by James Howard Kunstler, Daily Reckoning
Here are my financial forecast particulars for 2015:
- Early in 2015 the ECB proposes a lame QE program and is laughed out of the room. European markets tank.
- Greek elections in January produce a government that stands up to the EU and ECB and causes a fatal slippage of faith in the ability of that project to continue.
- Second half of 2015, the rest of the world gangs up and counter-attacks the US dollar.
- Bond markets in Europe implode in first half and the contagion spreads to the US as fear and distrust rises about viability of US safe haven status.
- Derivatives associated with currencies, interest rates, and junk bonds trigger a bloodbath in credit default swaps (CDS) and the appearance of countless black holes through which debt and “wealth” disappear forever.
- US stock markets continue to bid upward in the first half of 2015, crater in Q3 as faith in paper and pixels erodes. DJA and S&P fall 30 to 40 points in the initial crash, then further into 2016.
- Gold and silver slide in the first half, then take off as debt and equity markets craters, faith in abstract instruments evaporates, faith in central bank omnipotence dissolves, and citizens all over the world desperately seek safety from currency war.
- Goldman Sachs, Citicorp, Morgan Stanley, Bank of America, DeutscheBank, SocGen, all succumb to insolvency. American government and Federal Reserve officials don’t dare attempt to rescue them again.
- By the end of 2015, central banks everywhere stand in general discredit. In the US, the Federal Reserve’s mandate is publically debated and revised back to its original mission as lender of last resort. It is forbidden to engage in further interventions and a new less-secretive mechanism is drawn up for regulating basic interest rates.
- Oil prices creep back into the $65 – $70 range by May 2015. It is not enough to halt the destruction in the shale, tar sand, and deepwater sectors. As contraction in the failing global economy accelerates, oil sinks back to the $40 range in October…
- …unless mischief in the Middle East (in particular, the Islamic State messing with Saudi Arabia) leads to gross and perhaps fatally permanent disruption in world oil markets — and then all bets are off for both the continuity of advanced economies and for peace between nations.
The signal event of 2015 will be the disintegration of Tom Friedman’s global economy, the trade and banking relations we have known for about a quarter century, especially the frictionless flow of goods and capital between East and West. The tactical blunders of the USA and its Euro-partners drive the so-called emerging markets, led by China’s Shanghai Cooperation Organization, into a skein of work-arounds to undermine and avoid the US dollar trade. They don’t exactly replace the dollar as the world’s reserve currency but the workarounds lead to a period of worldwide currency turmoil that can only be resolved by monies being at least partially backed by gold. Both China and Russia will continue to work to convert their dollar reserves into Gold whenever possible. Meanwhile, America and Great Britain’s campaign to discredit and devalue gold will only permit their rivals to acquire more at a cheaper price.
The rest of the world is sick of America’s interventionist shenanigans and its moronic exported culture of burgers, Grand Theft Auto, and twerking Jezebels. They are aided by America’s own obdurate foolishness and poor strategic choices, for instance the blowback from the Ukraine misadventure of 2014. Who in the White House, Pentagon, or State Department thought it was a great idea to undermine the fragile stability of Ukraine? Is there any question that Ukraine was ever not in Russia’s sphere of influence? Or that Russia would allow it to be dragooned into NATO and used as a forward base for American firepower? Dmitry Orlov’s explanation for all this is the most cogent on the web:
“What the Anglo-imperialists were paying for in corrupting Ukraine’s politics was a ring-side seat at a fight between Ukraine and Russia. And what they got instead is a two-legged stool at a bar-room brawl between Eastern and Western Ukraine.”
Read the whole darn thing; it’s not long.
We succeeded in turning a marginally-bankrupt, marginally-independent nation into a complete basketcase that is going Dark Age as I write — no money, no work, no fuel, no heat, no food, no prospects. Having completely botched the operation, and misplayed the game against Russia’s Putin — and Russia’s legitimate interest in a stable next-door neighbor — the US will now abandon Ukraine. It will be forgotten as surely as the US-sponsored Ukrainian air force’s role in the crash of Malaysian Airlines Flight 17 — the incriminating details of which were buried by the Dutch investigating officials. Eventually, the Russians will have to care for the dying Ukraine. They will not be enthusiastic about it. They will do little and do it slowly.
Likewise our economic sanctions campaign against Russia (including the attack on the ruble) is now blowing back on the Eurozone’s export economy. Russia has survived much worse than Western sanctions in recent history. Russia will survive by turning east to Asia. This is already happening and is well publicized. What it means for Europe sooner than later is the loss of their access to imported oil and gas from Russia.
Meanwhile, the North Sea fields and the Dutch Groningen gas field are dying. Good luck staying warm, Europe.
The blowback of Europe’s foolish partnership with the US campaign to punish Russia can only discredit the ruling parties and boost new right-wing parties such as France’s National Front and Britain’s UK Independence Party, both deeply nationalistic, anti Euro Union, and anti endless immigration.
The Islamic State was another legacy of blowback from American foreign adventurism. It was spawned out of the remnants of Al Qaeda in poor, broken Iraq and its conquests in 2014 ranged clear across northern Syria to several major cities in Iraq (Faluja, Tikrit, Mosul) right up to the suburbs of Baghdad. They made a lot of money off of captured oil wells and ransoming western hostages, and they shocked Western decency with their YouTube decapitations of hostages that the US and UK refused to ransom. The US’s response now is to bomb their installations and bivouacs. That can only drive them, literally, underground. IS will thrive on Western punishment. It has vast potential to recruit the population of idle, under-employed young men all across North Africa and the Middle East, and beyond to Europe and the band of Islamic society that stretches below Russia across mid-Asia. The catch is, if and when they come to actually rule most of these territories, they will be running economies reduced to Dark Age levels. Continue Reading>>>