The Great Unwinding Has Begun

[dropcap]D[/dropcap]espite the US Treasury’s best market manipulation, which may or may not save US Stocks for the day, the inevitable stomach turning feeling that the World is once again out of control is unmistakably in the air. There has been a subtle feeling that this could be the reality for months now and as Iran’s oil came into the global market, crude’s collapse has been assured. With oil down below $27 a barrel, the market rout that has been underway since the first of January will assuredly continue.

Courtesy Bloomberg

In all honesty, the global recovery since 2008 has not really been a recovery.  Propped up by cheap credit and a farce of a fracking and shale industry as well the emerging markets, which have been more fictional than fact, the economy should have given way a long time ago.  Humans like to live in a bubble. So long as there has been available credit the false economy could continue lying.

Keynesian Economics is Bringing Everything Else Down

The game that has been played by the central bankers for the last few decades has reached the end.  Over manipulation of the markets which has flowed from the statist policies rooted in Keynesian Economics has warped the global economy.  This unraveling is picking up pace and threatens to derail the global economy.

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Keynesian Economics never made much sense. The idea that central banks could increase deficit spending to ensure economic growth in times of stagnation would eventually be over used. The only surprise is that is has taken this long for a real decoupling to begin.

From Economic Collapse to War

One thing is certain. When global economic stresses increase to an unacceptable level, geopolitical friction begin to stir. Russia cannot sustain itself with oil as low as it is.  Neither can the Arab nations or Iran.

With no reason to keep the guns holstered expect Russia and Iran to be on the move. After all, the best way to raise oil prices is war. If there is war then why not make the most of it and restore some lost territory in Ukraine and other areas Mother Russia once had.

For Israel’s part, the economic level of most of its citizens have always been borderline poverty.  If the tech bubble bursts the government will have to instill emergency measure.  Of course, Israel has always functioned on a different wavelength and there is no reason to assume it won’t do so this time as well. Of course if there is real war, all bets are off.