At The Foot Of The Volcano

I always conclude one thing after reading a book or article written by Thomas Friedman, "the guy knows the Eastern geopolitical scene extremely well".  His most recent NY Times article is significant:

"What’s unfolding in the Arab world today is the mother of all wake-up calls. And what the voice on the other end of the line is telling us is clear as a bell: 'America, you have built your house at the foot of a volcano. That volcano is now spewing lava from different cracks and is rumbling like it’s going to blow. Move your house!” In this case, “move your house” means “end your addiction to oil.”  No one is rooting harder for the democracy movements in the Arab world to succeed than I am. But even if things go well, this will be a long and rocky road. The smart thing for us to do right now is to impose a $1-a-gallon gasoline tax, to be phased in at 5 cents a month beginning in 2012, with all the money going to pay down the deficit. Legislating a higher energy price today that takes effect in the future, notes the Princeton economist Alan Blinder, would trigger a shift in buying and investment well before the tax kicks in. With one little gasoline tax, we can make ourselves more economically and strategically secure, help sell more Chevy Volts and free ourselves to openly push for democratic values in the Middle East without worrying anymore that it will harm our oil interests. Yes, it will mean higher gas prices, but prices are going up anyway, folks. Let’s capture some it for ourselves."

Read the remainder of the article

Drunk on Kool-Aid

"The mushroom cloud never forms until the mania is over because people are too mesmerized by the boom to see even the most blatant abuse in their quest for 'easy money' ".

Robert Prechter - January 2009

I read this last week in a report and it rang so true. Every day on the news we see reports from within the "mushroom cloud". Everyone now has a theory on why and how, but 99% didn't see it coming. The "blatant abuse" has evolved during the entire expansion phase. The Madoff scam is a classic example. It didn't happen yesterday and it wasn't fallout from the mortgage crisis. It was one small piece of an overall cycle. Regulation is always laxed during the expansion. The SEC investigated Madoff during the expansion, but the hammer doesn't fall until the contraction phase gains momentum.

The cycle vibrates along and the herding mammals align in perfect synchronization. These unfolding events are the "flip side" of the last 26 years of excess. The mob's anger continues to grow as their long buzz wears off. For details, keep your eyes on Israel/Gaza, India/Pakistan, Greece, Russia/former Republics, Zimbabwee, and the Congo. When will N. Ireland reignite? That Christian struggle has always baffled me. Keep your ears on the ground and your eyes on the road!