Cue Greenspan....

I have maintained that the fall of 2005 would see a few things -

1. A major increase in the cost of crude oil, doubling, perhaps even tripling from May/June of 2005 to May/June of 2006.
2. An United States invasion into Iran. (This adds to the oil instability.)
3. A moderate to severe US economic collapse that would lead to further calls for 'free trade' and globalization. (I.E. - The American Union)

With regards to point #3, I see several things that are extremely troubling -

1. The US dollar has fallen by 45% over the last three years. This has in part been accomplished by the Federal Reserve flooding the market with dollars.
2. Many families are increasingly floating large amounts of debt to maintain their current 'lifestyle'.
3. This has led to the purported 'housing bubble' that has been largely responsible for the economic turnaround of the last few years.
4. Oil costs are eating up much of the economy's cash flow.

Hot on the heels of this series of developments comes the economic bogeyman, Alan Greenspan, with a new word in his vocabulary.

Crash.

The Real Effect
What I see is the makings of a possible economic 'perfect storm'. Oil prices are approaching inflation adjusted records achieved in the late 70's/early 80's and indebted Americans with little playroom in their budgets. Add-in a campaign of war in the middle east and a fiscal policy that is somewhat reminiscent of the "New Deal" and one is left feeling slightly chilled.
I believe that Mr. Greenspan's statements will scare the market into further decline over the next few months.


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