By Richard J. Maybury
Reprint from May 2003 Early Warning Report
Copyright © 2003 by Henry Madison Research, Inc.
www.richardmaybury.com
1-800-509-5400, Fax 602-943-2363

War—The Big Picture
MAY 2003 EWR

Investment markets set prices according to what they think they see in the future. As we go to press, they are pricing in a perfect war.
   These are the same markets that in the 1990s priced in an infinite tech boom.
   The end of the war in Iraq, if it ever comes, will not be the end of the war, or the end of the runup in war investments. It will be only the end of the beginning.
   George Bush repeated continually, "you are either for us or against us." After his precautionary attack on Iraq, most of the world decided to be against us. Millions fear they, too, will be caught in a precautionary attack; America is commonly referred to as "the rogue superpower."
   So, much has changed in a mere two months. This is a good time for a reality check, and a review of the model EWR uses to understand the geopolitical forces that affect your investments.

The Model: The Two Laws
   The foundation of our model is the two laws that make civilization possible: do all you have agreed to do and, do not encroach on other persons or their property. The first is the basis of contract law, the second, the basis of tort law and some criminal law.
   These two laws, taught by all religions, are ethical bedrock. They were the basis of the old British Common Law, on which the American founders built the Constitution, Declaration of Independence and Bill of Rights.
   Liberty is widespread obedience to the two laws, especially obedience by the government.
   After the American Revolution, those in other nations saw the freedom and abundance that liberty produced for Americans, and they wanted it, too. The system of liberty began to spread around the world.
   Unfortunately, in the mid-1800s, a new system called socialism came along. Socialism became so popular it halted the spread of liberty.
   There are more than 200 nations, which means there are more than 200 experiments with varying degrees of liberty. The results of these experiments are, to my mind, conclusive. In nations where we find the most obedience to the two laws, especially by government, we find the most peace, freedom and abundance. Where the two laws are widely violated, we find war, crime, poverty - in a word, chaos.
   The most important region that never received the principles of liberty is east Europe, Asia and north Africa, the area I call Chaostan, the land of chaos. None of the 91 nations of Chaostan has ever achieved what an American would regard as freedom, or anything close to it. Chaostan contains no Thomas Jeffersons.

Three Possible Conditions
   There are, at bottom, only three possible political and economic conditions: liberty, tyranny or chaos. All systems are variants of these three.
   The people of Chaostan have little history or knowledge of liberty, so for them there are only two possible conditions, tyranny or chaos.
   In the wake of 9-11, George Bush sent his armed forces into Afghanistan, removing the tyranny (the Taliban). Today the Afghans are in the chaos of inter-tribal warfare, crime and economic collapse. Many talk about the Taliban era as the good old days. ¹
   I think this exemplifies Washington's grand strategy in this "war on terrorism." Remove the tyranny, then call the chaos victory.

Shiites vs. Sunnis

o.o = Kurds in each nation, in millions

   Iraq contains three main ethnic groups, the Arab Shiite Moslems in the south, Arab Sunni Moslems in the center, and Sunni Kurds in the north.
   These three groups break down into more than 150 tribes. Each tribe is a separate country, with its own history of quarrels with neighboring tribes.
   The Arab Sunni tribes, about 20% of the population, were the group closely allied with Saddam Hussein. They ran almost everything, and terrorized the other groups.
   The Shiites are the majority, about 60%, and to a lot of them, the only good Sunni is a dead Sunni.

Liberty vs. Democracy
   When George Bush says he plans to democratize the whole Arab world, he apparently thinks he is making a wonderful promise. But, in Chaostan, "we will bring you democracy" is a terrifying threat.
   Democracy is not liberty. Liberty is obedience to the two laws. Democracy is majority rule, and majority rule is mob rule.
   The first thing any majority in Chaostan is likely to vote for is to massacre the minority.
   This means US forces cannot withdraw from either Iraq or Afghanistan, or any other Chaostan nation they take over. The moment they do, the massacres will begin.

Another Reason They Can't Leave
   The Kurds are the only large ethnic group in the world without their own country. They have been fighting for one since 1925, against the governments of Iran, Iraq, Syria and Turkey, each of which holds part of the Kurds' homeland, Kurdistan.
   Turkey's rulers know if an independent Kurdistan is created, the Kurdish inhabitants of Turkey will declare independence and join with the new nation, reducing Turkey's territory by about 60,000 square miles. Iran and Syria, too, would probably lose their Kurdish territories.

Tarpit Report As we go to press, the US armed forces are stuck in their 485th day of the occupation of Afghanistan, and 13th day of the occupation of Iraq.

   So, Kurds know when they declare independence they will need to be heavily armed. This will take money, lots of it.
   Areas in and around Mosul and Kirkuk contain some of the richest oil fields on earth. These are in the Kurds' homeland.
   The Turkish government's worst nightmare is Kurds taking Mosul and Kirkuk. Before his invasion of Iraq, George Bush promised the Turks he would not let the Kurds do it.
   On April 10th and 11th, Kurdish troops disobeyed the orders of the US and their own commanders, and took Kirkuk and Mosul.
   Turkish rulers were enraged. Colin Powell promised that the US would take Kirkuk and Mosul away from the Kurds.²
   If the Kurds agree to a peaceful handover, don't expect the agreement to hold. This oil-rich area is their ancestral home. Let me emphasize, this land is theirs, they have every right to take it and use it as a base on which to erect their dream, an independent Kurdistan.
   Do not expect the Turks to tolerate this. If US forces withdraw and the Kurds declare independence, expect the Turks to invade. This is another reason US forces can never leave Iraq.

Third Reason They Can't Leave Leave
   Iraq is surrounded by governments cut from the same cloth as Saddam Hussein. It contains more oil than any nation except Saudi Arabia. All these cutthroats would love to own this oil, and chaos in Iraq would give them an excuse to invade to "restore order."
   They all know the first to invade will get the most oil, so a US departure would likely trigger a free-for-all throughout the Persian Gulf, driving oil to $200 per barrel, maybe more. (It is presently $30.)
   So, as in the case of the Sunnis vs. Shiites, and Kurds vs. Turks, the oil means US forces can never leave.

But They Must Leave Leave
   Iraq is a Moslem nation and it contains Shiite Islam's holiest cities, Karbala and Najaf. The one thing on which absolutely every Mideast expert agrees is that Iraqis will tolerate rule by an outside (Christian) nation for no more than a year or two, and maybe only a few months.
   On April 9th, defense secretary Rumsfeld admitted this, promising, "The United States is not going to stay in that country and occupy it."³

Summary
   The US must get out of Iraq soon, but if it does, Iraq and very likely the whole Persian Gulf will explode.
   Again, there are only three possible political conditions, liberty, tyranny or chaos. When a population is not dedicated to a legal system based on the two fundamental laws, their only choices are tyranny or chaos.
   The invasion was the easy part.

U.S. & World Early Warning Report®. Published ten times per year.
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