Special Update #21

INTRODUCTION

In Special Update #20 which we sent on March 22nd, I reprinted three articles that I wanted you to read and think about seriously.  It has been over six months since 911, and most people have returned to a fairly normal lifestyle.  Many people have assumed that because there have not been additional serious terrorist attacks, the threat must have been greatly reduced by our increased security measures.

Yet based on the analysis you read from STRATFOR.COM in the last Special Update, the Bush administration believes the threat of another major attack is still VERY HIGH, and this time the threat could be nuclear, chemical, biological or weapons of mass destruction.  There is the possibility that these weapons could already be in the US, or if not, they may be on their way. 

Before I get into the analysis of this information, I want to make one point clear.  In my opinion, the Bush administration means everything they say.  Unlike the Clinton administration, which set policy based on focus groups and polls, and which often said one thing one day and something totally different the next, President Bush and his advisors have consistently said that the threat of more major terrorist attacks is still VERY REAL.

Finally, because we have over 1,600 new readers of these Special Updates, let me clarify something about STRATFOR.  Stratfor is NOT some crackpot, gloom-and-doom or conspiracy theory outfit.  Stratfor IS a highly respected and highly paid global intelligence firm.  Multinational corporations pay Stratfor big bucks to keep them informed of what could happen to their operations in countries all over the world.

We have subscribed to Stratfor for several years, mainly to get their economic and geopolitical analysis.  Yet since 911, we have been much more interested in their analysis of the War Against Terror ("WAT").  And now they definitely have our attention with their analysis of the threat of weapons of mass destruction ("WMD"). 

WHAT DO THEY REALLY KNOW?

We believe the Bush administration knows something that scares them VERY MUCH.  Think back to the Stratfor analysis of March 18 that was in the last Special Update - "THE CHENEY TOUR -- A CONFRONTATION OF FEARS."  While Stratfor does not know for certain, they believe that the Bush administration is convinced that WMDs are either already on their way to the US or they will be before long.

[As an aside, I think Stratfor makes a big LEAP in its assumption that no nukes or WMDs are already in the US, just because they haven't been detonated yet.  That's not an assumption I would make.  Remember, these terrorists can be very patient.]

In any event, it appears very clear that the US has some intelligence which indicates that the threat to America is still VERY REAL.  Why?  First of all, it was VP Dick Cheney, America's second most powerful man, and not Colin Powell, who was sent, first to England and then to the Middle East.

Prior to Cheney's visit, Great Britain had made it clear that it wanted no part in any effort to topple Saddam Hussein.  Enter Cheney.  About face!  Britain's Prime Minister, Tony Blair announced that England would assist the US.  After the visit, Blair raised a big stick in support of American action against Iraq, and said that the UK would respond to any weapons of mass destruction attack on America or itself with immediate force up to and including nuclear weapons.  Wow!  Many people don't know that Tony Blair was a flaming liberal during the Margaret Thatcher era, who wanted total nuclear disarmament.  Now that's a real change of heart, folks!

It was when I saw Tony Blair get onboard that I wondered. . . whatever intelligence the US has must be VERY SERIOUS.  If so, it follows then that Stratfor's analysis of Cheney's Mid-East trip may be dead-on accurate.

WHAT CHENEY TOLD THEM

Stratfor argues, and I agree, that Cheney was sent to the Middle East to make it clear that the Bush administration believes this is a conflict between America and radical anti-American fundamentalism on a global scale.  It was not a diplomatic mission. Cheney was not building consensus; he was taking stock and issuing ultimatums.

I think it is very reasonable to believe, as Stratfor suggests, that Cheney told those leaders in no uncertain terms that they can either allow our military entry into their countries or, if not, we will come in anyway. 

Cheney's mission was to bring back a checklist for President Bush.  That checklist may well have had only two columns on it: above one of the columns it might have read "WITH THE U.S."; on the other it might have read "WITH THE TERRORISTS." Each of the countries visited are now considered to be in one of these camps. While we can't be 100% certain who is where, it probably stacks up like this:

WITH U.S.: Israel, Yemen, Qatar, Kuwait, Egypt and Jordan.  

WITH TERROR: Iraq, Iran, Syria, Lebanon, Palestinian Authority and Saudi Arabia.

Some of you may doubt that Egypt and Jordan would be on the "With US" list.  I include them only because they are generally pro-American.  You may also be surprised to see Saudi Arabia on the "With Terror" list.  We'll talk more about that one later on.  In any event, knowing where the countries in the region stand is pivotal in planning how the campaign against terror will evolve. 

THE BUSH ADMINISTRATION'S SENSE OF RESPONSIBILITY & DUTY

As discussed earlier, Stratfor and we believe the Bush administration has seen something that scares them very much. This is increasingly evident in their rhetoric.  Maybe this is why a reluctant Colin Powell seemed to finally get onboard the WAT in late February.  I believe President Bush and his advisors consider this to be the single greatest threat to America, ever. We are continually reminded of the possible costs involved in both military and civilian life.

This administration, I believe, considers its actions a result of a deep sense of responsibility and of duty.  There have been stories about this president, this vice-president and their military advisors believing in their hearts that they are the RIGHT PEOPLE, in the RIGHT PLACE and at the RIGHT TIME to face America's greatest threat.

They also know that they are living in the MOST DANGEROUS place in America -- Washington, DC.  George W. Bush is the most hated man in the radical Islamic world.  If the terrorists could get a nuke or a WMD into the US and had any options, I believe they would go for Washington, DC over any other target.

[I do stop sometimes and wonder where we would be if Al Gore was the president.  I wonder who would be the Secretary of Defense, the Chairman of the Joint Chiefs, etc.  Would we have done anything but rattle our sabers over the events of 911?  Would there even be a War Against Terror?  Would we right now just be waiting until something far worse than 911 happens?  This is not something I can think about for very long!]

PAX AMERICANA?

Given everything we have talked about in this Special Update #21 and #20, and given that the administration apparently has some very troubling intelligence, it is at least possible that the US will force a "Pax Americana" on the Mid-East.  Pax Americana is a term which is applied to a world (or a region of the world) in which the US has dictated that the leaders of the various countries are, at the least, sympathetic to our concerns. 

Let's say we invade Iraq, throw out Hussein and install a new government that is either sympathetic to our concerns or is visibly loyal to us.  Iraq, in this case, would become what many call a "client state" of the US.  This would be an example of Pax Americana, although this term is usually used to represent more than just one country in which we would oust the current hostile regime and install a friendly government.

Pax Americana does not mean that we would "occupy" (large numbers of troops and we call all the shots) Iraq or any other Mid-East state for extended periods, but it does certainly mean the replacement of governments and the neutering of any WMD capabilities where needed.  The best guess is it will begin with Iraq in the next few months, followed by Iran and others.  Potentially, the Mid-East could be transformed into a string of US client states. 

RISKS WITH PAX AMERICANA -- THERE ARE MANY

Should the US elect to reshape the Mid-East in a major way, it would be a historic action and fraught with risks.  The most obvious and serious risk is there is no guarantee we will be successful.  Such action could easily unite Islamists all across the region and beyond, including some countries that are on good terms with the US. 

Several Arab nations that have been sympathetic to us in the past, such as Jordan and Egypt, could turn against us.  These actions could so destabilize the region that OPEC could be diminished or fractured altogether.  An oil embargo on the West is not out of the question.

Keep in mind also that we placed Saudi Arabia in the TERROR column.  That's because they have -- so far - denied us access to their country to carry out our plans against Iraq.  Actually, we only "think" Saudi Arabia has denied us access.  The Bush administration has not said publicly that the Saudis turned down VP Cheney.  The only place we saw this news was on ARABICNEWS.COM on March 18th.  You can read it in the links below.

If the Saudis refuse to cooperate, the US could withdraw its support of the Al Saud royal family.  This would be bad for the Saudis. Without US backing, the Saud family could be ousted from power, and the country could fall into the hands of the radical fundamentalists who are just as bad as Al Qaeda. 

Were that to occur, the US would have to intervene militarily for a number of reasons.  The US would not let the world's largest producer of oil fall into the hands of terrorists.

If revolution does find its way to Saudi Arabia, there is a very good chance that the US and the UK will occupy the oilfields in response. This move would be made to stave-off global eco-shock and a possible worldwide depression.

The list of risks and problems goes on and on, but you get the picture.  It's NOT pretty. 

WHERE WOULD RUSSIA FIT IN?

For purposes of this analysis, let's assume Russia does agree to stop trafficking in weapons technology.  In this scenario Russia could well emerge as the world's pre-eminent petro-state. This could happen with the full backing of the US, again assuming Russia agrees to cease selling the technology for WMDs.

You may not have heard this, but Russia pumped more oil than Saudi Arabia last month; that has never happened before. If relations continue to improve, Russia could become an even greater oil exporter if the US, and eventually Euro-zone countries, aide the Russians in tapping their vast oil resources. 

Obviously, this analysis includes a LOT of assumptions, but this scenario could see the Russians finally admitted to NATO and with a budding economy after all these years.  I have discussed such possibilities in previous Special Updates. 

CONCLUSIONS

It appears the Bush administration has seen evidence that much greater terror attacks are likely, or at least possible.  President Bush means what he says when he warns that if terrorists get nukes or WMDs, they WILL use them against the US.  The President and his advisors are DEAD SERIOUS about wiping out Al Qaeda and any other regimes, such as Iraq, that are known to be working on or producing WMDs.

Vice President Cheney's trip to the Mid-East was to put them on notice that we will take these actions with, or without, their approval.  Due to the seriousness of the threat(s), the US will attempt to install friendly governments wherever necessary in the region.  "Pax Americana" is not out of the question in the Middle East.

Make no mistake, this is a dangerous strategy!  But it may not be one we can avoid.  There are, of course, several other scenarios that could unfold, other than that which I have outlined above.  This is especially true if the current crisis in Israel escalates into a full-blown Arab/Israeli war, which could happen any day now.

This scenario above may seem extreme, but it could happen.  In fact, it is unfolding even now.  People are frightened; the government is frightened.  Keep that in mind.  Also understand that our current government is committed to seeing this republic survive, no matter the cost.

LATE NOTE:  US ARRANGES FOR ARAFAT'S EXILE IN MOROCCO - MAYBE

When we arrived at work today and checked our usual dozen or so Internet spots for news, we saw that WorldTribune.com and DRUDGE were reporting that the US has arranged for Arafat to leave Palestine and go into exile in Morocco.

Strangely, this story has been out there all day, and we have yet to see anyone in the mainstream media pick it up.  We don't believe it was discussed in the White House press briefing or the Defense Department press conference this morning.

You can read the stories about this in the links below.

Wishing you a good week,

Gary D. Halbert 

SPECIAL ARTICLES

US arranges for Arafat exile in Morocco.

http://www.worldtribune.com/worldtribune/breaking_7.html

Another source Arafat's exile.

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=27041

Saudis reject use of their soil by US troops. 

http://www.arabicnews.com/ansub/Daily/Day/020318/2002031811.html

Israel preparing drawn out campaign.

http://www.stratfor.com/fib/topStory_view.php?ID=203715

Jordan and Egypt may expel Israeli envoys.

http://www.haaretzdaily.com/hasen/pages/ShArt.jhtml?itemNo=147217&contrassID=2&subContrassID=1&sbSubContrassID=0

Mideast, all attack no endgame.

http://www.csmonitor.com/2002/0401/p01s02-wome.html


Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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