Showing posts with label World News. Show all posts
Showing posts with label World News. Show all posts

Monday, August 8, 2011

A 634 Point Stock Market Crash And 8 More Reasons Why You Should Be Deeply Concerned That The U.S. Government Has Lost Its AAA Credit Rating




Are you ready for part two of the global financial collapse?  Many now fear that we may be on the verge of a repeat of 2008 after the events of the last several days.  On Friday, Standard & Poor's stripped the U.S. government of its AAA credit rating for the first time in history.  World financial markets had been anticipating a potential downgrade, but that still didn't stop panic from ensuing as this week began.  On Monday, the Dow Jones Industrial Average dropped 634.76 points, which represented a 5.5 percent plunge.  It was the largest one day point decline and the largest one day percentage decline since December 1, 2008.  Overall, stocks have fallen by about 15 percent over the past two weeks.  When Standard & Poor's downgraded long-term U.S. government debt from AAA to AA+, it was just one more indication that faith in the U.S. financial system is faltering.  Previously, U.S. government debt had a AAA rating from S&P continuously since 1941, but now that streak is over.   Nobody is quite sure what comes next.  We truly are in unprecedented territory.  But one thing is for sure - there is a lot of fear in the air right now.


So exactly what caused S&P to downgrade U.S. government debt?

Well, it was the debt ceiling deal that broke the camel's back.

According to S&P, the debt ceiling deal "falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

As I have written about previously, the debt ceiling deal was a complete and total joke, and S&P realized this.

Forget all of the huge figures that the mainstream media has been throwing at you concerning this debt ceiling deal.  The only numbers that matter are for what happens before the next election.

The only way that the current debt ceiling deal will last beyond the 2012 election is if Obama is still president, the Democrats still control the Senate and the Republicans still control the House.  If any of those things change, this deal ceiling deal is dead as soon as the election is over.

Even if all of those things remain the same, there is still a very good chance that we would see dramatic changes to the deal after the next election.

So in evaluating this "deal", the important thing is to look at what is going to happen prior to the 2012 election.

When we examine this "deal" that way, what does it look like?

Well, Barack Obama and the Democrats get the debt ceiling raised by over 2 trillion dollars and will not have to worry about it again until after the 2012 election.

The Republicans get 25 billion dollars in "savings" from spending increases that will be cancelled.

The "Super Congress" that is supposed to be coming up with the second phase of the plan may propose some additional "spending cuts" that would go into effect before the 2012 election, but that seems unlikely.

So in the final analysis, the Democrats won the debt ceiling battle by a landslide.

25 billion dollars is not even 1 percent of the federal budget.  The U.S. national debt continues to spiral wildly out of control, and our politicians could not even cut the budget by one percent.

Somehow our politicians believed that the rest of the world would be convinced that they were serious about cutting the budget, but it turns out that global financial markets are tired of getting fooled.

It has gotten to the point where now even the big credit rating agencies are being forced to do something.

Not that they really have much credibility left.  Everyone still remembers all of those AAA-rated mortgage-backed securities that imploded during the last financial crisis.  The reality is that the big credit rating agencies are a bad joke at this point.

Several smaller credit rating agencies have already significantly slashed the credit rating of the U.S. government.  But a lot of pressure had been put on the "big three" to keep them in line.

But now things have gotten so ridiculous that S&P felt forced to make a move.

Sadly, our politicians are still trying to maintain the charade that everything is okay.  Barack Obama says that financial markets "still believe our credit is AAA and the world's investors agree".

Once again, Barack Obama is dead wrong.

The truth is that the credit rating for the U.S. government should have been slashed significantly a long time ago.  This move by S&P was way, way overdue.

Moody's might be the next one to issue a downgrade.  At the moment, Moody's says that it will not be downgrading U.S. debt for now, but Moody's also says that it has serious doubts about the enforceability of the "budget cuts" in the debt ceiling deal.

This crisis is just beginning.  It is going to play out over time, and it is going to be very messy.

The following are 8 more reasons why you should be deeply concerned that the U.S. government has lost its AAA credit rating....

#1 The U.S. dollar and U.S. government debt are at the very heart of the global financial system.  This credit rating downgrade just doesn't affect the United States - it literally shakes the financial foundations of the entire world.

#2 As the stock market crashes, investors are flocking to U.S. Treasuries right now.  However, once the current panic is over the U.S. could be faced with increased borrowing costs.  The credit rating downgrade is a signal to investors that they should be receiving a higher rate of return for investing in U.S. government debt.  If interest rates on U.S. government debt do end up going up, that is going to make it more expensive for the U.S. government to borrow money.  The higher interest on the national debt goes, the more difficult it is going to become to balance the budget.

#3 We could literally see hundreds of other credit rating downgrades now that long-term U.S. government debt has been downgraded.  For example, S&P has already slashed the credit ratings of Fannie Mae and Freddie Mac from AAA to AA+.  S&P has also already begun to downgrade the credit ratings of states and municipalities.  Nobody is quite sure when we are going to see the dominoes stop falling, and this is not going to be a good thing for the U.S. economy.

#4 10-year U.S. Treasuries are the basis for a whole lot of other interest rates throughout our economy.  If we see the rate for 10-year U.S. Treasuries go up significantly, it will suddenly become a lot more expensive to get a car loan or a home loan.

#5 The current financial panic caused by this downgrade is hitting financial stocks really hard.  The big banks led the decline back in 2008, and it looks like it might be happening again.  Just check out what CNN says happened to financial stocks on Monday....
Financial stocks were among the hardest hit, with Bank of America (BAC, Fortune 500) plunging 20%, and Citigroup (C, Fortune 500) and Morgan Stanley (MS, Fortune 500) dropped roughly 15%.
#6 China is freaking out. China's official news agency says that China "has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets".  If China starts dumping U.S. government debt that would make things a lot worse.

#7 There are already calls for the Federal Reserve to step in and do something.  If the U.S. economy drops into another recession, will we see more quantitative easing?  It seems like we have reached a point where the Fed is constantly in "emergency mode".

#8 The U.S. national debt continues to get worse by the day.  Just check out what economics professor Laurence J. Kotlikoff recently told NPR....
"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap"
Dick Cheney once said that "deficits don't matter", but the truth is that all of the debt we have been piling up for decades is now catching up with us.

The United States is in such a huge amount of financial trouble that it is hard to put into words.  The days of easy borrowing for the U.S government are starting to come to an end.  We have been living in the greatest debt bubble in the history of the world, and it has fueled a tremendous amount of "prosperity", but now the party is ending.

A whole lot of financial pain is on the horizon. 

Please prepare for the hard times that are coming.

Tuesday, June 21, 2011

The Financial Collapse Of Greece: The Canary In The Coal Mine For The Global Economy?

article from: The Economic Collapse Blog


anarchists athens greece

The rest of the world needs to sit up and take notice of what is going on in Greece right now.  This is what can happen when you allow government debt to spiral out of control.  Once it becomes clear that you can't pay your debts, a financial collapse can happen very suddenly and you start losing your sovereignty to those that you must turn to for financial help.  So is the financial collapse of Greece the "canary in the coal mine" for the global economy?  EU finance ministers have given the Greek government two weeks from Monday to approve another round of brutal austerity measures.  If the austerity measures are not approved, Greece will not receive the next bailout installment of 12 billion euros.  If that happens, the whole globe better buckle up because it is going to get crazy.


July 3rd is the deadline.  Basically the EU has put a gun to the head of the Greek government.  Without this bailout money, Greece will default and economic hell will break loose all across the country.

It is important to keep in mind that this is just the first Greek bailout that we are talking about.  Last year, the EU and the IMF agreed to provide the Greek government with a 110 billion euro bailout. The current 12 billion euro installment is part of that package.
Sadly, it has become apparent that the first bailout is not going to be nearly enough for Greece.  A second bailout, which will be the same size or even larger, is already being discussed.  This is going to put the Greek people even more under the heel of the money powers in Europe.

Keep in mind that all of these "bailouts" are just more loans.  There is no way that the Greeks are ever going to be able to repay all of this money.

But this is what happens when a nation lets debt get out of control.  For years and years it can seem like all of that debt does not have any consequences, but then the day of reckoning comes and it is a complete and total nightmare.

In order to get the next installment of 12 billion euros, European finance ministers are insisting that the Greek Parliament approves a package of austerity measures that will be worth approximately 28 billion euros.

At this point, it is uncertain whether those austerity measures will pass.

However, the pressure on the Greek government to get them pushed through is immense.

These austerity measures include tax increases, budget cuts and a "large-scale privatization program".

This is often what happens to third world nations that cannot pay their debts. 

Organizations such as the IMF or the World Bank will come in and insist that they tax their people more, cut back on their spending and sell some of their public assets to big corporations.

As we can see from the wild protests that have been taking place in Greece, a significant percentage of the Greek population is not happy with all of these austerity measures.
Unfortunately, the EU and the IMF are able to put a lot more pressure on the Greek government than the Greek people are.

Greek Prime Minister George Papandreou recently gave the following warning to the Greek people about what could happen if this debt crisis ends badly....
The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks, and the country's credibility.
Not only would a Greek default be a total disaster for Greece, it would potentially be a total disaster for the entire global financial system.

Sung Won Sohn, an economics professor at California State University, recently made the following statement about the seriousness of the debt crisis in Europe....
"The European debt crisis has the potential to have as big an impact as the subprime mortgage crisis did in the United States"
So will these bailouts solve the problem?

No, giving Greece more loans is only going to kick the can down the road for a little while longer.

The truth is that Greece is bankrupt.  Unless huge amounts of Greek debt are forgiven, Greece is going to default sooner or later.

When confidence in the finances of a nation is lost, borrowing costs can go up very quickly.  Today, the yield on two year Greek bonds is up to 28.6%.

Anyone that has ever been late on paying their credit cards knows how painful an interest rate like that can be.

So why doesn't Greece just slash government spending to the bone and get their financial house in order?

Well, it is not that easy.  Harsh austerity measures have already been implemented.  As a result, unemployment is rampant and there is rioting in the streets.

The truth is that, as an article in The Guardian recently explained, austerity has taken a brutal toll on the Greek economy....
A year of wage and pension cuts, benefit losses and tax increases has taken its toll: almost a quarter of the population now live below the poverty line, unemployment is at a record 16% and, as the economy contracts for a third year, economists estimate that about 100,000 businesses have closed.
As the economy crumbles, Greece has descended into an almost permanent state of civil unrest.

The fact that the EU and the IMF want even more austerity measures has sparked some wild rioting In Greece in recent days.  You can see video of the stunning violence going on in Greece right here.

Not all protesters are being violent.  Some of them are showing their displeasure in non-violent ways.  For example, workers for Greece's state-owned electric utility are staging 48 hours of rolling strikes that are designed to create blackouts over large areas.

The frightening thing is that Greece is not alone.  Ireland has already received a bailout and they are probably going to need another one at some point.

Portugal is a financial basket case and they are probably next in line for a bailout.

The employment situation in Spain is absolutely nightmarish.  Spain will probably be able to squeak by without a bailout if the global economy stays stable, but if the dominoes start to fall Spain could be in a massive amount of trouble very quickly.

Not that many people are talking about Italy, but the truth is that Italy has a huge debt problem.  On Friday, Moody's warned that it may downgrade Italy's Aa2 debt rating at some point within the next 90 days.

Belgium and France also have very substantial debt problems.  They probably would not be the first dominoes to fall, but if the "contagion" starts to spread they could certainly have massive problems.

The truth is that Europe's entire financial system is extremely vulnerable right now.  Big banks all over Europe (and especially in Germany) are leveraged to the hilt.  All it would take to topple many of them is a stiff breeze.

When Lehman Brothers collapsed, it was leveraged 31 to 1.

Today, German banks are leveraged 32 to 1.

German banks are also holding a massive amount of Greek debt.

That is why there is so much fear that the crisis in Greece could spread across the rest of Europe and start toppling dominoes.

The sovereign debt crisis in Europe did not happen overnight and it is going to be with us for a long, long time even if the global economy remains relatively stable.

At the moment, the best that officials in Europe can seem to come up with is to put off the pain for another day.  Pimco's Mohamed El-Erian told CNBC the following on Monday....
"This problem is not going to go away. It's going to weigh on markets here and we're going to see the same set of headlines over and over again. We simply cannot continue to kick the can down the road, because we're coming to the end of the road in Greece."
So if Europe starts having major problems will the U.S. step in and help?

Yes, if the crisis in Europe gets worse, the Federal Reserve will probably step in just like they did back in 2008.

But the U.S. is rapidly approaching a day of reckoning like the one that Greece is going through.  The U.S. government has piled up the biggest mountain of debt in the history of the world and faith in the U.S. dollar is dying.

The economic crisis in the United States gets worse with each passing year.  Yes, the Federal Reserve can print up stacks of money and send it over to Europe, but that isn't going to solve anything in the long run.  The truth is that the U.S. is not even going to be able to keep itself from drowning.

The world financial system is far more vulnerable today than it was back in 2008.  The next wave of the financial collapse is going to hit at some point, and when it does it is going to probably be even more painful than the last wave.

Our world is becoming an incredibly unstable place.

You better get ready.

Friday, May 20, 2011

Obama Well Knows What Chaos He Has Unleashed

by: Victor Sharpe


antiisrael 
Not content with creating havoc in the U.S. economy, setting Americans against each other, and forcing through a health reform act which has nothing to do with health but everything to do with the redistribution of wealth and an immense increase in governmental interference, our president has now opened a Pandora's Box in the Middle East.  It may well usher in a catastrophe not seen since World War 2.

From his notorious Cairo speech to the present, President Obama speaks, and disaster follows.  Some commentators believe that President Obama and Secretary of State Clinton are so utterly naïve as to make themselves unable to understand what will happen in Egypt as a result of their undermining of the Mubarak regime.

The question is justifiably asked: Do they truly believe that the next regime that comes to power will have the interests of the U.S. and the West at heart?

My fear is that Obama is not naïve at all, but he instead knows only too well what he is doing, for he is eagerly promoting Islamic power in the world while diminishing the West and Israel, however much innocent blood will flow as a result. 

Inevitably, sooner or later, the Muslim Brotherhood will take power, usher in a barbaric Islamist power in Egypt that will control the Suez Canal, and show no mercy to its own people or its perceived foes.

So now we see what the present incumbent in the White House has wrought, and so can our few remaining allies.  They must now wonder what confidence they can ever have in any future alliance with the United States.

We should be aware of what endemic Islamic violence has wrought in the past.  For example, assassinations of Arab leaders are not an infrequent occurrence.  After the 1948 Arab-Israel War, the King of Jordan, Abdullah, was murdered by followers of the Muslim fanatic, the Mufti of Jerusalem.

The Egyptian prime minister, Nokrashi Pasha, was also struck down.  The forces behind the killings were elements of both Arab socialist movements and the Muslim Brotherhood.  Today, in the streets of Cairo, we have an unholy alliance of the current radical left with the same Muslim Brotherhood.

The Suez Canal is a major lifeline for the economies of Europe and the United States.  It has been the source of political disruption in the past, as it may well be in the near future. And the Muslim Brotherhood may soon control it. As always, the past is our guidepost to the future.

In 1952, Gamal Abdul Nasser seized control of the Egyptian state and forged an alliance with the Soviet Union, which provided enormous arms shipments to Egypt.

Feeling greatly empowered, Nasser broke both the 1949 Armistice Agreement with Israel and international law by blocking the Suez Canal to Israeli ships and other vessels bringing cargoes to and from the Jewish state.  At the same time, Nasser blockaded the narrow Straits of Tiran at the foot of the Sinai peninsula, thus preventing Israeli maritime trade with the Far East and Africa.

Nasser eventually nationalized the Suez Canal on July 27, 1956.  This illegal act threatened the oil supplies to Britain and France from the Middle East.  The economic stranglehold on Israel became intolerable, and Arab terrorism against the Jewish state led to many Israeli civilian deaths.  (Incidentally, Arab terrorism began long before the so-called Israeli "occupation," which Arab and pro-Arab propagandists now use as the excuse for present Arab aggression against Israel.)             

In October 1956, war by Britain, France, and Israel against Egypt broke out.  Israeli forces, in what became known as the One Hundred Hours War, defeated the Egyptians in Sinai and Gaza and broke the naval blockade.  Britain and France invaded the Canal Zone to end Nasser's blockade of the Suez Canal.

Under U.S. Secretary of State John Foster Dulles, Britain and France were eventually forced out of Egypt.  This was, as future events showed, a dreadful blunder on the part of the Eisenhower administration.  It was the beginning of Britain's decline as a world power.  It also led to Nasser remaining in power.

The Egyptian dictator's political and pan-Arab ambitions again climaxed in 1967.  Nasser again blockaded the Suez Canal to Israeli shipping and reinstituted the naval blockade at the mouth of the Tiran Straits.

This in turn led, in 1967, to the hasty withdrawal of the U.N. buffer force that had been in place to prevent further Egyptian aggression against Israel.  U.N. Secretary General U. Thant folded under Arab pressure and arbitrarily withdrew the buffer force.  Egyptian armed forces then entered the Sinai, heading for the Israeli border.

The Arab and Muslim world called then, just as now, for Israel's extermination, and huge mobs in Arab capitals uttered lurid threats for Israel's defeat and the slaughter of her people.  The world prepared for Israel's destruction, but everyone was astonished when in June 1967, Israel -- forced to fight a defensive war of survival -- destroyed the combined Egyptian, Syrian, and Jordanian armies and air forces within six days.

The Suez Canal and the Straits of Tiran were again open for the free passage of Israeli ships.  Nasser fell from power and was replaced by Anwar Sadat.  However, in 1973, the Syrian and Egyptian armies attacked Israel on the holiest day in the Jewish religious calendar, Yom Kippur, which gave its name to the war.

Israel was hard put to survive initially, but she gradually beat back the Arab threat.  Sadat eventually decided that war was not an option for the time being and chose to make peace with Israel.

Israel vacated the entire Sinai desert (95% of the territories Israel conquered) and gave up the oil-producing facilities it had developed at Abu Rodeis -- all in return for a signed peace agreement with Egypt.  Jordan eventually followed Egypt's decision, but both Arab nations maintained a frigid peace with the Jewish state.

Anwar Sadat was subsequently assassinated by members of the Muslim Brotherhood.  His successor was Hosni Mubarak, who, for the last thirty years, has kept control over the seething Egyptian masses and the volatile Arab street.

Now his thirty-year rule has been fatally undermined by U.S. President, Barack Hussein Obama, in a betrayal that is as astonishing as it is deplorable.

It is clear to any child that a new Egyptian regime will, if not immediately, be hijacked by the Muslim Brotherhood, which is now calling for Egypt to prepare itself again for war with Israel and for the blockading of the Suez Canal to American, Western, and Israeli shipping.  Obama is no fool; he engineered this.

So, thanks to President Obama, we are back to square one with an Islamic Egyptian regime poised to send Egypt's massively armed army back into Sinai and towards the Israeli border with the aim of exterminating the Jewish state.  So much for "land for peace."

But what economic turmoil would a new Egyptian Islamic closure of the Canal mean to the West?

It is estimated that slightly more than two million barrels of crude oil and refined petroleum products flow both north and south through the Suez Canal every day.

In 2009, for example, almost 35,000 ships transited the Suez Canal, and 10 percent were petroleum tankers.  Oil shipments from the Persian Gulf travel through the Canal primarily to European ports, but also to the United States.

Additionally, the Sumed Oil pipeline provides an alternative to the Suez Canal, transporting as much as 3 million barrels of crude oil from Saudi Arabia and several Gulf states.  It amounts to up to seven percent of Europe's oil needs.  Since the violence erupted in Egypt, European oil prices have risen far more than they have in the United States.

If the Muslim Brotherhood, which was founded in 1928, takes over Egypt, it is more than likely that both the Canal and the pipeline would be shut again, causing oil tankers to travel around the Cape of Good Hope, adding six thousand miles to the journey to Europe alone.  Not what an economically strapped Europe wants.

At the same time, the Brotherhood, now governing over 80 million Egyptians and possessing a huge military, would join with a radicalized Yemen in blockading the Bab al Mandeb straits at the foot of the Red Sea.

Add to the noxious mix the Islamic Republic of Iran, and we may well see the closure of the Gulf of Oman, with additional disruptions of oil shipments to the West. The economic reality for America will be catastrophic.

Under Obama's watch, the true democratic revolution against the mullahs in Iran was snuffed out because the American president refused to support the demonstrators in the streets of Tehran.  In contrast, the same Obama ordered Hosni Mubarak to leave office and let the rioters in Cairo have "free" elections.

Following Condoleezza Rice's naïve call for "free" and democratic elections in Gaza, a branch of the Muslim Brotherhood (Hamas) used the democratic process to come to power and immediately trashed all semblance of democracy by instituting oppressive sharia law and raining thousands of missiles upon Israeli towns and villages.

The grotesque policies of Obama have caused Lebanon to fall under Islamic occupation, with the Iranian puppet, Hezb'allah, now controlling the Lebanese government.  Jordan's kinglet, Abdullah, sits on a powder keg whereby his throne is under increasing pressure from violent members of the same Muslim Brotherhood.

So there you have it.  Islam increasingly holds Europe, America, and what is left of the free world in its clutches...and the left cheers it on.

Let me close with the words of  Michael D. Evans, New York Times bestselling author of Jimmy Carter: The Liberal Left and World Chaos:  

It's no coincidence that Al Baradei showed up in Cairo only two days after the uprising began and was immediately named a negotiator by the Muslim Brotherhood. In fact, he had been waiting in the wings for quite a while.

He's on the board of an organization headed by George Soros and Zbigniew Brzezinski called International Crisis Group. Brzezinski is the same man who supervised the fall of the Shah of Iran in 1979.

Another board member of the ICC is one Javier Solana. Solana is one of the most powerful figures in the European Union. Because of Solana's Marxist sympathies, and his support for the regime of Cuba's Fidel Castro, Solana was on the USA's subversive list.

Former U.S. National Security Advisor, Sandy Berger, who once smuggled incriminating documents out of the Clinton White House [editor's note: the documents were smuggled out of the National Archives] by hiding them in his clothing, is another Board Member, as is General Wesley Clark, once fired from his NATO command.

Mohamed El Baradei also sits on the ICC's Board and thus, seeing the hand of George Soros along with the other players who for so long have plotted against the West and Israel, the Islamists are joined together."
Update: Clarice Feldman writes:
 

The ICG site has now updated his membership as a board member.

Mohamed El Baradei

Mr. ElBaradei suspended his membership from the Board of Crisis Group concurrent with his January 2011 return to Egypt.

Director-General Emeritus, International Atomic Energy Agency (IAEA); Nobel Peace Prize (2005)

What, one wonders, will history say of the foreign policies of Barack Hussein Obama?

STICK A FORK IN IT OBAMA – YOU’RE DONE!

article from: Angrywhitedude.com

Dear Leader telling Israel how it must be today with his intentional agenda-filled blather… displaying his true colors for all to see world wide-wide in his Mideast Speech today…you can be sure our enemies within and abroad are Happy Campers…especially Iran, the Muslim Brotherhood and all terrorists everywhere.




Rush Limbaugh responds here mincing no words…if you can’t get the video read here for information.

Congressman Allen West speaks out here with disgust as well in response to Obama’s words today in regards to Israel:

“Today’s endorsement by President Barack Obama of the creation of a Hamas-led Palestinian state based on the pre-1967 borders, signals the most egregious foreign policy decision his administration has made to date, and could be the beginning of the end as we know it for the Jewish state,” said West, R-Fla., one of the leading Tea Party thinkers in the House Republican freshman class,” West said in a prepared statement.
“From the moment the modern day state of Israel declared statehood in 1948, to the end of the 1967 Six Day War, Jews were forbidden access to their holiest site, the Western Wall in Jerusalem’s Old City, controlled by Jordan’s Arab army.

“The pre-1967 borders endorsed by President Obama would deny millions of the world’s Jews access to their holiest site and force Israel to return the strategically important Golan Heights to Syria, a known state-sponsor of terrorism,” said West, a career military veteran of the war in Iraq.

The rest of West’s words can be read here.

West speaking about Israel in Dec. at Fort Lauderdale.


Netanyahu is flying to Washington today and addressing Congress…anyone wonder what he’s going to say, he has to be seething, I’ve read where members of the Knesset have already referred to Obama as the new Arafat.

Rage is going on with many in this country today with this speech from Obama, I’m one of them…add your thoughts and opinions as well, this isn’t going to end up pretty for Obama, hopefully Israel will do what it has to do to defend itself as it is now surrounded by all that want it’s demise, they sure can’t depend on this administration, they’ve helped ensure that Israel is now surrounded by all enemies far and wide.

Saturday, May 14, 2011

The Geopolitics of Israel: Biblical and Modern

from: Stratfor

The founding principle of geopolitics is that place — geography — plays a significant role in determining how nations will behave. If that theory is true, then there ought to be a deep continuity in a nation's foreign policy. Israel is a laboratory for this theory, since it has existed in three different manifestations in roughly the same place, twice in antiquity and once in modernity. If geopolitics is correct, then Israeli foreign policy, independent of policymakers, technology or the identity of neighbors, ought to have important common features. This is, therefore, a discussion of common principles in Israeli foreign policy over nearly 3,000 years.


For convenience, we will use the term "Israel" to connote all of the Hebrew and Jewish entities that have existed in the Levant since the invasion of the region as chronicled in the Book of Joshua. As always, geopolitics requires a consideration of three dimensions: the internal geopolitics of Israel, the interaction of Israel and the immediate neighbors who share borders with it, and Israel's interaction with what we will call great powers, beyond Israel's borderlands.

Israel's first manifestation, map

Israel has manifested itself three times in history. The first manifestation began with the invasion led by Joshua and lasted through its division into two kingdoms, the Babylonian conquest of the Kingdom of Judah and the deportation to Babylon early in the sixth century B.C. The second manifestation began when Israel was recreated in 540 B.C. by the Persians, who had defeated the Babylonians. The nature of this second manifestation changed in the fourth century B.C., when Greece overran the Persian Empire and Israel, and again in the first century B.C., when the Romans conquered the region.

The second manifestation saw Israel as a small actor within the framework of larger imperial powers, a situation that lasted until the destruction of the Jewish vassal state by the Romans.

Israel's third manifestation began in 1948, following (as in the other cases) an ingathering of t least some of the Jews who had been dispersed after conquests. Israel's founding takes place in the context of the decline and fall of the British Empire and must, at least in part, be understood as part of British imperial history.

During its first 50 years, Israel plays a pivotal role in the confrontation of the United States and the Soviet Union and, in some senses, is hostage to the dynamics of these two countries. In other words, like the first two manifestations of Israel, the third finds Israel continually struggling among independence, internal tension and imperial ambition.
Israel's second manifestation, map

Israeli Geography and Borderlands

At its height, under King David, Israel extended from the Sinai to the Euphrates, encompassing Damascus. It occupied some, but relatively little, of the coastal region, an area beginning at what today is Haifa and running south to Jaffa, just north of today's Tel Aviv. The coastal area to the north was held by Phoenicia, the area to the south by Philistines. It is essential to understand that Israel's size and shape shifted over time. For example, Judah under the Hasmoneans did not include the Negev but did include the Golan. The general locale of Israel is fixed. Its precise borders have never been.

Israel's third manifestation, map

Thus, it is perhaps better to begin with what never was part of Israel. Israel never included the Sinai Peninsula. Along the coast, it never stretched much farther north than the Litani River in today's Lebanon. Apart from David's extreme extension (and fairly tenuous control) to the north, Israel's territory never stretched as far as Damascus, although it frequently held the Golan Heights. Israel extended many times to both sides of the Jordan but never deep into the Jordanian Desert. It never extended southeast into the Arabian Peninsula.

Israel consists generally of three parts. First, it always has had the northern hill region, stretching from the foothills of Mount Hermon south to Jerusalem. Second, it always contains some of the coastal plain from today's Tel Aviv north to Haifa. Third, it occupies area between Jerusalem and the Jordan River — today's West Bank. At times, it controls all or part of the Negev, including the coastal region between the Sinai to the Tel Aviv area. It may be larger than this at various times in history, and sometimes smaller, but it normally holds all or part of these three regions.

Israel's geography and borderlands, map

Israel is well-buffered in three directions. The Sinai Desert protects it against the Egyptians. In general, the Sinai has held little attraction for the Egyptians. The difficulty of deploying forces in the eastern Sinai poses severe logistical problems for them, particularly during a prolonged presence. Unless Egypt can rapidly move through the Sinai north into the coastal plain, where it can sustain its forces more readily, deploying in the Sinai is difficult and unrewarding. Therefore, so long as Israel is not so weak as to make an attack on the coastal plain a viable option, or unless Egypt is motivated by an outside imperial power, Israel does not face a threat from the southwest.

Israel is similarly protected from the southeast. The deserts southeast of Eilat-Aqaba are virtually impassable. No large force could approach from that direction, although smaller raiding parties could. The tribes of the Arabian Peninsula lack the reach or the size to pose a threat to Israel, unless massed and aligned with other forces. Even then, the approach from the southeast is not one that they are likely to take. The Negev is secure from that direction.

The eastern approaches are similarly secured by desert, which begins about 20 to 30 miles east of the Jordan River. While indigenous forces exist in the borderland east of the Jordan, they lack the numbers to be able to penetrate decisively west of the Jordan. Indeed, the normal model is that, so long as Israel controls Judea and Samaria (the modern-day West Bank), then the East Bank of the Jordan River is under the political and sometimes military domination of Israel — sometimes directly through settlement, sometimes indirectly through political influence, or economic or security leverage.

Israel's vulnerability is in the north. There is no natural buffer between Phoenicia and its successor entities (today's Lebanon) to the direct north. The best defense line for Israel in the north is the Litani River, but this is not an insurmountable boundary under any circumstance. However, the area along the coast north of Israel does not present a serious threat. The coastal area prospers through trade in the Mediterranean basin. It is oriented toward the sea and to the trade routes to the east, not to the south. If it does anything, this area protects those trade routes and has no appetite for a conflict that might disrupt trade. It stays out of Israel's way, for the most part.

Moreover, as a commercial area, this region is generally wealthy, a factor that increases predators around it and social conflict within. It is an area prone to instability. Israel frequently tries to extend its influence northward for commercial reasons, as one of the predators, and this can entangle Israel in its regional politics. But barring this self-induced problem, the threat to Israel from the north is minimal, despite the absence of natural boundaries and the large population. On occasion, there is spillover of conflicts from the north, but not to a degree that might threaten regime survival in Israel.

The neighbor that is always a threat lies to the northeast. Syria — or, more precisely, the area governed by Damascus at any time — is populous and frequently has no direct outlet to the sea. It is, therefore, generally poor. The area to its north, Asia Minor, is heavily mountainous. Syria cannot project power to the north except with great difficulty, but powers in Asia Minor can move south. Syria's eastern flank is buffered by a desert that stretches to the Euphrates. Therefore, when there is no threat from the north, Syria's interest — after securing itself internally — is to gain access to the coast. Its primary channel is directly westward, toward the rich cities of the northern Levantine coast, with which it trades heavily. An alternative interest is southwestward, toward the southern Levantine coast controlled by Israel.

As can be seen, Syria can be interested in Israel only selectively. When it is interested, it has a serious battle problem. To attack Israel, it would have to strike between Mount Hermon and the Sea of Galilee, an area about 25 miles wide. The Syrians potentially can attack south of the sea, but only if they are prepared to fight through this region and then attack on extended supply lines. If an attack is mounted along the main route, Syrian forces must descend the Golan Heights and then fight through the hilly Galilee before reaching the coastal plain — sometimes with guerrillas holding out in the Galilean hills. The Galilee is an area that is relatively easy to defend and difficult to attack. Therefore, it is only once Syria takes the Galilee, and can control its lines of supply against guerrilla attack, that its real battle begins.

To reach the coast or move toward Jerusalem, Syria must fight through a plain in front of a line of low hills. This is the decisive battleground where massed Israeli forces, close to lines of supply, can defend against dispersed Syrian forces on extended lines of supply. It is no accident that Megiddo — or Armageddon, as the plain is sometimes referred to — has apocalyptic meaning. This is the point at which any move from Syria would be decided. But a Syrian offensive would have a tough fight to reach Megiddo, and a tougher one as it deploys on the plain.

On the surface, Israel lacks strategic depth, but this is true only on the surface. It faces limited threats from southern neighbors. To its east, it faces only a narrow strip of populated area east of the Jordan. To the north, there is a maritime commercial entity. Syria operating alone, forced through the narrow gap of the Mount Hermon-Galilee line and operating on extended supply lines, can be dealt with readily.

There is a risk of simultaneous attacks from multiple directions. Depending on the forces deployed and the degree of coordination between them, this can pose a problem for Israel. However, even here the Israelis have the tremendous advantage of fighting on interior lines. Egypt and Syria, fighting on external lines (and widely separated fronts), would have enormous difficulty transferring forces from one front to another. Israel, on interior lines (fronts close to each other with good transportation), would be able to move its forces from front to front rapidly, allowing for sequential engagement and thereby the defeat of enemies. Unless enemies are carefully coordinated and initiate war simultaneously — and deploy substantially superior force on at least one front — Israel can initiate war at a time of its choosing or else move its forces rapidly between fronts, negating much of the advantage of size that the attackers might have.

There is another aspect to the problem of multifront war. Egypt usually has minimal interests along the Levant, having its own coast and an orientation to the south toward the headwaters of the Nile. On the rare occasions when Egypt does move through the Sinai and attacks to the north and northeast, it is in an expansionary mode. By the time it consolidates and exploits the coastal plain, it would be powerful enough to threaten Syria. From Syria's point of view, the only thing more dangerous than Israel is an Egypt in control of Israel. Therefore, the probability of a coordinated north-south strike at Israel is rare, is rarely coordinated and usually is not designed to be a mortal blow. It is defeated by Israel's strategic advantage of interior lines.

Israeli Geography and the Convergence Zone

Therefore, it is not surprising that Israel's first incarnation lasted as long as it did — some five centuries. What is interesting and what must be considered is why Israel (now considered as the northern kingdom) was defeated by the Assyrians and Judea, then defeated by Babylon. To understand this, we need to consider the broader geography of Israel's location.

Israel is located on the eastern shore of the Mediterranean Sea, on the Levant. As we have seen, when Israel is intact, it will tend to be the dominant power in the Levant. Therefore, Israeli resources must generally be dedicated for land warfare, leaving little over for naval warfare. In general, although Israel had excellent harbors and access to wood for shipbuilding, it never was a major Mediterranean naval power. It never projected power into the sea. The area to the north of Israel has always been a maritime power, but Israel, the area south of Mount Hermon, was always forced to be a land power.

The Levant in general and Israel in particular has always been a magnet for great powers. No Mediterranean empire could be fully secure unless it controlled the Levant. Whether it was Rome or Carthage, a Mediterranean empire that wanted to control both the northern and southern littorals needed to anchor its eastern flank on the Levant. For one thing, without the Levant, a Mediterranean power would be entirely dependent on sea lanes for controlling the other shore. Moving troops solely by sea creates transport limitations and logistical problems. It also leaves imperial lines vulnerable to interdiction — sometimes merely from pirates, a problem that plagued Rome's sea transport. A land bridge, or a land bridge with minimal water crossings that can be easily defended, is a vital supplement to the sea for the movement of large numbers of troops. Once the Hellespont is crossed, the coastal route through southern Turkey, down the Levant and along the Mediterranean's southern shore, provides such an alternative.

There is an additional consideration. If a Mediterranean empire leaves the Levant unoccupied, it opens the door to the possibility of a great power originating to the east seizing the ports of the Levant and challenging the Mediterranean power for maritime domination. In short, control of the Levant binds a Mediterranean empire together while denying a challenger from the east the opportunity to enter the Mediterranean. Holding the Levant, and controlling Israel, is a necessary preventive measure for a Mediterranean empire.

Israel is also important to any empire originating to the east of Israel, either in the Tigris-Euphrates basin or in Persia. For either, security could be assured only once it had an anchor on the Levant. Macedonian expansion under Alexander demonstrated that a power controlling Levantine and Turkish ports could support aggressive operations far to the east, to the Hindu Kush and beyond. While Turkish ports might have sufficed for offensive operations, simply securing the Bosporus still left the southern flank exposed. Therefore, by holding the Levant, an eastern power protected itself against attacks from Mediterranean powers.

The Levant was also important to any empire originating to the north or south of Israel. If Egypt decided to move beyond the Nile Basin and North Africa eastward, it would move first through the Sinai and then northward along the coastal plain, securing sea lanes to Egypt. When Asia Minor powers such as the Ottoman Empire developed, there was a natural tendency to move southward to control the eastern Mediterranean. The Levant is the crossroads of continents, and Israel lies in the path of many imperial ambitions.

Israel therefore occupies what might be called the convergence zone of the Eastern Hemisphere. A European power trying to dominate the Mediterranean or expand eastward, an eastern power trying to dominate the space between the Hindu Kush and the Mediterranean, a North African power moving toward the east, or a northern power moving south — all must converge on the eastern coast of the Mediterranean and therefore on Israel. Of these, the European power and the eastern power must be the most concerned with Israel. For either, there is no choice but to secure it as an anchor.

Internal Geopolitics

Israel is geographically divided into three regions, which traditionally have produced three different types of people. Its coastal plain facilitates commerce, serving as the interface between eastern trade routes and the sea. It is the home of merchants and manufacturers, cosmopolitans — not as cosmopolitan as Phoenicia or Lebanon, but cosmopolitan for Israel. The northeast is hill country, closest to the unruliness north of the Litani River and to the Syrian threat. It breeds farmers and warriors. The area south of Jerusalem is hard desert country, more conducive to herdsman and warriors than anything else. Jerusalem is where these three regions are balanced and governed.

There are obviously deep differences built into Israel's geography and inhabitants, particularly between the herdsmen of the southern deserts and the northern hill dwellers. The coastal dwellers, rich but less warlike than the others, hold the balance or are the prize to be pursued. In the division of the original kingdom between Israel and Judea, we saw the alliance of the coast with the Galilee, while Jerusalem was held by the desert dwellers. The consequence of the division was that Israel in the north ultimately was conquered by Assyrians from the northeast, while Babylon was able to swallow Judea.

Social divisions in Israel obviously do not have to follow geographical lines. However, over time, these divisions must manifest themselves. For example, the coastal plain is inherently more cosmopolitan than the rest of the country. The interests of its inhabitants lie more with trading partners in the Mediterranean and the rest of the world than with their countrymen. Their standard of living is higher, and their commitment to traditions is lower. Therefore, there is an inherent tension between their immediate interests and those of the Galileans, who live more precarious, warlike lives. Countries can be divided over lesser issues — and when Israel is divided, it is vulnerable even to regional threats.

We say "even" because geography dictates that regional threats are less menacing than might be expected. The fact that Israel would be outnumbered demographically should all its neighbors turn on it is less important than the fact that it has adequate buffers in most directions, that the ability of neighbors to coordinate an attack is minimal and that their appetite for such an attack is even less. The single threat that Israel faces from the northeast can readily be managed if the Israelis create a united front there. When Israel was overrun by a Damascus-based power, it was deeply divided internally.

It is important to add one consideration to our discussion of buffers, which is diplomacy. The main neighbors of Israel are Egyptians, Syrians and those who live on the east bank of Jordan. This last group is a negligible force demographically, and the interests of the Syrians and Egyptians are widely divergent. Egypt's interests are to the south and west of its territory; the Sinai holds no attraction. Syria is always threatened from multiple directions, and alliance with Egypt adds little to its security. Therefore, under the worst of circumstances, Egypt and Syria have difficulty supporting each other. Under the best of circumstances, from Israel's point of view, it can reach a political accommodation with Egypt, securing its southwestern frontier politically as well as by geography, thus freeing Israel to concentrate on the northern threats and opportunities.

Israel and the Great Powers

The threat to Israel rarely comes from the region, except when the Israelis are divided internally. The conquests of Israel occur when powers not adjacent to it begin forming empires. Babylon, Persia, Macedonia, Rome, Turkey and Britain all controlled Israel politically, sometimes for worse and sometimes for better. Each dominated it militarily, but none was a neighbor of Israel. This is a consistent pattern. Israel can resist its neighbors; danger arises when more distant powers begin playing imperial games. Empires can bring force to bear that Israel cannot resist.

Israel therefore has this problem: It would be secure if it could confine itself to protecting its interests from neighbors, but it cannot confine itself because its geographic location invariably draws larger, more distant powers toward Israel. Therefore, while Israel's military can focus only on immediate interests, its diplomatic interests must look much further. Israel is constantly entangled with global interests (as the globe is defined at any point), seeking to deflect and align with broader global powers. When it fails in this diplomacy, the consequences can be catastrophic.

Israel exists in three conditions. First, it can be a completely independent state. This condition occurs when there are no major imperial powers external to the region. We might call this the David model. Second, it can live as part of an imperial system — either as a subordinate ally, as a moderately autonomous entity or as a satrapy. In any case, it maintains its identity but loses room for independent maneuvering in foreign policy and potentially in domestic policy. We might call this the Persian model in its most beneficent form. Finally, Israel can be completely crushed — with mass deportations and migrations, with a complete loss of autonomy and minimal residual autonomy. We might call this the Babylonian model.

The Davidic model exists primarily when there is no external imperial power needing control of the Levant that is in a position either to send direct force or to support surrogates in the immediate region. The Persian model exists when Israel aligns itself with the foreign policy interests of such an imperial power, to its own benefit. The Babylonian model exists when Israel miscalculates on the broader balance of power and attempts to resist an emerging hegemon. When we look at Israeli behavior over time, the periods when Israel does not confront hegemonic powers outside the region are not rare, but are far less common than when it is confronting them.

Given the period of the first iteration of Israel, it would be too much to say that the Davidic model rarely comes into play, but certainly since that time, variations of the Persian and Babylonian models have dominated. The reason is geographic. Israel is normally of interest to outside powers because of its strategic position. While Israel can deal with local challenges effectively, it cannot deal with broader challenges. It lacks the economic or military weight to resist. Therefore, it is normally in the process of managing broader threats or collapsing because of them.

The Geopolitics of Contemporary Israel

Let us then turn to the contemporary manifestation of Israel. Israel was recreated because of the interaction between a regional great power, the Ottoman Empire, and a global power, Great Britain. During its expansionary phase, the Ottoman Empire sought to dominate the eastern Mediterranean as well as both its northern and southern coasts. One thrust went through the Balkans toward central Europe. The other was toward Egypt. Inevitably, this required that the Ottomans secure the Levant.

For the British, the focus on the eastern Mediterranean was as the primary sea lane to India. As such, Gibraltar and the Suez were crucial. The importance of the Suez was such that the presence of a hostile, major naval force in the eastern Mediterranean represented a direct threat to British interests. It followed that defeating the Ottoman Empire during World War I and breaking its residual naval power was critical. The British, as was shown at Gallipoli, lacked the resources to break the Ottoman Empire by main force. They resorted to a series of alliances with local forces to undermine the Ottomans. One was an alliance with Bedouin tribes in the Arabian Peninsula; others involved covert agreements with anti-Turkish, Arab interests from the Levant to the Persian Gulf. A third, minor thrust was aligning with Jewish interests globally, particularly those interested in the refounding of Israel. Britain had little interest in this goal, but saw such discussions as part of the process of destabilizing the Ottomans.

The strategy worked. Under an agreement with France, the Ottoman province of Syria was divided into two parts on a line roughly running east-west between the sea and Mount Hermon. The northern part was given to France and divided into Lebanon and a rump Syria entity. The southern part was given to Britain and was called Palestine, after the Ottoman administrative district Filistina. Given the complex politics of the Arabian Peninsula, the British had to find a home for a group of Hashemites, which they located on the east bank of the Jordan River and designated, for want of a better name, the Trans-Jordan — the other side of the Jordan. Palestine looked very much like traditional Israel.

The ideological foundations of Zionism are not our concern here, nor are the pre- and post-World War II migrations of Jews, although those are certainly critical. What is important for purposes of this analysis are two things: First, the British emerged economically and militarily crippled from World War II and unable to retain their global empire, Palestine included. Second, the two global powers that emerged after World War II — the United States and the Soviet Union — were engaged in an intense struggle for the eastern Mediterranean after World War II, as can be seen in the Greek and Turkish issues at that time. Neither wanted to see the British Empire survive, each wanted the Levant, and neither was prepared to make a decisive move to take it.

Both the United States and the Soviet Union saw the re-creation of Israel as an opportunity to introduce their power to the Levant. The Soviets thought they might have some influence over Israel due to ideology. The Americans thought they might have some influence given the role of American Jews in the founding. Neither was thinking particularly clearly about the matter, because neither had truly found its balance after World War II. Both knew the Levant was important, but neither saw the Levant as a central battleground at that moment. Israel slipped through the cracks.

Once the question of Jewish unity was settled through ruthless action by David Ben Gurion's government, Israel faced a simultaneous threat from all of its immediate neighbors. However, as we have seen, the threat in 1948 was more apparent than real. The northern Levant, Lebanon, was fundamentally disunited — far more interested in regional maritime trade and concerned about control from Damascus. It posed no real threat to Israel. Jordan, settling the eastern bank of the Jordan River, was an outside power that had been transplanted into the region and was more concerned about native Arabs — the Palestinians — than about Israel. The Jordanians secretly collaborated with Israel. Egypt did pose a threat, but its ability to maintain lines of supply across the Sinai was severely limited and its genuine interest in engaging and destroying Israel was more rhetorical than real. As usual, the Egyptians could not afford the level of effort needed to move into the Levant. Syria by itself had a very real interest in Israel's defeat, but by itself was incapable of decisive action.

The exterior lines of Israel's neighbors prevented effective, concerted action. Israel's interior lines permitted efficient deployment and redeployment of force. It was not obvious at the time, but in retrospect we can see that once Israel existed, was united and had even limited military force, its survival was guaranteed. That is, so long as no great power was opposed to its existence.

From its founding until the Camp David Accords re-established the Sinai as a buffer with Egypt, Israel's strategic problem was this: So long as Egypt was in the Sinai, Israel's national security requirements outstripped its military capabilities. It could not simultaneously field an army, maintain its civilian economy and produce all the weapons and supplies needed for war. Israel had to align itself with great powers who saw an opportunity to pursue other interests by arming Israel.

Israel's first patron was the Soviet Union — through Czechoslovakia — which supplied weapons before and after 1948 in the hopes of using Israel to gain a foothold in the eastern Mediterranean. Israel, aware of the risks of losing autonomy, also moved into a relationship with a declining great power that was fighting to retain its empire: France. Struggling to hold onto Algeria and in constant tension with Arabs, France saw Israel as a natural ally. And apart from the operation against Suez in 1956, Israel saw in France a patron that was not in a position to reduce Israeli autonomy. However, with the end of the Algerian war and the realignment of France in the Arab world, Israel became a liability to France and, after 1967, Israel lost French patronage.

Israel did not become a serious ally of the Americans until after 1967. Such an alliance was in the American interest. The United States had, as a strategic imperative, the goal of keeping the Soviet navy out of the Mediterranean or, at least, blocking its unfettered access. That meant that Turkey, controlling the Bosporus, had to be kept in the American bloc. Syria and Iraq shifted policies in the late 1950s and by the mid-1960s had been armed by the Soviets. This made Turkey's position precarious: If the Soviets pressed from the north while Syria and Iraq pressed from the south, the outcome would be uncertain, to say the least, and the global balance of power was at stake.

The United States used Iran to divert Iraq's attention. Israel was equally useful in diverting Syria's attention. So long as Israel threatened Syria from the south, it could not divert its forces to the north. That helped secure Turkey at a relatively low cost in aid and risk. By aligning itself with the interests of a great power, Israel lost some of its room for maneuver: For example, in 1973, it was limited by the United States in what it could do to Egypt. But those limitations aside, it remained autonomous internally and generally free to pursue its strategic interests.

The end of hostilities with Egypt, guaranteed by the Sinai buffer zone, created a new era for Israel. Egypt was restored to its traditional position, Jordan was a marginal power on the east bank, Lebanon was in its normal, unstable mode, and only Syria was a threat. However, it was a threat that Israel could easily deal with. Syria by itself could not threaten the survival of Israel.

Following Camp David (an ironic name), Israel was in its Davidic model, in a somewhat modified sense. Its survival was not at stake. Its problems — the domination of a large, hostile population and managing events in the northern Levant — were subcritical (meaning that, though these were not easy tasks, they did not represent fundamental threats to national survival, so long as Israel retained national unity). When unified, Israel has never been threatened by its neighbors. Geography dictates against it.

Israel's danger will come only if a great power seeks to dominate the Mediterranean Basin or to occupy the region between Afghanistan and the Mediterranean. In the short period since the fall of the Soviet Union, this has been impossible. There has been no great power with the appetite and the will for such an adventure. But 15 years is not even a generation, and Israel must measure its history in centuries.

It is the nature of the international system to seek balance. The primary reality of the world today is the overwhelming power of the United States. The United States makes few demands on Israel that matter. However, it is the nature of things that the United States threatens the interests of other great powers who, individually weak, will try to form coalitions against it. Inevitably, such coalitions will arise. That will be the next point of danger for Israel.

In the event of a global rivalry, the United States might place onerous requirements on Israel. Alternatively, great powers might move into the Jordan River valley or ally with Syria, move into Lebanon or ally with Israel. The historical attraction of the eastern shore of the Mediterranean would focus the attention of such a power and lead to attempts to assert control over the Mediterranean or create a secure Middle Eastern empire. In either event, or some of the others discussed, it would create a circumstance in which Israel might face a Babylonian catastrophe or be forced into some variation of a Persian or Roman subjugation.

Israel's danger is not a Palestinian rising. Palestinian agitation is an irritant that Israel can manage so long as it does not undermine Israeli unity. Whether it is managed by domination or by granting the Palestinians a vassal state matters little. Nor can Israel be threatened by its neighbors. Even a unified attack by Syria and Egypt would fail, for the reasons discussed. Israel's real threat, as can be seen in history, lies in the event of internal division and/or a great power, coveting Israel's geographical position, marshalling force that is beyond its capacity to resist. Even that can be managed if Israel has a patron whose interests involve denying the coast to another power.

Israel's reality is this. It is a small country, yet must manage threats arising far outside of its region. It can survive only if it maneuvers with great powers commanding enormously greater resources. Israel cannot match the resources and, therefore, it must be constantly clever. There are periods when it is relatively safe because of great power alignments, but its normal condition is one of global unease. No nation can be clever forever, and Israel's history shows that some form of subordination is inevitable. Indeed, it is to a very limited extent subordinate to the United States now.

For Israel, the retention of a Davidic independence is difficult. Israel's strategy must be to manage its subordination effectively by dealing with its patron cleverly, as it did with Persia. But cleverness is not a geopolitical concept. It is not permanent, and it is not assured. And that is the perpetual crisis of Jerusalem.

Friday, May 6, 2011

If It Is Time To Sell Gold Then Why Are Central Banks Hoarding Gold Like Crazy?


Has the time to sell gold now arrived?  Before you start dumping all of your gold, you might want to check out what central banks all over the globe have been doing.  There is some serious hoarding of gold that is going on.  For most of the past two decades, central banks have been net sellers of gold, but now many of them are gobbling up gold as fast as they can.


So why would they be doing this if gold was not a good investment?  Yes, we did see gold, silver and oil all take a very serious tumble today.  That is what happens sometimes - global financial markets are so unstable at this point that even a piece of relatively minor news can set off a bit of a panic in one direction or another.  But the long-term trend for gold has been up, up, up and it look like the central banks around the world continue to expect the price of gold to soar over the long-term.

The central bank of Mexico gobbled up almost 100 tons of gold during February and March alone.

So how much is 100 tons of gold?

The following is how The Economic Policy Journal is describing the significance of this purchase....
The purchase is one of the largest by a central bank in recent history. The gold is worth $4.6 billion at current prices and is equivalent to about 3.5 per cent of annual mined output
But it isn't just Mexico that is buying up gold.  As an article on Bloomberg recently noted, countries such as Russia and Thailand have also been very busy hoarding gold this year....
Russia increased its reserves by 18.8 tons to 811.1 tons in March and Thailand expanded assets by 9.3 tons to 108.9 tons in the same month
As faith in the U.S. dollar and other major global currencies falters, the big central banks around the globe are making sure that they have plenty of precious metals on hand.

According to Business Insider, the following are the top ten gold hoarding countries in the world....

#1 United States: 8134 tons of gold (although there are many that would dispute this figure for the United States)

#2 Germany: 3401 tons of gold

#3 Italy: 2452 tons of gold

#4 France: 2435 tons of gold

#5 China: 1054 tons of gold

#6 Switzerland: 1040 tons of gold

#7 Russia: 792 tons of gold

#8 Japan: 756 tons of gold

#9 Netherlands: 613 tons of gold

#10 India: 558 tons of gold

In particular, China has been rapidly moving up the list in recent years.

As I have written about previously, China now gobbles up 25 percent of all global gold production.

The following are ten facts about the gold fever that has erupted in China....

#1 According to the World Gold Council, China consumed 579.5 tons of gold during 2010.  The United States only consumed 233.3 tons.

#2 China has been importing gold at a feverish pace.  In fact, China imported five times as much gold in 2010 as it did during 2009.

#3 The Chinese appetite for gold only seems to be accelerating in 2011.  The Industrial and Commercial Bank of China sold approximately 15 tons of physical gold in 2010.  That was a huge amount.  But during the month of January alone, the bank sold approximately 7 tons of physical gold.  The growth in the demand for gold in 2011 is being called "explosive" by executives at the bank.

#4 Chinese demand for gold has now risen to approximately 25% of total global production.

#5 Investment demand for gold in China soared by a whopping 70 percent during 2010.

#6 It is being projected that China’s gold investment demand will grow another 40 to 50 percent during 2011.

#7 Consumers in China and India now account for more than half of all global demand for gold jewelry and gold coins.

#8 Chinese households have purchased almost half as much gold since mid-2007 as all the investors in the West combined.

#9 On the Shanghai Gold Exchange, trading volume soared 43 percent during the first 10 months of 2010.

#10 China replaced South Africa as the number one gold producer in the world back in 2007.  China's gold mines produced an all-time record 340 tons of gold last year.

So don't be too hasty to dump all of your gold.

Just like with anything else in today's financial world, the price of gold is likely to continue to experience wild swings in price from one day to another.

But the long-term trend is clearly up.

In the end, the U.S. dollar and all other major global currencies are going to fail.

When that day arrives, you will be much better off holding gold than holding a whole lot of worthless paper.

article from: endoftheamericandream.com