A Few Scenarios to Ponder

Gambling is bad, bad, bad!!!  That’s what my Grandma would tell me.  You listening Mr. White?  Your Grannie would too, I’ll bet! 

But, of course, whether we actually wager on the outcome of these various evolving dramas or not, we’ll necessarily be gambling on these upcoming scenarios.  Sorry, Grannie, you just can’t help it whenever the stakes are high enough.

  1. Monetize the World – Bernanke is game, it seems and well on his way.  The latest Euro bailout won’t change the outcome, as Merkel seems to know, even if Ben doesn’t.  Still, you’d have to guess that even Bernanke would have to be full-on messing his pants to go down that road.  Others, like Krugman, would just say, “bring it on, it’s only money”.  On this path, you can “bet” that commodities are going to run like there’s no tomorrow, and well, do I really need to say it? (Better get you some.)
  2. Triage – This isn’t just a medical analogy, its basic biology.  Extremities are sacrificed in order to save the core.  This is Germany’s ultimate Plan B, and one way or another, it will be part of their latest “final solution”, no doubt about it.  Will they go along with Benny, the ECB, and the IMF?  Up to a point, I’d guess maybe so.  Will they be willing to take on a share of obligations using these various EURO bond, SDR, or dollar swap solutions?  For a limited time only and, as Merkel has made quite clear, not without truly measurable strings attached.  Germany’s got a growing debt problem too, after all.
  3. Political Backlash – I predicted it, and it now appears to be happening.  Showdown at Fed Corral, so to speak.  The question was:  What happens if/when the Federal Reserve’s and the Federal Government’s interests diverge.  Apparently that door opened this AM a planned Senate bill to block IMF funding of the bailout.  What’s interesting here is that the US is the largest IMF contributor and, thus, Congress can try to intervene using that mechanism.  Equally disturbing is the implicit recognition that it can’t do a bloody thing to stop the Fed, at the moment.  But, you can “bet” that this is merely the latest of what will become increasingly ardent opposition to the Fed’s policies in the days and weeks to come.
  4. Social Unrest –   OK, we haven’t touched on this directly for a while, but its high time” we at least mention the “Occupy” movement (pun intended).  Many, if not most, are paying little heed to these misguided nutjobs, numerically being more “useful idiots” than savvy political operatives.  But, they are being funded and guided by those with a hardcore “progressive” (marxist/statist) agenda.  While the rank and file never, ever, slow down long enough to actually ponder who they might entrust with so much power (and, yes, some even naive enough to imagine that anarchy itself would be a positive outcome), they are still well enough “fired up”.  And, you don’t need many actual bomb-throwers to produce radical outcomes, as history has proven time and again.  These guys are not going away.
  5. Convergence – The “convergence zone” is where all the action really occurs.  None of the above are mutually exclusive and, thus, what we ought to expect is various combinations of these influences.  Turbulence ahead, that’s the odds-on bet here, though, in of itself, that’s not very useful, is it?  For what it’s worth, I didn’t even touch on what may still be the more significant storylines:  Israel, Iran, Egypt, China, etc.  Europe and the US aren’t playing in a sandbox, after all.  All of the various political “solutions” being toyed with have serious impacts on the rest of the world and their problems bounce right back into our own playground. 

So, Mr. White is, as always up for another wager.  I do recognize the failures of my own strategy.  I keep buying lottery tickets, he keeps selling tickets.  It’s surely time to adjust my game plan. 

HT

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