I’m traveling this week. So I’ll keep my comments brief …
If you think the Middle East conflict began just a few decades ago, you’d better take a closer look at history.
The instability in the region can actually be traced back to 1916, nearly one hundred years ago.
And if you believe this week’s eye-for-an-eye rocket and air-strike attacks between Israel and the Hamas-controlled Gaza is “business as usual,” think again …
* This is the first time ever that a new Israeli-Palestinian conflict is erupting in the midst of equally serious conflicts now boiling over in Eastern Europe, the Persian Gulf and the Far East.
* This is the first time that Arabs and Jews are on the brink of an all-out war precisely when jihadists are establishing an Islamic state nearby.
* And this is also the first time it’s happening after gold suffered a major decline and has formed a major bottom.
All of this adds still more power and relevance to the Perfect Storm Driving Gold Higher, which I wrote about last week. (If you missed it last Saturday, don’t miss it again. Click here to read it now.)
I’ll connect the dots in a moment. But first a bit of history …
The Great British Blunders of 1916 and 1917
In 1916, Britain and its allies were locked in a horrific epic war with Germany and its allies. Every possible means to vanquish the enemy was deployed — the first air war, the first widespread use of chemical weapons, and the largest attempts ever to manipulate deep-seated ethnic rivalries.
Here’s how that last aspect ties back to the Middle East: Germany formed an alliance with the great Turkish Ottoman Empire, the colonial power in what is today Israel, Gaza, West Bank, Jordon, Lebanon, Syria and beyond.
So in an attempt to undermine the German-Ottoman alliance, the British persuaded Arab leaders to rebel against their Turkish rulers, promising to help the Arabs establish an independent state, including Palestine.
Then, in the following year, the British made essentially the same promise again — but this time to the Jews in the region.
To make things worse, Britain also cut a deal with France to carve up the Arab provinces of the Ottoman Empire and divide control of the region.
This combination of contradictory cross-deals and alliances was one of the biggest foreign policy blunders of any major world power in the 20th century … setting the stage for the suspicion, confusion and conflict that have endured to this day.
Then, after World War II, the newly formed United Nations compounded the problem. They recommended the partition of Palestine into two states and the internationalization of Jerusalem. Instead, with war between the two already exploding, they were only able to create one state, postponing the second for a future that, to this day, has never come. The Jerusalem idea also fizzled.
The State of Israel was proclaimed on May 14, 1948. But the Arab states rejected the partition of Palestine and the existence of Israel. The armies of Iraq, Syria, Lebanon, Trans-Jordan, Saudi Arabia, Yemen, and Egypt attacked. And they were promptly defeated by the Israeli army.
That seemed to end the conflict, but it didn’t.
Eight years later, Egypt nationalized the Suez Canal; and in response, Britain, France and Israel invaded the Sinai peninsula of Egypt — supposedly “the war that would end all wars in the region.”
Did it? No.
In 1967, Israel attacked Egypt, Syria and Jordan in a pre-emptive strike against Arab troops amassed along its borders, ready to “drive Israel into the sea.”
Israel’s resounding victory then convinced many observers that this time, finally, peace would prevail, but it didn’t.
On Yom Kippur day, 1973, Egypt and Syria attacked Israel in an attempt to regain lost land. But they failed, as Israel retaliated and won still another war.
Five years later, Israel and Egypt signed Israel’s first-ever peace treaty with a major Arab country ― the Camp David accords. “Now,” said the analysts, “THIS will finally end the conflict.”
Famous last words! Again, the conflicts returned. In fact, the vitriol, venom and terror merely shifted — from one set of countries seeking Israel’s demise to another set of countries seeking its demise.
Indeed, just as Israel was establishing diplomatic ties with one of the largest powers in the region (Egypt), tensions were escalating with another (Iran).
And not long after Israel befriended its Eastern neighbor (Jordan), the threat from Jordan’s own large neighbor to its East (Iraq under Saddam Hussein) went off the charts.
Fast forward to today, and …
Now, nearly all those who had forever expected, predicted, hoped for, or prayed for peace in the Middle East have largely given up doing so.
U.S. Secretary of State John Kerry’s recent super-shuttle diplomacy to patch together a peace deal was a wild goose chase. No one paid attention. No one really believed it would work. And now Kerry himself admits it was a total failure.
The U.N.’s warnings this past week to Hamas and the Israeli government –that they must immediately stop their mutual rocket and bomb attacks or risk an all-out war — has also fallen on deaf ears. Besides, they already are at war, and anyone who thinks otherwise is dreaming.
Here’s the key: As Money and Markets precious metals specialist Larry Edelson has stressed from day one, the wars raging in the Middle East are not separate conflicts. They are all part of a single, complex of wars that is continually deepening, spreading and escalating.
And as Larry has also made clear, it is not just a regional war. It has all the earmarks of a world war, dragging in arch enemies Iran and Saudi Arabia … Turkey and others on Continental Europe … Britain and the United States … plus Russia and China. Even Japan, thanks to its new self-given powers to participate in foreign wars, could ultimately send troops to the area.
To show you how this impacts gold, I don’t have to connect the dots for you. You know how even regional conflicts disrupt the production and transportation of energy and other natural resources. And you know how that drives inflation fears through the roof, a powerful engine for gold bull markets.
If that’s what happens in a regional war, imagine what a world war will do.
Good luck and God bless!
by Don Lucek
Last Wednesday in this space, I strongly implied that for a good number of individual investors, it was probably wise to just turn off the financial-news media and “hit the hammock” for the long weekend.
by Jon Markman
Let it not be said that the tech start-up community does not care about women and their needs. A new company launched in New York this summer called TheStylisted.com promises to sort of be the Uber of hair and makeup, connecting independent stylists to find customers who want a customized beauty experience in their homes.
by Bill Hall
The U.S. Labor Department said Thursday that U.S. employers added 288,000 workers in June, exceeding economist forecasts, causing the unemployment rate to fall to an almost six-year low of 6.1 percent. That’s good news because the average monthly job gain over the past year has been about 231,000.
by Mike Larson
Is the U.S. spying on everyone, everywhere — including you? Are your most intimate, personal pictures, emails, instant messages, Facebook postings, and more ending up in Uncle Sam’s electronic archives?
by Mike Burnick
It has been said that investors are operating in an era of unprecedented “financial repression” these days.
Since the financial crisis nearly sunk the global economy and financial markets in 2008, central banks led by the Federal Reserve, but ably assisted by the Bank of England, European Central Bank, Bank of Japan, etc. have pumped out trillions of dollars of easy money.
by Larry Edelson
I hope you had a wonderful July 4 weekend, celebrating our country’s independence with family and friends.