Ya Gotta Have Faith

Barclays recently admitted to '"fixing" interest rates illegally. Faith is usually a religious term, or a phrase from a George Michael song. But actually, our whole economic system is based on faith.

While a roofer will ask for a portion of the fee before beginning the job, it is the last payment that holds all the profit for the contractor. He has to have faith that the final payment will be made. And the home owner who gives the initial payment has to have faith that the roofer will not disappear before the job is done. 

Here in Idyllwild a few years ago we had a contractor who was promising to build log homes at a very competitive price—too competitive. One customer came to my retail lumber business. We told him the competitor’s price was too low—but the customer had faith. That was a mistake. He lost his 25% deposit—and we ended up with the contract to supply the lumber for the house. 

If we lose faith in each other and in the system, the system will collapse. 

I mentioned before a game my boys and I played on the Shoney kids’ meal menu. You flipped a coin to move. Heads you went one space, tails you went two. There was one spot on the map where you could not progress unless you could move three spaces. We had no three sided coin. We quit playing the game when we understood that the game was unplayable. 

Our faith in the system, like the unfortunate customer I mentioned, may be is misplaced.

The show “Capital Account” talks about this.

LIBOR Rate Rigging

I did not watch all of this video because I am mobile this week, and mobile data rates are pricey. 

But I saw enough of it to want to blog about it. If something as basic as the LIBOR bank rate is fraudulent, as is shown in this video, then everything is fraudulent. It will get to the point where markets will break down because no one can trust anyone else. 

The LIBOR bank rate is a base rate that is used to estimate interest rates, and many contracts use the rate to determine that rate of interest in the contract. Fraud at such a basic level is extremely disturbing. 

The Band Played Waltzing Matilda

A Colossal Gamble

What Will War Do To Our Debt?It seems to me that our foreign policy is a colossal gamble. 

I recently shared an article on Facebook from the Economic Collapse blog. The article gave 17 reasons to be concerned about the economy—derivatives, the European crisis, bank runs, and so on. Each of these scenarios is possible, but none of them likely, or likely to be bad enough to cause economic collapse. 

But the article does not mention the biggest risk I see on our horizon, the coming war with Iran. 

The hubris of the ruling class is amazing. It is like an ancient Greek play. In such a play, the character flaws of the characters bring about their fall. Such plays often had a chorus that told the characters of their impending doom. The characters in the play were blind, deaf, and dumb.

Or maybe it is like a modern teen slasher movie. The pretty blonde makes her way toward the door. Her hand reaches for the door. "No!" we shout, "Do not open it!" She opens it. Her body is found later. 

"No, No, Obamney. Do not open that door."

But will Obamney listen? 

Here is one list of the potential landmines in our path to war. 

The United States will be drawn into war with Russia. Russian special forces are already stationed in Syria to guard a Russian navy port in the coastal city of Tartus. Russia is also massing troops along its southern border for deployment to Iran. This means that any U.S. attack on either Syria or Iraq will likely lead to direct engagements with Russian military forces.

The U.S. military will suffer much heavier casualties than anticipated. Syria’s anti-aircraft capability is robust, and Russia is boosting it further. Iran has both Chinese “Silkworm” and Russian made “Sunburn” anti-ship missiles in its arsenal. A single missile can sink a large warship. One war game simulation predicts that Iran will retaliate against any naval attack with massive missile launches against U.S. navy forces and kill up to 20,000 U.S. military personnel in just the first 24 hours of the conflict.

Iran and Syria will escalate proxy wars against the United States and U.S. allies, such as Israel. Count on attacks on Israel from both Lebanon and the Gaza Strip and on possible suicide bombings in the United Kingdom and perhaps even the United States.

Iran will deploy tens of thousands of mines to block the Strait of Hormuz, through which about 20% of the world’s oil supply flows. While there’s little question the United States has the military capability to clear the mines, military experts predict it could take months to do so. In the intervening months, oil prices will skyrocket.

Russia will block natural gas exports to Europe in an effort to drive a wedge between the United States and its European allies. About 25% of Europe’s natural gas supplies come from Russia. Coming on top of the euro crisis, a cutoff in Russian gas supplies could tip Europe into a depression. 

Is it worth the risk? 

Tim Hawkins-I Am No Rock Star

I hve not seen all of this, but I thought we could all use something lighter.