A new American-led war against radical Islam is approaching critical mass, with potentially dramatic impacts on your stocks, your bonds, and your financial well-being.
Perhaps you have become inured to the drumbeat of bad news. Perhaps you have pushed aside lurking concerns and focused on the rising Dow or surging GDP.
But you cannot ignore this crisis any longer. Unless you face it squarely, understand it fully, and take protective action to protect yourself and your family, you’re soon bound to regret your complacency.
In response to the terrorist attacks of 9/11, our citizens responded promptly, and our troops fought courageously.
We raised tens of billions in new financing … rallied the support of dozens of allied nations … integrated myriad national security agencies … revamped domestic and international intelligence networks … and much more.
We defeated scores of tyrants and terrorists — Osama Bin Laden and Mullah Muhammad Omar … Saddam Hussein and his sons Uday and Qusay … the five responsible for the murder of Wall Street Journal reporter, Daniel Pearl … plus dozens more associated with al Qaeda, the Taliban and the Saddam regime — all marginalized, killed, or captured.
We also won many battles — Kabul and Kandahar in 2002 … Basra and Baghdad in 2003 … and probably more to come in 2004, 2005, and beyond.
But despite our valiant efforts and quick victories, there is one singular reality that is both abundantly obvious and enormously painful …
THE WEST MAY BE LOSING THE WAR
Israel and its allies may be effectively losing the war in Palestine, where the second “intifada” (popular uprising) has been escalating since September 2000, and where Palestinians have transformed what were once random suicide bombings into a highly organized military strategy, now mimicked around the world.
The American-led alliance may be losing the war in Afghanistan, where the Taliban and other anti-American rebels are mounting a new round of attacks in the southeast and the east … and where factional fighting is exploding in the north and west.
We also seem to be losing control in Iraq, where a new kind of intifada — this time directed against Americans and their allies — has exploded in Falluja, Baghdad, Ramadi, Karbala, Kut, Kufa, Najaf, and other cities covering two-thirds of the country.
We certainly face a tougher-than-expected battle across the globe, where terrorist cells are far more diverse and elusive than most had originally imagined, including, just to mention a few …
* The Armed Islamic Group in Algeria …
* Hamas, the primary power behind the second Palestinian intifada …
* Hezbollah, established by Shiite fundamentalists in Lebanon …
* Palestinian Islamic Jihad, a loose amalgamation of radical factions inspired by the Iranian revolution …
* Multiple groups in Pakistan seeking the overthrow of the pro-American military regime — Harakat ul-Mujahedin, Hizb-ul Mujahideen, Jamaat ul-Fuqra, Lashkar-e-Toiba, and Sipha-e-Sahaba …
* Philippine organizations loosely allied with radical counterparts in the Mid-East — including Abu Sayyaf, which helped stage a major prison outbreak this weekend, as well as Moro Islamic Patriotic Front, the New People’s Army …
* An alliance of Moroccan terrorists, drug dealers and others, with no concrete evidence of ties to al-Qaeda, who were responsible for the March 11 attacks on Madrid train stations, the deadliest in Spanish history …
* Many more in Turkey, Western Europe, North Africa, the Arabian peninsula, South and Southeast Asia …
* And now, dozens of yet-unnamed, stealth groups in Iraq — local insurgents aligned with Saddam and Sadr … plus newly formed branches of international terrorist organizations like Hamas and Hezbollah.
THE NEW “CAUSE”
For most of these groups, Palestine used to be the cause celebre, the rallying cry of Arab and other Moslem fundamentalists stretching from Morocco to the Philippines.
Palestinian cities like Gaza, Hebron and Ramallah were the poster towns that the Arab media used to help spark rage and rebellion throughout the Arab world.
Now, however, we can see a not-so-subtle change: Iraq is their new “Alamo,” and a new set of place names — like Falluja, Najaf, and Kut — are the magic words used by their propaganda machines.
I know, because in my home, I subscribe to a special satellite TV service to pick up European and other foreign-language channels. I didn’t order any Arabic channels because I don’t understand the language. But they came free with the package, including Al Manar (sponsored by Hezbollah) and several others broadcast from around the Middle East.
I can see how, every day, Arab networks flash images of the latest victims — maimed women and children in ill-equipped hospitals, child-size coffins carried by chanting crowds.
And every day, I must assume the sheer power of these symbols is galvanizing the masses into a more frenzied state of anger.
Yes, the majority of citizens in the Arab world may be moderate, even silent. But while the silent majority watches passively from the sidelines, the violent minority is now waging a spreading worldwide rebellion with growing momentum.
Follow the chronology of recent events, and you will see what I mean …
GAZA CITY, PALESTINE — MONDAY, MARCH 22
(three weeks ago today)
It’s daybreak, and this city, the largest in Israel-occupied Palestine, is teaming with activity.
The quadriplegic spiritual leader and founder of Hamas, Sheik Ahmed Yassin, is leaving a mosque in his wheelchair, accompanied by bodyguards and a dozen others.
Suddenly, in retaliation for a rash of Hamas-led suicide bombings against civilians, Israeli helicopters fire three missiles at Yassin and his entourage.
He’s killed almost instantly.
The Bush administration is deeply troubled by the attack. British Foreign Secretary Jack Straw says the assassination is unacceptable and unjustified. Egypt cancels a trip by legislators and other dignitaries to Israel to mark the 25th anniversary of the peace treaty between the two countries.
At the funeral procession, more than 200,000 Palestinians, some carrying billowing green Hamas flags, flood the streets. Thousands also take to the streets in the West Bank. Millions throughout the Arab world, including Sunnis and Shiites in Iraq, vow revenge.
Most people probably think the next acts of retaliation will be against Israel, and indeed there are a few. But I wonder: What impact will this have on Iraqi insurgents and other terrorist groups?
FALLUJA, IRAQ — WEDNESDAY, MARCH 31
Four Americans working for a security company are ambushed and killed. An enraged mob, including teenagers and children, jubilantly drags the burned bodies through the streets of downtown Falluja, hanging two of the corpses from a bridge over the Euphrates River.
The violence is the most brutal outburst of anti-American rage since the war in Iraq began more than a year ago. The steadily deteriorating situation in the Falluja area, a center of anti-American hostility west of Baghdad, is so precarious that no American or Iraqi forces respond to the attack.
Only later is it learned that the assassination of the Hamas leader nine days earlier has been looming large in the minds of Iraqi rebels.
WASHINGTON, D.C. — SATURDAY, APRIL 3
The Bush Administration is coming under public pressure to strike back at Falluja and punish those responsible.
Indeed, for several days, the image of the burned and mutilated bodies of the four murdered civilians has been flashing across TV screens in the homes of millions of Americans.
The New York Times, plus local newspapers around the nation, is dedicating page after page to the admirable life histories of the four men, each in their prime of life. Their parents, siblings and relatives are being interviewed on news and talk shows. The national outrage is building to a crescendo, implicitly demanding action by American forces.
Will they exercise the proper restraint?
SADR CITY, BAGHDAD — SUNDAY, APRIL 4
While American commanders still ponder a counter-attack against Falluja, another major conflict has just erupted.
Followers of Moktada al-Sadr, a radical Shiite cleric, are enraged by the Hamas assassination two weeks ago and by the American shutdown of their newspaper a few days ago. They are using both as excuses to make a grab for power, and they have launched coordinated anti-American uprisings in several cities.
In Sadr City, named after the rebel leader’s father, and home to more than two million Shiites, eight American soldiers and about two dozen Iraqis have lost their lives during gunfire that erupted today. For American forces, the death toll is one of the worst single-battle losses since United States troops drove Saddam Hussein from power last spring.
What’s most worrisome is that the battle opens a massive, second front that now extends far beyond the previously narrow combat zone limited mostly to the Sunni triangle in central Iraq.
WASHINGTON, D.C. — MONDAY, APRIL 5
Administration and Pentagon officials have been notably frustrated and disturbed by the events of the past week. Many admit that the new surge of violence in Iraq represents a worrying challenge to their plans to turn over power in less than 90 days.
General John P. Abizaid, the senior U.S. commander in the Middle East, is asking for contingency plans for increasing the number of troops in Iraq. Meanwhile, U.S. officials announce a previously issued warrant for Sadr’s arrest.
FALLUJA — TUESDAY, APRIL 6
U.S. forces begin a full-scale attack, finally seeking to respond to the horrendous attack on the four American civilians. But in the process, they embroil themselves in one of the toughest urban battles of the war.
Block by block, they fight their way into the city, calling into play a weapon rarely used against the Iraqi guerrillas: the AC-130 gunship, a warplane that circles over its target, laying down a devastating barrage of heavy machine gun fire.
FALLUJA — THURSDAY, APRIL 8
Today, more than 1,200 Marines, backed by attack helicopters and fighter-bombers, are battling insurgents in fierce block-by-block fighting. Several companies of Marines and Iraqi civil defense forces are pressing closer to the city center, dashing through smoke-filled streets and across rooftops to root out masked guerrillas holed up in houses and buildings, who blast at allied forces with small arms and rocket-propelled grenades.
American warplanes drop two laser-guided bombs on houses in Falluja where the Marines said insurgents have taken cover.
Not long ago, Marine commanders said they would avoid these hard-nosed tactics the Army is using, relying instead on more precise raids and foot patrols aimed at gaining intelligence and presenting a friendlier side of the American military.
But after the four American civilian contractors were killed and their bodies mutilated on March 31, the marines are now forced to adopt heavier weapons and tougher tactics. The cost in civilian lives, shattered buildings and fractured goodwill are large.
Meanwhile, the Shiite uprising has intensified and spread to new parts of the country. U.S. forces are confronting a broad-based uprising that goes far beyond just Moktada Sadr and his militia, with a much larger number of Shiites having turned against the American-led occupation of Iraq.
FRIDAY AND SATURDAY — APRIL 9 AND 10
On my satellite TV, the Arab media are again fanning the fires of outrage by broadcasting the images of the new Iraqi intifada, complete with the gore, blood, and sorrow that naturally inspire awe and ire among all classes of Arabs around the world.
But the villain of the stories is no longer Israel, backed by its American allies. It is the United States itself, backed by its allies in Europe, Japan, and South Korea.
BAGHDAD — SUNDAY, APRIL 11 (yesterday)
Two U.S. Army pilots have just been shot down by surface-to-air missile fire west of Baghdad International Airport, bringing to 16 the total number of soldiers that have been killed there just since Friday.
In Falluja, a soccer field has been turned into a mortuary for Iraqi dead. A hospital spokesperson quoted by The Associated Press says the number of dead exceeds 600, with more than 1,000 wounded.
However, a spokesman for the American command, Brig. Gen. Mark Kimmit, denies claims by some Iraqi leaders that the Marines have used tanks, infantry, and air power in excess … or that the American retaliation for the four murdered civilians could be accurately portrayed as “collective punishment” for the 200,000 people of Falluja.
DEEP ROOTS
What is really behind the conflict? Last year, in my second Martin on Monday e-mail, I put it this way:
“Most people … think about these far-away conflicts in just one dimension: Radical Muslim movements, and anti-American or anti-Western fervor.
“In reality,” I wrote, “they stem from multi-dimensional, multi-cultural fissures, and many of these fissures have already ruptured … or seem about to do so soon.
“The most critical fissure is ECONOMIC: With a few notable exceptions, corrupt despots, monopolists and oligarchs control most of the wealth in North Africa, the Middle East, Central Asia, Indonesia and the Philippines. Even in the richest country of all, Saudi Arabia, thousands of royal princes have a lock hold on the most strategic positions in government, commerce and industry.
“At the same time, throughout these regions, desperate, downtrodden urban and rural poor have little or no access to adequate housing and modern sanitation — let alone good health care or education.
“The second major fissure is CULTURAL. The elites are mostly modern and Westernized. The masses are typically not. Yes, in some countries, middle classes are struggling to emerge, but in most areas, they are in a minority.
“A third fissure is RELIGIOUS. Islamic fundamentalists clash with more moderate Muslims, and both clash with Christians, Jews, Hindus and agnostics. Even as far East as the island of Mindanao in the Philippines, Muslim fundamentalism is the primary ideological tool used by militants and insurgents to recruit members.
“The fourth is HISTORICAL. The protagonists trace their conflict through millenniums of battles, wars and massacres. Using a mix of historical fact, legend and myth, they build a case for revenge and martyrdom.
“The fifth and most frightening fissure is MILITARY. Virtually all of the hot spots are akin to armed camps. That includes established regimes armed to the teeth. Plus it includes militias and ubiquitous stashes of dangerous weapons outside the control of the authorities — in hideaways, places of worship, homes, even schools.
“In the past, each fissure was on a different plane, with differing consequences, occurring at different times. Now, the globe seems to have rotated in such a way that the fissures — and the anger they generate — are coming into dangerous alignment.
“Each of the lines of conflict … is now coming into synch along one axis and with one by-product: VIOLENT CHANGE.”
THE ECONOMIC IMPACTS
For better or for worse, we are now deeply enmeshed and embroiled in an escalating, centuries-old religious, political, and economic conflict — essentially the same conflict that began with the first Israeli-Arab war over five decades ago. The outcome of this conflict is uncertain. But the economic and financial impacts are clear:
* MORE DEBT. The war now has at least four fronts — U.S. domestic security, international efforts against terrorist groups, Afghanistan, and Iraq. Each will continue to require stepped up financing, primarily through the issuance of U.S. government securities. But since no hard estimates are possible, these extra borrowings are routinely excluded from official estimates of the deficit, now pegged at a record $521 billion.
* MORE INFLATION. We have bigger deficits and more money printing to help finance them. Plus we have rising demand for commodities worldwide. The result has been absolutely explosive surges in soybeans, natural gas, scrap steel, copper, and other key commodities. Even this morning’s Wall Street Journal warns that world price increases — especially in Asia — are fanning inflation fears in the United States.
* FLIGHT TO GOLD. In the wake of the 3/11 attacks on Madrid train stations, 800 million Europeans are scrambling to prepare for the next round. But with over 86,000 hard-to-secure railway stations in Europe (72 times more than in the United States!), they have no place to hide.
Japan’s sprawling rail system is equally insecure, and three Japanese hostages taken in Iraq late last week is just one more reminder of their vulnerability.
In response, many investors in Europe and Japan are pulling out at least a portion of their investments and moving them to safe havens, especially gold.
* RISING INTEREST RATES. Despite powerful forces normally associated with higher interest rates — war financing, the bulging federal deficit, and surging commodity prices — the U.S. Federal Reserve continues to holding down the lid on its official rates. But they’re a pressure cooker, ready to explode.
Last week, U.S. bond rates continued to march higher, and it’s becoming increasingly unlikely the Fed will be able to hold out much longer. An official rate hike could come a lot sooner than most people now expect.
My advice: Pray for the best, but prepare for the worst. Get your money to safety. Don’t wait.
Good luck and God bless!
Martin
Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc.
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