Today the currency markets are flirting with the U.S. dollar cash index at 103.80. The breakpoint to new lows for the dollar will occur when the index breaks and holds below 103.50.
On a parallel track, Jim Sinclair an expert in precious metals – famous for managing the damage of the Hunt brothers’ failed attempt to corner the silver market – raised two talking points regarding the inverse strength of gold against the dollar.
First, Sinclair talked about how the “discovery” process in the lawsuit by 9-11 victims against Saudi financiers might cause the Saudis to exacerbate a pre-existing systemic weakness in the dollar. Second, he talked about the announced acceleration of an Islamic gold currency tied to the Euro aimed at replacing the dollar as the world’s reserve currency. Both these action items are Saudi initiatives and they are designed to weaken the United States.
Dramatic moves to weaken the dollar, and to strengthen gold, are a direct Saudi retaliation related to U.S. involvement in the Middle East. Saudi Arabia now wages an undeclared economic war on the United States.
A main justifier for U.S. military involvement in Iraq resides in the fact that we as a nation need to throttle in the more dangerous near term threat of Saudi Arabia. Iraqi “weapons of mass destruction,” hidden from view in the Sudan, are a long-term issue but Saudi Arabia represents the largest near-term security problem and danger to the United States.
With the recent weakness in the dollar we may be seeing the opening salvos in a conventional economic war. Conventional wars are waged economically.
In parallel, the United States may have to counter both asymmetric and multiple conventional wars in Afghanistan, several nations in the Middle East, and perhaps parts of Asia.
The tendency in this war will be that multiple international issues and escalations will occur concurrently in different theaters of operations around the world. As the United States moves towards Iraq, Saudi Arabia will push back economically. The United States may also need to counter exploratory aggression both from terrorists, hostile nations such as Saudi Arabia, and rogue nations such as North Korea and Iran.
The Achilles heel of the United States resides in the preservation and continuity of its economic and technological dominance. Some natural economic forces causing a downturn in the U.S. economy and dollar may be accelerated by intentioned international economic warfare.
Warren Pollock has been published in the Journal of Homeland Security and is recognized as an expert on the survivability of financial-trading systems. His insights have been used in other publications such as the Intellibridge Homeland Security Monitor and on CNBC.
