...The paradigm we've called Globalism is falling apart now. Followers of Tom Friedman (The Earth Is Flat) [см. Мои впечатления о книге "Мир - плоский" Томаса Л. Фридмана] tried to put across the story that Globalism would become a permanent feature of the human condition, an idea I regarded all along as utter nonsense...
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Rather, Globalism was a set of transient economic relations characterized by particular conditions of a certain era (the post-WW2 cheap energy era), and that when history moved on, Globalism would dissolve. As is the case now, first in the unraveling of global financial arrangements - a terrifying matrix of irresolvable mutual obligations that are destined to be repudiated in an ugly way. Everybody owes too much money to everybody else. A worldwide game of financial musical chairs is currently eliminating various nation-players too weak to plant their asses in the diminishing chair-space. Iceland dropped out first, then Greece, then Ireland, and so it goes. Entering 2011, the trouble is that the world is out of runt countries to shove to the sidelines. There are Portugal and Belgium to go, and from these on all you've got are nations too big to fail and too broke to keep going, the most conspicuous being Spain.
The Euro took center stage in the global financial fiasco in 2010...It can only be resolved two ways: by 1.) countries defaulting, dropping out of the Euro monetary system, returning to a currency of their own and activities that reality will admit; and 2.) Germany, France, and Holland taking the others in like poor relatives and paying their living expenses. I really don't see Number 2 working out. The voters in the bigger three economies will revolt. Of course, the Number 1 route implies the destruction of a whole bunch of European banks, perhaps all of them, and their shareholders positions, and big trouble for the wealthier Euro member countries - ultimately leading to the same place: a lower standard of living, even in Germany, for all its frugality and efficiency.
On paper, the UK is epically insolvent... It just sinks. Living standards crater, people freeze to death and go hungry, and the interesting politics commence in all their multicultural splendor.
...Global banking operations are hopelessly intertwined and hopelessly damaged now, and any problem on the Euro bank scene could easily be the tipping point for a global retreat by all countries to defend their own barricades of money, in whatever form money shakes out as, not to mention whatever's left of real productive activity, meaning the end of free trade as we've known it. This might temporarily favor the US dollar as a refuge for the desperate, but the holistic equation of money factored into trade in vital resources like oil, metals, and grains suggests, once again, just a different route to reduced living standards anyway you slice it....
...I'm still not among those who view China as the onrushing new hegemonic world power. Their banks are more reckless than the western banks because they really don't have to account to anyone for lending (or getting paid back). The government IS the banks. Some jaboney in Guangzhou wants to start a company that manufactures licorice dildos and borrows sixty million yuan through a guy he knows at the regional office of the PBOC (for a piece of the action). The business doesn't work out, say, because the Australian wheat harvest failed and the first guy couldn't get enough wheat paste to make the darn licorice. Oh, and that sixty million yuan on the books? The dog ate the books (then we had the dog for lunch). Meanwhile, that sixty million is circulating, driving up prices. It doesn't sound all that different from the western banks, but they don't even have casual watchdogs in their government-run news media, let alone an FDIC.
The result for the moment in China is pretty serious price inflation. Officials are jacking up some wages more than 25 percent at a crack. Their building bubble (whole new empty cities!) makes the state of Arizona look like the doll house section of Toys R Us. The massive lending failure it represents has not yet thundered through the Chinese banking system, such as it is, and may never in the western sense of a true clearing (though you could argue that the clearing process is a world-wide anachronism). But it will be expressed in other ways: possibly hyperinflation, crashing living standards (all roads lead there now), and ultimately political trouble in a nation with an unelected government that can really only change via popular uprising of some kind or another.
Among the consequences of all this mischief would be to the sort of interbank lending that makes letters-of-credit possible (promises to transfer large sums of money for large shipments of goods), and without letters of credit global trade withers. The last time this happened, in 2008, the Baltic Dry Index, which measures shipping tonnage, slipped down off the charts. When this occurs, the resource countries can't move any of their stuff. Australia, for instance, which I visited recently, jokes to itself about being "China's mining operation." Without letters of credit they won't move any of their coal and copper - or wheat (and ten years of drought plus one season of Biblical flooding has put the schnitz on their grain exports to principal clients, the Middle East and China) - all of which adds up to trouble Down Under. In the bigger picture nothing moves anywhere, not plastic salad shooters from China to the Altoona WalMart or buckwheat from Russia to Senegal or even oil from Abu Dhabi to Westville, New Jersey. People go hungry and get cold.
...Maybe nations will make "special" arrangements with each other for this or that commodity outside the banking system but that's desperation-level trade, not something that will lead to more cell phone customers and burgeoning middle classes. In fact, I'd call 2011 as the turning point in the global growth of the middle class. We've maxed out, passed the high point. The entry gates are closing and the eviction squads are prepping for action. The cracks in the floor are widening and lots more people will fall through while the ladders for climbing up will be withdrawn over the parapets. There just isn't enough stuff left in the world, even while the movement of remaining stuff gets stuck in political bottlenecks.
One place I'd look for trouble on this is India. They have no energy resources of their own...They may have to shut down a lot of call centers...As India's prospects dim in 2011, look for political animus to focus on their perennial adversary next door, Pakistan. In its fury at losing economic momentum, India might turn the next "insult" from Pakistan into a real smackdown. Pakistan is renowned for having the world's most unstable nuclear arsenal...
I don't know what the hell Japan is going to do in 2011 (and I doubt anybody else does). It has no energy resources either, and if global banking seizes up, well.... It has stoically gone broke by slow degrees for twenty years. It may opt out of modernity altogether - it tried to before once and got suckered back in. Letting go is not the worst outcome...
I've heard people say that North Korea is China's stalking horse in some kind of world domination scenario out of the James Bond script locker. That doesn't really add up to me. North Korea is like a nineteen-year-old autistic nephew jacked up on vodka...You wouldn't give such a creature the run of the neighborhood, would you? Of course not. You'd whack it in the head with a shovel, drag it down the coal chute, and starve it to death. My forecast for 2011 includes such a schooling by China to that reckless rogue state. South Korea becomes a vassal of China's eventually, but not in 2011. They just gaze at the world scene in wonder and nausea and try to puzzle out what happened to that global economy they depended on.
The Middle East
This sorry-ass corner of the world...has the most potential for blowing up than any other region except Korea. One way or another, they're all on the downside of oil production, even poor beat-up Iraq, with its El Dorado of presumed reserves. They're all wildly overpopulated, given their unfortunate geography, scarce water resources, and blast furnace climates. They're all chronically enraged over some sectarian hermeneutic or old tribal grudge, or swindle in the souk.
And then there's Israel, settlement of my people since 1945 (traditionally, for millennia), but a very troubled polity in which a cult of religious fanatics every bit as extreme as their counterparts in surrounding nations are taking over by sheer population explosion. This suggests something less than a happy ending. The inversions of history can be very cruel. A people of great learning and philosophical liberalism comes to shelter there after an earthshaking genocide, and then commits suicide in a fugue of ideological nuttery. I don't have a religious bone in my body and I pray for Israel's survival under the circumstances. Or maybe the dwindling sane among them can come to Nebraska now. I'm not joking. I know it's not the exact spot on the planet assigned by Yahweh, but it is reasonably buffered against Israel's modern political enemies and increasingly available from a real estate point-of-view as the descendents of the original sodbusters pack up and leave to become film-makers in LA.
Which of what numerous booby traps and flashpoints might blow in the Middle East in 2011? An obvious one is Hezbollah in Lebanon, next door to Israel. They've been collecting Iranian rockets by the truck-load since their last active jihad against Israel in 2006. That's a lot of rockets in a lot of years. Their fingers might be getting itchy. That leads to some questions about Iran itself but also some strange corollary politics of the region, namely the curious mood of Shia Islam where that sect is concentrated on the rim of the Arabian Peninsula along the Persian Gulf and down into Yemen, comprising nearly half the population of that country. Consider that King Abdullah of Saudi Arabia is going on 87 years old. Sure, he has access to pretty good medical care, but he's been sick and immortality just isn't in the cards. His official successor Crown Prince Sultan is pushing 83. What I'm driving at is the possibility of turmoil in Saudi Arabia aggravated by Shia provocations emanating from Yemen against the Wahhabist-inflected Al Saud dynasty. Anyway you look at it there is going to be a fight for control of the Arabian Peninsula and its oil riches, and the family that has been in charge since the oil first began to flow in the 20th century could easily get kicked out. It might not get replaced by anything nearly as stable, or as friendly to western interests. It might not get replaced at all. The region could remain fragmented indefinitely, and that would not bode well for the oil trade. If there is a breakdown in order in Arabia, a lot of hardware could get smashed up in the process, too. Oil terminals, pipelines, drilling rigs.
...Bottom line for the Middle East: all kinds of world-inflaming mischief possible there in 2011.
Over 2010, the anxiety over Iran's nuclear ambitions was allayed somewhat by the appearance of the Stuxnet computer worm, a piece of "malware" allegedly of Israeli origin that went in and gummed up the computers at Iran's Bushehr nuclear facility before it even officially opened for business. It's not altogether great news because it suggests the opening round of world-wide computer hacking wars, which could shut down whole societies and economies in the years ahead - a subject that will no doubt preoccupy the blogosphere until the moment it is brought down by a computer worm. But, at least, Iran's nuclear program might be neutralized - and kept gummed up through the foreseeable future...
...In 2011 everything just gets harder for the masses of Americans not on the payrolls of banks or hedge funds. The middle class is a state-of-being that recedes deeper into the mists of history while resentment builds ominously. Something could convert it into anger in a flash - I still think the announcement of the annual banker bonuses could bring it out (but I thought that last year, too) - or maybe it will just keep simmering. We'll get an idea by summertime.
In the absence of productive activity we have Federal Reserve money injected everywhere in the economy like botox in a Real Housewife of Beverly Hills, and to about as much effect. QE-1 didn't do anything because existing notional wealth disappeared at a much greater rate than computer bits the Fed could hope to replace it with. (Money is loaned into existence and defaulted out of existence.) Officially sanctioned (by the FASB) accounting tricks that permit the concealment or suppression of real asset prices, along with a complete failure of regulation and law enforcement in lending procedures allowed the nation to just barely stay open for business through 2010. QE-2 is slated to run in monthly installments of US bond purchases (through "primary dealer" banks, at a premium) for the first half of the year. But housing prices continue to fall, meaning the collateral behind the "toxic" securities that the Fed stuffed its vaults with keeps losing value, meaning the Fed is functionally bankrupt, meaning actually that its member banks are toast - because the Fed is not an actual bank itself but a consortium. How long can an institution pretend it exists?
We can look forward to an entire year of trouble with foreclosures and everything they entail legally, from robo-signing lawsuits to title quarrels, even as defaults mount to a climax. The courts are losing legitimacy like everything else in America. In Florida, according to Matt Taibbi, there isn't even anything resembling perfunctory legal protocol, as it is known in societies where people eat with forks and spoons. In 2011 we'll see the introduction of new instruments in the foreclosure courts: firearms. It will be a bad sign.
Sooner or later all this dishonesty will terminate in collapsing living standards, loss of public services, growing civil disorder, and political crisis. You can get there via deflation (no money) or via inflation (plenty of worthless money) but the destination is the same. I don't see how America fails to begin arriving at that destination before Halloween 2011. Europe may get there by springtime, anyway, dragging the rest of the developed world into a vortex.
The reality of Peak Oil glowers in the background all the time. These epic disturbances in money and banking are expressions of it, but they will also feed back into the oil industry imposing a generalized shortage of capital that will make the decline of oil production ever worse - since new fields will not go into production and exploration will stop - and will also impede the movement of inventory around the world. These dynamics will feed back into economies and hurt every kind of business, probably destroying demand for oil which will lead to further shortages of capital in the industry and lead to even lower oil supplies. Finally, economies may be so devastated that oil could sink to something like $$$25-a-barrel - the catch being that no one will have any money to pay for it. More likely through 2011, we'll see rising prices joined by regional scarcities. The US is a prime candidate for scarcities since we import more than two thirds of our oil and a lot of that comes from countries that have an ax to grind with us. The aforementioned potential for disarray in the Middle East would only make matters much worse.
The fate of the stock market is actually trivial in the context of constricted energy supplies and chaotic behavior in currencies. Anyway, the stock market is the primary object of the Fed's pumping because in the past its symbolic value has been crucial to the project of self-deception, of presenting to ourselves the appearance of an economy that is okay - because, in a therapeutic culture, feeling okay about something is the same as being okay. Just don't lose sight of the fact that a pumped and gamed stock market has no relation to economic well-being. It may go up forever now, and if so then it will just be another thing that needs to be swept away in the re-set to a reality-based economic system.
As usual, though - annually for several years, in fact - my target number for the DJIA is 4000, which coincidentally may be exactly where gold is going, too. In a true correction process, historically, the stock market's indexed value meets the equivalent value of an ounce of gold. Gold floats up on sheer uncertainty as much as fear of inflation. While it is certainly true that you can't eat gold or heat your house with it, it's not likely to lose its meaning as an ultimate repository of wealth. Humans will continue to regard it as an alternative kind of money, maybe more real than paper money. There isn't much of it in the world to begin with and the newer deposits get lower in grade every year.
My personal belief is that things could get desperate enough in the USA that we begin to circulate silver coins again to pay for stuff. That's the World Made By Hand outcome anyway, though it is admittedly a "made-up" story, a novel set in the not-distant future. Part of the reason silver (and some gold) circulates in that fictional world is because modern industry as we know it has ceased to function, so silver is not being gobbled up by the electronics-makers and a thousand other manufacturing activities. I don't see that happening as soon as 2011, but owning silver in the form of pre-1965 coins is a good idea (if you can get them, which is increasingly difficult as the recognition of our predicament grows), or any other form of bullion you can get your mitts on...
...Everybody is worried now about the fate of states, counties, and municipalities. Just about all of them are broke one way or another. A state and muni bond bail-out would only send interest rates to the moon, meaning the absolute end to lending and servicing of existing debt and, well, really all business as usual. I don't think it can happen. It will be interesting to see what does happen to states and localities if left to dangle slowly slowly in the wind. If they can be induced into some kind of real bankruptcies they'll get rid of a lot of dead weight - which will, very unfortunately, also mean lost jobs, incomes, and homes, since so many people are on a government payroll of one kind or another - but how else do you get out from under unendurable promises to pay for people to play golf?
This would be a scenario not unlike the collapse of the Soviet system, in which virtually everybody got fired at once. We may not survive it as well as they did - after all, the collapse of the Soviet Union was historically extraordinary in the sense that it generated almost no bloodshed. Imagine that! (Read your Dmitry Orlov.) Americans are too undisciplined, too heavily armed, and too deeply programmed in melodramatic vengeance-seeking to pull something like that off. We'll be all over each other like cheap suits. That might be the point where you have to send the army in, and if a president won't do it because the constitution frowns upon it, the army might send itself into the White House in the form of a coup d'état. It's not something I'd like to see but let's face it: shit happens. This republic has had a long run compared with all the others that have ever existed and nothing lasts forever, even if your flag lapel pin came from Tiffany and was blessed by the restless ghost of Abe Lincoln.
Good luck in 2011 everybody! And keep your hats on!
http://kunstler.com/blog/2011/01/forecast-2011---gird-your-loins-for-lower-living-standards.html
Очень краткий перевод: прогноза на 2011 год. Глобализация подходит к концу. Последователи Тома Фридмана, см. Мои впечатления о книге "Мир - плоский" Томаса Л. Фридмана, не правы, это был лишь краткий эпизод в истории. Все должны всем слишком много денег. Еврозона дезынтегрируется. Особенно уязвима Великобритания. Кюнстлер не видит в Китае новой сверхдержавы. Он считает их банковскую систему очень уязвимой. Свободной торговле больше не будет из-за политики протекционизма. На Ближнем Востоке может начаться война. Stuxnet может означать начала эры кибервойн. Peak Oil приведёт к резкому падении цены на нефть до примерно 25 долларов за баррель. В 2011 Индекс Доу Джонс сравняется со стоимостью унции золота и будет равняться 4000. Муниципалитеты в США - банкроты. Для США Кёстнер рисует похожую картина распада, как я рисует Дмитрий Орлов, сравнивая с распадом СССР.
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