The Day the Oil Stopped Flowing


And on the 85th day, after vomiting 184 million gallons of oil into the Gulf of Mexico, British Petroleum finally capped the oil well drilled by the Deepwater Horizon drilling rig under one mile of water. Thank goodness.

You can see from the chart below that uber contrarians and bottom fishers already began taking a punt on BP in late June. They must have reckoned the capping of the well was the beginning of the end of BP’s tribulations. And it IS a big company with a worldwide portfolio of upstream and downstream assets, presumably with the backing of the British government (with nearly 18 million Britons owning BP stock in their pensions).

Click here to enlarge

It is also true that, in the words of our friend and resource guru, you’re either a victim or a contrarian as a resource investor. Victims buy resource stocks when it’s safe to do so because they’re on the front page of the paper. Contrarians do so when no one wants to touch them.

That said, BP would have to be viewed as short-term speculation right now. For one, it’s not certain the leaking oil has actually been stopped. It’s just been stopped from the top of the well. If the well is ruptured in other places, more leaks will emerge. This could be just the end of the beginning (rather than the end of the end).

The larger question, in our mind, is how long it might take be BP to be litigated out of existence. A complete speculation on our part is that the British government will be forced to take over the company to protect from legal threats. But that’s just wild speculation.

For energy investors, the other issue is how much the ecological catastrophe in the Gulf will affect the willingness of publicly listed companies to drill for oil off shore. It’s a difficult dilemma. If you’re a major oil produce and you’re not adding to your reserves, you’re not going to be punished by shareholders. You’re also going to produce more oil than you find and replace, which is not a long-term survival strategy for a going concern.

But you have to balance the imperative for finding new reserves with the legal risk of another deep water drilling accident. If that kind of accident, no matter how low the probability, represents an existential threat to your business, and you’re the director of a publicly held oil company, can you permit more off-shore drilling?

We wrote about this in the last monthly report of the Australian Wealth Gameplan . Our tentative conclusion – to be followed up with recommendations – is that the BP spill favours National Oil Companies (NOCs). The NOCs are the only institutions that aren’t going to be sued out of existence if they run into drilling accident.

Is it hard to be a contrarian here in Australia, though? After all, commodities are on the front page of the paper every day. It’s the bread and butter of the export economy. Or the iron and coal if you prefer. Does the fact that these things are on front pages of the paper mean you’re already a victim?

Well, not necessarily. In our five years here, we’ve come to be wary of news that celebrates high prices. Anytime those high prices are figured into government revenue projections and make nice pretty graphs on the front page of the paper, you should be cautious.

On the other hand, we find ourselves more and more attracted to picking over share market road kill. You want firms with decent assets, but perhaps hitting a finance hick up. The other real allure for us is finding a commodity that’s fallen so much the momentum chasers can’t be bothered. That’s when you find things very cheap.

Speaking of not cheap, the July 10th edition of The Economist has again called out Australian housing as being the most over-priced in the world. The magazine reports that, “House prices in Australia rose by 20% in the year to the end of the first quarter, faster than the 13.5% recorded in the 12 months to late 2009.” That’s not so bad if you already owned a house and bought for the purpose of making a quick capital gain.

But not so fast!

“More concerning,” the magazine continues, “is our analysis of ‘fair-value’ in housing, which is based on comparing the current ratio of house prices to rents with its long-term average. By this measure Australian property is the most overvalued of any of the 20 countries we track.” How overvalued? By 61.1% to be exact.

As far as we can tell, the usual suspects spruiking property in Australia were not as quick to rubbish the article as you might expect. Hmm.

To be fair, the same issue of the The Economist had a dreadful article about gold. It goes to show you that credibility does not come from authority but from a well-made argument. This is a variation on the conclusion Boethius made in The Consolation of Philosophy that reputation doesn’t matter. What other people think of you will be fair or unfair by turns. And it is beyond your control. All you can control is the integrity of your own actions.

But back to the Economist. In its article on gold it concluded, “As the world economy returns to business as usual, the gold market may also return so some semblance of normality…As long as the world economy remains uncertain and investors fear inflation and sovereign default, gold will keep its allure. Eventually, however, the price will weaken: it is even possible that the recent slide to below $1,200 marks the turn. And investors may look back on the bull run of 2009-10 or 2009-2011 with the sort of wonder that humanity has too often reserved for the yellow metal itself.”

As pithy and superficial as that analysis is, it hardly compares to the comment of Citigroup chief economist Willem Buiter. He says that gold is, “the longest lasting bubble in human history” and that he would not put any of his wealth into “something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs.”

Sigh. How snarky can you get? It is quite possible that investors are going to make a lot of money speculating on gold shares leveraged to the gold price in the coming years. Gold is not anyone else’s liability. That alone gives it intrinsic value as money, not to mention the physical qualities it possesses which make it a very stable medium of exchange.

But we view gold, fundamentally, as catastrophe insurance against the crash in asset values from a highly leveraged economy. It’s not gold moving up or down versus the dollar. It’s the dollar moving up or down versus the gold, depending on the relative degree of currency mismanagement and money printing by the Fed.

Besides, after the last three years, if you don’t think financial catastrophes are made more frequent and more probable due to the intervention of the banksters and the State in the free market, then you aren’t living on the same planet. Since 2008, we’ve been in a reflationary period in which the most inflationist policies of the world’s central banks have barely managed to keep asset prices moving higher.

Without those policies, asset prices would already be much lower. Recovery to a new production possibilities frontier would also be a lot closer. Bad investments would have been liquidated and the people who wasted capital would have had that money removed from their mismanaging hands.

Instead, we have governments perpetuation the money, power, and mistakes of bankers. To the extent it keeps households happy because it keeps asset prices high, it’s perceived as having a bad odour about it, but somehow necessarily.

Well, that odour is the rotting carcass of a corporatist alliance between big finance and big government. It’s not doing anyone any favours. And it’s smelling up the joint. And it’s certainly not alive, despite the attempt to pump new credit into it. Credit is the lifeblood of an economy addicted leverage and asset growth.

Our view? Phase one of the great credit depression is over. It caused a massive transfer of liabilities from the private sector to the public sector and concentrated those liabilities in a handful of firms that are now considered too big to fail. But if the whole system is a failure, what then?

In PhaseTwo, the Welfare State’s 300-year old model of funding deficits will be stress tested. And what happens when the stress is too much…when a mountain of debt is supported by an anthill of real tangible equity? You’ll read about that in the Economist too, but only after it has happened, and it’s too late for you to have protected yourself from it.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.


  1. Yes but there is still oil & gas flowing on-shore USA and my what competition there is to by some of the shale leases. I am multibagging it ATM with almost zero risk. And they are plenty of follow on plays in the making out there for those who may be interested.

    You may wish to read what Terry Barr, CEO of ASX listed SSN has to say about BP. If what Terry says is factual, the problem lay not with standard industry practice but with a rogue operator that was well known by the regulators to cut corners and to hell with the consequences. The regulators failed to take action and now the US has more regulation as a consequence.

    The bigger they are the harder they fall and that’s one reason why I don’t trust the managers of my mandatory super funds.

    (As an aside, the majors may choose to mitigate some risk by increasing their non controlling interests in certain small cap and mid cap oilers. that way they will be able to hide behind the corporate veil with the smaller partner holding the minimum legislated insurance coverage).


    Coffee Addict
    July 16, 2010
  2. If you have that desire to read propheses more extreme than those of Mogambo Guru then try this … We’re all what?

  3. The bottom line is today’s cyclical stock bull is very much alive and well. At barely a year old, it is far too young yet to give up its ghost. The recent big correction changes nothing, such events happen from time to time even within healthy ongoing cyclical bulls. And the SPX not only remains low within its secular trading range, but it is still trading in irrational panic territory. This is an anomaly that cannot persist.

    So not only are the stock markets likely to continue rallying for the rest of 2010, but their gains should be strong. In order for this year to even come close to conforming with cyclical-bull-within-secular-bear precedent, the SPX needs to rally another 12% to 22% from today’s levels. And leveraged sectors like commodities stocks will soar in such a scenario, greatly amplifying the broad-market gains.

  4. Watcher7,

    I think time will prove you wrong, a crash is coming in 2010 in my humble opinion.
    I’m looking for a game changing event. Possibly a terror attack the magnitude of 9/11.
    Obama’s approval ratings are under 50% and a ex-Clinton official said something like “All that can help Obama get the American public back on his side is another OKC Bombing or 9/11 magnitude attack.”
    The game changer will come before the US Congress in December.


  5. Watcher, as you know I am with Dion. For the goldphiles too last night was yet another lesson in what will happen in a deleveraging. The hedgies got pasted in equities at the end of their period and it again appears that they were forced to liquidate gold positions. Their margin call rate gives them no wiggle room. If you think gold has real instrinsic value, sufficient demand and are optimistic on the future of its sustainability you will at least need to start thinking about whether your position will survive the price fall off the cliff of deleveraging. And the hedgies liquidity is armed only by the ZIRP and the razors edge that in turn creates that narrow margin call. One bump in mass sentiment or the cost of money and all the risk money and positions in US markets is as dead as.

    And I also agree with Dion on political events. The US wants war with China but both the Russians and the Chinese are trying to stall events as long as they can. US led quagmires suit them. Meantime they will bend over backwards not to confront the US. They won’t confront the aircraft carrrier led exercises in the Yellow Sea but the Russians have their flagship in waters near their territorial border in the Sea of Japan because the exercise is now extended on both sides. The US would like nothing better than for China to light up and identify its defences like the silly Iraqis did. The Russians are moving many batteries of S400’s (which can target both missiles and even stealth fighters at long range) to its North Korean border to try to deter the US launching an attack on North Korea. It is using the premise that it is only trying to protect its borders from rogue North Korean missile aggression. Meanwhile the US is trying to bait Vietnam into joining the war on China by offering them the Spratley’s and South China Seas resources as a prize to be shared with the Phillipines. Did you know we are conducting military exercises with the US in Cambodia right now (maybe the CIA imported a couple of Islamist extremists for the show?). Vietnam currently has the presidency of ASEAN and the US is pushing ASEAN to accuse North Korea directly over Cheonan. Malaysia and Singapore have joined RIMPAC exercises for the first time. The US has vastly expanded military training bases in Mongolia which now falls under their military sphere of influence. India just gets more and more US military hardware purchases ticked off that were previously withheld on the basis that they can confront China, and they get the tick to reprocess nuclear fuel which facilitates a great expansion in their ability to weaponise plutonium even when they are not even a member of the NPT and have no inspections. India is the only country increasing its long range forces and weapon systems. US KC’s joining US strike fighters and Russian built aircraft carriers, and nuclear ballistic missile subs. China is a longrange lightweight in comparison.

    So Australia’s greatest ally is now arming Australia’s greatest strategic threat!

    The US’s “arc of instabilty” is being sown from Central Asia to South Asia to South East Asia to North East Asia. China has explicit support only from Myanmar and North Korea.

    The non aligned world all believe the Cheonan was sunk by the US as the start of this campaign. The South Koreans had mass resignations of military officers following the incident. An Australian in the RAN signed off on the US led investigation and he and every individual in his chain of command right up to the highest of offices will be made fully accountable if they participated in a star chamber that risked Australia’s security. If we are complacent then a Bay of Tonkin event will surely follow given current events, rhetoric, and action.

    Even US war gaming is said to predict 5 million US led combatants dead if they launch an invasion of China. They also predicted their own loss of the conflict. But hell, like the Japanese at Pearl Harbour, you know have only one shot. Your conventional forces are at their zenith of superiority and can only be eroded when the bookkeeping catches up with the economic reality. What happens in and around the Korean War “meat grinder” that they want to restart? Read it from the horses mouth.

  6. I have another reference of interest. Explicit alliances are a funny thing and so too trust. It is not unreasonable to consider the possibility of one or all of the US’s Asian alliance partners changing sides. Even the Americans know this as evidenced here.

  7. Gold may retreat more but the medium term outlook for Gold is up.

    July 17, 2010
  8. Unreasonable no. Inevitable at some point. As the red haired rock star sungeth, “nothing lasts forever,and we both know hearts can change”
    and “we’re all freakin doomed” said the Guru.
    Night all :)

  9. I find it a bit difficult to imagine the ‘slav hordes’ rolling west out of Russia to pinch everyone else’s oil and gas and iron ore. Or the ‘yellow peril’ nuking North America to kill off all the waiters and financial engineers who’d prefer go back to competing with them making levis and mobile phones. Although yeh, I wouldn’t put it past Uncle Sam to bring a bit of military pressure to bear to maintain his position in the world. But only for our own good of course! :)

  10. Ned S., of Australia’s politicians remember only Billy Hughes. He spoke of the yellow terror for the unions before they got rid of him, he as Wilson’s “varmint” spoke for 60,000 dead in Versailles and did more pulling above Australia’s weight in demanding Germany pay war reparations beyond their ability to exist into a future (when the Brits wouldn’t cough up for what we had provided by way of man and money for WWI), and while he didn’t have a relationship with Wilson he still opposed Britain’s transfer of the German Pacific colonies to Japan, and his interests white anted pro Japan-Brit alliance Menzies at every turn. That racist Australian political sentiment that Menzies couldn’t counter act was at least a factor in the US’s conduct of the war, the cutting off of resources and teh southern front they expected of Australia.

    So Billy Hughes had Australia pulling well above our weight in contributing to the deaths of 60 million people in World War II. And who can’t see the Billy Hughes in Paul Keating, John Howard, Kevin Rudd or Tony Abbott when you have a real look. Keating and Howard would paint themselves as standing on the shoulders of Lang and Menzies respectively but all you saw in foreign & social policy was more of Hughes. The Canberra executive, academia, and the Defence Dept is full of him. And if you can’t see it in Gillard it is only because beyond opportunism there is nothing there at all.

    I don’t seek to be an apologist for imperial Japan but we should have seen Asian interests and by recognising them done more to build the Commonwealth and non align country’s profile in censuring them to prevent US adventurism. Right now we are on a path to disaster and it may already be too late, I think we went hard over to the US position 18 months ago as was reflected in the radical change in Rudd rhetoric towards China, and that the US position on attacking China is already locked.

    The US is fertile ground for Emmanuel and the crony estate “making good of every opportunity provided by a disaster”.

    US political crony capture built more out of congressional / house votes than the Presidency. Can incumbents of both parties go to the polls without a turn of events. It may not be war but it is likely to be conflict that speaks of war and will lead to war.


    Latest approval polls

    Approve Disapprove Spread
    Obama 47.0 46.9 +0.1
    Congress 21.8 71.2 -49.4

    RealClearPolitics produces a comprehensive average of recent US political polls.

  11. Comment by Stillgotshoeson on 17 July 2010:

    Gold may retreat more but the medium term outlook for Gold is up.

    Further to that, there will be money to be made in Gold, be greedy thought and you could well lose it as well..

    Set a sell point and sell.. Gold falls can be sharp, sudden and severe…
    The fundamentals for gold to rise are good.. I can not see that changing medium term. Gold is not a buy and hold though..

    July 18, 2010
  12. How about that CTO though!?

  13. I’ll have a bit more of a read on Billy Hughes then Ross. My only real knowledge of him is that he did make a fair bit of noise about Oz’s 60,000 war dead when the Allies sat down at the table to divvy up the spoils of WWI; And managed to get Oz into the colonial masters seat re what had until then been Germany’s bit of PNG (the northern half – with Wilson being keen to give it to Japan.)

    It’s a brave man who’d just parrot off any of his nation’s rhetoric re history and geopolitical events though. Whenever I’ve scratched the surface on pretty much any of same, I’ve tended to find myself in way, way murkier waters than any simple us/them, goodies/baddies version of events written for general consumption by “us goodies” attempts to portray.

    I’m actually of the fairly strongly held opinion that one of the more valuable investments we could make in our national future is to pack our kids off to places like China and Russia and India for 6 months in their final year of school to live with a middle class local family on an exchange basis – And Yes, we’d get to pay the costs on their kids as well as ours – Because we can afford it and they can’t. But the potential paybacks sound worth it to me.

    Your thoughts on current Oz politicians seem to sum it up.

  14. Theres now a hacked US gold chart where a parablic spike should have been. Most breakouts successfully capped. Maybe the paper gold market is going to collapse due to the manipulation at some point. Maybe paper longs will flee. Maybe discounts on gold are coming. Maybe this is all garbage. Hope theres some physical to be bought. Seems you can have physical almost unavailable and little price increase. Thanks bullion banks. But gold is the best store of value (money not nutritional value) and our currencies are increasingly abused. If war breaks out that will worsen abruptly. The pressure on govs to borrow and print is increasing every day. Gold and silver are a hold for me until the fiat currencies are underpinned by sound economies (minus the current unserviceable debt and hyperspending govs) at which point I’ll buy land. Couldn’t careless the dollar price of gold. Its value/purchasing power will rise in the deleveraging which will happen…someday.

  15. “at which point I’ll buy land” – Land’s where it’s at Lachlan. They aren’t making any more of it as my granddad used to say. Gold, ivory, slaves and land – Yep, it’s obvious where the real long term value is – Providing one can cause the slaves who know same to cease and desist from pinching his land! :) :) :)

  16. You can even drop a bomb on a piece of land Ned and its still a block of land eh No worries Ned I want my land….often window shopping.

  17. Good for you Lachlan – At least you aren’t too bound up in fools gold or ivory or stocks or bonds then … :)

  18. Nah Ned this bitch about gold and property is only a short term abberation in my view. If I had more dough Id own plenty of both and forget about short term gyrations in the markets. Theres been excessive speculation on property lately which means people should keep leverage under control. And maybe larger holders should be selling on net but thats about all imo. Any hard asset including gold can be overvalued at times (eg gold in 1980). Longer term such hard assetts/tangibles are the things that always hold value so if you own them outright or mostly so then all is good. If price goes down who cares. You can still swap 3 houses for three other houses and even more if your astute investor in property. A grazier grows 30 head cattle and sells them at a loss in a depressed market. Eeek a loss! Or is it? He used the proceeds to purchase 70 weiners the same day at depressed prices.
    I have stated here before that my investment is a gamble. Yes because I’m all metal construction ;) but my desire is to purchase land for my own use (not as investment) and within the timeframe of the next ten years. That makes me a market timer of sorts. Well Im happy with my choice but a gamble it is. Worst case scenario my investment cant be devalued to nothing… and if short term appreciation of PMs value over land value does not eventuate I doubt I’ll lose much. A good gamble has limited downside and considerable upside.
    Crumbs Ned its getting late and Sunday ta boot. Night Ned :)

  19. Ned, I had that opportunity to get to China and Eastern Europe before my political views were formed solidly and can see only good in your idea.

    I tried in vain to have Australia business and trade get involved in the Russian railway freight scene just at the turn into the Gorby years and hence didn’t get there. We could only have learnt on the infrastructure side because they were just so much better than us, but we could have contributed on the commercial side and opening of access to unit load competition. It was a missed opportunity and it also slowed & narrowed our rail development.

  20. Hi Ross,

    Wouldn’t put anything past the yanks, but why would it be in US’s best interest to take out China?

  21. Davo: “…why would it be in US’s best interest to take out China?”

    You’d think that North Korea and Iran would fully occupy their strategic military planning, wouldn’t you, Davo? (Not forgetting Iraq and Afghanistan, of course… .)

  22. Hi Biker,

    Seems like a helluva way to not pay back the $900B they owe the Chinese, when a phone call would do the job. Suspect it would cost them more than that to fight the war.


  23. we’re all what?
    when the air sea and land is poisoned and we all have to create vast environmental shields over the cities, we’ll all be
    freakin domed (sic)… like in Logan’s Run.

    keep in mind the false flag theories (that the black swans are not accidents) when looking at ‘who gains’ and how shares and investments magically occur just before such events.

    (quick search reveals)

    which company had security for 911. madrid, london etc?

    I wont go on, we’ve all got the internet too look it up, and I DONT KNOW.

  24. Gotta agree, Davo. Consider Obama’s situation… . What does he need _less_ right now than another horrifically expensive, unwinnable foreign war?!~ Enough problems at home and abroad without five million more warriors in body bags being shipped back to the US, to a politically media-frenzied public…

    I worry, at times, that _extreme_ views seem to be required, for gold to reach its zenith. This link touches on that phenomenon:

  25. It’s all a bit strange Lachlan when with both ‘hard’ assets like property and bullion, one licks his finger and waves it in the air and says With luck I doubt prices would drop much more than 40% on either of these – So they seem like reasonable investments – Compared to the alternatives. But I don’t feel real comfortable sitting in cash either! :)

  26. “But I don’t feel real comfortable sitting in cash either! :)”

    Caution is recommended, but pessimism, hypochondria and paranoia are all key indicators along the low-to-high-risk continuum, Ned… and they’re all infectious. :) Your cash is fairly safe in Oz. Inflation is the pacman of _all_ asset classes, no matter how crispy, shiny, or sandy… . ;)

  27. Favo/Biker, for two reasons. US domestic political control and future private profitability both as seen through the eyes of the crony elite.

    When Volcker and Reagan killed off the brown belt rather taking the hard decisions to reform it, and they spent into the military industrial estate (with the spill over into commercial aviation & communication/satellite) like never before the outcome benefit for the crony elite was two fold.

    First the creation of an import consumer economy where the elite own the brands and increased the corporate profits derived from cheaper offshore production. And next the creation of a job creating trickle down services economy (built upon their view of the success of sectors insurance and advertising and retail in through the post WWII economy could be exponentially expanded through information services and communications and dual income generated outsourced personal services in particular).

    Then next post soviet we had unchecked hard imperialism resumed unchallenged until China came along with their soft diplomacy.

    After the Reagan/Volcker incredible govt debt escalation we had them staring at a reckoning. “Its the economy stupid” goaded Clinton to Bush Snr after Iraq V1. Smart alec banksters to the fore again noted US’s biggest strategic weapons, as being the global reserve USD, the ability to print and export inflation profitably in creating risk markets while printing and creating private debt and derivatives that gave the false impression that risk was endlessly lowered. DR does a good job on that story so I will leave it there.

    Now however, the US’s ability to fund arms, to create leverage, and to project the power of the USD internationally are all going backwards. China and Asia generally is rising while America is falling. The US killed a rising Asia in WWII by getting in and choking their logistical access to resources before killing them militarily and subjugating them socially and economically. The crony estate will seek to do it again and creates rents to feed from on the Asian patch.

    Today the US has few Asian rents besides the subsidies to the US military paid by the Asian allies that are tiring of them. Corporate American had the bankster’s ticket clipping of “risk” inflation turnover and from resources/commodities traded in USD both of them threatened or at least waning. Retail America has to start importing price inflation from higher Chinese standards of living and wage inflation and that will kill US crony profits and turnover as the consumer market slows. A restart of industrial America without war mobilisation is impossible due to the capital base erosion.

  28. One big worry with America is that they are a major power that persists in maintaining the concept of having ‘enemies’ as part of their national mindset and political rhetoric. No-one else much talks like that do they?

    Everyone else seems to be able to get their heads around the ideas that they have competitors and that there are a few extremists out there who actually dislike them enough that they will actually do some extreme things occasionally – With an appropriate response presumably being to do some extreme things back occasionally – But without wanting to turn it into a fundamental part of the reason for one’s national existence.

    So I can only assume there is more to it than meets the eye with America. And am certainly inclined to the view that it is really all about continuing to encourage the world to take the view that what is good for the US will ultimately be good for them. And that what isn’t won’t be! :)

  29. Comment by Justin on 18 July 2010:

    How about that CTO though!?

    CTO Could fail regardless of what gold does..

    100’s of gold mining exploration companies.. many will amount to nothing..
    High gold price will not guarantee CTO’s success.. Greatly improves their chances in getting a JV happening of financing operations

    I personally have sold out, they hit my stop so they got sold, I am down brokerage only. Still have them on my watch list..

    July 19, 2010
  30. Ned, if the US can retain their pre-eminence and profits I am sure they would like it to remain that way. If the numbers say that isn’t a possibility I believe they will act as threatened empires have always been inclined to do.

    I agree with your statement on the rhetoric of enemies vs rivals. Apart from Ron Paul and the GOP “conservative conservatives” (as opposed to the radical & christian conservatives) I don’t think there are many in US polotics that see it that way. Certainly not among the Democrat Rockefeller & bankster backed factions anyway.

  31. Shoes, have been watching your IMP. An interesting ride. MAQ equity and funding intriguing. Inching up despite dilution anyway.

  32. “…a major power that persists in maintaining the concept of having ‘enemies’ as part of their national mindset and political rhetoric. No-one else much talks like that do they?”

    Well, Iran and North Korea certainly do, Ned!~

    “A restart of industrial America without war mobilisation is impossible due to the capital base erosion.”

    I’ve no doubt a few of the hawks would countenance a war of attrition with China to turn US industry and influence around, Ross. However America’s current situation might be so stretched at present that it could drag its economy further into the mire. They couldn’t be sure of any support from the West, let alone the East, either.

    I doubt we’ll see it in my lifetime… or, as the Who hoped: “….

  33. “Iran and North Korea certainly do” – I was trying to be fair and reasonable and charitable to America in avoiding making any obvious comparisons in that regard to some nations they mightn’t like being compared to Biker … :)

  34. I hope you are wrong too of course Ross. But unfortunately the approach of trundling off to war regularly without any really good apparent reason does seem to have become part of the American way of doing things. And yes, I suppose there could be something in it for them even if they didn’t win as such – Providing the game wasn’t played at home. And it presumably wouldn’t be. Doubt they’d actually want to ‘win’ as such in fact – Lordy, imagine them trying to occupy a country like China or Russia while they reconstructed according to America’s criteria. That’d be just too damn horrific to contemplate.

  35. “….imagine them trying to occupy a country like China or Russia while they reconstructed according to America’s criteria… ”

    Yep. Unimaginable, inconceivable lunacy*. Wouldn’t _entirely_ rule it out though!~ ;)

    * Apparently it’s also infectious… :)

  36. Maybe US civil violence might put a spanner in that outcome (war with China) Ross? Not that I know much but seems to be a lot miffed people over there with lots guns n bullets.
    Seems a sad outcome for what was the land of the free (relatively free anyhow), but I guess its just the way of the world.

  37. Ned, do you remember Brzezinski’s “The Great Game”. Well he nicked it from 19th century “history”.

    The trouble is that real history had never heard of it. Certainly not Russian history, those who were supposed to be Britannia’s adversaries in “The Game”. Apparently Fleet Street came up with “The Great Game” after their Afghan opponents turned up with some Russian rifles. Hence you have the US brains trust coming up with the Central Asian adventure on the basis of an historical lie (admittedly they had dabbled in on a soft dimplomacy basis back in the 50’s).

    In a twist of history Russian SVD sniper rifles have in the last year started to show up with the Taliban and are the next in the list of weapons causing fatal casualties after IED’s in the last few months. The rifles were used extensively by the Russians in the Afghan war and are available right through the old Soviet world so not even McCain could justify nuking the Russians for it today.

    The trouble is they will open their “history” books and see chapter headings on the colonial occupations of China & the divide & rule on ethno-linguistic lines and away they will go …. Who cares what really happens moments after the invasion? The forces of puny little intellects and unbound “can do” and “daring do” are frightening.

    No-one more than me would like to see foreign military adventurism curtailed by the executive of the protagonists and for it to start from the court of US public opinion as voted by members of congress installed after a peaceful ballot. My judgement that the probability is against the latter happening is not one to be celebrated that’s for sure. I don’t see many futurologists getting it right either so the shape of what happens is nothing I could claim as backable. While Eric Blair (George Orwell) may end up being proved right on his visions in 1984 but a punter would have done his money on him.

  38. Thanks Ross – I’d never heard of Brzezinski – Nice of him to document his thoughts for all and sundry to have a read of though. (Although I did take the shortcut of looking at some wiki references on him rather than reading his book.)

    I’d just been reading stuff like the US is putting missiles in Poland to counter the threat of Iranian attacks on America’s Allies in Europe? And saying I’m not sure that has a fundamental ring of truth and honesty about it. Plus reading about stuff like American military advisors in Georgia (the one Stalin grew up in rather than the one near Alabama)? And saying those good ole boys seem to be a long way from home and awfully close to a part of the world [South Ossetia] I reckon anyone who has the brains they were born with would probably choose to stay well away from – If they had a choice.

    And more recently mulling over Ms Gillard’s thought that we are killing Afghans because Australians were attacked in Bali and 9/11 – And wondering if it might not be more accurate to say that we are over there because we are too lazy to spend time and thought and effort on a decent foreign policy; And figuring out what sort of defence force might be required to complement it; So simply find it easier and more cost effective to keep doing the All the way with LBJ thing. Which given Brzezinski’s thoughts, the average Aussie might have a few reservations about if asked?

  39. Comment by Ross on 19 July 2010:

    Shoes, have been watching your IMP. An interesting ride. MAQ equity and funding intriguing. Inching up despite dilution anyway.

    Continual growth through aquisitions look promising, or they will get swallowed by a bigger fish.. either way looks profitable I think.. Still only have a nibble on them at 20000 shares
    It will be some time before they are big enough to list on a stock exchange in the US.. Watching them a bit longer until I decide to add more to the portfolio..

    July 20, 2010
  40. Ned, on Brzezinski. The following is alarmist and is taken from the fears of the time. I marries with what you have read from Brzezinski’s own words. The Russians decided to take a stand and so the coloured revolutions came to meet resistance. Since then Ukraine has turned and you have send Kyrgistan.

    if you are interested in what happened search for “Places that time forgot” South Ossetia on the BBC website. The TV show’s narrative is there and it might even have a video stream these days. It tells of the time that the Brits (on behalf of BP who has the pipeline interest) got close to supporting the Georgians attack on South Ossetia a couple of years earlier but they were so useless in urban assault training and the Brit government got cold feet so it was put on hold and the Brits were later replaced by US trainers and there were said to be Israeli’s in the field too (although the Russians found only 1 Texan passport at the front). It was close at that time though, and the TV show had the Georgian military living in rail carriages ready to be moved up to the front. Funny thing was that the Abkhazians were set just a little while earlier to overrun Georgia militarily and the Russians saved them. Never trust a Georgian goes the old saying.

  41. One last reference on ZBIG Ned. I don’t find this site trustworthy on current events but what they have done is to bring together references and testimony from the public record. That, rather than opinion, is what I am mostly interested in when interpreting events.

  42. Ross, I went through Obama’s inaugeration speech fairly thoroughly at the time and recall reading the bit where he said “we are ready to lead once more”. And thinking I don’t actually recall voting for you lot to lead the first time round?

    OK, so one knows their game. But there isn’t much one can do about it that I can see. Like you, I actually have a few doubts about their ability to ‘win’ any major conflict these days. Which could certainly leave Oz in an unenviable situation if our major ally stirred up the wrong hornets nest and trundled off back to their side of the Pacific to rethink their foreign policy while leaving us all lonely on our side of said ocean to rethink ours.

    None of our major parties are showing any inclination to declare us a non-aligned nation that I’ve heard of though. And suggesting to American voters of any political persuasion that their hat might be a somewhat sullied shade of grey rather than a pristine white, isn’t a concept they seem to relate to at all well!

  43. What bothers me Ned is that in the 70’s & 80’s we did nuance. The Chinese believed that we wanted them to succeed even if we worry about the overseas Chinese, and especially in those days those in Indonesia. We don’t do nuance anymore. We have reverted to all the way with LBJ. As for the Indians we were closer to the non aligned movement and ex colonies like Malaysia at the time of the NPT than we are now. We really did try to do something positive with the Colombo education programme. Sure Lee and Mahatir spat in our face but we do nothing like that now, as of the 80’s we went from well intentioned paternalism to egomaniacal lecturers.

    The most important Obama speech was that on the 4th of July 2010 when he reprioritised his security services to address homeland threats. Do you know how many “security services” they have now?

    I am reminded of the US direction now to that illuminated by the TV Show FBI from the 60’s. Effrem Zimblast Jnr would see the bad guy. The bad guy would shoot first. Effrem returned one bullet and shot him dead. Episode after episode infinitum. Popular culture meets reality, you might remember the LA traffic cop where the guy inched forward toward him at a corner and the guy unloaded his magazine and shot him dead. As visitors we know not to reach for the door handle or try to get out as we get pulled over.

    The other thing was my discovery in the 80’s that the Australian and international obsession with the CIA was not matched in the US. In the US they feared the FBI first. I also came to understand some of the unholy alliances between authority and enterprise and some of the nuances of the corporation that lived a corporate socialism and came under the umbrella by being Hoover’s eyes and ears. Most of their foot soliders wore those funny police state hats that were peculiar to the place.

  44. On the differences in sovereign rents for the extraction of oil.

    The more vulnerable sovereign the cheaper it is. Brazil must be feeling quite safe as they are talking up to $5/barrel for Petrobras having to pay for the deep sea licences and that is delaying the capital raising.

  45. On Japan. Even thought they got humiliated when forced to accept the retention of US forces on Okinawa they are expressing themselves otherwise. The US/EU economic blockade and Russian effort at containment will be harder to enforce now. Japan is only doing what Australia’s long term NPT policy should also have us do.

  46. I’m still working through my thoughts on a lot of it Ross. I’m a slow learner I guess, but stuff like Mujahideen freedom fighters morphing into Taliban terrorists, and following through the various Iran/Iraq sagas over time, plus it becoming obvious that the greatest real threat to world peace in my lifetime to date just may have been some Yank banks and bankers setting the global economy up to self destruct, and I’m reasonably open to ideas.


Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to