Afghanistan: A Lost Cause

“Afghanization. Vietnamization. Surge. Gradual escalation. Corrupt dictators. Internal dissension. The war follows a familiar script.” POLITICO

Despite proclamations of victory by the Administration of President Barack Obama, the death of Osama bin Laden is not like the fall of Berlin in 1945. In itself, killing bin Laden brings no peace. It does ask many unsettling questions about America’s No. 1 ally in the War on Terror, Pakistan. It also puts into question America’s ability to even win the war in Afghanistan.

When Obama took office, he got this advice from Vice President Joe Biden: “If you don’t get Pakistan right, you can’t win.”[1]

The reason was and remains simple. The enemy, the Taliban, are using Pakistan as a base to operate hit-and-run missions against American troops the way North Vietnam used Cambodia to strike GIs four decades ago. The key difference is former President Richard Nixon launched attacks into Cambodia. Obama’s Cambodia is Pakistan, a Muslim nation with 100 nuclear weapons in its inventory.

If you think the nearly decade-long war in Afghanistan has a lot of similarities with Vietnam, you are not alone. The New York Times reports the recently deceased Ambassador Richard Holbrooke had to shut up regarding how badly the war in Afghanistan was going.

“There are structural similarities between Afghanistan and Vietnam,” Holbrooke noted, in ruminations now in the hands of his widow, Kati Marton.

“He thought that this could become Obama’s Vietnam,” Marton recalled. “Some of the conversations in the Situation Room reminded him of conversations in the (Lyndon B.) Johnson White House. When he raised that, Obama didn’t want to hear it.”

The Times indicated if Holbrooke were still alive, he would be shuttling frantically between Islamabad, Pakistan, and Kabul, Afghanistan, trying to take advantage of bin Laden’s killing to lay the groundwork for a peace process.

The Ghost of LBJ

Johnson was a guns-and-butter Democrat who sat in the Oval Office during the Vietnam War. The undoing of the nation was not solely over his vision of the Great Society, but rather America’s defeat in Vietnam.

Even LBJ finally understood that Vietnam was a lost cause, but not before tens of thousands of Americans died.

Johnson drawled: “Light at the end of the tunnel? We don’t even have a tunnel; we don’t even know where the tunnel is.”

This truth applies to Obama, who still won’t admit it. Without Pakistan as a reliable partner, the United States cannot win peace in Afghanistan. And Pakistan is moving away from the U.S. faster than a bootlegger from the cops.

Last week, the Toronto Sun wrote: “The Pakistani government is embarrassed that bin Laden was found living in relative comfort, but there’s little in their reaction that indicates shame. Rather, they are miffed that the American SEAL team went in without telling them. Parliamentarians even cheered Prime Minister Yousuf Gilani when he warned of dire consequences if the U.S. ever again sent troops into Pakistan without permission.”

Gilani declared that Pakistani intelligence services were neither complicit nor incompetent and that the discovery of bin Laden living in plain sight of Pakistan’s military academy was not Pakistan’s fault. He insisted China is Pakistan’s “all-weather friend” and implied the U.S. is an unfaithful ally.

Can you imagine Winston Churchill warning America about coming on British soil to hunt Nazis during World War II? Of course not, but Pakistan is not a real ally. It is a Muslim nation in which key members of the government and its intelligence service (Inter-Services Intelligence) covertly plan American deaths in Afghanistan while cheering on a war that is exhausting both America’s financial resources and the nation’s psyche.

But there are no Churchills in Pakistan or Afghanistan.

The President of Pakistan is Asif Ali Zardari. His own people call him “Mr. 10 Percent” because of all the kickbacks he took during the premiership of his late wife, Benazir Bhutto, who was assassinated when she again ran for office in 2007. Not only is Zardari corrupt, but he is weak against the Muslim mob which grows angrier each month.

The other key ally in America’s war on terror is Afghanistan President Hamid Karzai, who is also corrupt, perhaps delusional and, most likely, a drug addict. The U.N. envoy to Afghanistan even questioned the “mental stability” of Karzai and suggested the Afghan president may be using drugs.

In an interview on MSNBC, Peter Galbraith described Karzai as “off-balance” and “emotional.” Galbraith went so far as to call for Obama to limit Karzai’s power to appoint officials within Afghanistan until he proves himself a reliable partner.

“He’s prone to tirades. He can be very emotional, act impulsively. In fact, some of the palace insiders say that he has a certain fondness for some of Afghanistan’s most profitable exports,” said Galbraith, in reference to heroin.

When asked straight out if Karzai is a drug addict, Galbraith responded: “There are reports to that effect. But whatever the cause is, he can be very emotional.”

You can see where this is going. In World War II America had Churchill and Charles de Gaulle on our side. In this war we have Zardari and Karzai, two leaders that make South Vietnam’s dictator Ngô Đình Diệm look like Thomas Jefferson.

A Steep Price of Peace

There is a lot of money being made in these Arab wars, at least for U.S. military contractors. Fighting in Afghanistan and Iraq has cost more than$1 trillion. Yet some neoconservatives just can’t get enough, as was evident earlier this year when Senator John McCain (R-Ariz.) wanted to put boots on the ground in Libya. McCain declared the Libyan “rebels” are true heroes and represent American democracy. Either the Senator has seen Star Wars one too many times, or he has forgotten that Americans are still dying because Washington armed the mujahideen in Afghanistan in the 1980s.

It is true that Presidents and generals never get credit for battles they never fought. In this way President George H.W. Bush never got credit for not invading Iraq in 1991 and for letting the Communist bloc determine their destiny without American interference.

Furthermore, the success in killing bin Laden shows that surgical operations, whether lead by SEAL teams or pinpoint bombing, can knock out America’s enemies and not at the cost of hundreds of billions of dollars per year.

But I don’t expect Obama to declare victory and bring the troops home anytime soon. There is still an election to win, so I expect the President to give his “Peace with Honor” speech just before Americans go to the polls.

Yours in good times and bad,

–John Myers
Editor, Myers’ Energy & Gold Report

[1] From the book, Obama’s War, Bob Woodward, Simon & Shuster, New York, NY, 2010

Barack Attack!

“They want what every first-term Administration wants — a second term.” — from the movie “Clear and Present Danger”

America hasn’t had a leader like President Barack Obama in generations. He is more shrewd than a Chicago mayor, more powerful than the Tea Party and able to read a teleprompter at a single glance. He is ObamaMan! Not since former President Harry Truman’s capture of former Prime Minister of Japan Hideki Tojo has the nation had such a “presidential” President.

The “interdiction” ordered against Osama bin Laden, aided by the best fighting force in the world, is sure to make Obama’s Nobel Peace Prize a footnote for some of his biographers. And depending on whom you listen to, the President has either eradicated Muslim extremism or set a course for democracy in the Middle East.

No doubt Hollywood producers are hoping Wesley Snipes will be released from jail so he can play the role of the commander in chief. Expect the screenplay to deviate from the truth. In the film version the President will probably overcome an army of Muslim bodyguards armed with AK-47s before kicking down a steel door and dealing with bin Laden mano a mano.

The true story is not nearly as engrossing. It is about a president desperate for reelection and seeking the spotlight for an American electorate who only glance at headlines.

But the question remains: Why did it take our government nearly a decade to kill the worst mass murderer of the 21st century? And why was our closest ally in the Middle East protecting him? In the final analysis, both Pakistan and the White House may have to answer for the medieval meltdown that is the Muslim world.

We are left watching The Barack Obama Tour, with visits by the President to Ground Zero, an hour-long interview on 60 Minutes and a jingoistic speech in front of America’s real patriots, the men who carried out the mission: the Navy SEAL assault force the President spoke to at Fort Campbell, Kentucky.

If you think I am wrong about Obama being an opportunist, consider what Gary D. Barnett wrote for The Daily Reckoning:

“There has never been such an opportunity for the U.S. government to stage a false flag event in order to start yet another war as there is today. The setup is obvious to Libertarians and some sane others, but it eludes most (sic) all Americans who are busy dancing in the street after the so-called killing of Osama bin Laden.

“Consider the timing of this attack by U.S. Navy SEALs, and then consider recent events. First, the economy is in shambles, unemployment is sky high, price inflation is excessive, and the U.S. military has been bombing civilians in an attempt to assassinate (Moammar) Gadhafi, including murdering innocent little children. Our money is being destroyed before our eyes. The wars are not going well for the ruling elite, and Obama’s ratings are horribly low at the beginning of his presidential crusade.

“What better reason then for an event to solidify the masses… ”

It is the dangerous masses, a growing Muslim mob that is becoming more belligerent to America each passing year. Arab governments collect billions of dollars from us while secretly supporting jihad when our backs are turned. What makes it all the more maddening is that a tidal wave of Arab hate created bin Laden and not the other way around.

More lives than a cat

According to the CBC TV program The Fifth Estate, there were nine previous attempts by the U.S. to kill or capture bin Laden before his death. They commenced with the Administration of former President Bill Clinton and finally succeeded this month. But should it take more than a decade and three Presidents to kill one man living next door to Pakistan’s version of West Point?

On more than one occasion, Pakistan’s government or security apparatus, the Inter-Services Intelligence (ISI), tipped off bin Laden. That is a bad deal to U.S. taxpayers who have provided Pakistan with more than $10 billion since 9/11. Then again, bin Laden was a cash cow for the Pakistani government, which only feigned being his bounty hunter.

But that gravy train might soon be over, as announced by Senator Dianne Feinstein, the head of the Senate Intelligence Committee. The Democrat from California said that if it turns out the Pakistani government knew where bin Laden was hiding, Congress may cut $1.5 billion dollars in annual aid to Pakistan. That should have happened years ago, and the Obama Administration knows it.

The problem with PakiSatan, a Muslim power with more than 100 nuclear warheads, is its intelligence service and the government itself are corrupt — begging for money from the United States in a pretense to arrest extremism while at the same time providing aid and support to Islamic extremists. The evidence comes from the Pakistani government which first insisted it knew nothing of the planned assault, then claimed to have provided crucial intelligence for the raid on the compound.

Pakistan can’t have it both ways, or can it? The government of Pakistan even wants an apology from Washington for conducting a military operation on its soil to get bin Laden. So strained have relations between the two countries become that, on occasion, U.S. troops have had to engage Pakistani soldiers in firefights, and the Navy SEAL team was prepared to shoot its way out of Pakistan should it have to engage the enemy… I mean ally.

It is hard to know who America’s real friends are in the Muslim world, as many Islamists are outraged over the killing of bin Laden. They don’t understand our outrage, and I partially blame Obama for that. Obama was sympathetic to the mosque being built next to Ground Zero and shared his outrage over Pastor Terry Jones’ burning the Quran.

American troops are still falling in Afghanistan as the Obama Administration props up corrupt and unpopular Muslim leaders. These diplomatic failures will in the end far outweigh the killing of one aging terrorist.

While it is wonderful to have bin Laden dead, others are carrying the torch of hate. In the end, one dead Saudi isn’t going to pave a road to peace.

Yours in good times and bad,

John Myers
Myers’ Energy & Gold Report

Filling Up On Stupid

The next time you pull into a gas station and pull out $100 from your wallet, take a look around. Notice the other vehicles that are sucking up the $4-per-gallon gasoline. My guess is you would be hard-pressed to find a late-model car, truck or SUV that has anything smaller than a 200-horsepower engine.

I know more than half-a-dozen family and friends driving vehicles that punch out a mind-numbing 300 to 500 horsepower. That is a lot of ponies unless you spend your Friday nights down at the local drag strip.

It was not supposed to turn out this way. Thirty-five years ago, I carpooled to the University of Calgary with my best friend Dave. The world had just come off of two OPEC-induced oil shocks and he drove a 1976 Honda Civic. It looked exactly like the car pictured at the top, replete with the tiny fog lights and the canary-yellow paint.

Dave’s Honda had a 91-cubic-inch engine that produced 53 horsepower. For four years, we drove 40 miles round-trip in it. On alternate weeks we took my car, a 1976 Mercury Capri. That was a bit of a hot rod for its day, generating 130 horsepower.

What I remember most about Dave’s Honda is that it got us to class on time, it never broke down and we passed a lot of gas stations. It was to be the wave of the future.

But in the early 1980s, crude-oil prices fell all the way to $12 per barrel. People stopped caring about fuel economy and became obsessed with horsepower and status.

From 1984 through 2010, the fuel economy of new U.S. cars increased… from 27 mpg to 27.5 mpg. Forget the tech revolution. In the past three decades, the average car can now go half a mile farther on a gallon of gasoline.

Source: Wikipedia

 

As a result, it is not hard to understand that demand for gasoline in the U.S. has nearly doubled in the past 35 years.

The Wall Street Journal addressed the issue a year ago with a story which asked: Whatever happened to fuel efficiency? According to the newspaper, “If there is a super fuel-efficient car in your future, then it was built in 1986.”

The Journal pointed out the Environmental Protection Agency’s top 10 list of cars with the best fuel economy in history. According to The Journal: “Many of the best haven’t been available in showrooms for years or even decades.”

“In addition to music, the 1980s were a high point for fuel-efficient cars,” concluded the WSJ. “Even when judged against today’s high-tech hybrids, cars like the 1987 Honda CRX shine.”

The CRX was updated version of my friend Dave’s ’76 Honda Civic. Like that Civic, the CRX was fun, dependable and it got 47 mpg! It turned out nobody wanted it.

The New “Stupid” Car

It almost seems as if Detroit doesn’t even know what the price of gasoline is.

A few weeks ago, Ford announced its newest Mustang, the Shelby Super Snake (try saying that four times in row). In case you are worried about merging onto the interstate, you can take comfort in knowing the Super Snake pumps out 800 horsepower. That is about the same horsepower Japan used in Zero fighters during World War II, and it will catapult today’s new Mustang from zero to 60 in fewer than 4 seconds. If luxury is more your style, you can pick up the Cadillac CTS-V super sedan with its 556-horsepower supercharged engine that gives you a top speed of 190 mph.

With products like these, it is not hard to see how Detroit has been broke and begging Washington for money since Chrysler first got on bended knee in 1980.

The real question is: Why do we ignore all common sense when it comes to things like cars, yet complain when we have to pay so much at the gas pump? (By the way, I don’t exempt myself from these criticisms. My lust for fast cars ended only after I almost killed myself in my 1995 Chevy Camaro. By today’s standards, the Camaro was relatively tame, generating just 275 horsepower and a top speed of only 155 mph.)

It’s the Economy that Needs Turbo-charging

Remember the 1980s when America had a fast economy and slow automobiles? Today, it is the opposite. Unemployment is a chronic problem. Credit is almost gridlocked. And inflation is starting to boil over. A single oil shock — say upheaval in Saudi Arabia — could send the U.S. economy over a cliff.

Even-higher gasoline prices would quickly choke off U.S. consumer spending, the one bright spot in a dull economy. Say gasoline gets above $7 per gallon. In that case, there won’t be much left to spend on clothes, entertainment and even basics like food and mortgages.

That is exactly what happened in the 1970s following two oil embargoes. The price of crude oil rocketed from $3 per barrel to $36 per barrel. Unemployment soared from 4.9 percent in 1973 to 5.6 percent in 1974 and then hit 8.5 percent in 1975. Then, things got bad. As a result, the Dow Jones Industrial Average lost two-thirds of its inflation-adjusted value by 1980.

All this happened just more than a generation ago, yet we Americans continue to make stupid mistakes — from the cars we choose to the leaders we elect.

For example, President Barack Obama wants to spend billions of dollars on new rail systems, new solar-energy power plants and electric cars — most of them built off a blueprint that doesn’t even exist.

My question is: Why don’t we improve our economic prospects by returning to tried-and-true technologies (like fuel-efficient cars) while exploring and developing America’s own fossil fuel reserves, especially those offshore and in Alaska?

The answer comes down to two words: power and corruption. Despite the fact taxpayers keep bailing out Detroit, U.S. automakers could not care less about what is good for the country. They care about padding profits and collecting big bonuses. And you don’t have to be an automotive engineer to see the fat profits in an 800-horsepower muscle car compared to an economy car that gets 50 mpg.

As a nation, we must start making smarter choices because we are running out of chances. When I was going to college in that Honda, the U.S. imported 6 million barrels of crude oil each day. Today, the U.S. imports twice that amount (see chart below). Yet Washington doesn’t bat an eye as Madison Avenue convinces us we cannot possibly be happy unless we have a 300-horsepower V-8 parked in the garage.

 

U.S. Imports of Crude Oil and Petroleum Products (Thousand Barrels per Day)

Through it all, Obama proclaims he wants to rebuild America, make it a Green utopia fabricated from fanciful wishes and borrowed money.

But listen hard and you can almost hear them coming: a mechanized army of Obama electric cars. What a shame when all we needed was to modernize that little yellow Honda and elect some good leaders.

Yours in good times and bad,

John Myers

Editor, Myers’ Energy & Gold Report

The Gold Bull Is Still Charging

In October 2000 I became the editor of Outstanding Investments. In that first issue I told subscribers to buy gold. For 10 and a half years I have not once wavered in my advice. But I have to confess, after having recommended bullion at $284 per ounce a decade ago I have been tempted to tell readers that it is time to take profits.

Over these past couple of weeks I have contemplated what I would tell you today. And although you are Personal Liberty Digest™ readers and have only read me for two years, gold has in that time nearly doubled.

The question that has been giving me a headache: Is it time to take profits or stand firm with gold?

In considering this I thought back to some of the teachings I learned from my late father, Vernon. He told his subscribers in 1968 to buy bullion when it was $35 per ounce. He stuck with gold all the way through to its eventual high of $850 per ounce. And he watched it slip back to $680 per ounce before telling his clients to sell every ounce they had and instructed them to buy U.S. Treasury bearer notes which at the time were paying 16 percent to 18 percent.

I once asked my dad if he felt bad that he had missed the very top of the gold market. No, not at all he said. He told me how he sat back and watched other advisors sell their subscribers out early; some at a price of $100 per ounce, many more at less than $500 per ounce.

Vern also told me that you can never know the top until it has it has been reached and a decline has begun. He said that J.P. Morgan never looked for the first 20 percent profit or the last 20 percent, but was very happy to take the 60 percent in the middle.

So I list here what I think to be true:

1. We have yet to hit a top. At $1,500 gold may look pricey. But in more than a decade gold has not corrected. Technically, it looks strong.

2. Gold is cheap compared to stocks. In 1980, when gold hit its apex of $850 per ounce, investors could theoretically trade away an ounce of gold for a single share in the Dow Jones Industrial Average. Today it takes eight ounces of gold to buy a single share in the Dow (Dow 12,200 divided by $1,500 per ounce gold).

3. In inflation adjusted terms, gold is still cheap. By real terms I mean when we adjust the purchasing power of the dollar, which shows just how little of a bang for the buck we are getting nowadays. I did an inflation check on the Web (http://www.westegg.com/inflation/). An ounce of gold that may have been in your mattress and was selling for $850 per ounce in 1980 would have to fetch almost $2,500 to buy you the same goods and services that it would have bought you back then.

4. There has been an avalanche of money. Compared to fiat currency there is less gold now than ever. All the gold ever mined in the world fits in less than one tennis court cubed and has a total value of roughly $2 trillion in today’s money. All that gold is roughly worth the freshly printed money that President Barack Obama gave away to big banks, automakers and the quantitative easing program by the Federal Reserve

Miners are adding less than 2 percent to the world’s above-ground gold supply annually, while monetary numbers like M2 or MZM (the super money that the Fed lends to the banks which in turn is lent out in multiples) has been growing at near double-digit rates.

And consider this; all the gold mined this year will be worth less than $200 billion. To give you a measuring stick as to how little this is, the Federal government spends $200 billion every five days!

The numbers get even more jaw-dropping. For example, the U.S. bond market is worth an estimated $25 trillion. With just $200 billion in new gold being produced, if just a fraction of it were converted into bullion, gold prices would skyrocket.

In 2009 the World Gold Council’s Marcus Grubb pointed out that current gold investment allocation stands at less than 0.6 percent of total global wealth (see chart below).

Source: http://www.moneyweek.com/investments/precious-metals-and-gems/gold-investment-has-more-room-for-growth-63944

According to Jeffrey Christian of the CPM consultancy, “Gold [has] been deprecated and reduced as a financial asset. In 1968 gold may have represented 4.5% to 5.0% of the world’s wealth… By the 1990s it was down to 0.2% of the world’s wealth.”

Now Factor In China

The market must also account for China, which has the fastest-growing economy in modern history and is undergoing major changes in the way it handles gold.

Private gold ownership was outlawed by Chairman Mao. But in 2002, the Shanghai Gold Exchange opened and started free trade in gold for the first time in the nation’s history.

In 2004, China legalized gold ownership for its citizens for the first time in 54 years. This newfound right should have a big impact on world gold demand.

Forbes.com, has reported Chinese ownership in gold totals “less than one-tenth of a gram per Chinese citizen,” far below the rate of ownership in India.

It’s estimated that the equivalent of $36 billion in Chinese private investment could move into gold in the coming years. That would be 50 percent of the world’s entire annual gold production at current prices.

On April 21st MSN Money carried this headline: “Why gold could hit $5,000.”

The article points out that analysts at Standard Chartered Bank (SCB) believe gold is in a new “super-cycle” as a number of structural factors—including U.S. monetary growth and consumer demand from Asia along with tepid growth in supply—will push prices vastly higher. Team leader Dan Smith is looking for prices of $2,107 per ounce by 2014.

But the SCB team thinks the ultimate potential is much higher. “Statistical modeling suggests a possible ‘super-bull’ scenario of gold prices rallying up to $4,869 in nominal terms by 2020,” said Smith.

I don’t know where Smith and his analysts come up with these numbers but I, too, think that gold is poised to go even higher.

Action to take: Hold or add to all your physical gold and silver positions. I wouldn’t be surprised by a $200 per ounce or greater correction in late spring or early summer. But if you are not trading in and out of precious metals and are a long-term investor, then hang tight. Five years ago I said gold would hit $2,000 per ounce. At the time bullion was around $600 per ounce, and I think many of my subscribers thought I was nuts. Yet today gold still looks strong and $2,000 per ounce remains my target.

Yours in good times and bad,

John Myers
Myers’ Energy and Gold Report

Violent Deflation

The other day, I walked into the Royal Café in the town of Vulcan, Alberta. The café is on Centre Street, a dozen miles west of the family homestead whose lone curator is my uncle, Dick Myers. The café has not been redecorated since I was a kid, but nobody seems to notice.

I sat across from my uncle. I could be in a time warp, except for the teenage waitress sitting nearby, eagerly texting someone.

My uncle’s sharp blue eyes looked tired. I imagine 83 years of farming will do that. He has seen much hard work and hardship. Born in 1927, he grew up during the Great Depression and the Dust Bowl.

As my uncle gulped the thick black coffee, I could tell his mind was not on the long winter that had delayed seeding by weeks.

He quickly told me he is worried about the growing protests that threaten our fragile world. I listened because I love and respect him. My uncle’s farm once spanned to the horizon, and the cattle he once herded numbered in the thousands. But he didn’t want to talk about wheat or livestock.

My uncle said that when he was a boy, hobos would come to the homestead. My grandfather did well with the section of land he farmed, so my grandmother always had some scraps to give to hungry men. But times were tough, and some neighbors did not have food to spare. My uncle reminisced that hungry travelers would tip their hats and move along without malice.

“The world has changed,” Dick said, “and not for the better.”

I sipped my coffee, which had been brewed in an old stovetop percolator, and nodded in agreement. The waitress was talking on her iPhone, loudly commiserating about her weekend plans with her boyfriend. I didn’t mention the irony.

Dick leaned over the table: “Middle East violence… these protests in Europe; I wouldn’t be surprised if it spreads. And who knows where it will end? If this economy doesn’t stay afloat, then there is going to be hell to pay.

“It won’t be like it was when I was a kid,” Dick explained. “If times get tough and people come on to a property and ask for something, there won’t be no saying ‘no.’ Nowadays, people take what they want.”

On the drive home, I thought about what my uncle had said. I wanted to share it. There are agitated protestors from London to Liberia. Some are even protesting the wedding of Prince William and Kate Middleton. Others, like Muslim rampages over the burning of the Quran, have obvious roots and will have more serious consequences. And war rages in Iraq, Afghanistan and Libya.

Much of the world is becoming violent, and I don’t have any reason to believe North America is immune from this trend.

What The Ruling Elite Fears Most

Nobody in Washington fears the deflation the way my uncle does, or the way your parents or grandparents might. Our leaders are too young to have lived through it. The closest facsimile is Federal Reserve Chairman Ben Bernanke — a student of the Great Depression, the architect behind trillion dollar bailouts of banks and automakers, and the man in charge of quantitative easing (the process in which the Fed creates money out of thin air by buying up Treasury debt).

The second-phase QE2 accounted for the purchase of $600 billion in Treasury debt. In all, the Federal government has injected about $2 trillion into the U.S. economy.

I don’t believe former President George W. Bush and President Barack Obama were eager to save their friends in the banking business. Say what you will about both of them, but I think they are shrewd men.

Instead, I believe both their administrations have systematically flooded the U.S. economy with borrowed money because Washington is terrified of what would happen if deflation ever got a grip on America.

The Obama administration and Bernanke fear that a massive destruction of wealth and jobs will lead to widespread protests and violence. As a result, the Federal government has pumped money into the economy, even as it has sacrificed the dollar.

What has yet to be determined is whether it will succeed or not.

Deflation Threat Still Lingers

Great wealth could be wiped out in a couple of weeks if a bear market commenced in stocks and bonds. Bonds might be the most vulnerable, because the Fed has said it will stop further quantitative easing. Meanwhile, the Fed funds rate is effectively at zero, the lowest it has been since the Great Depression.

The only direction for interest rates to go is up. Bond prices move in the opposite direction of interest rates, so higher rates will mean that bonds are less valuable. The U.S. bond market is worth approximately $25 trillion dollars. Therefore, even a 6 percent or 7 percent spike in interest rates could erase $2 trillion in assets.

Higher interest rates also hurt big corporations. Companies that have been able to borrow have done so at interest rates not seen in more than half a century. This has allowed at least some companies to expand. But if interest rates rise, U.S. companies will stop expanding and cease hiring.

Unemployment is already at 9 percent, and real unemployment is close to 16 percent. This is as good as it has gotten, with record-low interest rates from the Fed and the unprecedented expansion of the U.S. money supply. Higher interest rates are coming down the pike, and they could ignite another — even worse — recession. They might even lead to a depression.

A crashing economy will create social unrest. We have seen it in the Middle East and in Europe.

Action to take

Take steps now to prepare for the worst:

  • Stock up on emergency rations of food and water.
  • Store medicines, such as antibiotics.
  • Make your residence more secure.
  • Develop a plan to protect your family in case of a crisis.
  • Keep on hand some cash. Store it in a home safe, if you can afford one. As a last resort, 1-ounce silver coins may come in handy if you have to barter for basics.

Should the U.S. economy crash, disaster will inevitably follow. Those who have prepared for the worst will be grateful that they did.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy & Gold Report

The Color Of Green

“You walk in to a shoe store with $150, you walk out with one shoe." —Paul Newman speaking to Tom Cruise in the film “The Color of Money.”

Earlier this month another terrible blizzard struck in what has been one of the worst winters in memory. As snow packs finally begin to melt I can’t help but think that the environmentalists are not telling us the truth. Of course, having two terrible winters in Western Canada over the past three years can’t yield a scientific conclusion. Yet my observations may carry as much evidence as the Green’s theory that the earth is melting beneath our mukluks.

In his 2009 book Heaven and Earth: Global Warming—The Missing Science, Australian geologist Ian Plimer makes the following points:

  • There is little to no geological, archaeological or historic analysis on what is causing climate change.
  • Greenland was once a green land because of natural occurring global warming. During medieval times Earth was several degrees warmer than it is now.
  • Climate has always changed but it is not because of industrialization.
  • Atmospheric CO2 has been far higher than it is now.
  • The hockey stick graph that charts global warming as the result of manmade CO2 emissions is fraudulent.

The book concludes that the slogan, “Stop climate change”, is a public phenomenon based on widespread ignorance rather than real science. The sheer number of TV programs that go out of their way to hammer home the dangers of global warming is evidence that Plimer is on to something.

You can order this book from Amazon.com by clicking here.

President Barack Obama is staking America’s future on clean energy while ignoring these truths. A few weeks ago in a major policy address, Obama announced that America would continue to pursue green energy solutions from wind, solar, biofuels and nuclear power.

According to the President, “We cannot keep going from shock when gas prices go up to trance when gas prices go back down.”

This prompted The New York Times toconclude: “The path to energy independence—or at least an end to dependence on the Mideast—could well be dirty, expensive and politically explosive.”

What the Greens seem blind to is the fact that a shift away from fossil fuels will have huge opportunity costs for the United States at a time when the country can least afford it. The technology for clean energy does not yet exist. To embrace it when competitors like India and China do not would be economic suicide.

What the President either cannot or will not grasp is that these solutions involve huge subsidies and are cost ineffective.

Why Adam Smith Would Hate The Environmentalists
Over the past couple of years I have written to you about all the problems inherent with renewable energy. On that list is the vast amount of cropland needed to create ethanol, the inefficiency of solar energy and the lack of an infrastructure for hydrogen vehicles. In time, all of these problems can be worked out, but the best way to achieve a seamless switch is to take government out of the equation.

And while Adam Smith died more than 200 years ago, the father of economic thought would object to Obama’s energy agenda because it does not allow free markets to operate.

The invisible hand that Smith spoke of when describing how free markets create wealth was at work when oil was trading above $120 per barrel. The record purchases of hybrid cars three years ago were evidence that free markets work.

The chart below shows hybrid car sales statistics along with the price of gasoline over the past seven years. As gasoline prices have declined so too have sales of hybrid cars. That is how the free market works.

Hybrid car sales statistics, January 2004 to March 2009

As petroleum becomes less and less affordable, consumers will switch towards other types of transportation, including electric cars. This will encourage outside investment and, over time, crude oil will be displaced. This won’t happen because the Federal government mandates a changeover which is neither practical nor affordable.

Despite this fundamental truth, Obama is hell-bent on the Federal government fixing a problem (global warming) that doesn’t even exist. It seems hard to understand why, but the Las Vegas Review Journal suggested an answer. A headline in the April 4 issue read, “Green goal: End capitalism, destroy our quality of life.”

According to that newspaper:

“Those who claim to be trying to save the planet from the scourge of greenhouse gases and catastrophic global warming have a few other goals: social engineering, assaulting capitalism and assailing the American lifestyle.

“United Nations Environment Programme (UNEP) defines a green economy as one that results ‘in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities.’ In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive.

“By socially inclusive they appear to mean a leveling [SIC] of the capitalist system under a global government, with less wealth spread equally among a population of green-collar workers without social or employment mobility.”

I don’t know if Obama and his Green coalition are nefarious. But there remains one simple fact—fossil fuels still make economic sense. To claim otherwise and keep subsidies for renewable energy or pass carbon tax legislation would only serve to sell the American people a useless bill of goods.

Yours in good times and bad,

John Myers
Myers’ Energy & Gold Report

Trumped-up?

I understand that many of you want nothing better than to tell President Barack Obama, “You’re fired!” But do we really need a New York City billionaire Donald Trump to help us do it?

I fret over Trump’s motivations. He could be questioning Obama’s birth certificate to stir up publicity for himself and his TV program, “The Apprentice.” It could also be that Trump wants to create negative sentiment against conservatives by painting us as extremists. If so, then The Donald is really allied with Obama and privately wants to see him re-elected through the power of independent voters.

Before you dismiss that Trump is really an Obama ally, consider this from Brendan Coffey’s blog on Forbes.com:

“Donald Trump may be talking a game the Tea Party activists embrace, such as consistently questioning President Obama’s American birth of late, but an analysis of his political donations since 1989 show a distinct support of the Democratic Party that may not go over well should Trump be serious about running for the Republican Party nomination for President.

“According to electoral cycle donations via OpenSecrets.org which I examined this morning, Trump has donated a net $744,033 to political candidates and committees since 1989 (the extent of the online database).

Of this, $612,083 are [sic] to candidates or parties identifiable either as Republican or Democratic.

“Of that amount, $320,300 of that have [sic] been to the Democratic Party and Democratic candidates; $291,783 to Republican committees and candidates. That’s 52% of his giving to identifiable political giving to Democrats.”

Forbes’ list of some of Trump’s liberal recipients includes:

  • $20,350 to Charles Rangel, the Harlem-based Congressman
  • $9,900 to Chuck Schumer
  • $9,400 to Harry Reid
  • $9,000 to various Kennedys, mainly Ted.
  • $5,500 to John Kerry

Trump is not putting much of his money where his enormous mouth is.

Even as I was finishing up this column I found this editorial by Richard Roeper of the Chicago Sun-Times: “Having written three books and dozens of columns debunking urban legends, myths, rumors, tall tales, half-truths and general crackpottery, I’m hardly one to jump on the “Aha!” bandwagon, but I’m starting to think Donald Trump is spearheading a vast conspiracy. To get Barack Obama re-elected.”

Regardless of Trump’s motivations, I believe that the spotlight on Obama’s birthplace may hurt conservative-minded people that want to see the President defeated in 2012.

I say this even though I believe that Obama may not be a natural-born citizen as the U.S. Constitution requires. If that is true, as a person who respects the Constitution, I object wholeheartedly.

Yet as a pragmatist I fear that if we focus on Obama’s birthplace we are wasting our energies and it could cost us the election. Keep in mind it is very hard to prove a negative, and with the Ruling Elite supporting the President, I think it could be next to impossible.

Lessons From The Vince Foster Saga
Remember Vince Foster? He was Deputy White House Counsel to President Bill Clinton and a close confidant of the First Lady Hillary Rodham Clinton. Foster was found dead in Fort Marcy Park on July 20, 1993. A three-year investigation conducted by independent counsel Kenneth Starr concluded that Foster died of a self-inflicted gunshot wound. It was all very convenient for the President and the First Lady because Foster knew the deepest secrets of the Clinton’s not-so-blind trust, as well as the truth behind Whitewater.

The ruling of suicide was made despite the fact that one witness, Patrick Knowlton, entered Fort Marcy Park approximately 70 minutes before Foster’s body was discovered. Evidence shows that Foster was already dead at that time. Knowlton saw two vehicles in the parking lot, neither of which matched the description of Vince Foster’s 1989 silver Honda.

There were many other inconsistencies with the suicide finding and I remember I was outraged that more was not done. At the time, I was publishing an investment letter and President Clinton was coming up for re-election. I wrote about Vince Foster’s death, Whitewater and what I thought was a web of corruption and lies inside the Clinton White House. Some influential writers and broadcasters addressed the subject, all for naught. Clinton was re-elected in a landslide over Bob Dole in 1996.

Looking back, I think time and energy was wasted on what was almost impossible to prove while not enough was spent on Clinton’s blatant failings as President. Fast-forward 15 years and we have a President that takes prideful ownership of many policies that are destroying America.

A Checkered Past Since 2008
Three years ago, candidate Obama said he would fix the economy. Instead, he spent his energy on ramming Obamacare down the throats of the nation.

The President also promised to be fiscally responsible. Yet Federal spending has soared during the President’s 26 months in office as is clearly demonstrated in the chart below.

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The U.S. Treasury Department is warning that it will reach its debt limit of $14.3 trillion in mid-May unless the Federal government gets new financing.

Given Obama’s ambitions on everything from green energy to healthcare to Arab intervention, Federal spending as a percent of gross domestic product could exceed World War II levels. That could be disastrous for America for many reasons, one being if China—sitting on $1 trillion in Treasuries—starts to liquidate Treasury debt. That would send interest rates soaring (the Treasury would have to auction off debt to keep the government afloat). Instead of paying 2 percent or 3 percent yields, the Treasury would have to yield 22 percent or 23 percent.

This would devastate the bond and stock markets as well as real estate, which is still staggering from the 2008 Depression.

Then there is the dollar itself. The bear market for the greenback began in 2001 with President George W. Bush. But the decline of the dollar has been accelerated under Obama. A decade ago my Canadian Loony was worth less than 70 cents against the dollar. Today it is worth $1.05 U.S.

It could get a lot worse, said former Treasury Secretary and Secretary of State James Baker: "At some point we have to get a handle on this spending binge we’re on."

Baker, whose glory days were in the Reagan administration, added: "If the United States of America didn’t have the dollar as the de facto reserve currency of the world, we’d be Greece. I mean we are broke, bankrupt."

When one of the top American powerbrokers of the 20th Century says the country is bankrupt, that should be the headline on every newspaper in the country. Instead what is making headlines is Trump. Don’t you see? We are drowning in an ocean of debt and people like Trump are describing the water.

America is in for hard times if Obama is not defeated. And there are so many obvious reasons that he should not be re-elected.

Yours in good times and bad,

John Myers
Editor Myers’ Energy & Gold Report

Blame It On Rio: The President Goes Petro Hunting In Brazil

A good President might try to correct three of America’s biggest problems: intractable unemployment, America’s increasing dependency on foreign oil and a monstrous trade deficit. Yet none not one of these issues concerned President Barack Obama as he traveled throughout Latin America and launched another war upon a Middle Eastern nation.

Libya is ground zero for American air and sea power. Libya has more than 40 billion barrels of crude oil reserves and before its civil war was producing 1.7 million barrels of oil per day, roughly 2 percent of the world’s daily oil output.

No longer can other oil exporters replace shrinking Libyan production. That makes the crisis in Libya not just a potential military one but an economic one as well.

Barack’s Brazilian Solution
Apparently President Barack Obama does not think American roughnecks can be trusted. Boring at vast oil veins under the Gulf of Mexico has been suspended by the President. Now he has made his case for offshore oil development much further south, off the coast of Brazil.

Obama made his proposal while meeting with Brazilian President Dilma Rousseff. The Tupi oil field alone, which lies off Rio de Janeiro in the Santos Basin, has a potential deepwater reserve of 100 billion barrels.

Of course, the Gulf of Mexico has vast reserves, too. But like a good Democrat, Obama has added a middleman, and a foreign one at that.

The prospect of drilling for oil off the coast of Brazil rather than the coastal waters of the Gulf of Mexico seemed to have Obama tickled pink. 

“By some estimates, the oil you recently discovered off the shores of Brazil could amount to twice the reserves we have in the United States,” Obama said. “We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.”

The “you” Obama was talking about is one of the largest corporations in the Americas—Brazil’s state-owned Petrobras oil company. Obama previously offered the company a $2 billion loan guarantee to help develop the oil field, but to date, Petrobras has not given an answer.

While the President has embraced oil production off Brazil, operations in the Gulf of Mexico and off the coast of Alaska are at a standstill because of Obama’s “permitorium” on drilling. The only exceptions being three Gulf permits granted to operations which previously had permits and one allowing for new exploration (which will probably soon get slammed by a lawsuit).

Brazilian oil only makes sense if the United States didn’t have reserves. But the nation does. Still the President wants to invest billions of U.S. tax dollars for oil off Brazil.

And let’s not forget the unemployment problem. Obama promised to get America back to work during his primary run for the Presidency three years ago. But the jobless situation has not improved. According to The Washington Post, real unemployment in the United States may be as high as 16 percent.

Never mind that American rig operators go without work as do a multitude of small businesses that support them.

Fill’er Up With Corn And Check The Oil
Pleasing the Greens seems more important to Obama than getting America back on its feet. Of course, pleasing the Greens won’t produce much work for Americans and will only make the United States more dependent on oil imports. And oh yes, it will add to America’s massive trade deficit which has been weakening the U.S. dollar and therefore aggravating inflation.

Little wonder that on March 25, The Canada Free Press gave its opinion on Obama’s aspirations for Brazil:

“If Obama seems to be taking a wrecking ball to domestic oil production while increasing our reliance on oil from unstable foreign regimes, he at least partially explained his reasoning while in Brazil. ‘In the United States, we’ve jump-started a clean energy industry, and we’ll soon have the capacity to produce 40 percent of the world’s advanced batteries.’

“Of course, ‘jump-started’ is Washington speak [SIC] for subsidized. So in essence, the President is more than happy to trade our energy security and tank our economy to lead the world in the production of batteries.”

The Canada Free Press concluded that nobody can make, “stuff like this up and if it wasn’t so seriously stupid, it might be hilariously funny.”

Obama seems locked into remaking America into a Green nation whether it makes economic sense or not. Before his trip to Brazil, The Economist came out with its Feb. 28 issue, the cover of which said: “Blood and oil.” Within this issue is a Special Report, The Future of Food.

Food and energy have always been interconnected because it takes one to produce the other. Despite dire warnings of the surging global demand for food over the next two decades the Obama administration is willing to grow corn rather than drill for oil. 

While China aims to make 5 percent of its gasoline supply ethanol by 2020, Obama is far more ambitious, demanding that 30 percent of U.S. gasoline be derived from ethanol or alcohol by 2030.

Today ethanol only accounts for 8 percent of America’s transportation fuel yet takes up to 40 percent of the nation’s corn acreage. The Economist warns that if Obama’s 2030 deadline for clean gasoline is met, it will inflate food prices by an additional 15 to 40 percent.

If Obama had read this issue of The Economist, he might have spent less time talking about drilling for Brazilian offshore oil and spent more time learning the truth about ethanol. 

Brazil has no special advantage in finding crude but does have a tremendous advantage in making ethanol. The Economist points out that Brazil generates its ethanol, not from corn but from sugarcane, and the result is that it harvests eight units of energy for every one unit spent. In the U.S., corn produces one and a half units of energy for every one unit spent. 

Yet Obama is insistent that America grow ethanol, food prices be damned.

According to Peter Brabeck, the CEO of food giant Nestlé, “This is the craziest thing (the United States) is doing.”

I take issue with Brabeck. The Obama administration has been doing so many crazy things when it comes to U.S. energy policies it seems impossible to name just one.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy & Gold Report

Ignoring Stupid Fears, Dealing With Legitimate Worries

A few weeks ago I called a friend that lives in Los Angeles. I spoke to his secretary and chided her, asking her if she had bought her iodide pills because of events in Japan.

Funny you should ask she said; her mother was on her way to pick up a bottle for both of them. Later I sat back and wondered: Why is it that we worry about such things?

I suspect tens of thousands of people along the West Coast fretted about radiation while they drank alcohol and smoked cigarettes.

So why shouldn’t we fear radiation from the crisis at the Japanese nuclear power plants? Simple, it doesn’t pass the common sense test. If there was a serious leak there would be a lot of dead Japanese. Also consider in August 1945 the United States exploded two nuclear bombs over Japan. Yet radiation did not spread to Hawaii let alone California.

In fact, if you live on the West Coast and you buy iodide pills off the Internet it could be counterfeit. In that case the remedy is worse than the risk.

Fear is nothing new. It is primal. With the 24-hour news cycle it can be infectious.

When the AIDS scare broke, I had a friend who had been involved in a one night fling with a woman years earlier. After it was announced that Rock Hudson was dying of AIDS there was rampant speculation that a plague was about to be unleashed. My friend was certain he had HIV. He called the local AIDS hotline and demanded a blood test. My friend explained his circumstances at which point the nurse on the hotline told him that the chances he would be killed in a car accident driving to get the test were higher than the likelihood he had the virus.

The list of what we don’t need to fear is almost endless. What I want to address are the things that we should be concerned about and what precautions we can take to protect ourselves.

The U.S. Economy And Stock And Bond Markets
Nothing from the Middle East to Japanese can derail the bull market in U.S. stocks. The Dow Jones Industrial Average stands above 12,000, pushed higher by the tidal wave of fresh money courtesy of Washington bailouts and Federal Reserve quantitative easing. New money in the absence of increased productivity does not create wealth.

President Barack Obama has created a buffer against the Great Deflation of 2008, yet fundamental problems still plague the U.S. economy.

The official government unemployment rate is running at close to 10 percent but the Bureau of Labor Statistics—the agency that accounts for people who have simply given up looking for work—puts the real unemployment rate closer to 16 percent.

The dearth of jobs means a frail recovery in consumer spending. Since that sector accounts for almost two-thirds of the nation’s gross domestic product, this is a problem for the immediate future.

It is possible that the Federal government and the Fed will continue to inject more money into the economy. But before too long, Washington will reach its breaking point; China and Japan will no longer purchase U.S. Treasury debt.

Tens of billions of dollars in Treasuries must be auctioned off weekly. These two nations alone hold more than $2 trillion in U.S. Treasury instruments that can be sold at a moment’s notice. Given the crisis in Japan, there is the possibility that even if Tokyo doesn’t sell Treasuries, it may stop making bids at Treasury auctions. Since the U.S. must sell this debt to finance itself the end result will be higher rates.

That will cripple the U.S. bond and stock markets. This is a real threat to your financial future, especially if you invested in U.S. paper instruments.

To reduce this threat you should have at least 20 percent of your investment funds in physical gold and silver, blue-chip resource stocks and physical cash. Use what proportions work best for you.

Your Personal Habits
It is ironic that the person that could hurt you most is yourself. I am not going to lecture you because there is no need for it. If you smoke, you know you should stop. If you drink more than moderately, you know you should cut back.

But there are other ways to take care of yourself. I used to be fanatical about exercise right up until I was in my early 40s. I took a decade off and the last year has been a tough comeback. But it has been worth it. I shed a few pounds doing simple things like walking every day. Now I can run three miles a day.

As important as the changes I have seen in my body have been the changes I feel in my mind.

You should be more active and try not to watch too much news. I have to for my work, but after a full day of CNN, Fox News and the BBC I feel incredibly tense. The media is good at selling fear. So too is our government.

I am not a fatalist but there is nothing I can do about an asteroid strike, terrorist attack or super-flu. Unless you want to remove yourself from society and live in a bunker, you will die of worry just thinking about such things.

I am not saying be unprepared. I take seriously what Bob Livingston says. My wife and I keep extra provisions such as water and food on hand. More importantly, I don’t take stupid risks. I don’t drink and drive, I do not travel on snow-covered roads and I won’t venture into the bad areas of the city.

If you treat your body and mind better and take fewer risks you will live a longer and happier life.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy & Gold Report

P.S. If you would like to read an interesting book on risk, I recommend you pick up a copy of The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb. It is available at Amazon.com by clicking here.

Obama’s War

(Part two of a two part series about Presidents and the Middle East)

President Barack Obama is not who the world thought he was. His policies, including the attack on Libya starting last weekend, prove it.

Candidate Obama promised peace in the Middle East. Yet with Libya, the President is using the same logic and rhetoric as George W. Bush used during the U.S. war against Iraq that began nine years earlier to the day.

After presenting his message of diplomacy it was no surprise that when he took office Obama was viewed by the world as the most highly regarded U.S. President since John F. Kennedy. But as the Middle East has crumbled under the weight of hate and violence, Obama first sat on the sidelines for weeks, refusing to take on even the vilest of America’s enemies; men like Libyan leader Colonel Moammar Gadhafi.

Finally, on March 17, the Obama administration, lead by Secretary of State Hillary Clinton, joined a United Nations resolution that permits "all necessary measures" to impose a no-fly zone, protect civilian areas and impose a ceasefire on Gadhafi’ s military. Enforcement will rely only on air power as the resolution rules out sending ground troops, at least for now. Two days later the U.S. launched its first attacks; ostensibly to “save lives” in Libya.

But as Bush 43 proved in Iraq, no-fly zones can soon be transformed to boots on the ground, and that could mean yet another U.S. war on Arab soil. This is most disconcerting because the United States is already fighting a two-front war in Iraq and Afghanistan.

Last week I wrote about Presidents Ronald Reagan through George W. Bush and their mismanagement in the Middle East. With the region dissolving into mayhem, I thought it important to put this week’s focus on Obama.

Some analysts were calling it Obama’s "deer-in-the-headlights" doctrine. On key issues from Tunisia to Egypt the Obama administration has not shaped events in a positive way, even though it has been the U.S. that has been instrumental in creating this Middle East crisis.

According to the Daily Star, “As revolution has spread from the Maghreb to the Gulf region and back again, President Barack Obama has stuttered and fumbled and sometimes fallen strangely silent. What can explain this from a man whose manner has always been smooth and whose oratorical gifts propelled him from utter obscurity to the White House in just four short years?”

The newspaper went on to ask: “Why has the president seemed so indifferent to democracy in the Middle East?”

The simple answer is that Obama does not have the wherewithal to lead. The other answer is more complicated; that Obama is purposefully undermining democracy in the region and launching a war to help his bid for re-election.

So who is the real Obama? It is an important question with blood being spilled on a daily basis in the Middle East and in the wake of oil prices spiking at more than $100 per barrel, more than twice as high as they were the day Obama was elected.

It is hard to reconcile the differences between candidate Obama and President Obama. It was candidate Obama that gave an inspirational speech in Cairo on June 4, 2009:

“That does not lessen my commitment, however, to governments that reflect the will of the people. Each nation gives life to this principle in its own way, grounded in the traditions of its own people. America does not presume to know what is best for everyone, just as we would not presume to pick the outcome of a peaceful election. But I do have an unyielding belief that all people yearn for certain things: the ability to speak your mind and have a say in how you are governed; confidence in the rule of law and the equal administration of justice; government that is transparent and doesn’t steal from the people; the freedom to live as you choose. These are not just American ideas; they are human rights. And that is why we will support them everywhere.”

We are approaching the second anniversary of that speech. Middle East regimes have collapsed and the U.S. is in yet another war. It remains to be seen exactly how far Obama will use America’s military might in Libya. Whatever actions the President finally settles on, from Libya to Pakistan, it will translate into further Muslim extremism aimed against Americans.

True, Gadhafi has slaughtered thousands of his own civilians. At the same time, Obama leaves Saudi Arabia’s repression of democratic ideals unchallenged even though the House of Saud spends billions of dollars financing Islamic terrorist organizations.

Obama’s policies in the Middle East have been inconsistent. France and Britain first endorsed a no-fly zone over Libya to give anti-Gadhafi insurgents a fighting chance. It took the Obama administration weeks to catch up.

It is Obama’s job to be the leader of the free world, but he has failed miserably at that task. The result is a wave of unrest across the region and another war in yet another Arab country. Fox News has gone so far as to say that the President’s leadership in the Middle East has been nothing less than a “dereliction of duty.”

It could be that Obama is shell-shocked by the huge responsibilities of office; that he is not up to the job.

At stake is not only a democratic future for Libya, but America’s national interest. Libya has oil reserves of 41 billion barrels of crude, the largest of any African nation.

Every President from Ronald Reagan to George W. Bush stood for something, right or wrong. All were decisive. Obama seems to lack leadership qualities by first his hesitancy and now his impulsiveness. That is why he deserves a failing grade when it comes to the Middle East. I just hope his incompetence doesn’t lead to a ground war, this time in Libya.

Yours in good time and bad,

John Myers
Myers’ Energy & Gold Report

Stupid Presidents: How America Blew-Up The Middle East

(Part one of a two-part series on U.S. Presidents and the Middle East)

For more than four decades United States Presidents have made a mess out of the Middle East. Now the region is boiling over. Americans face $4 per gallon gas. In the wake of all this I thought it is a legitimate question to ask: Why has every President since Lyndon Johnson been so utterly stupid when it comes to the Middle East?

I don’t want to speculate at what is at the root of nearly a half century of incompetence, so instead of spewing a conspiracy theory I decided to just grade the last five Presidents when it comes to their handling of the region.

Beside each President I give a grade. Notice the marks fall progressively until I get to our current President, Barack Obama. I would be delighted to get your feedback on what you think of my grades and how you would mark our recent Presidents when it comes to the Middle East.

Ronald Reagan — C+. I would love to give Reagan a higher grade. After all, he used the U.S. Navy to put Libya in its place, ordering two F-14s to shoot down two Libyan jets in August 1981. He cultivated solid relationships with oil producers like Saudi Arabia that brought the inflation adjusted price of oil to its lowest levels since the 1960s. Yet I can’t give Reagan sterling grades for his Mideast policies.

First he put U.S. soldiers in harm’s way in Lebanon in 1983. The end result was 241 American servicemen killed by truck bombers. Guards posted outside the barracks could not stop the Islamic jihad terrorists because they were under strict orders to have no magazine inserted and no rounds in the chamber of their weapons.

Reagan also looses points for not bringing justice to Moammar Gadhafi after his Libyan agents blew-up Pan Am flight 103 killing all 259 on board and another 11 on the ground in December 1988.

Then there is the fact that Reagan armed Saddam Hussein to the teeth to oppose Iran in a war that lasted eight years. Later administrations would argue that the Iraqi dictator menaced the world with weapons of mass destruction (WMD). That turned out to be untrue, but whatever arsenal Saddam had came from the billions of dollars in aid and technology that was provided by the Reagan administration.

On August 18, 2002, The New York Times wrote:

"A covert American program during the Reagan administration provided Iraq with critical battle planning assistance at a time when American intelligence agencies knew that Iraqi commanders would employ chemical weapons in waging the decisive battles of the Iran-Iraq war.”

Reagan also doesn’t score well because of his guns for hostage deal with Iran; that he “forgot” about. When he was pressed on the issue—because it might have meant that he had broken the law—Reagan sounded like the kid who tells the teacher that the dog ate his homework.

George H.W. Bush – C. Some of you might think that Dubya’s dad should get a solid A. After all, he launched Desert Storm, an overriding victory of Coalition Forces that drove Saddam Hussein out of Kuwait and kept a lid on oil prices.

But you might also remember that it was under Herbert Walker’s leadership the U.S. completely missed the fact that Iraq not only had aims on dominating the Persian Gulf—under which sat two-thirds of the world’s conventional oil reserves—but that U.S. intelligence services didn’t notice that Iraqi tanks and troops were massing for invasion of Kuwait.

Then there was the entire lying to the American public by the Bush I administration to justify the war. It started off well with telling the truth—a crazed dictator like Saddam could not control the world’s energy supply. But when the Left leaned on Bush’s argument (which was a great one), his administration changed the story that America had to oppose Saddam because he was the next Hitler. Nobody believed that. So Bush said that Saddam had to be stopped because Iraqi troops were killing Kuwaiti babies in their incubators. It was an incredulous lie, but America got behind him as if he were Franklin Delano Roosevelt leading the nation into World War II.

Operation Desert Storm turned out to be a hiccup when it comes to U.S. wars. The ground war lasted 100 hours. Yet Bush—when he had Saddam on his knees and was able to promote U.S. policies in throughout the Middle East—did a most incredible thing: He stopped advancing U.S. forces at the Iraq border.

Bill Clinton — D: During Clinton’s eight years in office the Middle East was a relatively stable place. The Clinton administration made some important strides in the peace process with Israel and its neighbors. We cannot forget that during the Clinton Presidency cheap oil kept flowing from the region unimpeded.

But none of that can excuse the fact that more than anyone, Clinton was responsible for 9/11. He not only failed to recognize the growing extremism of Islam but he failed to heed warnings that were given to him about Osama bin Laden and al-Qaida which by most accounts Clinton saw as a rag-tag group that created no real threat to the United States.

If Clinton’s mind had been on al-Qaida rather than the Monica Lewinsky scandal, for which only he was responsible, bin Laden would have long ago been dead and most of the world would not know his name.

Following 9/11, NBC News reported that the Clinton administration had multiple opportunities to either kill or capture bin Laden but failed because they did not take him or his organization as a serious threat.

George W. Bush — F: I could write a book on how Bush the younger made a mess of the Middle East and only touch on his administration’s mismanagement of the region. (I say his administration because so much of the blame should go to former Vice President Dick Cheney, former Secretary of Defense Donald Rumsfeld and former Deputy Secretary of Defense Paul Wolfowitz who were the architects of the war against Iraq).

I don’t even hold 9/11 against President Bush. But there are two blunders he should be accountable for:

  1. The failure to kill and capture Osama bin Laden.
  2. Launching the war in Iraq with questionable if not downright untruthful intelligence of WMD and with no end-game in sight other than a vague notion of spreading democracy throughout the Middle East (we can see how that has panned out).

So far the U.S. military operations in Afghanistan and Iraq have cost the lives of more than 5,900 American service men and women. Yet the excuse that the Bush II administration made for not going after bin Laden with “boots on the ground” was they didn’t want to incur heavy U.S. casualties.

Bush compared 9/11 to Pearl Harbor. Yet Roosevelt mobilized an entire nation to fight the Axis in response to Pearl Harbor. The Bush II administration made strafing bomb runs over bin Laden’s lair. There was no massive drop of infantry as one might have expected. Instead, agents of the Central Intelligence Agency were sent over with trunks full of cash so they could hire mercenary warlords.

Instead of finishing off al-Qaida, Bush committed most of the U.S.’s full military might against Iraq. No question Saddam Hussein was a bad man. But was he any worse than Moammar Gadhafi? Time will tell but what we do know is that while Bush was prosecuting the war against Iraq, his administration was instrumental in lifting sanctions on Libya.

Nearly one decade after 9/11, U.S. forces are still on the ground in Iraq. That country is rife with corruption and has become a hotbed for terrorism directed against the United States. And we are still fighting what some think is a losing war in Afghanistan.

Barack Obama — F: I would have thought it impossible for any President following George W. Bush to make a bigger mess of the region. Yet Obama has done so, and he has done it in spades. And Obama has been in office just over two years.

Next week I will tell you why I think that when it comes to the Middle East and Islam, no President has been worse than Obama.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy and Gold Report

Obama Has Sabotaged American Energy Independence

The Middle East, with two-thirds of the world’s oil reserves, is in revolt. Some have blamed President Barack Obama for inciting chaos in Egypt; once an American pillar in the region.

Others have criticized the President for not clamping down on Moammar Gadhafi, the supreme leader of Libya for 42 years, who has created chaos and killed Americans.

The net result is, as the Middle East melts down, oil prices are ablaze: rising from less than $37 per barrel during their 2008 lows to breaking above the $100 per barrel mark. Soaring oil prices impact the cost of all things, from transportation to leisure to foodstuffs.

If Saudi Arabia implodes this will be the world’s worst energy crisis. The House of Saud has bailed out the Western world for four decades. But Saudi Arabia’s ability to ramp-up production is very much in question, as is the nation’s capacity to protect itself from what may be a revolutionary Jihad.

But Obama’s travesty has not only been how he has handled the Middle East but how he has steadfastly refused to develop America’s domestic petroleum production.

Oh Dear! Green Politics Could Mean $10 Per Gallon Gas!
Three years ago, candidate Obama made proclamations on opening up the U.S. to exploratory oil and gas drilling. But the oil executives I have spoken to say Obama has done nothing to increase America’s domestic capabilities.

While Obama has added acreage in Alaska for possible leasing, the best sites have been yanked off the table. Drillers have had to sit on their hands waiting on environmental studies before lease sales are held.

The President’s biggest backers, the Green lobby, have plans to line-up one lawsuit after another to block critical drilling that needs to be done in Alaska and on the Gulf Coast. Environmentalists are blocking millions of barrels of petroleum that would meet America’s long-term needs regardless of what happens in the Middle East.

Last year the National Association of Regulatory Utility Commissioners provided geological evidence that the U.S. has more than 200 billion barrels of oil and 2,000 trillion cubic feet of natural gas that can be recovered affordably with today’s technology. That is roughly two-thirds of Saudi Arabia’s petroleum reserves. Between what oil is in Alaska, the Dakotas and the Gulf, plus what Canada is eager to sell, there is more than enough petroleum to make Middle East oil irrelevant.

Obama and Secretary of State Hillary Clinton openly block domestic petroleum recovery while wringing their hands over the revolt in greater Arabia. The Administration continues to spend billions in aid to Organization of Petroleum Exporting Countries (OPEC) producers like Saudi Arabia, which use some of that money to finance Islamic extremists whose aim is to kill Americans.

Mr. President: Our Future Is In Alaska, Not Arabia
Alaska and its Arctic National Wildlife Refuge (ANWR) hold the key to our energy future. Billions of American barrels of crude lay untouched; locked away by Greens whose extremism matches that of many Muslims.

Thankfully the Greens are facing some opposition. In February, Lisa Murkowski, (R-Alaska), introduced two pieces of legislation to increase domestic oil production.

“Now is the time to develop our domestic oil reserves in the ANWR,” said Murkowski. “For far too long, we’ve kept resources under lock and key that could improve our energy security and create badly-needed jobs. There’s no excuse for continuing to pay foreign countries for resources we have here.”

The American Energy Independence and Security Act would provide the most efficient development of ANWR’s resources by allowing exploration and production within the coastal plain of ANWR.

The new legislation would require the Secretary of the Interior to lease at least 200,000 acres of the 1.5 million-acres within two years of its passage. Infrastructure—including all roads, airfields, drilling pads, pipelines and other facilities—would be restricted to 2,000 acres to minimize environmental impact on the region. Revenue from ANWR oil production would be divided between environmental mitigation and Federal deficit reduction.

The bill will try to make Greens happy. It would dedicate a portion of ANWR revenues to fund renewable and alternative energy development, wildlife and fishery habitat programs, energy conservation and low-income energy subsidies.

My expectation is that it will be flatly rejected, which is a travesty. It makes so much more sense to disturb some wildlife than it does to send our young men and women into combat in the Middle East.

George W. Bush and all of his apologists said we invaded Iraq because Saddam was a bad man. Was he any worse than Moammar Gadhafi? Probably not. Saddam did gas the Kurds, but Gadhafi has turned his tanks and guns on his own people. Saddam’s weapons of mass destruction (WMD) were nonsense.

It turned out Saddam didn’t have any, just as a lot of people in the State Department thought. Finally, if we really wanted to get every “bad guy” with a finger on real WMD, why don’t we invade North Korea? Because they don’t have oil.

Iraq’s invasion was ordered by George W. Bush and not Obama.

The fact is, I didn’t like that President’s Middle East policies either, or the doctrine that came down to the brain trust of Dick Cheney, Donald Rumsfeld and Paul Wolfowitz.

Obama’s Middle East policies are just as wrong-headed. I am in my 50s and I hope to have 20 years ahead of me. In that time solar shingles, electric trains and wind-turbines may revolutionize our way of life. But it won’t happen this decade. What we need is a President that will focus on domestic petroleum production. If he won’t, we will face the same gas lines I saw when I was a kid in college.

With Obama’s recovery already dead on arrival, the nation simply cannot endure a spike in oil prices. Yet the mess in the Middle East and the willful neglect regarding domestic oil drilling makes higher prices assured.

Action To Take
Look for oil prices to top $150 per barrel by autumn. Add to your energy equity positions, including Suncor Energy (NYSE, SU, $47).

Yours in good times and bad,

John Myers
Myers’ Energy & Gold Report

 

PS—Finally, to my readers that point out that there are billions of barrels of oil in the Bakken Oil Basin in North Dakota, the truth is yes there are! However, let me caution you on three points:

  • Federal and state governments need to encourage exploration with further tax breaks.
  • The region will take years to come on-stream.
  • While it is a bonanza, the geology of the region will make it expensive to develop and produce using current technology.

House Of Cards: The World’s Future Hinges On Oil

(Part one of a two part series on oil and the crisis in the Middle East)

At the intersection between peaceful prosperity and a global Jihad stands the House of Saud.  They are the ruling Royal Family of Saudi Arabia, only a few generations removed from their tribal Bedouin forefathers. 

Some 10,000 princes control the world’s single largest oil reserve, nearly 300 billion barrels in all.  Yet the Saudi Kingdom has been America’s energy vanguard. However, in the past four weeks more mayhem has occurred in the Middle East than happened during the previous four generations.

In the last month Tunisia and then Egypt fell under the weight of political dissent and the wireless revolution.  Just as revolt spread across Eastern Europe 20 years ago, political unrest is a contagion in greater Arabia and has now infected Bahrain and Libya.  Neither is as politically significant as Egypt, yet both carry far more weight when it comes to the world’s most important resource — oil. 

Last week crude oil surged more than $10 per barrel.  On Thursday it reached the $103 per barrel threshold that has not been seen since 2008.

It was no coincidence that as oil prices rose last week, stock prices fell.  By mid-week the Dow had lost nearly 500 points from where it opened the week and, unless the Middle East is stabilized, Dow 12,000 may be just a happy remembrance.

Global markets certainly seem fragile in the wake of rantings by Libyan strongman Muammar Gaddafi.  His defiance was reminiscent of Hitler’s final days in the bunker.  Fortunately, Libyans don’t fear Gaddafi the way Germans feared Hitler so the Marines won’t have to land on the beaches of the Mediterranean. 

That doesn’t mean that Gaddafi can’t force a bloody civil war onto Libya, which is Africa’s No. 1 oil producer.

Late last week, Italian oil giant Eni, the largest foreign oil company in Libya, said production in the country is being shut down due to ongoing violence. 

Eni produces about 250,000 barrels a day from Libya, which has total oil output of 1.6 million barrels per day. The largest oil firm in the country is the government-run National Oil Corporation. It reports that production is grinding to a halt.  This erases roughly 2 percent of the world’s current oil supply.

Some have tried to calm the markets saying that Saudi Arabia will resume its role as the world’s historical swing producer and will match any falloff resulting from the revolution in Libya.  Not so says Barclays.

"Firstly, the grades and quality of crude available from Saudi Arabia is likely to be different from Libya," says Suki Cooper at Barclays Capital.

Cooper points out that Libya has extremely lightly graded oil which is cheap and easily refined into gasoline. Even Saudi Arabia has heavier oil than Libya. As a result, Libyan oil cannot be easily replaced by oil production from anywhere in the world.

According to Cooper:

“Libyan crude is sweeter, with CPC Blend and Azeri Lights likely to feel the shortages. Effectively, West African crude should receive a higher bid from the Med, with the ultimate effect likely to be seen via a widening in the Brent-Dubai spread, as prompt supplies of Brent-related crudes [SIC] remains the issue.

"Also, the time taken to bring those Saudi barrels to the market is likely to be significantly longer compared to the ongoing Libyan production. Thus, the concept of a barrel for barrel replacement is not a correct one.

"Ultimately, the overall significance of the situation in Libya is more than just about lost barrels. It continues to inject a huge amount of uncertainty in the oil market especially for the medium term, as destabilisation (sic) in the Arab world, home to the world’s largest oil and gas reserves and production, is of extreme significance."

There is a much bigger problem thatBarclays doesn’t address. It is a question the energy world is afraid to even touch on. 

It is the fact the Saudi Arabia’s oil fields have been bled down over the past five decades.  Pressure inside the giant oil domes of Saudi Arabia have fallen drastically since the early 1980s and the House of Saud cannot simply open up the oil taps the way it used to every time Arab unrest raised its ugly head. 

The Saudis have hundreds of oil reservoirs. Yet 90 percent of the country’s oil production comes from only five fields, and all of them were discovered before 1966. The largest is Ghawar, an oil field so large that its production accounts for about 60 percent of all Saudi Arabian oil output. The giant Ghawar Field stands out as the region’s crown jewel.

Ghawar was discovered in 1948 and production started two years later.  In 1981 it reached a peak of 5.7 mb/d. That is almost 1 mb/d more oil than is produced in all of the United States.

Since its discovery, Ghawar has produced more than 55 billion barrels of crude. No one is sure exactly how much crude the Ghawar Oil Field still contains. The evidence suggests that official oil reserve claims have been vastly inflated. It is almost certain there’s not as much oil at Ghawar as the Saudis say. And for an oil-hungry world, that is bad news. But it gets worse.

Mixing Water With Oil

In Saudi Arabia, seawater is injected into oil fields to increase pressure and stimulate production.

Currently, only 30 percent of the oil in a reservoir can be extracted. But injected water increases that percentage — known as the recovery factor — and maintains the production rate of a reservoir over a longer period of time. As the volume of water that is lifted along with the oil increases the volume of oil decreases proportionately until eventually what flows out of the reservoir is almost pure water and the field is no longer worth operating.

The national oil company of Saudi Arabia and Ghawar’s operator is currently injecting nearly 8 million barrels of sea water each day.

It will be decades before Ghawar is abandoned.  But the field can no longer do what it once did — increase output during periods of political instability and soaring prices.  The Saudi safety-net that was Ghawar no longer exists.  The greatest oil elephant the world has ever known is dying. 

Thirty years ago Saudi Arabia could and did ramp-up oil production as high as 14 mb/d.  To meet the current loss in Libya and the uncertainty in the rest of the Persian Gulf 14 mb/d is what it would take to sooth the oil markets.  But regardless of prices or pressure from Washington, the House of Saud will have a tough time keeping oil production above 10 mb/d this year.  Over the short-term that means $100-plus per barrel of oil.  Over the longer term, Saudi Arabia has a much bigger problem than the fact that its wells are running dry. 

As Libya burns and protests erupt in Bahrain, Saudi princes are not fretting about how much oil their country will pump.  They are worried if their blood is about to flow.

Action To Take

Unless you own stocks whose business it is to discover or deliver real assets, sell them immediately.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy and Gold Report 

Nixon To Obama: America’s Disastrous War On Drugs

America is unsettled about the war in Afghanistan and with good reason; it has lasted almost a decade and victory is not in sight. Yet the nation has been fighting a more insidious war for 40 years. It is being waged along our borders, into our communities and next door to our homes. It is the War on Drugs; a conflict that continues to escalate and which threatens our institutions, friends and family.

I don’t pretend to suggest how we wage and win the War on Drugs, only that we must. Psychotropic drugs are eroding the American way of life. And if we don’t find a solution fast America will become the battlefield that Mexico has turned into.

Last week 40 people died in a bloody surge of drug-violence in major Mexican cities. The bloodshed is typical of the growing violence gripping Mexico as the government employs the police and army to crush drug cartels that grow richer and more powerful each passing year.

Last year, 15,000 Mexicans were murdered in the cartel battles that fought against each other and the Mexican authorities. What hasn’t been so widely reported is the increase in cartel activity on the United States side of the border.

In the wake of this infestation the Obama administration has said it has the resolve to win the drug war. If you think you have heard this message before it is because you have. President Richard M. Nixon declared the “War on Drugs” on June 17, 1971.

“America’s public enemy number one in the United States is drug abuse. In order to fight and defeat this enemy, it is necessary to wage a new, all-out offensive,” Nixon said in a national address.

Nixon went on to add: “I have asked the Congress to provide the legislative authority and the funds to fuel this kind of an offensive. This will be a worldwide offensive dealing with the problems of sources of supply, as well as Americans who may be stationed abroad, wherever they are in the world.”

To say it has been a costly and ineffective war is an understatement. The Los Angeles Times estimates that the U.S. has spent $1 trillion in the past 40 years fighting the war on drugs. That is roughly what World II cost the U.S. (According to www.threeworldwars.com, World War II cost the United States $2.1 trillion in 1990 dollars, or just over $1 trillion dollars in today’s money if you run the numbers at www.InflationCalculator.com.)

All this expenditure and yet we continue to lose this war; a war that Presidents Nixon, Carter, Reagan, H.W. Bush, Clinton, W. Bush and Obama all promised to win.

How do we know we are losing it? The U.S. Justice Department reports that Mexican drug cartels now operate in 2,500 U.S. cities and towns.

There is also the U.S. prison rate. In 2008, more than 7.3 million people were in jail, on probation, parole or conditional release. That was 3.2 percent of the entire U.S. adult population or 1 in every 31 adults. According to a study conducted by the U.S. Department of Health and Human Services, between one-third and one half of America’s prison population are incarcerated because of drug related offenses.

Obama likes to talk about meeting the nation’s healthcare crisis, but he has spent little time addressing the financial and spiritual cost of drugs.

Finally, on Jan. 27 Obama said the question of drug legalization and regulation is an "entirely legitimate topic for debate" — the first sitting president to do so since cocaine, heroin and marijuana were made illegal.

In a question-and-answer session on YouTube, the President focused on drug policy. Obama responded to a question from a representative of Law Enforcement Against Prohibition, a group of former law enforcement officers whose experience on the streets has led them to conclude that drug prohibition actually drives crime and does not solve drug problems. You can watch the video of this question and answer here.

Even though some conservatives, such as the late William F. Buckley Jr., provided reasoned arguments for the legalization of drugs, the President has stated he is not in favor of that. Instead he says drugs should be treated like a public health problem.

I am surprised that the White House and the First Lady have put more energy into promoting a healthy diet for our children than they have in saving our children from the ravages of drugs. After all, the President has mostly ignored the drug crisis. Only recently has Obama even addressed the problem, saying that more money will have to be spent on rehabilitation. This extra money, says Obama, will steer non-violent, first-time drug offenders "into the straight and narrow."

I have news for the President: America is not imperiled by the likes of Olympic swimmer Michael Phelps, who was caught on camera smoking grass. The real threat comes from Mexican drug cartels that represent a clear and present danger. They are vast criminal organizations that smuggle unprecedented amounts of cocaine, heroin and methamphetamine into the country.

The Obama administration denies the impact that cartels are having on America. Department of Homeland Security Secretary Janet Napolitano recently told a crowd at the University of Texas at El Paso that it is, “inaccurate to state, as too many have, that the border is overrun with violence and out of control.”

Texas Governor Rick Perry disagrees. Immediately after Napolitano’s speech in which she actually bragged that the Obama administration is protecting the nation from cartel crime, Perry’s office released this statement:

“The federal resources in Texas are woefully inadequate to secure the border with Mexico, and Gov. Perry will continue urging the Obama administration to do its job and protect our citizens from the ruthless drug cartels. It’s unfortunate that a former border governor, who knows the implications of a porous border, continues to downplay the fact that there is a war waging within a stone’s throw, or for that matter, firing range, from our border communities.”

Last year two U.S. consulate employees were assassinated in Juarez, Mexico. Perry ordered Texas National Guard Lakota helicopters to shore up the U.S./Mexican border.

Perry said that the deployment of the helicopters was meant to contain spill-over violence from Mexican drug cartels and that he was willing to put “additional resources on standby to combat any potential situation.”

But defending America’s borders is the President’s job. It seems that Obama is just another President in a long line who has failed to deal with America’s drug problem. The stakes have never been higher than they are for his administration.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy & Gold Report

Is Barack Obama The Manchurian Candidate For The Muslim Brotherhood?

 “The Americans love Pepsi-Cola, we love death.”– Maulana Inyadullah, al-Qaida leader, September 2001.

The extremists may soon hold the reins in Egypt. Islam marches forward while former President Hosni Mubarak is in hiding. Thirty years ago Iran was toppled. Then fell Afghanistan. And just last week it was Egypt, the jewel of the Nile, the Arab gateway to the world.

Never mind what former Secretary of Defense Robert McNamara proclaimed about Vietnam. The real threat to freedom both in America and abroad is much more dangerous today than any domino theory manufactured by Pentagon think tanks in the 1960s. It turned out Communism was soulless. Islam has a soul; a very dark one that wants to engulf the world. It may have just swallowed Egypt.

The Muslim Brotherhood (MB) demanded and got the resignation of President Hosni Mubarak. Today the military controls power in Egypt but soon the MB may institute its own brazen rule. After all they helped force Mubarak’s full and unconditional surrender. This has created a huge vacuum in Egypt, the outcome that the MB was gunning for.

Before fleeing, Mubarak slammed Egypt’s MB as a "dangerous" and “duplicitous” movement. Egypt’s president feared MB because of its close relationship with Hamas and radical groups in Jordan, Kuwait and farther afield.

Before Mubarak’s departure, Egypt’s Director of Intelligence Omar Soliman stated that the MB is:"Neither a religious organization, nor a social organization, nor a political party, but a combination of all three."

The principal danger Soliman warned, is the group’s exploitation of religion to influence and mobilize the public. Soliman asserts that the MB has spawned, "Eleven different Islamic extremist organizations," most notably the Egyptian Islamic Jihad and the al-Gama’a al-Islamiyya.

Soliman termed the MB’s recent success in the parliamentary elections as "unfortunate," adding his view that although the group was technically illegal, existing Egyptian laws were insufficient to keep the MB in check.

What Are Obama’s Real Ambitions?
The real question is why President Barack Obama wasn’t willing to keep MB at check, to help see Mubarak’s government into a peaceful transition. Certainly history called out for this course of action from the White House.

Consider the writings of Edmund Burke, one of the fathers of Conservatism who lived in the 18th Century. Burke wrote extensively about the French Revolution and proclaimed that it was a massive social experiment doomed to fail because it presumed to start a society over from scratch.

“Good order is the foundation of all things,” Burke wrote. The terror that followed the revolution saw the execution of 40,000 French citizens.

In my lifetime something similar happened in Iran. Yet Obama doesn’t seem to have learned anything from history going so far as to ignore pleas by U.S. allies to use Mubarak to help with a peaceful transition towards democracy in Egypt.

Obama, it seems, is either ignorant of the problems posed by an Islamist Egypt or worse, he embraces them.

The MB threatens not just Egypt and the Suez but puts a noose around the most important oil producer in the world, Saudi Arabia. Could it be that for either personal or pragmatic reasons, Obama wants to see the price of oil soar? A death grip around Egypt and Saudi Arabia is a perfect prescription for $150 per barrel oil. Those prices suddenly make green energy a viable alternative.

The American Thinker believes that Obama is not like President Jimmy Carter, a deer caught in the headlights. Instead it says, Obama understands exactly what he is doing in muckraking radical Islam:

“From his notorious Cairo speech to the present, President Obama speaks, and disaster follows.

“Some commentators believe that President Obama and Secretary of State Clinton are so utterly naïve as to make themselves unable to understand what will happen in Egypt as a result of their undermining of the Mubarak regime. The question is justifiably asked: Do they truly believe that the next regime that comes to power will have the interests of the U.S. and the West at heart?

“My fear is that Obama is not naïve at all, but he instead knows only too well what he is doing, for he is eagerly promoting Islamic power in the world while diminishing the West and Israel, however much innocent blood will flow as a result. 

“Inevitably, sooner or later, the Muslim Brotherhood will take power, usher in a barbaric Islamist power in Egypt that will control the Suez Canal, and show no mercy to its own people or its perceived foes.

“So now we see what the present incumbent in the White House has wrought.”

Fact #1: If MB gains control of Egypt, it will dictate the use of the world’s most important water transits. Nearly 2 million barrels of oil per day, most of it destined for Europe, could be cut off without notice even as that continent is in the midst of its worst economic crisis in 70 years.

Fact #2: If the MB wrestles control of Egypt, that sets up Saudi Arabia as Islam’s next target. The House of Saud pumps 8 million barrels of crude per day. If they collapse, a petro-based world collapses. There is not enough oil in the world to compensate for the current petroleum production coming from Saudi Arabia. (Before you write me about the pie-in-the-sky project in the Dakotas, do a bit of research — the U.S. is currently pumping less than 5 million barrels of oil per day, or about what we produced when Truman was in office while oil production for North Dakota will take well over a decade to develop.)

Fact #3: New green technologies only work if oil prices are well above $100 per barrel. If MB rules Egypt radical Islam will set its sights on Saudi Arabia.

That would give Obama’s Green Revolution a lot of traction. In fact, the President’s view of the world as it “should be” can only happen if he instigates a price contagion upon petroleum. Only then can he sit back and say: “Green energy. Mission accomplished!”

I don’t know what is going through the President’s mind, but I do know we have a President very different from George W. Bush. Bush wanted to protect America from Arab oil shocks. Obama seems to be inviting them.

Is it out of Muslim loyalty or Green ambitions? In the end, does it even matter? What matters is that America has a President that is putting his personal goals ahead of the nation. First and foremost for this man is his re-election, with all of his grandiose ambitions that will follow.

Yours in good times and bad,
John Myers
Editor, Myers’ Energy & Gold Report

It’s All About Jobs — His Job!

President Barack Obama has been on a pilgrimage of late, declaring that America will re-invent itself with green technology.   He has even declared that the nation must move away from oil and invest in things that will vastly improve our fortunes; things like solar shingles and cars that run on sunlight and water.

The President has gone so far as to promise that in just four years America will be the first nation in the world to have a million electric cars. 

It is the President’s version of Jack and the Beanstalk.  In that story and in Obama’s imagination, immense wealth and a great transformation will occur overnight.  All we need is a few magic beans (patent pending), water, sunshine and poof, we will have a green beltway to Eden which will be brimming with new jobs.

The President has been talking about jobs a lot lately.  Last week he went to Penn State University to stump his green revolution.  And late last month he announced that he has created at least one new job.  But it is for someone who doesn’t even need it, General Electric Chairman and CEO Jeffrey Immelt, who will focus on growing employment for the nation.  The object of all this media, money and minutia all comes down to saving one job; Obama’s.

“We’re going back to [GE founder] Thomas Edison’s principles,” Obama said in Schenectady, N.Y. “We’re going to build stuff and invent stuff.”

Unsaid in his “Stuff Speech” is that the plant he was speaking from dates back to when Edison was helping invent the Industrial Revolution.  After the President’s speech the media did not make much of the fact that GE has fewer than half its workforce in the United States and that more than 50 percent of its revenues come from foreign operations.  Like the rest of the world, G.E. understands that its fortunes are not dependent upon the U.S. 

Also unsaid is that the world will be happy to buy blue print proprietary technologies that Obama is willing to give away in an effort to be re-elected. 

Let’s take away words like traitor and poser and ask ourselves a simple question: Can America sell enough high tech turbines to offset all those dog-toys from China and petroleum from the Organization of the Petroleum Exporting Countries?  Probably not.

Nevertheless Obama recently proclaimed: “We can out-compete any other nation on Earth.”

Not so said The New York Times

“Let’s not kid ourselves: Talking about ‘competitiveness’ as a goal is fundamentally misleading…  [Instead] that talk of competitiveness helps Mr. Obama quiet claims that he’s anti-business. That’s fine, as long as he realizes that the interests of nominally “American” corporations and the interests of the nation, which were never the same, are now less aligned than ever before.”

Maybe I am jaded, but I believe that the only interest Obama has in his heart is self-interest.  He also has many powerful disciples, including the mighty Oprah Winfrey.  She was the first guest on the new CNN talk show hosted by Piers Morgan. English and a younger version of Larry King and with only a fraction of the wives, Morgan proclaimed Oprah to be, “the American Queen” and said she and President Barack Obama are arguably the two most powerful people in America. 

When asked whether Obama’s performance in office had been disappointing, Winfrey angrily declared:

“I don’t think he (Obama) has been disappointing at all.  I really do not. I really do not, because I believe that I understand the heart of him. And I understand that when he took this role on, he took it on to really bring a sense of betterment to the United States of America and the people of this country. And I know that in his heart, that is his ultimate and primary role.”

What Oprah seemed to be saying is that Americans do not yet understand or appreciate the President and the mission he has undertaken to save us.  Obama remains to Oprah as she proclaimed him to be three years ago: “The chosen one”.

While Oprah didn’t specify on exactly why most Americans are either too ignorant or too stupid to “get it,” Obama is finally getting a grasp of things.  Following two years of ramming Obamacare and gays in the military down America’s throat, the President realizes it might be a good time to work on that little problem he and his cabinet have been calling, “the worst economic crisis since the Great Depression.” 

Recently, the President revealed his Franklin Delano Roosevelt-like ambitions which he has spelled out in grand and green changes for the future.  I don’t know about you, but I felt better just thinking Obama was just another crooked Chicago politician.  The idea that the President has grandiose plans is downright disturbing. 

Vice President Joe Biden recently wrote an email in which he thanked activists of the Democratic National Committee, Organizing for America.  In it, Biden asked them for their continued support: "We knew it would take time. We knew it would be hard. And we knew we would sometimes make mistakes."

Biden continued. "But we did not lose sight of what we came to do. Together, we took on difficult issues that had been put off for decades. And some say we have accomplished more in two years than any administration since Roosevelt’s."

Biden went on to say that the administration’s success is, "literally proof that the organizing you do on the ground — the conversations you have with your friends and neighbors — is working." 

The Vice President’s email contained a list of legislative accomplishments, including healthcare reform, financial regulatory reform, the stimulus, the auto bailouts and the repeal of the military’s "Don’t ask, don’t tell" policy.

When you see a list like that it is hard to argue with Biden’s logic.  The only thing missing is that FDR was president for 12 years while Obama is just two years into his presidency.

It is yet to be determined whether Obama’s green schemes will get him re-elected.  I am optimistic they won’t.  If anything, Obama is proving himself to be most like Jimmy Carter.  Rising inflation, the crisis in the Middle East and an environmentalist President seem all too familiar.  Hopefully, Obama won’t spend one more day in office than Carter did.

Yours in good times and bad,

–John Myers
Myers’ Energy and Gold Report

Islam Is Afire While Obama Fiddles

“Is that a fiddle I hear there somewhere drifting through those fired dry sands?”–Raphie Frank

Another week with Barack Obama as U.S. President and radical Islam grows even stronger. Egypt, America’s largest and most important ally in the Middle East, is aflame as revolutionary forces marched and even burned President Hosni Mubarak’s Ruling Party headquarters.

As I write to you the streets of Cairo are ablaze following a week of mass demonstrations in which thousands of people have attacked the police and ignored curfews. The people want to end the 30-year dictatorial rule of Mubarak, but radical elements are quickly bending the protests their way in an all out effort to turn the land of the Pyramids into the home of martyrs.

If the extremists in Egypt can do what they did in Iran, then the Middle East — home to two-thirds of the world’s oil reserves — will turn to Islamic law.

Egypt sits at the crossroads between Europe and the Middle East. Not only does it have the largest Arab population but also the strongest conventional army in the region. Since the fall of the Shah in Iran, Egypt has provided the glue that held the Middle East together. It was Egypt that was the first Arab nation to recognize Israel and it is always Cairo at center stage in any Middle East peace process.

Political analyst Simeon Mitropolitski sums up what is at stake:

“Egypt offers a completely different political and social model, something between the Iranian and the Taliban versions of Islamic state. In 1954 this organization was banned and shortly afterward it was accused of trying to assassinate President Nasser, a champion of alternative secular social and political model.”

Regardless of what is at stake, Egypt is burning and the Obama administration has once again been caught off guard.

On Monday, Washington was desperately trying to fly more than 2,400 U.S. citizens out of Egypt. It appears that no contingency plan was made for this revolt. Again, American intelligence services appear to be anything but intelligent.

So far the State Department has put a remarkable positive spin on events, just like they did when the Shah was toppled. But wishful thinking isn’t going to create a new Egypt built on Thomas Jefferson’s ideals. It is far more likely that America and the world will have to deal with an Islamic-ruled Egypt, if not now then in a few short years.

One of the most immediate worries is the Suez Canal, a waterway that opens into the Red Sea and which is a choke point for much of the world’s oil supply. Egypt’s primary export is cotton. The world isn’t going to fall apart because of a cotton shortage. Yet whoever rules Egypt also has their hands on the Suez spigot. This could have an immediate short-term impact on oil deliveries — the price of crude has surged more than $6 per barrel in just the past two trading days.

Rioting in Cairo could spread fast. Many businesses have shut down operations. Egypt’s stock market (EGX) has been closed after it fell 16 percent last week.

Outside of Egypt the financial center of the Middle East, Abu Dhabi, has been hit the hardest. On the Dubai exchange shares plummeted to a one-year low. If unrest grows and the Suez Canal closes it won’t be some far off stock exchange falling, it will be the New York Stock Exchange. But there is something far more worrisome than a 25 percent correction in the Dow Jones Industrial Average or even $5 per gallon gasoline. Rather think of the ramifications if Egypt, a center post of America’s war on terror, falls into the hands of the enemy.

Forget Robert McNamara’s incorrect domino theory that was projected for Southeast Asia in the 1960s. If Egypt crumbles there really will be a cascade of giant dominoes headed straight for the West and riding atop each one of them will be a crazed terrorist with a bomb strapped to his back.

It is still too soon to say what will arise from this revolt, but it could center on the growing power of Egypt’s Muslim Brotherhood (MB). According to the Business Insider:

“The MB would be calamitous for U.S. security. What’s more, their current defenders don’t really argue that point, as much as they seem to dismiss it as not important or something we can live with. The MB supports Hamas and other terrorist groups, makes friendly noises to Iranian dictators and torturers, would-be uncertain landlords of the critical Suez Canal, and opposes the Egyptian-Israeli agreement of 1979, widely regarded as the foundation of peace in the Mideast. Above all, the MB would endanger counterterrorism efforts in the region and worldwide. That is a very big deal.”

This leaves the United States at the mercy of another Iranian crisis, but this time around is far worse. 

True, Iran was a major oil exporter and Egypt is not. However the world was consuming only half as much oil when the Shah fell compared to today. More importantly, during the Iranian revolution Saudi Arabia had enough spare oil production capacity to replace all of Iran’s oil exports. In fact, the House of Saud increased oil output from 8 million barrels per day to more than 12 million barrels per day. That is something that Saudi Arabia can no longer do.

If another Islamic Revolution gains traction in Egypt how much longer will there even be a Saudi Arabia as we know it? Egypt has been a great counter-balance against extremism in the Middle East for almost 40 years. It has provided critical support to Arab oil producers like Saudi Arabia and Kuwait and it has been the primary reason there has been peace between Israel and the Arab world.

The Middle East is a bigger tinderbox than ever and once again Obama has shown that, under his leadership, the world continues to become a less safe place. Is it his fault that Egypt is burning? No. But it is his fault that he and his Secretary of State, Hillary Clinton, didn’t see it coming and weren’t able to force Mubarak to reform his dictatorial rule before it was too late. Now the world will have to pay the consequences.

Action To Take

Double down on your oil investments. Canadian oil sands can only benefit from the trouble that is brewing in the Middle East. If you have not yet bought shares in Suncor Energy (NYSE, SU, $41) I urge you to do so. The price of the stock has doubled in the past two years. I expect that it could double again over the next year.

Yours in good times and bad,

–John Myers
Myers’ Energy & Gold Report

With Gun Control, Canadian Criminals Are Making A Killing

“After a shooting spree, they always want to take the guns away from the people who didn’t do it.”–William Burroughs

When I lived in Spokane, Wash., I exercised my right as an American citizen to own a handgun. As an American living in Canada, I no longer have that right. And while there may be fewer guns in Canada, I feel less safe than I did in the U.S. That is because up here it is the criminals that have guns.

There is no constitutional right to bear arms in Canada. Instead, most of us hope that we won’t someday look down the barrel of a gun drawn by a felon.

It is a worry I hope Americans don’t ever have to live with. But you don’t have to be much of a prognosticator to expect a crackdown on guns following the Tucson tragedy. Just days after the murders which almost took the life of Congresswoman Gabrielle Giffords (D-Ariz.), Democratic Rep. Carolyn McCarthy (D-N.Y.) was already planning to introduce legislation that would put restrictions on law abiding citizens’ freedom to obtain firearms.

No doubt McCarthy and other liberals will decry gun ownership and will stump about the need to make America safer.

But I can tell you laws don’t make people safe. Canada has some of the strictest gun control legislation in the world. Yet Canadian criminals seem to have easy access to guns.

Such was the case on New Year’s Day 2009. I was in my office in Calgary. I looked out the window and saw half a dozen police cruisers racing down Bonaventure Drive, sirens blaring. They went to a usually quiet strip mall two blocks from my office.

It was around 3:45 p.m. when a car pulled into the parking lot of the Bolsa Vietnamese Restaurant. One man remained in the car while two others entered the restaurant. There they shot dead two members of a rival drug gang.

An innocent victim, 43-year-old Keni Su’a who happened to be eating alone that day, was also shot dead.

The press named it the Calgary New Year’s Massacre and it was an escalation in an ongoing war between rival drug gangs: The “Fresh Off the Boat” (FOB) and the “Fresh Off the Boat Killers” (FK).

This and many more murders have happened even as the Canadian government has cracked down on gun registration. None of which seems to have bothered immigrant gangs like the FOB and FK who have gone from carrying knives to toting high-powered assault weapons. Such guns were in use again this past New Year’s Day when two gang members fired shots that killed one man and left another in serious condition.

This is happening in Calgary which has a population of 1 million. Things are more dangerous in larger Canadian cities like Montreal, Toronto and Vancouver. And it is not just the drug gangs that breed gun violence in Canada. There is no shortage of crazies who always seem able to arm themselves.

In 2006 a Canadian gunman uploaded pictures of himself posing with a rifle. He bragged on his blog that he loved the Internet game based on the Columbine shootings. One day he decided to stop playing. He went to a Montreal college and, when all was said and done, he killed one person and seriously wounded another 19 before he shot himself.

On Jan. 13 the Ottawa Citizen, concluded that Canadian gun legislation is a failure:

“As strict as Canadian gun laws appear, they do not prevent the movement of illegal firearms in or out of this country, nor their possession, and only cover those firearms that have been registered. Last year, Canadian police services reported some 8,000 victims of violent gun crime, ranging from assault to robbery and homicide — a rate of almost one person per hour victimized by violent gun crime. On average, more than 1,200 Canadians are killed and more than 1,000 injured with firearms each year.”

Canada’s stringent gun laws don’t simply take aim at handguns. In 2001, the registration portion of Bill C-68 was implemented. With that law the Federal government demanded all firearms — including rifles and shotguns — be registered. Then, in 2003, Ottawa passed a law that failure to register any and all firearms would result in criminal charges.

There are a lot of old ranchers and farmers in Alberta that couldn’t be bothered to do the paperwork on an old Winchester. In the eyes of Ottawa’s bureaucrats these people are criminals.

Canada Once Embraced Guns

I was born in Alberta and I grew up around guns. On my 12th birthday my dad bought me a single-shot .22 rifle. On my 18th birthday he bought me a 12-gauge pump action Remington shotgun. I never imagined that a time would come where I would have to level my shotgun at a person; that I would take deadly aim with it.

But that happened when I as a senior at the University of Calgary and was cramming for a final. Around midnight I heard a car screech to a stop outside my parent’s home which sat on an isolated street. I was home alone with the family dog, Elsa, a Great Dane with a gentle disposition.

In the news had been reports that two men were terrorizing women on Calgary streets. Two young women, Laurie Boyd and Debbie Stevens, had been dragged from their cars at night and murdered.

I heard pounding at the front door. I knew something was seriously wrong when I opened the door to find my girlfriend Angela standing before me crying. Before I could even ask her what was happening a second car pulled into our driveway with the high-beams on.

I took Angela inside and went outside to see what the commotion was about. I brought the family dog with me and kept her leash wrapped tightly around my hand.

Two men were walking straight towards the door; neither one saying a word and neither showing any regard for me or our dog which was growling and barking.

I dragged the dog back inside and gave her to Angela. I remembered the Remington that I kept in the front closet. I found it and then fumbled for the single target load shell that I kept in the corner of the hat shelf. It was all the ammunition I had, but I was damn happy to have it.

I was shaking, but I loaded the shell. I slipped back outside. I was surprised at how close these strangers were to me; perhaps fewer than 20 paces. I remember the taller of the two had his hand reached inside his coat.

It was dark so at first I don’t think they noticed my shotgun. But they knew it was there when I raised it to my shoulder and pumped the fore-end, chambering the shell.

In a split second they spun and ran to their car, roaring off into the darkness.

More than a year later two men, Jim Peters and Rob Brown, were charged and convicted on multiple charges of murder.

My girlfriend Angela later became my wife. To this day we don’t know if those men were the Calgary serial killers. All these years later we remain certain of two things: These men had evil intentions and we were damned lucky to have that shotgun.

Yours in good times and bad,

– John Myers
Myer’s Energy and Gold Report

Bailing Out Obama: The Federal Reserve’s New Mandate

“Quis custodiet ipsos custodes?” (“Who watches the watchmen?”)

The Federal Reserve is a traitor to the American people and the nation it has sworn to protect. Recently, the Fed has acted less like a central bank and more like President Barack Obama’s personal piggybank. The Fed seems hell-bent on re-electing Obama for a second term regardless of what it costs.

How is the Fed doing this? By creating trillions of new dollars to re-flate a U.S. economy that is fundamentally flawed by the unprecedented spending of a President and Congress.

The Federal Reserve’s recklessness — orchestrated by Chairman Ben Bernanke — is putting at risk the savings of every American. His actions are straightforward — to create trillions in new aggregate dollars, making each existing dollar able to purchase less.

The central aim of America’s central bank seems simple: Hold together the economy until Obama is re-elected in November 2012. This month the Fed began a second round of quantitative easing, or QE2. This second round of cash creation is meant to jump-start the economy and silence Obama’s critics who complain he hasn’t engineered his promised recovery.

In December the Fed exceeded its authority for the first time when it began purchasing $600 billion in U.S. Treasury securities. Besides flooding the world with fresh money, Bernanke announced in January that he wants to keep interest rates low so the fledgling recovery can fly.

According to Forbes, the Fed’s actions have drawn opposition around the world.

“China, Russia, Brazil, Germany and the U.K. all believe that it will seriously weaken the dollar, possibly forcing other countries to devalue their own currencies and impose more trade restrictions against the U.S. Brazil and other emerging economies also fear that by loosening credit, the Fed could cause new destabilizing asset bubbles abroad.”

Forbes doesn’t point out that none of this is in the Fed’s charter. Instead the job of the Federal Reserve is to faithfully manage the economy and create stability for world markets.

I stumbled upon one of my old textbooks which said: “One of the statutory goals of the Federal Reserve System is to ensure stable prices. This goal can only be achieved if the public believes that the Federal Reserve is taking effective measures to ensure them.”

That is how the Fed is supposed to operate. Created in 1913, the Federal Reserve System had two prime directives: “The dollar over the President; the economy over the Party.”

And for nearly a century the Federal Reserve followed that code of conduct. It was through such actions that the Fed helped establish American economic dominance.

Even after President Franklin D. Roosevelt made it so citizens could not redeem dollars for gold, there have been extended periods when Americans trusted in the dollar more than they trusted gold. Consider President Ronald Reagan’s two terms and the decade that followed. During most of those years, Paul Volcker was Chairman of the Federal Reserve. The result was that between January 1980 and June 1999, the price of gold fell from $850 per ounce to $253 per ounce.

But that was a different era. Today the Federal Reserve and its Chairman no longer hold sacred protecting the purchasing power of the dollar. The once-independent Fed now seems intent on serving the President and promoting his economic policies.

Of course, Bernanke has been a loyal public servant to two Presidents. He was first appointed by President George W. Bush in the winter of 2006. Then Obama re-appointed him. Over those five years Bernanke has used every power at the Fed’s disposal to pump up the U.S. economy, even though it has delivered a devastating bear market for the greenback.

In a short statement given in Martha’s Vineyard in August 2009 with Bernanke at his side, Obama lauded the Fed chief’s “temperament, courage and creativity.” It was these personal characteristics, said Obama, that had helped Bernanke navigate America out of a Great Depression.

President Obama left out the one characteristic that Bernanke seems to have in spades — loyalty. Only loyalty can explain why Bernanke has been playing fast and loose with interest rates while initiating monetary policies that have spawned hundreds of billions of dollars in fresh new money.

Bernanke certainly has more than his share of critics. During his second Senate confirmation, 70 Senators voted in favor of Bernanke, but 30 voted against him. That was the narrowest margin by which a Fed chairman was ever won a nomination.

Still, Obama and many members of his administration applaud Bernanke. As long as he can keep the Chinese lending and investors from balking on Big Board stocks, Bernanke can help Obama be re-elected.

But holding the economy together won’t be easy. The Chinese and other foreign investors are growing restless about throwing money into U.S. Treasuries — those pesky bonds Washington needs to keep selling every week just to stay in business. Meanwhile, people like Congressman Ron Paul (R-Texas) are not turning a blind eye to Bernanke.

According to Paul: "There is something fishy about the head of the world’s most powerful government bureaucracy, one that is involved in a full-time counterfeiting operation to sustain monopolistic financial cartels, and the world’s most powerful central planner, who sets the price of money worldwide, proclaiming the glories of capitalism.”

And there is more to this than just Paul’s opinion. There is hard evidence that the United States — under the leadership of Obama and his loyal lieutenant, Bernanke — is headed for an inflationary maelstrom. Fueled by the Fed’s program of quantitative easing, MZM money supply has soared $475 billion in the past six months. This is the money the Fed lends to the banks which is then lent out at a multiple. That is why MZM is sometimes referred to as super-money, and can be a catalyst in creating inflation.

Another broad measure of money, M2, has also been rising at an alarming rate, as you can see in the chart below.

That the Fed is pushing such rapid monetary growth may underscore just how frightened Federal Reserve Governors are that we will see a double-dip recession, perhaps even a full-fledged depression. But remember, the Fed is supposed to be worried about protecting the integrity of the dollar. It appears instead that the Fed wants to protect itself along with the rest of the Ruling Elite.

More than 150 banks shut their doors last year. Five-hundred banks could close this year. The Federal Reserve will do whatever it takes to see that doesn’t happen, the dollar be damned.

One final thought — it is probably premature to celebrate the eviction of Obama from the White House in two years as much as we might like to. There are a lot of powers at work, the Federal Reserve included, that will be working to ensure the status quo.

Yours in good times and bad,

John Myers
Myers’ Energy and Gold Report

Obama’s Ultimate Betrayal

Welcome to 2011; another year for President Barack Obama, whose energy policies are dictated not from the White House but from Abu Dhabi and Riyadh.

Obama’s Christmas gift to the nation was the December announcement by the President himself to clamp down further on domestic oil and gas drilling. Welcome to the New Year where pump prices now average more than $3 per gallon.

Despite the worst recession since the Great Depression, we are paying the highest gas prices since 2008. All thanks to Obama’s need to go Green, which is enriching Arab oil producers while putting America’s future at risk.

Obama regulators have been busy slipping in ill-advised energy policies. First came the pre-Thanksgiving announcement that oil exploration and drilling in Alaska would be curtailed. All for a good cause, said the Obamaites, to help save vast expanses of polar bear habitat. Then Obama’s Department of the Interior made a pre-Christmas policy change that would further cut domestic oil supplies by making energy-rich lands untouchable.

It seems that Obama forgot that designating Federal lands as wilderness areas was supposed to require an act of Congress. Yet the day before Christmas Eve, Obama’s Department of the Interior did a coup d’état. As a result, the Obama administration alone is able to judge where oil can or cannot be drilled. In doing this, Obama has thwarted George W. Bush’s policy that restricted unilateral action by the White House.

Then there is the drilling in the deep-water Gulf of Mexico. Nearly three months after the Obama administration lifted its ban, oil companies are still waiting for approval to drill the first new oil well in the Gulf. In fact, the petroleum industry expects the wait to continue until the second half of 2011, and perhaps well into 2012.

This long delay by the Obama administration is costing Big Oil billions of dollars that they have tied up in Gulf projects; projects that are now on hold while petroleum companies pay out thousands of dollars every day on rigs that stand idle.

Last week the Wall Street Journal wrote this indictment of Obama’ energy policy:

“Their impact goes beyond the oil industry. The Gulf coast economy has been hit hard by the slowdown in drilling activity, especially because the oil spill also hurt the region’s fishing and tourism industries. The Obama administration in September estimated that 8,000 to 12,000 workers could lose their jobs temporarily as a result of the moratorium; some independent estimates have been much higher.

“The slowdown also has long-term implications for U.S. oil production. The Energy Information Administration, the research arm of the Department of Energy, last month predicted that domestic offshore oil production will fall 13 percent this year from 2010 due to the moratorium and the slow return to drilling; a year ago, the agency predicted offshore production would rise 6 percent in 2011. The difference: A loss of about 220,000 barrels of oil a day.”

All of which leaves America more susceptible to an Arab oil embargo. The last one happened in the 1970s when the U.S. was pumping twice as much oil as it is now.

With the U.S. gulping more foreign crude than ever, Arabs could bring America to its knees. You would think that a President as smart as Obama would understand the risk he is putting the nation in; a nation which he has sworn to protect.

Perhaps the greatest waste of American resources is out West where there is potentially hundreds of millions of barrels in oil reserves and trillions of cubic feet in gas deposits; all of it just waiting to be drilled and pumped to a thirsting nation. Yet our President is obstructing America from meeting its energy needs.

Ben Lieberman of The Washington Times explains:

“Utah is particularly hard hit, with up to 6 million acres in jeopardy of being locked away from development. Rep. Rob Bishop, Utah Republican, told The Salt Lake Tribune, “[This decision will seriously hinder domestic energy development and further contribute to the uncertainty and economic distress that continues to prevent the creation of new jobs in a region that has unduly suffered from this administration’s radical policies.”

But there is more. Two days before Christmas the Environmental Protection Agency (EPA) undertook a Pearl Harbor-like pre-emptive attack on U.S. refiners with an order that will place severe limits on carbon-dioxide emissions. The EPA, in language Joseph Stalin would have been proud of, said: “The details have yet to be determined.”

The Moroccan Candidate
The bottom-line is that under Obama, Washington is certain to increase the cost of converting oil into gasoline. If you are looking forward to spending $5 per gallon at the pumps, you will love Obama’s bold new move to make America more green.

The $5 per gallon is not just a number I picked out of the air. The former president of Shell Oil says that’s entirely possible as high demand pushes the price of crude oil higher and higher.

Culminating some time by the third quarter of 2012, retail pump prices in places like California and New York will reach roughly $5 per gallon, said former Shell Oil president John Hofmeister.

Former energy secretary Bill Richardson was asked about Hofmeister’s stark prediction: “I hope he’s wrong, but this is a very volatile energy market and we haven’t moved as fast as we should in America towards reducing our dependence on fossil fuels.”

Hofmeister underscores the urgent need to develop domestic oil production and he even accuses the Obama administration of being anti-oil.

“I have no problem moving beyond oil but not today, not tomorrow, not 2011 or 2012. We can’t. It’s simply impractical and unreal,” Hofmeister said.

Meanwhile, the Department of Energy (DOE) has put out a statement saying it will continue to pursue responsible oil and gas production while focusing on vehicle efficiency standards and investing in electric vehicles, bio-fuels and mass transit.

Obama’s DOE must think America alone can make the Earth green. What the President seems to forget is the fact that China, India and Russia, along with a host of Third World polluters, are using coal and even wood furnaces to drive their industries.

It appears to me that Obama’s Green policies are nothing more than collateral damage to a nation that needs domestic petroleum and the jobs that that industry provides. Instead Obama’s policies seem to be helping Arab oil exporters.

If you think I exaggerate, consider this from the Dec. 29 Economist, not known as a bastion of conservative ideals: “Mr Obama’s team of managing the Middle East is even more inept than Mr Bush’s. The American right and many Israelis think he is too pro-Arab.”

Dubya Billboard: “MISS ME YET?”
People in the petroleum industry don’t believe Obama is pro-North America, at least not when it comes to energy. Canada’s oil sands — which help keep America on the road every day—have been labeled “dirty oil” by Obama Democrats (as if the crude they pump out of the Saudi desert was somehow clean). And given the political realities that exist in many parts of Alaska, Sarah Palin has a greater chance of hitting a gusher with an errant shot from her AR-15 than Big Oil has with a drill-bit.

Despite Bush’s multiple mistakes in the Middle East, he was a patriot who at least wanted to ramp up domestic oil and gas production. That’s not true of Obama, who seems intent on increasing America’s dependency on Arab oil.

As I write to you, oil has topped $90 per barrel. I believe that by summer it will break over $100 per barrel. That makes Big Oil a good investment. But at what cost?

Under Obama’s presidency we are headed for an energy crisis worse than anything President Jimmy Carter could have engineered. Just how high oil prices will go I don’t know. Much depends on what happens in the 2012 election.

Yours in good times and bad,

John Myers
Myer’s Energy and Gold Report

Investment Forecast 2011: History And The Doomed Dollar

The administration of President Barack Obama continues to work furiously to float the U.S. economy in order to facilitate his re-election.

Pumping up the U.S. economy has been ongoing for more than two years. Trillions of dollars have been created out of thin air to offset the deflationary destruction of assets that began three years ago. But opting for inflation at all costs is nothing new.

Since the first civilizations there has been a need for money — an instrument which could be a store of value and thus used to expedite trade. Universally, hard assets, most notably gold and silver, have backed money.

But since ancient times there has been the temptation to debase the money in what seems to be an overwhelming desire to have something for nothing. Pontiffs and politicians have for centuries achieved their goals by creating more money. The tendency to inflate the money supply seems to be rooted in human nature.

Julius Caesar understood power came with money and that if he could control Rome’s vast stockpile of gold he would reign supreme.

It was a lesson not lost to his grandnephew, Octavian, who won a civil war largely because he secured Rome’s bullion. Unfortunately, the Empire would list and then sink because of overspending and progressive inflation.

Yet Ancient Rome was not the first great power to fall into ruin from inflation. A thousand years before Caesar, Babylon implemented hard-money and became the center of world power and wealth: A city of gold.

But eventually inflation brought down Babylon’s Tower. King Nebuchadnezzar leveraged the kingdom’s gold to create short-term wealth. He issued receipts — IOUs — and loaned out at interest the great wealth from Babylon’s treasury.

First he doubled and then tripled the empire’s money supply. There was no stock market, but if there had been, it would have soared.

Eventually, foreign claims exceeded the amount of gold in Babylon’s treasury.

Still, the money supply continued to grow. But just as is happening today with the dollar, the growing debt had people demanding more money for their goods and labor. Back in the days of Babylon, inflation went into high gear.

Yet the Babylonians remained undaunted. Their treasury still had lots of silver, so King Merodach-Baladan pulled an interesting trick: He declared that the value of silver equaled the value of gold. Eventually the King declared that copper had a value equal to silver, which had equal value to gold.

You can probably imagine this didn’t work too well. Copper was in far greater supply than silver, which was in even greater supply than gold. Money began losing its value and confidence began to crumble. So did the world’s first great empire.

Babylon’s wealth had been the foundation for its society. The economic crisis led to a civil war. Babylon didn’t fall; it was buried beneath an avalanche of worthless money.

Five hundred years later, the city-states of Greece were issuing metallic coins, the silver obol. Another historical record of monetary inflation soon followed.

After Sparta captured the Athenian silver mines around 400 B.C., Athens was faced with a grave shortage of coins. Over the next couple of decades Athens issued bronze coins with a thin plating of silver. The shortage was made even worse as citizens hoarded the old coins and spent the new. It was the world’s first experience of what has become known as Gresham’s Law: Bad money drives out good money.

Empires Come And Go
It is amazing to think that in 1490 Spain didn’t even exist. Yet within a century it was the greatest power on earth.

The discovery of new lands was the major factor in Spain’s success. In 1492, Christopher Columbus, exploring for Spain, discovered land in the Bahamas, which he named San Salvador and claimed for the Spanish Monarchy. His claims paved the way for future Spanish imperialism. With land came the most important of resources of the age — gold and silver.

The Spanish government seized all of the riches, including the silver mines of the Aztecs. In Peru the Spaniards tapped the richest silver mines in all of the New World.

But Spain would spiral down into decline. Riches from the New World poured into the port of Seville. Spanish expansion was based on finding and bringing precious metals back to the monarchy. Yet no matter how much was brought back, more was spent.

Inflation completely ruined the Spanish economy. Additionally, precious metals being shipped from the Americas often didn’t reach Spain because Spanish ships were pillaged by the English. King Philip had to pay debts to his armies and foreigners, but to pay them he produced more money, making the money worth less and less.

Creditors soon caught on and, when they refused to lend, the Spanish Empire dissolved.

Inflation Boils Even In The 21st Century
History has shown that manipulating the volume of money leads to hyperinflation and economic collapse. Consider what happened in Germany, Zimbabwe, Argentina, Brazil and Peru.

During the era of 1918-1923, the Weimar Republic in Germany began printing money at a dizzying rate, setting off hyperinflation. Prices were rising so fast that workers receiving their pay would immediately run to the store to buy foodstuffs before prices climbed again. Business and industry were paying their employees with wheelbarrow-loads of cash.

In trying to keep up with the falling currency rate, Reichsbank printed a 1,000-billion Mark note that was so worthless that when it was spent few bothered to collect the change. By 1923, with one dollar equal to one trillion Marks and inflation at 30,000 percent, the collapse of German currency was complete.

During the 1980s the South American countries of Argentina, Brazil and Peru all experienced triple digit annual inflation.

In Zimbabwe in late 2008, inflation hit 11 million percent. The government finally acknowledged that its own currency was done and began issuing licenses allowing stores and businesses to begin accepting U.S. dollars, South African rands and other foreign currencies.

The economy had to be “dollarized.” The local currency was worthless as legal tender. Barter trading took over, with the most prominent bartered item being a fuel coupon worth about $30 U.S.

None of these lessons have made an impact on the Obama administration which continues to use the Fed and the Treasury Department to create trillions of dollars in fresh money. The consequences for this reckless action will be felt this year beginning with the…

U.S. bond market, which has a gun to its head despite the fact that during the fourth quarter the U.S. government had no problem selling $36 billion in two-year Treasury notes yielding an unbelievably low yield 0.441 percent. To date, low yields have not fazed bond buyers. That’s because dollar inflation is still coming down the pipeline. This will change as the U.S. Treasury continues its massive sales program to prop up the Obama administration. Warren Buffett was correct when he said, “Debt is a four-letter word.” Once foreign investors, especially the Chinese, understand this it will have a devastating impact on the…

U.S. dollar, which continues to flounder. Last week the Aussie dollar broke above parity with the greenback while the Canadian loonie can almost be exchanged at a one-to-one ratio. A decade ago the Canadian dollar was under 70 cents U.S. and the only relief the greenback has had in a decade-long decline was during the deflationary scare that happened during the banking crisis in late 2008. A weakening dollar and accompanying higher U.S. interest rates will hurt the stock market and the end result will be a continuing bull market in…

Precious metals, which are showing new strength in the New Year. Silver, which has long been a laggard, is at $30 per ounce after reaching a high of $31.10 on Monday. Gold broke through $1,400 before giving up some of its gains. In many ways the precious metal markets are behaving the way they did in the 1970s during the latter part of President Jimmy Carter’s single term. My expectation is that we have yet to see the spectacular blow-off for either gold or silver. I think we will see it this year, with gold moving close to $2,000 per ounce and silver hitting $50 per ounce. Therefore there is more leverage in silver than in gold, but both are worth buying and holding.

Action To Take
Look for an investment crisis in 2011 as inflation makes itself felt on the bond and stock markets. Sell blue chip stocks and all bond instruments. If you want to hold large amounts of cash then do so only in the form of 3-month Treasury bonds. You can always roll those over. You are not losing any income in buying longer term Treasury notes or bonds, just incurring massive risk. Other than money necessary to pay monthly expenses and cover emergencies, I would not keep additional cash in U.S. banks.

Yours in good times and bad,

–John Myers

Myers’ Energy and Gold Report