“Russia sent more tanks, troops and rocket launchers in the breakaway Georgian region of South Ossetia this morning amid fears that it is planning a new front against Georgia in the west,” reports the Times.
The escalation of hostilities between Russia and Georgia is noteworthy to investors.
Russia and Georgia now are in a war and former Russian President Vladimir Putin is clear about his lack of desire to consider the ceasefire the world is demanding. Even President Bush has called the action “disproportionate” and yet Russia is not listening.
Keep in mind, America is an ally of Georgia. Georgia has troops fighting side by side with U.S. troops in Iraq. Therefore I would imagine they will look to friends for help. That is why it is so important to examine the initial response from Russia.
Putin, while denying claims that he targeted pipelines, is having a hard time selling that to the international community. The Baku-Tbilisi-Ceyhan pipeline carries oil that is headed for the West to the Mediterranean Sea, much of that oil finds its way to America.
The fact that strategic oil pipelines were targeted is a clear indication that Putin is willing to use the strained oil markets as political leverage in defeating the Georgians. Russians fight wars to win.
Russia is the second largest producer of crude in the world and they have been rather quiet since the Soviet Union’s breakup. But make no mistake about it. Russia is a powerful nation, with a huge military and nuclear weapons. Putin is KGB all the way and a very good friend of the Iranians.
Russia is one of the strong voices telling the world to leave Iran alone in its pursuit of nuclear capacity. Russia provides nuclear technology and material to Iran’s nuclear program. Iran is a good customer.
So why is the dollar unaffected, oil stable and gold prices down after being stronger in Europe all night?
Simple: The world is in a slowdown and many are expecting currencies that have been extremely strong to weaken and weak currencies to strengthen. The belief in “demand destruction” for all commodities is dominating the traders’ attention and as such we are seeing a sell-off.
Only one problem.
Gold is more than just a commodity, it is a stable currency. If gold simply was a commodity, supply and demand would dictate price. Since 2001, gold investment has been transformed primarily from being seen as a commodity to now being seen for what it really is: the ultimate global currency. A currency that is inflation proof and immune from collapse.
America’s founding fathers said money must have four basic characteristics: 1) Scarcity 2) Portability 3) Divisibility, and 4) Dependability as a Store of Value. “The dollar is slowly becoming an I-O-U nothing,” former Fed economist John Exter once said. Why? Because real money must be derived from a commodity or it will eventually become fraudulent money.
The dollar has been in a bear market for 36 years. Gold prices fell to 2008 lows today on recent dollar strength but that strength will be short-lived, just as it has been since 1972 when the long-term downtrend for the dollar began. Sure there are periods of recovery, but each rally has failed. All bear market sucker rallies do just that. They suck people in just before the next drop.
This week will be crucial in determining whether the dollar has broken free from its 36-year downward trend as we get the latest figures on the U.S. trade deficit and inflation. I expect both to expand faster, thus bringing the dollar rally to an end.
If the action in Russia doesn’t calm this week, we should see upward pressure on oil and gold prices. Any major disruptions of natural gas or crude out of Russia may be viewed as an act of aggression to other nations, not just Georgia.
Now is a time to focus on keeping your money safe by diversifying assets out of paper and into tangibles – including the world’s most stable currency – gold.
Craig R. Smith is an author, commentator and popular media guest because he instantly engages audiences with his common-sense analyses of local, national and global trends. Serving as CEO of Swiss America for over 25 years, Craig understands that Americans want solid answers to the tough questions and that real leadership begins with servanthood. Craig’s most recent book is “ Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil ,” which he co-authored with WND columnist Jerome R. Corsi . For media interviews please call Holly at 800-950-2428.