Rekindling The Flames

Keep an eye on these old foes.
"Executives and traders in both countries have said that Chinese customs agents have blocked rare-earth exports since early last week, after a diplomatic dispute over Japan’s detention of a captain of a Chinese fishing trawler in waters claimed by both countries. Japan released the captain Friday."
Source: New York Times


"Rekindle, reignite...it's all the same thing. My prediction on this one was that when the tide lowers, it's easy to pick a fight with an old foe. It usually takes a small spark."
Random Roving, March 8, 2009

Working It Through

"It's a total and complete disaster and the crisis we had is just the appetizer to the big total breakdown of financial markets and of governments in five or 10 years time when the whole system goes bust. The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society. Unless the system is cleaned out of losses, the way communism collapsed, capitalism will collapse. The best way to deal with any economic problem is to let the market work it through."
Marc Faber

Legitimate Use of Violence

“Legitimate use of violence can only be that which is required in self-defense.”
Ron Paul

"Never swing first, but if he swings at you, knock his lights out."
Robert F. Barrell

"Humanity should question itself, once more, about the absurd and always unfair phenomenon of war, on whose stage of death and pain only remain standing the negotiating table that could and should have prevented it."
Pope John Paul II

Can our initial and continued efforts in Afghanistan be categorized as "self-defense"?
Can any of our efforts in Iraq be categorized as "self-defense"?
And now, Iran??

DJIA/Gold Ratio: A Frame of Reference For Northern Ireland

This is the fifth post focusing on the DJIA/Gold Ratio. The ratio provides an interesting "frame of reference" and backdrop for events that occur through time. I recently made a post regarding the renewed conflict in Northern Ireland. One aspect of conflict is the "tit for tat" process. It's a "closed loop" with no terminating point. The "tat" occurred yesterday in Northern Ireland.

Gunmen kill a police officer in Northern Ireland
By John F. Burns and Alan Cowell Herald Tribune
Published: March 10, 2009
Two days after two British soldiers were shot and killed in Northern Ireland, gunmen opened fire and killed a police officer late Monday, news reports said, reinforcing a challenge to the authorities to maintain a mood of reconciliation underpinning a still-uncertain peace.
The killing came as the British prime minister, Gordon Brown, visited Northern Ireland to insist that the protracted peace effort beginning with the Good Friday agreement in 1998 could not be reversed, despite the death of two soldiers outside a British Army base in Antrim on Saturday. The soldiers were shot hours before they were set to depart for Afghanistan.

The Northern Ireland conflict provides an interesting opportunity to align it with the frame of reference of the economic cycle that I have presented in the past (DJIA/Gold Ratio). The theory is that during the expansion phase of the economic cycle we predominantly have peace. Most economies are growing, people are prospering, and happiness is the dominant mood. In contrast, during the contraction phase, the masses quickly and collectively become fearful and angry. This "shift in mood" leads to conflict. One the the commencement points is usually a "rekindled old fire". Northern Ireland fits the description very well. The chart below presents the model with the DJIA/Gold Ratio serving as the metric.

Now lets take some key events from Northern Ireland over the past 28 years and see how they align with the ratio through time. During the 80's and 90's many attempts were made for peace in Northern Ireland. This culminated in the signing of the Belfast or Good Friday Agreement that officially called a ceasefire in 1998. It's important to note that this agreement is reached practically at the peak of the DJIA/Gold Ratio. Unfortunately, it didn't take long for more terrorist events to occur. In August, 1998 An explosion in Omagh kills twenty-eight. The Real IRA, an anti-Agreement splinter group of the Provisional IRA, claims responsibility. Since the Belfast Agreement, a general decline in peace has occurred. The events of the past week indicate that more trouble could lie ahead. If one believes that mass social mood aligns with the economic cycle, than the chart and the forecasted trend might indicate more significant conflict lies ahead.