Through The Lens of The Long War

Long War: The Stock Market is experiencing a historic correction. There hasn't been a downturn this bad in decades. It has many causes, primarily the sovereign debt crisis, which has spread to Italy and Spain, countries that are so big if they need to be bailed out the Euro-zone will be bankrupt. But you can read about all this in the Wall Street Journal. Today let's look at the stock market melt down through the lens of the Long War.

The bill that just raised America's debt ceiling only pretends to cut domestic spending while it actually slashes the budgets of the Pentagon and the CIA. It is unexpected and shocking that the CIA should be singled out for draconian cuts. It would be far better to eliminate aircraft carrier battle groups and actually increase the CIA's budget. That is not in the cards.

Consider recent Long War events... Gaddafi announced he is forming an alliance with Islamic radicals in rebel controlled Libya. Through his son, he is saying that after defeating the rebels, Libya will become a Jihadist nation, like Iran. His alliance has already born fruit, it seems to be responsible for the assassination of the rebels top general. Al-Qaeda will be only too happy to cozy up to Gaddafi, who still has access to billions of dollars in hard currency and gold.

There is a small CIA presence in Libya. But for it to handle a problem of this size there should be a huge presence. Unfortunately there is yet another resolution waiting in the wings of Congress to curtail America's involvement in the Libya War. While bad guys across the globe may tremble at the might of the CIA, the Agency itself trembles in fear of the US Congress. Right now Washington DC is saying it is okay to lose a war. This stance, if fully implemented, has a 100% correlation with a bear market.

And finally, in recent days, the Islamic rebellions in China and Thailand have flared up dramatically. Obviously the US Army is not going to land in Thailand or China. The Long War is morphing into a conflict that only the CIA can deal with.

There are currently three Long War type wars in oil producing regions (Libya, Sudan, and Yemen), this is jacking up the price of oil and crushing global growth. The debt crisis has only one solution: more growth. Every actor in the crisis has cut government spending as much as it will be cut. The Euro-Zone countries have austerity budgets in place. America has made cuts to the war fighters and that is all that will be cut. Growth will only come with lower oil prices.