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February 05, 2007

Government Forecasting 3 Disasters
by Martin Weiss

Three just-released government reports are so caustic they're virtually burning my hands.

They represent the joint conclusions of hundreds of experts and thousands of researchers.

They are supported or accepted by both the U.S. Congress and the White House.

Most important, they are forecasting three disasters, with incalculable impacts on your financial security and investment opportunities.

If you want to drill down to the shocking details, you can download your own copies of these reports instantly, and I show you exactly where below. But first read along with me as I connect the dots that most of Washington and Wall Street are apparently missing ... and point to some of the few places where we can expect to find realistic solutions.

Government Report #1
NIC: Iraq Collapse Now Very Possible
(Click here to download the report.
Also see my articles "Winds of Change,"
"Millennial Conflict," "Break Points,"
and "Break Points: An Urgent Update,"
plus Larry's "Iran Erupting" and
"The Cycle of War.")

This first report is on Iraq.

Its author: The National Intelligence Council (NIC), which consolidates the resources of the CIA, the FBI and DEA ... Army Intelligence, Air Intelligence, Marine Intelligence, and Defense Intelligence ... the intelligence services of the Department of Energy, the State Department and the Treasury ... plus six other national intelligence agencies.

Its conclusions: Precisely the same ones we began giving you in our Money and Markets articles five hundred and twelve issues ago:

Worse than civil war. According to the NIC, Iraq is not just a civil war. It's also an insurrection and a criminal free-for-all. Their own words:

"The term 'civil war' accurately describes key elements of the Iraqi conflict, including the hardening of ethno-sectarian identities, a sea change in the character of the violence, ethno-sectarian mobilization, and population displacements."

In addition, "the Intelligence Community judges that the term 'civil war' does not adequately capture the complexity of the conflict in Iraq, which includes extensive Shia-on-Shia violence, al-Qa'ida and Sunni insurgent attacks on Coalition forces, and widespread criminally motivated violence."

Still sinking fast. Unless something changes drastically, "the overall security situation will continue to deteriorate at rates comparable to the latter part of 2006." In other words, very quickly.

Bleak scenarios. Two years ago, the NIC's worst-case scenario was the civil war now engulfing Iraq. Today, it paints three new scenarios:

The NIC's Scenario A. Civil War and Partition: "With a rapid deterioration in the capacity of Iraq's central government to function, security services and other aspects of sovereignty would collapse. Resulting widespread fighting could produce de facto partition, dividing Iraq into three mutually antagonistic parts. Collapse of this magnitude would generate fierce violence for at least several years ..."

The NIC's Scenario B. A Shiite Dictator: "A security implosion could lead Iraq's potentially most powerful group, the Shia, to assert its latent strength." Result: A new, energy-rich, Shiite alliance in staunch defiance of the West -- Iran and Iraq.

The NIC's Scenario C. Chaos and Anarchy: "The emergence of a checkered pattern of local control would present the greatest potential for instability, mixing extreme ethno-sectarian violence with debilitating intra-group clashes."

The NIC does not say which scenario is more likely. My own forecast, which I issued months ago, leans mostly toward Scenario A -- civil war and partition, followed by a wider Middle East and Persian Gulf war.

But anything is possible, and nothing is certain, except one aspect: Regardless of the policy options now being debated in Congress and the White House, it's going to continue to cost the United States a lot of money.

That's why the U.S. is spending $99.6 billion in additional war outlays for the remainder of the 2007 budget year.

That's why the U.S. is shelling out another $145.2 billion for supplemental war spending for the 2008 budget year.

And that's why the Pentagon is the big winner in President Bush's proposed budget, which the White House is releasing later this morning: $481.4 billion for the Pentagon's core budget plus the additional $245 billion in war costs over the next year and a half.

All told, taking into account all of the president's supplemental war budgets, this places the projected costs of the conflicts in Iraq and Afghanistan at close to $700 billion by the end of 2008.

Wall Street can no longer sit back and watch events of this magnitude unfold without expecting an impact on already-dire U.S. government finances, already-rising-again oil prices and an already-surging gold market.

Government Report #2
IPCC: Global Warming Is 90% Certain
And Substantially Unstoppable
(Click here to download the report and here
for my article "Unstoppable Force.")

This second report, just released by the Intergovernmental Panel on Climate Change (IPCC), will go down in history as the blockbuster of the third millennium.

It was produced by 620 experts from 40 countries.

It was approved by 300 delegates from 113 governments, including the U.S.

Even the White House, which had previously charted a dissenting path, announced that it's on board with the report's frightening conclusions. Here they are:

90% certain. The IPCC's overall projections have a probability of 90%. And there's a better than 10% chance that they could be greatly understating the danger that things could suddenly pick up speed and careen out of control.

At least 100 more years of global warming. Don't tell the victims of Katrina, Rita or the rip-roaring tornadoes that just smashed four counties not far from here in Central Florida ... but the IPCC concludes that, regardless of what's done to avert it, we face another century of climbing temperatures, rising seas and shifting weather patterns.

Greenhouse gases going wild. The inescapable conclusions now accepted by everyone, including President Bush's Energy Secretary Samuel Bodman, is that greenhouse gases are mostly caused by human activity ... their levels are now the worst in thousands of years ... and their rise is accelerating at a pace that's driving them off the charts.

Carbon dioxide in the atmosphere, the most important greenhouse gas produced by mankind, surged from 280 parts per million (ppm) in the 1700s to 379 ppm in 2005. That's higher than at any time in the last 650,000 years. The smoking-gun culprit: The burning of fossil fuels like coal and oil.

The surge in methane gas is even more dramatic: From 715 parts per billion (ppb) in the 1700s to 1,774 ppb in 2005. The primary co-conspirators: Fossil fuels and agriculture.

Since the dawn of civilization over 10,000 years ago, these levels were relatively stable. Now, their curves are hyperbolic. They're trapping the heat of sunlight. And they're warming the planet. Period.

This conclusion is undisputed and final. In the words of the IPCC: "Warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean seal level."

Its consequences are also unequivocal:

• Droughts in tropical regions, like those that have devastated sub-Saharan Africa and parts of Brazil.

• Heavy rainfall and flooding in other regions, like those we've seen in Europe.

• Massive heat waves, like the ones that have swept across the U.S.

• Much stronger storms, like Katrina or the tornadoes that just struck Florida.

To most victims of these disasters, the link to global warming was always suspected but never proven. Now it is.

It's getting worse faster: According to the IPCC report, "Continued greenhouse gas emissions at or above current rates would cause further warming and induce many changes in the global climate system during the 21st century that would very likely be larger than those observed during the 20th century."

It's going to last a lot longer than previously believed: Due to a series of processes and feedback loops that have already been set into motion, man-made global warming and the rise of sea levels will continue for centuries even if greenhouse gases could be stabilized immediately.

The IPCC has not yet proposed solutions. That's coming later this year. But again, one thing is abundantly obvious: It's going to cost money, more money than hardly anyone could fathom today.

Think about it: Just the prevention and adaptation are going to cost countless times more than the worst oil spill, the worst nuclear meltdown, or the worst natural disaster of all time.

And even after spending those enormous sums, the damage to life, property and commerce from global warming is likely to cost unimaginably more than the prevention and adaptation.

That's a lot -- certainly far more than the total, ultimate cost of the wars in Afghanistan, Iraq and beyond.

But alas, it's money that, by every measure, is going to be very hard to squeeze out of already-stressed government finances ...

Government Report #3
GAO: Fiscal Disaster on the Horizon
(Click here to download the report.
Also see my articles "3 Dire Warnings
Fall on Deaf Ears," "Enslaved Generation,"
"Vivid Voices" and "The Great Budget Hoax.")

When the economy grows and corporate profits improve, the taxman always rakes in his share of the proceeds. So the U.S. Treasury naturally collects more money. And the U.S. budget deficit naturally recedes from the consciousness of most investors.

That's what has happened the last couple of years. And that's probably why, among all the otherwise-smart politicians jumping into the 2008 presidential race, none are talking about the deficit, let alone loudly.

But that doesn't mean the deficit has gone away. Quite to the contrary, this just-released report from the U.S. General Accounting Office (GAO) implies it's actually getting a lot worse.

If there is any unimpeachable source in government today, it's the GAO. Their leaders and staff are not running for political office. They are bipartisan. And they have no ax to grind. Their conclusions:

Huge deficits despite good times. "Despite an increase in revenues in fiscal year 2006 of about $255 billion, the federal government reported that its costs exceeded its revenues by $450 billion (i.e., net operating cost). Its cash outlays exceeded its cash receipts by $248 billion (i.e., unified budget deficit)."

Deep in debt despite big assets. "As of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion."

Future obligations that are out of control. "The present value of the federal government's major reported long-term 'fiscal exposures' -- liabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare) -- rose from $20 trillion to about $50 trillion in the last 6 years."

Virtually certain fiscal Armageddon. "The federal government faces large and growing structural deficits in the future due primarily to known demographic trends and rising health care costs. These structural deficits -- which are virtually certain given the design of our current programs and policies -- will mean escalating and ultimately unsustainable federal deficits and debt levels."

American standard of living and national security in jeopardy. "Based on various measures -- and using reasonable assumptions -- the federal government's current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security."

Now Do You See How
The Dots Are Connected?

It all ties back to money:

Dot #1. The government's finances are already sinking, pulled down by long-term, structural dead weights like Social Security, Medicare and surging health care costs.

Dot #2. The added cost burden of global war, and soon, global warming, threaten to deliver the coup de grace to government finances.

Dot #3. The most viable solutions seem to lie with for-profit corporations.

Dot #4. Among the biggest winners will be

• Producers of fossil fuel alternatives such as ethanol. (See my report "Ethanol Explosion! How to Profit.")

• Defense contractors and homeland security providers. (See John Burke's "The Rising Tide of War: Five Defense Stocks Set to Soar.")

• And most urgently, small, leading-edge uranium companies that have the best chance of helping the world's fastest growing economies replace their fossil fuels. (See Sean's latest blockbuster report on six uranium wonders.)

Therein lies the greatest hope that none of the experts have adequately factored into their forecasts: Enough investors with enough financial clout ... waking up ... smelling the coffee ... and shifting vast sums of money to the private enterprise companies that can deliver practical solutions.

Join these investors early. Make a not-so-small fortune for yourself, your family and your heirs. Then pray that the money from investors like you will be enough to save us from the three disasters that governments are forecasting.

Good luck and God bless!

Martin

Martin Weiss, Ph.D.
Editor, Safe Money Report
support@martinweiss.com

For more information and archived issues, visit http://www.moneyandmarkets.com.

About MONEY AND MARKETS

MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Jennifer Moran, John Burke, Beth Cain, Red Morgan, Ekaterina Evseeva, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.

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