Americans, this is a term which refers to a company relaxing its normal dress code on Fridays so that employees can wear more comfortable attire, i.e. not three piece suits.)
Key Indicators for Friday, March 28th, 2011

*See FED Perceived Economic Effect Rate Chart at bottom of blog.  This rate is the FED Target rate with a 39 month lag, representing the time it takes for the FED Target rate changes to affect the real economy.  This is a 39 months head start that the FED member banks have on the rest of us on using the new money that is created.