FYIJOHANNESBURG -- The United States is preparing for another war in the Middle East, with Washington insiders convinced that President George W Bush will launch a full-scale attack on Iraq in the near future. Apart from its widely publicised troop build-up, US officials are also deep into a charm offensive to bring the rest of the world, including South Africa, onto its side. The impact is already being felt in local investment markets and is one of the major reasons for the sharp rebound in equity prices and the currency.
There has been a quantum shift in US Foreign Policy in the wake of the September 11 attack. Bush and his advisers are treating what's dubbed Islamic Fascism as a threat to equal German Nazism. Among the tactics to prepare the American people and the world for what's ahead is Bush's reference to the Axis of Evil (Iraq, Iran, North Korea), linking them with the World War Two enemy Axis forces (Germany, Japan, Italy). His speeches call for a similar approach to that adopted with Adolf Hitler such as on September 20 when he stated: "they follow in the path of fascism and Nazism and totalitarianism……and they will follow that path all the way to where it ends." Thinking in Washington is that the only sure protection against more terrorist attacks is to eliminate the likes of Osama bin Laden and Saddam Hussein through military action; and by introducing America's liberal democratic political system into the Middle East.
While most investors globally have been preoccupied with concerns about corporate governance, interest rates and accounting standards, some have taken note of a determined President who fully intends carrying out his promises. Implications of the next dramatic chapter in world history are becoming apparent in the behaviour of investment markets. Most obvious has been sustained strength in the gold price which has risen steadily from $271 an ounce on the day before the September 11 atrocity to a solid $310 and trending towards further gains. Written off as a relic just a year ago, gold is once more proving to be the ultimate hedge against political uncertainty.
It is not only on the bullion market where political decisions are now leading economic ones. Platinum, SA's biggest foreign currency earner ahead of gold, is also benefiting from the US foreign policy switch which will set the global agenda for years to come. Announcements of massive expansion of production weighed heavily on the platinum price last year. Between April and November, it dropped from $630 an ounce to $420. Against all apparent logic, though, the price has bounded back strongly gaining over $100 an ounce in the last six months. It, too, is trending higher.
The smart money is betting this is a direct result of a US Government determined to accelerate the proposed introduction of platinum-rich fuel cells powered by hydrogen. These fuel cells are proving to be the most viable substitute for oil-reliant internal combustion engines which power most motor vehicles today. Post-September 11 Washington talks of an urgent need to move away from oil to fuel cells. Primarily because many of the world's oil reserves are controlled by countries antagonistic towards the country's largest consumer of the product – which means by its sheer economic growth and success, America is funding those it regards as its enemies.
As SA has 70% of the world's platinum reserves, one can hardly exaggerate this country's strategic significance in the US's chosen path of moving away from its reliance on oil. But first, the country needs to be in touch with international realities. There is strong evidence of recent behind-the-scenes discussions between the countries. Most obvious is the manner in which previously out-of-step SA political leadership has moved back into the global mainstream.
The amazing turnaround in SA President Thabo Mbeki's stance on HIV/Aids is a case in point. Similarly, SA Reserve Bank Governor Tito Mboweni's back-flip on his approach to the value of the rand. During last year's currency crisis, Mboweni flew in the face of investor demands for monetary integrity by telling Time magazine the drop in the value of the rand was irrelevant. Suddenly Mboweni is now a hawk, warning that he intends raising interest rates again to counter-balance the impact of the lower rand. The currency has reaped the benefits of leadership's reversion to the global mean – rising from December's worst point of R13.50 to the dollar to the current level just over R10. Further improvements are widely forecast, an inconceivable prospect just five months ago.
Posted: 2002/05/09 Thu 13:00 ZE2 | © Miningweb 1997-2002