Saturday, 16 June 2012

Deja Vu

I just happened to get an invite to Dwight Eisenhower’s birthday. It was Dwight’s hundredth, so he was long since gone. But that didn’t stop the military from throwing one hell of a bash. It was in NYC, on the USS Intrepid. Black tie for the civilians like me, the Generals and their staff were decked out to the nines in their full dress uniforms. There must have been a thousand pounds of medals on display. All of the “big shots” in the military were there.

The hanger deck of the Intrepid is enormous, but it was full that night. Flags and banners where everywhere, the Marine Corps Band was playing Sousa marches. The wait staff was dishing out champagne; they too wore crisp uniforms and stood at attention as they handed out canapés.

This gala happened a long time ago. It was May 22, 1990. This was a critical period for America, even more critical for the country’s military. The night of the party was two months before the start of Gulf War I. Damn near every person on that carrier was involved with war preparations. It made the mood that much more electric. I was standing amongst those who would soon take the country into the biggest war in two decades.

I was doing my best to take it all in while at the same time remaining invisible. But at one point I turned around and one of the Generals was right there with his hand out. He was flanked by three of his aides. I introduced myself. In an effort to be friendly he asked:

How is it that you are invited to this party tonight?

I had a lie prepared for this question, but I told the truth instead:

I'm a stand in for someone else.

His aides stiffened at this response but he thought it was amusing, so we chatted a bit. Being nervous, I asked a stupid question:

What will happen when we go to war?

The General looked at me, and the aides stiffened a bit more, then he said:

We have prepared the Country to expect a long and protracted war.

We have said that there will be thousands of American casualties.

We have said that the economic costs would be high. That there would be long-term disruptions of vital sea-lanes; energy cost would rise as the war dragged on.

We have done what we could to prepare the country for the worst possible outcomes. We have not white washed any aspect of what may happen.

These words sent a chill down my spine. It was true, not a day went by by without another major news story of America’s preparations for the coming of the “mother of all wars.”

But then he blew me away with this:

But actually our plan is to kick the shit out of them in the first 24 hours, and end it fast.

Of course that is exactly what happened on August 2, 1990. The shock and awe of the first day decimated the enemy. The US controlled the sky; any air defenses were obliterated. Volleys of cruise missiles and 500 pound smart bombs delivered by invisible planes had demolished Iraq’s Command and Control structure. Individual targets were obliterated with laser precision.


I'm having this Deja vue feeling. The deciders are leaking a story of a major emergency that is pending. The nonstop leaks from “EU Officials” that extraordinary measures are ready to be implemented added to the sense of foreboding that existed a week ago.

Obama has blamed the recent US slowdown on the problems with Spanish banks (a ridiculous assertion). It’s clear that POTUS is laying the groundwork for some emergency spending measures. We may hear something from the Big O this weekend at the G-20 meeting.

The Fed will react in a week. Something is coming. The cover that Bernanke needs to keep buying long dated paper at an average of $5 billion a day for another six-months will be Europe. Bernanke will argue that the next round of liquidity is a “precautionary step."

The UK is going to spend another 100m Quid they don’t have. Japan is printing, QEing and spending like mad. More is coming. China will stimulate by building more unwanted cities. Australia will cut rates.

After the elections this week, France will have a green light to increase the size of government to greater than 50% of GDP. The ECB will cut interest rates and change collateral requirements to bailout banks. Spain (and even Greece) will get some cash. Another Long-Term Refinancing Operation (LTRO) is in the works. The IMF will start writing checks. Previous debt deals for Ireland and Portugal will come back on the table. 

The coming economic steps that are being leaked by the deciders and teed up in the press is an orchestrated effort to create fear of the future and the excuse for more emergency measures. They are playing this one as well as the Generals did back in 1990. I think we are about to see a series of global economic announcements that are intended to, “Kick the shit out the enemy,” yet again. 

We may see some attempts at economic shock and awe over the next few weeks, but they won’t work for long. This time there are no Generals with extraordinary firepower running the show. We have a bunch of technocrats trying to plug a leaking dike with dodgy paper.

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