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Revisiting a Mad, Mad, Mad, Mad World!!

Posted by Larry Doyle on May 25, 2009 1:01 PM |

As if we do not have enough issues to deal with here in our own backyard, we are reminded on Memorial Day, of all days, just how mad and unsettling the state of our world happens to be. I broached this theme on April 5th, but recent international events make it prudent to revisit.

While the issues in North Korea and the Middle East deal primarily with military and political conflicts, they most definitely impact our financial markets. How so? Any time we are faced with increased risks of any sort, the markets incorporate them into prices. 

Going to the Far East, we encounter Kim Jong Il of North Korea detonating a nuclear bomb. As reported by CNN,  World Outraged by North Korea’s Latest Nuke Test.  How will Obama and world leaders respond? A bully left unchecked will continue to try to move his sphere of influence:  

“North Korea is directly and recklessly challenging the international community,” the White House said. “The danger posed by North Korea’s threatening activities warrants action by the international community.”

While the test was not a surprise, Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, said it showed Pyongyang was becoming “increasingly belligerent.”

Moving into the Middle East, we encounter a cauldron continuing to boil. Reuters reports, Iran Sends Warships to Gulf of Aden:

Iran has sent six warships to international waters, including the Gulf of Aden, to show its ability to confront any foreign threats, its naval commander said on Monday.

Admiral Habibollah Sayyari, quoted by the ISNA news agency, made the announcement five days after Iran said it test-fired a surface-to-surface missile with a range of 2,000 km (1,200 miles), putting Israel and U.S. bases in the area within reach. 


How about developments in Israel?  On the heels of a recent meeting in Washington between Obama and Israeli Prime Minister Benjamin Netanyahu, Reuters reports Netanyahu Defies Obama on Israeli Settlement Freeze:

Israeli Prime Minister Benjamin Netanyahu on Sunday rebuffed U.S. calls for a full settlement freeze in the occupied West Bank and vowed not to accept limits on building of Jewish enclaves within Jerusalem. 

Netanyahu’s defiant stance set the stage for a possible showdown with U.S. President Barack Obama, who, in talks with the new Israeli prime minister in Washington last week, pressed for a halt to all settlement activity, including natural growth, as called for under a long-stalled peace “road map”. 

Does Netayahu specifically and the Israeli nation as a whole detect a decidedly lukewarm level of support from the Obama administration? Many believe so. How are the Israelis themselves dealing with the increased level of aggression being directed their way? The Jerusalem Post asserts that Israel is fully preparing for an assault on its land and that a Home Front Drill Scenario Not Fiction. The report highlights the heightened level of anxiety within Israel: 

The upcoming home front drill, Turning Point 3, is based a scenario in which “a combined missile and rocket attack on Israel from all sides combined with terror attacks from within,” and is “not a fictional scenario,”, Deputy Defense Minister Matan Vilan’i told members of the Knesset’s Foreign Affairs and Defense Committee on Monday.

Vilna’i briefed the committee on the state-wide drill, scheduled to begin on May 31. The threat of missiles hitting mainland Israel “is not unrealistic,” Vilna’i continued. “If a war breaks out, that is probably what would happen.”

In regard to our “war on terror” or rather our “overseas contingency operation” or whatever our engagement in Pakistan and Afghanistan is now called, we witness a growing likelihood of a refugee crisis as reported by The Washington Post, Pakistani Refugee Crisis Poses Peril:

The government has been overwhelmed by the human tide that has washed over the northwest as about 2 million people have fled fierce clashes in Swat. With Pakistan experiencing its largest exodus since the nation’s partition from India in 1947, only a fraction of the displaced civilians are receiving assistance in government-run camps. The rest are fending for themselves or getting help from private charities, including some that are allied with the very forces the Pakistani army is fighting in Swat.

Refugee camps in Pakistan have been prime recruiting grounds for militant groups ever since the Soviet invasion forced millions of Afghans to cross into Pakistan in the 1980s. Now, concern is growing that this latest wave of displacement will create a fresh crop of Pakistanis with grievances against the government and loyalty to groups that seek to undermine the state through violent insurgency.   

In terms of immediate reaction in world financial markets, I am not surprised to see analysts calling for a rise in the price of oil. Mideast turmoil always creates potential havoc in the oil markets. We have already seen an oil surge north of $60/barrel recently and many are calling for it to move to $75. A rise in the price of oil is not only inflationary but truly a tax on an economy already overburdened. My fear of stagflation increases.

While global situations remain tenuous, we can not rest easy here at home as recent terror related arrests in New York City attest. Additionally, given the heightened political and military stresses in the global sphere, our country’s military commitment may very well be tested. The Obama administration must be diligent on this front. 

In light of these global strains, I once again extend my grateful and heartfelt commendation to all those serving our country in the armed forces.  Our country is truly blessed by the brave men and women putting themselves in harms way so the freedom and liberty of our country can remain strong. I salute you!

LD






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