Signs of the Economic Apocalypse, 5-15-06

From Signs of the Times, 5-15-06:

Gold closed at 716.00 dollars an ounce on Friday, up 4.5% from $685.20 at the end of the previous week. The dollar closed at 0.7737 euros Friday, down 1.5% from 0.7854 for the week. The euro, then, closed at 1.2926, up from 1.2732 dollars compared to the end of the week before. Gold in euros would be 553.92 euros an ounce, up 2.9% from 538.17 for the week. Oil closed at 72.04 dollars a barrel, up 2.9% from $70.01 at the end of the previous week. Oil in euros would be 55.73 euros a barrel, up 1.3% from 54.99 for the week. The gold/oil ratio closed at 9.94, up 1.5% from 9.79. In the U.S. stock market, the Dow closed at 11,380.99 on Friday, down 1.7% from 11,577.74 at the end of the previous week. The NASDAQ fell sharply, closing at 2,243.78, down 4.4 % from 2,342.57 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 5.19%, up nine basis points from 5.10 at the previous week’s close.

The signs are ominous for the U.S. and world economy. Gold continued its sharp rise, especially in dollar terms, and oil seems to have renewed its climb after a brief pause. The dollar continued to fall. This week, however, saw a decrease in the U.S. stock market after it had approached an all-time high. The political crisis in the United States worsened last week as well, with Bush’s approval rating falling below 30%; soon he will be the most unpopular president since the beginning of polling. This week may see an indictment of Karl Rove. Significantly, the mainstream media is paying attention to all of these stories. Even cautious establishment outlets like National Public Radio has pundits worrying that Bush’s position is so hopeless he will launch an attack on Iran as a desperate, last-ditch attempt to salvage enough popularity to avoid prison (by keeping Congress in Republican hands). Not surprisingly, then, last week also saw the release of some bad consumer sentiment numbers in the United States, showing the sharpest drop in consumer confidence since Hurricane Katrina.

Let’s look at gold and the dollar. A whole range of evidence points to a currency collapse for the dollar. The problem is, this has never happened to the supposed “sole superpower” in the world. The fall of the dollar, which has so far been steady and not catastrophic, may be in for a few sharp shocks ending in disaster. Here’s a look at how it might unfold:

How does a currency collapse? And the U.S. $?
Excerpts From – “Gold Forecaster – Global Watch”
May 8, 2006
http://www.goldforecaster.com/

When a currency loses the confidence of its people, its fall becomes exponential, as has happened to the Zimbabwe $, where in 1982 one U.S.$ equalled 1 Zimbabwe $. Today around Z$200,000 buys one U.S. $ if you can find someone idiot enough to sell one for the Z$.

In day-to-day terms, the smallest note in Zimbabwe a Z$500 is the size of a U.S.$. The price of a single-ply sheet of toilet paper is more expensive at around Z$867.

The U.S.$ is nowhere near there, but clearly the U.S. Administration has no plan or even desire to rectify the U.S. Trade deficit. Consequently, we are seeing a growing number of Central Banks turning to the Euro for its reserves and away from the U.S.$.

Whilst most observers and particularly U.S. observers like to have tangible facts and numbers with which to mathematically gauge the present and the different possible futures, a collapsing currency situation is not as neatly gaugeable. Indeed it is driven in stages of ‘confidence’, which are rarely measurable in advance.

For instance we see today the move of the Pension and other long-term funds into the gold E.T.F.’ one finds there are no mathematically measurable factors with which to measure the pace of change to these funds. Yes, the number of ‘Road-shows’ the World Gold Council does affects this move to some extent, but how do you measure the spread of that knowledge and resulting investment in the E.T.F.’s outside of that? How does one measure the forces causing uncertainty and falling ‘confidence’.

It is an emotional progression, one that moves in lurches as particular incidents destroy confidence limb by limb. In such a climate a steady degeneration of confidence lead to an effect we shall call a "plateau - cliff" process.

• As confidence is whittled away the currency appears relatively stable.

• Then a particular event will occur that triggers a breakdown and the currency drops suddenly, like falling off a cliff, until it finds a short-term bottom and it holds that level for a period as though on a plateau. The process then repeats itself.

• The degeneration then accelerates, so the fall from the cliff to the next stable plateau happens more quickly.

• Then the height of the cliff [the fall] extends until it grows at an exponential basis.

• The final collapse will occur when the currency is completely discredited and used only by those unfortunate to have no other choice. Alternatively the currency is changed to a new one, one whose issue is backed by assets [Such as land - after the Weimar republic] and limited to a fixed relationship to those assets until confidence is restored by a healthy economy and a balanced Balance of Payments. This provides a basis in which to be confident about currency.

However, were the $ heading for a collapse, the U.S. $, a global reserve asset, nothing in the U.S. such as land or any other fixed U.S. asset would suffice. The asset would have to be accessible by its creditors, outside the States who would have to have a willingness to accept that asset in the case of a default by the U.S. The use of the $ domestically and internationally brings such problems that in the final extreme conditions the $ is inadequate as a global reserve currency. But for the market to whittle away confidence in the $ would take some time. But we believe that it will happen.

• Look back a couple of years and we saw the $ reigning supreme.

• Then warnings were given against it as the Trade deficit began to grow.

• The Fed or the Administration then allied itself to the euro, giving it the respite it has enjoyed over the last year.

• Now there seems to be a breaking down of the $ of late and some Central Banks switching to the Euro out of the $. These were three distinct stages.

• The next stage is for the $ to fall heavily against the Euro and Euro oriented currencies.

• Next will come the defence of the $ until the weight of selling pressure exhausts the $ against other currencies [please note the U.S. has few foreign currencies left in its hands with which to defend the $, but the Fed put in place measures to allow it intervene in the international foreign exchanges.]

• This could delay the fall for some time, but history has shown that when a Central Bank defends a rate in the market, it gives in periodically and devalues. If insufficient it has to defend again and again.

• I have no doubt that Central Banks will use this defence to unload their dollars back to the States.

• At some stage the U.S. will have to impose Controls to prevent foreign capital from exiting the States and rejecting dollars coming home. These are called Exchange Controls.

• When this happens many currencies will begin facing the same problems as their reserves become suspect too and they cannot defend their own Balance of Payments deficits.

• At this point for the global economy to function adequately, a new “Global Currency” will have to be established and be supplied sufficient so as to regain global confidence. We cannot see this happening without gold in there to a greater or lesser extent. Of course this will have to be at prices believed by all nations, not just individuals!

During this process confidence in the currency will be the measuring factor, a nebulous, unstable element in itself. The process of the decay of confidence is described above. But confidence could well go down dramatically from the point we are at now with the $ in the monetary system. Soon the cliffs will extend until the defence of the currency comes, then a long plateau while the dollar is defended, until the heavy falls begin…

Even Alan Greenspan’s predecessor as Fed Chairman, Paul Volcker, is sounding the alarm.

"A Really High Gold Price"

By Eric J. Fry

On Tuesday, the Ben Bernanke hiked short-term interest rates to 5% - the 16th straight quarter-point increase – and promised to continue hiking rates "if the data warrant." Over the ensuing three days, global stock marketshave stumbled, the dollar has dropped 2% and the gold price has skyrocketed more than $50.

These financial data are probably not the sort of "data" that Bernanke had in mind, but they are exactly the sort that might warrant a 17th or 18th or 25th rate hike...as a desperate effort to defend the U.S. dollar.

…At $730 an ounce, the gold price has reached its highest level since thebeginning of the Volcker era. But beyond this superficial connection, the two eras possess very few obvious similarities, "obvious" being the operative word. Based on the prevailing economic [view], Volcker faced a far more dire situation than Bernanke faces. But we fear that the reality is exactly the opposite.

"Ben Bernanke," writes Ambrose Evans-Pritchard for the Telegraph of London," picks up a chalice brimming with the nastiest of toxins: a current account deficit of 7% of GDP, covered for now by fickle flows of capital from the Chinesecentral bank and petro-dollar sheikhdoms; a negative flow of global investments earnings for the first time in modern memory; a dollar hanging by a political thread; and hair- raising levels of debt."

Volker's chalice, by comparison was brimming with milk and honey. In 1979, America produced a current account surplus and boasted a national savings rate of nearly 10%. Today, both of these essential balance sheet line-items are in thered.

Meanwhile, we have amassed a few trillion dollars of government debt since the Volcker era. Our crippled national balance sheet, therefore, raises the risk ofserious economic crisis, should the dollar's slump become a rout.

And now that the dollar is slumping, while gold is soaring, the unimaginable rout of the dollar is becoming a bit too imaginable.

"How much longer can the dollar's supremacy last?" Paul Volker wondered aloud at the Grant's Interest Rate Observer Conference last month. "And what's the endgame?"

Implicit in Volcker's musing was the clear suggestion that the dollar's days are numbered. "Does this go on forever?" he asked rhetorically about the financing of Americanconsumption by foreign creditors. "What kind of pyramid can you build?"

"There seem to me to be a lot of unknowns that are facing this de facto world currency called the U.S. dollar and its increasing importance in the world," Volcker concluded. "Does that increase in importance have some natural limit?And if so, what is the endgame?"

"In response to the question posed by Paul Volcker," James Grant remarked, "not a few of the Grant's conferenceattendees had an answer at the ready: 'A really high gold price.'"

Asian central banks seem to be quietly losing confidence in the dollar. Quietly because they want to plan their escape from the burden of holding so many dollars and have everything in place before it happens. They can’t afford to spook the market just yet, but the following column which appeared on Bloomberg has a startling quote from China’s vice Minister of Finance:

Asia Is Getting Ready to Dump the Dollar Peg: Andy Mukherjee

May 8 (Bloomberg) -- Li Yong, China's vice minister for finance, said he had heard a “rumor” that the U.S. dollar was headed for a 25 percent drop. If the gossip was true, the consequences would be “shocking,” he said.

Li's comment, which he made at a discussion on global financial imbalances last week at the annual meeting of the Asian Development Bank in the Indian city of Hyderabad, was aimed directly at fellow panelist Tim Adams, the U.S. Treasury undersecretary of international affairs.

The unspoken message was: “Don't try to talk the dollar down.” And Adams knew better than to ask, “Well, what are you going to do about it?” The answer to that question has already begun taking shape: Asia may be getting ready to fix its currencies to a local anchor, dumping the region's unofficial dollar peg.

Even as they continue to pile up U.S. debt in their foreign- exchange reserves to keep their currencies stable against the dollar, Asian nations, China among them, are preparing for a scenario where the dollar does indeed collapse under the weight of a record U.S. current account deficit.

At the Hyderabad meeting, finance ministers of China, Japan and South Korea got together with their counterparts from the Association of Southeast Asian Nations, or Asean. The 13-nation group said it would sponsor a research project, titled “Toward greater financial stability in the Asian region: Exploring steps to create regional monetary units.”

Asian Currency Unit

This is no innocuous academic exercise. Regional monetary units are a euphemism for a parallel Asian currency, an idea that has been around since the 1997-98 financial crisis and is now, for the first time, entering the realm of policy making.

Both Japan and China are extremely serious about it and are vying to take ownership of the project.

An Asian Currency Unit, or ACU, will be an index that seeks to capture the value of a hypothetical Asian currency by taking a weighted average of several of them. The weight for a particular currency in the index may be determined by the size of the economy and the quantity of its total trade.

What's the big deal with the ACU? Given the data, anyone can set up an index. It isn't that Asia is talking about replacing its national currencies with the ACU. A European-style single currency in Asia is at least decades away. The ACU is an accounting unit; it won't change hands in the physical world.

The ACU will start making a difference when it becomes the fulcrum of exchange-rate management in Asia. There is some sign that Asian nations want to do just that.

A New Peg

Korea, Japan and China agreed in Hyderabad to “immediately launch discussions on the road map for a system to coordinate foreign exchange policy.”

The ACU can help a lot in such coordination. It can become a basket peg against which any Asian nation can fix the value of its currency within a band. The ACU, itself, will float.

Why might the ACU work when the now-defunct European Currency Unit, on which the concept is modeled, didn't? One good reason, as noted by economist Barry Eichengreen of the University of California, Berkeley, is that Europe's need for a parallel currency was satisfied by the dollar.

The ACU may well emerge as a viable currency for denominating export invoices, bank loans and bond issuances if the dollar is no longer perceived as a safe storage of value.

So far, Japan has been driving the ACU concept. Haruhiko Kuroda, a former Japanese vice minister of finance and currently the president of the Asian Development Bank, was vigorously pursuing it. The ADB was going to start computing and publishing several ACUs sometime this year.

China in Control

One such ACU would have comprised 13 members, including the Japanese yen, the Chinese yuan, the Korean won and the currencies of Singapore, Malaysia, Thailand, Indonesia, Brunei, Vietnam, Cambodia, Laos, Myanmar and the Philippines. Another ACU would have included both the yuan and the Taiwan dollar -- and that would have been anathema to China. Nor would China have liked to peg the yuan to an ACU that was overly dominated by the yen.

Now China has taken control. While the research will still be conducted in Japan, Asean will take the decision on the composition of the ACU. While Japan is a member of this club, its influence is in decline. The association is now firmly under China's thumb.

While China continues to exhort the U.S. not to follow weak- dollar policies, it, like everyone else, can only guess about the longevity of the present global imbalances.

If there is a sudden collapse in the dollar, the U.S. appetite for imported goods may vanish. The Chinese export engine may seize up and its fragile banking system may collapse under a spate of new bad loans. The idea behind the ACU is to buy some insurance, however inadequate, against all of this.

Stalemate

With its “my currency is your problem” attitude, the U.S. has made a negotiated settlement of global imbalances a diplomatic non-starter. China isn't willing to consider the U.S. argument that quicker appreciation of the yuan may prevent a costly adjustment later.

Once again in Hyderabad, Undersecretary Adams tried valiantly to get this message across to Chinese Vice Finance Minister Li. He was wasting his breath.
Li, as Adams noted wryly, “knows all my talking points.”

The fact that this correction of a massive structural imbalance in the world economy coincides with the looming collapse of a world politcal and military hegemony makes the situation all the more perilous. The following article published last week by William Engdahl details how the United States, in a desperate roll of the dice, just lost the Great Game:

America’s Geopolitical Nightmare and Eurasian Strategic Energy Arrangements

F. William Engdahl, May 7, 2006

Part I: The disintegration of the Bush Presidency

By drawing attention to Iraq and the obvious role oil plays in US policy today, the Bush-Cheney administration has done just that: They have drawn the world’s energy-deficit powers’ attention firmly to the strategic battle over energy and especially oil. This is already having consequences for the global economy in terms of $75 a barrel crude oil price levels. Now it is taking on the dimension of what one former US Defense Secretary rightly calls a ‘geopolitical nightmare’ for the United States.

The creation by Bush-Cheney-Rumsfeld and company of a geopolitical nightmare, is also the backdrop to comprehend the dramatic political shift within the US establishment in the past six months, away from the Bush Presidency. Simply put: Bush/Cheney and their band of neo-conservative warhawks, with their special relationship to the capacities of Israel in Iraq and across the Mideast, were given a chance.

The chance was to deliver on the US strategic goal of control of petroleum resources globally, in order to ensure the US role as first among equals over the next decade and beyond. Not only have they failed to ‘deliver’ that goal of US strategic dominance. They have also threatened the very basis of continued US hegemony or as the Rumsfeld Pentagon likes to term it, ‘Full Spectrum Dominance.’ The move by Bolivian President Evo Morales, following meetings with Velezuela’s Hugo Chavez and Fidel Castro, to assert national control over oil and gas resources is only the latest demonstration of the decline in US power projection…

Part II: Disintegration of US Eurasia Strategic Influence

A Foreign Policy disaster over China

In this context, the recent diplomatic insult from Bush to visiting China President Hu Jintao, is doubly disastrous for the US foreign position. Bush acted on a script written by the anti-China neo -conservatives, to deliberately insult and humiliate Hu at the White House. First was the incident of allowing a Taiwanese ‘journalist,’ a Falun Gong member, into the carefully-screened White House press conference, to rant in a tirade against Chinese human rights for more than three minutes, with no attempt at removal, at a White House filmed press conference. Then came the playing of the Chinese National Hymn for Hu. The ‘Chinese’ hymn, however, was the (Taiwan) Republic of China hymn, not the (Beijing) Peoples’ Republic hymn.

It was no ‘slip-up by the professional White House protocol people. It was a deliberate effort to humiliate the Chinese leader. The problem is that the US economy has become dependent on Chinese trade imports and on Chinese holdings of US Treasury securities. China today is the largest holder of dollar reserves in form of US Treasury paper with an estimated $825 billion. Were Beijing to decide to exit the US bond market, even in part, it would cause a dollar free-fall and collapse of the $7 trillion US real estate market, a wave of US bank failures and huge unemployment. It’s a real option even if unlikely at the moment.

China’s Hu didn’s waste time or tears over the Bush affront. He immediately went on to Saudi Arabia for a 3 day state visit where both signed trade, defense and security agreements. Needless to say, this is no small slap in the fact to Washington by the traditionally ‘loyal’ Saudi Royal House.

Hu signed a deal for SABIC of Saudi Arabia to build a $5.2 billion oil refinery and petrochemical project in northeast China. At the beginning of this year, King Abdullah was in Beijing for a full state visit. Hmmmmm…Since the Roosevelt-King Ibn Saud deal giving US Aramco and not the British exclusive concession to develop Saudi oil in 1943, Saudi Arabia has been regarded in Washington as a core strategic sphere of interest.

Hu then went on to Morocco, another traditional US sphere of interest, Nigeria and Kenya, all regarded as US spheres of interest. Hmmmm. Only two months ago Rumsfeld was in Morocco to offer US arms. Hu is offering to finance energy exploration there.

The SCO and Iran events

The latest developments around the Shanghai Cooperation Organization (SCO) and Iran further underscore the dramatic change in the geopolitical position of the United States.

The SCO was created in Shanghai on June 15, 2001 by Russia and China along with four former USSR Central Asian republics-- Kazakhstan, Kyrgystan, Tajikistan and Uzbekistan. Prior to September 11 2001, and the US declaration of an Axis of Evil in January 2002, the SCO was merely background geopolitical chatter as far as Washington was concerned. Today the SCO, which has to date been blacked out almost entirely in US mainstream media, is defining a new political counterweight to US hegemony and its ‘one-polar’ world.

At the next June 15 2006 SCO meeting, Iran has been invited to become a full SCO member.

Last month in Teheran, the Chinese Ambassador, Lio G Tan announced that a pending oil and gas deal between China and Iran is ready to be signed.

The deal is said to be worth at least $100 billion, and includes development of the huge Yadavaran onshore oil field. China’s Sinopec would agree to buy 250 million tons of LNG over 25 years. No wonder China is not jumping to back Washington against Iran in the UN Security Council. The US had been trying to put massive pressure on Beijing to halt the deal, for obvious geopolitical reasons, to no avail. Another major defeat for Washington.

Iran is also moving on plans to deliver natural gas via a pipeline to Pakistan and India. Energy ministers from the three countries met in Doha recently and plan to meet again this month in Pakistan.

The pipeline progress is a direct rebuff to Washington's efforts to steer investors clear of Iran. Ironically, US opposition is driving these countries into each others’ arms, Washington’s ‘geopolitical nightmare.’

At the same June 15 SCO meeting, India, which Bush is personally attempting to woo as a geopolitical Asian ‘counterweight’ to China, will also be invited to join SCO. As well, Mongolia and Pakistan will be invited to join SCO. SCO is gaining in geopolitical throw-weight quite substantially.

Iran’s Deputy Foreign Minister Manouchehr Mohammadi told ITAR-Tass in Moscow in April that Iranian membership in SCO could ‘make the world more fair.’ He also spoke of building an Iran -Russia ‘gas-and-oil arc’ in which the two giant energy producers would coordinate activities.

US out in cold in Central Asia

The admission of Iran into SCO opens many new options for Iran and the region. By virtue of SCO membership, Iran can now take part in SCO projects, which in turn means access to badly-needed technology, investment, trade, infrastructure development. It will have major implications for global energy security.

The SCO has reportedly set up a working group of experts ahead of the June summit to develop a common SCO Asian energy strategy, and discuss joint pipeline projects, oil exploration and related activities. Iran sits on the world’s second largest natural gas reserves, and Russia has the largest. Russia is the world’s second largest oil producer after Saudi Arabia. These are no small moves.

India is desperate to come to terms with Iran for energy but is being pressured by Washington not to.

The Bush Administration last year tried to get ‘observer status’ at SCO but was turned down. The rebuff - along with SCO's demands for a reduced American military presence in Central Asia, deeper Russia-China cooperation and the setbacks to US diplomacy in Central Asia – have prompted a policy review in Washington.

After her October 2005 Central Asian tour, Secretary of State Condoleezza Rice announced re-organization of the US State Department's South Asia Bureau to include the Central Asian states, and a new US ‘Greater Central Asia’ scheme.
Washington is trying to wean Central Asian states away from Russia and China. Hamid Karzai's government in Kabul has not responded to SCO's overtures. Given his ties historically to Washington, he likely has little choice.

Gennady Yefstafiyev, a former general in Russia's Foreign Intelligence Service, says, ‘The US's long term goals in Iran are obvious: to engineer the downfall of the current regime; to establish control over Iran's oil and gas; and to use its territory as the shortest route for the transportation of hydrocarbons under US control from the regions of Central Asia and the Caspian Sea bypassing Russia and China. This is not to mention Iran's intrinsic military and strategic significance.’

Washington had based its strategy on Kazakhstan being its key partner in Central Asia. The US wants to expand its physical control over Kazakhstan's oil reserves and formalize Kazakh oil transportation via Baku-Ceyhan pipeline, as well as creating the dominant US role in Caspian Sea security. But Kazakhstan isn’t playing ball. President Nursultan Nazarbayev went to Moscow on April 3 to reaffirm his continued dependence on Russian oil pipelines. And China, as we noted back in December, is making major energy and pipeline deals with Kazakhstan as well. To make Washington’s geopolitical problems worse, despite securing a major US military basing deal with Uzbekistan after September 2001, Washington's relations with Uzbekistan today are disastrous. The US effort to isolate President Islam Karimov, along lines of the Ukraine ‘Orange Revolution’ tactics, is not working. Indian Prime Minister Manmohan Singh visited Tashkent in late April.

As well, Tajikistan relies heavily on Russia's support. In Kyrgyzstan, despite covert US attempts to create dissensions within the regime, President Burmanbek Bakiyev's alliance with Moscow-backed Prime Minister Felix Kulov, is holding.

In the space of 12 months Russia and China have managed to move the pieces on the geopolitical ‘chess board’ of Eurasia away from what had been an overwhelming US strategic advantage, to the opposite, where the US is increasingly isolated. It’s potentially the greatest strategic defeat for the US power projection of the post World War II period…

At least the fall of the U.S. Empire offers some hope for Latin America. Here’s the syndicated columnist, Charley Reese:

Capitalism Wasn't Working In Bolivia

Charley Reese

Bolivia's newly-elected president, Evo Morales, has nationalized the nation's oil-and-gas industry and says he will nationalize the timber and mining industries, too.

Good for him. Capitalism was obviously not working in Bolivia. How else can you explain that a nation rich in oil, gas and minerals is the poorest nation in South America? Obviously, the nation's wealth was not flowing to the people.

I confess I have no sympathy for corporations, multinational or otherwise. As a noted English cleric observed, the corporation "has neither a body to kick nor a soul to damn." Typically, multinational corporations find it is cheaper to bribe a dictator or crooked politician than to pay honest royalties and taxes. Thus they suck wealth right out of the country.

Morales has given the corporations 180 days to sign a new contract with the state-owned oil company, or they have to leave the country. In the meantime, he has ordered the Bolivian army to watch over the facilities — a smart move on his part — and sent in auditors to determine how much the oil companies should be compensated for the shares they will sell the government.

Morales has also signed a new trade pact with Venezuela and Cuba, so you can be sure he is on the Bush administration's bad-guy list. Our national scold, Condoleezza Rice, will soon be making catty comments about him. Come to think of it, she rarely has anything good to say about anybody but old George W. Unfortunately for her, the only people who pay any attention to anything she says is the lap-dog press in Washington. She is the silliest secretary of state in American history.

Ordinarily, I believe that a property-based capitalism is the best system. Unfortunately, that has been replaced by finance capitalism, and so we have to face the fact that when the super-rich and the giant corporations buy up all the assets and then sit on them, opportunity for average people shrinks almost to nothing.

That's always been the system in Latin America, and now the Bush administration is imposing the system on us. Congress and the president are bought and paid for. The deliberate influx of immigrants is driving down wages. The ability of corporations to shut their American plants and move them overseas is breaking the union movement. Wealth is accumulating in fewer and fewer hands — hence the proliferation of billionaires.

I hope Morales has a good personal security system. He is messing with big money, and messing with big money can get you killed almost quicker than anything else. People should recognize that money is power — the power to hire thugs and murderers, the power to shut down competitors, the power to corrupt the government. The only possible counterbalance to big money is honest government, which more or less lets us out, at least for the moment. One historian's theory on the rise and fall of empires is that when all the wealth accumulates at the top, the people rebel and the wealth is redistributed. Then the process starts all over. That's sounds plausible to me. If you've ever seen the Palace of Versailles, you can understand why the French revolted. That's the best symbol of greed and ego on the planet.

The old German Oswald Spengler, predicted in his book "The Decline of the West" that the Age of Money would be replaced by the Age of Caesars. That seems to be happening. Certainly George Bush is the most Caesar-like president we've ever had. There are so many laws he's decided don't apply to him that he can rightly be called a scofflaw. And like Rome when the republic died, the legislative branch lies supine on the floor, unwilling to challenge the usurper.

I believe men like Morales and Venezuela's Hugo Chavez represent the best hope of breaking the chains of poverty that have held Latin America behind for so many generations. I hope more countries will realize that toadying to the U.S. is the worst thing they can do for their own people.

The American foreign policy today is clearly imperialistic, and as an American whose loyalty is to the Constitution, I fully oppose it. It's too bad the Democrats are too gutless to oppose it, too.