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Friday, April 15, 2011

WMD, The Real Truth

WMD, The Real Truth
It’s All Fidel’s Fault
      It seems no matter what President Obama does he can not get the WMD off his back. Even though everyone, the Republicans included, know it is not a problem he created. He only gets the privilege of accepting all the blame, and no I did not vote for him. How the WMD really started can be identified with some research. The real WMD is not defined as Weapon of Mass Destruction. The real definition will be given later. The market crash in 2008 was not the cause of the problem but an effect. Sky high oil prices that preceded the crash were simply the last straw on the camel’s back. The present high oil prices threaten to finish breaking that straw. If it breaks the Great Depression will look like a cake walk in comparison. Finding the source of the WMD requires a short history background which is extremely relevant as it also explains why we are not liked much in the Middle East, going back almost sixty years if not longer. It is almost like the story of David and Goliath from the Bible except in this story the combatants, unwittingly inflict the wounds that destroy themselves as well as their enemies.
     While there are many places one could point a finger. Big Banks, Wall Street, The Federal Reserve System to name a few. My choice is Fidel Castro. Politicians certainly can not be expected to step up to the plate and accept any of the blame. As things have settled down the blame has shifted. It now has come full circle. The problem is the average American. They will not get up off their wallets. They are unwilling to do their duty to their country and spend some money. They are listening to what the president says, but something deeper keeps them from standing up. Is it voices from their past warning them not to. All those stories about the Great Depression their parents and grandparents told them did sink in after all.
      If you bear with me, hopefully, the rabbit trail I am about to take you on will bring us back here. Rabbit trails always end up where they started, that is why hunters use dogs to hunt rabbits. Once the chase commences the hunter just stands still and waits. Shortly the dogs will chase the rabbit back to where it started. Almost all rabbits run in a big circle when chased. The benefit of that is you know what to expect and where to point your gun. So if you bear with me I will get around the trail as fast as possible. If nothing else you may have learned something about hunting rabbits.
     With the world economy in chaos. Two wars going on in Asia. The memory of 9/11 not that distant. A national economy that is shaky at best. The middle east in turmoil. One might ask how we got here. Fingers are pointed every where and at everybody. The real source of the problem goes back a whole lot farther than the crash in 2008. It really goes back to bad decisions, made over a very long period of time and by a whole lot of people. It is like a snow ball rolling down hill and picking up momentum. Of course for a snow ball to start down hill someone usually has to give it a shove and then gravity takes over.
     The one person I can point my finger at is Fidel Castro. When I get done explaining, it is my hope people will understand he did it quite by accident. Castro has been fighting a David and Goliath fight with the United States for many years. It all started because of bad choices by him on a few counts. He had bad timing, a bad location and several bad political choices working against him. At the very height of America’s anti-communist paranoia he chose to try and establish a communist country on America’s doorstep. He even recruited the Russians to help him get the job done. Had he chosen fascism, or even liberation as a cause he would probably have just been ignored. That was not the case though. He chose Communism to thumb his nose at the United States for not helping him become the dictator he always wanted to be. The problem with that was that the Russians were Communists. America was so upset that the CIA sponsored a Cuban liberation movement. It turned out to be a major fiasco called the “Bay of Pigs” which was a CIA backed and failed invasion of Cuba in 1959. Castro fearing America might actually invade, pleaded with the Russians to come and protect him from the big time Yankee Imperialist.
     The Russians saw this as a chance to settle some scores and level the playing field so to speak The United States had helped Britain overthrow the democratically elected government of Iran in 1953 to put a more pro western government in power. Britain was worried that the original Iranian government was to friendly with the Russians. Britain in turn felt this threatened their oil holdings in the Middle East. This was not a problem during World War II as America used Iran for a pathway to get American made weapons and supplies to the Russians.  Who at that time were our allies. This all changed with the end of World War II and the Russians getting their own nuclear weapons. The United States used regional paranoia and the turmoil as an opportunity to put nuclear armed missiles in Turkey aimed at Moscow.
     Needless to say the Russians were not happy with this situation. So when Castro called for their help they were more than willing to do so. They even started placing nuclear missile sites in Cuba in 1961 which ended in the Cuban Missile Crisis in October 1962. It was a case of brinkmanship which was settled through back water channels when Russia agreed to pull the missiles out of Cuba in return for a promise from the United States that we would not invade Cuba. Under the table and behind closed doors America also agreed to pull its nuclear missiles out of Turkey. You have to wonder if the whole thing was not a calculated chess move by Russia to make themselves feel a little safer using Cuba for a pawn.
     Regardless of who did what and why, the end result was a financial embargo and severing of diplomatic relations with Cuba by the United States. It was an action that created much hardship on the Cuban people. We had a physical war with Vietnam at the cost of 58,000 American lives and we have already normalized relations with Vietnam. Yet fifty four years later we are still embargoing Cuba. It is my personal belief if we had normalized relations with Cuba the Communist government would have fallen years ago. We didn’t and it has not. The situation goes on.
     The embargo created severe hardships on Cuba as they had to find other sources of supply. Cuba also had to pay double on all financial deals that they made. If they wanted to buy items in Europe they had to convert their currency to dollars. Dollars are the currency most world bank transactions are done in.  Then the dollars had to be converted into the currency of the country they were dealing with. Basically the same transactions had to be done going the other way also. Each transaction had a fee attached. Cuba had no choice but to use the dollar as a reserve currency. The dollar was the standard reserve currency all countries used after World War II. The dollar determined the value of other nations money when they made purchases or exchanges of currency on world markets. The price of oil was also tied to the value of the dollar. Cuba was not the only country hurt by the dollars dominance. Europeans were also paying the fees to transact international business.
     In the nineteen nineties the European Union came into existence and one of its goals was to liberate their currency and trade from the tyranny of the dollar on world markets. They created the Euro to free their economies from American domination.
    When Castro heard of the Europeans plans to introduce the Euro as currency which could be used for all financial transactions a little light came on.  Fidel leaped at the idea. Castro saw a way out of his double cost on transactions. He was one of the first countries to accept and use the Euro as his countries reserve currency in 1998. The Euro did not officially go into effect till 1999 but Castro was committed. It saved Cuba tons of money. They could finally see a light at the end of the tunnel. It was a way of reducing America’s hold on his country. Castro was quick to share this good news with his strange clique of friends. To get in that circle the rules were and are very simple. Either hate the United States or be hated by the United States. Saddam Hussein of Iraq, Chavez of Venezuela, Iran, Libya, Syria, and North Korea were top friends. They all shared another distinction. They were all on the Axis of Evil list. Depending on which speech you listened to, determined who made the list.
      Saddam Hussein was also on America’s embargo list. Following Fidel’s lead Saddam pulled a fast one by going to the United Nations in October 2000. Saddam secured authorization to exchange his oil for Euros instead of dollars. This set a pattern that was soon followed by Iran, Venezuela and most of the Axis of Evil countries. When Europeans found they could buy oil with out the losses in the exchange markets it gave the Euro a major boost.
      This situation created a problem for America. All of a sudden the dollar was not the only fish in the sea so to speak. Slowly the price of oil started climbing as the dollar had to compete with the Euro on world markets for oil. The “Perfect Storm” was brewing for oil, when Bush and Cheney came to power in America. They were both experienced oil men and could read the writing on the wall. They had to defuse the situation. They just needed and excuse and September 11th, 2001 provided it.  A recent book by retired USMC Lt. Gen. Michael De Long makes it clear Bush and Cheney were much more interested in attacking Iraq than Afghanistan.  Lt. Gen. De Long argues the case for WMD’s was a strong foundation for the attack. However one has to wonder which kind of WMD’s Bush and Cheney were really concerned with.  My argument would be that they agreed more with my definition of WMD’s, which is Wealth Melt Down.
       It is my belief the Bush administration did everything they did with what they considered the best interests of the United States first in their minds.  They understood that if oil prices were not determined by the dollar, the dollar was in danger.  The problem was the damage was done. Getting rid of the Euro was not feasible. (Of course with all the financial turmoil in Europe's financial markets we might want to take a harder look at what is causing the problems.) Taking Iraq was the only way to stall or slow down the problem. One of the first actions taken by the United States after “winning the war” was to put Iraqi oil back on the dollar. The real problem was that other factors had started creeping into the picture.
     Other United States government programs to push home ownership were starting to have issues. The placement of marginally qualified owners into homes they could not really afford started taking its toll. As long as no one rocked the boat everything was okay. The home owners were living at the very edge of their limits. Unfortunately the boat started rocking.
      Over the next couple years as oil prices went up so did bankruptcies. Families that had been living on the edge had to make choices about what to pay. They were not going to quit eating. They were not going to quit driving the cars they also could not afford. Something had to give.  Most chose to stop paying their house payments. The higher the gas prices went the worse the situation got. Suddenly loans that had been sold on international markets started defaulting.
     The snowball was picking up speed. Then the market collapsed and everything started falling apart. The federal government tried to save the situation but to no avail. The damage was done. The slide down hill suddenly turned into an out of control avalanche. The economic collapse now started taking its toll on pension funds and any other investments that had been secured by the shaky mortgages. Companies getting slammed financially started reining things in. Eventually we had over fifteen million people unemployed. The government has done too little and too late to save it all. The jobs are gone. Many are not coming back as the companies they were based on are gone.
     The Fed keeps saying it will all work out. However in reality the stage is set to only get worse. It may have slowed down but that is only temporary. Why do I say that? It is really pretty simple as the people who were the hard working core of America start falling off unemployment another round of foreclosures will start. The government is broke.  It can not afford to keep giving people unemployment. Borrowing the money to pay unemployment will only push the budget and debt beyond legal limits. The government will go bankrupt. The truth is that it already is. If the government does not pay the unemployment the unemployed will start losing their homes and the cycle will continue on down the hill.
      The present situation is tenuous at best. The governments predictions are based on things remaining stable or hopefully getting better. Their plans do not allow for things that will sink all their hopes. The price of oil is going to go up. It will continue to go up because of increased demand as the rest of the world starts recovering and needs more oil. Some other unknown and unforeseen event could create more instability in the oil markets. As a for instance the Arab Spring which happened since I originally started this.  It could be the European financial crisis or instability in the Middle East. Both can effect America and our recovery. America can not borrow its way out of debt. It is going to require action and some tough decisions will have to be made. Fifteen million people unemployed means that fifteen million people are not creating income or paying taxes. That means the debt snowball just got another shove down the hill. Unemployment could go a lot higher in the long run if something is not done. As the housing market continues to collapse so does the tax base that states and the government depend on, As of November 28.6% of homes are underwater.  The problem rolls on. Somebody better come up with some solutions. The Republican plan to cut spending and put even more people out of work is only going to magnify the problem. It certainly will not solve it.
      The rabbit trail is back to its start. Thanks Fidel you may have saved Cuba for a few days. Ultimately though the whole financial system worldwide is liable to collapse. That is good for nobody. States are broke already and crying the blues that they need money. There has to be a solution and I think I have a few. You can read them on my blog by typing "jobs" in the search bar.  Nobody may like them but they can help if implemented. The old saying is, "if there is no pain there is no gain" What is my solution? Pay more, borrow less and cut spending. It is simple but it works. For starters how about freezing spending at present levels. That was always the solution thirty to forty years ago. It just delayed the problem. It is a matter of how you do it that determines if it works. It will take commitment and sacrifice. The alternative is something nobody really wants to experience. It will take the American electorate holding the politicians feet to the fire. It will not be fun. The first step is to freeze the government budget till the plan I am proposing can kick in. If America does not do that, it is all over but the crying
 

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