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Thursday, August 21, 2008

Russia Smells Blood, Commodities Bounce, The 'Great Game' Heats Up

Overnight, the US dollar got hit pretty hard.

The US dollar is massively overbought and extremely stretched. A pull back to the 200 day EMA (green line) is probable. That would result in a bounce in commodities as well.

Everything is coming together nicely for a little bit of a commodity bounce and general equity weakness.

Oil Gains a Third Day on U.S.-Russia Tensions, Dollar Weakness: “Oil rose on speculation that Russian crude may be disrupted because of rising tensions with the U.S., and as the weaker dollar bolstered the hedging appeal of commodities.

U.S. plans for a missile shield in Poland will ``spur an arms race'' in Europe, Russia's Foreign Ministry said in a statement. About 1.1 million barrels of Caspian Sea crude remains shuttered following a pipeline fire in Turkey on Aug. 5. Russia's invasion of Georgia closed some export routes that could have been used to re-direct Caspian supplies to Europe.”

I wrote about that a week ago in The Russian Bear Awakens: Poland Threatened. Immediately after War: Russia and Georgia I picked the next target of Russian aggression in Quick Little Oil and Gas Bounce? Ukraine Next?.

Throughout history Poland has been repeatedly smacked around by it’s neighbors to the west (Germany, Austria), north (Sweden) east (Russia) and south (Hungary, Turkey). While the bad old days of 'hot' war and occupation are probably over, the new tools of war will be economic, political and covert. The prize remains the same. Power and control. The 'Great Game' was never really over.... it just cooled down a bit.

The U.S. is currently crippled in every major way.

Politically: A sitting president that is “full of sound and fury signifying nothing.” And an upcoming election too close to call has made any coherent foreign policy impossible.

Militarily: Tangled up in perpetual conflict in Afghanistan and Iraq while keeping a nervous eye on North Korea and Iran, the U.S. military is stretched to the breaking point, both in terms of manpower and logistics.

Economically: The U.S. is facing the very real consequences of the implosion of several very large bubbles and is already running some of the largest current account, trade and budget deficits ever. This means politicians will focus inwards and no further military adventures will be considered... giving free reign to the bold new Russia, looking for it's place in the sun.

Russia, after being humiliated in the early nineties is now experiencing a booming economy, both as a consequence of embracing capitalism and booming commodity prices. Brimming with new confidence and chafing under old insults from the west, Russia can smell blood. Seeing an insecure, indecisive and divided west, Russia will take this opportunity to expand it’s power and influence.

China and India will not be far behind. Expect them to use this opportunity as well to make their moves in their respective regions.

Ten years from now, the balance of global power is going to be significantly different. The 'Great Game' is about to heat up again with some new major players set to enter the field.


Ben Bittrolff said...

Russian Armor Rolls Home as Georgia Says `Occupation' Expanding

"Georgian President Mikheil Saakashvili denied the Russian claim, saying in Tbilisi today that Russia ``has actually widened its occupation'' of Georgia rather than making ``any serious movement'' to withdraw. ``It looks like they're relocating from urban areas to different positions that would enable them to control the country's economy,'' Saakashvili said.

Russian troops still hold all entrances to Gori, a major crossroads between east and west Georgia, and won't allow Georgian officials into the city, Interior Ministry spokesman Shota Utiashvili said by phone. Georgian officials have said Russia controls a third of the country."

Anonymous said...

Shift in power is certainly on the move.

The US is now slave to the masters of the owners of our debt. The banks gave the US (and a lot of Europe) a lot of rope to hang ourselves with.

China (et al) have already invaded.

If you don't believe it, go visit Wal-Mart and see who occupies the shelves.

If you don't believe it, when you make that CC payment, a significant chunk of that interest you are paying is going into the pockets (non US, Canandian, European) banks, not to mention the original purchase $ eventually eneded up overseas.

We are enslaved to other contries via our own, debt-fueld greed.

Shame on us for not slowing our spending down...but this lesson will resonate for generations to come..and will eventually right itself.

Good call on DUG the other day BTW!

Anonymous said...

yupp. everyone talking about russia vs usa these days. just wait till the soon-new world power china enters the game. US debt sell off. Then Taiwan then Australia(mucho natural resources, small population).

Bill Luby said...

Nice summary of the current state of the state(s)...



Anonymous said...

Output interruptions in bannana republics will be the norm from here on out.. pushing oil up and past $150 per barrel

Anonymous said...

IIRC as fear increases so usually does the price of gold.
IMO the Pres. of Georgia should not have attacked Ossetia and I do not believe him now. His idiocy is costing some of us big-time. FWIW he used to work at the same NY law firm that employed the current US Attorney General. Small neo-con world.
Georgia is not worth a new cold war, another increase in the amount of borrowed funds going to the Generals....

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