As the humble Aussie dollar soars towards parity with the greenback, and oil nudges even closer to US$100 a barrel, it's becoming increasingly likely that a global financial "tsunami" (of the sort Peter Costello predicted) could yet swing the election. Still four weeks to go, and the warning beacons are already going off.
Iran could well be the key. Max Hastings today has some good analysis of the latest US scare-mongering:
The Iranians have oil, which the world wants to buy. The EU is eager to build a gas pipeline there, to diminish its dependence on Russian energy. Beijing and Moscow show no interest in helping Bush face down the Iranians...At ICH, Michael S. Rozeff spells out the nightmare scenario we now face:
Few strategists dispute either that Iranian revolutionaries are playing a prominent role in frustrating the stabilisation of Iraq, or that Iran is doing its utmost to build nuclear weapons. Doubts focus on what can be done about these things. Europeans will continue to support diplomatic and economic measures adopted by the UN, designed to exhibit the world's dismay at Iran's behaviour. There is chronic scepticism, however, about such initiatives. Next month the UN will debate further sanctions, but neither Russia nor China will support tough action.
President Vladimir Putin last week compared Bush's behaviour towards Iran with that of a madman "running about with a razor blade in his hand". Not many Europeans suppose that it is desirable for Iran to acquire nuclear weapons. Yet most think this almost inevitable, and preferable to the ghastly geopolitical consequences of adopting military action to stop it.
The seven years of the Bush presidency have witnessed a haemorrhage of American moral authority of a kind quite unknown in the 20th century. Even in the darkest days of the cold war, and indeed in the Cuban missile crisis, most people around the world retained a faith in the fundamental benign nature of American purposes. This has been lost in Iraq...
Ahmadinejad and the Revolutionary Guard need US enemies to justify their idiocies at home and mischief-making in Iraq. At every turn the Bush administration obliges them, by seeming to welcome confrontation. The rival governments in Tehran and Washington deserve each other. It is another matter as to whether their peoples, and the world, do so. But relations between Iran and the US are likely to get much worse before either nation changes leadership and gives peace a chance.
The U.S. encourages Israel to bomb the Natanz nuclear facility in Iran. Russia attempts to restrain an Iranian response but fails. Iran responds in any of many ways, such as launching missiles on Israel, firing on shipping in the Straits of Hormuz, mining the Straits of Hormuz, sending troops into Iraq, or allying its military with Hezbollah and attacking Israel from Lebanon.
The U.S., citing Iran’s aggressions (that will be the story), launches a full-scale attack on Iran designed to devastate the country. This attack has actually been planned by the U.S. for years. Syria is unable to maintain neutrality and quickly becomes a battleground between Iran and Israel.
The price of oil by this point has already soared to $200 a barrel. The U.S. begins to use its strategic reserve and to divert Iraqi production. Russia responds by taking steps to prevent its oil production from reaching the U.S. China responds by cutting off its support of the U.S. Treasury market. Venezuela halts oil shipments to the U.S. The first stages of WWIII are economic warfare designed to cripple the U.S. and halt its war-making capacity.
The U.S., unable to finance its deficits and fund its sovereign debt, is forced into raising interest rates drastically in order to borrow. The Fed is forced to print money. An inflationary spiral occurs. Meanwhile the high interest rates and high oil prices, not to mention the shock of a spreading conflict, drive the U.S. economy into severe decline. The U.S. attempts to raise taxes in order to fund itself, further crippling the economy. Gold soars to $1,500–$2,000 an ounce.
The U.S. attempts to bolster its military forces. The draft is reinstated. The severity of the emergency allows Bush and Cheney to assume emergency powers and begin a dictatorship. Elections are postponed.
The U.S. collapses.