Good Morning,

Showing signs that its problems are more severe than those of the US dollar, the British pound took a pounding that left it at a seven and a half year low of $1.3915 against the greenback, and at a record low of 125,62 versus the yen. Worries about the state of the financial sector and that of the domestic economy helped drive the currency lower overnight, amid indications that a second bank bailout and the quasi-nationalization of the Royal Bank of Scotland were in the works.

Risk aversion was manifest among investors once again. Guru Jim Rogers urged them to sell any sterling they might have. Apparently, the pound can be broken without Mr. Soros, of late. Investors are leaning towards the few currencies that have trade surpluses acting as a cushion underneath them: the Swiss Franc, Japanese yen, and the Norwegian Kroner are the prime beneficiaries of such a quest.

Crude oil prices slipped to under $33 per barrel, on a combination of another surge in the US dollar, evaporating demand, rising inventories, and the upcoming expiration of the February contract. The US dollar was up once again, this time approaching the 86 mark on the index, on a combination of inauguration-related optimism and the aforementioned woes afflicting the currencies over in the Old World. The euro was quoted at just under $1.30 this morning.

Gold prices traded in a broad channel ahead of the NY open, touching lows near $822 and highs near $858 as uncertain participants tried to gauge near-term direction for the precious metal. The Tuesday session opened on a note of fast-shrinking gains for bullion this morning. Minutes before the start, gold had been up by better than $10, but following the first 10 minutes of trading, the metal was ahead by only $3 at near $845 per ounce. Following that early dip, the metal returned to a $10 gain in only another five minutes.

Economic worries continue to dominate the investment scene, and many a trader will be looking to Mr. Obama for clues to the future, as he takes the helm of the severely listing US ship. A deeply divided and apprehensive America prepared to hand leadership of the nation over to the first-ever African-American President this morning. Will he be better able to unite the country and to lead it on a stable course, following the 42 white men who came before him? Expectations are running high following the Bush administration's worst jobs record since WW II.

More nervousness will surely be on tap for the next several session, as the pivotal previous all-time high level of $845 sees battles to overcome and/or pierce it developing. Resistance remains overhead, and is seen as still strong as the metal gets closer to $890 per ounce. However, any gain achieved on a day when the dollar is also up, has to count as a very good day for bullion. Silver saw a similar situation developing, and as of this writing was higher by but 2 cents, at $11.24 per ounce. Platinum and palladium were not as fortunate, shedding $4 and $1 respectively, and were quoted at $939 and $183 per ounce. News that FIAT will take a 35% ownership stake in moribund Chrysler (for no cash) was offset by Toyota's first decline in annual sales in nearly a decade.

We close this morning with a vision of the future that is not perhaps what one expects to hear these days. The launch of a book titled The Next 100 Years: A Forecast for the 21st Century is creating a stir of late. Its author, George Friedman, is someone whose firm's bulletins the writer has been following for a couple of years now. Suffice it to say, many of the scenarios being tendered in this book seem hardly plausible today. However, try to think back to, oh, perhaps as recent a time as 1980 and recall what the prognostications and expectations about 2010 were then. You get the idea. Bloomberg's James Neuger delves into Friedman's book and finds this futureworld:

The year is 2050: Russia and China have fragmented, leaving Japan and Turkey to bestride the Eurasian landmass and take up arms against the world's lone remaining superpower. The U.S. triumphs in the First Space War, the centerpiece of The Next 100 Years, George Friedman's prankish preview of the bare-knuckled realpolitik that he says will dominate the 21st century.

Friedman, the Austin, Texas-based controversialist who runs the Stratfor Inc. strategic-advisory firm, has little time for the appeal to universal values that Barack Obama is set to make from the steps of the U.S. Capitol during his inauguration today.

The main constants in Friedman's cold-blooded analysis of nation-state behavior are geography and demography, which underpin his against-the-grain forecast that the U.S., the victor of the last century, will remain the world's center of gravity in this one.

The United States -- far from being on the verge of decline -- has actually just begun its ascent, Friedman writes in this geopolitical thriller. Already in 2009, Friedman says, the jihadists behind the shock of Sept. 11, 2001, are a receding threat, their goal of an Islamic empire straddling Europe and Asia shattered by divisions in the Muslim world.

China will be the next challenger to go, torn apart by the inevitable economic slowdown and rekindled tensions between the coastal provinces and the countryside, Friedman predicts. Russia will hang on longer, rebuilding a Soviet bloc-lite by 2015, only to lose the second Cold War in much the same way it lost the first, and more quickly.

America the Dominant

Two facts will drive the century according to this forecast: America's dominance of the world's oceans and its comparatively low population density. Dismissing the Great Man school of history, Friedman pays little attention to the triumphs and blunders of political leaders. He instead argues that each country's grand strategy is deeply embedded in its DNA.

There are some brilliant apercus to be found in these pages. The U.S. tends to first underestimate and then overestimate enemies, we read. Russia is rearming because rich and weak is a bad position for nations to be in. Friedman's page-turning prose only flags in his sci-fi digressions on future technologies, military and civilian alike. Friedman takes delight in war-gaming the high-tech mid- century conflict, starting with a sneak Japanese attack on American space-based command centers on Thanksgiving Day -- an orbital Pearl Harbor. As after the original day of infamy, the wounded giant totters, then rallies and, leveraging its superior industrial base, overwhelms the enemy with modern weaponry.

The United States always overreacts, Friedman tells us.

'Benign Chaos'

Where does this leave Europe? Well, hardly anywhere. Mired in benign chaos, the European Union fades from view, accompanied by its belief in interdependence, shared sovereignty, a rules-based international system and values-driven foreign policies without the military might to back them up. Instead, Germany ends up at war with Poland and Britain, in a World War II redux beyond the darkest imaginings of the present-day reader. Friedman's retort is that few world-changing events -- think of the Great War of 1914-18 or the dissolution of the Soviet bloc starting in 1989 -- were imagined in the years before they struck.

Even less imaginable is how Friedman's new American century ends: with a geopolitical train wreck that calls into question the manifest destiny of the U.S. to reign supreme over its own continent. By 2090, Friedman writes, increasing immigration in response to the population bust of the 2030s leads to majority- Mexican communities in the vast stretches of the American southwest that were wrested from Mexico in 1848.

An ethnically mixed borderland comes into being, contested by the U.S. and the economically ascendant Mexico much as Germany and France sparred for centuries over Alsace and Lorraine. A Mexican political party, a secessionist movement, disloyal National Guard units, the resettling of illegal immigrants and acts of terrorism all figure in the ultimate battle for control of the North American continent.

Who wins? That is a question that will have to wait until the 22nd century, Friedman concludes.

The trade may book its deals early on today, and then proceed to become glued to its various LCD screens, as the feed from Washington slowly takes over the airwaves around the world. A new era begins. We just do not have a handle of its exact tenor. That, is as it has always been.