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While the U.S. has been on a credit funded spending spree for 17 years, the countries known as the BRIC’s (Brazil, Russia, India and China) have been saving up for a rainy day. With more than $3 Trillion in government reserves, they could potentially come to the rescue of the overextended developed world. But will they?

As the lessons of the Great Depression have taught us, the greatest threat to come is that of deflation. If the spector of a worldwide fall in prices materializes, the BRIC’s may have no choice but to save themselves, before they deploy their reserves in the West.

From Asia to Latin America, exports are slowing and should continue to do so as the global appetite shrinks. This is spawning fears that major producers like China and India — which vastly expanded production capacity in recent years — will have to dump products on world markets to keep factories running and stave off unemployment, pressing prices lower.

Faced with high unemployment and potential civil unrest, I am guessing that the BRIC’s will spend their money at home rather than buying US Treasury Bills.

As Roger MacNamee points out, the deployment of the 3rd Infantry inside the U.S. on active duty seems to violate one of the founding laws of the Republic–Posse Comititus Act.

“The PCA generally prohibits U.S. military personnel from interdicting vehicles, vessels and aircraft; conducting surveillance, searches, pursuit and seizures; or making arrests on behalf of civilian law enforcement authorities. Prohibiting direct military involvement in law enforcement is in keeping with long-standing U.S. law and policy limiting the military’s role in domestic affairs.

This law which is one of our oldest laws, stemming from the boot of English enforcement of their colonial powers before the revolution. But in the panic of post 9/11, Congress passed laws that overrode the PCA.

Recently, Congress passed a controversial bill which grants the President the right to commandeer Federal or even state National Guard Troops and use them inside the United States. This bill, entitled the John Warner Defense Appropriation Act for Fiscal Year 2007 (H.R. 5122.ENR), contains a provision, (Section 1076) which allows the President to:

“…employ the armed forces, including the National Guard in Federal service, to…

1. restore public order and enforce the laws of the United States when, as a result of a natural disaster, epidemic, or other serious public health emergency, terrorist attack or incident, or other condition in any State or possession of the United States…, where the President determines that,…domestic violence has occurred to such an extent that the constituted authorities of the State or possession are incapable of maintaining public order;
2. suppress, in a State, any insurrection, domestic violence, unlawful combination, or conspiracy..

Would some MSM journalist have the balls to ask the Pentagon if they are deploying the 3rd Infantry under H.R. 5122.ENR?

Some of us have smiled when our correspondents talked about the possibility of martial law and the election being cancelled. “Oh those paranoids”, I thought. Then a friend sent me this little dispatch from the Army Times.

The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys.

Now they’re training for the same mission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.

The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.

“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”

The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.

I’m still not buying the martial law idea, but if banks start failing and Wall Street barons flee the country on their private jets, there might be some pretty angry mobs in the streets. Somehow the “non-lethal weapons package” does not seem designed for assisting in natural disasters.

The lead in Merrill Lynch’s Friday evening research report is that Inflation is going to be the surprise issue of 2008. They have three reasons. Commodity and money supply inflation is a global issue. Developing nations will export their local inflation to the US by allowing their currencies to appreciate dramatically. The effect on the developing world could be quite chaotic.

The current global expansion will come to an end when emerging market central banks decide to deal with this threat (of inflation) more aggressively. Watch out for aggressive policy tightening, civil unrest and capacity constraints. Capacity constraints could take the form of power blackouts, physical shortages, or more frequent interruption of production as a result of seemingly random events such as extreme weather.

As the New York Times reports this morning, this is not some dystopian future scenario.

Food riots have erupted in recent months in Guinea, Mauritania, Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-exporting nations over the last two days — meant to ensure scarce supplies will meet domestic needs — drove prices on the world market even higher this week.