Let The Drugs Flow in Afghanistan

Charts: The S&P 500 broke under the key support level of 1333 yesterday in big volume. The 50-day exponential moving average is 1327. Breaking below that level is bad. The 50-day moving average is 1323. It could be very bad if the 50-day doesn't hold.

Fundamentals: Corrections in this bull market have all come from the problems associated with Greek sovereign debt. Greek GDP needs to grow at 13% to service its current debt load without default. The rescue packages have so far been designed to kick the can down the road until Greece's economy starts growing again. It has been a year since the first rescue and the Greek economy is growing between negative 3% and positive 0.7%. The weak GDP performance is because Greece won't sell hundreds of money losing state owned companies and restructure in other ways. If it did this it still wouldn't grow at 13%, but bond yields would come down so it wouldn't need impossible growth rates to survive. If Greece defaults on its bonds, then the European Central Bank would need to be recapitalized and several large French and German banks would too. The impact would be about the same as Lehman's collapse on financial markets.

Long War: Since we are talking about what "should" happen in Greece, let's do the same to the war in Af/Pak. OBL was very good at tapping wealthy Saudi's for millions and then funneling cash to the Taliban and Al-Qaeda. Now that OBL is gone, the Taliban is almost 100% reliant on heroin sales for funding, which is hundreds of millions yearly, much bigger than Saudi donations. If the CIA were totally in charge of the war it would stop America's anti-drug crusade in Afghanistan and would instead take over the drug trade and funnel the money into the war effort. It already does this to a small degree with Ahmid Karzai (Pres. Karzai's brother). If left alone it would expand this concept and could actually win the war in a few years. At some point it could emphasize pot production over heroin and gradually move away from the narco-state model, but really the eons-old problem that all of Mankind has with drugs is nothing compared to the current danger of an escalating Long War. The CIA is very good at choosing between the lesser of two evils.

Congress cannot choose between decaf and regular coffee. The more Congress gets involved in the war the more it wants to wipe out drug trafficking, which helps the Taliban by driving trafficking deep underground and by the simple fact that drug eradication simply does not work; consider the war on drugs in Mexico. So this is what "should" happen in Af/Pak: Congress, the White House and the DEA need to stop running the show and let the Pentagon/CIA take over. The western media needs to get kicked out of the battle torn country so unsavory but necessary steps can be executed. This is what Gen. Petraeus will try to do when he takes over CIA.