As I said yesterday in my little pre-prediction story, "This year's going to be tough" the economy, world wide, is in a serious recession and has been for some time without being detected, therefore the possibility of it being a depression is a real and present danger. I would like to avoid the methodology of CNN, where they take a single issue and deal only with it until everyone who has seen or even heard of them is sick and tired of the repetition. Since late September, they have referred to the collapsing economy as "Issue #1". The inescapable fact of life is that no one issue is the sum total of all things.
In my New Years Predictions for 2008 I pretty much dealt with the economy and though I got oil prices wrong, the main principles that caused the collapse have been in place for several years and it was simply a matter of time. Now, as we wade into 2009, the world economic crisis is showing no sign of improving, in fact all signs point to a prolonged situation that will be well entrenched at this time 365 days from now, with the expected improvements not expected until 2010, or 2012. It is not possible to predict, when the other shoe will drop, I mentioned this last year and nothing has changed, the value of all currency is in trouble and when deflation begins to take hold, a whole set of very unfortunate consequence will occur.
Government activities to moderate, or lessen the blow of the recession, have not produced positive affects, although there is a possibility, that some of the measures may influence things in a very minor way, in about eight to nine months time. But by then, the other fractures will overshadow the banks and automotive industry.
Let us push back from hammering away at possible government magic and concentrate on the various things that are part of this world and consider how the economy is going to impact on those things.
January is a very important month for the politics of Canada and United States. The government of Canada put itself in jeopardy when it covered up the real conditions of the economy during the October election campaign, with the Prime Minister even going so far as to suggest investor buy up the bargain stocks. Clearly, they were out of touch with reality and that brought about the lack of confidence and the forming of the coalition. For those of you who think that Michael Ignatieff has brought a moderating influence to federal politics you are mistaken. In a letter from him yesterday he said "There's simply no telling what Stephan Harper will do next. Given his behaviour in the past we must prepare for all eventualities including his calling another election Canadians do not want." That doesn't sound to me like the leader of the Liberal Party thinks that the new throne speech and budget will be something that the opposition will be able to pass. The Governor General granted him a prorogue and if he asks her to call an election in late January, she will do so and we will hear more attack ads that will result in another minority government.
Though George W. Bush is the worst president in the history of his country, all will not suddenly become sweetness and light with the inauguration of Barack Obama. His promise to the people of his country to bring about change is already pretty hallow, when you consider that those who will lead his government, are pretty much old experienced hands. The only noticeable change, will be to transfer the emphasis of war from Iraq to Afghanistan, while continuing to prop up Pakistan. US money keeps the government of Pakistan in power, that money is used to provide supplies and training to the Taliban and so indirectly, the United States is funding the war against itself, and Canadians as well. There is nothing new about this system, it is the tried and true method of operation used unsuccessfully in Vietnam and the Americans will stick with what they know, even though they are totally aware of its failure. That's the American way.
It is disturbing to notice that the government of India which moves with the speed of a star fish is moving its forces to the Kashmir frontier. The attack on Mumbai was planned and executed by a Pakistani agency and the government of India has no alternative but to defend itself. In the late spring the United States forces will have no choice, but to cross the Pakistani border with Afghanistan, or their surrogate militia may do so, one way or another, the world will concentrate its attention on the Khyber Pass and the area near Pashawar and India will move its forces west. The danger of this development is chronic, since Pakistan will be caught in a situation that US aid can not solve and the possibility of using nuclear weapons is no longer an academic discussion.
Should a huge conflict erupt in Pakistan the casualties to all forces in the area will be beyond anything we have seen since Korea. At that point, the world's economy will no longer be issue #1.
China is in a very tight spot, holding most of the American balance of trade debt that has piled up to a point that we simply can't comprehend. The American dollar is living on really borrowed time and will fall in value and the Chinese will see their source of growth and wealth vanishing with no means to stop the slide. If a major conflict occurs in Pakistan, the Chinese will not stand by as spectators, they will participate. Their problems are extraordinarily complex, with more than a billion people to calm and widespread unemployment, action of any kind will be a necessity.
Israel and Palistine
Looks important, sounds important, but unless the other Arab countries decide to back a war like that in 1948 or 56, its just the banging of pots and pans. The Arabs are big on talk but brutally incapable of an organised action of any kind.
Bread riots, mass starvation and strident militarism are everyday things for the fall of 2009 in Russia and the Ukraine. The economic down turn hurts the developed world a lot, but in Russia and former East Bloc countries, all of whom live far closer to the line, it will result in death and upheaval.
Sudan, Congo, Kenya, Rwanda, Somalia, Ethiopia, Uganda are all currently suffering from the three pronged disaster of climate change producing famine, political and racial tension and chaos from years of the compounding problem. Chad, Niger, Tanzania and all other countries in the borders of those affected are weighing into a bottomless pit. The UN is impotent and has been for decades and the world simply can not afford to care about Africa.
The tensions between nations states is definitely not confined to India, Pakistan, Afghanistan and Iraq. Nor is chaos and genocide confined to Africa. There are a huge number of places around the world teetering on the brink of open conflict and in some cases the conflict is full frontal warfare. Sri Lanka, Indonesia, Burma, Thialand have all been in and out of the fires of civil disruption and one is never sure what to expect from North Korea or possible internal problems in China, let alone Tiawan. This does not mean that the world is in foment for indeed there have been many times in the past where there have been a larger number of possible flash points. The difference in 2009 is that everything is in the context of massive economic upheaval. The destruction of jobs, dislocation of industry and trade and the glaring void in the world of any force to bring about stability.
The Cold War was in reality, a peaceful time because the balance of power meant that there were forces that came into affect to sort out a problem or in some cases push it over the brink, one way or another the world was to a certain degree, ordered. In 2009 the world's dominant superpower caused the economic chaos, just as deliberately as is possible to do so, the world's second superpower, China, is faced with its own dynamic nature and truly massive population neither the United States or China can exercise any positive influence. Other powers like Japan, the European G8 countries are all caught up in keeping their ships of state on as even a keel is possible under the circumstances. As you can see in Africa the wheels of civilisation are off the track, perhaps all evidence of track will soon be lost.
- January to March the United States is going to cool down and the people and speculators will give the new government a chance to do something. The cooling off period is likely to extend into early July but in July two massive things collide. The American unemployment rate will hit numbers in Michigan, Ohio, Illinois and perhaps the midwest that will equal or exceed 1930. The other factor, the one Bush and the majority have chosen to ignore will rear its head as massive storms continue the pattern we have seen in the past five years. Already, the winter cold snap has damaged the prospects of this year crop as yields in Kansas, Oklahoma, Missouri, Iowa will all be down in 2009. This will cause a marginal rise in commodity prices which are sinking now very quickly. Ultimately, unemployment and rising food costs coupled with devalued dollar and the summer of 1968 might seem like a good year.
- Economic growth and development in Saskatchewan and Alberta of course will slow most directly in the petroleum industry where there will huge lay-offs because you can't make synthetic oil costing $65 a barrel and sell it at less than $40. However, the low taxes and good shape the prairie governments are in will moderate the depression as the west will stand ready to offer the relief to Ontario and Quebec that came from there during the dirty thirties.
- The US dollar is endangered but could easily hold up for another fourteen months, should it tumble the Canadian dollar will slump as well but the problem would be less noticeable since almost all world currencies might suffer similar fates as money just become worth less and less.
- Canadian federal politics is and will continue to be, less and less important, compared to all things. The January 28th budget is unlikely to pass because Harper wants a majority. He has led his party to the polls three times and never won. If people bother to vote, they will vote as they did in October, unless the Liberals, NDP and Bloc work out deals and actually create a coalition election riding by riding, putting the majority candidate in office. And, like that's going to happen!
- Climate change is no longer just something to argue about or invent "green shift" policies about, the radical weather of the here and now is the new reality. Get used to it.
- Medicare, employment insurance, welfare should sustain Ontario's equally high unemployment rate comparable to the neighbouring states. The lesson of the 1930s was to create a cushion that would handle several years of bad times. Government "make work" projects will also be a help, but can be of little effect in the Toronto to Windsor corridor.
- We Canadians must consider ourselves lucky if the number of casualties in Afghanistan is only a few hundred in 2009 because this is shaping up to a blood awful year to be fighting a US controlled war between unknowns.
- Though continued Conservative domination of the federal scene is a possibility, the recession/depression could trigger a much different political landscape, one in which human programmes like pharmacare and dental programmes might see the light of day. Not likely in 2009, but as the economic downturn deepens, attitudes will change.
- Believe it or not, the right thing for government and society in this era, is education and continued emphasis on an information technological society. Pump money into improved public schools and make post secondary affordable for all and the times in the future will be truly better.
There are so many things that I should have told you in these predictions, but the unfortunate conditions of the times make other things seem trivial.
From these gloomy predictions one might assume that there is no hope and that is simply not the case. Indeed we all know we can make it through tough times, we can cope with winter we can handle a bit of bad financial times. Don't do anything radical with your savings and hunker down for the bad stuff to blow over. In three years things will be a bit better.
When you talk to those who survived the Great Depression you will have discovered they were tough not bad times. People had fun, enjoyed themselves and survived, as better people. So have a happy New Year, you can be sad if you want, or you can be happy, it really is up to you.