Saudi Arabia

Current US Treasury issuance is relatively low due to sequestration and (at least temporarily) less US warmongering in the Middle East. That's about to change, of course, now that the US is getting ready to launch a Cruise missile attack on Syria (we’re already been arming and financing the opposition rebels, including groups directly linked to al-Qaeda for several years now). Bernanke and the Fed doves would like nothing better than another “controlled” war in the Mideast, because with war comes massive debt issuance, and with massive debt issuance comes the transmission mechanism (QE) for monetizing that debt and mainlining it onto the Wall Street banks' broken balance sheets. And yes, they’re still broken, and Ben is still bailing them out at the expense of the American middle class. Make no mistake, Jamie Dimon, Lloyd Blankfein, and every other complicit banker on the Street has no problem with this, or any other, war, regardless of whether such a conflict would destabilize the entire region and would almost assuredly pull Russia and China into the fray. The more the merrier, just keep letting that free QE monopoly money roll in from the 4X weekly Federal Reserve Permanent Open Market Operations (POMO’s).  And with the significant financing needs for a large war effort in the Middle East, say good-bye to “Taper.”

Yesterday we implied a difficult question when we illustrated the huge size of US Treasury bond holdings that China and Russia have between them - accounting for 25% of all foreign held debt - implicitly funding US standards of living (along with the Federal Reserve). The difficult question is "Can the U.S. really afford to greatly anger the rest of the world when they are the ones that are paying our bills?" What is going to happen if China, Russia and many other large nations stop buying our debt and start rapidly dumping U.S. debt that they already own? If the United States is not very careful, it is going to pay a tremendous economic price for taking military action in Syria.

“Will we help Syria? We will,” the Russian leader said recalling that Russia had already been helping Syria through arms supplies and economic and humanitarian cooperation, including provision of humanitarian aid. In reply to the question what other country in the world may theoretically be subjected to aggression similar to that Syria is facing, Putin said, “I do not want to think that any other country will be subjected to any external aggression.” A military action against Syria will have a highly deplorable impact on international security at large, Putin emphasized. He said he was surprised to see that ever more participants in the summit, including the leader of India, Brazil, the South African Republic, and Indonesia were speaking vehemently against a possible military operation in Syria. Putin cited the words of the South African President, Jacob Zuma, who said many countries were feeling unprotected against such actions undertaken by stronger countries.

Next week Congress can do far more than stop a feckless Tomahawk barrage on a small country which is already a graveyard of civil war and sectarian slaughter. By voting “no” it can trigger the end of the American Imperium - five decades of incessant meddling, bullying and subversion around the globe which has added precious little to national security, but left America fiscally exhausted and morally diminished. By long standing historical demonstration, the US Congress specializes in paralysis, indecision and dysfunction. In the end, that is how the American warfare state will be finally brought to heel and why the American Imperium will come to an end - at last.

As we asked (rhetorically, of course) over 3 months ago, why has the little nation of Qatar spent 3 billion dollars to support the rebels in Syria?  Could it be because Qatar is the largest exporter of liquid natural gas in the world and Assad won't let them build a natural gas pipeline through Syria?  Of course.  Qatar wants to install a puppet regime in Syria that will allow them to build a pipeline which will enable them to sell lots and lots of natural gas to Europe. If the U.S. is successful in getting rid of the Assad regime, it will be good for either the Saudis or Qatar (and possibly for both), and it will be really bad for Russia.  This is a strategic geopolitical conflict about natural resources, religion and money, and it really has nothing to do with chemical weapons at all...

When last week the revised Q2 GDP print was announced, which beat expectations solidly driven entirely by a surge in net exports, we said that "with China on the rocks and tightening, the Emerging Markets in free fall, and Europe still a net exporter (so not benefiting the US), anyone hoping this trade led-recovery will be sustainable, will be disappointed." Sure enough, the first trade data update for the third quarter as of July, confirmed just this, as the trade deficit widenedfrom a revised $34.5 billion deficit, to a substantially larger monthly deficit, amounting to $39.1 billion. This was $500MM more than consensus expected, or $38.6 billion, and it means that as we predicted, the downward revisions to Q3 tracking estimates are about to start rolling in, trimming ~0.1%-0.2% from US GDP for this current quarter. Specifically, imports for the month rose from $225.1 billion to $228.6 billion while exports fell from $190.5 billion to $189.5 billion. But perhaps most notable is that in July, the US trade deficit with China and the EU rose to a record of $30.1 billion (from $26.6bn last month) and $13.9 billion (from $7.1bn) respectively.

After a modestly weak start, India's FX and stock markets accelerated lower overnight in the currency's second biggest daily collapse in 17 years, and stocks second biggest daily plunge in 2 years. Rubbing further salt into an already gaping wound of capital outflows, S&P re-iterated its downgrade threat overnight following India dismal PMI print and this appears to have pushed the Indian government to Plan D. Following the failure to halt outflows of Plan A (status quo and blame it on the Fed/Speculators), Plan B (well something is up so 'capital controls' on FX and tariffs on gold), Plan C (that's not working so let's confiscate people's gold), the Indian government is trial-ballooning Plan D - ditch the USD for trade-payments (especially oil which is up 50% in INR terms in 4 months).

The conclusions I have come to are somewhat threatening in the short term, but even more disconcerting in the intermediate term, as the developing image is exposing a crystal clear picture of the ominous resource wars looming directly ahead. Equally dismaying, are the "honorable distinguished gentlemen" presiding over this Middle East mayhem, which are showing themselves to be either grossly incompetent cretins or dangerous duplicitous megalomaniacs

Equity futures stormed out of the gate on initial relief that a Syria attack may be avoided, which sent oil and the PM complex flash crashing lower. However, overnight, sentiment shifted that the Syrian escalation is at best delayed and as a result Brent regained all losses, with the precious metals also largely unchanged from Friday's close. Futures on the other hand, were perfectly happy to rise on the transitory Syrian risk moderation reduction, and then continue rising when Syria returned to the forefront, this time prodded higher by PMI exuberance out of China and Europe. How credible such manufacturing data remains to be seen. A surging USDJPY was also rather helpful, with the pair breaching 99.00 stops to the upside shortly after the European PMI data printed. And with the cash US market closed, and electronic equity trade halted at 10:30 Central, it is unlikely that concerns about all those "other" things that will define September, will seep in and it is likely the HFTs will push equities to session highs before reopening for the Tuesday trading.

While it is unknown is the US is suddenly focusing more on non-Cyprus based air support in the aftermath of the Cypriot decision to prohibit the launch of air strikes from its territory (just in time following a Russian agreement to restructure Cyprus debt), what is known, according to Reuters, is that while broad popular opinion is that the war drums are beating far more quietly following Obama's Saturday punt to Congress (a decision which can certainly still go either way), the US has decided to reroute CVN-68 USS Nimitz, and other ships in its strike group including four destroyers, in direction west toward the Red Sea "to help support a limited U.S. strike on Syria, if needed, defense officials said on Sunday."

Someone wants to get the United States into a war with Syria very, very badly.  Cui bono is an old Latin phrase that is still commonly used, and it roughly means "to whose benefit?"  The key to figuring out who is really behind the push for war is to look at who will benefit from that war.  If a full-blown war erupts between the United States and Syria, it will not be good for the United States, it will not be good for Israel, it will not be good for Syria, it will not be good for Iran and it will not be good for Hezbollah.  The party that stands to benefit the most is Saudi Arabia, and they won't even be doing any of the fighting. 

The most likely path of collapse to take place within the U.S. includes economic destabilization caused by a loss of the dollar's world reserve status and petro-status.  This fiscal crisis event will likely not occur in the midst of a political vacuum.  The central banks and international financiers that created our ongoing and developing disaster are not going to allow the destruction of the American economy, the dollar, or global markets without a cover event designed to hide their culpability.  They need something big.  Something so big that the average citizen is overwhelmed with fear and confusion.  A smoke and mirrors magic trick so raw and soul shattering it leaves the very population of the Earth mesmerized and helpless to understand the root of the nightmare before them.  The elites need a fabricated Apocalypse. Enter Syria...

WWhile there may have been a verbal attempt by the Obama administration to diffuse Syrian tensions in the aftermath of Thursday's shocker out of the House of Commons, the action on the ground so far is hardly conciliatory. Or rather water, because a sixth US warship has now anchored in proximity to Syria, joining the recently arrived fifth destroyer USS Stout, which joined the warships already "breathing down Assad's neck." From AP: "Five U.S. Navy destroyers - the USS Gravely, USS Mahan, USS Barry, the USS Stout and USS Ramage - are in the eastern Mediterranean Sea waiting for the order to launch. And the USS San Antonio, an amphibious assault ship has now joined them. The USS San Antonio, which is carrying helicopters and can carry up to 800 Marines, has no cruise missiles, so it is not expected to participate in the attack. Instead, the ship's long-planned transit across the Mediterranean was interrupted so that it could remain in the area to help if needed." So in addition to a cruise missile based force, the US is now bringing in the marines? The justification that they are there "just in case" seems a little shallow in context.

If Barack Obama is going to attack Syria, he is going to do it without the support of the American people, without the approval of Congress, without the approval of the United Nations, and without the help of the British.  Now that the British Parliament has voted against a military strike, the Obama administration is saying that it may take "unilateral action" against Syria. Unfortunately for the Obama administration, the world is not buying it.  In fact, people are seeing right through this charade. The following are 25 quotes about the coming war with Syria that every American should see...

The present picture for the oil price looks increasingly bullish once more. Citi asks, is this a replay of the dynamics seen in the 1970’s? We hope not... but the feedback loop (from oil prices) to the economy and markets is undeniable...