Carolyn G (16 Nov 2010)
"Where's that "Tipping Point"?"

Where's that "Tipping Point"?
by George Ure

I don't know how many times I'm going to have to say this, but I will try once more with the hope that it will sink in:  A 'tipping point' is not necessarily a single "event" as it is a massive change in how things work which often is not apparent instantly.


Did the 'tipping point' begin on Sunday morning? Yes.  Not only did we have lots of release language surrounding the release of Aung San Suu Kyi of Burma/Myanmar, but there was the release of  Paul & Rachel Chandler who had been held by Somali pirates for 388 days.


Then - almost exactly on schedule - time-wise - we've had a big outburst of earthquakes in the area south of Yemen and northeast of Djibouti.  And no, we're not talking 2's and 3's.  This is an area which hasn't been seismically active and in the past 30-hours it has suddenly popped off - not with one or two - but with 40 quakes on the USGS site.


Meantime, in Indonesia, the Child of Krakatau (Krakatoa) has been active every five minutes


As I pointed out for Peoplenomics readers on Sunday, there very well could be a once-in-a-lifetime geological event building and here's why:  Back in 2009, there were reports of a great crack in the earth that had opened up in Somalia south of the Dabbahu volcano.  (see triangle below)


Now, let's see what happens when you draw a line from Dabbahu volcano, through the earthquake swarm in the Gulf of Aden/Djibouti/ Off Yemen quake area.  Where does it point?


In the direction of the Indonesia quakes at Merapi and possibly soon Krakatau.


Then there's the matter of  "What tipped, and how soon will it be apparent in economics?"  Good question, since the tipping period is supposed to be primarily economic in nature, although it's possible it could be otherwise. 


The word "failure" is being associated with the G20 talks this weekend, which means global markets are upset this morning.  Whether it will just pass, or whether it will escalate remains to be seen.


Commodities have tumbled the most in 18-months as reports that China will raise its interest rates in order to combat inflation, and that in turn would ripple into reduced purchases and that in turn leads to lower prices.


In Europe, Ireland is in the midst of a financial implosion so severe that young people are fleeing the country to avoid being caught in the failing economy.  The Dow Jones news service reported this morning that the ECB is standing ready with its $750 billion bailout facility if Ireland needs it, but as was the case of the Icelandic meltdown in 2009-2010, there's nothing simple about such offers.


While the Euro-lenders are waving flags at Ireland, the Portuguese foreign minister says that his country might leave the Eurozone over austerity demands being placed on his country.


Near as I can figure, the failed G20 was like turning on the blender in global economics.  As the EU faces troubles and as China thinks about slowing, there's been a big surge in the purchasing power of the US dollar.  In fact, the Financial Times notes that the "Dollar rises to six-week high".


What that in turn could lead to would be the Dow tumbling to six-week lows, specifically because the US Dow has been a kind of 'inverse dollar" play.  In other words, as the dollar has gone down, more of them would be needed to 'buy the Dow" and this has run up markets.


With the dollar quickly gaining strength, that could put the Dow quickly back down to six-week lows, which by my reckoning might mean a quick visit to the 10,682 level, the intraday low October 4th.  Lower if the dollar continues to strengthen.


Very short term, futures are up this morning, perhaps on flight to safety and off in the background, we see there are reports starting to surface that China's banks are stopping real estate loans in order to dampen, or prevent, a Western style housing bubble.


To be sure, none of this looks like a 'life changer, yet.  In fact, I've been getting a fair number of emails like this one:


The only thing tipping over today is your credibility and Cliff's. This is funny though since there isn't a sane person that reads your blog that wants you to be right. We all hope you are wrong. Have you thought about what you will do if you are? This would wipe out a lot of your reputation and trash the web bot project.

I've said it before but apparently I need to say it again:  A tipping point is not a single event.   I have outlined a lot of possibilities but I've tried to say repeatedly not a single event.  


If you remember the July 2001 tipping point, it came before the 9/11 attack.  July was when - we would later learn - the last decisions about the 9/11 attack were reportedly made while AQ was partying in Las Vegas.