These were the events that mattered in Gorilla’s world this week:
Afghanistan: A deal is in the works, despite all the posturing, or rather the indecision, about sending in more troops. There’s no public support within NATO for an endless occupation, so the window of opportunity (cut deal, train troops, peace with honor) is at most 18-24 months. Gorilla thinks we’ll be on the way out in the next 12 months.
The Asian Two Step: President Obama again pleads with the Chinese to let the yuan appreciate. The Chinese again make noises about protectionism and the dollar. Since both sides prefer this outcome, both will claim victory. Gorilla suggests the dollar will fall further and the yuan will begin to rise over the next 12 months.
Elections Do Not Peace Make: The Palestinians, yet again, cannot find a way to unify Hamas and Fatah, whose positions on peace are fundamentally opposed. So the election can will be kicked down the road a few months, sufficient to guarantee no progress for at least a year. Gorilla believes this is the outcome all sides want, so he’s not particularly worried about how unserious the Israelis and Palestinians decide to be.
Trying The Mastermind: The 9/11 mastermind, Khalid Sheik Mohammed, will be tried in the US after all. All the Guantanamo detainees could have been tried in the US and/or released by now, but politically it’s much better to continue cowering, increase middle class jobs programs like the Pentagon, and pretend that the fate of the civilized world depends on defeating a handful of fifth-rate terrorists who occasionally get lucky. Gorilla is certain Guantanamo will close in 2010, only 8 years behind schedule.
The Dollar Carry Trade Goes On: Will Ben Bernanke at last decide that bubbles are not the only thing America consistently produces? It’s a tricky question. Raising interest rates would show resolve, whatever that is, but not doing so demonstrates conclusively that big US commercial banks remain zombies. Gorilla foresees a few more years of deleveraging, living standards declining, and unemployment, sans another large stimulus package, won’t recover for a decade. Gorilla thinks the writing is on the wall, but the oracle of Maiden Lane isn’t interested in reading the message. Much better to be defending one’s turf near the barn door while the next horse bolts for greener pastures…
