Article by: Martin Straith
Three years ago, we forecast that we were on the verge of rising civil unrest, due to economic conditions such as increased unemployment, especially for the younger people..
When the economy is good, and everyone has a job, a house, and lots of toys, as was the case from 2002 -2007, everyone is pretty content; life is good. But when you lose your job, you house, and have to sell the toys, things are not so good.
In the last couple of decades, governments have decided that the best way to stay in power is to promise the world, and spend, spend, spend. They know that their country can't afford all this spending, but they can't think of any other way to stay in power. If they speak the truth, and tell the voters there isn't enough money to pay for all of these promises, the voters will throw them out because the voters have gotten used to all these nice government hand outs.
So the politicians kept offering unrealistic promises, the debts kept growing, and now all of these governments around the globe are in serious economic situations. Europe is an absolute mess; the youth unemployment rate in many of those countries is over 40%, with some over 60%.
When everyone is fat and happy, there is no tension or civil unrest... but that is no longer the situation. Millions of people have lost their jobs and their homes. When you cannot feed your family, you get desperate and angry. When these desperate and angry people see politicians stealing funds, and living the great life, on their tax dollars, revolutions are born.
Every day you see protests and riots all over the world. Be it Brazil, Turkey, Egypt, Spain, Italy, Portugal or the Ukraine... you name it, the people are angry. And as investors, we cannot ignore this rapidly rising tension, both domestically and internationally.
When the people start to rise up and oppose their government, the politicians in those countries will do anything to stay in power. Historically, we have seen that when governments become unpopular in their own country, those government leaders look for distractions. One of the best ways to divert negative attention away from the local government is to engage in a conflict with another country, and create an "us against them" national pride.
Wars give the country a focus away from the internal issues of unemployment and the economy, to one of pride for their country, and a sense of togetherness.
Also, wars create jobs, especially in the military, and in the defense industry; they need soldiers, and they need weapons.
Tensions are rising everywhere, and the problems in the Ukraine are increasing daily. We even saw Ukrainian President Viktor Yanukovich defiantly use the Nazi salute recently in Russia. Putin is getting anxious to make a move, and we would not be at all surprised that once the Olympics are over, Putin flexes his muscle, and moves into Ukraine saying that the 8 million ethnic Russians living in Ukraine need protection.
This is how things escalate; we start with internal revolt, which then turns international. Putin is chomping at the bit to re-establish Russia as a global power, and the Ukraine revolt looks to be too tempting for him to pass up. With this threat in the offing, we now have the US stepping in to try to keep the Ukraine out of Putin's grasp. We are really starting to see a Cold War ll heating up here.
Another serious conflict that won't go away is the tension between China and Japan. Just last week, Japanese Prime Minister Shinzo Abe did something politicians seldom do, he bluntly spoke the truth when he said that the current Sino-Japanese tensions and relations are similar to those between Britain and Germany just prior to World War I. The Financial Times reported that last
Wednesday, Abe said Japan and China are in a "similar situation" to the two European powers just prior to the Great War.
Now of course since that very direct and blunt comment, the Japanese government has tried to calm the waters saying that "The prime minister meant to say that something like WWI must never be allowed to happen," Chief Cabinet Secretary Yoshihide Suga, the government's top spokesman, told a news conference in Tokyo on Thursday.
Re-tweak the comments all they want, but this tension is real. We were in China when the conflict over the Senkaku or Diaoyu Islands escalated in September 2012, and it was made clear to us it would not be a good idea to visit a Japanese retailer or restaurant. We saw many posters of Abe dressed in a Nazi uniform, and other anti-Japanese material.
In addition to the US moving closer to a Cold War ll with Russia, Secretary of State John Kerry vowed Friday that the United States would defend Japan against attack including over islands claimed by China as tensions boil between the Asian powers. Kerry, who said he would visit China next week, met in Washington with Japanese Foreign Minister Fumio Kishida and reaffirmed the 1960
treaty that commits the United States to protect its ally.
"That includes with respect to the South China Sea," he said, before correcting himself to say the East China Sea, where China and Japan have conflicting claims. Bottom line is that this China-Japan situation is at the point now that any slight shove in either direction could cause something serious to happen. As investors we cannot be naive enough to believe that these rising tensions, both domestic and international, can't and won't escalate into something very serious.
If we do get an escalation in the Ukraine, or China/Japan, or in the Middle East, or any number of other powder kegs, then we will see huge volatility in the markets, and that means equity, bond, currency markets, and precious metal markets. Stay tuned!
If you are serious about becoming a better investor, we can help! Martin Straith - http://www.thetrendletter.com
(Article Source: http://EzineArticles.com/?expert=Martin_Straith)
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