Exactly How Does This Turn Out?

03/24/11 Pittsburgh, Pennsylvania – “It’s hard to know exactly how this turns out,” said Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, this past Sunday, in answer to a question about the US-French-British-et al. aerial assault on Libya. Oh, really?

The admiral made his statement after US and British ships opened fire and put 114 million-dollar Tomahawk cruise missiles downrange at Libyan targets over the weekend. Another 25 or so US and British Tomahawks have left the launch boxes in the past couple of days.

Meanwhile, over the weekend, French jets bombed the tar out of Libyan armored and troop columns near Benghazi. While a flight of B-2 bombers soared from Missouri, crossed the Atlantic Ocean and Mediterranean Sea and dropped precision weapons on other Libyan targets – according to Aviation Week & Space Technology magazine.

So let me see if I’ve got this straight. The US armed forces, and allies, are waging intercontinental, techno-war against Libya – a desert-dictatorship that is, at root, a failing, North African petro-state with mostly third-rate military capabilities. But according to the top honcho of the JCS, we don’t know how it’s going to turn out?

We don’t know? That’s quite an admission by Adm. Mullen. If nothing else, whatever happened to sounding confident for the TV cameras and saying, “We win, they lose”?

Then again, what else doesn’t Adm. Mullen know? Let’s get down to basics. What’s the alliance? Who’s fighting whom? Who’s with us? Who or what are we targeting? Is this Libyan air show a NATO thing? If so, why does NATO member Turkey oppose it? Why is a core NATO member, Germany, pulling out?

More broadly, what’s the strategy? What’s the operational concept? What’s the order of battle? What are the military goals? When the shooting stops (and it will stop, right?), with whom do we make peace? So maybe we won’t have a signing ceremony on the deck of a battleship, but what’s the theory of victory? Um…by the way, who’s in charge?

Sure, there’s an adrenalin rush from picking up the morning newspaper and seeing front-page photos of bombs bursting, airplanes falling and tanks smoking.

Then again, you could get your heart rate up by going to see the recently released movie Battle: Los Angeles. Wow, what a campy ordnance flick! It’s a Marine Corps recruiting infomercial from start to end. And at least in Battle: Los Angeles, you can set aside your moral qualms. Battle: Los Angeles is a sci-fi bug hunt, in which space aliens have invaded Santa Monica and are, in turn, getting what they asked for. But I digress.

Space aliens aside, it’s not as if Libya’s Generalissimo Gaddafi doesn’t have serious pain coming to him. He’s never paid for his role in the gratuitous 1988 bombing of Pan Am Flight 103. On that point of history, the US should maintain a very long memory – and be open and honest about it when the right time comes along.

In case you can’t tell, Pan Am 103 brings out my inner Roman Legionnaire. I think that Pan Am 103 supports the ancient concept of a purely punitive expedition. Blow up one of our airliners? We’ll pulverize you, out of raw vengeance. Under most circumstances, I’m OK with bombing Gaddafi under the doctrine of payback and specific deterrence. That is, he’ll never blow up another airliner because he’ll be toast.

But something troubles me about the current military display. The air raids are occurring absent anything like a formal US declaration of war against Libya, let alone a mere congressional authorization to employ arms. Indeed, before the Romans destroyed Carthage, they debated the purpose of their effort in their Senate. The outcome? Well, they set a clear policy. “Carthago delenda est” (Carthage must be destroyed.)

Now, however, the US is waging war under a rather novel form of legal reasoning, if not presidential war powers. Shoot first, and notify Congress later. Or are we saying, perhaps, that the legal authority to attack Libya is embodied in the “Marines’ Hymn”? You know, “From the Halls of Montezuma/to the Shores of Tripoli,” and all that. In which case, does Mexico have to worry?

Let’s get past the military fact that it’s raining steel in Libya. Something else troubles me. The US government doesn’t have a 2011 budget for its Department of Defense – and we’re six months into the fiscal year. This is, at root, courtesy of the last Congress, which failed to pass a defense budget in the waning days of 2010.

No defense budget? Last year, there was political capital for Congress to pass “don’t ask, don’t tell” legislation. But for some strange reason, Congress could not pass anything as mundane as a law to fund procurement and operations, let alone to pay the troops.

Not to put too fine a point on it, Congress has authorized no money to fight wars – at least not this one. Thus, right now, the US is shooting missiles, dropping bombs and engaged in its third, simultaneous “hot” war (actually, the fourth, if you include bombing Pakistan), and there’s no budget. Not to be legalistic, but isn’t every fire-breathing Tomahawk missile a violation of the Antideficiency Act?

Let me refine this last point. There’s a recently passed congressional “Continuing Resolution” (CR), valid until April 8 that appropriates funds to the DOD. But the nature of the CR is that it restricts the DOD to fighting this year’s wars on last year’s budgeting structure. I don’t believe there’s a line item for “bombing Libya.”

The whole thing is very strange. And no, I am NOT making any of this up.

At the beginning of this note, I said that I’d come around to the investment side of things, and here we are. What should you do?

Easy. Buy gold and silver. Buy shares in mineral developers with assets in the ground. Buy oil- and energy-related shares, as well as oil service players. See? Easy.

Why buy gold and silver? Because the US government is fighting wars without really knowing what it’s doing (Adm. Mullen, call your office), let alone how it’s paying for the bullets (see above). And this is just a mini-version of all the other things the US government is doing without having the resources to pay for them.

Using the above-noted DOD budget mess as an example, the US is not just spending money it doesn’t have fighting an unauthorized war. No, the US is spending money when Congress has not even passed a real budget. Of course, this is just a small step removed from the usual routine of Congress spending money that’s not there.

The bottom fiscal and monetary line is that the federal budget is out of control. Federal spending is out of control. The federal deficit is out of control. The national debt is out of control. Interest on the national debt is out of control. Neither the president nor Congress is in control. To quote Adm. Mullen, “It’s hard to know exactly how this turns out.”

The endgame is that the dollar is destined for inflation, loss of value and the long-term impoverishment of people who don’t invest around this nation-busting, failed-state-walking issue. Buy gold. Buy silver.

Regards,

Byron King
for The Daily Reckoning

Byron received his Juris Doctor from the University of Pittsburgh School of Law, was a cum laude graduate of Harvard University, served on the staff of the Chief of Naval Operations and as a field historian with the Navy. Our resident energy and oil expert, Byron is the editor of Outstanding Investments and Energy and Scarcity Investor. Byron has made frequent appearances in mainstream media such as The Washington Post, MSN Money, Marketwatch.com, Fox Business News, CNBC's Squawk Box, Larry Kudlow, Glenn Beck and PBS Newshour. He also had a feature article written in the Financial Times, and has appeared on both CNN and Marketplace radio broadcasts. Byron has also been quoted in various international publications such as The Guardian and De Volkskrant, and has been a guest on Canada's CBC television broadcast.

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