Tuesday, September 15, 2015
Me? I thought YOU were driving?
Here I am once again with your weekly dose of boredom, unless you're a geopolitical junkie like me. Then you might find this interesting....scary even. Based on all I've seen, heard, and read, we're on the very edge of a perfect storm, and not a good one.
Over the next few years things are going to happen all around the globe that could change us dramatically. I base this on my world-wide reputation as a preeminent....OK, I couldn't sleep, so it was post this Stephen King-like horror story or eat ice cream.
Our world is now more inter-dependent than ever. What happens in Vegas, or Beijing, or Tehran doesn't stay there anymore. Here's what we could soon be seeing:
1. The Mid East is in mid-collapse....fact. Iraq, Syria, and a few other so called "sovereign nations" *snort* in the region will never be reconstructed. They are fragmented beyond repair. A working alliance is developing between Egypt, Saudi Arabia, Turkey (all predominately Sunni Muslim) as well as....shhhh....Israel. Their goal is to counter, take down even, Shia Muslim Iran. Except Iran soon might have nukes, and may or may not be afraid to use them. *gulp*
When the implosion finally comes, in whatever form it comes, some of us might be giddy happy....until we realize the real world consequences. The global oil supply will be forever changed, and radical Muslims will scurry from there like rats fleeing a flooded sewer.
As Europe gets 70-80% (?) of their energy from Russia and the Mid East combined (more on Russia later), they will be devastated. The US, thanks to its newly energized oil production (fracking), will be somewhat spared....until the Europeans start bidding up the price of the rest of the world's oil. Then it will impact us here, too. We currently think we're swimming in oil world-wide, but if production tanks in the Mid East, that changes big time! (You might think twice about the long-term wisdom of buying that giant gas guzzling truck/SUV.)
2. Europe is screwed. REALLY screwed! In addition to their energy dilemma, the European Union (EU) is in its death throe. The Euro as a monetary unit is not long for this world. It is fatally flawed. A common currency where each Euro zone country is counting on the others collectively to bail them out in a pinch (see Greece), yet has no say in how their errant cousins spend their money, is crazy. If one stumbles, the others can motor along just fine, but if several go over the edge at the same time....YIKES! (Would you give your kid a credit card, and guarantee their debts, with no strings attached?)
The wealthy northern Europeans resent the spendthrift southern Europeans, and if / when their economies hit the fan, it will be taps for the EU. And the Biggest Loser will be Germany, and Germany pulls Europe's strings. Dependent on others for most of their energy, and with 50% of their GNP derived from high-value exports, Germany will take a huge hit. Europe will be "every man for himself", and we've seen how that often turns out.
And do I even have to mention what is likely to happen when the social cost of taking in a million or more Middle Eastern refugees becomes apparent? And since the Europeans have a rather dismal record of assimilating immigrants from other cultures, these new arrivals are likely to become restive and even violent, egged on by the embedded Muslim extremists / terrorists streaming in, too. (But give the Europeans credit....most have their hearts in the right place at least.)
3. China will wonder what hit them, too. China's huge appetite for energy will see them dramatically retrench when the oil market wretches. We tend to think of China as an economic behemoth, and it sorta is, but it's also a house of cards. Their "stock market" is laughable. It is HUGELY overvalued.
Most of their companies (literally) are money losers kept afloat by their Sugar Daddy government, yet have P/E multiples in the stratosphere. The Chinese right now are burning through their vault-full of surplus cash at an alarming rate, trying to buy time until they can fix things. Which are they going to run out of first....time, or cash? The ripples spreading out around the globe due to a stumbling China will be tough to contain.
And there are really two (Mainland) China's: The industrial, gleaming, new, prosperous coastal China, and the still relatively backward interior. The former gets much more generous treatment from their government, while their country cousins get short changed. How long do you think THAT inequality will last when faced with a substantial economic meltdown? Ouch!
4. Russia....they're in denial. They (their leadership at least) still like to think of themselves as a world power, but they aren't. They're broke, and their economy is pretty much a one-trick pony (oil & gas). If the collapse of the Mid East makes Russian oil suddenly more valuable....here's the scary part....they could be even MORE delusional. The drunk bull will once again be stumbling around in the china closet. And if they, for whatever reason, remain economically sickly, remember the old saying...."desperate people do desperate things." Don't take your eye off them!
5. South/Latin America is constantly on the verge of breaking out, but whenever they get close, they shoot themselves in the foot. There is no sign of anything changing there any time soon. Same old same old.
6. Africa is still resource rich....and still (likely forever?) dysfunctional. No change there, either.
7. North America (which includes the USA, for those who are geographically challenged :) will come through in much better shape, though we're not invulnerable. We're both envied and scorned now for our often excessive / bully ways, and we will be even more so if we keep to our "my way or the highway" Tea Party / conservative attitude. I am heartened, though, by the fact that many of our current crop of political candidates, D & R alike, are NOT the same old party hacks that we keep recycling, but genuinely new faces, even if one is Donald Trump's. :)
We are much more energy sufficient than we were just a decade ago, yet if the rest of the world retrenches due to a Mid East in permanent collapse, we'll have foreigners wanting to buy OUR oil at prices that will hit us consumers hard in our wallets. And with the world in a prolonged economic squeeze, we'll have fewer markets for our super-productive businesses to sell to. We simply can't consume internally all we are capable of producing. We'll likely see business closures, rising unemployment, and maybe even social unrest. Then throw in a stagnant middle class, deteriorating race relations, etc....
8. The environment is a changing. We can argue about whether this change is man-made or just nature's natural cycle, but regardless, it's changing. Colder winters, hotter summers, more severe droughts and floods....Mother Nature is pissed! Her PMS may well change world-wide agricultural patterns. Remember, hungry people are dangerous people.
When you put all the jigsaw puzzle pieces together, this is the picture on the box top. If this scenario is correct, or even partially correct, we could be in for a rough ride. Even if we get our house in order, we can still be blindsided by others around the world who are likely to be fighting for their lives. Sometimes it seems like "globalism" is coming full circle to bite us, huh?
And if this scenario proves NOT to be correct, then it means all those think tanks, fancy-pants PhD analysts, and other assorted soothsayers I subscribe to were full of crap, so never mind. ;)