Terrorism, Revolution, and the Financial Markets

By: Clif Droke | Thu, Jul 13, 2006
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"The more things change, the more they stay the same." That oft-repeated bromide contains more truth than most would care to admit. This statement can be applied to our troubled times as every day we are greeted with the same lurid tales of death and destruction overseas. Not a day goes by without news of several bombings and other acts of violence happening throughout the world, especially in the Middle East region. This violence has been underway since the start of the year and is reaching the crescendo stage; it's culmination will undoubtedly bring about a revolutionary change in geo-politics and the global economy. No country will be untouched by its significance. It's our place in this article to examine what these changes might be and how they are being brought about.

The month of July is historically a revolutionary month. If we return back to the pages of history we will see this proven time and again. From the U.S. Declaration of Independence, to commencement of the French Revolution of 1789, to the July Revolution of 1830, major acts of violence and terror often occur in July. More recently we saw the London Bombing last year on July 7, and this year's July witnessed the notorious Indian train bombings of July 11. As we shall see, in virtually all cases these acts of terror are instigated by a small cadre of vested interests whose design is to bring about a desired change (i.e., "revolution") through a manipulation of mass psychology, principally through the emotion of fear.

The French Revolution period of the late 1700s is a fertile field for study in the various modes of propaganda and manipulation tactics used to bring about political and economic change to a country. It also shows how the people of a given country must always be intimately involved in the revolutionary process, even if it means dragging them kicking and screaming against their will into the fray (this literally occurred in several instances during the French Revolution). Change can only be brought about through the active participation of the people of the country involved in revolution. A passive disinterest or even tacit consent is never sufficient. The people at some point during the revolutionary process are always called upon to suffer in some way or another before the desired change can be brought about.

To see numerous examples of this there is no better reference text than Nesta H. Webster's classic volume entitled "The French Revolution." Unlike most studies of this epochal period of French history, Webster delves behind the scenes and uncovers the details that most establishment histories fail to uncover. Her exhaustive investigation of the French Revolution brings to light the involvement of a few sinister men and women and explains how they managed to drag the country into a long and bloody revolution with consequences that reach to modern times.

One of the more striking aspects of the French Revolution was the progress made on behalf of revolution and anarchy by the most unsuspecting accomplices - that of the normally law-abiding French people. Through various propaganda techniques, chiefly involving contrived fear and terrorism campaigns, the decent hard-working folks of France were reduced to their basest natures and driven to commit unspeakable atrocities against their king and queen. Above all, it was fear that was the key that enabled a relative handful of conspirators to manipulate multitudes of Frenchmen and Frenchwomen to do their bidding.

Webster chronicles the beginning of the Revolution ahead of the siege of the Bastille (which began in July 1789). She provides a riveting description of the emotional state of the French public in the early stages of the Revolution. Fear and terror were the weapons used to engender the required state of mind used by the manipulators to bring about revolution.

Concerning the public agitation just before the siege on July 12, 1789 she writes: "This agitation...was terrifying...At every moment a fresh rumour was circulated, adding to the general consternation; now a messenger, wild-eyed, rushing into the square and crying out that he had just arrived from Versailles where the deputies were being massacred; now a panic-monger announcing that the Duc d'Orleans was exiled - thrown into the Bastille - condemned to death; now warnings shrieked to the terrified people that the troops were marching on the city to put everything to fire and sword. The seething multitude that filled the garden and arcades was like a sea lashed by a hurricane; at each new alarm a long deep moan arose from thousands of throats, a moan that now grew into a muffled roar of fury, now died away into the silence of consternation."

Webster continues with her vivid description of what has been called the Great Fear: "The effect of this circumstance on the minds of the people was indescribable. The wildest scene of confusion began. Men haggard with fear, women pale and tearful rushed hither and thither; the streets were filled with bands of citizens, silent and distraught, hurrying like frightened sheep they knew not whither. Unhappy people driven desperately to and fro by the men who had made themselves their shepherds!"

Webster later proves that many of the most violent episodes of terrorism during the French Revolution were not spontaneous outbursts of the supposedly enraged French peasants, but instead were carefully plotted and pre-planned by a small group of revolutionary "illuminati." She writes, "In no case, however, do we find these outrages to be the spontaneous work of the people; the conception of downtrodden peasants rising incontrollably to overthrow their oppressors....Such violence as the people committed was invariably instigated by revolutionary emissaries who persuaded them to act under a misapprehension, and methods of diabolical ingenuity were employed to overcome their reluctance." The more things change...

Moreover, Webster places the blame for stirring up revolutionary sentiment in the French multitudes on what we would today call the government and the popular press. Quoting a "man of good sense" writing a report to the Committee of Inquiry, she quotes him as saying: "You wish to know the authors of the troubles, you will find them...particularly amongst those who are attorneys or lawyers. They write incendiary letters to their constituents, these letters are receives by the municipalities which are likewise composed of attorneys and lawyers...they are read aloud in the principal square, and copies are sent into all the villages."

Returning to our opening statement about things never changing despite the progression of history, are we not seeing now an eerily similar replay of this fomenting fear? Are not the "scandal sheets" of the popular press daily proclaiming some new terrorist episode (actual or potential) with an aim at arousing fear in the minds of the populace? And are not the seeds of violent revolution being planted every day, particularly in the powder keg that is the Middle East? Indeed, the winds of change are blowing strongly and the Great Fear of late 18th century France is reviving in 21st century America!

One recent example of this fear-mongering in the daily press is found in an article published by Reuters on July 4, headlined "Minister says new attack 'inevitable.'" The article was in reference to the first anniversary of the July 7, 2005 London bombing which killed 52 people. It stated that a new guerrilla attack on Britain is inevitable, according toa member of the British government. Asked if he thought further attacks were "inevitable" he responded, "Yes, I do think it is inevitable, yes." As if expressing such alarmist, impossible-to-prove sentiments weren't enough, he added, "...there are some exponents of some religious that believe that it's their job to kill all infidels." Not just "some" infidels, but "all" infidels. Presumably that includes you and me. The message of course is the same that is being repeated and circulated throughout the mass media every hour of every day: "Be afraid...be very afraid!"

As if to underscore the ubiquitous threat that global terrorists pose to us all, we are given stories to show us that major terrorist threats are being attempted all the time. One recent example was the headline given by the AFP on July 7 (a busy day for terror-related news!) The headline read, "FBI foils terror attacks on New York tunnels, three arrested." It explained that a major plot involving "martyrdom, explosives and certain of the tubes that connect New Jersey with Lower Manhattan" was prevented thanks to the ever vigilant anti-terrorist officials within the government. But what this high-profile story really amounts to is more fuel for the fire of fear within the public imagination.

What then is the connection between violence, revolution, and the financial markets? In our time the most obviously politically sensitive financial commodity is oil and the crude oil price is daily thrust before our eyes as a barometer of not only inflationary pressure but of political/military activity, mainly in the Middle East. Even as this is being written a headline crosses the news wire: "Oil makes new high as Middle East violence escalates." Thus the relationship between oil and violence is easy for all to see.

A more finely tuned approach to seeing the correlation between the oil price and violence in the Middle East and elsewhere is the Global Bombing Momentum index (GBI) which was developed earlier this year and previously discussed in these commentaries. As its name implies the Global Bombing Momentum index shows the increase or decrease in the rate of change of the number of politically motivated bombings worldwide. At any given time most of these bombings are of course in the Mid-East region and not a single day passes without at least 3-4 bombings taking place, on average, as reported in the mainstream news. (Note: "bombings" as defined by the GBI does not include military initiatives such as aerial attacks, mortars,, etc. It focuses solely on explosive devices used by non-military personnel in private initiatives).

When the Global Bombing Momentum index is rising it shows not only that the trend for bombing and terrorist activity to be on the rise but it also paves the way for further increases in the price of oil and gas. A rise in the GBI has never failed to produce a rise in the crude oil price.

Going back to the start of this year we find the crude oil price peaking in late January at approximately $68/barrel. Then in February it fell to a low for the year-to-date of about $58 by the end of that month. During this same period of time between January and February the GBI index continued its upward path of making higher highs and higher lows and didn't peak until around the middle of March (the same time oil was bottoming). Thus the GBI index made a positive divergence when compared to the oil price and was predicting that oil would take off again soon for higher prices. This it did in April when it rose from approximately $60 to the $75.00 level.

After the near-vertical rally in the oil price during April, crude oil peaked in May and spent most of that month traveling a sideways-to-slightly lower path. It bottomed above $68 (previous resistance) and continued its sideways move into the middle of June, at which point it turned slowly higher again and most recently made a new high of just over $76/barrel. Throughout the months of May and June when the oil price was consolidating, the GBI index was screaming higher, and again making higher highs and higher lows. It spiked on June 14 when an incredible 42 bombings were reported that day, a record. (Interestingly, a record 104 earthquakes were also recorded that same day by the U.S. Geological Survey). This gave birth to a spike rally in the oil price that as of July 13 hit a recent high of almost $77.

The lessons of history combined with the lessons of the global bombing phenomenon show us that not only can a major commodity price be influenced by fear, but so too can the very social and political fabric of entire countries. We will soon experience the end goal of the global bombing and terror campaigns and the result will likely be similar to that of all previous revolutions, namely, a shift from the "Old Regime" to an entirely new one.



Clif Droke

Author: Clif Droke

Clif Droke

Clif Droke is a recognized authority on moving averages and internal momentum. He is the editor of the Momentum Strategies Report newsletter, published since 1997. He has also authored numerous books covering the fields of economics and financial market analysis. His latest book is Mastering Moving Averages. For more information visit www.clifdroke.com

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