US Employs Global Strategy For 1st Time

Charts: The S&P 500 closed at 1100, up .42%. This is the second day the index has traded above the 100-day moving average, further technical evidence that the recent correction was a garden variety one. Chartists will want to see at least 4 days above the 100 day line before blowing the all clear whistle. There is a very worrisome inverse dynamic between Greek debt yields ebbing and rising yield on the US ten-year note. As the bond vigilantes stop attacking Greek debt, they start attacking American debt.

Fundamentals: Over 70 years ago John Maynard Keynes proposed a quite valid theory that said the business cycle could be smoothed out if governments ran big surpluses in boom times and deficits in downturns. America and most major economies are not practicing Keynesian policies with today’s stimulus programs because they run big deficits in boom times and bigger deficits in downturns. The effect of this pseudo-Keynesianism is best understood by another economic theory called Ricardian Equivalence (RE), which says that for every dollar of stimulus spent by a heavily indebted government the private sector will hold back a dollar as savings for future tax increases. Empirical data shows that RE is completely valid once debt loads reach a certain level and the trillions of dollars of government stimulus during the Great Recession has been hurting the world recovery. But there is huge political pressure to cut government spending; which we are seeing in Greece and elsewhere. What this all means is that the recovery will grow stronger if government spending is cut.

Geopolitics: 1100 elite Afghan paramilitary police are being deployed in Marja and other key towns in Helmand Province. The deployment is coming one month ahead of schedule. Several hundred more paramilitary cops are in the wings, ready to go. NATO and Afghan soldiers have seized most of their targeted positions in Marja and are moving to link these positions together into a seamless web that will engulf the entire region, placing it under control of the good guys.
Reports of Karzai’s government negotiating peace deals with various Taliban factions are coming with greater frequency. One such meeting was supposed to have occurred recently on the Maldives Islands. It is certainly true that some bad guys will negotiate in bad faith, play possum, and strike back at the good guys at a later date. Nevertheless, all this talk of bad guys surrendering is good news.
In Mogadishu, Somali Army and African Union troops continue to mass against Al Shabab. This will be the biggest and best organized offensive against the bad guys yet, a hopeful sign.
In Yemen, the Houthi rebels have left all their positions that were arrayed against the Saudi Army in the north of the country.
It is impressive that the US has been able to coordinate the action in Yemen and Somalia with the Battle for Marja, the first instance of a global US strategy in 31 years of fighting the Long War. On the other hand, this shows how the sluggish superpower is just beginning to respond as if it there is a global conflict. A long road stretches ahead. Centuries of road, in fact.